Technology & Marketing Law Blog

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

As usual, I'm running late with my year-end recap. This post begins with my countdown of the top 5 Internet Law developments of 2011, then it lists other interesting developments and cases. It concludes with some of the most linked posts and then my editor's choice of some posts in 2011 that might have been a little overlooked. As usual, thanks for reading the blog in 2011!

Countdown: My Top 5 List of Developments in 2011

#5: Righthaven Implodes. Since the beginning, I've been skeptical of Righthaven's business model. Seriously, who else thinks it's a good idea to sue small-time mom-and-pop bloggers and non-profits on a one-by-one basis? However, even I had no idea that Righthaven would accelerate their own demise by routinely making basic litigation errors. A sketchy business model + a litigation shop that isn't very good at litigation = one dead start-up. It's always fun (in a bloodsporty way) to watch hubristic bullies get their just desserts, but watching the Randazza firm school the Righthaven litigators in Litigation 101 has been amazing. THAT'S how you litigate.

Righthaven lost often in 2011 (see my August reset). They lost fair use rulings (e.g., CIO, Choudry). They lost on standing grounds (e.g., Democratic Underground, Wolf). They were hit with sanctions. They were hit with hundreds of thousands of dollars of attorney fee shifts (e.g., Leon, Wolf, DiBiase). They even lost their domain name in an auction--a delicious irony given that Righthaven's complaints improperly demanded its defendants' domain names on the theory that it might need the domain name to satisfy a judgment against the defendant, when in fact it was Righthaven's domain name that was used to help satisfy a judgment against it!

Righthaven ended 2011 on death's door, but the trend of newspapers trolling for copyright litigation isn't going away. I'll be watching NewsRight closely in 2012.

#4: Medical Justice Gives Up. Speaking of hubristic bullies... You recall Medical Justice, the organization that helped doctors and other medical service providers take copyright assignments from patients in their as-yet-unwritten reviews so that the doctors could expeditiously remove unwanted reviews by sending 512(c)(3) takedown notices to review sites. It's an interesting legal hack, but it has some bad side-effects, including the fact that patients hated it, the copyright assignments almost certainly were void (for public policy reasons and others), doctors were hurting themselves by discouraging patient reviews (patients prefer to choose doctors when there's a critical mass of patient reviews), and (as our research uncovered) most consumer review sites ignored the doctors' 512(c)(3) takedown notices. Obviously, with those defects, Medical Justice wasn't exactly adding a ton of value to its clients. Medical Justice finally gave up, but too late to prevent a lawsuit against one of its clients and a complaint to the FTC. Chances are Medical Justice will be living with a long-term hangover from this entrepreneurial foray.

Seeing Medical Justice stop peddling anti-patient review tools was slightly satisfying, but that result was always a fait accompli. The reason Medical Justice's change of heart matters is that shady or clueless vendors keep developing new ways to suppress unwanted consumer reviews, and I hope Medical Justice's experiences will discourage other vendors from trying the copyright hack. I talk about these dynamics more in my paper on regulating reputational information.

#3: gTLD Expansion. It remains unclear exactly what ICANN's rollout of unlimited top level domains will do. Due to the expansion of new namespaces, brand owners face a long list of complicated--and potentially expensive--choices to make. Unfortunately, these choices don't really benefit society; instead, the gTLDs tax businesses while the benefits accrue to a small number of service providers (and, of course, ICANN itself). I think many businesses will reserve their name in multiple new gTLDs to prevent squatting--with the net effect that businesses will spend more money just to preserve the status quo. Meanwhile, most consumers are likely to be bewildered by the unlimited number of TLDs, which is just going to increase their tendency to rely on search engines and link directories rather than domain names to navigate to their desired destinations.

#2: Internet Consumer Privacy Lawsuits Tank. 2011 initially looked like the year of the Privacy Plaintiff. A torrent of privacy lawsuits had been filed, plaintiffs had wrested a few important and lucrative settlements, and Internet companies continue to make questionable privacy decisions that create a steady supply of potential new lawsuits.

But the path to riches didn't materialize. Instead, 2011 emerged as the year when privacy class action lawsuits mostly failed miserably. Courts principally rejected the lawsuits on standing grounds for lack of cognizable harm, but plaintiffs failed on other related grounds, such as a lack of damages negating the prima facie case. There were some exceptions where plaintiffs made a little progress (see, e.g., Claridge v. RockYou, Anderson v. Hannaford, Fraley v. Facebook). I'm sure the privacy plaintiffs' bar will be studying those rare successes to formulate a better battle plan--and to better prepare their cases and find strong named plaintiffs, a recurring omission that hasn't gotten a lot better over the year. However, for now, it's clear that the privacy plaintiffs' bar can't just show up in court and hold out their hands for a payday.

#1: Regulators Broke the Internet. We've always known that regulators could combat bad online activity by working "up the chain," i.e., by making upstream service providers liable for the bad acts or obligated to cut off the activity. However, for the most part, we've shared a tacit understanding that systematically going up the chain was a "nuclear" option--it would fix the specific problem but only at significant collateral cost that, on balance, makes the option unattractive.

I think we'll look back at 2011 as the year that tacit understanding broke down. In 2011, regulators around the world showed a seemingly insatiable demand for working up the chain. Although we in the USA like to think we're different from other repressive regimes, the evidence suggests otherwise. Some examples of "up the chain" activity in 2011:

* Arab Spring. Repressive regimes got local Internet access providers to turn off Internet access in the country.
* Operation in Our Sites. The Immigrations and Customs Enforcement (ICE) agency keeps seizing domain names of suspected foreign rogue websites on an ex parte basis, making errors and breaking the law in the process. Mike Masnick blew open the story on Dajaz1.com, which ICE seized on an ex parte basis, conducted secret proceedings for a year, and then gave back the domain name with no explanation.
* Graduated Response. Copyright owners got Internet access providers to voluntarily (?) agree to restrict, and eventually terminate, their users' accounts.
* Secondary liability against intermediaries. Rightowners keep expanding their intermediary targets, including lawsuits against ad networks and SEOs/web designers. To be fair, some of these lawsuits aren't going very far, and expansive secondary liability theories aren't new in 2011.
* Ex Parte Seizures. Rightsowners are asking for the moon against third party service providers in ex parte proceedings, and courts are giving it to them because the third parties aren't there to represent their own interests. We recap this epidemic in this post.
* SOPA and PIPA. These proposed bills were the finest examples of rightsowners pursuing the nuclear option regardless of the collateral damage. The bills' basic architecture was to attack a wide range of intermediaries for third party actions--domain name registrars, search engines, payment service providers, ad networks. By seeking to deputize the intermediaries, the bills sought to instantiate "up the chain" duties across virtually the entire Internet. Putting aside their other policy deficiencies, I think we should resist all laws predicated on that fundamental assumption of intermediary deputization. See my post on the OPEN bill for why I reject the compromise "follow the money" solution. Sadly, I stand virtually alone in my stance.

Other Interesting Developments.

Some other interesting developments this year:

* Patent Reform. The America Invents Act is the most dramatic patent reform bill in years, and it has many provisions that may affect Internet companies, including the joinder standards, the prior user defense, and the novelty/priority standards. The law doesn't fix the overall problems with bad Internet patents or unmeritorious assertions of those patents, but it nevertheless could make some dramatic changes in what Internet companies do.

* Google and Antitrust. Google has become the incumbent in search, and all of its rivals--especially the companies Google is disintermediating--are desperately seeking to knock it off its perch. I believe Google and antitrust was the #1 topic prompting reporter phone calls to me in 2011. We are waiting to see what comes from the FTC investigation into Google's practices, and the list of Google-haters keeps growing daily. At the same time, the anti-Google forces made surprisingly little actual progress in 2011, including suffering a conspicuous (and not even close) loss in the myTriggers case. See my paper on why I am so over the Google antitrust battles.

* DC's Obsession with Busting Silicon Valley Companies. Sometimes, it feels like DC insiders wake up in the morning and wonder, "What Silicon Valley company do I feel like busting today?" Drive down the 101 from San Francisco to San Jose and play the "Spot the FTC/DOJ Bust" bingo game. Some of DC's targets in 2011: Google Buzz, Twitter (finalized in 2011), Facebook, Google pharma ads, Apple and others for no-poaching restrictions, and others. Good times!

* Judges Order Litigants to Hand Over Passwords to Social Networking Sites. This year, several judges ordered litigants to turn over their Facebook passwords to their litigation opponents for discovery purposes. See, e.g., Zimmerman v. Weis (which I added to my Internet Law reader this year). In 10 years, we'll look back at this mini-trend and shake our heads at the judicial cluelessness. Social networking sites contain a mix of public and private information, and letting a litigation opponent root around the account is just as objectionable as making a litigant hand over the keys to his/her house so the opponent can rummage around.

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

* Author's Guild v. Google. The court rejected the Google Book Search settlement agreement for good reasons, but it sent the parties back to square 1. Why the parties haven't been able to broker a legislative compromise is beyond me.

* Barclays v. theflyonthewall. The Second Circuit took a big bite out of the hot news doctrine. Unfortunately, the Second Circuit didn't kill the hot news doctrine outright, but the opinion leaves open very little room for hot news plaintiffs.

* Network Automation v. Advanced System Concepts. The most important keyword advertising ruling to come out in several years. While the ruling itself was a mixed bag for the litigants, the opinion tore down a number of crusty plaintiff-favorable legal doctrines that had cluttered up trademark jurisprudence for years--including virtually mooting the initial interest confusion doctrine and killing the "Internet trinity" bypass to the standard multi-factor likelihood of consumer confusion test. I've noticed that the opinion has already noticeably tilted courts towards more defense-favorable rulings.

* Betty Boop case (Fleischer Studio v. AVELA). For a few months, it looked like the Ninth Circuit had eliminated trademark merchandising rights in characters that were out-of-copyright. Then it changed its mind; but still it liberated Betty Boop to the world.

* PhoneDog v Kravitz. An interesting battle over ownership of a Twitter account.

* Levitt v Yelp/Ascentive v. PissedConsumer. 47 USC 230 still works really, really well as an immunity. In Levitt, Yelp got a 230 dismissal that Yelp had tried to get advertisers to pay to manage consumer reviews. In Ascentive, the court rebuffed a plaintiff's effort to use a trademark infringement claim against a consumer review website to work around 230.

* Habush v Cannon. Buying a person's name as the trigger for keyword advertising doesn't violate their publicity rights.

* UMG v. Shelter Capital. While everyone waits for the Second Circuit's decision in Viacom v. YouTube, the Ninth Circuit stole some of that thunder with a powerful endorsement of the 17 USC 512 safe harbor. Too bad Veoh didn't live long enough to enjoy the win.

* In re Rolando S. Rolando was convicted of felony identity theft for taking a classmate's Facebook page for a joyride. My vote for the most interesting Internet Law case of 2011, and an instant cyberlaw classic. I've already added it to my Internet Law reader, and the students seemed to enjoy discussing the case.

Some of the Most Linked Blog Posts in 2011 (Per Topsy)

* New Advertising & Marketing Law Casebook Available for Review
* Court Orders Plaintiff to Turn Over Facebook and MySpace Passwords in Discovery Dispute -- Zimmerman v. Weis Markets, Inc.
* "App Store" Isn't Generic, But Apple Can't Enforce Its Purported Trademark in the Term--Apple v. Amazon (Apple legal issues are always good link bait)
* Twitpic Modifies Terms and Claims Exclusive Rights to Distribute Photos Uploaded to Twitpic
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Court Rules That Instant Message Conversation Modified the Terms of a Written Contract -- CX Digital v. Smoking Everywhere (the most popular post of the year by far--a modern Contract Law classic)
* Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

* Cyberbullying and Restorative Justice [a Long-Delayed Post on DC v. RR]
* Racy Teen Photos Posted to Facebook Are Constitutionally Protected Speech--TV v. Smith-Green
* Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion
* Free-to-Consumers Ad-Supported Website Isn't Illegally Priced--Cammarata v. Bright Imperial
* What Would a Government-Operated Search Engine Look Like in the US?

Lists of Yore

Previous top 10 lists from 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 09:45 AM | Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Patents , Privacy/Security , Search Engines , Trademark | TrackBack

January 23, 2012

Comments on the Golan v. Holder Supreme Court Ruling (Guest Blog Post)

By Tyler Ochoa

In a decision that favored the 1% (copyright owners) over the 99% (consumers and the public domain), the U.S. Supreme Court recently held that neither the Patent and Copyright Clause of the U.S. Constitution nor the First Amendment prohibits the removal of works from the public domain. Golan v. Holder, No. 10-545. Prior blog coverage of the case: certiorari granted and the 10th Circuit opinion.

The majority opinion was written by Justice Ginsburg for herself and five other justices. Justice Breyer, joined by Justice Alito, dissented. (Justice Kagan recused herself, as she had participated in the case as Solicitor General before being named to the Court.) The line-up of justices was therefore essentially the same as the 7-2 opinion in Eldred v. Ashcroft, 537 U.S. 186 (2003), which upheld the Constitutionality of copyright term extension, with Justice Alito replacing Justice Stevens in dissent, and Chief Justice Roberts and Justice Sotomayor replacing Chief Justice Rehnquist and Justice O’Connor, respectively, in the majority.

The case concerned Section 514 of the Uruguay Round Agreements Act of 1994 (URAA), which is codified in 17 U.S.C. § 104A. That section “restored” copyright protection to works of foreign origin that were still under copyright protection in their source countries, but were in the public domain in the U.S. for one of three reasons: (1) lack of national eligibility, for countries with whom we did not have copyright relations prior to joining the Berne Convention; (2) lack of subject-matter eligibility, for sound recordings fixed before February 15, 1972 (the date sound recordings first became eligible for federal protection); and (3) failure to comply with the formalities previously required under U.S. (such as proper copyright notice and registration of the renewal term). Effective January 1, 1996, all such works were taken out of the public domain and placed under copyright protection in the U.S., for the same duration that is granted to domestic works. (For the background of the case, see Tyler T. Ochoa, Is the Public Domain Irrevocable? An Introduction to Golan v. Holder, 64 Vanderbilt L. Rev. En Banc 123 (2011)).

The Petitioners (orchestra conductors and film distributors who had performed and sold foreign works in the public domain before restoration) made three principal arguments, all of which the majority rejected. First, Petitioners argued that the phrase “for limited Times” in the Patent and Clause prohibits Congress from removing works from the public domain once those “limited Times” have expired. Justice Ginsburg, however, relying on her majority opinion in Eldred, held that “limited” does not mean “fixed” or “unalterable,” and noted that terms granted to foreign works are the same as those granted to domestic works, which the court had previously held in Eldred to be “limited.” Slip. op. at 13-14. She also relied on the fact that many of the works whose copyright was “restored” had never enjoyed copyright protection in the U.S. at all, saying “surely a ‘limited time’ of exclusivity must begin before it may end.” Slip. op. at 15. (Here, Justice Ginsburg is not quite correct: all works enjoyed common-law copyright protection before they were published, even those foreign works originating in countries with whom the U.S. had no copyright treaty relations. It was only upon first publication that foreign works entered the public domain in the U.S. if they failed to comply with formalities or were not from an eligible country. But it is true that many of the works involved had not previously received federal statutory copyright protection.) Nonetheless, the majority’s rationale does not apply to those foreign works that did receive 28 years of copyright protection and were not renewed. Not only did the Berne Convention NOT require that such works be removed from the public domain, Article 18(2) of Berne commands that such works “shall NOT be protected anew” (emphasis added). See Daniel Gervais, Golan v. Holder: A Look at the Constraints Imposed by the Berne Convention, 64 Vanderbilt L. Rev. En Banc 147, 149-54 (2011).

Justice Ginsburg relied primarily on the fact that “the Copyright Act of 1790 granted protection to many works previously in the public domain. . . . The First Congress, it thus appears, did not view the public domain as inviolate.” Slip. op. at 16. However, as Tomas Gomez-Arostegui and I pointed out in our amicus brief, the historical evidence on this point is highly equivocal and far from compelling. We cannot say with certainty whether the members of the First Congress thought they were removing works from the public domain or not; but there is a strong argument that they did NOT think so. It is true that in 1834 the Supreme Court held that there was no post-publication common-law copyright, meaning that, to the extent that the First Congress had protected previously published works, that law was later held to have had the effect of removing works from the public domain; but it is far from clear that the members of the First Congress would have foreseen or agreed with that conclusion.

Justice Ginsburg also relied on a handful of private patent and copyright laws that removed specific works from the public domain, and on two acts that gave owners of foreign works who were unable to comply with U.S. formalities during World Wars I and II the opportunity to comply with those formalities after the war, thereby removing works from the public domain. In so doing, however, Justice Ginsburg indulged in the blithe assumption that anything Congress has done a handful of times must be Constitutional. Marshaled against her conclusion is that is the fact that Congress has steadfastly avoided protecting works already in the public domain each time it has passed a general revision of the Copyright Act, and even expressed the opinion in the legislative history of the 1976 Act that doing so would be unconstitutional. (See Breyer’s dissenting opinion, slip. op. at 19.)

The Petitioner’s second major argument was that granting copyrights to existing works does not “promote the Progress of Science,” as the Copyright Clause requires. In the 18th Century, “Science” meant knowledge broadly, and this portion of the Clause is traditionally read to incorporate a “utilitarian” view of copyright; namely, that the purpose of copyright is promote the creation and distribution of new works of authorship. (This is the principal basis of Justice Breyer’s dissenting opinion.) The majority, however, held that the Clause is also intended to promote the dissemination of existing works of authorship. While there is plenty of evidence to support this assertion (see, e.g., Malla Pollack, What Is Congress Supposed to Promote? Defining ‘Progress’ in Article I, Section 8, Clause 8 of the U.S. Constitution, or Introducing the Progress Clause, 80 Neb. L. Rev. 754 (2002)), it is the majority’s application of this principle that is problematic. Basic economic theory holds that an existing work will be more widely disseminated when it is in the public domain than it will be under copyright protection. Copyright exists to solve the “public goods” problem of financing the work’s creation and initial publication (who would invest in the creation and distribution when the work could be copied more cheaply without paying the author?); but after a “limited Time,” dissemination is better served by placing the work in the public domain. The majority, however, refuses to question Congress’ assertion to the contrary, applying only rational basis review, instead of any kind of heightened scrutiny. (Slip. op. at 21-22).

Petitioner’s third argument was the First Amendment requires heightened scrutiny, because leaving works in the public domain was one of the “traditional contours of copyright protection” that the majority alluded to in Eldred that would justify First Amendment scrutiny. The majority rejects this argument, and squarely holds that the “traditional contours of copyright protection” are limited to the idea-expression dichotomy and the fair use doctrine. (Slip. op. at 23-26 & n.29.) So long as those two (vague and inconsistently applied) limits on copyright are preserved, apparently Congress had the power to impose any other type of speech restriction in the name of copyright protection.

The majority’s decision would seem to foreclose almost any future Constitutional challenge to Congress’ patent and copyright power. The majority rejected (or reinterpreted) the dictum in Graham v. John Deere Co., 363 U.S. 1, 6 (1966), in which the Supreme Court stated that “Congress may not authorize the issuance of patents whose effects are to remove existent knowledge from the public domain, or to restrict free access to materials already available,” saying that this is NOT a Constitutional limit on Congress’ power. (Slip. op. at 19) The majority also states that that the public has no vested rights in the public domain at all. Instead, it characterizes the public domain as the absence of ownership, rather than affirmative ownership by the public. (This characterization is at odds with 19th Century opinions on the subject. In my article Origins and Meanings of the Public Domain, 28 U. Dayton L. Rev. 215, 232-36, 256-66 (2003), I collect the evidence that the public domain was consistently said to have two characteristics in the 19th Century: it was property that was owned by the public, and it was irrevocable.) The absence of any ownership interest in the public domain would seem to foreclose any challenge based on the Fifth Amendment’s Due Process Clause as well.

The Golan opinion is a severe blow for those who believe that the public domain is a vital resource for public education and creativity. I anticipate that owners of copyright in domestic works will now lobby Congress for the same advantage that foreign copyright owners received in 1996: restoration of copyright for those works that are in the public domain for failure to comply with formalities such as copyright notice and renewal. This move, if successful, would have an enormous impact on the public domain. It has been estimated that only about 85 percent of works published in 1923-1963 were renewed; the remaining 85 percent are in the public domain. Congress could apparently restore the copyrights in this 85 percent at any time, leaving the U.S. public domain with only those works that were created before 1922.

Would Congress go back and attempt to restore copyrights in even older works, those that did enjoy the maximum period of copyright protection? I agree that it is far-fetched to suppose that Congress will take advantage of its newly-ratified power to do so, although a broad reading of the opinion would certainly support its power to remove any works from the public domain, including Shakespeare and Beethoven. (Indeed, under the majority’s rationale, none of their works ever enjoyed copyright protection in the United States.) However, at least one passage in the opinion suggests that even this Supreme Court might balk at such a move:

Carried to its logical conclusion, petitioners persist, the Government’s position would allow Congress to institute a second “limited” term after the first expires, a third after that, and so on. Thus, as long as Congress legislated in installments, perpetual copyright terms would be achievable. As in Eldred, the hypothetical legislative misbehavior petitioners posit is far afield from the case before us. In aligning the United States with other nations bound by the Berne Convention, and thereby according equitable treatment to once disfavored foreign authors, Congress can hardly be charged with a design to move stealthily toward a regime of perpetual copyrights.

(Slip. op. at 15) This paragraph suggests that, should Congress attempt to “restore” copyright protection to a work after its maximum statutory period of duration had expired (rather than a work which failed to achieve the maximum period for failure to comply with formalities), the Court might be willing to hold that such “misbehavior” does violate the “limited Times” provision.

Posted by Eric at 02:53 PM | Copyright | TrackBack

January 22, 2012

Photobucket Qualifies for the 512(c) Safe Harbor (Again)--Wolk v. Kodak

By Eric Goldman

Wolk v. Kodak Imaging Network, Inc., 2012 WL 11270 (S.D.N.Y. Jan. 3, 2012). Prior blog post on this case.

As I've indicated before, blogging 17 USC 512 cases has gotten tedious because they are just TOO LONG. I can crank through most 47 USC 230 cases in an hour or two because they are usually quite short and efficient. In contrast, because 17 USC 512 gives copyright plaintiffs so many words to contest, 512 opinions tend to be lengthy and quite time-consuming to blog--with this 69 page opinion as a prime example. This has some implications for drafters of laws like SOPA/PIPA, which have similarly long and detailed provisions that just beg plaintiffs to contest every word and will force courts to write quite lengthy opinions that bloggers like me will struggle to crank through. I cheer for immunities and safe harbors, but I have three cheers for SHORT immunities and safe harbors.

This case is even more unfortunate because the pro se plaintiff had an obviously unmeritorious case, yet the two defendants used three law firms to beat this case. And it's not exactly like Kodak is wallowing in cash any more.

Wolk is an artist. Users uploaded images of Wolk's work to Photobucket (a UGC photo-sharing site). Photobucket, in turn, had a revenue-sharing agreement with Kodak Imaging that allowed users to print the images via Kodak (i.e., Kodak did "photofinishing").

Photofinishing Liability

The court says that Kodak Imaging wasn't directly liable for printing the images (Wolk didn't allege secondary infringement). The court observes that "reproduction, display or transmission of the Plaintiff's images by or through the KODAK Gallery website is an automated process with no human intervention by any employee of the Kodak Defendants." Thus, because its entire system was automated, Kodak didn't act volitionally and thus avoids the strict liability standards of direct copyright infringement.

This ruling is unexpected because it's been conventional wisdom for many years that photofinishers were in fact directly liable for their print jobs. Perhaps that's because humans were always involved in the photofinishing process during that time, as opposed to now where the process from photo upload to mailing of items can be completely automated. Whatever the case, this ruling has to be encouraging for other automated photofinishers (whether they print photos or other items), such as CafePress or Zazzle. Then again, perhaps the copyright plaintiffs will pursue them under secondary infringement doctrines, which Wolk didn't do.

Although I like the result, I remain confused about the scope of the "volitional doctrine." As was the case in Cablevision, Kodak's system was completely automated only because Kodak's engineers designed it that way. We would benefit greatly from a richer theoretical grounding for the volitional doctrine and how it interplays with strict liability. Without that grounding, the results seem a little random.

512(c) Safe Harbor

Photobucket qualified for the 512(c) safe harbor. This isn't surprising; the court indicated as much when it denied Wolk's request for a preliminary injunction. Still, the court works through a 512(c) in fine detail:

* Photobucket is a "service provider"
* Photobucket properly adopted and implemented a repeat infringer termination policy.
* Photobucket accommodates standard technical measures. Wolk argued that Photobucket gives users tools that can remove or hide watermarks. The court doesn't opine whether watermarks are a standard technical measure, but instead the court says Photobucket doesn't encourage users to use the tools, so users--not Photobucket--would be the ones interfering with standard technical measures if watermarks qualified as such.
* Photobucket didn't have actual or constructive knowledge of the infringement. Before the lawsuit, Wolk sent 15 infringement notices covering 9 works. When Wolk sent 512(c)(3) notices, Photobucket expeditiously responded. However, 11 of the notices weren't 512(c)(3)-compliant (because they didn't specify URLs) and thus are irrelevant. (Compare the troubling dicta in the uncited UMG v. Shelter Capital). Wolk argued--as so many copyright owners do--that one notice about a work should cover all existing and future uploads without providing URLs of the other items. The court rejects that argument.
* Photobucket doesn't have the right/ability to control infringement because it does not prescreen content, render extensive advice to users regarding content and edit user content. Photobucket also lacked direct financial benefit from the infringement: "The Defendants' profits are derived from the service they provide, not a particular infringement."
* Photobucket properly identified its agent for notice and designated it with the copyright office.

All of this 512(c) analysis was fairly by-the-book. The most interesting part is where the court discussed how "Photobucket Has No Duty To Police Its Website For Infringements." The court says:

Photobucket is a website that consists of over 9 billion images and videos. Under the plaintiff's theory, Photobucket would be required to police its website for infringing copies of her work wherever they may appear once she has provided a DMCA-compliant notice....[due to 512(m),] the DMCA does not require the policing the Plaintiff suggests.

Secondary Infringement

The court says, without any real discussion, that 512(c) moots Photobucket's secondary liability. Accord UMG v. Shelter Capital. The court continues with other reasons those claims fail. In particular, Photobucket lacked the requisite scienter about the infringing items it transmitted to Kodak at users' requests, nor did Photobucket act "in concert" with Kodak. The court rejects the applicability of Grokster, Napster and Aimster because those cases involved peer-to-peer file sharing (more evidence of the exceptionalism towards P2P) and her incomplete takedown notices didn't confer scienter.

Conclusion

The court granted summary judgment against Wolk, ending her case. The precedential value of this case's discussion about 512(c) probably will be overwritten by the Second Circuit's Viacom v. YouTube ruling, and a win against a pro se litigant isn't much in the grand scheme of things. Nevertheless, the ruling reinforces that courts continue to take the 512 safe harbor seriously. In particular, they continue to rebuff copyright owners who don't send 512(c)(3) takedown notices but still want judicial relief.

Meanwhile, the "volitional conduct" defense appears to be live and well, especially in the Second Circuit, although I'm not sure anyone understands the doctrine's parameters.

Posted by Eric at 02:00 PM | Copyright , Derivative Liability | TrackBack

January 17, 2012

Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming -- Deckers and Richemont

[Post by Venkat Balasubramani, with comments from Eric]

Deckers v. Liyanghua, 11-cv-07970 (N.D. Ill.; Dec. 15, 2011) (report and recommendation)

Deckers proceeds against a slew of domain names in Illinois. The case was originally sealed, but in granting a preliminary injunction, the court unseals it. The court's November 15, 2011 (now-unsealed) order provides for the following relief:

- an injunction against defendants
- An order requiring the registries and/or registrars to “prevent the . . . domain names from connecting to corresponding” websites and prevent the registration or transfer of new domain names
- an order directed at search engines, web hosts, registrars and registries to cease facilitating access to any websites through which defendants conduct business
- expedited discovery (Deckers emails a subpoena to banks and service providers who now have to turn over documents)
- authorizing notice via email . . . but “[a] ruling on permissible service of process methods is held in abeyance until Deckers has obtained discovery responses from third parties” [this is significant -- there has not yet been service of process]
- an asset transfer restriction

The preliminary injunction similarly includes a broad injunction against defendants. It also orders the registries to change the registrar of record for the domain names to a registrar of Decker’s choosing. There’s a broad injunction against those "in privity" with defendants, including search engines, web hosts, registrars and registries. The court orders broad discovery, and an asset freeze.

The one interesting thing is that the court makes Deckers post a $150,000 bond. Deckers contested this but the court didn't budge on this issue.

Richemont Int’l v. Montesol OU, 11-cv-09322 (S.D.N.Y.; Jan. 3, 2012)

In this case, the court enters a TRO on Dec. 21, 2011. The TRO broadly enjoins defendants from infringing on the marks and contains an asset freeze. It also purports to enjoin websites, online search engines, online shopping price comparison services and other businesses and publications from advertising, promoting, or marketing the websites or products in question. A similar prohibition is directed to website hosts, ISPs “or any other business supporting, hosting, or providing e-commerce services to defendants’ websites.” The order also directs registries or registrars to “delete all existing DNS entries” for the domain names and to enter the registrar’s default DNS address for the domain names, and orders a slew of service providers to "temporarily disable service to" the domain names.

On January 3, 2011, the court enters a preliminary injunction. The order notes that defendants were served with the papers on December 23 and, as of January 3, 2012, they did not submit any papers in objection. The injunction is similar in scope to the TRO. It contains a broad account freeze directed at third parties. It enjoins service providers from providing support to the websites. It tells the registries/registrars to delete all existing DNS entries and enter the registrar's default DNS address.
__

Venkat's Comments

This activity in the courts is crucially relevant to the SOPA/PIPA discussions taking place right now. Congress should take a look at what is going on in courts--if for no other reason than to figure out what relief judges think is authorized under current law (or what relief plaintiffs seem to obtain) and what potential abuses (if any) may occur, and also to explain how exactly SOPA/PIPA changes existing law. Obviously, just because a court authorizes a certain type of relief does not mean that there is always a proper basis for it. There are a lot of cites to "the court's inherent equitable power" in these orders. That's judicial code for: "there is no express basis for it, but I think certain relief is appropriate and I'm going to grant it."

It may not be easy to engender much sympathy for these defendants, but that's not the point. The system has certain procedural safeguards in place, and those should not go out the window just because you're dealing with a foreign online infringer. The relief that is being granted in these cases is extraordinary and is frequently being done with no notice or minimal notice. There is no way much of this will fly against a domestic litigant. In some cases, the initial papers are filed under seal, so defendants cannot determine what the allegations are against them until the preliminary relief--in the form of a shutdown--is awarded. Plaintiffs seem to be required to do nothing more than to present a declaration from their investigative team alleging that (1) defendants infringe, (2) defendants are located abroad, and (3) perhaps the defendants will evade or frustrate the court's relief.

Based on this, the court typically shuts off the defendant's website and also orders relief directed at third parties who may or may not be subject to the court's jurisdiction. These third parties are not before the court and have no chance to contest the scope of the relief being sought. I'm curious as to how they react when they are presented with the order. Do registrars routinely transfer domain names to a friendly registrar of the plaintiff's choosing? Is DNS deletion or revision routinely implemented in response to these orders?

It's interesting to compare the approach Deckers took in this case to the approach it took against alleged infringers who was selling counterfeit UGG boots out of a house (located in Illinois). See Deckers v. Migliore, 11-cv-06836 (N.D. Ill.; Nov. 15, 2011). Deckers didn't obtain any ex parte relief; they moved for a default after effecting service. Is this because a court was less likely to order the total shutdown of the point of sale of the infringing goods (in this case, a house), or because Deckers views infringement occurring on the internet as somehow different?

All of these ex parte shutdown cases (and there are probably many more out there) warrant a *close* look. It's disappointing to see so many of these orders sail through without any significant objection from the judges who sign them. Of course, they offer a preview of how rightsowners will proceed under SOPA. Many have highlighted the potential for abuse under SOPA. There's little doubt that rightsowners will push the envelope. They are already doing so under current law.
_______

Eric's Comments

Ex parte orders regarding foreign alleged infringers are out-of-control. Without sufficient regulation and without any adversarial pushback, rightsowners have learned that they can ask for ridiculous relief on an ex parte basis and get a judge to sign off on most or all of it. It's clear that rightsowners are asking for way more than the law allows, but judges seem to acquiesce. The results are two-fold:

1) the rightsowners are taking control over third party domain names on an ex parte basis and with questionable notice given to the domain name registrants
2) worse (IMO), judges are issuing orders that purport to bind third party non-litigants, such as domain name registrars, search engines and shopbots. The Federal Rules of Civil Procedure purport to limit such orders against non-litigants, but litigants and judges apparently interpret phrases like "acting in concert" incredibly broadly. The result is that these third party service providers--who aren't in court protecting their interests when the orders are being signed--are presented with a court order that imposes costs on them no matter what they do. They can take the action required in the court order...at some cost. Or they can contest the order...at some cost. Or they can ignore the order and risk being found in contempt. Naturally, these third parties will take whatever path is cheapest--which is usually to honor the order regardless of its legal legitimacy. (This is especially true in the case of domain name registrars, who typically make only a buck or two of profit a year off any particular domain name). So when the judge doesn't tightly control the ex parte requests being imposed on third parties, the judges are usually ensuring that the third party won't contest even an illegitimate order.

Rightsowners don't look so good in this process, but who can blame them for overreaching? If judges are freely handing out lollipops, why not ask for a lollipop! Plus, lawyers view themselves as zealous advocates, so anything that they can get a judge to sign must, by definition, be OK.

This means the real breakdown is occurring with judges. They are supposed to be the safeguards to prevent abuses, but judges are so dependent on adversarial proceedings that they are surprisingly flexible when only one side bends their ears. It looks we need some urgent judicial education about the issues raised by rogue website enforcements.

As Venkat points out, some members of Congress and their rightsowner patrons are also looking pretty silly right now. They keep insisting, with the straightest face imaginable, that rightsowners lack the current ability to bring effective enforcement actions against foreign rogue websites, and this is just FLAT-OUT WRONG. So either these folks are ignorant about what's happening in the courts or lying about it (or possibly both). Now, the entire legislative process is routinely detached from actual facts, so this is nothing unusual, but it's hardly a credit to those who are looking increasingly foolish as rightsowners in court keep getting what lobbying rightsowners and members of Congress keep insisting isn't possible to get. Get your story straight, please.

For the critics of SOPA and PIPA who have decided this legislation is the place to draw the line in the sand: I'm with you, brothers and sisters, but defeating the legislation doesn't end the problem. Until we fix what's taking place in the courts with rightsowners running hog-wild in ex parte proceedings, any legislative successes will be hollow. After we wipe out SOPA and PIPA completely, we need to proactively seek out at least two additional policy solutions:

1) We need to develop educational programs for judges about dealing with ex parte orders, especially when it comes to third party non-litigants.
2) We may need to fix or clarify the portions of the Federal Rules of Civil Procedures so that ordinary service providers aren't bound by ex parte orders against them. The rules should be clear enough that service providers don't have to spend their money to correct judicial errors. Maybe an automatic fee-shift if a plaintiff gets a judge to sign off on an overbroad order that a third party non-litigant successfully contests?

If you have any other suggestions about proactive steps we should take to fix the abuses we're seeing in court, please send them along.

Prior blog coverage of these topics:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

UPDATE FROM ERIC: A reader reminded us of the UDRP Sec. 3, which says: "We [registrars] will cancel, transfer or otherwise make changes to domain name registrations under the following circumstances...b. our receipt of an order from a court or arbitral tribunal, in each case of competent jurisdiction, requiring such action." So when a judge issues an ex parte order against a registrar, the registrar's hands may be tied. All the more reason for the judge to get it right and not rely on ex post pushback from the non-litigant third party. This also creates the possibility of abuse of ex parte orders, just like I discussed in this blog post. If we were to redraft the UDRP, we probably would not make it mandatory for registrars to honor ex parte orders.

Posted by Venkat at 11:49 AM | Copyright , Domain Names , Trademark | TrackBack

January 16, 2012

Copyright Doe Defendant Can’t Quash Disclosure Subpoena Anonymously—Hard Drive Productions v. Does (Guest Blog Post)

By Guest Blogger Elliott Alderman with brief comments from Eric

[Eric’s introductory note: Elliott Alderman is an IP attorney in Washington DC. I asked if he could guest-blog this opinion after calling it to my attention.]

Hard Drive Productions, Inc. v. Does 1-1,495, Civil Action No. 11-1741 (D.C. D.C. Dec. 21, 2011)

Overview: A DC Magistrate Judge recently ruled that a defendant cannot file anonymous motions to quash disclosure subpoenas in copyright file-sharing case. This ruling invites discovery abuses--and kicks due process.

The fragile balance between copyright owners enforcing their rights and the privacy interests of IP address owners was upended recently in Hard Drive Productions, Inc. v. Does 1-1,495, Civil Action No. 11-1741 (2011). There, the magistrate held that individuals who subscribe to the Internet through ISPs have no expectation of privacy in their subscriber information, since they have already disclosed this information to their service providers. So when copyright owners file disclosure subpoenas seeking subscriber information, local district court rules require that responding IP address owners must publicly identify themselves as part of filing a motion to quash.

There are two separate levels of privacy involved here: (1) public knowledge (including opposing counsel) of the IP address owner’s identity, and (2) the court’s knowledge of the parties involved in an action before it. A simple solution to the considerable detriment posed to subpoenaed parties is to allow motions to be filed under seal. At this stage, it is only discovery, not adjudication on the merits of the underlying claims, and there is no public benefit to disclosure before consideration of the motions.

Some background: As content owners move from suing download sites for inducement liability to a model of filing reverse class actions against unnamed individual users of P2P networks, discovery of infringers becomes crucial. However, content monitoring software, at best, may associate a digitally marked file with an IP address, but does not identify the owner of the account. And, significantly, the owner of the account is not, by definition, an infringer. So with IP addresses in hand, copyright owners must file disclosure subpoenas with ISPs to get the subscriber information associated with the identified IP addresses.

Typically, consistent with due process (and common sense), IP address owners responding to a disclosure subpoena have the right to preserve their anonymity while a judge reviews the propriety of the class action and the corresponding subpoena. Without the protection of anonymity, a motion to quash a disclosure subpoena is rendered moot, since disclosure of personal information on a public docket reveals the name and address information sought by the subpoena. See Achte/Neunte Boll Kino Beteiligungs GMBH & Co. v. Does 1-4,577, 736 F. Supp. 2d 212, 215 (D.D.C. 2010). Ironically, Achte/Neunte is one of the cases cited by the magistrate in support of public disclosure.

For a number of reasons, Hard Drive makes no sense. A subpoenaed owner essentially no longer has a right to contest disclosure, since challenging the merits of the discovery process reveals the very thing sought in discovery – his identity. And even if the judge later holds that the owner was misjoined, that an IP address is not an infringer, or any of the other bases that courts throughout the country are using to dismiss file-sharing defendants and kill these suits, plaintiffs have the personal information that they need to harass presumptively innocent parties. Worse still, plaintiffs will be encouraged to withdraw subpoenas before judges evaluate their merits, since the subpoenaed information will already be in hand.

As noted above, the Hard Drive magistrate also based his holding on Local Rule 5.1, which requires that all parties who file pleadings and papers with the district court must provide their name and full residence address, even if they are seeking to proceed anonymously. Judge Bates, who had assigned the case to the magistrate, originally ordered that motions to quash would remain under seal even if the moving party lost. How about a Solomonic compromise? Allow motions to be filed under seal, then only if the motion is denied would subscriber information be released, since the ISP is going to disclose the information anyway. Certainly there are policy reasons supporting the requirement that parties identify themselves to the court -- not the least of which is that it has no way of communicating with unrepresented Does – but permitting sealed motions balances the interests of copyright owners seeking to vindicate their rights against the privacy rights of IP address owners.

Moreover, the central premise of the decision, that there is no expectation of privacy in business transactions where information is disclosed to a third party, defies logic. One also shares information with telephone and insurance companies, and medical doctors – third parties all – but an expectation of privacy remains. Moreover, courts have implicitly recognized a privacy interest in ISP subscriber information, holding that copyright owners may not use the DMCA’s takedown notice-subpoena provisions to discover subscriber identities. See Recording Industry Association of America v. Verizon Internet Services, Inc., 351 F.3d 1299 (D.C. Cir 2003); In re Charter Communications, Inc., 393 F.3d 771 (8th Cir. 2005). And although it may be argued that when copyright infringement is at issue there is no free speech right to anonymity, see e.g. Sony Music Entertainment, Inc. v. Does, 326 F. Supp. 2d 556 (S.D.N.Y. 2004), the extortionate nature of the file-sharing cases is such that fairness would dictate that IP address owners should be able to anonymously defend against inclusion in classes of unrelated others.

Further, even assuming that an individual has no reasonable expectation of privacy in his subscriber information, he certainly does in his choice of movies. Part of the copyright troll business model, particularly for pornographic films, is the threat of publicly associating an individual with his private tastes. I have represented a number of owners who have had their routers hacked or had tenants or other unauthorized parties who used their Wi-Fi connections. With or without legal liability, too many of these parties have settled because privacy is a more expensive currency than cash.

In fact, in other contexts where there is the potential for stigma or embarrassment, courts typically evaluate the merits of the underlying case before requiring disclosure of confidential information, like a person’s identity. See, e.g. Doe v. Smith, 429 F3d 706 (7th Cir. 2005). The potential for harm to defendants in file-sharing cases is worse, however, because in addition to whatever shame or stigma attaches to being labeled an infringer or, worse, a porn hound (I think that’s the legal term), there are immediate legal consequences to stripping anonymity. Not permitting sealed motions is like having discovery first, then later evaluating its legitimacy.

Finally, the importance of the anonymous motion is intertwined with the architectural problems with the reverse class action model generally. This is not a white hat/black hat debate between content creators and piracy. Rather, the file-sharing cases are about the economics of joining unrelated parties in a class as a cost-effective way to pursue often non-meritorious actions, where secondary parties who are not infringers become the collateral damage. A number of court have dismissed these actions on a variety of grounds, including that:

* IP address owners are not intrinsically infringers. See VPR Internationale v. Does 1-1017, 2:2011cv02068 (C.D. Ill. 2011) (an IP address is not a person)
* different owners have different defenses; and
* unrelated owners do not act in concert by using a P2P program. K-Beech, Inc. v. John Does 1-85, Civil Action No. 3:11cv469 (E.D. Va. 2011); Raw Films, Ltd. V. John Does 1-32, Civil Action No. 3:11cv532 (E.D. Va. 2011); Hard Drive Productions, Inc. v. Does, No. C-11-01566 (N.D. Cal. 2011).

Moreover, the reliability of monitoring programs is suspect, Challenges and directions for monitoring P2P File Sharing Networks, University of Washington Technical Report, UW-CSE-08-06-01, and because a number of ISPs use dynamic IP addresses (where an IP address is rotated between several users) and “infringements” are generally date- and time-stamped, the odds of mistakenly associating a particular IP address with the “infringement” is greatly increased.

All this for want of a sealing motion!
___________

Eric’s Comments

This is a bad ruling. The court has guaranteed that the copyright plaintiff can unmask defendants simply by asking for a subpoena—either the subpoena is granted or the defendant reveals him/herself to fight the subpoena. That’s not the way the system is supposed to work. By creating a no-recourse situation for anonymous/pseudonymous defendants, the court has stripped them of essential due process rights. And, as we know, plaintiffs able to unmask defendants often can take advantage of substantial extra-judicial remedies, such as the public embarrassment factor in porn copyright cases. Thus, this ruling unfairly screws over anonymous defendants in these cases. It needs to be fixed.

For more on the topic, see Lior Strahilevitz’s paper Pseudonymous Litigation.

Posted by Eric at 10:00 AM | Copyright , Evidence/Discovery , Privacy/Security | TrackBack

January 09, 2012

Updates on Transborder Copyright Enforcement Over "Grandma Got Run Over by a Reindeer"--Shropshire v. Canning

By Eric Goldman

Shropshire v. Canning, 2012 WL 13658 (N.D.Cal. Jan. 4, 2012). Prior blog post.

This dispute involves complicated facts, so here's my understanding of what's happening:

The lawsuit involves the musical composition "Grandma Got Run Over by a Reindeer." I won't give the song a dignity of a link. The song is co-owned by a group that includes Shropshire and his ex-wife Patsy. A Canadian group, the Irish Rovers, covered the song. I can't tell if that cover was properly licensed. Canning, a Canadian, uploaded the Irish Rover's cover to YouTube and synchronized it with Christmas-themed pictures, such as reindeers. I infer that Canning uploaded the cover without express consent from the Irish Rovers. Shropshire eventually sent a takedown notice to YouTube, and Canning submitted a counter-notice. Shropshire then sued Canning for copyright infringement and a 512(f) claim for an impermissible putback notice. Canning subsequently got authorization from co-owner/ex-wife Patsy for his video.

In the first ruling last January, the court rejected (with leave to amend) Shropshire's synchronization claim, saying that Canning's synchronization took place in Canada, not the US, and therefore wasn't covered by US copyright law. The court also rejected (with leave to amend) the 512(f) claim for lack of a claimed misrepresentation. Finally, the court required Shropshire to bring in Patsy as a party, which Shropshire did.

In August, the court partially granted and denied a motion to dismiss the second amended complaint. The court held that "extraterritoriality [is] an element of a claim for copyright infringement rather than an issue of subject matter jurisdiction," and then that "the alleged act of direct copyright infringement – uploading a video from Canada to YouTube’s servers in California for display within the United States – constitutes an act of infringement that is not “wholly extraterritorial” to the United States." Copyright's strict liability made it irrelevant if Canning tried to upload to youtube.ca and had no idea that this would result in files being stored on US servers. [In my opinion, this is a harsh result as none of us have any idea about the geographic situs of servers in the cloud, nor do we care]. The court also partially upheld Shropshire's 512(f) claims from a 12(b)(6) dismissal motion.

That brings us to the most recent ruling, which is largely procedural. Shropshire had named ex-wife Patsy as a party, but they worked things out and settled, which led to Patsy being dismissed. Canning reiterated that Patsy was still an indispensable party to the litigation, but the court held that Shropshire satisfied the prior order by bringing Patsy in and then working out a deal with her. To me, the more interesting development is that the case started with no lawyers on either side, but now both sides have lawyered up in a big way--Shropshire's team lists 4 lawyers from DLA Piper (possibly the world's largest law firm), while Canning has 3 lawyers from Mark Lanier's law firm (not Lanier himself). Seriously, guys? We're talking about a comparatively obscure YouTube video, not Obamacare!

Putting aside the many quirks of this case (including the fact that Canning posted a cover recording and the implicit proxy war between ex-spouses), I think the case is interesting because it demonstrates that US copyright owners can bring--and are bringing--copyright enforcement actions in US courts against foreign alleged infringers. This is the kind of fact that seems highly relevant to SOPA/PROTECT-IP...not that the advocates would actually acknowledge what's taking place in court if it would undercut the case for the legislation--even if the court system today will provide them with their desired solutions without any damaging legislative fixes.

Posted by Eric at 12:04 PM | Copyright | TrackBack

January 06, 2012

Did a Court Eliminate 512(h) Subpoenas?--Maximized Living v. Google

By Eric Goldman with additional comments from David Gingras

Maximized Living, Inc. v. Google, Inc., 2011 WL 6749017 (N.D. Cal. Dec. 22, 2011). The initial 512(h) subpoena. The Justia page.

17 USC 512(h) is a relic of a different era. The basic architecture of 17 USC 512 seeks to put copyright liability on users instead of their service providers. However, for that scheme to work, anonymous/pseudonymous infringers must be identifiable so the copyright owners can sue them instead of the intermediaries. 512(h) seeks to expedite the identification of alleged infringers by allowing copyright owners to get an unmasking subpoena super-easily. All copyright owners need to do is file a subpoena request with a court clerk, and in response the court clerk *must* issue the subpoena--the copyright owners don't need to file a lawsuit, and no judge reviews or approves the subpoena's issuance.

Indeed, neither the clerk nor a judge have any statutorily provided discretion to refuse the subpoena. As a result, 512(h) is now badly out-of-step with the law governing anonymous/pseudonymous online defendants that has developed over the past decade in response to unmasking abuses. In other areas than copyright, plaintiffs usually must make some showing that their substantive claims are meritorious before a judge will issue an unmasking subpoena. (The level of the plaintiff's showing depends on a variety of factors). In contrast, a 512(h) subpoena issues irrespective of the substantive merits of the plaintiff's claims--thus opening up a backdoor channel to unmasking abuses. For example, last year I got anecdotal reports that doctors used 512(h) to unmask patients that anonymously/pseudonymously reviewed doctors in contravention of the Medical Justice-supplied contract. If we were redrafting 17 USC 512 today, we would pay a lot more attention to 512(h) and its privacy implications than we did in 1998. [On that front, I have a latent empirical research project to investigate what happened after 512(h) subpoenas issued, but this case may have mooted it.]

With that background, let me turn to this case. Maximized Living sells copyrighted material to chiropractors. Anonymous blogger Doe allegedly infringed Maximized Living's copyrights via a Blogspot blog post. Maximized Living submitted an apparently overbroad 512(h) subpoena request to Google to identify Doe, and Doe successfully quashed the subpoena for its irregularities. Nevertheless, Doe apparently removed the infringing material from the blog. After that removal, Maximized Living sent Google a putatively corrected 512(h) subpoena request to unmask Doe. In this ruling, the court quashes Maximized Living's 512(h) subpoena for a second time.

The court does something goofy to reach this result. The court holds "that the subpoena power of s 512(h) is limited to currently infringing activity and does not reach former infringing activity that has ceased and thus can no longer be removed or disabled." Thus, because Doe had removed the infringing material after the first 512(h) subpoena was quashed, there was no infringing activity taking place when the second 512(h) subpoena request was made.

The problem with this result is that copyright owners must submit a 512(c)(3) takedown notice to service providers before seeking a 512(h) subpoena. Most service providers will take down the allegedly infringing material in response to the 512(c)(3) notice, so unless the copyright owner moves really fast to make its 512(h) request, the infringing material invariably will be down before the 512(h) subpoena request gets filed with the court--leaving those copyright owner in the same place as this one (i.e., submitting a 512(h) request when there's no current infringement). Below, David Gingras explains why the court may have misread the statute.

As a practical matter, this case's result may not be earth-shattering even if it survives appeal. I believe most service providers honor 512(h) subpoenas without much scrutiny and perhaps without notifying the targeted individual. This case will only help if the targeted individual challenges the subpoena, which will only happen if the service provider notifies the individual before releasing the unmasking information and the individual gets to court quickly enough. Because the service providers are a critical player in this process, how they handle 512(h) subpoenas warrants careful attention. I'd be game to work with you to try to get service providers to tell us more about their 512(h) handling procedure and if they give notice to the users--and wait for any quashing effort to materialize--before forking over unmasking info. [FWIW, Google appears to have done both, so they get a gold star for the day.]

Copyright owners also can avoid this result by filing the 512(h) subpoena request basically at the same time as they send the 512(c)(3) notice. That way, when the 512(h) subpoena is filed, there is still infringing activity occurring, even if it's quickly eliminated by the service provider responding to the 512(c)(3) notice. My guess is that many copyright owners will be reluctant to do this because it will increase the cost and time required to target infringing material when quick-filing of a 512(h) request will help in only a small number of situations. Thus, changing the takedown protocol to add a 512(h) filing probably isn't cost-effective.

Finally, even if 512(h) isn't available, the copyright owner can still seek unmasking through a John Doe lawsuit. This isn't as low-cost as 512(h) and will trigger judicial screening of the subpoena request before issuance, so 512(h) is better for copyright owners if they qualify. Nevertheless, copyright owners can still achieve unmasking, and perhaps this case simply indicates that 512(h) is a much more highly specialized solution than we thought.

Finally, a personnel note: one of the plaintiff's lawyers is Kenton Hutcherson. You may recall that last year I blasted an article by Kenton for advocating that plaintiffs scrub search results by taking advantage of Google's apparently lax policy towards court orders. Here, it looks like the judge didn't respond well to at least two of the plaintiff counsels' choices:

1) the overreach in the initial 512(h) subpoena request
2) the submission of a second 512(h) without the court's permission, as specified when the court quashed the first subpoena

One possibility is that the court reached its odd substantive conclusion in response to the plaintiff lawyers' errors.

________________

Comments by David Gingras

[Eric's introduction: Many of you already know David Gingras due to his positions as General Counsel for Ripoff Report and litigation counsel for thedirty.com. While drafting this post, I sent this opinion to David for his thoughts, and his statutory analysis in response was so useful that I asked his permission to share it]

I think it’s extremely clear the court make the wrong decision here. I think the court should have found that the subpoena was entirely appropriate under § 512(h) even if the allegedly infringing material had been removed and the infringing activity stopped.

The court’s premise seemed to be that you could only use a pre-suit subpoena under § 512(h) to identify current infringers, not a former infringer who had stopped infringing. By itself, this seems like a very dubious distinction. What’s the difference?

As far as I can see, the conclusion was based on the fact that you obviously can only use what is commonly referred to as a “DMCA notice” (i.e., a takedown demand under § 512(c)(3)(A)) to address active infringements. In turn, that sounded correct because § 512(c)(3)(A) requires the party submitting the notice to identify, inter alia: “the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled." By using the present and future tenses here, it’s beyond obvious that this section doesn’t apply to past acts of infringement. In other words, you can only use a § 512(c)(3)(A) notice to address current/ongoing infringements (DUH – if the material was already removed, you wouldn’t need to a send a takedown notice anyway, right?)

Up to this point, the court interprets the DMCA in a common sense way, but then it erred when it assumed (incorrectly), that because § 512(h) subpoenas are necessarily premised on a § 512(c)(3)(A) takedown notice, that requires the court to find that where the infringement has stopped, the right to pursue a § 512(h) subpoena also stops. That’s just totally inconsistent with the plain language of § 512(h)(5) which talks about the duties of a party on the receiving end of a DMCA notice (like Google) once they receive the follow-up subpoena:

(5) Actions of service provider receiving subpoena.--Upon receipt of the issued subpoena, either accompanying or subsequent to the receipt of a notification described in subsection (c)(3)(A), the service provider shall expeditiously disclose to the copyright owner or person authorized by the copyright owner the information required by the subpoena, notwithstanding any other provision of law and regardless of whether the service provider responds to the notification. [italics added]

The way I read that section, it seems pretty simple – you can get and serve a § 512(h) subpoena either contemporaneously with the § 512(c)(3)(A) takedown notice, or the subpoena may be issued subsequent to that notice; i.e., at a later time when the infringement has already stopped. Either way is perfectly fine, which makes sense.

In this instance, the way the court interpreted § 512(h) makes the words “or subsequent to” totally superfluous, so we know the court’s conclusion is incorrect. Furthermore, the last few words of § 512(h)(5) seem to suggest that § 512(h) subpoenas may or may not come after a service provider has already “responded” to the takedown demand; i.e., after the material has already been removed – that’s another strong indicator that the right to pursue a § 512(h) subpoena may start with a § 512(c)(3)(A) takedown notice, but it does not stop simply because the infringing material was removed.

Posted by Eric at 09:18 AM | Copyright , Derivative Liability , Privacy/Security | TrackBack

January 05, 2012

SOPA/PROTECT-IP/OPEN Linkwrap #2

By Eric Goldman

It's been a busy time for news related to SOPA (the Stop Online Piracy Act, not the Stop Online Privacy Act, although that could be an unintended result!), PROTECT-IP/PIPA, and the OPEN Act. In a bit, I'll recap some links. First, though, some general thoughts about the last month.

As I predicted, SOPA has been incredibly divisive. It has largely boiled down to Hollywood in support vs. the rest of the world against, with an emerging "with me or against me" attitude. What a shame. We get much better results when the tech and entertainment community collaborate rather than play zero-sum games.

Naturally, I think Hollywood has made several strategic miscalculations here. First, the outrageousness of its proposals has mobilized the tech community. It's been fascinating watching companies and politicians scramble to disavow themselves from SOPA when targeted by the anti-SOPA advocates. That NEVER happens when it comes to a Congressional proposal to regulate technology. Perhaps this mobilization will be a flash in the pan, or perhaps Hollywood has poked a sleeping tiger once too often.

Second, Hollywood's credibility with its financially-sponsored politicians may be wearing thin. Politicians will happily take its money, but they don't enjoy looking like fools--and many SOPA supporters have, in fact, looked pretty silly while being left twisting in the wind by their Hollywood patrons. Money will buy a lot of politician patience, but the goodwill reservoir is not bottomless.

Third, even if Hollywood can succeed in passing something like SOPA or even PIPA, I believe it would be counterproductive to its long-term interests. As I've mentioned before, we all benefit from having larger common markets (see, e.g., NAFTA or the EEC), and the Internet has emerged as the largest common market of all. A Balkanized Internet will devolve into disparate smaller markets that represent less value for everyone.

A final counterproductive point, although Hollywood may not care. SOPA/PIPA absolutely will drive US dollars--and jobs--overseas. For example, I ditched GoDaddy as my domain name registrar and took my business to a foreign registrar who won't be subject to SOPA/PIPA. If other folks make the same calculations I did, collectively it will be a boon for foreign service providers and a net loss for US service providers. At best, SOPA/PIPA preserve some jobs at the expense of others; my guess is that our economy will suffer a net reduction in jobs. Just what we need during this protracted economic downturn.

The amazing thing is: despite the complete lack of credible empirical evidence supporting SOPA/PIPA, and despite a groundswell of grassroots opposition to it, and despite companies and politicians dropping their support of SOPA/PIPA when the spotlight is cast on them, Hollywood might still be able to succeed in this rent-seeking endeavor. It's evidence of just how well Hollywood has embedded itself into Congress' psyche (and wallets).

Some news items since my last linkwrap:

* OPEN has been introduced in the Senate as S.2029.

* CDT's list of opponents. As you know, I am on it.

* Mike Masnick broke a huge story about Dajaz1.com, showing how our government repeatedly broke the law in falsely pursuing a so-called rogue website. The conduct of the government is chilling--things like this aren't supposed to happen in our democracy!--and if heads don't roll for the coverup, it will be another nail in the coffin of our republic.

* The government also lost the Rojadirecta case. Also, an in-depth look at the Operation in Our Sites bust of Ninja Video, where the government continues to make questionable interpretations of criminal copyright law.

* Constitional Law scholar extraordinare Laurence Tribe and advocate Marvin Ammori both explained how SOPA violates the First Amendment. Marvin followed up with a First Amendment assessment of the manager’s amendment. Corynne McSherry’s thoughts.

* Why aren't members of Congress listening to the opposition? Maybe it has something to do with the revolving door between government and industry. See this article: SOPA revolvers: Sixteen former Judiciary staffers lobby on online copyright issues.

* Wikimedia’s General Counsel Geoff Brigham explains “How SOPA will hurt the free web and Wikipedia”

* One of the many unanswered questions: who is a rogue website and how many are there? CNET News.com suggests that SOPA is all about taking out just one website--The Pirate Bay. Seriously, we're going to break the Internet because of The Pirate Bay? Talk about collateral consequences for something that could be handled with incredibly narrow legislative fixes—or better yet, with precise transborder enforcement cooperation.

* EFF on the good and bad in the OPEN Act.

* Mike Masnick completely destroys Lamar Smith’s so-called statement of facts in support of SOPA. Reading articles like this remind us that support for SOPA/PROTECT-IP is hardly about "the facts."

* More "fact" debunking, this time by Julian Sanchez.

* Speaking of "the facts" or the lack thereof, it appears that the House Judiciary Committee is massively overclaiming who supports SOPA. Misleading the American public apparently is just business as usual in DC.

* Meanwhile, companies are realizing that being listed as a SOPA supporter isn't necessarily good for business. SOPA opponents targeted GoDaddy, who instantly declared their lack of support for SOPA but remains completely untrustworthy and hypocritical.

* Meanwhile, SOPA is turning into an election-year issue, and politicians are beginning to learn the power of Reddit.

* If you want to speak up, check out SOPA Track and find out where your legislators stand. My Congresswoman, Anna Eshoo, has been firm in her opposition to SOPA, but the California senators are both PIPA co-sponsors because they too deeply in bed with Hollywood to listen to other constituents. So fair warning to Sen. Boxer and Feinstein--I plan to vote for your opponents, whoever they are, in the next election cycle.

* Great article about how SOPA will become a Trojan horse for all types of online content censorship, not just the suppression of rogue websites.

* Opposition to SOPA is bipartisan: “I suggest the left and right unite and pledge to defeat in primaries every person named as a sponsor on H.R. 3261, the Stop Online Piracy Act.”

Just a reminder because everyone knows SOPA is so ridiculously extreme: PROTECT-IP is NOT an acceptable "compromise" to SOPA. PROTECT-IP is also extreme. As I indicated previously, if we're going to have any legislative discussions about rogue websites, we should start with the OPEN Act and iterate from there. In light of the action in the courts (see the links below), any legislative solution should be coupled with increased immunities for Internet intermediaries so that they don't just coddle the rightsowners irrespective of the legislation.

FWIW, I have called Rep. Eshoo to thank her for her opposition to SOPA, and I've contacted Sens. Feinstein and Boxer to let them know that I disagree with their positions on PROTECT-IP. Have you contacted your legislators to tell them how you feel? If you don't speak up, they won't know where you stand.

Prior blog coverage of SOPA/PROTECT-IP/OPEN:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 09:15 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

January 03, 2012

Nov.-Dec. 2011 Quick Links, Part 2 (Extended IP Edition)

By Eric Goldman

Copyright

* Costco v. Omega (E.D. Cal. Nov. 9, 2011). On remand after the disappointing non-result from the Supreme Court in this case, the district court gives Costco a decisive win, holding that Omega engaged in copyright misuse:

Omega concedes that a purpose of the copyrighted Omega Globe Design was to control the importation and sale of its watches containing the design, as the watches could not be copyrighted. Accordingly, Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.

The net effect is that Costco violated copyright law's importation clause but Omega's copyright misuse makes the importation not actionable. This is one of the most significant copyright misuse decisions we've seen. Assuming it goes to the Ninth Circuit again, it will be interesting to see what they do with it. If this latest ruling stands, Omega's legal hack will be decisively shut down; and other manufacturers trying to use copyright to control their channels for non-copyrightable articles will want to reevaluate their approach.

* The Righthaven debacle continues to wind towards its messy but inevitable conclusion. Some of the items from the last couple months that caught my attention:

- Every time Righthaven's lawyers whine about opponents' unfair litigation tactics, I'm dumbstruck by the duplicity.

- Stephens Media dropped its efforts to contest that Democratic Underground made a fair use by republishing a newspaper article excerpt.

- Righthaven v. Wolf: "The Court admonishes Mr. Mangano regarding his lack of civility. The motion for reasonable attorney's fees in the amount of $32,147.50 and costs of $1,000.85 is GRANTED."

- Righthaven LLC v. Newsblaze LLC, 2011 WL 5373785 (D. Nev. Nov. 4, 2011). Yet another dismissal for lack of standing.

- the auction for Righthaven.com is going on right now. Current high bid is $1,900.

* C-70/10, Scarlet Extended SA v. Societe Belge des auteurs, compositeurs et editeurs (SABAM) (ECJ Nov. 24, 2011). Some interesting quotes from an ECJ opinion:
- "EU law precludes the imposition of an injunction by a national court which requires an internet service provider to install a filtering system with a view to preventing the illegal downloading of files"
- "The filtering system would also be liable to infringe the fundamental rights of its (Scarlet's) customers, namely their right to protection of their personal data and their right to receive or impart information"
- “E.U. law precludes an injunction made against an Internet service provider requiring it to install a system for filtering all electronic communications passing via its services, which applies indiscriminately to all its customers, as a preventive measure, exclusively at its expense, and for an unlimited period”

* Brownmark Films LLC v. Comedy Partners, 2011 WL 6002961 (E.D. Wis. Nov. 30, 2011): In awarding a fee shift to defendants, "the Court finds that Brownmark's legal positions were also objectively unreasonable, and thus their position was frivolous. To this Court, there is little that could justify the plaintiff's stated view that the South Park version was not parody....given the transformative nature of the use and the lampooning Brownmark's original received, there is ample reason to believe that South Park's use would have greater spurred the market for the original. In the internet era, with information freely and quickly accessible, viewers interested in South Park's version could turn to the internet to find a copy of the original. And any confusion over which version was the original could be supplied to online viewers through a statement at the video's web page. For all of these reasons, the Court finds that Brownmark was objectively unreasonable in its position that South Park's use was not fair." Wendy Davis' writeup.

* Carolyn Wright, a/k/a PhotoAttorney, who helps photographers enforce their copyrights, got side-swiped in a misguided enforcement action and had her photo site mistakenly taken offline by a DMCA takedown notice (not surprisingly, GoDaddy was in the middle of this).

* UC Berkeley revamps its policies about student note-taking and recordings of classes. It seems a little odd to encourage faculty members to be sending 512(c)(3) takedown notices freely. James Grimmelmann has more criticisms.

* Gibson v. Amazon (C.D. Cal. Sept. 8, 2011). The court rejected a copyright infringement case against Amazon, Urban Dictionary and others. Gibson is appealing to the Ninth Circuit.

* RIAA is in pre-litigation enforcement mode against ReDigi for reselling digital files.

* The Zynga-Vostu litigation settled.

* Ars Technica: Warner Bros: we issued takedowns for files we never saw, didn't own copyright to

* Megaupload brought a 512(f) suit against UMG for wrongfully taking down a promotional video. The complaint. The contract. James Grimmelmann's comments.

* The economics of the record label-online music site deals look very, very bad for the music sites.

* Techdirt: Congressional Research Service Shows Hollywood Is Thriving

* David v. CBS complaint. Tertiary infringement re-redux: Download.com sued again for secondary copyright infringement for distributing LimeWire and BitTorrent clients.

* A Singapore newspaper sued Yahoo News for copyright infringement.

* An analysis of the Trans Pacific Partnership (TPP).

Trademark

* 1-800 Contacts, Inc. v. Lens.com, Inc., 2011 WL 5403368 (D. Utah Nov. 4, 2011). The court denies 1-800 Contacts' motion for post-judgment relief based on newly discovered evidence. This case could be a textbook case of trademark bullying--remember, 1-800 Contacts has spent well over $650k on this case and Lens.com made $20 (not a typo) of profit directly from its keyword ads based on 1-800 Contacts' trademarks. Prior blog post.

* Speaking of trademark bullying, does an "Eat More Kale" t-shirt infringe any IP rights that Chik-fil-A has in "Eat Mor Chikin"? See the 2011 C&D letter, the 2006 C&D letter and the 2006 C&D response. I assume most kale eaters don't overlap with Chik-fil-A consumers. But, Paul Levy explains why there should be a pox on both parties' houses.

* Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC., 2011 WL 6055489 (D. Neb. Dec. 6, 2011). In a trademark lawsuit, the defendant asked for:

REQUEST NO. 32: All documents referring or relating to purchasing of keywords, “Ad Words,” “sponsored links,” or other advertisements for search engines and any efforts to achieve search prominence on search engines, including but not limited to Your purchase, or consideration to purchase, the name “Lively Skin” or the URL www.livelyskin.com.

REQUEST NO. 37: Documents referring or relating to communications with Google to purchase “lively skin” and “livelyskin.com” as keywords or “Adwords.”

The court says (cites omitted):

In support of its motion to compel, Ishtar states that Lovely Skin's production of documents in response to these requests are “deficient for two reasons.” First, the Google information lacks the dates that the keywords were used, which are necessary to establish “(1) whether Lovely Skin's marks had achieved secondary meaning when Ishtar entered the market; and (2) the extent of Lovely Skin's inequitable use of the term “livelyskin” in its keyword advertising campaigns.” Second, Ishtar claims that as a result of its recent Internet searches, Ishtar has learned that “Lovely Skin possesses additional information regarding keyword purchases made by Lovely Skin through other search engines.” The Court finds that the information sought by Ishtar is relevant to its affirmative defenses of the claims made against it by Lovely Skin.

* Partners for Health and Home, L.P. v. Seung Wee Yang, 2011 WL 5387075 (C.D. Cal. Oct. 28, 2011):

Defendants have infringed Plaintiff's Perma–Life trademark by each of the following acts, taken either individually or as a whole:

a. Registering the domain www.perma-life.co.kr and using it to promote their competing Pearl Life cookware;

b. Applying the metatags “perma life” and “permalife” to the website at www.perma-life.co.kr through which they sold their competing Pearl Life cookware;

c. Applying the term “permalife” as visible video tags (indexes) on videos promoting Pearl Life cookware which they posted on the Internet at video sharing websites YouTube (www.youtube.com) and Tag Story (www.tagstory.com), and on the “blog” site Daum (www .daum.net).

d. Purchasing the term “permalife” as an Internet search engine advertising keyword to direct Internet users to their website at www.pearllife.com at which they advertised their Pearl Life cookware.

* Foreword Magazine Inc. v. Overdrive Inc., No. 10-1144 (W.D. Mich. Oct. 31, 2011). Offering to sell a domain name after getting a C&D can't be introduced as evidence of bad faith in the resulting ACPA suit.

* Weather Underground v. Navigation Catalyst (E.D. Mich. Nov. 9, 2011). Typosquatters' liability for ACPA violations must be evaluated on a domain name-by-domain name basis, not based on the defendant's entire portfolio; and ACPA bad faith cannot be established on a "willful blindness" standard.

* iYogi Holding Pvt. Ltd. v. Secure Remote Support, Inc., 2011 WL 6291793 (N.D.Cal. Oct. 25, 2011). A default judgment against a competitor who created fake reviews bashing the plaintiff.

* Fordham sent a trademark demand letter to Texas Wesleyan for using the acronym "CLIP" to describe its IP center, which garnered derision from many other IP professors. The demand letter (currently set to private; I'm trying to fix that).

* Multi-Time Machine v. Amazon complaint. A watch manufacturer sues Amazon for trademark infringement based on Amazon's internal search engine's results.

* Night Owl Games v. Zynga complaint. Another game developer seeks a declaratory judgment against Zynga over the -ville trademark, this time "Dungeonville."

* Harvard spikes a Yale t-shirt making fun of it.

* Rebecca provides three updates on Southern Snow Manufacturing Co. v. Sno Wizard Holdings, Inc. (see my prior blog post on the case): insurer had duty to defend, a baffling battle over false trademark marking, and a further rejection that metatags matter.

Patents/Trade Secrets

* The Trade Secret Litigator: The America Invents Act: What Will the Impact of the New Patent Law's "Prior Commercial Use" Defense Have on Trade Secret Protection?

* Coca-Cola turns the vault for its secret formula into a tourist attraction.

* The producers of the Bachelor/Bachelorette sued Reality Steve for inducing show participants to leak spoilers. Reality Steve’s response.

* Are strict limits on e-discovery coming for patent cases?

* All Things D reports on Abhyanker v. Benchmark Capital, an idea theft lawsuit against a VC fund involving the entrepreneur who also is behind Trademarkia.

Posted by Eric at 01:05 PM | Copyright , Domain Names , Evidence/Discovery , Patents , Trade Secrets , Trademark | TrackBack

January 02, 2012

UGC Website Hit With Spoliation Sanctions--Io v. GLBT

By Eric Goldman

[This is one of those blog posts that got stuck in queue. It's still pretty interesting, so I'm sharing at this relatively late date. Happy new year!]

Io Group Inc. v. GLBT Ltd., 2011 WL 4974337 (N.D. Cal. Oct. 19, 2011)

This case involves Io, the pornography company that lost Io v. Veoh, the main 17 USC 512 case I teach in my Internet law course. The defendants in this case are British. They run a series of UGC porn websites where users can get some porn for free and then must pay for additional access either with cash or by uploading their own content. The plaintiffs seek to hold the defendants liable for copyright and trademark infringement because users are allegedly committing copyright infringement by uploading the plaintiffs' porn. The defendants are defending on 17 USC 512 and other grounds.

Being in Britain, the defendants are governed by the Data Protection Act. They interpreted that act to require them to flush lots of data very quickly. Perhaps they have been overly zealous about implementing the DPA such that their interpretation isn't so credible. For example, they automatically deleted all incoming and outgoing email after 3-4 days, and they didn't change this for more than a year into the lawsuit. They also completely deleted all files that were subject to a takedown notice, so it wasn't possible for plaintiffs to see which files had been removed. Their answers to the judge's pointed questions apparently weren't very satisfying, and eventually the defendants went AWOL. So it's a little hard to tease out any legitimate DPA-based objections the defendants might have had from their other questionable choices.

FWIW, I'm not a DPA expert, but the DPA requires that the service provider keep data only so long as reasonably necessary. I would think legal obligations/discovery rules satisfy that standard.

The court's opinion gives some insights into the evidence that would be useful for the 512 safe harbor. The defendants completely wiped away any UGC files they disabled. The court says:

With respect to the deleted audiovisual files, Plaintiffs are prejudiced by not being able to examine the files and related metadata for any "red flags" indicating that infringement was likely. Such red flags could render Defendants ineligible for safe harbor protections of the Copyright Act.

This is consistent with language in the Ninth Circuit's subsequent ruling in UMG v. Shelter Capital. The court continues:

The loss of takedown notices and corresponding removal notification emails also prejudices Plaintiffs. First, the trier of fact may consider the extent of copyright infringement on Defendants' websites when analyzing a claim of inducement to infringe....Although the number of takedown notices does not alone determine the amount of actual infringement on the site, a large number of notices could indicate that a large portion of the material on the site is infringing. In addition, in order to be eligible for safe harbor protection, Defendants must show that they have policy in place providing for the termination of repeat infringers. 17 U.S.C. § 512(i)(1)(A). Defendants claim that they have such a policy in place, but without the ability to examine the takedown notices and corresponding emails, Plaintiffs have no way of challenging the implementation and enforcement of the policy because they cannot examine whether Defendants actually terminated individual users who repeatedly posted infringing material.

I'm not clear about the relevance of the percentage of infringing activity, but for more on the evidentiary issues associated with inducement, see the Grokster ruling. Finally, the court says:

the destruction of Defendants' internal emails renders it impossible for Plaintiffs to explore Defendants' motivation and state of mind in operating their websites; this is key to Plaintiffs' claim of secondary infringement based on inducement

For the evidence spoliation, the court hits the defendants with adverse inference sanctions:

Plaintiffs are entitled to adverse inference instructions in the form of rebuttable presumptions. Given the specific evidence destroyed by Defendants, the court orders the following rebuttable factual presumptions: 1) third parties posted material on Defendants' websites that infringed Plaintiffs' copyrights; 2) Plaintiffs submitted takedown notices to Defendants regarding the infringing material; and 3) Defendants did not take steps to remove Plaintiffs' infringing material from their websites.

Unless the defendants magically find some exculpatory evidence, it sounds like those inferences will nail them on the substantive rulings. The court also awarded $15,000 in attorneys' fees.

This case raises a number of interesting issues.

First, exactly what evidence is plaintiffs entitled to when trying to overcome a service provider's 512 defense? As far as I can tell, there are few limits because just about anything might support an inducement finding. The otherwise defense-favorable ruling in UMG v. Shelter Capital provides some other ideas about information that plaintiffs can seek. Summing all this up, as a practical matter, 512's safe harbor is nifty, but it's an increasingly expensive proposition for both parties. Contrast this with 47 USC 230, where many immunized lawsuits are tossed on a motion to dismiss without any discovery at all. Not only does that allow judges to issue clean and quick rulings, but it saves both plaintiffs and defendants a lot of coin. Note to statutory drafters: it's so important to consider the evidentiary implications of your legislative drafting. The way the statute implicitly allocates discovery costs has a huge substantive effect--especially if the goal is to create a safe harbor or immunity. On this point, even if 512 usually gets to the right result, the safe harbor is miscalibrated from an evidentiary standpoint.

Second, service providers hoping for a 512 safe harbor are often uncertain about what data they should or must retain. After Grokster, UGC sites became nervous about potential inducement liability. As a result, I believe it's become common to recommend that UGC sites flush as much material as quickly as possible (and before litigation becomes "reasonably anticipatable") to reduce the risk that the material will be cited as evidence of inducement or otherwise disqualify the 512 safe harbor. However, UGC sites don't want to look like they are trying to evade the truth or, worse, disrespecting the court (as the defendants in this case might be perceived as doing) or engaged in evidence spoliation, so how should UGC sites strike an appropriate balance? I'd welcome your thoughts about that.

Third, irrespective of how we feel about these particular defendants, their underlying point about the intersection between 17 USC 512 and user privacy is worth considering. 17 USC 512(m) is entitled "Protection of Privacy," so the drafters of 512 recognized the push-pull issue here. Assume for a moment that the defendants in this case honestly wanted to provide their users with private browsing/uploading/downloading, something that might be desirable in the context of these defendants' service. It seems logical that the service provider seeking a privacy-enhanced UGC service would flush its logs, email and disabled files promptly and make those representations to its users. Here, it appears the court would undo those promises, forcing the service provider to retain data it didn't want to keep for the benefit of copyright plaintiffs. I understand that may be our current state of play, but I see the potential for mischief too.

Posted by Eric at 08:20 AM | Copyright , Derivative Liability , Evidence/Discovery , Privacy/Security | TrackBack

December 28, 2011

Why Are Korean Copyright Owners Suing an Australian Infringer in San Jose, California?

By Eric Goldman

DFSB Kollective Co., Ltd. v. Tran, 2011 WL 6730678 (N.D. Cal. Dec. 21, 2011)

In light of SOPA, I am paying closer attention to transborder copyright and trademark enforcement actions. After all, SOPA is designed to redress foreign rogue websites, so the results being obtained in court today are highly relevant to the policy debates. As we've previously shown, a lot of SOPA remedies are already being awarded by judges--for better or worse (mostly the latter)--and some of those rulings are raising some of the same due process concerns we have about SOPA.

Today's ruling baffles me, and I'm hoping you'll help me understand the case and the issues. The plaintiffs own copyrights in Korean pop music and are based in Seoul. The defendant is Kenny Tran, who runs ihoneyjoo.com and ihoneydew.com (both offline--more on that later) and is peripatetic on social media. Tran allegedly posted infringing music files and album covers to cyberlockers and other sites and then linked to the uploads from his social media accounts. The plaintiffs claim Tran is "one of the biggest illegal uploaders (and free download link providers) of Korean music in the world" and his site generated more traffic than the top 3 legitimate Korean music sites combined. (If true, this crucial information about consumer behavior made me think of this meme). Tran allegedly profited from his actions by showing ads and soliciting PayPal donations.

The plaintiffs claim they repeatedly sent takedown notices to Tran's service providers, but Tran allegedly evaded enforcement by opening new accounts or switching vendors. So they sued Tran in San Jose, California, where they happened to draw Judge Koh, the only federal district court judge of Korean descent. They claim to have served him in Australia, but Tran hasn't responded to the lawsuit at all.

As usual in default judgments, the judge basically rubber-stamps the plaintiffs' arguments. She finds personal jurisdiction over Tran, a result that's become almost pro forma in copyright infringement cases (see the multiple Righthaven jurisdictional wins). As for Tran's ties to California, Judge Koh says:

it appears as though Defendant has specifically used several California companies to further his scheme of perpetrating illegal downloads. Tran uses California companies Facebook, Twitter, and YouTube to promote the websites he operates, and to allow users access to the pirated copies of the copyrighted music and artwork. Additionally, it appears as though Defendant uses a privacy service located in California to shield his identity....In light of the nature of the websites run by Defendant, it appears that Defendant's activities are expressly aimed at California.

Similarly, with respect to how Tran caused harm in California, the opinion says:

Tran relied on several California companies to further his scheme of providing copyrighted music to a world-wide audience of users. Additionally, given the evidence provided by Plaintiffs of the reach of Defendant's activities, Tran likely knew that harm—in the form of distribution and download of copyright protected material—would be suffered in the forum state.

Completely missing from this discussion is how the plaintiffs suffered any harm in California or, for that matter, had any ties themselves to California. The opinion offers nothing on that point, leaving open the possibility that the plaintiffs are engaged in strategic forum-shopping. The opinion also does some serious arm-waving about the other factors in the personal jurisdiction tests that evaluate the forum's appropriateness--because the plaintiffs apparently didn't provide anything to show their interest in California, the opinion just says a lot of factors are "neutral" when in fact she's working with no information at all. This is typical of default judgments; we usually wouldn't see such corner-cutting in an adversarial proceeding. Similarly, the conclusion that using Twitter or Facebook makes defendants subject to California jurisdiction would not survive properly adversarial proceedings.

The opinion finds direct copyright infringement of 11 albums/129 songs. It also finds contributory copyright infringement, although it never says who the direct infringer is given that Tran allegedly uploaded the files himself (the failure to identify a direct infringer in a contributory copyright infringement analysis is a common error on my Internet Law exam, a mistake that my students usually regret when they get their grade). The opinion punts on the inducement question, saying "there is some doubt as to whether [inducement] is a separate cause of action or more properly considered a species of contributory infringement."

Based on the copyright infringement, Judge Koh approves $5k statutory damages per infringement, for a total of $645k. She also grants the following injunction:

Defendant Kenny Tran, and his officers, agents, servants, employees, and attorneys, are permanently enjoined from copying, displaying, or distributing Plaintiffs' works without permission, and from providing internet links or instructions enabling others to access infringing copies of Plaintiffs' works.

In light of recent injunctions involving foreign rogue websites, this injunction is quite restrained.

This ruling leaves open the big unanswered question: why the plaintiffs didn't sue Tran in Australia? If they really wanted to shut him down, they are more likely to get the desired enforceability from an Australian court.

One possibility is that the plaintiffs knew Tran would default in a US action but feared he would fight in Australia, so suing in San Jose was a quick way to get a default judgment. But is the default judgment actually worth more than the paper it's printed on? I assume they will have some difficulty enforcing their damages award and even more difficulty enforcing the injunction given Tran is in Australia. If Tran breaches the injunction and is held in contempt by a US court, then what? Getting a quick but unenforceable win seems like an odd move.

Another possibility is that the plaintiffs will use the ruling to cut off Tran from US service providers, like kicking Tran off Facebook, Twitter, etc. Interestingly, the injunction doesn't specifically reference any remedies against these third-party service providers, unlike some of the other troubling rogue website enforcements we've blogged about recently. Furthermore, many of those service providers already are willing to kick Tran off as a repeat infringer, but they won't set up the screens required to proactively prevent Tran from setting up new accounts, so I don't see how this injunction helps.

Nevertheless, Tran's two domain names are already down. Did the domain hosts cut off the domain names only because of this ruling? Or would they have done the same with an Australian ruling of infringement? Or, especially in the case of GoDaddy, merely at the copyright owner's request without any judicial adjudication at all?

A third possibility is that the plaintiffs had copyright registrations in the United States but didn't have the requisite copyright standing in Australia. I haven't researched this, but it seems doubtful.

As you can see, I have a lot of questions about this case and not a lot of answers. I'd welcome your thoughts about what's going on here and what it might mean. (As usual, let me know if it's OK to post your email to the blog).

One thing I do know: our judicial system depends on adversarial proceedings, and it frequently breaks down quickly when judges are asked to make rulings based on hearing only one side of the story. In this case, Judge Koh--a shining light in our federal judiciary who normally issues rock-solid opinions--totally sidestepped a deeper inquiry into the plaintiffs' interests in California. I can't imagine she missed this glaring hole in the plaintiffs' case (the opinion unmistakably arm-waves on the factors that would prompt that inquiry), so perhaps she just wanted to quickly move this uncontentious case off her docket. However we get there, it's clear that judges won't aggressively protect defendants in default judgments on their own accord without any help from defendants. Any legislative solution that relies on ex parte or non-adversarial proceedings before a judge superficially appears to bake in due process but instead will suffer the same defect, even when we have great federal judges who try to do the right thing. This has a lot of implications for SOPA, but it's also relevant to OPEN.

For more on the case, see Mike Masnick's post.

UPDATE: Leanne O'Donnell, an Australian IP lawyer, emailed me some comments:

1) Australian federal court will not enforce the California judgment (see Sec. 5(1) of the Foreign Judgments Act; the United States doesn't get reciprocity).

[Further update: Leanne subsequently qualified that the copyright owners could seek common law enforcement of the California judgment even if they can't take advantage of the Foreign Judgments Act, but it's more expensive and complicated. See, e.g., Stern v National Australia Bank at 133. It's also subject to public policy limits.]

2) She speculated on the reasons why the copyright owners didn't sue in Australia, including the lack of statutory damages in Australian copyright law and potential issues with the injunction. She pointed to Cooper v Universal Music [2006] FCAFC 187 as a case that discusses relevant topics. The Roadshow v. iiNet case, currently on appeal, is also possibly relevant.

3) I asked her about any potential issues with extraterritorial downloads, as we saw in the Shropshire case. She replied: "If the claim for infringement against Tran was for both primary infringement and authorisation he could be found to have infringed copyright in Australia if the plaintiffs could establish that Australians (primary infringers) downloaded songs from his site." If Tran was really running the largest Korean music site on the Web, proving Australian downloads seems plausible.

Posted by Eric at 12:34 PM | Copyright | TrackBack

December 27, 2011

UMG v. Shelter Capital: A Cautionary Tale of Rightsowner Overzealousness

By Eric Goldman

UMG Recordings, Inc. v. Shelter Capital Partners LLC, 2011 WL 6357788 (9th Cir. Dec. 20, 2011). My prior blog posts on district court rulings on Veoh’s 512(c) safe harbor and attorneys’ fees/Rule 68.

Make no mistake, web hosts and their investors got a major 512(c) victory in this ruling. The Ninth Circuit, building on its favorable but convoluted ruling in Perfect 10 v. ccBill, wrote a decisive and clear (well, as clear as the 9th Circuit gets...) opinion interpreting the crucial 512(c) safe harbor. This opinion is so comparatively lucid that I plan to substitute it into my Internet Law reader next Fall as a replacement for the Io v. Veoh and Viacom v. YouTube district court rulings.

But also make no mistake: this case reminds us why we need to strike a fair balance between rightsowners and technology providers, or else our system will break down. This case's real result is that Veoh is legal, but Veoh is dead—killed by rightsowner lawfare that bled it dry. Meanwhile, rightsowners wrongly assessed the legality of Veoh, but the worst consequence they suffered was overpaying their lawyers. Indeed, UMG isn’t liable under 17 USC 512(f) for sending bogus takedown notices because they never sent any notices at all., nor is UMG liable for Veoh's attorneys’ fees. UMG’s decision-makers walk away from this car crash, muttering under their breath that the Ninth Circuit misunderstood their brilliant legal arguments, but they still get to go to their cushy jobs tomorrow. The same can’t be said for Veoh, even though it "won." Veoh’s employees? On the street. Veoh’s investors? SOL. Veoh’s community? Kicked to the curb.

This case outcome—Veoh is legal, but Veoh is dead—highlights one of the many reasons why so many people are so opposed to SOPA/PROTECT-IP. Those proposals don’t make rightsowners fully internalize the cost of their actions, such as the economic losses suffered by erroneously accused targets. Of course rightsowners will overclaim when there's no real downside to doing so; that’s just human nature. (And please, I don’t want to hear any BS that rightsowners will never get it wrong. See, e.g., Viacom v. YouTube). Without proper calibration, rightsowner overclaiming threatens to wreck the entire Internet ecosystem.

A partial fix to SOPA/PROTECT-IP would make rightsowners bear the cost of their overclaiming. Make them put up a $1 billion bond for the privilege of sending cutoff notices; and pay liberally out of that bond if the rightsowners get the law or facts wrong. Write checks to the investors and employees whose economic expectations are disrupted when rightsowners get it wrong. Write checks to the payment service providers and ad networks who turn down money from legally legit businesses based solely on rightsowner accusations. Heck, write checks to the users of those legit services who are treated as inconsequential pawns in this chess match. Sure, a $1B bond obligation with liberal payouts would turn cutoff notices into a sport of kings that only the richest rightsowners could afford, but perhaps that’s the way it should be. A rightsowner's decision to send a cutoff notice should be a Big Deal, the equivalent of going to Defcon 5, and not like sending holiday cards to distant relatives you last saw at Ethan's bar mitzvah.

Unless (until?) Congress wrecks the Internet with SOPA/PROTECT-IP, 17 USC 512(c) still matters a lot to the Internet ecosystem, and this ruling has a lot of good news for web hosts. It’s a long opinion, as 512 opinions usually are. Some highlights:

* Since its passage, 512(c) has had a crucial ambiguity: did it provide a safe harbor for all three flavors of infringement (direct, contributory, vicarious) or just direct infringement? The legislative history was clear that the safe harbor applied to all three flavors, but the literal text of the statute seemed, by its very terms, to exclude contributory and vicarious infringement. Remarkably, most 512(c) cases sidestepped this fundamental interpretive issue. In contrast, this case confronts it head-on and, perhaps for the first time in an appellate ruling, indicates that 512(c) applies to all three flavors of infringement. For example, the court says:

Given Congress’ explicit intention to protect qualifying service providers who would otherwise be subject to vicarious liability, it would be puzzling for Congress to make § 512(c) entirely coextensive with the vicarious liability requirements, which would effectively exclude all vicarious liability claims from the § 512(c) safe harbor….Although in some cases service providers subject to vicarious liability will be excluded from the § 512(c) safe harbor, in others they will not.

To achieve this outcome, the Ninth Circuit says that “right and ability to control”—language that appears in both the standard test for vicarious copyright infringement and as an exclusion to 512(c)’s availability—means different things in those contexts. I presume the same applies to “direct financial interest,” though that didn’t come up here. Notice this is a result only lawyers could love: the exact same words have different meanings depending on whether they are in the plaintiff’s prima facie case or in the defendant’s affirmative defense.

The good news is that the opinion reads “right and ability to control” as dependent on knowing of specific problems that need to be remediated, like the Viacom v. YouTube opinion did:

a service provider must be aware of specific infringing material to have the ability to control that infringing activity within the meaning of § 512(c)(1)(B). Only then would its failure to exercise its ability to control deny it a safe harbor….A service provider’s general right and ability to remove materials from its services is, alone, insufficient. Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge.

Unfortunately, the last sentence reminds me a little of the gratuitous dicta in Tiffany v. eBay about "willful blindness," which trademark plaintiffs have already started to mine. Trying to scrounge for any angle, I'm sure copyright plaintiffs will start digging around for evidence that service providers buried their head in the sand, making the most tendentious interpretations of fact that aren't damning in the least.

* UMG argued that 512(c) only provided a safe harbor for personal cloud storage. Under this reading, the moment a file stored in the cloud was available to third parties, 512(c) dropped away. The court brushed away UMG’s argument, and I can’t believe UMG thought it was worth pressing. The argument made no sense historically (no one was offering personal cloud storage lockers when the DMCA was passed), it contravened numerous provisions in the statute that clearly suggested otherwise, it would have conflicted with a long list of precedent cases that applied 512(c) to public hosting, and it’s almost impossible to construct a fact pattern where a user uploading to a personal cloud locker commits copyright infringement (or that a copyright owner would learn about this storage sufficient to send a 512(c)(3) notice specifying the file’s location).

As a corollary, 512(c) applies even if the service provider slices-and-dices the user-submitted file, such as transcoding the file and extracting metadata. This is consistent with earlier 512(c) cases, but now it’s Ninth Circuit law.

* The court rejects UMG’s many arguments that Veoh had impermissible scienter. UMG’s hubris was insane. For example, UMG argued that Veoh hosted music videos, and that because it didn’t have licenses to the music, its general knowledge categorically disqualifies Veoh from 512(c). The court shreds UMG’s argument, noting that Veoh did have direct arrangements with music video producers, and UMG’s argument (if you host music, you must know you’re infringing) would negate the entire 512(c) safe harbor. Instead, the court emphasizes the importance of the notice-and-takedown scheme in 512(c) because “Copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.” Thus, the court “hold[s] that merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one’s services could be used to share infringing material, is insufficient to meet the actual knowledge requirement.” Nor can such knowledge count as a “red flag.”

The court isn’t any more impressed with UMG’s argument that Veoh bought Google Adwords keyed to the names of UMG artists like 50 Cent, Avril Lavigne and Britney Spears. The court responds:

50 Cent, Avril Lavigne and Britney Spears are also affiliated with Sony-BMG, which gave Veoh permission to stream its videos by these artists. Furthermore, even if Veoh had not had such permission, we recognize that companies sometimes purchase search terms they believe will lead potential customers to their websites even if the terms do not describe goods or services the company actually provides. For example, a sunglass company might buy the search terms “sunscreen” or “vacation” because it believed that people interested in such searches would often also be interested in sunglasses. Accordingly, Veoh’s search term purchases do little to demonstrate that it knew it hosted infringing material.

I wouldn't rely on the Ninth Circuit for SEM advice, but did the court really say that a site can buy the keyword “Britney Spears” to reach teeny-boppers, even if the site doesn’t offer any Britney Spears music? Hmm...

The court also rejects UMG’s argument that takedown notices from the RIAA should have prompted Veoh to go find additional videos from the same artists mentioned in the takedown notices. As ccBill said, service providers don’t have that affirmative investigatory duty; it remains solely on copyright owners’ shoulders.

Finally, the court rejects UMG’s efforts to dig up old newspaper quotes from Veoh executives acknowledging that their site contained infringing material. The court appropriately notes that 512(c) assumes UGC sites will contain some infringing items. That’s why copyright owners should send takedown notices, and why they shouldn't bitch if they don’t.

One sour note: The court says that a user-submitted complaint that he’d seen infringing content on the site, and fingering a specific other user, could constitute a "red flag of infringement" even if the user complaint didn’t constitute a 512(c)(3) notice. UMG didn't make any progress here based on the specific facts, but unfortunately the Ninth Circuit opened up the door for copyright owners looking for notifications from non-copyright owners that the copyright owners can turn into red flags. Of course they are going to find such notices; what UGC site hasn’t gotten dragged into intra-user disputes? Unfortunately, 512(c) discovery is already ridiculously expensive, and hunts for needles in the haystack like this only add to everyone’s costs—with almost no payoff because sites should be free to ignore user gripes (non-512(c)(3) notices) in their considered judgments. Until the Ninth Circuit fixes this in a future opinion, this sloppy discussion means UGC sites must address non-512(c)(3) gripes about potential copyright infringement at peril of being accused of having red flags of infringement. This isn’t what Congress intended, so it’s a bummer the otherwise-solid opinion went off the rails here.

* The ruling absolved Veoh’s investors of liability. In a footnote, the court recognizes the importance of keeping investors free of liability, especially when the site actually qualifies for the 512(c) safe harbor:

Congress was no doubt well aware that service providers can make the desired investment only if they receive funding from investors like the Investor Defendants. Although we do not decide the matter today, were we to hold that Veoh was protected, but its investors were not, investors might hesitate to provide the necessary funding to companies like Veoh, and Congress’ purpose in passing the DMCA would be undermined.

The court says that UMG isn’t arguing that funding a venture is enough to create liability; the investors must be involved with the business operations. The court tries not to overrule one of the Napster district court rulings regarding investor liability by saying that, in the Napster case, only one investor (Bertlesmann) was involved with Napster. So long as there are more than 1 investor—and frankly, when won’t that be the case?—each individual investor can’t have sufficient control to trigger liability. In response, UMG tried to argue that Veoh had three outside board members from investors and they collectively controlled the board, but the court said UMG didn’t adequately allege that they were in cahoots with each other.

It would have been so much better if the court had just rejected investor liability outright rather than nose-counting board seats and agreements among board members. Expect copyright owners to impose discovery heck on investors, looking for any evidence that smacks of coordinated efforts among them, and expect rightsowners to make mountains out of molehills like stockholders’ agreements. Nevertheless, the Ninth Circuit opinion has enough language to raise the bar on investor lawsuits that district courts should toss these efforts on summary judgment (the needle-in-haystack discovery hunts are going to make motions to dismiss hard). Let’s hope the district courts set the bar high enough that copyright owners eventually get discouraged in pursuing investors.

* The ruling basically eliminates FRCP 68 for copyright cases (and presumably any other statutes that have express fee-shifting provisions). Rule 68 says that if a defendants offers a jdugment, is refused, but then achieves final results better than the settlement offer, the plaintiff must pay all attorneys’ fees after the offer. The idea is to motivate plaintiffs to accept fair settlement proposals—they have to be so confident they’ll do better the settlement offer because they have to pay off the defendant if they are wrong. Rule 68 provides a useful tool from a game theory standpoint, but the court eviscerates it for copyright cases. The court says that Rule 68 offers can pay off only if the judge chooses to award attorneys’ fees under 17 USC 505. No 505 fee shift, no Rule 68 fee shift. But, why is Rule 68 needed if the judge has to make a 505 fee award anyway? This makes no sense. Rebecca discusses this issue in more detail.

I know a lot of folks are interested in how this case affects Viacom v. YouTube. The news is all good for Google. First, until the Second Circuit issues its opinion, this opinion is the new high water mark for 512(c) cases; and it is the governing law of the Ninth Circuit. Second, I imagine the Second Circuit panel will take a look at this opinion, and they may choose to defer to it. The opinion isn’t airtight analytically, but it’s persuasive enough. Third, in the unlikely situation that Google loses in the Second Circuit, this opinion sets up the possibility of a bona fide circuit split that might open the door for a Supreme Court appeal.

Other coverage of the case:

* Techdirt
* Rebecca (focusing on Rule 68)
* EFF
* Michael Barclay

Posted by Eric at 08:19 AM | Copyright , Derivative Liability | TrackBack

December 26, 2011

Infringing Download Without Further Infringement Only Supports Lost License Fee--Real View v. 20-20

By Eric Goldman

Real View LLC v. 20-20 Technologies, Inc., 1:07-cv-12157-PBS(D. Mass. Sept. 21, 2011). The jury verdict form. A June 2011 ruling with more background.

Copyright damages may not seem like the sexiest topic, but the reality is that damages issues are producing some of the most interesting recent copyright jurisprudence. The record-breaking Oracle v. SAP damages award stands out, but other interesting case include Oracle v. Google, Bryant v. Media Right, UMG v. Veoh (more to say about that case soon) and of course the P2P file-sharing cases (including the Tenenbaum case).

This case involves an apparently growing phenomenon where competitor A illegitimately downloads competitor B's copyright material and then uses the material for non-infringing purposes. In this case, Real View downloaded 20-20's software (something having to do with kitchen design) without permission via eDonkey and then used it to refine its competing software so that it was more like 20-20's. Real View then aggressively competed with 20-20, including using an alternative business model that substantially undercut the incumbent's business model. After 20-20 sued, a jury concluded that Real View's software didn't infringe 20-20's software. All that left to adjudicate, then, was the initial unauthorized download, which Real View admitted was infringing (Real View brought a declaratory judgment).

20-20 argued that Real View should pay $38M, which is the amount 20-20 spent to buy a competitor company. Failing that, 20-20 argued that Real View should pay $2M due to "price erosion." Real View said it should pay 20-20's standard license fee of $4,200--although apparently 20-20 wouldn't have licensed the software at all to Real View, making the license fee calculation somewhat hypothetical. Real View also admitted to about making three-quarter million dollars in profits from its own licenses.

The jury came back with an award of $1.37M. In this ruling, the judge issued a remittitur down to $4,200, holding that Real View only was liable for the license fee for the unauthorized download--everything else wasn't proved or was irrelevant. For example, the court rejects all of 20-20's arguments about Real View's "saved development" costs as speculative. Perhaps more importantly, 20-20's claims of price erosion were irrelevant; any price erosion occurred due to Real View's non-infringing competitive software, not the infringing software download itself, and 20-20 didn't prove the causal link between the two well enough. Similarly, the court says 20-20 can't get any of Real View's profits from the non-infringing competitive software simply because it was facilitated by the illegal download.

Not surprisingly, 20-20 rejected the remitittur and instead opted for a new trial. After all, what do they have to lose? They will likely get at least $4,200 again (and if they didn't, it's not a big loss), so they might as well shoot for the upside. But if the damages award goes sour a second time, it would be another example where overaggressive copyright enforcement snatches defeat from the jaws of victory.

This case is interesting because it highlight how copyright owners can easily overclaim damages. Even if one step in the defendants' process involving infringing activity, that doesn't mean that the copyright owner gets to disgorge the defendant of all of its profits. For example, if a defendant impermissibly scrapes a plaintiff's website--making unauthorized copies into RAM while doing so--but the defendant's resulting publication doesn't infringe the plaintiff's copyright, arguably this case would take the defendant's profits off the table, leaving only the potentially meager and overly speculative damages from the illegal download.

Posted by Eric at 08:16 AM | Copyright | TrackBack

December 23, 2011

Academic Literature Recap, Q4 2011

By Eric Goldman

I'm mired in grading heck, slogging my way through 146 exams. As a result, blogging has taken a back seat. I have several key items to blog, including the UMG v. Shelter Capital and Ascentive v. Opinion Corp. rulings. I'll get to these and other topics soon.

In the interim, just in time for the holidays, let me call your attention to some recent academic articles that caught my eye this quarter. They may be worth checking out during your holidays. Happy reading!
____________

Bevin Ashenmiller and Catherine Shelley Norman, Measuring the Impact of Anti-SLAPP Legislation on Monitoring and Enforcement, The B.E. Journal of Economic Analysis & Policy: Vol. 11: Iss. 1 (Topics), Article 67 (2011). The abstract:

We examine changes in environmental monitoring and enforcement activity in the presence of state legislation prohibiting Strategic Lawsuits Against Public Participation (anti-SLAPP laws). Using data on the Clean Air Act from the Environmental Protection Agency’s ECHO database, we find evidence that state inspections increase by almost 50% after a state passes anti-SLAPP legislation. In addition, we find strong evidence that the ratio of findings of noncompliance to inspections more than doubles in the presence of anti-SLAPP legislation.

____________

danah boyd, Eszter Hargittai, Jason Schultz & John Palfrey, Why parents help their children lie to Facebook about age: Unintended consequences of the ‘Children’s Online Privacy Protection Act’, First Monday, Volume 16, Number 11 - 7 November 2011. The abstract:

Facebook, like many communication services and social media sites, uses its Terms of Service (ToS) to forbid children under the age of 13 from creating an account. Such prohibitions are not uncommon in response to the Children’s Online Privacy Protection Act (COPPA), which seeks to empower parents by requiring commercial Web site operators to obtain parental consent before collecting data from children under 13. Given economic costs, social concerns, and technical issues, most general–purpose sites opt to restrict underage access through their ToS. Yet in spite of such restrictions, research suggests that millions of underage users circumvent this rule and sign up for accounts on Facebook. Given strong evidence of parental concern about children’s online activity, this raises questions of whether or not parents understand ToS restrictions for children, how they view children’s practices of circumventing age restrictions, and how they feel about children’s access being regulated. In this paper, we provide survey data that show that many parents know that their underage children are on Facebook in violation of the site’s restrictions and that they are often complicit in helping their children join the site. Our data suggest that, by creating a context in which companies choose to restrict access to children, COPPA inadvertently undermines parents’ ability to make choices and protect their children’s data. Our data have significant implications for policy–makers, particularly in light of ongoing discussions surrounding COPPA and other age–based privacy laws.

This article stirred up a fair amount of discussion. See, e.g., the CNET coverage.

Some notes about this article:

* no one looks good here: not the kids, parents, Facebook or Congress.
- Parents teach children how to lie to get what they want online
- Gilmore’s law that the Internet interprets censorship as damage and routes around it. COPPA has been a success at getting websites to shun kids 12 and under, but it’s been a complete failure at protecting kids online.
- all of the lying kids are presumptively engaged in criminal activity

* when kids are asked to represent themselves as older than they actually are, do they inadvertently put themselves in more adult situations than they can handle? See my post on mistake of age defenses.

* the policy implications of this report cut in both directions. Pro-regulation: the only way to keep kids off Facebook is to do mandatory age authentication that parents can’t game; or do comprehensive privacy regulation. Anti-regulation: COPPA was a bust, so we should repeal it or structurally modify it.
____________

Felix T. Wu, Collateral Censorship and the Limits of Intermediary Immunity, 87 Notre Dame L. Rev. 101 (2011). We don't have too many law professor papers really grokking 47 USC 230, which makes this paper instantly noteworthy. Felix presented this paper at our 47 USC 230 fiesta earlier this year. His conclusion:

Intermediary immunity can and should play an important role in protecting speech on the Internet. Immunity prevents the application of laws targeted at original speakers to intermediaries that lack the incentives of original speakers to speak. Immunity can thus be used to avoid the collateral censorship of lawful, socially desirable speech that poses a real or perceived risk of liability to intermediaries. At the same time, immunity can and should be limited. When intermediaries are actually original speakers, and have the incentives of original speakers, immunity is no longer appropriate. Similarly, immunity as to causes of action that are specifically targeted at intermediaries inappropriately prejudges the reasonableness of such liability.

Even ardent supporters of intermediary immunity would be well-served to recognize its limits. When immunity becomes unbounded, it begins to seem increasingly unfair, stimulating calls to cut back on the immunity, or even eliminate it entirely. The framework developed here demonstrates how, without any need to amend current law, we can limit the immunity, while still serving its core purposes.

James Grimmelmann's comments about the paper.
____________

Sandra L. Rierson, The Myth and Reality of Dilution, 2012 Duke Law & Tech. Rev. ___ (forthcoming 2012). From the introduction:

This Article advances three claims. First, statutory dilution erroneously assumes that the source-identifying function of a trademark is a rivalrous good and one that is dissipated by use. This assumption lacks empirical support, and is assuredly not categorically true despite the contrary principle that underlies the federal dilution statute. If marks are nonrivalrous, as they often are, no cause of action for dilution should exist.

Second, even were particular marks indeed rivalrous, the social and transaction costs imposed by the federal dilution statute would still outweigh the supposed harm to trademark holders. Dilution claims inflict profound anticompetitive burdens, preclude beneficial comparative advertising, and entrench dominant (often oligopolist) firms at the expense of market entrants. Dilution has serious non-economic costs as well and prohibits protected First Amendment speech without justification. For these reasons and others, the federal dilution statute imposes substantially more harm than it (allegedly) prevents.

Finally, the true foundation for the federal dilution statute lies not in alleged economic harms, but rather results from an entirely misplaced fiction of corporate personality. We do not require trademark holders to prove actual economic injury in the context of a dilution claim because, in truth, there is none. Instead, we have granted the holders of famous trademarks the equivalent of a “moral” right to these marks: an extension of the rights granted to a creator of an expressive work in the copyright context. Trademark owners feel vested in their brands, many of which are deliberately anthropomorphized, and the dilution statute reifies and protects these rights as a matter of federal law.

Stacey Dogan's cogent critique of the article. You may recall that in 2007, SCU convened a major academic conference on trademark dilution.
____________

Lydia Pallas Loren, Deterring Abuse of the Copyright Takedown Regime by Taking Misrepresentation Claims Seriously, 46 Wake Forest L. Rev. ___ (forthcoming 2011). A nice in-depth look into one of my favorite topics, 17 USC 512(f), by one of my favorite authors. The conclusion:

The takedown provisions of the Copyright Act are a powerful tool that copyright owners may use to obtain prompt removal of infringing material from the Internet without judicial assessment of the assertion of infringement. Congress provided a mechanism to deter abuse of this extrajudicial enforcement mechanism in the form of a new cause of action for material misrepresentation. Courts should interpret the requirements for prevailing on a claim of misrepresentation with an eye toward fulfilling Congressional intent. This means using a standard that would hold copyright owners liable not only when they had actual knowledge that the material targeted for takedown was not infringing, but also when the copyright owner should have known if it acted with reasonable care or diligence that the material was lawful. It also means interpreting the injury requirement broadly and awarding attorney’s fees to prevailing plaintiffs. Taking the claims of misrepresentation seriously will shape the behavior of copyright owners who seek removal of material through takedown notices.

Posted by Eric at 07:55 AM | Content Regulation , Copyright , Derivative Liability , Privacy/Security , Trademark | TrackBack

December 20, 2011

Twelve Comments Filed in Response to Copyright Office Proposal to Amend 512 Designation Requirements

By Eric Goldman

With all of the focus on SOPA/PIPA/OPEN, it's easy to lose sight that a Copyright Office proposal seriously jeopardizes the 17 USC 512 online safe harbors for many service providers. Specifically, the Copyright Office proposes to expire existing agent designations and then require periodic maintenance of designations or they too will be expired. In both situations, a service provider without a designated agent instantly loses all 512(c)/512(d) eligibility--even if the failure was an administrative accident or mistake, and even if the service provider properly filed a valid designation initially. Worse yet, the Copyright Office hasn't shown how the existing database causes problems for copyright owners, so the Copyright Office is proposing to jeopardize these essential safe harbors for no apparent gain to anyone else.

In response to the Copyright Office's proposal, twelve comments were submitted, including the comment that I submitted with the EFF and Jason Schultz. Regarding the proposal to expire existing designations and require periodic maintenance of future designations, the comments broke out as follows:

AGAINST: EFF/Schultz/Goldman, Public Knowledge, Microsoft, CCIA, Matthew Neco
FOR: RIAA, Verizon/Internet Commerce Coalition (I treat these as identical because Verizon is a member of ICC, and their points were similar)
AMBIGUOUS: MPAA (seemingly leaning against the proposal but equivocal)

The CCIA’s opposition on this issue was well-stated: "it would be unsound and inconsistent with Section 512 to attempt to revoke the safe harbor and impose liability on services who do not resubmit contact information to the Office which the Office already has…Proposed § 201.38 is itself a formality which -- at least as described in the NOPR -- may also impose harsh penalties for failing to prepare redundant paperwork at the proper time."

Some of the “AGAINST” comments wondered if the Copyright Office has the power to terminate a validly filed designation, because doing so creates a forfeiture and apparently exceeds the authority that Congress provided to the Copyright Office. I do hope the Copyright Office will consider the administrative law issues carefully before doing something that leads to an expensive lawsuit over its authority.

Some other interesting points raised in the filings:

* the RIAA made several aggressive proposals, including (1) a requirement that "the service provider...disclose any shareholders or related groups of shareholders (such as a family) with a majority ownership of the service provider; and any persons or entities with a controlling interest in or decision making power over the service provider," and (2) "the Copyright Office require proof of the business address of the service provider, perhaps by requiring the entity to scan a piece of business correspondence and attach it to the designation as a PDF." I don’t see it as the Copyright Office’s responsibility to validate service providers’ self-reported information, and I thought the requirement to disclose related entities was overreaching and creates traps for the unwary.

* Microsoft proposed "that the Office consider issuing OSPs a unique identification number corresponding to their submission of a designation of agent, and requiring the OSP to post this number where it also posts information about its DMCA agent and its process for submitting notices of claimed infringement. This requirement would enable users of the OSP directory to easily link a particular website with the DMCA agent designation (and related records) maintained by the Copyright Office." While this proposal would solve one set of problems, I don’t think the Copyright Office has the authority to require the publication of this unique ID as a condition of the online safe harbor.

* Google believes only written takedown notices should satisfy the 512 requirements:

We urge the Office, however, to also note that takedown notices sent to designated agents must be in the form of a written communication. We are concerned that the clarifications and the availability of a phone number do not lead to a requirement that service providers designate a specific person to be contacted for voice communication or that leaving of takedown notices be authorized via phone calls or voice mail. Accepting takedown requests via phone or voicemail would present a multitude of problems: for example, lack of documentation to send on to the alleged infringer, lack of signature, problems with verifying identity, detecting abuse, lack of accurate metrics, scalability, and potential differences of opinion about what was identified.

While I completely agree about the problems of non-written takedown notifications, I’m pretty sure 512 doesn’t give the Copyright Office the power to effectuate this request.

* The Verizon/ICC filings encouraged the Copyright Office to warn rightsowners not to misuse takedown notices. For example, the ICC filing says "we urge the Copyright Office to post a prominent notice at the entry point to the database warning entities submitting DMCA notices that knowing material misrepresentations in 512(c) notices may trigger monetary liability."

* The ICC filing also gave a specific example of the privacy issues raised by the designated agent database:

One woman who works as a designated agent for one of our member companies has received harassing “stalking-type” messages from people who are not copyright owners, but found her name through an agent designation. For precisely this sort of reason, it is important to allow email addresses of designated agents to reflect their function, rather than their name, and to allow designated agents to list P.O. Boxes as their address, wherever their address is a home address.

I frequently use the designated agent database to find contact information for a company when other resources fail me.

* The MiMTiD filing was a piece of work. It appears to misunderstand the existing 512 safe harbors, and most of it is just a rant against Google.

If you want to comment on the Copyright Office proposals, do so quickly. Reply comments are due December 27.

Posted by Eric at 08:00 AM | Copyright , Derivative Liability | TrackBack

December 14, 2011

If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei

[Post by Venkat Balasubramani, with comments from Eric]

True Religion v. Xiaokang Lei (S.D.N.Y.) (TRO; Nov. 18, 2011) (Prelim. Injunction; Dec. 2, 2011). The initial complaint.

We recently blogged about a case where Chanel obtained surprisingly broad remedies against domain names associated with foreign "rogue" websites which allegedly sold counterfeit Chanel items. Much of the relief Chanel sought and obtained in that case overlapped with relief that the proposed SOPA law would provide to rightsowners.

True Religion, a company which manufactures jeans, brought a similar enforcement action against foreign "rogue" websites in the Southern District of New York. It first obtained a temporary restraining order, which the court converted into a preliminary injunction. The relief obtained by True Religion is similarly broad as, and presents the same due process concerns raised by, the Chanel case.

True Religion filed a lawsuit in the Southern District of New York. As in the Chanel case, it went after numerous domain names in a single lawsuit, and it presented declarations from its investigators that they bought counterfeit goods from those domain names. True Religion also presented evidence that defendants undertook efforts to conceal their true identities (primarily by supplying 'purposely-deceptive contact information' to registrars), and that if defendants were provided notice, they would "likely destroy, move, hide or otherwise make [the domain names, products in question, accounts, and records] inaccessible to the Court." True Religion filed its lawsuit on November 15, and the court issued an ex parte TRO three days later. The TRO broadly enjoined the conducts of defendants and third parties, authorized service via email, and set a hearing for November 30, 2011. Defendants were required to show cause on or before the hearing date as to why the court should not issue a preliminary injunction. True Religion filed two sealed declarations and an unsealed declaration. No defendant appeared or filed any pleadings. On December 2, 2011, the court issued the preliminary injunction.

The TRO: The TRO finds that True Religion established a likelihood of succeeding on the merits of its claims that defendants sold products which infringed on True Religion's trademarks and copyrights and that defendants' conduct will cause irreparable injury to True Religion. The TRO also finds that defendants undertook efforts to conceal their identity and that if "True Religion were to proceed on notice to defendants," defendants would shift their operations. Pending the court's ruling on True Religion's request for an injunction, the court issues the TRO, which contains the following provisions:

- defendants and any third parties acting in concert with them, including ISPs, registrars or third party selling platforms are restrained from selling allegedly infringing items;
- True Religion is entitled to broad financial discovery and discovery from various service providers (MasterCard, Visa, PayPal, back-end service providers, web designers, third-party selling platforms, registrars, registries, ad-word providers, etc.);
- third party payment processors and financial institutions are ordered to freeze any of defendants' funds;
- domain name registries (VeriSign, Neustar, Public Interest Registry) and registrars are orderd to "temporarily disable" the domain names referenced in the TRO, "through a registry hold or otherwise";
- third party service providers are ordered to cease providing service to defendants.

The Preliminary Injunction:

The order largely tracks the TRO, but adds a approximately 24 new domain names. As with the TRO, the preliminary injunction broadly enjoins defendants from exploiting True Religion's copyrights and trademarks. In addition, it contains the following provisions:

- third party service providers who are provided notice are enjoined from providing services to defendants in conjunction with any of the acts which defendants are enjoined from doing;
- a broad asset freeze, directed at banks, payment processors, PayPal and other payment services providers;
- continuing right to conduct discovery for True Religion;
- domain name registries and registrars are directed to continue disabling and lock the domain names, including the new domain names;
- third party service providers, including ISPs, back-end service providers, affiliate program providers, web designers, sponsored search engine or ad-word providers are ordered to "disable service" to the defendant websites; and
- an authorization to serve process via "registered electronic mail" pursuant to rule 4.

__

This is a slightly different flavor from the Chanel orders, but it raises similar due process concerns. The initial order (the TRO) is issued on an ex parte basis without notice, and it contains extraordinary relief--it's essentially a kill switch for the websites in question. There are a variety of reasons why this has the potential to run roughshod over the rights of defendants or third parties; among other things, there could be some mistake as to the underlying domain name or website. There's no assurance that the site as a whole (as opposed to one or two products) is infringing. Also, after bona fide adversarial proceedings, True Religion's copyrights or trademarks may not turn out to be as enforceable as they seem at first blush. But on the strength of True Religion's unchallenged assertions, the court orders various third parties, including registrars, registries, payment processors, ad-word providers and others, to cut off the defendants. (The court did require True Religion to post a bond of $10,000--a laughably nominal amount.)

Regardless of whether the court has the authority to issue an injunction binding third parties who are not before the court, and who may not even be subject to the court's jurisdiction, many service providers will just follow the court order anyway. They may have no interest in expending resources to fight for a third party's due process rights. Indeed, in its declaration filed after the TRO was issued, True Religion indicated that the registries (VeriSign, Affilias, Public Interest Registry, Nominet UK) disabled many of the domain names in question upon receiving notice of the court order. PayPal also froze the funds in 84 different PayPal accounts.

It's unclear how much business defendants conducted in the United States. If their business activities in the US were nominal, this looks like an extraterritorial enforcement by a US rightsowner in a US court. It's tough to tell, given that the process hasn't been adversarial or even designed to facilitate bona fide participation by the defendants.

I know there are some tweaks in pending SOPA/PIPA legislation that surely would be even more helpful to plaintiffs, but courts today seem willing to grant broad remedies to rightsholders without any legislative change at all. It seems that today, rightsowners are able to go to court and, quickly and at low cost, take down domain names and get an order directing third parties, including service providers, ad networks, and payment processors, not to provide services to various websites. That's a pretty good deal if you are a rightsholder. They may even prefer that to the ITC proceedings proposed in OPEN.

_______

Eric's Comments

This case raises so many unanswered questions for me:

1) Just how many rightsowner vs foreign rogue website lawsuits are already in the court system? Are the Chanel and True Religion cases unique, or are dozens or hundreds of similar cases percolating through the system?

2) Did so much of this case really need to be done under the cloak of secrecy, and even if the answer is yes, why is so much of the case history still sealed?

3) Just how far can rightsowners go in suing dozens or hundreds of unrelated defendants in a single lawsuit? We've seen some pushback against copyright trolls. Are trademark owners similarly overreaching?

4) Just how far can rightsowners go in forcing third party service providers, like domain name registrars, ad networks, payment service providers and others, to honor rulings where the service providers aren't litigants? We dealt with this issue a bit in the 47 USC 230 context in the Blockowicz case. In that case, the Seventh Circuit set some important limits on the reach of Rule 65. Without an adversarial process, were the Chanel and True Religion courts perhaps a little lax in their reading of Rule 65?

5) If rightsowners can already get in court so much of the remedies that SOPA would provide, then why are they pushing so hard for SOPA?

6) Then again, if rightsowners can already get SOPA-like remedies in court, why are we fighting so hard against SOPA? This reminds me a little of the public outcry against UCITA a decade ago--much of the angst was about the parts where UCITA merely restated then-current contract law. Similarly, perhaps SOPA is more of a mirror on present reality than a bona fide change in the law. At minimum, it suggests SOPA may be distracting us from other real problems. If we object to the remedies in SOPA, not only do we need to kill SOPA, but we need to proactively seek new statutes that prevent the outcomes Chanel and True Religion are getting in court.

I plan to continue my personal efforts against SOPA, but it's clear that killing SOPA isn't enough to end the fight. Perhaps OPEN would help by giving rightsowners an easier path to attacking illegitimate foreign websites and thereby alleviate the pressure that rightsowners are putting on doctrines not specifically designed to deal with that problem. That would be a good reason to support OPEN, but it's now 100% clear to me that OPEN also needs more immunities, safe harbors and other limitations on rightsowner powers. If rightsowners get a shiny new enforcement toy via OPEN, they should have to give up some of their overreaching elsewhere.

Posted by Venkat at 11:54 AM | Copyright , Domain Names , Trademark

December 10, 2011

The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP

By Eric Goldman

Sen. Wyden and Rep. Issa have released a draft of OPEN: Online Protection & ENforcement of Digital Trade Act, intended as an alternative to SOPA/PROTECT-IP. See my prior posts opposing SOPA and linkwrapping the discussion. Unlike SOPA's disgustingly blatant rent-seeking, which was such an over-the-top abuse of the legislative process that it did not (and could not) support a principled or even intelligent conversations about it, OPEN provides a useful starting point for a sensible conversation that could actually lead to acceptable compromises. For that reason alone, I think Congress should immediately stop all work on SOPA/PROTECT-IP and redirect that energy towards vetting this proposal. Having said that, for reasons I'll explain in a moment, I continue to believe the assumptions underlying SOPA/PROTECT-IP and OPEN are misguided, meaning that forging a compromise from OPEN’s more sensible proposal may be tricky.

Before I get further into substance, two process notes:

First, SOPA was the product of rent-seekers who were talking only amongst themselves and legislators tethered to their campaign contributions. The drafting process was disturbingly closed-door and exclusionary, exactly the kind we wish didn't take place in our representative democracy. In contrast, the OPEN sponsors want to have a dialogue about their ideas. In support of that, they have posted the draft to a website that allows comments and discussion. This is the way our democracy SHOULD work. Why is such an open process the exception instead of the rule?

Second, OPEN is a comparatively svelte 18 pages focused mostly on one core concept, compared to SOPA's 78 page monstrosity that advanced about a dozen different substantive proposals. I can't tell you the number of times I've seen very smart people stymied to keep all of SOPA's moving parts separate, and the failure to do so meant that they were conflating different parts of the statute in ways that prevented productive discussion. (Just two examples: the Colbert Report, where Zittrain mostly focused on SOPA's felony streaming provision while his counterpart was mostly talking about the cutoff provisions; and Business Insider's infographic where the felony streaming sanction was presented as a remedy to the cutoff provisions). By reducing the number of topics at issue, OPEN substantially reduces the chance that policy discussants will simply talk past each other.

An Overview

The law contemplates that rightsowners can file a petition against rogue websites at the ITC, an independent federal agency best known for its adjudication of certain patent disputes. In response to the rightsowners’ petition, the ITC will conduct an administrative adjudication. If the ITC determines that the website is a rogue website, then (1) the website is required to cease its conduct (not sure how enforceable that is), (2) the site also will be subject to any other unspecified consequences following from its determination as a rogue actor, and (3) most importantly, the rightsowner can take the ITC determination to payment service providers (PSPs) and ad networks and have them cut off the flow of money to the rogue website. The PSPs and ad networks would be protected by several immunities for trying to comply with the orders or their other efforts to protect the public.

This makes OPEN similar to SOPA in that it seeks to cut off funds flowing to rogue actors. However, among other key differences, PSPs and ad networks have no legal obligations until the ITC makes a ruling. In contrast, SOPA imposed cutoff obligations on PSPs and ad networks based merely on rightsowners’ unsubstantiated assertions.

What's Good

Substantively, some of the things I liked about OPEN:

* it situates the discussion about "rogue websites" in foreign trade policy. This fixes SOPA's overinclusive application to both domestic and foreign actors. However, if we really think rogue websites are a transborder enforcement problem, there are many other trade policy solutions that might be better options to consider—the most obvious being transborder enforcement coordination like the FTC does with its foreign counterparts.

* OPEN doesn’t touch the domain name system or search engines. SOPA had the potential to destroy the DNS and to jeopardize search engine functioning. OPEN sidesteps both pitfalls.

* OPEN builds in some due process before any formal legal obligations attach. As we've recently seen, due process is actually quite important, and we suffer from its absence. I say “some” due process because I’m not sure how much due process will attach in practice. For example, I have some concerns about the notice provision--not every targeted website will receive notice of the ITC investigation. However, I did like that any website the ITC labels as rogue can correct any identified problems, reapproach the ITC and ask it to remove the “rogue” determination.

* the definition of rogue website is tightened up substantially. It requires three elements:
a) a "non-domestic domain name," which requires that the registry, registrar and registrant all have to be located outside the US (I'm not sure what "located" means in this context). Venkat asked me what happens to a .com registered with a foreign registrar; I believe OPEN does not apply to this domain name.
b) conducting business in the US; and
c) "has only limited purpose or use other than engaging in infringing activity and whose owner or operator primarily uses the site to willfully engage in infringing activity."

The last element, in particular, is quite restrictive by requiring willful infringement. The meaning of the word "willful" is notoriously murky (see, e.g., the multitudinous Supreme Court cases over the word), so the statute would be improved by using a more detailed synonym. No matter what, though, willful is a high scienter level that should easily exclude most legitimate players. The statute further expressly excludes any sites that:

- follow good notice-and-takedown procedures
- qualify for 17 USC 512 (the DMCA online safe harbors) [this means that the statute sits next to 512 instead of rendering 512 moot like SOPA threatened to do], or
- distribute "copies that were made without infringing a copyright or trademark." I’m not 100% sure what this means. It apparently excludes websites reselling goods covered by the First Sale doctrine. I presume that the exclusion includes sites that sell legitimate knock-off goods, such as replicas of goods that aren’t protected by copyrights or trademarks.

* if a PSP or ad network fails to comply with an ITC order, the only consequence is that the DOJ can seek injunctive relief. Rightsowners do not have a private cause of action in those cases. As discussed below, this doesn't eliminate all PSP/ad network exposure to rightsowners, but rightsowners can't introduce evidence of ITC orders in any civil suits they bring against PSPs or ad networks.

* on the trademark side, it expressly limits its applicability to counterfeiting (although there is a erroneous cross-reference in the draft). Presumably, dilution or garden-variety trademark infringement disputes don't qualify under the statute.

What's Not Good

Substantively, some of the things I don't like about OPEN:

* OPEN still contemplates reestablishing a Fortress USA. Fortress USA marginally makes sense regarding the shipment of physical goods across geographic borders. It makes zero sense for digital bits zinging around the borderless network.

* in particular, because OPEN would burden only US-governed PSPs and ad networks, it may drive websites—including legitimate websites who want to reduce their risk of being mistargeted—to shift their business to foreign-based PSPs and ad networks. If lots of businesses make a switch based on these concerns, OPEN could counterproductively result in net financial losses for the US economy.

* similarly, foreign websites can opt-out entirely of the ITC process by consenting to US judicial jurisdiction. I like the idea of an opt-out, but imagine if other countries offered the same quid-pro-quo of allowing US websites to opt-out of some nasty foreign process so long as the websites consent to jurisdiction in their countries. I think we’d be outraged and insulted; which is how I would expect foreign countries to view this quid-pro-quo. Cf. Venkat's recent post on Facebook v. Faceporn. Then again, other countries might think it’s a pretty good idea, leading to a proliferation of transborder quid-pro-quo jurisdictional offers.

* designating the ITC to conduct the investigations is a little odd. First, the ITC is an administrative agency, not a federal court. I don't fully understand all of the implications of administrative vs. judicial review, but I believe there are substantial procedural differences that could lead to important substantive differences. Second, the ITC has been gamed in the patent world (see, e.g., my colleague Colleen Chien's research on the ITC explaining how the ITC hears many US company vs. US company disputes), so I fear similar gaming will emerge. For example, a rightsowner chasing a rogue website could simultaneously pursue a domestic court action, a foreign court action and an ITC proceeding. How would these types of parallel proceedings play out in practice? We’re still trying to resolve the parallel proceeding problems in patents.

* like SOPA, the bill covers copyright infringement, trademark infringement *and* 1201 circumvention. I don't understand why the circumvention issue is getting equal billing or how often transborder circumventions are a real problem. Seeing how 1201 circumvention lawsuits have devolved into anti-competitive enforcements, picking up the circumvention piece could increase the risk of competitive misuse of the statute.

* like SOPA, the definitions are vague. Consider, for example, the definition of Internet advertising service:

The term Internet advertising service means a service that serves an online advertisement in viewable form for any period of time on an Internet site.

Hmm...what does that mean? Notice that the definition doesn't directly distinguish between third-party ad networks and sites that sell their own ads. I think in practice sites that sell their own ads drop out of the statute, so one possible implication is that more sites will ramp up their own ad sales. (This is doubtful, but just throwing the possibility out there). I think the focus on "viewable" is interesting; are audio-only ads excluded? And what does it mean to "serve" content? This contemplates a specific technological interaction that I don't fully understand today and will almost certainly evolve over time.

Why I’m Not Enthusiastic About OPEN

Even though OPEN is worth discussing intelligently, unlike SOPA, I believe it's based on two underlying assumptions that aren’t fixable.

First, like SOPA, OPEN assumes there is a problem with foreign rogue websites that needs to be solved. I'm not saying there isn't, but the policy discussions have been startlingly devoid of reliable and credible facts demonstrating the nature and scope of the problem.

Instead, the evidence in support of a rogue website "problem" typically consists of two main threads: (a) people are dying from counterfeit drugs, and (b) bad guys are "stealing" our stuff. With respect to the former, I've never seen anything more than ad hoc assertion; but if there’s a real problem, counterfeit drugs can be fixed with a highly targeted solution. With respect to the latter, it's hard to give those arguments much credit. After all, all of rightsowners’ arguments are inherently self-interested: it's in their financial interest to say that they would like to make more money than they are making. It's also in their interest to bemoan broad sectoral changes in the economy as evidence that someone is capturing money they think they are entitled to (and to use rent-seeking to thwart those broad sectoral changes). More importantly, there is lots of evidence that a lot of rightsowners are making a lot of money today, both via the Internet and more generally. So it's hard to break out the quantity of actual economic losses that rightsowners are truly suffering when those claims are intermingled with rightsowners’ general rent-seeking efforts.

Therefore, until the rightsowners offer us more than the trumped-up BS already-discredited statistics, I'm still not clear on the problem, how bad it is, how any legislative solution would remediate that problem, and if the collateral consequences of the effort to remediate the problem are greater or less than the problem itself. OPEN does nothing to fill the void of supporting foundational evidence of the problem, so it's hard for me to be enthusiastic about its solution.

Second, and more importantly, attacking the money supply to supposed bad actors remains too blunt an instrument. I may be truly on my own on this point, as many people I respect--including, notably, Rep. Lofgren--are prepared to embrace the policy solution of cutting off money flows. However, by embracing an attack on the movement of money, OPEN replicates one of SOPA's sins. If a player is engaged in legitimate and illegitimate activity and its money supply is cut off, both activities go down the tubes. In contrast, one of the positive aspects of 17 USC 512(c) and (d) is that they require the copyright owner to identify infringing items and target only those items. Giving rightsowners a remedy that would affect an entire site for only some items on the site goes too far.

The OPEN bill tries hard to minimize overbreadth by narrowly defining the targeted websites. Perhaps this definition is narrow enough that there won't be much collateral damage. However, in practice, regulating money flows nevertheless could have pernicious effects in the field. A PSP or ad network drawn into an ITC proceeding frequently will “voluntarily” choose to toss the targeted website before the ITC proceeding reaches its conclusion—even if the ITC proceeding would have rejected the challenge. Furthermore, rightsowners still will send cutoff notices to PSPs/ad networks without filing any ITC petition, and the PSPs/ad networks will often honor them as a way of preempting an ITC proceeding.

What this teaches me (in combination with the Elsevier v. Chitika case) is that PSPs and ad networks need robust statutory immunities which are not based on a notice-and-takedown scheme. On the trademark side, the need for an immunity became clear after the sloppy language in Gucci v. Frontline. On the copyright side, 512 doesn’t cover PSPs and ad networks, probably because in a million years the safe harbor drafters never thought PSPs and ad networks would be liable for third party infringing activity in the first place. Now that we've seen copyright law and trademark law creep much further than we could have imagined in 1998, we should plug this liability hole completely. If OPEN proceeds, it should have a broad-based immunity for PSPs and ad networks with the idea that rightsowners are getting a specific remedy against them in the new law.

While OPEN can’t really be fixed to resolve my two structural concerns, my hope is that the discussion about OPEN will force rightsowners to provide *credible* evidence of harms that they or consumers are suffering (no more self-serving hype, please), and that such evidence will force us to think carefully about how "rifle shot" solutions (as opposed to shotgun solutions) can ameliorate those harms. If we have a discourse that even slightly resembles this ideal, then OPEN will be successful no matter what final outcome we reach.

Posted by Eric at 09:55 AM | Copyright , Derivative Liability , Search Engines , Trademark | TrackBack

December 07, 2011

I Don't Heart SOPA or PROTECT-IP: A Linkwrap

By Eric Goldman

Venkat and I have been covering SOPA and related topics. In case you missed our posts:

* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika

Next week, SOPA is supposed to go to committee markup. In anticipation of that, some of the SOPA-related links from the past few weeks that have caught my attention:

* Bose v. Ejaz (D. Mass Nov. 7, 2011). Paypal cut off funds transfers to an International eBay merchant at the request of Bose, a rightsholder. The court rejects the merchant's tortious interference claim.

* Techdirt: The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas

* Politico: Shootout at the digital corral. The entertainment industry spent $91M this year on lobbying. Tech industry spent $15M. Guess who wins that battle?

* Op-eds against SOPA from NYT, LA Times and the Economist.

* EFF: What's On the Blacklist? Three Sites That SOPA Could Put at Risk

* Public Knowledge explains why PROTECT-IP isn’t an acceptable compromise to SOPA. Both "solutions" are off-the-charts extreme.

* Wired: Analysis: Internet Blacklist Bill Is Roadmap to ‘the End’ of the Internet.

* WaPo: SOPA opposition goes viral. Partially related: interesting stats about SOPA's lack of popularity.

* DHS/ICE seize another 150 domain names. Who needs SOPA? Reuters’ coverage.

* Hollywood Esq.: How Controversial Antipiracy Laws Could Be Enacted Even Without Congress.

* Nazerali v. Mitchell, 2011 BCSC 1581 (B.C. Sup. Ct. Oct. 19, 2011): A Canadian court ordered Google and other support providers to cut off the domain name of an allegedly defamatory website.

* EFF: Free Speech is Only as Strong as the Weakest Link. Check out their new resource, www.globalchokepoints.org.

* The RIAA wrote a letter to the editor headlined “RIAA largely succeeds in goal of bringing piracy under control.” Yet, they insist that SOPA is needed?

* Amusingly misguided: The $500,000,000 Cost of Google’s Five Million DMCA Notices. Partially related: Techdirt: As We Complain About SOPA & PIPA, Don't Forget The DMCA Already Has Significant Problems

Posted by Eric at 08:48 AM | Copyright , Derivative Liability , Trademark | TrackBack

December 05, 2011

Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika

By Eric Goldman with comments from Venkat

Elsevier, Ltd. v. Chitika, Inc., 2011 WL 6008975 (D. Mass. Dec. 2, 2011). Chitika's brief supporting its motion for judgment on the pleadings. Elsevier's opposition. Chitika's proposed reply brief.

As Venkat recently indicated, while Congress generates massive amounts of hot air discussing SOPA, there's a common law battle quietly brewing with rightsowners seeking to obtain in court the same basic remedies that SOPA would provide statutorily. This judge nixes this rightsowner's request, but this is hardly a win for SOPA opponents or ad networks.

Elsevier publishes textbooks. This lawsuit involves pharmatext.org, a (now-defunct) site that provided links to allegedly infringing copies of Elsevier's books. We'd now characterize pharmatext.org as a possibly rogue website. I previously blogged about this case in January, when the judge issued a dense and troubling ruling that ordered ad networks Chitika and Clicksor to freeze the site's money and stop serving ads to the site. It also ordered the domain name privacy proxy to freeze the domain name and identify the owner. Basically, Elsevier got much of the relief that SOPA now seeks to enact as law.

But hold on a second. The court's January order was based on ex parte proceedings. Chitika subsequently showed up to contest the case, and surprise! The court reaches a different result after adversarial proceedings. Let's hear it for due process!!! YEAH!

[Note: you may recall Chitika separately had an unfortunate legal scrape with the FTC.]

Chitika first argued that Elsevier never proved any direct copyright infringement in the United States because Pharmatext.org's operator, Saggi, was based in India, and the site had no US presence. Elsevier argued that it had test downloads done by US investigators, so there was infringing activity in the US. The court nearly blows a gasket before punting this sticky jurisdictional issue:

While it appears that Chitika may eventually be entitled to judgment on this ground (that is, plaintiffs’ failure to allege any act of direct infringement occurring entirely within the United States), factual issues involving the structure of the Internet and the locus of the infringing activity remain (Where did the copying take place? Where are the third-party websites and servers, from which unauthorized copies of plaintiffs’ books were downloaded?). These issues preclude the granting of the motion on this ground.

For more on the jurisdictional question, see, e.g., the Shropshire case. This locus-of-infringement question is quite interesting, especially as applied to "foreign" rogue websites, but SOPA largely sidesteps all of the doctrinal complexity (and creates its own mess).

Without resolving whose the underlying direct infringer, the court instead considers Chitika's contributory copyright liability. The court concludes that Chitika doesn't have the requisite knowledge of infringement:

Plaintiffs do not allege facts showing that Chitika was familiar with the content of the Pharmatext website, or knew (or had reason to know) that such content was infringing. Thus, plaintiffs fail to support with plausible facts their conclusory allegations that Chitika “must have had knowledge” of the alleged infringement of plaintiffs’ books...and that Chitika “plac[ed] ads on the Pharmatext site because [it] believe[d] that Pharmatext users – in other words, people seeking to obtain pirated copies of copyrighted books – are a target audience for particular advertisers.”

Notice this leaves open what would have happened if Elsevier had sent a takedown/cutoff notice to Chitika. Presumably, such a notice would have conferred the requisite knowledge to Chitika.

Heavily relying on Perfect 10 v. Visa (even though it wasn't binding precedent in Massachusetts), the court also rejects Chitika's material contribution to the infringement. The court says:

while Chitika’s advertising payments might make it easier for Saggi’s infringement to be profitable, Chitika did not create, operate, advertise, or promote the infringing websites, and its advertisements were not the “site” of the infringement.

However, the court hedges at the end, saying it wasn't deciding the issue definitively because Chitika's lack of knowledge resolves this case.

In a footnote, the court explains why Judge Kozinski's dissent in Perfect 10 v. Visa is unhelpful to the plaintiffs:

in contrast to Visa, Chitika did not provide an “essential” service to Saggi that enabled infringement on a “massive scale.” Plaintiffs make no factual allegations that Chitika knew about any infringing activity, nor is there any evidence that Chitika was “intimately and causally involved in a vast number of infringing transactions.”

This is a little garbled (because it references the defendant's knowledge in the consideration of material contribution), but it seems like the court suggests that ad networks may be in a different position than payment service providers because ad networks don't have the same multi-iteration "transactions" with the rogue website.

Notice that this court totally sidestepped (or missed?) the tertiary liability aspect of this case--that Chitika was a support provider to a site that only provided links to allegedly infringing files. To me, it would be entirely appropriate for the court to say that any tertiary player categorically lacks the ability to materially contribute to infringing activity. Otherwise, once we start doing a dragnet for service providers to service providers to infringers, the universe of potential defendants grows to a ridiculous size.

In the end, the court grants Chitika's Rule 12(c) motion for judgment on the pleadings. Broadly construed, this ruling is a win for ad networks, indicating that they are not automatically liable for contributory copyright infringement simply because allegedly rogue websites participate in their networks. But I'd hardly call this a resounding win. Elsevier didn't send Chitika a cutoff notice, giving the court an easy escape valve on scienter, and the court waffled on the material contribution prong. I would expect this opinion to look very different if Elsevier sent a cutoff notice and Chitika didn't promptly drop Pharmatext. In so, rightsowners like Elsevier probably can get 90%+ of the benefit of SOPA Section 103 simply by sending cutoff notices to ad networks.

Notice also that in the face of a cutoff notice, Chitika would not stand up to defend the alleged rogue website publisher in its network. Chitika alleged that Saggi accrued about $500 in royalty payments over 29 months of service. Assuming Chitika does 50/50 splits with its publishers, Chitika will not expend an ounce of effort to preserve its $17/month revenue stream from Saggi. Thus, Elsevier's cutoff notice would be dispositive--even if Chitika could win a ruling like this (which would be more uncertain after Chitika gets a cutoff notice), it's not worth the fight. So after Elsevier's cutoff notice to Chitika, Chitika instantly tosses Pharmatext overboard like a piece of garbage, due process be damned. SOPA isn't required to get that result.
__

Comments from Venkat:

As Eric points out, Elsevier is trying to hold Chitika liable under a theory of tertiary liability. It's far from clear that Pharmatext is liable to Elsevier for merely linking to infringing downloads. Columbia Records v. Fung is currently pending in the Ninth Circuit, and it should shed some light on how extreme the facts need to be in order to hold a website liable for merely linking to allegedly infringing downloads. (Here's Eric's post on the district court opinion in that case: "Torrent Sites Induce Infringement and Lose DMCA Safe Harbor--Columbia v. Fung." I expect the Ninth Circuit's ruling on the appeal fairly soon.)

The question of infringement that occurs purely off-shore is interesting. As Eric mentions, the court questions whether a site that is totally off-shore can be held liable if there's no predicate act that occurs in the United States. I wonder if this is a legitimate argument for rightsowners as to something in the rules that should be 'fixed'? If Elsevier has no recourse in US courts against Pharmatext, should this automatically undermine any possibility of going after service providers of rogue sites?

Finally, as to the issue of whether Chitika has the requisite knowledge of the underlying infringements for Elsevier to be able to hold it liable, query as to whether any search terms that were used to target could be used to show the requisite knowledge on Chitika's part. The use of search terms as a proxy for intent has come up in the copyright context (e.g., it was used against Limewire as indicative of its intent to lure Napster users) but it would seem less probative in this context.

Posted by Eric at 09:20 AM | Copyright , Derivative Liability | TrackBack

December 01, 2011

Spiritual Group's Attempt to Unmask Online Critics Goes South--Art of Living Foundation v. Does

[Post by Venkat Balasubramani]

Art of Living Foundation v. Does, 10-cv-05022-LHK (N.D. Ca.; Nov. 9, 2011)

Art of Living Foundation is an organization based in India that is dedicated to teaching the spiritual lessons of “His Holiness Ravi Shankar.” Defendants are disgruntled former “student-teachers and students” of plaintiff who want to bring to light their view that AOLF is a “manipulative and abusive cult.” Defendants posted blogs under the pseudonyms “Skywalker” and “Klim.”

AOLF sued, alleging various claims including defamation, misappropriation of trade secrets, copyright infringement and trade libel. AOLF also alleged that defendants published AOLF’s copyrighted “Breathe Sound Water Manual.” AOLF sought leave to conduct expedited discovery. This request was approved and AOLF issued subpoenas to Google and Automattic. Before Google and Auttomatic complied with the subpoenas, defendants appeared through counsel and moved to dismiss AOLF’s defamation claim, strike its trade secrets claim, and also moved to quash the discovery. Skywalker acknowledged that he published the manual, but said that he posted this solely as part of his larger campaign to bring awareness to his views about AOLF.

While the motion to quash was pending, the court granted defendants’ request to dismiss the defamation claim, and struck the trade secrets claim. AOLF filed an amended complaint limiting its claims to copyright infringement and misappropriation of trade secrets. Magistrate Judge Beller granted the motion to quash as to Klim but denied it as to Skywalker, relying largely on the fact that a prima facie claim of copyright infringement is sufficient to overcome the right to anonymity. Judge Koh, reviewing Magistrate Judge Beller’s order, finds that AOLF failed to overcome Skywalker’s right to remain anonymous and quashes the subpoena as to Skywalker.

In a characteristically excellent order, Judge Koh canvasses the various standards courts apply in resolving anonymity issues. Some courts have required plaintiffs to make a prima facie showing before ordering disclosure, while others have demanded admissible evidence establishing each element of a claim. The Ninth Circuit recently held that in resolving the disclosure issue, courts should keep in mind the nature of the speech (e.g., purely commercial versus purely political) as well as the potential chilling effect of ordering disclosure (In re Anynomous Online Speakers). Finally, and most troubling for the defendants, a widely cited 2004 decision from the Southern District of New York found that a prima facie allegation of copyright infringement entitles the plaintiff to identify doe defendants (Sony Music v. Does).

Defendant raised a fair use argument, but the court does not rely on the possibility of non-infringement in resolving the disclosure issue. The court notes that “evidence of copyright infringement does not automatically remove the speech at issue from the scope of the First Amendment.”

The court employs a balancing test where it weighs the harm to plaintiff and defendants. Disclosure of Skywalker’s identity would have a chilling effect on other bloggers, and this weighed heavily in favor of defendants. With respect to harm to the plaintiff from quashing the subpoena, the court finds that AOLF would not suffer a comparable harm. AOLF could proceed in the litigation without knowing Skywalker's identity—Skywalker had responded to written discovery, and if necessary, AOLF’s counsel could even conduct a deposition via telephone (or alternatively, Skywalker’s identity could be revealed on an attorneys’ eyes only basis). Ultimately, AOLF was unable to make a compelling argument that it needed to discover Skywalker’s identity at this point in the litigation. It raised a weak argument that it needed to find out the revenues generated from Skywalker’s blog but the court notes that this information could be gleaned through other sources, such as Google and Automattic.
__

This is a nuanced result. The court recognizes that the copyright claim is not particularly strong and there is a good chance, this is the end of the road for Art of Living Foundation. The earlier dismissal of its defamation claim (and accompanying liability for attorney's fees) is a serious blow, but the court's rejection of its request to unmask Skywalker deprives AOLF of what it was looking to get out of this lawsuit--early identification of a pseudonymous blogger. On the merits of his copyright claim, Skywalker may win on his claim for fair use or successfully argue that the damages are minimal at best. (See generally, the Righthaven debacle.)

The overall takeaway is that if you as a blogger face a claim for garden-variety copyright infringement, this type of a ruling shouldn't give you much hope. Courts will readily cite to Sony Music v. Does and order compliance with a subpoena seeking your identification. If, on the other hand, a plaintiff is using a weak copyright claim to get at you for bad-mouthing the plaintiff, a court may see it for what it is, and deny the requested discovery. Of course, this depends on your luck of the draw and requires you to be in front of a thoughtful judge and have good representation. (The ACLU, EFF, and Public Citizen weighed in as amici, which didn't hurt.) It also requires that service providers don't jump the gun when responding to subpoenas seeking identification. I'm sure on a daily basis, numerous posters and bloggers are unmasked because the circumstances are different from those in this case. Additionally, "garden-variety" copyright infringement unmaskings never get to court at all; service providers routinely make disclosures under section 512(h) without the alleged infringer even knowing it.

Added: Art of Living approached me and asked if I would add a link to an explanatory letter from them explaining their motivations in bringing the lawsuit. I've uploaded it to Scribd here.

Other coverage:
Public Citizen: Federal Judge Protects Anonymity of Blogger Despite the Allegedly Infringing Posting of a Copyrighted Teaching Manual
Techdirt: Courts Can't Ignore Free Speech Concerns Just Because Someone Claims Copyright Infringement
Wendy Davis: Court Rejects Bid To Unmask "Art of Living" Critic
RCFP: Federal judge preserves blogger's anonymity

Posted by Venkat at 04:45 PM | Copyright , Privacy/Security

November 28, 2011

Dangerous Copyright Office Proposal to Undercut the DMCA Online Safe Harbors

By Eric Goldman

In light of SOPA and its capacity to destroy the current online safe harbor scheme, it seems almost quaint to keep worrying about 17 USC 512. However, unless SOPA/PROTECT-IP passes, 512 remains an essential part of the UGC economy, and it's worth fighting to preserve the safe harbor's integrity and all of the social benefits that have flowed from it.

Recently, the Copyright Office floated a proposal that would result in websites completely losing the 512 safe harbors due to administrative technicalities. Specifically, the Copyright Office proposes to force all websites that currently have properly designated an agent for notice to re-register or they will automatically forfeit the safe harbor; then, the Copyright Office proposes to require all websites to take affirmative action to confirm their designation every two years or they will automatically forfeit the safe harbor.

Unquestionably, the proposal's net effect will be that well-meaning legitimate websites will lose their safe harbor protection due to unintentional or garden-variety clerical/administrative errors. Further, there is almost no countervailing benefit to copyright owners or the Copyright Office from the additional administrative requirements.[**] Indeed, the Copyright Office proposal inevitably will increase the litigation costs for both copyright owners and UGC websites as it gives them yet another thing to litigate over--as if 512 opinions weren't long enough already.

[**: Perhaps I've overstated things. In fact, the proposal may offer indirect benefits to both copyright owners and the Copyright Office. First, copyright owners might be happy that more UGC websites become easy targets for their lawsuits. Second, I wonder if the Copyright Office plans to use filing fees to extract more profits from UGC websites, something they didn't expressly say but I have my suspicions].

Working with Corynne McSherry of the EFF and Jason Schultz from UC Berkeley, today we filed comments to the Copyright Office proposal encouraging them to scrap this part of the proposal. Our comments are just 3 pages long, so take a look. The initial comment due date is today; reply comments are due Dec. 27.

Posted by Eric at 09:20 AM | Copyright , Derivative Liability | TrackBack

November 21, 2011

Can A Copyright Be Assigned By Email?--Hermosilla v. Coca-Cola

By John Ottaviani with comments from Venkat and Eric

Vergara Hermosilla v. The Coca Cola Company, No. 11-11317 (11th Cir. Nov. 3, 2011).

Can a copyright be assigned by an exchange of emails? Section 204(a) of the Copyright Act provides that a transfer of copyright ownership is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or by such owner’s duly authorized agent. The 11th Circuit has recently affirmed a lower court’s decision that an exchange of emails was sufficient to constitute a contract to assign a copyright. The court’s decision, however, does not seem to adequately address whether the email exchange satisfies the “writing” requirement in Section 204.

Background

The dispute arises out of Coca Cola’s worldwide marketing campaign for the 2010 FIFA World Cup soccer tournament. As part of its advertising campaign, Coca Cola enlisted recording artist K’Naan to create a new version of his song “Wavin’ Flag,” and called the new version the “Celebration Mix.” Coca Cola had certain lyrics in the “Celebration Mix” adapted and sung in different languages by local artists and K’Naan. In 2009, Coca Cola contacted Jose Puig, a representative of Universal Music Latin America, to produce a Spanish version of the Celebration Mix. The Spanish lyrics were to be sung by David Bisbal, a Spanish language singer. Puig was referred to the plaintiff, Rafael Vergara Hermosilla, in November 2009. Vergara adapted the Celebration Mix into Spanish, and subsequently delivered the Spanish lyrics to Puig in December 2009. A dispute later arose over Vergara’s compensation for the adaptation.

Puig and Vergara negotiated a settlement. After a phone conversation about the terms of the deal, Vergara wrote this email:

[B]ecause I am a man of my word and honor, that is not moved by economic motives, my only request is the my credits are respected as producer and adapter of the Spanish version (that every time the name of any composer of this version appears, my name appears as adapter), and obviously, the credits for the production that are detailed in the invoice sent for this production, which I have detailed below.

For the adaption, you may consider it a work for hire with no economic compensation to that respect. I believe what’s legal is a dollar.

I hope this leaves clear what my work was and what my good intentions were from the beginning.

The next day, Puig responded by email to Vergara to the effect that “You can count on the credits on the track. I am resending you the contract.”

Puig subsequently sent draft contracts confirming the assignment, but inadvertently omitted the provisions that would give Vergara the credits. So Vergara rejected what he characterized as his “proposal” and filed a lawsuit in the Southern District of Florida to enjoin Coca Cola from using the Spanish version of the Celebration Mix without giving him proper credit.

After initially enjoining Coca Cola in May 2010 from disseminating the Spanish version of the Celebration Mix without giving credit to Vergara as the adapter, in February 2011 the District Court granted a summary judgment in favor of Coca Cola. The district court found that the e-mail exchange constituted an assignment by Vergara of his copyright in the adapted lyrics. The court characterized the exchange of emails as an offer and acceptance, “and at that moment the deal was made irrevocable.” The court determined that Puig’s sending of formal contracts that did not reflect all of the terms of the earlier emails was not a “counteroffer which is labeled as an acceptance, but adds new terms” (which typically is not binding under Restatement (Second) of Contracts §59), but was an offer to modify an existing contract. Although Vergara rejected this offer, the court found that this did not impact the initial agreement to assign the copyright.

In a brief aside, the district court also recognized that Section 204 of the Copyright Act requires a signed writing for a conveyance. However, the district court simply noted without discussion that “Courts have found emails to constitute signed writings.” (citing Lemel v. Mattel, Inc., 394 F.3rd 1355 (Fed. Cir. 2005) and the federal E-Sign Act).

11th Circuit Decision

The 11th Circuit opinion is relatively short and to the point. After reciting the facts, the 11th Circuit found that, under Florida law, “the record established without dispute that Vergara assigned his copyright interests to Universal.” The court used a traditional contract analysis to characterize Vergara’s e-mail as an offer and Puig’s e-mail as an unconditional acceptance, which together were effective to create a contract.

Discussion

Unfortunately, while the 11th Circuit found that the e-mail exchange constituted a binding contract under Florida law, the court did not address whether the e-mail exchange constituted a “writing” for purposes of Section 204 of the Copyright Act. Prior to the adoption of the E-Sign law, courts differed as to whether an e-mail exchange would satisfy the writing requirements of Section 204. Section 7001(a)(2) of the federal E-Sign Act, which was enacted in 2000, provides in relevant part that “a contract relating to [a transaction in or affecting interstate or foreign commerce] may not be denied legal effect, validly or enforceable solely because an electronic signature or an electronic record was used in its formation.”

Few courts have addressed what consitutes a "writing" for purposes of E-Sign. Earlier this year, the Arkansas Supreme Court found that a waiver of coverage in an online insurance application constitutes a "writing" for purposes of the Arkansas insurance law requirng such waivers to be in writing. In 2010, the federal district court in Colorado found that an e-mail summary of a settlement meeting could consitute a "writing" for purposes of the Colorado Statute of Frauds, but that the summary could not be enforced as a contract because it was written by an administrative assistant and was not "subscribed by the party to be charged."

But does E-Sign apply to transactions involving transfers of copyrights? Professor Nimmer notes that “[n]othing about the ESIGN Act overtly mentions copyrights in particular or other federal enactments in general.” He further notes that E-Sign does purport to apply “to any transaction in or affecting interstate or foreign commerce,” with some exceptions. It remains to be seem, then whether courts will treat e-mail as having sufficient formalities to satisfy the writing requirement in Section 204 of the Copyright Act.

The 11th Circuit decision also ignored the fact that Vergara’s email characterized the adaptation as a “work made for hire.” Would the decision have come out any differently if analyzed under the “work made for hire” provisions? Probably not. Under Section 101 of the Copyright Act, certain works qualify as a work made for hire if “the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” The court did not discuss the question whether the adaptation qualified as one of these specially ordered works (at best it might be viewed as a part of an audio visual work, or as a translation, but probably not). Even if the adaptation did qualify as a work that could potentially be a “work made for hire,” does the exchange of emails constitute “a written instrument signed by them?” I find it harder to classify the exchange of e-mails as an “instrument’ within the meaning of the work made for hire definition. This may be why the 11th Circuit decided the issue on contract grounds, but it would have been nice to have some analysis of this issue.
_________

Comment from Venkat:

This is a great post by John that delves into the interplay between the federal ESIGN Act and the Copyright Act. I wonder whether an email disclaimer would have affected the analysis. There’s been a lot written on the efficacy and the desirability of email disclaimers in other contexts, but I wonder if an email disclaimer that said

Nothing in this email is intended as an offer and the author disclaims any intention to make an offer or create an enforceable agreement through any email messages. Any agreement with the author of this email must be in a signed paper document!

would have protected Hermosilla? I’m guessing the court would have said that Hermosilla’s unequivocal intent to reach an agreement trumped anything in an email disclaimer. It may not have been useful here, but it would be useful in other contexts, such as where people exchange email messages in an attempt to settle a dispute and one party tries to use an email along the way to say that the parties reached a settlement and tries to enforce a settlement on this basis. I’m not a fan of email disclaimers, but this type of a disclaimer may be worth exploring.
_________

Eric's comments.

To me, the legal doctrine in this case seems pretty straightforward. If the parties formed a contract or did a proper contract amendment, the fact that the contract was made via email should satisfy the Section 204 "writing" requirement per E-SIGN/UETA. After all, Section 204 is a statute of fraud, and E-SIGN/UETA were designed to say that emails satisfy the statute of frauds. See, e.g., the many real estate cases reaching this result and John E. Theuman, Satisfaction of Statute of Frauds by E-Mail, 110 A.L.R.5th 27 (2003). I don't see any reason why copyright law would be handled differently under E-SIGN or UETA. My analysis is the same for the "work for hire" statute of fraud.

For me, the harder part is whether the email exchange properly formed a contract/contract amendment and, if it did, if Coca-Cola (or its assignor) violated one of the contractual conditions such that their failure to perform negated the contract. If this situation didn't have a whiff of the content creator changing his mind with venal intent, I think other courts might have been more sympathetic on that point.

Posted by John Ottaviani at 08:50 AM | Copyright , E-Commerce , Licensing/Contracts | TrackBack

November 15, 2011

Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

By Eric Goldman

[Note: I've been working on this post for about 2 weeks, so my apologies if my comments are duplicative of the intervening discussion about the bill]

The DMCA online safe harbors have worked pretty well over the past 13 years. I don't know that anyone loves the compromise, but everyone seems to have done OK. We've seen an explosion of UGC websites fueled by the safe harbor, and content owners as an industry have done pretty well for themselves financially and have developed a working relationship with most major UGC sites.

The Stop Online Piracy Act, with its ridiculously named subpart the "E-PARASITE Act," doesn't expressly modify 17 USC 512. Nevertheless, it is a full-fledged assault on the safe harbor's scheme. It employs the same basic notice-and-takedown structure of 512, but it applies the cutoff obligations to payment processors and ad networks (thus effectively reversing Perfect 10 v. ccBill and Perfect 10 v. Visa), expands--for the first time--the takedown obligations to trademarks (thus embracing and expanding Gucci v. Frontline), expands the takedown obligations to cover anti-circumvention in addition to the 17 USC 106 rights, expands the reasons why a rightsowner can complain, and does not give the governed intermediaries any business incentive to stand up for user content. On the latter point, because SOPA is designed to cut off the cash, each and every UGC item potentially jeopardizes its entire economic enterprise of a website hosting it. In other words, if the website goes offline because of cash flow problems caused by the cutoff attributable to a single UGC content item, all of the UGC on that website goes dark because of a single content item. Talk about collateral damage.

Thus, among other adverse consequences, if SOPA passed, it effectively repeals 17 USC 512 by shifting most of the action to the notice-and-takedown process in SOPA. In doing so, SOPA radically changes the balance between content owners and UGC websites. Despite the FUD from the content industry and other bill supporters about the supposedly serious problems caused by "rogue" websites and the supposedly fine-grained targeting of this bill, make no mistake--this law mortally threatens the entire UGC community.

There are a lot of other serious problems with the law and I'll discuss a few in a moment, but let me step back for a moment. Some legislative proposals, even if everyone knows they won't pass, are nevertheless useful for sparking healthy conversation among disparate communities. SOPA is not such a law. It doesn't seek to engender productive conversations. Instead, it goes out of its way to pit Silicon Valley v. Hollywood. This fosters unhealthy and antagonistic conversations, and the ongoing battle between the two diverts valuable resources that could be used to enrich both communities. See, e.g., the $100M+ that Google has spent fighting Viacom in the YouTube lawsuit--a huge amount of money that could have been instead invested in new services that benefit consumers, help rightsowners make more money and generally improve society.

Further, this law represents the worst kind of rent-seeking we see from incumbent industries. One approach to drafting legislation is to put so many objectionable concepts into a single bill that the opponents feel like they won if they clean up 50% of the problems, but that still leaves the other 50% of nasties to get through the system. I find it dispiriting that we must spend a lot of resources just to preserve the status quo from this type of industry overreaching. I support democracy for the reasons articulated by Winston Churchill, but I wished I lived in a democracy where attempts at legislative manipulation like SOPA were obviously DOA and led to its proponents suffering appropriately adverse consequences for their overreach.

In addition to the trumping of the 512 notice-and-takedown provisions, other major structural deficiencies of the law include:

* attempting to reinstantiate geographic borders on the Internet. Perhaps rebordering the Internet is inevitable, but it's bad policy for the United States to be cutting off transborder data flows, even for the putatively noble purpose of suppressing copyright infringement. Basically, the law provides a roadmap to foreign governments on how to reinstantiate geographic borders over their Internet connections, and they won't limit their censorship to copyright infringement. Instead, they'll go for the whole enchilada to restrict every type of foreign content the governments object to. (It seems virtually inevitable that we'll do the same in the US too, but that's a separate post). It will be hard for us to criticize those foreign governments' efforts because we taught them how to do it. The retort that we only deemed border reinstantiation worthy for copyright infringement and no other content type will ring hollow. When the Internet balkanizes into the US Internet, which looks nothing like the Egypt Internet, we'll have no one to blame but ourselves. I encourage the act's proponents to think very carefully whether such a Balkanized Internet will make them less money in the long run.

* The imposition of cutoff obligations on a wide variety of intermediaries, including Internet access providers and search engines in addition to the payment processors and ad networks I discussed above.

* Terms that don't lend themselves to precise statutory definitions, including "Internet advertising service," "Internet search engine," and "Internet site." All of these definitions are broad, ambiguous and based on assumptions about current technology. They don't make sense today and will look even sillier 10 years from now.

* the complete absence of empirical evidence supporting the need for any changes, or that the proposed changes fix any important problem. The collateral consequences would be unacceptable even if this evidence existed; without it, it's hard to interpret this law as a good faith effort to improve society.

While most of the discussion has been justifiably focused on the cutoff provisions, I also want to call your attention to Section 205 of SOPA. The way I read it, it proposes to build a huge bureaucracy of foreign diplomats whose sole job is to advance the interests of US IP owners in foreign countries. We already have problems with USTRs being IP maximalists, but this section would dramatically expand the number of IP maximalists in the US diplomatic corps. I'm not sure I have a good handle on all of the implications, but it seems like (1) we'll have more opportunities for the revolving door from IP owners to government and back, (2) this will further inculcate the agenda of legacy/incumbent IP industries into our government policy, and (3) we will have more boots on the ground to push the US IP maximalist agenda on other countries as part of our doctrinal imperialism.

There has been a lot of commentary about the bills. Some links worth exploring:

EFF Coverage

SOPA: Hollywood Finally Gets A Chance to Break the Internet (an excellent single-stop resource to begin your research)

Proposed Copyright Bill Threatens Whistleblowing and Human Rights

Techdirt

[I know you're already reading Techdirt, but no one is doing a better job of chronicling the day-to-day SOPA developments than Mike Masnick.]

E-PARASITE Bill: 'The End Of The Internet As We Know It'

MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized [a must-read article of how content owners who should know better nevertheless mistakenly accuse legitimate businesses of infringing activity and, using the power of law enforcement, shut down legitimate businesses and cost Americans jobs]

Go Daddy Supports E-PARASITE Legislation Even Though Its Own Site Is Dedicated To Theft Of Property Under Terms Of The Bill

Viacom Exec: 'Everyone Knows A Rogue Site When They See One'… Except He Doesn't

Others

Larry Downes, News.com, SOPA: Hollywood's latest effort to turn back time

Future of Music Coalition, Coming Clean on SOPA

Rebecca MacKinnon, New York Times, Stop the Great Firewall of America

Public Knowledge, SOPA and Section 1201: A Frightening Combination

James Temple, San Francisco Chronicle, Stop Online Piracy Act would stop online innovation

What You Can Do

If your member of Congress is supporting the law, remember that fact come election time. Before then, some things you can do today:

Contact your legislator

Sign the petition at Whitehouse.gov

Sign the petition at Avaaz

If you qualify, sign the Educators' Letter to Congress

Posted by Eric at 08:16 PM | Copyright , Derivative Liability , Trademark | TrackBack

November 07, 2011

Good News/Bad News About the Number of Blogs Eligible for the 17 USC 512 Safe Harbor

By Eric Goldman

My 2006 article about blog law included the following passage (footnotes omitted):

few blogs satisfy the numerous technical prerequisites for § 512 eligibility, such as registering their websites with the U.S. Copyright Office. To assess this, on April 18, 2006, I searched the Copyright Office’s database of § 512 registrations and found only ten registrations containing the word “blog.”

In preparing comments on the Copyright Office's proposed amendments to the 512 designation of agent requirements, I decided to redo this pseudo-empirical study. On November 3, I went to the Copyright Office's database of registrations and searched for the character string "blog" in the name of the registered names/websites. I came up with over 200 hits. At the bottom of the post, I lay out the numerical details.

[Procedural note: I know this methodology is a hack. First, the Copyright Office has a lag of weeks/months between filing and publication. Second, many blogs don't have the word "blog" in their title for registration purposes but may be covered nonetheless. Third, a single entity might be counted multiple times in my count; for example, Weblogs, Inc. counted as at least 3 hits. Fourth, I'm not even sure what constitutes a "blog" any more. I'm sure there are many other objections. The count isn't super-precise. It's more of a directional indicator.]

Thus, the good news is that my 2011 census produced more than 20x the number of hits I got five years ago. Clearly the word has spread in the blogging community of the value of filing for 512 protection. But, the bad news is that even if 200+ blogs are covered by the agent designation--and therefore have satisfied one of the formalities prerequisites for a 512(c) safe harbor--it's a tiny fraction of the blogs that might ultimately want the 512 safe harbor because, for example, they allow user comments. Indeed, Righthaven repeatedly sued defendants over user-uploaded articles/comments to blogs and websites that hadn't made the requisite filing and therefore couldn't claim the safe harbor at all. So while it's heartening to see the growth in blogs eligible for 512 coverage, the overall number of covered blogs remains disconcertingly low.

FWIW, as a personal note, this blog isn't covered by a 512 designation of agent. I'm obviously aware of the statute, but comments have been off since 2006. The only posts that might be covered by my 512 filing are those of my co-bloggers, such as Venkat, and I've decided to take the risk that they will post infringing material and that a 512 designation would have been available in the co-blogger situation.
_____

The number of times the character string "blog" appeared per letter in the Copyright Office database: A - 2 // B - 50 // C - 12 // D - 6 // E - 1 // F - 7 // G - 6 // H - 16 // I - 6 // J - 1 // K - 6 // L - 6 // M - 13 // N - 9 // O - 1 // P - 10 // Q - 0 // R - 4 // S - 13 // T - 9 // U - 3 // V - 1 // W - 23 // X - 0 // Y - 1 // Z - 3 // Other - 0. Total = 209.

Posted by Eric at 08:54 AM | Copyright , Derivative Liability | TrackBack

November 06, 2011

October 2011 Quick Links

By Eric Goldman

Copyright

* MUST READ from Techdirt: MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized. On the topic of errors in determining copyright infringement, the incident a powerful reminder both that even those "in the know" overclaim copyright infringement, and that the targets of such overclaiming can suffer catastrophic losses. That makes the incident an important reminder of the value of procedural safeguards in the copyright setting.

* An amended Capitol v MP3Tunes opinion explains why 17 USC 512 applies to state copyright claims (see pages 14-17). Prior blog coverage.

* Megaupload settles with Perfect 10, and the judge vacated her opinion. Prior blog coverage.

* Permanent injunction issued against Zediva. Prior blog coverage.

* Supplemental briefing requested in Viacom v. YouTube:

The parties are hereby ordered to submit letter briefs, not exceeding ten pages doublespaced, on the following questions: (1) whether and how the red-flag knowledge provision would apply under the Defendants’ “specific” knowledge construction of § 512(c)(1)(A); and (2) whether YouTube’s “syndication” of videos to third parties falls outside the scope of safe harbor protection for activities that occur “by reason of . . . storage at the direction of a user” under § 512(c)(1).

Mark Lemley on Viacom v. YouTube.

* Mick Haig Productions, e.K. v. Does, 2011 WL 5104095 (N.D. Tex. Sept. 9, 2011). In a mass copyright lawsuit, the plaintiff's lawyer issues subpoenas without authorization to identify the defendants and gets sanctioned $10k for it.

* Righthaven LLC v. Newman, 2011 WL 4762322 (D. Nev. 2011):

the restated SAAs are not a simple attempt to clarify or supplement the facts pleaded in the complaint with additional facts that were present at the time of filing. Rather, the restated SAAs present a new set of facts with respect to the alleged copyright ownership, which is impermissible because Righthaven may not amend the defects in the jurisdictional facts themselves. See Newman–Green, 490 U.S. at 830. Next, the restated SAAs' terms substantially contradict the original SAA. Again, defects of allegations may be amended, but not defects in the facts themselves.

* Righthaven LLC v. Inform Technologies, Inc., 2011 WL 4904431(D. Nev. Oct 14, 2011). Upholding personal jurisdiction in Nevada but issuing an order to show cause why the suit shouldn't be dismissed for lack of standing.

* Righthaven v. Newsblaze (D. Nev. Nov. 4, 2011). Another Nevada judge, this time Judge Jones, dismisses a Righthaven case for lack of standing.

* Sam Francis Foundation v eBay complaint: Class action suit against eBay under CA's "resale royalty" statute.

* Google got a good copyright win in a German case over its image search service.

* Wired: U.S. Copyright Czar Cozied Up to Content Industry, E-Mails Show

Search Engines

* Google implements SSL on its search results pages and knocks out search terms from the referrer URL. This may sound like a privacy win, but it also means that Google will increase the gap between its database and the databases of indexed websites. So this is a backdoor way for Google to hoard data for itself...and perhaps increase incentives for advertisers to pay. More on this point from Danny Sullivan: "if Google thinks this needs to be done for privacy reasons, then it needs to block referrers for everyone and not still allow them to work for advertisers. That move is one of the most disturbing, hypocritical things I’ve ever seen Google do."

* Google Buzz is dead, but Google has a 20 year hangover with the FTC, which approved the settlement. Prior blog post. Francoise Gilbert offers some lessons.

* Search Engine Land: Organic Click-Thru Rates Tumbling; Only 52% Click On Page One, Study Suggests

* News.com: Google's whimsical Easter eggs.

Content Regulation

* Darm v. Craig, the Oregon Twitter libel lawsuit, settled.

* Language Line Services, Inc. v. Language Services Associates, LLC, 2011 WL 5024281(N.D. Cal. Oct 13, 2011). Complicated dispute between two competitors. Many claims based on one competitor's blog post were stricken under CA's anti-SLAPP law. Rebecca’s coverage.

* Crookes v Newton, 2011 SCC 47 (Can Sup Ct): Linking to defamatory content on 3rd party site isn't "publication" of linked content.

* Hollywood Reporter: Misappropriation of personality claim in Hurt Locker case gets anti-SLAPPed.

Miscellaneous

* Ninth Circuit will rehear the Nosal case en banc. Prior blog post. Tom O’Toole’s reset.

* Zing Brothers LLC v. Bevstar LLC (D. Utah Oct. 14, 2011: “This specific inclusion of Utah in the drop down list of states, and the website statements that orders are solicited anywhere "inside the USA" is sufficient to establish that this site is "something more" than a non-targeted transaction site.”

* Ferris & Salter P.C. v. Thomson Reuters Corp. (E.D. Mich. Oct. 19, 2011): “There is no basis under Michigan law or, for that matter, in the vast majority of those states whose courts have considered the issue, to deem computer consultants and service providers professionals…. Thus, the Court concludes that—under Minnesota or Michigan law—no professional negligence action will lie against computer engineers and technicians.”

* From the Chronicle of Higher Ed: What Wikipedia Deletes, and Why.

* A new article tries to answer the question, "Why did Wikipedia succeed while other encyclopedias failed?" My Wikipedia article touched on this issue.

* Actors' unions ask IMDb not to publish the age of actors. NY Times coverage.

* Tom O’Toole: ICANN's .xxx sunrise period was a success--for ICANN.

* A behind-the-scenes look at the creation of the Paris Hilton brand:

* I was on TWiL 134 with Denise Howell, Evan Brown and Ernie Svenson. Listen in.

Posted by Eric at 03:35 PM | Content Regulation , Copyright , Derivative Liability , Search Engines | TrackBack

October 27, 2011

Righthaven Hit With Another Fee/Cost Award, This Time Nearly $120k--Righthaven v. DiBiase

By Eric Goldman

Righthaven LLC v. DiBiase, 2011 WL 5101938 (D. Nev. Oct. 26, 2011)

There's really not much to say about this one. In a brief opinion that speaks for itself, Judge Hunt awarded nearly $120,000 in attorneys' fees and costs to DiBiase. Given that Righthaven pleaded poverty in response to the $34k fee award to Hoehn, I'm assuming they don't have a spare $120k lying around either. For the reasons I expressed in my last blog post on Righthaven, "I feel no schadenfreude."

Some open questions on my mind:

- when will Righthaven declare bankruptcy? Given that litigation is their business, it would be ironic if they found more litigation success in bankruptcy court than they found in any other court they've visited.
- will Stephens Media infuse Righthaven with more capital, or will it let Righthaven starve for cash?
- can defendants find a way to pierce Righthaven's corporate veil and seek to get their fee award paid directly by Stephens Media and Steve Gibson personally? It seems to me that this possibility is not out of the question.
- will the cumulative attorneys' fee awards against Righthaven exceed the total revenue it brought in from its litigation campaign? At this point, I would be surprised if it didn't.
- if an appellate court does find some grounds to reverse on appeal, will Righthaven even be around to enjoy that new lease on life?

Prior blog coverage of the Righthaven fiasco:

* Colorado Judge Drills Righthaven and Awards Attorneys' Fees--Righthaven v. Wolf
* Resetting the Righthaven Fiasco
* Righthaven Defendant Awarded $3,800 in Attorneys' Fees--Righthaven v. Leon
* Recapping Righthaven Developments from the Past Two Weeks
* Righthaven Benchslapped in Ruling Saying It Lacks Standing--Righthaven v. Democratic Underground
* Another Defense-Favorable Righthaven Ruling--Righthaven v. Choudhry
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Blogger Wins Fair Use Defense...On a Motion to Dismiss!--Righthaven v. Realty One

Posted by Eric at 08:53 AM | Copyright | TrackBack

October 26, 2011

Ex-Employee Converted Social Media/Website Passwords by Keeping Them From Her Employer--Ardis Health v. Nankivell

[Post by Venkat, with comments from Eric]

Ardis Health, LLC, Curb Your Cravings, LLC and USA Herbals, LLC v. Ashleigh Nankivell, 2011 WL 4965172 (S.D.N.Y. Oct. 19, 2011)

Nenkivell worked for CYC as a "video and social media producer." Her work included producing videos, "websites, blogs, and social media pages" for CYC and the other two plaintiffs, which were founded by Jordan Finger. Her responsibilities included:

maintaining passwords and other login information for websites, email account, and social media accounts, a well as for third-party servers where plaintiffs stores content

Fortunately for plaintiffs, Nenkivell signed an agreement with CYC which vested ownership in her work product to CYC and required Nenkivell to return all confidential information at CYC's request.

In 2010, Finger and Nenkivell developed a service called "whatsinurs," which the court described as a "social media website for cosmetic products." Ardis applied for a trademark in Whatsinurs and registered the copyright for the website. Finger sent Nenkivell an agreement for the organization and ownership of the new site, which Nenkivell never signed. Nenkivell was restless and looked around for alternate employment. Plaintiffs were unhappy about this and fired Nenkivell in June 2011. After the termination, Finger requested the laptop, which plaintiffs had provided her, and the access information for the various websites. She declined to provide this. Plaintiffs sued and sought injunctive relief.

The Access Information: The court says that it's "uncontested that plaintiffs own the rights to the Access Information," and as a result, Nenkivell's retention of this information can form the basis of a conversion claim. The court also says that plaintiffs' inability to access and update their site ("to react to online trends" and effect a new initiative to participate in "'daily deal' promotions") constitutes irreparable harm. The court orders the information turned over to plaintiffs pending resolution of the dispute.

The Laptop: The court declines to order the laptop returned, saying that the laptop is a "mass-produced object," the loss of which can be compensated by money damages. Plaintiffs also argued that they were entitled to the information on the laptop but the court faults plaintiffs for not fully developing their argument--they relied on confidentiality terms in the agreement and nothing more. Nenkivell also argued that the laptop had continuously synched to plaintiffs' computer. Plaintiffs argued that they could not be sure of this without seeing the laptop, but this argument does not get much traction with the court.

Display of Whatsinurs Content on Defendant's Website: Plaintiffs also argued that they suffered irreparable harm from the display of the whatsinurs site's content on her personal website (as an example of her work). Plaintiffs' key argument on this score was that a search for "whatsinurs" would display both defendants' website and the same contents, as displayed on Nenkivell's personal website. Plaintiffs argued that consumers would be confused as to the source of the website and this would dilute plaintiffs' "whatsinur" brand.

The court says this argument "is preposterous on its face":

Not only do defendant's websites appear below plaintiffs' in search results, defendant's [sic] do not purport to be, or in any way give the impression of being, portals for the sale of commercial goods. On both of defendant's websites, the Whatsinurs content is wholly non-functional, little more than dressed-up image captures. It is clearly labeled as an example of defendant's "Design" capabilities and surrounded by content from other projects defendant has worked on. It does not compete with plaintiffs' websites or pose potential issues of confusion.

Plaintiffs argued that Nenkivell's bad faith raises a presumption of confusion, but the court says that Nenkivell has an innocent explanation and there's no bad faith. Even assuming that there is a presumption of confusion, the court says that this is alone insufficient to warrant injunctive relief.

__

Yet another dispute over access to websites and social media profiles. It look like plaintiffs half-followed the basic advice of having a written agreement in place that documents the relationship between the company and the individual who manages the company's website and social media profiles. But the agreement in this case was not necessarily clean--the agreement was between Nenkivell and CYC, but one of the other plaintiff entities actually (Ardis) asserted ownership over the "whatsinurs" website. The court does not get into the issue of whether Nenkivell's development of the "whatsinurs" website was outside the scope of her relationship with CYC and therefore not subject to the agreement, but this seems like an issue that should come up. Social media accounts do not neatly fit into existing categories of property and we haven't seen many disputes over account ownership fully play out. (See the OMG Facts case for one ongoing dispute.) While an agreement that expressly covers ownership is ideal, it's interesting to note that the confidentiality provisions of the agreement do the job in this case.

On the web developer/social media producer side, holding any sort of website or social media credentials (or domain names) hostage is legally risky behavior. We've seen a slew of cases where this type of behavior resulted in possible liability. In DSPT Int'l v. Nahum, the Ninth Circuit held that holding domain name hostage may be bad faith under the ACPA. Maremont v. Susan Fredman Design Group involved a social media manager who continued to post on the Twitter and Facebook accounts following termination (this case was dismissed for lack of prosecution). Finally, the Ohio Court of Appeals held earlier this year in Eyesoldt v. Proscan that obstructing access to a website and email account can constitute conversion. The contours of legal liability are far from clear, but there is definitely risk when you hold website, email, or social media credentials hostage! Courts have shown a willingness to treat these credentials as intangible personal property that can support a claim for conversion. We all know how important it is to constantly update our social media accounts. It looks like the courts get this.

[Eric adds: some other analogous cases include New Mexico v. Kirby, Mikhlyn v. Bove, In re Rolando S., Ground Zero Museum v. Wilson and TEG v. Phelps.]

The court's rejection of plaintiffs' request to have Nenkivell's "portfolio copy" of the site taken down was interesting. Courts have moved away from automatically granting injunctive relief based on copyright or trademark claims. You have to show actual irreparable harm now. Plaintiffs proceeded primarily based on a trademark theory, and the court's rejection of their argument that the portfolio copy of the site appearing in search results would cause them irreparable harm will get Eric's resounding endorsement. Any time a court credits an end user with the shred of common sense necessary to parse the origin of content on the internet is a cause for celebration in his book (and rightfully so).
_______

Eric's Comments

1) Kudos to the plaintiffs for having a written agreement that governed the social media credentials, but demerits to them for not learning those credentials before they needed them. If an employee has login credentials to an account that they use for the company, at minimum that employee's manager should get those credentials too.

2) The judge's references to the employee "converting" those credentials makes me want to cry. The court had a half-dozen other legal doctrines easily available to order the defendant to turn the credentials over. Calling her retention of those intangible data strings "conversion" was completely unnecessary and adds to the growing confusion on what it means to "convert" electronic information. Perhaps that ship is sailed, but I continue to insist that "conversion" only applies to physical chattel, not intangible assets, and conflating the two inevitably leads to doctrinal meltdowns.

3) As Venkat predicts, I do cheer that mere appearance in search results should be legally irrelevant. However, I definitely don't like the judge's reference to the relative placement of the search results. I last "bitched" about that issue in my post on the Bitchen Kitchen case, so check that out.

Posted by Venkat at 06:42 AM | Copyright , Privacy/Security , Search Engines , Trespass to Chattels

October 19, 2011

Court Rejects Copyright Misuse Defense Against Apple and Affirms License Restrictions in OS X License Agreement -- Apple v. Psystar

[Post by Venkat Balasubramani]

Apple Inc. v. Psystar Corp., 10-15113 (9th Cir. Sept. 28, 2011) [pdf]

This is a dispute over whether Apple can enforce a restriction in its software license agreements which requires end users to run the Mac OS only on Apple computers. Short answer: yes.

Psystar sold "Open Computers," which were originally called "OpenMacs," and intended as cheaper alternatives for Apple computers. In order to allow these machines to run the Mac OS, Psystar "purchased" (licensed) a copy of the Mac OS X, installed this copy on a Mac computer, downloaded various updates, then made a copy of the software and transferred it to a non-Apple computer. Psystar then "added its own bootloader and kernel extensions to the software" on the non-Apple computer and this copy became the "master image." Psystar shipped "Open Computers" with a copy of the "master image" installed, but it also shipped an unopened copy of the Mac OS X which Psystar had purchased from a third party vendor.

Apple sued, alleging breach of contract, direct and contributory copyright infringement, trademark and trade dress infringement, and unfair competition claims. It also added a DMCA claim to the mix. Psystar counterclaimed, alleging copyright misuse. The district court found Psystar infringed and entered an injunction against it. Psystar asserted an antitrust counterclaim, but that claim was dismissed and Psystar didn't appeal that dismissal. Psystar also did not appeal the copyright infringement ruling.

Psystar argued that the language in the SLA which barred the use of OS X on non-Apple computers "impermissibly extend[ed] the reach of Apple's copyright."

The court starts by noting that the sale versus license distinction (most recently affirmed by the court last year in Vernor v. Autodesk) is "well established." According to the court, this distinction "has caused the use of software licensing agreements to flourish and become the preferred form of software transactions." Psystar argued that Apple sold, rather than licensed, its software to Psystar, but the court spends less than a page explaining that Apple makes its copies of OS X available as a license and not a sale.

The court focuses on the misuse defense. Copyright misuse is an affirmative defense to a claim for copyright infringement, and it was borrowed by courts from patent law. While the Ninth Circuit has recognized the misuse doctrine, it notes that it has been applied "sparingly." The purpose of the defense is to "prevent . . . holders of copyright from leveraging their limited monopoly to allow them control of areas outside the monopoly." The court says it upheld the defense in only one case and there the licensor prevented the licensee from using any other competing product. In another case (Triad Systems v. Southeastern Exp.), misuse was asserted as a defense against a claim of infringement against a service provider who made copies in the course of performing maintenance on the software. The court rejected the misuse defense and held that the service provider infringed when it made copies in the course of performing maintenance. Although a key part of Triad had been legislatively overruled by an amendment to section 117(c), the Ninth Circuit in this case reaffirmed Triad's holding that a license restriction only constitutes misuse when it expressly limits use with a competing product.

Psystar looked to a Fifth Circuit misuse case (Alcatel USA v. DGI Technologies) where the license agreement allowed for use of the software "only in conjunction with [licensor]-manufactured hardware." The court distinguishes Alcatel on the basis that, unlike the licensing agreement there, the OS X license agreement only restricted the use of Apple's software to its computers--third parties were free to develop operating systems for use on Apple computers.
__

This is a big win for Apple and one that, as Evan notes, "solidifies Apple’s approach to enforcing a controlled, closed ecosystem for the distribution of software used for Macs and iDevices."

It's a win for software companies as well as it provides a resounding endorsement of Vernor. I keep wondering how Vernor v. Autodesk is going to play out. The court here does not spend much time debating the license versus sale issue, notwithstanding the fact that the software here was licensed to a less sophisticated consumer than in Vernor and there was no mention of possession, which was central in Vernor. In fact, there have been a few district court cases addressing the license versus sale issue post-Vernor, but in none of the cases did courts spend much time debating the issue of whether the transaction was a sale or license. Psystar appears to confirm that Vernor effectively shut the door on the use of the first sale doctrine in the software context (once the shrink-wrap comes off).

The case is also a significant limitation of the copyright misuse defense. This defense rarely gets play anyway, but the court's reading of it is narrow. The court notes that in order to constitute misuse, a limitation in a license agreement must "restrict [a] competitor's ability to develop [competing] software." In the Fifth Circuit case, Alcatel similarly argued that it only mattered whether there was an express limitation, but the Fifth Circuit rejected that argument, finding it key that the competitor "was effectively prevented from developing its product" because it did not have the freedom to test its systems with Alcatel's software. Alcatel did not look only to the express terms of the licensing agreement, but that's what the court does in this case. There's no discussion in this case of whether the limitations in the license agreement effectively limit the development of an alternative operating system.

There was also zero discussion of the effect of Apple's copy control mechanisms. Although the district court concluded that Psystar's use of "decryption software to obtain access to [the] operating system violated the DMCA," there's really no mention of this issue in the Ninth Circuit opinion.

I'm not sure what to make of the fact that Psystar did not appeal the copyright infringement ruling. I wonder if Psystar was thinking about making an argument that Psystar clients bought a copy of the OS X, so the shipment of the pre-installed version of the OS X was not an infringing distribution because it was merely an archival or back-up copy that the purchaser could have made him or herself. The fact that the transaction is deemed a license and not a sale put the kibosh on this argument. (See the MDY v. Blizzard case where the court held that section 117 was not available to licensees: "Ninth Circuit's Mixed Opinion in Glider/WoW Bot Case".) I don't think Psystar had a clean argument under section 117 anyway, given that the language of this section only applies to "exact copies," and the two versions of the OS X differed slightly.

I wonder if the result would have been different if Psystar merely distributed the pre-packaged version of the OS X and separately distributed the software components which the end user could use to install and run the OS X on whatever machine they desired? The limitation in the license agreement was fairly broad, and I wonder if the italicized portion could have more effectively supported a misuse argument:

This License allows you to install, use and run one (1) copy of the Apple Software on a single-Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.

Other coverage:

Evan Brown: Ninth Circuit: Apple did not engage in copyright misuse by restricting OS X to Apple hardware
Ars Technica: Appeals court: Apple can continue to restrict OS X to Mac hardware

Topically related posts:

Ninth Circuit's Mixed Opinion in Glider/WoW Bot Case -- MDY Industries v. Blizzard
Software Vendor Trumps First Sale Doctrine via License--Vernor v. Autodesk

Posted by Venkat at 09:08 AM | Copyright , Licensing/Contracts

October 06, 2011

Court Nukes Another Mass Defendant File-Sharing Lawsuit -- Digiprotect v. Does

[Post by Venkat Balasubramani]

DigiProtect USA v. Does, 10 Civ. 8760 (S.D.N.Y.; Sept. 26, 2011)

Plenty of bad news for copyright plaintiffs lately. Righthaven is getting hammered left and right and is struggling (to say the least) to keep any momentum going. (See Eric's most helpful recap: "Resetting the Righthaven Fiasco," in which he notes that '[t]he Righthaven empire is in tatters.") The mass defendant file-sharing lawsuits have mostly spiraled downward as well. So many of these lawsuits have been dismissed on procedural grounds that I've lost track. Here's another one to add to the list.

Background: This was one of two lawsuits filed by DigiProtect in the Southern District of New York. In late 2009, the court granted DigiProtect's request to conduct limited discovery, although the court put in place some procedural safeguards. In December 2010, Time Warner and Comcast moved for a protective order, claiming that compliance with DigiProtect's subpoenas would be unduly burdensome. They sought an order requiring DigiProtect to compensate the ISPs for processing subpoenas and to limit the scope of information sought. In January 2011, the court raised the issue that the 240 Doe defendants may not be subject to personal jurisdiction in New York, and joinder may not have been proper. After considering DigiProtect's response, the court dismisses the lawsuit, with leave to replead and name only those Doe defendants who are properly subject to personal jurisdiction in New York.

Personal jurisdiction: The court runs through the Due Process/long-arm statute analysis to determine whether jurisdiction is proper. Although a recent New York state court case construed its long-arm statute broadly to allow for lawsuits against non-resident defendants where the plaintiff/copyright-owner is located in New York, that analysis does not apply in this case. Here, DigiProtect was a New York resident, but the actual copyright holder (Patrick Collins Inc.) was a California company. In passing, the court notes that although DigiProtect is authorized to pursue claims, Patrick Collins "retains most of the bundle of rights as copyright holder." [Houston, we may have a Righthaven-style standing problem!] The court says DigiProtect can't sue based on the fact that the harm from the infringement would be felt in New York, because this is not the case.

DigiProtect also argues for a "swarm" theory of jurisdiction, under which infringers are viewed as agents or co-conspirators of each other. According to DigiProtect, if one participant in a P2P swarm is located in New York, then this is sufficient to assert jurisdiction over the remainder of the group. The court also rejects this argument, noting that the complaint does not connect the Doe defendants to the same "swarm" transaction. Just because the defendants may have downloaded the same media does not mean that there was any connection between the downloads. (See Pacific Century International v. Does, discussed in this blog post: "P2P Swarm Defendants Can't Be Joined in the Same Lawsuit.")

The court expresses a reluctance to

ensnare unsophisticated individuals from around the country in a lawsuit based in New York [where the individuals would] likely be encouraged to settle rather than incur the burden and embarrassment of contesting the litigation.

The fact that the individuals whose IP addresses associated with infringing activity are located in New York is sufficient to establish jurisdiction in the court's view, and the lawsuit may proceed against those individuals only. However, the court notes that this is not the case for the bulk of the Doe defendants in question. Comcast reported to the court that none of the Comcast-associated IP addresses were for New York residents, and Comcast argued that this information could be obtained using a "free, publicly-available website that matches an IP address with the internet service provider . . . and lists the geographic region in which the provider uses the address."

As Comcast notes, this "could easily have been done by Plaintiff at the outset." The court's discussion of this was somewhat confusing to me, as I was under the impression that you cannot reliably "look up" an Internet user's geography using just an IP address. Comcast says that Digiprotect can find the geography of the provider. The court seems to think this means Digiprotect can identify the geography of the accountholder, but of course many Internet access providers have customers in more than one state. In any event, the fact that the court makes this statement shows that it's not excited about plaintiff and its claims.

Costs of compliance: The court also grants the ISPs' request for reimbursement and limitations on plaintiff's requests for information. Plaintiff argued that the ISPs were required to turn over the information anyway based on the DMCA-subpoena provisions, but the DMCA subpoenas don't help when the entity is just providing connectivity and not storing the user files on its servers. (See the Verizon DMCA subpoena case.) In granting the request of the ISPs, the court says:

- DigiProtect must reimburse the ISPs for IP address look-ups and for notifying subscribers;
- this amounts to $120 per IP address (not per subscriber);
- the lookups are limited to 25 IP addresses per month.

__

Oy vey. A few quick observations.

I'm surprised at the procedural gaffes which have derailed the latest round of mass-defendant P2P lawsuits. I was even more surprised when I saw the large national law firm, Foley & Lardner, was representing DigiProtect. Somewhat surprising to see them involved in a lawsuit over "Let Me Jerk You 2." Even more surprising to see them get smacked down by the court on relatively obvious procedural grounds.

What bogs down these lawsuits are the way they are pursued. You could use the IP addresses and pursue actions in individual jurisdictions (subject to discovery and subpoena limitations), or pursue one identified component of an alleged "swarm" and go after the remaining people involved (subpoena their information from the initial defendant and then go after them in other jurisdictions, if necessary). DigiProtect did not do that, and there's a reason why. It wants to obtain the list of everyone whose IP addresses they have, and send every single one of these people a letter. The same letter. DigiProtect is pursuing the settlement mill model, and more often than not, this model is blowing up in the face of plaintiff and its counsel.

I don't recall whether other courts have expressly approved ISP requests for processing costs, but the court does so here and this may end up effectively putting the kibosh on the lawsuit. I don't get the sense that the plaintiff has invested significant dollars into the dispute or is willing to do so. Plaintiff may balk at the prospect of having to shell out cash upfront to learn the identity of the Doe defendants who may or may not pay off. The limitation on the number of lookups is also a significant limitation. It is at least going to slow things down

To people who are on the receiving end of subpoenas in Doe cases: take the lawsuit seriously, retain counsel, and if you don't have the resources to defend and push back, consider settling for a nominal amount, if possible. But definitely check to see if the case has been blown up by the judge. There's a good chance it has.

Posted by Venkat at 08:48 AM | Copyright , Privacy/Security

October 05, 2011

Q3 2011 Quick Links, Part 1 (Copyright Edition)

By Eric Goldman

* The Golan v. Holder SCOTUS oral arguments are today. My colleague Tyler Ochoa has been actively monitoring the case:
- his essay previewing the case and the issues it raises
- an amicus brief on whether the 1790 Copyright Act restored copyright on works then in the public domain
- a video where he explains the case to a student audience (item #21)
- a video of a Harvard Law School roundtable about the case

* Lots of news involving Oracle. First, in Oracle v. SAP, the court sliced Oracle's damages by about a billion dollars. Even reduced, Oracle got a huge copyright damages award. Prior blog post. In related news, TomorrowNow struck a plea deal where SAP will pay $20M in criminal fines.

Separately, in Oracle America, Inc. v. Google Inc., 2011 WL 4336691 (N.D. Cal. Sept. 15, 2011), Oracle got a favorable ruling on its copyright claims over Android's infringement of Java. Software geeks, this opinion warrants your attention.

* The Supreme Court denied certiorari in ASCAP v. US, which held that Internet downloads aren't a public performance. NY Times and Reuters.

* The Supreme Court also denied certiorari in Vernor v. Autodesk. Prior blog post.

* The PROTECT IP Act is an abomination. I signed a law professor letter against PROTECT IP. Entrepreneurs circulated their own letter. Larry Downes offered some suggestions on how to make the PROTECT IP Act less worse.

* In re Literary Works in Elect. Databases Copyright Litig., 05-5943-cv(L) (2d Cir. Aug. 17, 2011). The long-running Tasini battle takes another turn. This time, the court rejected the settlement because of intra-class conflicts. James Grimmelmann explains the implications for Google Book Search.

* Speaking of long-running disputes, the judge in the Jammie Thomas case once again reduced the damages. Opinion. EFF. Techdirt. The RIAA has appealed.

* Rock River Communications, Inc. v. Universal Music Group, Inc., 2011 WL 3501762 (C.D. Cal. Aug. 9, 2011). The court dismissed claims over allegedly bogus copyright takedown notices. Prior blog post.

* Only 13 years after DMCA passage, the Copyright Office is proposing a permanent process for designating 512 agents. I have strong objections to the proposal, especially the part where service providers can lose their registration for failing to jump through additional formalities over time. If you are interested in working on comments, contact me.

* A few Righthaven tidbits. MediaNews, one of Righthaven's two main newspaper "customers," has ended its contract with Righthaven. The new MediaNews chief says it was a “dumb idea” from the beginning. Amen! And in Righthaven LLC v. Hill, 2011 WL 4018105 (D. Colo. Sept. 9, 2011), the court denied a fee shift to the defendant. The 505 motion failed because Righthaven voluntarily dismissed the case, meaning that Hill was not a “prevailing party.”

* Flexible Lifeline Systems, Inc v. Precision Lift, Inc., 10-35987 (9th Cir. Aug. 22, 2011): "presuming irreparable harm in a copyright infringement case is inconsistent with, and disapproved by, the Supreme Court’s opinions in eBay and Winter. Thus, our long-standing precedent finding a plaintiff entitled to a presumption of irreparable harm on a showing of likelihood of success on the merits in a copyright infringement case, as stated in Elvis Presley and relied on by the district court, has been effectively overruled."

* Kernal Records Oy v. Mosley, 2011 WL 2223422 (S.D. Fla. June 7, 2011): "publishing AJE on a website in Australia was an act tantamount to global and simultaneous publication of the work, bringing AJE within the definition of a “United States work” under § 101(1)(C) and subject to § 411(a)'s registration requirement." This appears to be an opposite conclusion to Moberg v. 33T LLC, 666 F. Supp. 2d 415 (D. Del. 2009) (mentioned here).

* Slightly related: Shropshire v Canning, 2011 WL 3667492 (N.D. Cal. Aug. 22, 2011). Uploading a video to YouTube's California servers from Canada can constitute infringement in the United States. Prior blog post.

* William Wade Waller Co. v. Nexstar Broadcasting, Inc., 2011 WL 2648584 (E.D. Ark. July 6, 2011). A 1202 CMI claim fails: "Assuming that RKC intentionally cropped the copyright notice out of the picture before distributing it to Nexstar, Plaintiff has made no effort to show that RKC did so intentionally to induce, enable, facilitate or conceal infringement."

* Edgenet v Home Depot (7th Cir. Sept. 2, 2011). A product taxonomy is copyrightable, but the Home Depot properly procured the necessary rights from its vendor before home-brewing its own solution and dropping its vendor. See more on property rights in taxonomies.

* Brownmark Films, LLC v. Comedy Partners, 2011 WL 2648600 (E.D. Wis. July 6, 2011) South Park parody of a YouTube viral video is fair use (on a motion to dismiss).

* Fraserside IP L.L.C. v. Youngtek Solutions Ltd., 2011 WL 2689058 (N.D. Iowa July 12, 2011). A potentially meritorious 17 USC 512(c) defense helps set aside a default judgment.

* The Swatch Group Management Services Ltd. v. Bloomberg LP, 1:11-cv-01006-AKH (SDNY Aug. 30, 2011). Recording a securities analyst call could be copyright infringement.

* Tertiary liability copyright infringement claims against CNET for distributing LimeWire dropped. In other LimeWire news, as part of a deal with the Maryland AG, LimeWire will notify users about the risks of inadverent data sharing.

* Another copyright infringement suit against Amazon, this time for "manufacture-on-demand" CDs.

* Princeton prevents its professors from assigning the copyright in their research to publishers.

* A significant Canadian ruling against scraping in a lawsuit between Century 21 and Zoocasa. Michael Geist's coverage.

* Turnitin’s “WriteCheck” service lets students preview the plagiarism detection report before submitting their papers to their instructors. Good business to be dealing arms to both sides.

Posted by Eric at 07:06 AM | Copyright | TrackBack

October 04, 2011

Article on Bypassing Geographic Content Restrictions Using Borrowed IP Addresses

By Eric Goldman

Marketa Trimble (UNLV Law) has posted a full copy of her article, The Future of Cybertravel: Legal Implications of the Evasion of Geolocation. I've highlighted this article before, such as in my coverage of the Internet Law Works-in-Progress where I heard her present it.

The paper relates to problems created by efforts to reinstantiate geographic borders on the Internet. In particular, where content owners have sought to restrict distribution of their copyrighted works online to only people located to specified geographies (as measured by the users' IP addresses), third party service providers in those countries offer to rent out "local" IP addresses to let non-local users bypass the geographic restrictions. I hate the name "cybertravel" to describe this phenomenon (a point I have stressed to Marketa), but the topic is crucial to cyberlaw. It implicates a wide swath of cyberlaw doctrines, including national efforts to restrict objectionable content; Lori Drew-style server misuse based on false registration information; and the efficacy of efforts (like the Protect IP Act) to suppress rogue foreign websites. Marketa does a super job engaging this complex topic, so this is an article worth checking out.
______

The abstract:

The internet is valued as a medium that both defies and defeats physical borders. However, cyberspace is now being exposed to attempts by both governments and private entities to impose territorial limits through blocking or permitting access to content by internet users based on their geographical location – a territorial partitioning of the internet. A number of authors have discussed the advantages and disadvantages attached to raising borders in cyberspace; however, as opposed to the earlier literature, this article focuses on an internet activity that is designed to bypass the partitioning of cyberspace and render any partitioning attempts ineffective. The activity – cybertravel – permits users to access content on the internet that is normally not available when they connect to the internet from their geographical location. By utilizing an internet protocol address that does not correspond to their physical location, but to a location from which access to the content is permitted, users may view or use content that is otherwise unavailable to them. Although cybertravel is not novel (some cybertravel tools have been available for a number of years), recently the tools allowing it have proliferated and become sufficiently user-friendly to allow even average internet users to utilize them. Indeed, there is an increasing interest in cybertravel among the general internet public as more and more website operators employ geolocation tools to limit access to content on their websites from certain countries or regions.

This paper analyzes the current legal status of cybertravel and explores how the law may treat cybertravel in the future. The analysis of the current legal framework covers copyright as well as other legal doctrines and the laws of multiple countries, with a special emphasis on U.S. law. The future of the legal status of cybertravel will be strongly affected by three current developments: the desire of countries and many actors on the internet to erect borders on the internet to facilitate compliance with territorially-defined regulation, the need for attribution of acts on the internet to particular actors, and the ongoing transition from the IPv4 to IPv6 protocol that is promising permanently assigned or embedded internet protocol addresses. This paper makes an attempt to identify arguments for making or keeping certain types of cybertravel legal, and suggests legal, technical and business solutions for any cybertravel that may be permitted.

Posted by Eric at 09:29 AM | Content Regulation , Copyright , Trespass to Chattels | TrackBack

September 28, 2011

Colorado Judge Drills Righthaven and Awards Attorneys' Fees--Righthaven v. Wolf

By Eric Goldman

Righthaven LLC v. Wolf, 1:11-cv-00830-JLK (D. Colo. Sept. 27, 2011)

Another judge, this time in Colorado, issued another stinging rebuke to Righthaven. This time it was Judge Kane in Colorado, and his decision will lead to the end of all of Righthaven's pending cases in Colorado over the "TSA Pat Down" photo from the Denver Post. I assume Righthaven will appeal this ruling to the Tenth Circuit, but until then, it seems like its Colorado operations will be on hold.

Like other judges before him, Judge Kane dismisses Righthaven's case for lack of standing due to an inadequate copyright assignment. Unexpectedly, Judge Kane doesn't simply rely on the Ninth Circuit Silvers case or the other Righthaven precedent. Instead, because the case is in the 10th Circuit and not bound by the Silvers case, the court does a scholarly analysis of the standing issue from scratch. The judge walks through the 1909 Act, the 1976 Act, precedent cases and Constitutional considerations to conclude that the Copyright Act precludes the bare assignment of the right to sue for copyright infringement. The court then finds that Righthaven's assignment from the Denver Post only procured that bare right to sue, despite self-serving language in the contract to the contrary. Some of the judge's arguments were a bit odd, but the detail and care of the judge's analysis substantially increases its odds of surviving the appeal.

The judge orders Righthaven to pay Wolf's attorneys' fees. As I've mentioned before, with every fee award against it, Righthaven's profit meter keeps running in reverse. It wouldn't surprise me if judges eventually award more fees against it than Righthaven took in through its settlements in total. However, none of the fee awards will matter if Righthaven is inadequately capitalized and thus continues to plead poverty. As its profit meter keeps running in reverse, Righthaven may have become a judgment-proof litigant itself. I expect that angry defendants with sizable fee awards are going to look for other parties who might pay the fees. MediaNews, you're probably going to hear from some defendants; I hope you built that contingency into your budget. Wouldn't it be ironic if defendants started sniffing around Steve Gibson's home looking for assets to satisfy their fee awards?

As a final insult, Judge Kane makes it clear that Righthaven isn't going to win in his court, even if they can get a reversal of the standing issue on appeal (see, e.g., FN 2 of the opinion). While this opinion wasn't a flamboyant benchslap like Judge Hunt's opinion in the Democratic Underground case, it was a stern rebuke nonetheless. It's interesting how so many judges, effectively independently from each other, have each morally condemned Righthaven's campaign.

A personal note: I know many folks get a thrill from watching Righthaven implode, but I must confess that I feel no schadenfreude. Yes, it's fun (in a bloodsport way) to watch judicial benchslaps. Yes, of course, Righthaven has been a plague on our community, so having them driven out would be welcome relief. Yes, they have contributed to a nice body of defense-favorable precedent. Yet, using the powerful tools of our judicial system, Righthaven has imposed significant financial and emotional costs on hundreds of victims. I feel sad for the victims who have had to fight back for their rights at the peril of losing their homes, and I feel sad that we as a society have accepted a litigation system that allows a scheme like Righthaven to harm for ordinary well-meaning citizens trying to do the right thing. A judicial crushing of Righthaven is inadequate restitution for these victims, so I remain sad about the overall situation.

Just a reminder: one of my side clients did get sued by Righthaven and settled the case. I publicly disliked Righthaven before that happened, and I still dislike them today.

I'll be off the rest of the week for the Jewish New Year. See everyone next week. To my Jewish readers: L'shana tovah!

Prior blog coverage of Righthaven:

* Resetting the Righthaven Fiasco
* Righthaven Defendant Awarded $3,800 in Attorneys' Fees--Righthaven v. Leon
* Recapping Righthaven Developments from the Past Two Weeks
* Righthaven Benchslapped in Ruling Saying It Lacks Standing--Righthaven v. Democratic Underground
* Another Defense-Favorable Righthaven Ruling--Righthaven v. Choudhry
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Blogger Wins Fair Use Defense...On a Motion to Dismiss!--Righthaven v. Realty One

Posted by Eric at 01:45 PM | Copyright | TrackBack

September 22, 2011

Copyright Preempts State Tort Claims Over Loss of Control Over Website -- 78th Infantry Div. v. Oprendek

[Post by Venkat Balasubramani]

78th Infantry Division, WWII Living History Ass'n v. Oprendek, 11-165 (D.N.J.; Aug 4, 2011)

This is another web vendor dispute. Professor Goldman posted about one earlier this week. As in that case, here the parties did not heed his admonition (which cannot be repeated often enough):

Hey people, when you have vendors help run your website, PLEASE dot your i's and cross your t's. When the shit hits the fan and the contract isn't in place or clear enough, the resulting litigation fusillade can destroy your life.

The 78th Infantry Division, World War II Living History Association is a non-profit organization that provides World War II reenactments and educates the public about World War II. According to the facts as the court describes them, the Association registered the 78thinfantry.com domain name in 2003, and in 2006 Oprendek joined the Association "and volunteered to be the webmaster." He recommended that the Association transfer the domain name to him, "claiming that 'the website needed more space,' and that the website would be easier to maintain under his control." We all know what happens next.

In 2009, Oprendek resigned, and instead of transferring the domain name back to the Association, he allegedly cancelled it and registered the domain name in his own name. He also allegedly used "content from the Association's website" to create a competing organization which he formed with some former members of the Association. Oprendek then registered the website's contents with the copyright office.

The Association sued in state court, alleging conversion, trespass to chattels, breach of the duty of loyalty, tortious interference, and unjust enrichment. Oprendek removed the lawsuit to federal court, citing preemption. The Association moved to remand, and in a sweeping ruling, the court says that the lawsuit stays in federal court due to copyright preemption.

The court says that "the core" of the Association's conversion claim "is the unauthorized taking of a website domain and its contents." Conversion under state law is the exercise of control over property "without authorization," and the court says that this element is "conceptually indistinguishable from an unauthorized taking in the copyright context." The court finds that a trespass to chattels cause of action is similar to a conversion claim, and both of these claims are preempted.

For whatever reason, the court does not separate out the Association's claim for dispossession of the domain name and the contents of the website. Wrongfully taking control of someone's domain name can state a claim for conversion. Recently, the Ohio Court of Appeals found in Eysoldt v. Proscan that GoDaddy could be held liable for preventing a customer from accessing their domain name and transferring it. This is not the same as preventing someone from accessing or updating the contents of their website, and this difference should be enough to avoid preemption. Preventing someone from accessing the back-end of their website so they cannot update the site's contents is a somewhat closer question, but even this arguably does not fall squarely within the rights granted by the Copyright Act. The question in my mind is whether this overlaps with the right to modify and create derivative works as provided in the Copyright Act. There's also the issue that the ownership of the underlying contents is at issue, and this is sometimes resolved with reference to state law.

The Ground Zero Museum web-vendor dispute Eric posted about addressed almost exactly the same preemption issue, and the court in that case also conflates access to the server, access to the website, and control over the domain name. The court comes to the opposite conclusion in that case, finding the trespass claim not preempted:

Plaintiffs do not contend that Wilson reproduced the content of the website, prepared a derivative work, distributed copies of the website, or displayed it in an alternate public forum. Instead, one component of Plaintiffs' claim is that Wilson deprived them of access to or possession of their own website or specific webpages for a period of time. This does not overlap with the exclusive rights granted to copyright holders.

The discussions from both of these cases were somewhat confused (and confusing). As Eric mentioned, in looking at the issue, it's worth separating and analyzing separately: (1) the domain name, (2) the content of the website, (3) access to the content of the website (which in many cases probably can't form the basis for a claim that does not survive preemption), and (4) access to the physical server itself.

This is a messy dispute all the way around, and Eric's admonition with reference to the Ground Zero web dispute is probably the big takeaway: do not transfer your domain name to your web vendor without documentation in place. I also thought the court's conclusion on the preemption issue was worth flagging and worth contrasting with the GZM case.

Posted by Venkat at 07:32 AM | Copyright , Domain Names , Trespass to Chattels

September 20, 2011

1st Circuit Reinstates $675,000 File-Sharing Award Against Tenenbaum -- Sony BMG v. Tenenbaum

[Post by Venkat Balasubramani]

Sony BMG Music Entertainment v. Tenenbaum, 2011 WL 4133920 (1st Cir. Sept. 16, 2011) [pdf]

Sony's lawsuit against Joel Tenenbaum was one of two file-sharing lawsuits brought by record labels against end users that proceeded to trial. (The RIAA's lawsuit against Jammie Thomas resulted in three trials, a $1.5mm verdict which was reduced to $54,000 and is currently on appeal.)

In a nutshell, in this case, the jury returned a verdict of $675,000. The trial judge found the award excessive under Due Process standards and reduced it to $67,500. The First Circuit finds that the trial judge erred in not reducing the award based on common law remittitur and giving Sony the choice between accepting the reduced verdict or opting for a new trial. The original verdict is reinstated and the case is sent back to Judge Gertner to rule on plaintiff's motion for remittitur.

The court's opinion summarizes the facts viewed in the light most favorable to the jury's finding, and contains plenty of facts that cast Tenenbaum in a not-so-favorable light. According to the court, he had plenty of notice of facts that precluded any sort of argument that he was innocent as to the consequences of his actions:

He used Napster . . . [After Napster was shut down,] he instead began using other peer-to-peer networks for the same illegal purposes. . . . Tenenbaum shifted to these other networks after Napster's termination despite his knowledge that Napster was forced to close on account of a lawsuit brought against it for copyright infringement. . . . . Tenenbaum knew that his conduct, both his downloading and distribution, was illegal and received warnings the industry had started legal proceedings against individuals. He received several warnings regarding the potential liability his actions carried with them.

He received warnings from Goucher College, which he attended, from his internet service provider, from his parents, and from the record companies themselves. It looks like he pretty much ignored these warnings. He was far from a model defendant, and the court's recitation of the facts makes it seem like he was an odd choice to push legal arguments that had yet to gain mainstream acceptance. (Tenenbaum was represented by a law professor who engaged in some questionable tactics, to say the least.)

Tenenbaum raised a variety of pre-trial issues, including some that veered into tax-protestor territory. He claims, for example, that Congress did not intend for the Copyright Act to impose liability against "consumer copiers," or intend that the Copyright Act be used for infringement suits of this nature. That's right up there with arguing that the IRS is should be abolished and is not properly empowered to levy taxes. The trial court rejects these arguments, and they fare no better with the First Circuit:

We reject Tenenbaum's invitation to usurp Congress's legislative authority and to disregard binding Supreme Court precedent.

The case went to trial, and the jury returned a verdict of $625,000 ($22,500 per infringement x 30 works). The Copyright Act provides for statutory damages to be determined by the court (rather than the jury), but the Supreme Court held in Feltner v. Columbia Pictures Television Inc. that the Seventh Amendment's right to a jury trial entitles a copyright defendant to have the amount of statutory damages determined by a jury and not a judge. Following Feltner, courts leave the damages determination entirely to the jury. After trial, Tenenbaum filed a motion for a new trial or for a reduction of the award based on the fact that it was excessive and "shocking to the conscience." He filed a separate motion arguing that the award violated Due Process standards. Sony opposed Tenenbaum's motions, and the United States also intervened, since Tenenbaum challenged the statutory damages award as being overly excessive. Judge Gertner tackled the Due Process question and held that an award of $625,000 violates Due Process.

The First Circuit says that the trial court should have avoided the constitutional issue and should have ruled first on the motion for remittitur. As the First Circuit points out, the constitutional issues are "difficult." Supreme Court precedent holds that states have wide latitude to impose statutory damages for violations of state statutes. On the other hand, under more recent case law, where a jury awards punitive damages, the jury award must comport with Due Process standards. It's not entirely clear where statutory damages fit in--are they punitive in nature? There's also the issue that Copyright Act damages are set by Congress, rather than awarded pursuant to state law, and a court's scrutiny of a statutory damages range set by Congress raises separation of powers issues.

At the end of the day, the First Circuit says that Judge Gertner should have avoided these thorny issues and should have instead considered the remittitur motion. There's a final question as to whether the trial court should give Sony the choice between accepting the award or a new trial or whether it may merely adjust the award. The court says that the usual rule is that the court may not reduce the jury's award without giving the plaintiff a choice, but there is case law from intermediate appeals courts which suggests that the court may reduce an award which is "punitive" in nature without giving the plaintiff a choice for a new trial. The court cites to Feltner and says that regardless of the precise nature of statutory damages under the Copyright Act, since the Supreme Court held in Feltner that the issue of statutory damages must be tried to a jury, the court may not reduce the award without also giving the plaintiff the option of a new trial.

__

I'm not sure exactly where this leaves us. The $625,000 award in favor of Sony is reinstated. Judge Gertner's analysis of the Due Process limits on statutory damages and the feelings of Congress about peer-to-peer file sharing, while interesting, is swept aside (for now). The million dollar question, and one I wish the court had answered, is whether Sony can immediately appeal the choice to accept a reduced award or whether it has to proceed with the new trial. Will Sony be trapped in an "endless loop" of going through trials resulting in a damage awards that the court reduces on the basis that the awards are "excessive"? (See Ben Sheffner's post about the Thomas-Rasset case: "Labels reject remittitur, opt for third trial on damages in Jammie Thomas-Rasset case.") The other question that the First Circuit's opinion raised but didn't address is: if statutory damages are to be determined by the jury, why does the trial court get to take this decision away from the jury and reduced it via a remittitur? What is the effect of Feltner on the common law practice of reducing damage awards? Where an award is within the statutory range, it seems odd for the court to have authority to reduce it via a remittitur--isn't this the point of Feltner?.

My instinct is that the labels will end up winning this particular battle over damages, although I don't know the various details of how statutory damages, Due Process, and remittitur fit together. Most notably, Tenenbaum does not look like anything close to a model defendant. While the economic arguments around what relationship the damage award bears to the actual harm suffered by the labels may be debatable, and the current scheme for awarding statutory damages may not be ideal, it will be tough for any court to ignore Tenenbaum's own culpability. And it looks from the First Circuit's opinion, there is a lot of it.

Added: Judge Gertner who heard the case has since retired from the bench and is now teaching at Harvard Law (alongside Charlie Nesson, whom she threatened with sanctions in this case, which should make for some lively faculty meetings). It looks like it will be up to Judge Gertner's replacement to determine whether the award should be reduced.

Other coverage:

Techdirt: "Appeals Court Reinstates $675,000 Jury Award Against Joel Tenenbaum On Procedural Grounds"
EFF: "Appellate Court Sends Tenenbaum Case Back For Another Round"

Previous posts:

Copyright Statutory Damages Award Violates Constitutional Due Process--Sony v. Tenenbaum

Posted by Venkat at 10:20 AM | Copyright

Web Vendor Dispute Gets Ugly--Ground Zero Museum v. Wilson

By Eric Goldman

Ground Zero Museum Workshop v. Wilson, 2011 WL 3758582 (D. Md. Aug. 24, 2011)

Disputes like these make me wonder if we can't find some way to get along. Suson runs a non-profit museum focused on the September 11 tragedy. Wilson runs an Internet shopping cart service. Wilson offered to help Suson with the museum website by adding shopping functionality. Wilson also helped Suson get free web hosting from a third party vendor, A-1 Hosting. Then, over what seemed to be a minor thing, the relationship soured in 2009. Wilson turned off the shopping cart functionality and reverted the website back to a prior version; Suson claims Wilson also took down the museum website. Wilson subsequently complained that the museum website continued to use his IP, and he sent an ineffectual takedown notice to A-1 Hosting. Wilson also allegedly badmouthed the museum to A-1 Hosting, allegedly causing them to stop providing free hosting. Wilson also set up a quasi-gripe site, cam-scam.com (now down), and allegedly a fake MySpace page, that said or implied unflattering things about Suson.

From a relatively simple commercial dispute involving a non-profit enterprise comes a cascade of litigation, including complaints and countersuits. I could seriously write my entire Internet Law exam from this situation. It touches on almost every topic I cover in class. This isn't the worst breakup I've seen, but it appears that the parties are using litigation as a sledgehammer, especially given the low dollars and stakes at issue.

1201 Circumvention. Suson claims Wilson committed a 1201 circumvention by administratively logging into the museum website and making changes in excess of his authorization. The court rejects this claim, saying "using a password or security code to access a copyrighted work, even without authorization, does not constitute 'circumvention' under the DMCA" and citing to several other cases (including the IMS and Egilman cases). The court also says that even though Wilson resigned his technical role, his continued login to the website was authorized until Suson changed the password. Finally, disabling the shopping cart wasn't a circumvention because the functionality lived on Wilson's site, not Suson's.

Computer Fraud & Abuse Act. The CFAA claim fails on summary judgment because "Plaintiffs have produced no evidence to back up their assertion that Wilson damaged the website or that his actions caused at least $5,000 in economic damages in one year." The only allegation of harm is that Wilson "stripped the metatags" (whatever that means) when he reverted the website back to the prior version, and the court can't make heads or tails of that. Suson also hired an SEO to redo the metatags for $8k, but the court can't consider this evidence either because it wasn't properly authenticated and the payments took place over more than one year (and thus perhaps didn't trigger the $5k/year CFAA threshold).

Trespass to Chattels. This was a very confused discussion. The court says the "chattel identified in Plaintiffs' trespass claim is the GZM website, or alternatively specific webpages within the site. Plaintiffs contend that Wilson deprived GZM of possession of its website and damaged the chattel by inserting a redirect command." This seems to conflate access to a virtual asset (the web page) and use of a tangible asset, the computer server. The court focuses on the virtual asset, but that should be impossible to "trespass," or any trespass claim should be preempted by copyright law. Reinforcing the court doesn't understand what it's talking about by lumping together three very disparate items, the court continues:

Although websites are not tangible property in the traditional sense, courts in Maryland, New York, and elsewhere have been willing to recognize claims for conversion or trespass to chattels involving certain digital things, such as websites and domain names and computer networks.

The court then cites cases finding conversion of domain names and a "website," plus the Cyber Promotions case where the court was clearly talking about trespass of the physical server. On this basis, the court says that copyright law doesn't preempt the trespass to chattels claim. Too bad the court couldn't make a more fine-grained distinction between tangible and intangible assets, because the trespass of an intangible asset claim should be preempted by copyright law.

The court then further finds a prima facie trespass to chattel because Wilson dispossessed Suson of the "current" website when he reverted to the older website version. However, whether Wilson acted with the requisite scienter has to go to the jury. Wilson's response that he co-owed the copyright in pieces of the website isn't availing; even if true, he can't dispossess his co-owners of their rights.

Note the unexpected result here: the CFAA claim failed and the common law trespass to chattels claim survived. How often do you see that? But this result occurs only because the court mixes its metaphors and treats the website owner's lack of virtual access to administrate the website as a physical dispossession.

Defamation. Because of the nature of the virtual interactions, the court struggles with deciding which law applies to the defamation claim. The court says:

Applying lex locus delicti is inconclusive because the websites Wilson created were accessible on the Internet from any location and the record on summary judgment does not identify the location of A1-Hosting or the unidentified third parties when they received the emails with alleged defamatory statements, so the exact place of publication for these statements is unknown.

The court finally decides that New York law applies because "Suson lives in New York, the museum is located there, and the bulk of Plaintiffs' business activities take place there. In addition, the alleged defamatory statements relate to Plaintiffs' business operations in New York. Accordingly, the brunt of the damage to Plaintiffs' reputation or business interests will be experienced in New York, and New York has the most significant relationship to the alleged defamation."

The court rejects defamation against all of the allegedly defamatory statements. If you're an Internet defamation junkie, it's worth reading the opinion.

Tortious Interference. This claim, based on Wilson's communications to A-1 Hosting, fails because Wilson didn't do anything improper.

512(f) Bogus Takedown Claim. Wilson didn't violate 512(f) because his takedown notice to A-1 Hosting was ineffectual. The court doesn't cite the Amaretto v. Ozimals opinion which reached an identical conclusion.

Copyright Co-Owner Counterclaim. The court lets Wilson plead that he made such contributions to the museum website that he became a co-owner, and therefore he is entitled to an accounting of profits. This is why you never let anyone modify your website code without a written agreement spelling out their rights.

Related Disputes. This is just the latest blog post on website co-ventures gone horribly awry. Other posts in the series:

* Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum
* Web Developer Didn't "Convert" Website--Conwell v. Gray Loon
* Taking Intangible Electronic Files is Criminal Fraud--NM v. Kirby
* Cautionary Tale of Website Co-Ownership--Mikhlyn v. Bove
* Another Cautionary Tale of Joint Website Ownership--TEG v. Phelps

Hey people, when you have vendors help run your website, PLEASE dot your i's and cross your t's. When the shit hits the fan and the contract isn't in place or clear enough, the resulting litigation fusillade can destroy your life.

Posted by Eric at 06:19 AM | Content Regulation , Copyright , Licensing/Contracts , Trespass to Chattels | TrackBack

September 13, 2011

Ninth Circuit Upholds Web Host's Liability for Counterfeiting Retailers--Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., No. 10-15909 (9th Cir. Sept. 12, 2011). Prior blog posts:
* Another Bad Ruling in Louis Vuitton v. Akanoc
* Making Sense of the $32M Contributory Trademark Infringement Judgment Against a Web Host
* Web Host Faces Potential Contributory Trademark Liability

This cases involves a US web host, Akanoc, that hosted Chinese retailers selling counterfeit Louis Vuitton goods. The web host apparently ignored numerous takedown notices from Louis Vuitton. Louis Vuitton sued for contributory copyright and trademark infringement, and the result has been a string of troubling rulings. For a sample of those, consider the trial court's rulings that individuals directly infringe copyrights when browsing a photo of a counterfeit good, and a 512 agent for service of notice could be personally liable for any infringements. Ugh. The coup de grace was a massive $32+M jury verdict against the defendants for willful infringement.

On appeal to the Ninth Circuit, the court issued a characteristic "omnibus" opinion that resolves lots of contentions in relatively short order. Opinions like this rarely become major precedents, which is fine by me given the results. Overall, the court rejects all of the defendants' arguments except one, but that one saves the defense over $10M.

Some of the more interesting points:

* MSG leased equipment to Akanoc. The jury held MSG liable, but the trial court reversed that. On appeal, the Ninth Circuit agreed that MSG wasn't liable for the retailer counterfeiting because "Louis Vuitton presented no evidence that MSG had reasonable means to withdraw services to the direct infringers."

* the defendants argued that its customers' websites were the "means" of trademark infringement, not the hosting services to them. The court rejected the argument as irrelevant:

websites are not ethereal; while they exist, virtually, in cyberspace, they would not exist at all without physical roots in servers and internet services....Appellants had control over the services and servers provided to the websites. Stated another way, Appellants had direct control over the “master switch” that kept the websites online and available.

This seems to resolve one of the open issues from the Ninth Circuit's 1999 Lockheed v. NSI case, which is the circuit's benchmark opinion on contributory trademark infringement online. That case said NSI as a domain name registrar wasn't responsible for an infringing domain name, but it implied that vendors closer to the infringement--such as web hosts--could be. This ruling confirms our assumption that web hosts have more affirmative obligations to intervene against trademark infringement than domain name registrars do.

* "providing direct infringers with server space" qualifies as a material contribution for contributory copyright infringement.

* the court touched on the required scienter for both contributory trademark and copyright infringement, but this discussion goes nowhere given that the jury found willful infringement.

Even though the defendants did not prevail on its doctrinal arguments, the appeal was partially successful because the court reduced the damages award over $10M (the jury had awarded $32+M against three defendants; the judge post-ruling had dismissed MSG, which cut the award to about $21M; this panel reduces it further to $10.8M). The trial court judge's jury instructions allowed the jury to cumulate awards against each defendant for the same infringements, rather than forcing them to make a single award joint-and-several. The appeals court fixed that perplexing error.

Even so, the lesson remains that any web host that fails to promptly honor takedown notices--copyright or trademark--does so at extreme peril. We don't have an express notice-and-takedown scheme for trademarks, but we've gotten there on a de facto basis.

Posted by Eric at 09:05 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

September 04, 2011

Resetting the Righthaven Fiasco (July-August 2011 Quick Links, Part 1)

By Eric Goldman

The Righthaven empire is in tatters. It hasn't expanded its inventory of cases for months (no new cases in July or August); its existing inventory of cases is shrinking for lack of standing and, increasingly, for lack of service; given that, the existing defendants aren't likely to settle, so Righthaven's revenues are stagnant; instead, its profit meter is running in reverse with mounting sanctions and attorney's fee awards; and as far as I can tell, Righthaven apparently has no full-time employees. Unless something changes big-time--such as a major victory in one of its Ninth Circuit appeals or a bankruptcy-inducing adverse fee award--it appears Righthaven will "quietly" fade into the sunset.

If you missed it, Steve Green did a nice job resetting the Righthaven debacle: 1, 2, 3.

Some of the other interesting developments over the past two months:

* In the Hoehn case, Righthaven was drilled for $34k in attorneys' fees. If you missed it, check out Steve Gibson's characteristically defiant response.

* Righthaven was also sanctioned $5,000 for failing to properly disclose its interested parties.

* Righthaven lost a series of standing decisions, including in front of Judge Mahan in the Pahrump Life case and in front of Judge Dawson in Righthaven LLC v. Mostofi, 2011 WL 2746315 (D.Nev. Jul 13, 2011) (although, in a typical fit of petulant spite, Righthaven resued Mostofi) and the Hyatt case.

* In Democratic Underground v. Righthaven, Judge Hunt continues to raise the UPL issue: "the Court questions whether Righthaven can even have a legitimate interest under any agreement (no matter the rights purportedly transferred) because Stephens Media and Righthaven’s arrangement seems very much like a contingency fee arrangement with an entity unauthorized to practice law." FN1: "The Court notes that it considered certifying the question of whether Righthaven is engaged in the unauthorized practice of law to the Nevada Supreme Court. Ultimately, the Court chose not to solely because that issue is not dispositive of this application because Stephens Media will adequately represent Righthaven’s theoretical interests and the application is untimely. However, the Court may yet certify the question in a separate case."

* In Righthaven v. Democratic Underground, Judge Hunt also ripped Righthaven over its request for extra time to comply with his ordered sanctions. Joe Mullin's coverage.

* Righthaven v. Choudry, 2011 WL 2976800 (D. Nev. July 21, 2011): The court denied the defendant's motion to reconsider. The court said: “The court understands defendant's position that in-line linking and volitional conduct are two separate defenses. However, this court cannot conclude, as a matter of law, that the presence of an RSS feed unequivocally absolves a defendant of any and all liability for potential copyright infringement. This court lacks the expertise required to determine when or how an individual may modify or otherwise alter the behavior of an RSS feed, if at all. As such, the court cannot make a legal determination on the consequences of any such modifications.”

* the Righthaven/MediaNews agreement is online.

* Righthaven finally put up a web page, although it's hardly confidence-inspiring.

Prior blog coverage:

* Righthaven Defendant Awarded $3,800 in Attorneys' Fees--Righthaven v. Leon
* Recapping Righthaven Developments from the Past Two Weeks
* Righthaven Benchslapped in Ruling Saying It Lacks Standing--Righthaven v. Democratic Underground
* Another Defense-Favorable Righthaven Ruling--Righthaven v. Choudhry
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Blogger Wins Fair Use Defense...On a Motion to Dismiss!--Righthaven v. Realty One

Posted by Eric at 03:38 PM | Copyright | TrackBack

August 30, 2011

Second Circuit Says No First Sale Doctrine for Works Manufactured Outside the U.S. -- Wiley & Sons v. Kirtsaeng

[Post by Venkat Balasubramani]

Wiley & Sons, Inc. v. Kirtsaeng, 09-4896-cv (2nd Cir. Aug. 15, 2011)

Wiley asserted copyright infringement claims against Kirtsaeng, who imported into the United States and sold "foreign editions" of Wiley textbooks. The books had legends printed on them which indicated that they were "Authorized for sale in Europe, Asia, Africa and the Middle East Only," and any exportation or importation to another region was prohibited. Kirtsaeng, who sold the books to finance his education, reportedly earned a tidy profit (between $900,000 and $1.2 million). The jury found Kirtsaeng liable for willful infringement and imposed $75,000 in damages for eight separate works. The district court judge disallowed Kirtsaeng's first sale defense, and on appeal, the Second Circuit addressed the issue of whether it should have been available to Kirtsaeng.

A section of the Copyright Act (section 602(a)(1)) provides that unauthorized importation is a violation of the copyright owner's exclusive distribution right:

Importation into the United States, without the authority of the owner of copyright under this title, of copies . . . of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute . . . .

Separately, the section codifying the first sale doctrine (section 109(a)) provides that:

the owner of a particular copy . . . lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . . .

The key question was whether the "lawfully made under this title" language of the first sale section refers to items that were physically made in the United States or whether it encompasses copies that were licensed by a United States copyright holder but manufactured abroad. There's obvious tension between section 602(a)(1) and section 109(a). Allowing importers to take advantage of the first sale doctrine with respect to works manufactured abroad would limit the copyright owner's rights under section 602(a)(1), as the owner would not be able to prevent the importation of copies once sold.

The Ninth Circuit recently took up this conflict, and ruled in Costco v. Omega that the "lawfully made under this title" language in section 109(a) only applied to items that were produced in the United States. The Supreme Court accepted cert. in the Costco case but affirmed without providing any guidance due to a 4-4 split among the Justices (Justice Kagan recused). A prior Supreme Court case dealing with the interplay between section 109 and 602(a)(1) (Quality King Distributors, Inc. v. L'anza Research International, Inc.) held that the first sale defense is available to imported goods, but that case involved goods that were manufactured within the United States, sent abroad, and then imported. The Ninth Circuit held that Quality King did not overrule existing Ninth Circuit precedent which restricted the first sale defense to goods that are "legally made and sold in the United States."

Wiley argued in the Second Circuit that, because the Copyright Act (Chapter 17 of the US Code) did not apply extraterritorrialy, "lawfully made under this title," should mean "lawfully made in the United States." The Second Circuit found that the textual argument was not determinative. Among other things, copyright protection can apply to works published in foreign nations, and elsewhere in the Copyright Act Congress used the phrase "lawfully made under this title" and did not limit it to items that were produced in the United States. Nevertheless the court held that any conflict between sections 109(a) and 602(a)(1) was best reconciled by limiting the first sale doctrine to "works manufactured domestically." According to the court, this was the approach the Court hinted at in Quality King and the approach that best comports with the overall structure of Title 17.

The court also pointed to some drawbacks of the approach suggested by Kirtsaeng. Under his approach, copyright holders could control importation either only where (1) the importer does not legally "own" the copy or (2) where the work is produced in a country where US copyrights are not protected (i.e., by treaty). From the court's perspective, this was untenable, because in order to be able to control importation, copyright owners would have to either not sell their works or would have to produce them in countries "that may not honor their copyright in the first place." Kirtsaeng also argued that US copyright owners could take advantage of the importation bar to circumvent the first sale defense by outsourcing all of their manufacturing to foreign countries and ship them back into the US for domestic sales. While this seemed farfetched to me, the court said this was a policy matter that did not affect its interpretation of the statute.

Judge Murtha dissented, pointing out that in Quality King, the Court noted that the bar on importation without permission "is an infringement of the . . . distribution right." Because the rights of distribution are expressly "'subject to sections 107 through 122,' the copyright owner's power to limit importation is qualified by the first sale doctrine . . . . " He also argued that the overall structure of the Copyright Act and other provisions support Kirtsaeng's position. In other sections of the Copyright Act, Congress expressly referenced the location of manufacture, and if it wanted to limit the first sale doctrine only to works manufactured in the United States, it could have easily done so. He also argued that economic justifications favor Kirstaeng's position. Allowing a copyright owner to freely limit importation would lead to uncertainty in the secondary market. It would also "provide an incentive for U.S. copyright holders to manufacture copies of their work abroad," since works manufactured abroad would in practical terms be entitled to greater copyright protection.
__

Although the policy clearly should favor the re-seller here, I didn't see a clear solution to the statutory conflict, and don't see either side as having a particularly compelling argument. The place of manufacture as a basis for a distinction seems arbitrary to me, particularly when it comes to something like content. I would expect that this may not be the last word, and the Supreme Court may end up weighing in on this case.

My understanding is that the publishing industry has traditionally treated the domestic and foreign markets separately and, as a matter of long-standing practice, has charged different prices for domestic and foreign editions of books. This pricing structure depends on being able to limit the availability of foreign editions in the domestic market. At first glance, this is precisely what section 602(a)(1) facilitates. I don't think this is a practice that should be encouraged, but it's one that publishers have long engaged in and that courts have supported. (See Eric's post on a case from the Southern District of New York, which reaches the same conclusion: "Resale of International Textbooks to US Students Not Protected by First Sale Doctrine--Pearson v. Liu.")

On the other hand, does it make sense to limit the copyright owner's control to new versions of the books? Should the resale market remain free of the copyright owner's control? Wiley's approach ends up allowing for greater copyright protection for works in the foreign markets, which is odd from a copyright standpoint. But will this realistically result in some sort of offshoring push by publishers? I wasn't sold on this argument.

One tweak in the case is that Wiley included a legend in one of the foreign editions which referenced US copyright laws:

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form . . . except as permitted under Section 107 or 108 of the 1976 United States Copyright Act.

As the dissent notes, it's awkward for Wiley to be able to rely on rights under the Copyright Act but for Kirtsaeng to be deprived of the protections afforded by the same act. Interestingly, the majority references this legend in a footnote states that they "are . . . somewhat puzzled as to why Title 17 is invoked." I wasn't sure if this referred to Wiley invoking Title 17 in the legend, or Wiley bringing an infringement claim under Title 17 rather than some other cause of action. (An interesting sidenote: Kirtsaeng was located in the US and sold the books via eBay; what result if he had been located off-shore and sold to US consumers via eBay?)

As books, including textbooks, migrate to devices and are sold or licensed in digital form, the focus of this battle will shift away from first sale to DRM. Although it's early to tell, my impression is that thus far, content owners are winning that battle.

[An interesting footnote to the case is that Kirtsaeng consulted, among other sources, "Google Answers" in order to determine the legality of his practice. It's unclear what answer he was provided, but he either didn't get the right answer, or got the right answer and disregarded it.]

Other coverage:

Poking More Holes in the First Sale Doctrine (EFF)
Legally Bought Some Books Abroad? Sell Them In The US And You Could Owe $150k Per Book For Infringement (Techdirt)

Previous related posts:

Software Vendor Trumps First Sale Doctrine via License--Vernor v. Autodesk
UMG Can't Enforce "Not for Sale" Restrictions on Promo CDs -- UMG v. Augusto
Supreme Indecision: Costco v. Omega Gums up the (Watch)Works

Posted by Venkat at 04:39 PM | Copyright , E-Commerce

August 24, 2011

Mixed DMCA Online Safe Harbor Ruling in Cloud-Based Music Locker Case--Capitol v. MP3Tunes

By Eric Goldman

Capitol Records, Inc. v. MP3Tunes, LLC, 2011 WL 3667335 (SDNY Aug. 22, 2011).

Background. This case involves MP3Tunes.com and Sideload.com. MP3Tunes is a music storage locker. Small lockers are free, but more storage is available at a price. The system doesn't store redundant copies; if the system recognizes an identical bit stream coming from a second user, it just records the hashtag. Sideload is a music search engine that lets users find free music on the Internet. (It was also a browser plug-in). If users find a music file they like, they can "sideload" the music file into their MP3Tunes' locker as a personal archive copy. MP3Tunes' database tracks the sources of these personally archived files.

Due to other issues being addressed in prior proceedings, this ruling primarily focuses on the applicability of the 17 USC 512 safe harbor. This court expressly interprets 512(d), the safe harbor for linking to infringing content--one of the rare opinions to do so. Like most 512 rulings, this ruling is lengthy and detailed, reflecting the fact that the plaintiff contested a long list of safe harbor elements. As I recently mentioned, god bless the pithy 47 USC 230 immunity and the short opinions it produces.

Result. The net effect is that most of MP3Tunes' operations got a 512 safe harbor defense, but it is contributorily liable for any infringing sideloaded files it didn't remove following a takedown notice, and MP3Tunes' CEO (the persistent Michael Robertson) may be personally liable for any infringing files he personally loaded into his locker. These rulings leave the defendants on the hook for potentially millions in damages. Other questions, such as liability for employees' uploads, were rolled over to trial. Because of this mixed ruling, both sides issued public statements touting their wins. As I'll explain momentarily, both sides also earn some brickbats from me.

Some of the post-ruling punditry has suggested this ruling provides a roadmap for other cloud-based music lockers, including the offerings from Apple, Amazon and Google. While that's partially true, the guidance is limited at best due to the fact-specific nature of the ruling. Perhaps the best news for the other services is that lockers may not have to store redundant copies of user-uploaded files to qualify for a Cablevision defense (see the EFF post for more on this). However, as the Zediva ruling recently showed, it remains uncertain how broadly other courts will read the Cablevision case. Otherwise, I think this case mostly tells us things we already knew but that copyright owners refuse to believe.

Out of this dense and slightly inscrutable ruling, some of the points that I found most interesting:

Bogus Takedown Notices (Yet Again...) EMI sent MP3Tunes overbroad takedown notices. The court says EMI affiliates "provided a list of EMI artists and demanded that MP3Tunes 'remove all of EMI's copyrighted works, even those not specifically identified.'" This was in 2007, NINE YEARS after the DMCA came into effect. Seriously, guys? 512(c)(3) isn't that complicated, and major copyright owners that send notices vastly in excess of 512(c)(3) look like greedy or clueless SOBs.

With the hope that we can avoid future SOBness, here's an offer I extend to any and all major copyright owners. I will happily give you a FREE tutorial on how to draft proper 512(c)(3) takedown notices so that you don't look as asinine as EMI looked here. I'm not worried about these trainings being too much of a drain on my time--they should only take about FIVE MINUTES and involve a variation of RTFM.

Needless to say, the court wasn't impressed by EMI's overreaching takedown notuices. It reminds EMI that a proper 512(c)(3) takedown notice requires the copyright owner to provide sufficient information to locate the infringing files (cite to Wolk v. Photobucket).

MP3Tunes' Takedown Policy. MP3Tunes took the puzzling position that, in response to the overreaching 512(c)(3) notices, it only had to remove specified links from Sideload and not any files downloaded from those URLs into personal lockers--even though MP3Tunes kept the source URLs in its database and could therefore trace those files. Now, if the users had downloaded the files to their hard drives, that wouldn't be MP3Tunes' issue--though, to be clear, the users probably don't have a fair use defense if the files are actually infringing (see, e.g,. the BMG v. Gonzalez case). However, as a cloud service provider, MP3Tunes needs to respond to 512(c)(3) notices when they meet the statutory requirements, even if the locker is supposed to be the user's "private" space. MP3Tunes loses the 512 safe harbor for these files because EMI's 512(c)(3) notices provided adequate information for MP3Tunes to locate the files, and the court says MP3Tunes is contributorily liable for these infringements. MP3Tunes argued a Sony defense that its lockers had substantial non-infringing uses, but the court says Sony applies only to products, not services.

It's unclear how this discussion applies to other cloud-based music lockers. The court distinguishes Viacom v. YouTube because Viacom could easily search YouTube for infringements--which isn't possible with private cloud-based lockers (just as it isn't possible with user hard drives). The court also asserts that any other lockers letting users "sideload" from the Internet must trace URL source and disable all files from that URL in response to a 512(c)(3) notice. But what if the music locker allows users to upload files from their hard drives and don't allow those to be searched? The opinion seems to deliberately avoid addressing that situation. [A related unresolved Q: how copyright owners can find private YouTube videos. I've posted a few myself for use in my Advertising Law course.]

The court dismisses MP3Tunes' seemingly overstated concerns about its liability to users for disabling files in their "private" lockers. MP3Tunes' user agreement expressly allowed this, as I would expect every other cloud service providers' user agreements to do.

Even so, it's 100% clear that cloud storage is different from hard drive storage, and some users are going to get quite a surprise when they learn that third parties can zap files from their cloud storage. (Recall the hubbub over Amazon's zapping of books from Kindle). If Congress weren't so dysfunctional, this would be a good place for a statutory fix. It would make a nice complement to the Digital Due Process initiative to fix the ECPA's application to the cloud.

It's worth noting that users weren't represented in this litigation and had no ability to show that their uses were fair, notwithstanding BMG v. Gonzalez and similar cases. If cloud-based music lockers simply pull the trigger on 512(c)(3) notices on an "ex parte" basis (i.e., without any input from the affected users), their fair use rights become effectively irrelevant unless the sites honor users' putback notices. I think it's critical for cloud-based music lockers enabling "private" lockers to address how they will deal with 512(c)(3) notices and if they will honor 512(g) putback notices. I'd welcome your thoughts on ways that we collectively can monitor cloud service providers' policies and practices on this topic.

Repeat Infringer Policy. MP3Tunes had an adequate repeat infringer policy because, among other things, its users weren't "blatant infringers" (they were just downloading files for personal use and may not have known better) and "MP3Tunes does not purposely blind itself to its users' identities and activities."

Red Flags of Infringement. I continue to assert that "red flags of infringement" is no longer possible given copyright owners' widespread practices of freely seeding their content on the Internet as marketing. EMI did that too. Indeed, the court says "EMI executives concede that internet users, including MP3tunes' users and executives, have no way of knowing for sure whether free songs on the internet are unauthorized." The court further dismisses EMI's mockable argument that the terms "free," "mp3" and "file-sharing" automatically confer red flags knowledge. EMI's takedown notices that didn't comply with 512(c)(3) didn't contribute to any red flags knowledge either.

Vicarious Infringement Standards. The court rejects that the sideloading feature contributed to "financial benefit" because, even if it was a "draw," it had non-infringing uses, and MP3Tunes didn't charge for its usage. MP3Tunes lacked the requisite "control" because it was a cloud storage solution.

Public Performance. EMI argued that MP3Tunes publicly performed the files in users' lockers. MP3Tunes responded with a Cablevision defense. The court explains that MP3Tunes doesn't deliver files from a "master copy" (even though redundant copies aren't made) but instead "uses a standard data compression algorithm that eliminates redundant digital data" and therefore preserves exact digital copies. Thus, MP3Tunes wasn't publicly performing. I didn't understand the technological distinction the court was making, but I didn't find it persuasive at all. The court also distinguished Cablevision because it couldn't qualify for 512, while MP3Tunes does.

DMCA's Applicability to pre-72 Sound Recordings. FN1 says that 512 applies to pre-1972 sound recordings:

The Court agrees with Defendants that the plain meaning of the statutory language makes the DMCA safe harbors applicable to both state and federal copyright claims. Thus, the DMCA applies to sound recordings fixed prior to February 15, 1972.

I believe this is the first ruling reaching this conclusion (am I forgetting one?). The court didn't offer any citations or analysis in support of this conclusion, and I anticipate this issue will continue to be litigated fiercely.

Reminder: in case you missed it, I recently caught up on 4 months worth of online copyright rulings, including several addressing the same or similar issues as this case.

Other comments on this ruling: Techdirt, EFF, CNET News.com

Posted by Eric at 02:26 PM | Copyright , Derivative Liability , Licensing/Contracts , Privacy/Security | TrackBack

August 12, 2011

Catching Up on 4 Months of Online Copyright Cases--Myxer, Hotfile, Megaupload, Flava Works, Zediva, Blue Nile, Perfect 10, Rojadirecta

By Eric Goldman

Online copyright cases have been coming at such a furious pace that I haven't had a chance to keep up. This blog post wraps up the last 4 months of decisions.

Arista Records v. Myxer, Inc., 2:08-cv-03935-GAF-JC (C.D. Cal. April 1, 2011)

Myxer allows users to upload sound files and create downloadable ringtones up to 40 seconds long. The plaintiffs claimed 90+% of the ringtones were at least 34 seconds; but Myxer claims its average length is 25 seconds and that this is shorter than Audible Magic can reliably filter. Myxer claims to be a tool for independent artists to easily get their music into the mobile environment, but of course users can upload third party copyrighted material. UMG objects to the ringtones at Myxer because the downloadable ringtones disrupt its paid-download ringtones business. For reasons that aren't explained, UMG apparently never sent a proper 512 takedown notice, and Myxer treated the complaint as a takedown notice.

In a perplexing but unexplained statement, the court says "The undisputed facts in the present record establish that Myxer has directly infringed at least one of Plaintiff's exclusive rights, pursuant to § 106." The court further says there is no "volitional" defense in the 9th Circuit. This shifts the battle over the 512 safe harbors.

Agreeing with the UMG and YouTube cases, the court says user downloading qualifies for 512 coverage. The adequacy of Myxer's repeat infringer policy and the expeditiousness of its removal was deferred to trial. Citing Io, the fact that terminated users could re-register didn't disqualify Myxer from the 512 defense. The court rejected UMG's arguments that Myxer had generalized knowledge of infringement and says "to the extent that Plaintiff suggests that Myxer should have taken additional steps to filter infringing material on the Myxer Website, ‘the DMCA does not place the burden of ferreting out infringement on the service provider.’" With respect to direct financial benefit, the court says the test is "whether the infringing activity constitutes a ‘draw’ for users, not just an added benefit."

Myxer also loses a fair use defense. It's pretty clear that Myxer kept the maximum ringtone length fairly short as part of a fair use strategy, but the court circularly says Myxer took the best part, i.e., the chorus.

The most remarkable thing about this opinion is its length--75 pages. Easily, 17 USC 512 opinions are, on average, double or even triple the length of 47 USC 230 opinions. That's because 17 USC 512 has so many more words--and elements--than the pithy 47 USC 230, and plaintiffs contest virtually every word in a 512 defense. This makes for long and sometimes ponderous opinions. As a reader of judicial opinions, let's hear it for short immunities!

Disney Enterprises, Inc. v. Hotfile Corp., 11-20427-CIV-JORDAN (S.D. Fla. July 8, 2011)

Hotfile is a cyberlocker. Part of its business model is to give faster download speeds to paying members. Hotfile pays uploaders who post popular large files, which could naturally encourage people to upload infringing files.

Unlike the Myxer case, and following in the footsteps of the old Netcom case, the court rejects Hotfile's direct liability: "the law is clear that Hotfile and Mr. Titov are not liable for direct copyright infringement because they own and manage internet facilities that allow others to upload and download copyrighted material.... nothing in the complaint alleges that Hotfile or Mr. Titov took direct, volitional steps to violate the plaintiffs’ infringement" [sic—the last word should have been "copyright"]. As a result, the court grants the defendants' motion to dismiss the direct infringement claim.

The court distinguishes some 1990s cases (Webbworld and Russ Hardenburgh, among others) suggesting otherwise, saying that, in those cases, the defendants uploaded files themselves or used software to search for files. The court also expressly disagrees with Capitol v. MP3Tunes and Arista v. USENET.com. This is a pretty unpersuasive distinction based on the facts of the precedent cases, and I think it highlights the weakness of the "volitional" defense. The fact is that all but the most passive of hosts or conduits take some affirmative steps towards customizing the downloader's experience, and trying to parse which of those steps constitute "volitional" conduct and which don't is leading to the inevitable doctrinal incoherence.

Having said that, I thought we decided that web hosts aren't directly liable for user-caused infringement 15 years ago. I can't believe we're still wasting our time on this issue in 2011.

Not surprisingly, the secondary infringement claims survived the motion to dismiss.

Perfect 10, Inc. v. Megaupload Ltd., 2011 WL 3203117 (S.D. Cal. July 27, 2011)

Megaupload is another cyberlocker with a terrible brand name. Its business model appears similar to Hotfile's. Like Hotfile, it also sought a motion to dismiss the direct infringement claim. Unlike Hotfile, the court sees enough volitional conduct to survive the claim. It would have been great if the opinion did a compare/contrast with the Hotfile opinion, but sadly Hotfile wasn't mentioned at all--but, naturally, the MP3Tunes and Usenet.com cases (the ones the Hotfile court trashed) were. Sigh.

As usual, Perfect 10 apparently failed to send a proper 512(c)(3) takedown notice. They sent 22 notices in all, but allegedly 21 related to stuff that wasn't theirs. (Huh?) The court can't do much with this on a motion to dismiss and tells Megaupload to put it in its answer. The court does dismiss the vicarious infringement claim, saying that Perfect 10 didn't properly allege the requisite supervision over infringing activity beyond alleging supervision of the system.

Perfect 10's trademark infringement claims get Dastar-ed, but the dilution claims survive. Perfect 10's allegation is tarnishment because its high-quality photos are intermingled with junk photos. Seriously?

Flava Works, Inc. v. Gunter, 2011 WL 3205399 (N.D. Ill. July 27, 2011)

This case involves myVidster, another lousy trademark. After the cataclysmic flameouts of Napster, Grokster, Aimster, Friendster and so many others, who thinks the "-ster" suffix is still cool??? myVidster is small operation, mostly focused on porn, that allows users to "bookmark" a video. From the description, it sounds like myVidster is like a delicious-style link aggregator that embeds the linked videos, but the court confusingly goes out of its way to say myVidster isn't a linking site:

MyVidster does not simply link to video files displayed on another site; it embeds the files on its own site at the direction of users. In other words, when a visitor to myVidster clicks on a video that is posted there, the video plays directly on myVidster, and the visitor remains on the myVidster site; he or she is not taken to the site that hosts the video file.

Right, that sounds like a linking site to me. It's not clear to me how defense counsel failed to get the judge to grasp this essential fact.

The court describes that myVidster adds some metadata. The court shares this panicky observation: "In cases where a myVidster user bookmarks another user’s bookmark, the ‘source code’ will be a myVidster URL even though the original file of the video may be hosted elsewhere." Quelle horreur! Exactly where would the court like that link to go? The court might not have realized that linking user #1 might have added its own metadata or other users may have posted comments that linking user #2 would want to incorporate.

Flava produces gay ethnic porn. It discovered that myVidster users were embedding lots of its content. It sent multiple DMCA takedown notices. Flava claimed that myVidster's response to its takedown notices was erratic--sometimes it would take everything down, sometimes it would remove the link but leave up a thumbnail, and sometimes it would ignore the notice. myVidster responded that it did a better job than that and produced a chart showing its responsiveness. The court discounts the chart because it was not prepared on a timely basis and wasn't sufficiently credible in its preparation, but in a footnote, the court makes it clear it just didn't believe myVidster's principal:

In any event, although it does appear that it was sometimes like pulling teeth to obtain full compliance from Gunter, as discussed infra, the crux of the problem here is not so much the removal of the infringing videos; it is Gunter’s attitude toward copyright protection and his related refusal to adopt measures to prevent or reduce copyright infringement on myVidster as well as to adopt and implement an appropriate policy regarding repeat infringers.

This quote shows that it’s not a good idea to displease judges hearing online copyright cases. As we learned in Io v. Veoh, websites that go beyond the DMCA and proactively fight copyright infringement get a lot of extra credit from judges. For more on this in the trademark context, see Stacey Dogan’s new article, “We Know It When We See It.”

In myVidster's case, its principal took the highly unusual position that anything publicly posted to the Internet was fair game for linking--irrespective of its underlying copyright status. For example, the principal said: "my policy on repeat infringers are those who are using myVidster as a ways and means to distribute content that is not publicly available." He repeatedly told copyright complainants to take it up with the video host, because removing the links from his site wouldn't remove the file itself from the Internet. This is true, but it's not really sensitive to the emerging legal obligations of intermediaries.

Based on the view that anything publicly posted was freely linkable, user-posted links implicated myVidster's repeat infringer policy only if they went to password-protected sites or private URLs. I find it hard to believe that a lawyer recommended this standard. Because of this policy’s incredibly narrow scope, myVidster only had a single user who got a repeat infringer warning. The court didn't have kind words for this policy: "Gunter’s ‘repeat infringer’ policy is in fact no policy at all, at least with respect to copyright infringement....His definition of ‘repeat infringer’ does not encompass copyright law."

The court has little trouble establishing prima facie contributory copyright infringement. Users posted links to infringing videos. myVidster's principal knew of these links from the DMCA takedown notices. He didn't remove the links (or only partially remove them) upon notice. The court says his view about the free linkability of publicly posted but infringing videos "is the epitome of ‘willful blindness.’" The court also cites his failure to implement filters to prevent repeat infringement or to take recourse against the infringing users.

The general operation of a linking site counted as a material contribution. It also cited the fact that the site offered paid hosting as a way to avoid the possible breakage of links (the court said that "encouraged" infringement), and the site's principal also encouraged infringement through his own personal "favorites" list, which included “Star Trek,” “Crank 2,” and “Hancock”--and at a hearing, he stubbornly said that only the copyright owner could tell if the movie posting was infringing. The court also cited the website’s failure to discourage users from infringing copyrights—this was a doctrinal shortcut by the court.

Needless to say, myVidster doesn't get a 512 defense. The court says brusquely: "It is difficult for us to understand how defendants can argue with a straight face that they have adopted and reasonably implemented a ‘repeat infringer’ policy."

It's frustrating to see a ruling like this. myVidster had a legitimate chance of legal success if it got competent legal counsel from day 1 (or, if they did, if they listened to their lawyers) and baked in even the minimum industry-standard anti-infringement efforts. But the misguided view that anything online was linkable couldn’t be defended in court, and the extremeness of that view (combined with the principal's mule-like refusal to give any ground) gave the court too much liberty to say doctrinally unhelpful things as part of a judicial bodyslam.

Although it's largely mooted by the summary judgment opinion, the court's opinion on the motion to dismiss is also interesting. The court dismissed the direct infringement claim (correctly IMO), and on the vicarious infringement claim, echoed the (uncited) Perfect 10 opinion by saying that "To sufficiently allege the element of “right and ability to supervise,” plaintiff will have to allege more than the mere ownership and operation of myVidster." Similarly, the court follows in the (uncited) Myxer court's footsteps by saying the plaintiff "does not allege that the presence of the infringing material on the site enhances the site’s attractiveness or draws customers." As a result, the court tossed the vicarious infringement claim too. The inducement claim also dropped out because of "formulaic" pleading. Finally, the court tossed the trademark claims because they didn't show how myVidster made a use in commerce. Yet, all of these defense-favorable rulings that narrowed the case didn't save myVidster from a disastrous contributory copyright infringement ruling. But, for other defendants, it shows how victory was attainable for myVidster had it followed a better recipe for clean living.

Warner Bros. Entertainment Inc. v. WTV Systems, Inc., 2:11-cv-02817-JFW -E (C.D. Cal. Aug. 1, 2011)

Unlike most of the other cases here, this is not principally a secondary infringement case. However, it bears some commonalities with the other cases.

Zediva was trying to find a way to take advantage of the Cablevision case to offer a video "rental" service online. Zediva would acquire DVDs and essentially check them out to paying customers such that only 1 customer could enjoy the DVD at any one time. Frankly, if the Cablevision case is good law, Zediva has a point. However, I've been troubled by the Cablevision precedent, and this opinion shows that Cablevision isn't a very robust precedent as the court basically says "nyet" to a similar application in a new context.

Zediva's main failing is that it doesn't maintain separate copies of the downloadable file for each viewer as Cablevision did. Of course, that probably wouldn't be profitable for Zediva, because it presumably needs to amortize the DVD's purchase price over multiple viewers. (Unlike Cablevision, which had already paid for the license fee to obtain the digital bits through its cable retransmission license). Then again, it would be really lame if the legal rule is that we have to build wasteful redundant systems to avoid copyright infringement. That was the implicit rule from Cablevision, and this court doesn't let Zediva cut that corner.

The court says Zediva is publicly performing the videos. Its main citation is to the On Command case from 2 decades ago and the Redd Horne case from over a quarter-century ago. How's this for some circular logic: "Defendants’ transmissions are ‘to the public’ because the relationship between Defendants, as the transmitter of the performance, and the audience, which in this case consists of their customers, is a commercial, ‘public’ relationship regardless of where the viewing takes place." Huh? The court distinguishes Cablevision because each viewer had his/her own dedicated copy of the video, unlike the shared copy of the DVD in this case.

Citing the Myxer case (discussed above), the court says that the Ninth Circuit hasn't adopted a volitional defense.

This opinion is pretty bad, but IMO the worst part is the court's discussion of irreparable injury. Check out this parade of horribles:

* Zediva might "jeopardize the continued existence of Plaintiffs’ licensees’ businesses" (really?!) because consumers find Zediva’s service more attractive than the crappy options officially sanctioned by the movie studios.

* "Defendants’ service threatens the development of a successful and lawful video on demand market and, in particular, the growing internet-based video on demand market. The presence of Defendants’ service in this market threatens to confuse consumers about video on demand products, and to create incorrect but lasting impressions with consumers about what constitutes lawful video on demand exploitation of Plaintiffs’ Copyrighted Works, including confusion or doubt regarding whether payment is required for access to the Copyrighted Works."

* "Defendants’ service also threatens the development of a successful and lawful video on demand market by offering a sub-optimal customer experience and, thus, tarnishing customers’ perception of video on demand as an attractive option for viewing Plaintiffs’ Copyrighted Works." In particular, the court cites Zediva's inability to let multiple customers share the same DVD simultaneously against it, saying that telling customers that a video is "out of stock" will turn off video-on-demand customers permanently.

After reading this, I get the sense that the movie studios think the video-on-demand industry is more fragile than a 1980s Jaguar.

The court spent a lot of time discussing the movie studios' windowing. This reminded me of recent language from the Second Circuit Barclays' case:

The adoption of new technology that injures or destroys present business models is commonplace. Whether fair or not, that cannot, without more, be prevented by application of the misappropriation tort.

Perhaps copyright law can prevent it.

Blue Nile Inc. v. Ideal Diamond Solutions Inc., 2011 WL 3360664 (W.D. Wash. Aug. 3, 2011)

This is a piercing-the-corporate-veil case. Chasin is the principal of IDS, an outsourced online jewelry website operator for offline jewelry retailers. Blue Nile (remember them?) claims IDS republished its copyrighted product shots. Chasin defended that he personally didn't do it, so he should not be personally liable. The court grants summary judgment to Blue Nile.

On direct infringement, the court says (footnotes omitted):

There is no question that IDS was the “brainchild” of Larry Chasin, that IDS “was a small company”, and that Chasin “controlled the corporate affairs”. In addition to creating and controlling IDS, Chasin licensed the development of the infringing websites, and had the power to direct the removal of infringing content.

Any lack of knowledge goes to damages as an innocent infringer, not to the merits. Of course, if the photos had a copyright notice, the innocent infringement defense may be unavailable, so I'm not sure the court did Chasin any favors there.

On vicarious infringement, the court says (cites omitted):

Chasin admits that he had the ability to remove the infringing content and that he controlled the corporate affairs of IDS; thus he had the right and ability to supervise the infringing activity. He also admits that he personally invested “over $440,000 cash” into IDS and that he received salary and benefits from IDS, thereby giving him a direct financial interest in IDS.

Without more insight into the source of the allegedly infringing photos, it's hard to know just how bad this ruling is. I believe that officer/investor liability for a company's copyright infringement remains undertheorized, and I'd love to see more attention paid both to the doctrinal fine points and to the policy implications of treating someone like Chasin as a direct and vicarious copyright infringer. If you’re looking for a paper topic, this might be worth considering.

I also continue to howl that product shot-related lawsuits are a ridiculous tax on the entire retailing industry, and an area that desperately needs reform. One idea I've been kicking around is a commons-style repository of product shots. If you're interested in kicking this idea around, contact me.

Perfect 10 v. Google, No. 10-56316 (9th Cir. Aug. 3, 2011)

Perfect 10 is in the Ninth Circuit again. This Ninth Circuit panel (the opinion was written by Judge Ikuta) made it very clear that it did not want to discuss the main event--i.e., the merits of Perfect 10's lawsuit against Google. I think that's because the panel knows that the case's substantive issues are coming back to it soon enough (it's interlocutory now), and this panel didn't want to skew the substantive analysis when the time comes.

Instead, this opinion is about the standards for a preliminary injunction in copyright cases. The district court denied preliminary injunctive relief to Perfect 10, while at the same time ruling mostly in Google's favor. In this opinion, the Ninth Circuit weaves eBay v. MercExchange into the standards for preliminary injunctions in copyright cases. The court holds:

We therefore conclude that the propriety of injunctive relief in cases arising under the Copyright Act must be evaluated on a case-by-case basis in accord with traditional equitable principles and without the aid of presumptions or a “thumb on the scale” in favor of issuing such relief.

As a practical matter, this opinion ought to make it harder for copyright plaintiffs to get preliminary injunctions, And unlike many recent Ninth Circuit opinions, I believe there's a realistic chance that other Ninth Circuit panels will honor this holding. The opinion is well-reasoned and a logical extension of the Supreme Court's eBay decision.

The court goes on to say that it wasn't an abuse of discretion to deny a preliminary injunction to Perfect 10, even if it meant they would go out of business. (We can only hope). Basically, the court called BS on Perfect 10's claim that Google is wrecking its business, noting (among other things) that Perfect 10 "failed to submit a statement from even a single former subscriber who ceased paying for Perfect 10’s service because of the content freely available via Google." It is really hard to be too sympathetic towards a copyright owner who seems far more passionate about litigating than in giving consumers reasons to patronize it.

Puerto 80 Projects SLU v. USA, 1:11-cv-04139-PAC (SDNY Aug. 4, 2011)

Rojadirecta is a Spanish operation that runs linking sites. Naturally, some links are to infringing material. Rather than send takedown notices or sue Rojadirecta for infringement, the US government (DHS ICE) just took the domain names on the theory that they were being used to commit criminal copyright infringement. There are numerous problems with ICE’s seizure, including jurisdiction (Rojadirecta is legal in its home country), doctrine (the US government will have a tough time showing criminal copyright infringement), procedure (all of this was done without an adversarial process) and the Constitution (the domain name was the functional equivalent of a printing press for Rojadirecta). The DHS ICE's efforts to shut down a purportedly "rogue" site has, in fact, caused our own government to go rogue itself.

In this lawsuit, Rojadirecta tries to get its domain name back. The applicable statute was designed to govern physical chattel, not virtual printing presses. In a remarkably tone-deaf opinion, the court has none of it. The statute at issue effectively puts the burden on Rojadirecta--an odd place for the burden to rest, given that the US government still hasn't proven anything--and the court doesn't see enough reason to disturb the status quo.

Consider the tone-deafness of the court's response, keeping in mind that the underlying allegation is criminal copyright infringement, where the government's burden should be higher than in a civil case. Rojadirecta argues that it's losing users who can't find it due to the seized domains. The court responds that Rojadirecta has other domains, and "Rojadirecta has a large internet presence and can simply distribute information about the seizure and its new domain names to its customers." Well, yes, it can bang the drum through other media, but by definition there's no way to ensure the publicity reaches folks who only knew of Rojadirecta at the seized domains. Contrast Judge Kozinski's discussion in the Toyota v. Tabari case, a trademark lawsuit over a domain name:

the Tabaris needed to communicate that they specialize in Lexus vehicles, and using the Lexus mark in their domain names accomplished this goal. While using Lexus in their domain names wasn’t the only way to communicate the nature of their business, the same could be said of virtually any choice the Tabaris made about how to convey their message.

In general, it's repugnant under the First Amendment for the court to second-guess a publisher's choices of how to communicate with its audience. Here, the court does just that, and ignores any lost audience because ICE has blocked the publisher's preferred communication method. Corynne at the EFF has more to say about this point.

The court makes the same error when it expressly discusses the First Amendment. The court says "the fact that visitors must now go to other websites to partake in the same discussions is clearly not the kind of substantial hardship that Congress intended to ameliorate in enacting § 983." That is true, but only because 983 contemplated the government would seize physical chattels that putatively facilitate crimes, not virtual printing presses. So when the government misuses its power to reach speech-facilitating chattels, the court should modulate accordingly.

The judge doesn't permanently shut the door on the First Amendment issues or other relevant defenses, but he's apparently not yet appreciated the magnitude of the government's errors either.

Posted by Eric at 09:29 AM | Copyright , Derivative Liability | TrackBack

July 20, 2011

P2P Swarm Defendants Can't Be Joined in the Same Lawsuit -- Pac. Century Int'l Ltd. v. Does

[Post by Venkat Balasubramani]

Pacific Century International Ltd. v. Does, C-11-02533 (DMR) (N.D. Cal. July 8, 2011)

There have been a slew of recent procedural rulings in mass copyright cases, with plaintiffs mostly getting smacked down by courts. Plaintiffs have tried to sue defendants en masse in a single lawsuit and courts have been unreceptive to this idea. One open question was whether P2P "swarm" defendants can be sued in the same lawsuit because of defendants' interactions with one another in downloading or distributing the same copyrighted work. In this case, the court says no, and sua sponte, severs a bunch of Doe defendants from the lawsuit.

Pacific Century International sued a hundred and one Doe defendants in the Northern District of California, alleging that defendants reproduced and distributed plaintiff's copyrighted work titled "Amateur Cream Pies -- Erin Stone." Plaintiff requested leave to take early discovery. The court approved the request for early discovery, but had questions about the propriety of joining Does 2 through 101 in the same lawsuit. Plaintiff offered the following explanation, and argued that all defendants should be joined together because they were all part of the same BitTorrent "swarm":

the [BitTorrent] protocol breaks a single large file into a series of smaller distributable pieces. Then, an initial file-provider (the "seeder") intentionally elects to distribute the pieces to third parties. . . . Other users ("peers") on the network download a small "torrent" file that contains directions on where to find the seeder as well as an index of the pieces. The torrent file is loaded into BitTorrent software, and the software follows the directions in the torrent file to connect to the seeder. When peers connect to the seeder, they download random pieces of the file being seeded. When a piece of download is complete, the peers automatically become seeders with respect to the downloaded pieces. In other words, each peer in a swarm transforms from a pure downloader . . . to a peer that is simultaneously downloading and distributing pieces of a file.

Plaintiff essentially argued that since all of the defendants worked together to download and distribute a copyrighted work, Plaintiff's claims arose out of the "same transaction." The court disagreed, noting that just because the Doe defendants happened to download or distribute the same copyrighted work does not mean that they were involved in the same swarm. For example, one defendant may distribute a low definition version of a video while another may distribute a high definition version. The court says:

[t]hat BitTorrent users have downloaded the same copyrighted work does not, therefore, evidence that they have acted together to obtain it.

Although plaintiff alleged that the Doe defendants were all involved in a civil conspiracy, the court concludes that plaintiff "failed to demonstrate that it has any right to relief against [Defendants] . . . . arising out of the same transaction, occurrence, or series of transactions of occurrences."
__

Ouch! As a bonus, although the court authorizes early discovery, it directs the ISP in question to provide the affected subscriber (Doe 1) with notice of the subpoena, and gives Doe 1 an opportunity to object.

This is just one more decision of many recent decisions where courts push back using procedural rules on copyright plaintiffs who are trying to sue multiple defendants in the same lawsuit. (See, e.g., "Judge Tells John Steele To Stop Mass Suing Anonymous People For File Sharing.") In addition to the problem highlighted by the court, there is one other obvious problem with suing a bunch of unidentified defendants in a single forum. You have no idea where the defendant is based and whether they're subject to jurisdiction in the forum. Most people view the mass lawsuits as an efficiency play by plaintiffs, at the expense of procedural rules and defendants' rights. I haven't been keeping a close tally, but it's clear that at least some judges are starting to push back on this tactic.

Strangely, some recent copyright plaintiffs don't seem to pick up on the subtle messages that courts send in their rulings. As a litigant, you don't want to blindly accept a judge's procedural rulings and directives, but you also want to pick your battles. One or two decisions out of ten is probably worth fighting over, and if the ruling is one that involves some exercise of the judge's discretion, you probably want to consider following the path laid out by the judge. Copyright plaintiffs don't seem to view things this way, and resist every single adverse decision issued by judges. Righthaven is probably the most prominent example of this, as extensively catalogued by Eric and others. We'll see what happens in this case.

(h/t Ray Dowd)

Posted by Venkat at 12:05 PM | Copyright , Evidence/Discovery

July 18, 2011

The “Graduated Response” Deal: What if Users Had Been At the Table? (Co-Authored Post)

[Cross-posted to EFF's Deeplinks as well as here]

By Corynne McSherry and Eric Goldman

As was widely reported last week, several major internet access providers (including, very likely, yours) struck a deal last week with big content providers to help them police online infringement, educate allegedly infringing subscribers and, if subscribers resist such education, take various steps including restricting their internet access. We’ve now had a chance to peruse the lengthy “Memorandum of Understanding" (MOU) behind this deal. Turns out, as is often observed, the devil is in the details – and they are devilish indeed.

Let’s start with the people taking credit: major content owners, service providers, and some government officials, principally New York Attorney General Andrew Cuomo. But guess who wasn’t invited to the party? The millions of subscribers who will be governed by the deal—the same subscribers who elect the politicians, buy the content owners’ goods and pay subscription fees to the internet access providers (which are likely to go up as administration costs are passed on – the UK’s graduated response system was estimated to cost about $40 per subscriber). Given that subscribers weren’t consulted, it’s probably not surprising that this deal is not in their interests.

Here’s some of the biggest problems with what resulted--and some ideas on what subscribers should demand of the system they’ll be paying for:

Who’s in Charge? The MOU calls for the creation of a new organization, called the Center for Copyright Information (CCI), to administrate the six-strikes system. CCI will be governed by a six-person executive committee comprised of representatives from content owners and internet access providers. Throwing a bone to subscribers, a three-person advisory board will include members “from relevant subject matter and consumer interest communities,” who will be given the chance to speak up whenever the executive committee asks. This possible advisory presence for subscribers is completely inadequate. Given they are the whole point of the MOU, subscribers deserve seats at the table as voting members of the executive committee.

“Mitigation” Measures and Independent Review: Internet access providers can punish accused subscribers by interfering with the subscribers’ connectivity, including by slowing transmission speeds, temporarily restricting web access for “some reasonable period of time,” and conditioning web access on completing a “meaningful copyright education program.” These mitigation measures can be imposed solely on the basis of the content owners’ assertions, without a judge ever determining that the subscriber did anything wrong.

Internet access has become an essential service in the digital age. Thus, just as we restrict the power of utilities to turn off services to their customers, we should not allow content owners to cause internet access providers to degrade or suspend their services without adequate due process.

The MOU does create a process designed to protect subscribers from unfounded accusations and punishment, but it’s hardly due process. Consider some of the procedural protections that subscribers might have sought if they had been at the bargaining table:

* The burden should be on the content owners to establish infringement, not on the subscribers to disprove infringement. The Internet access providers will treat the content owners’ notices of infringement as presumptively accurate--obligating subscribers to defend against the accusations, and in several places requiring subscribers to produce evidence “credibly demonstrating” their innocence. This burden-shift violates our traditional procedural due process norms and is based on the presumed reliability of infringement-detection systems that subscribers haven't vetted and to which they cannot object. (The content owners’ systems will be reviewed by “impartial technical experts,” but the experts’ work will be confidential). Without subscribers being able to satisfy themselves that the notification systems are so reliable that they warrant a burden-shift, content owners should have to prove the merits of their complaints before internet access providers take any punitive action against subscribers.

* Subscribers should be able to assert the full range of defenses to copyright infringement. A subscriber who protests an infringement notice may assert only six pre-defined defenses, even though there are many other possible defenses available in a copyright litigation. And even the six enumerated defenses are incomplete. For example, the “public domain” defense applies only if the work was created before 1923--even though works created after 1923 can enter the public domain in a variety of ways.

* Content owners should be accountable if they submit incorrect infringement notices. A subscriber who successfully challenges an infringement notice gets a refund of the $35 review fee, but the MOU doesn’t spell out any adverse consequences for the content owner that make the mistake – or even making repeated mistakes. Content owners should be on the hook if they overclaim copyright infringement.

* Subscribers should have adequate time to prepare a defense. The MOU gives subscribers only 10 business days to challenge a notice or their challenge rights are waived (a subscriber might get an extra 10 business days "for substantial good cause"). This period isn’t enough time for most subscribers to research and write a proper defense. Subscribers should get adequate time to defend themselves.

* There should be adequate assurances that the reviewers are neutral. The MOU requires that reviewers must be lawyers and specifies that the CCI will train the reviews in “prevailing legal principles” of copyright law – an odd standard given the complexity of, and jurisdictional differences in, copyright law. We’re especially interested in the identity of these lawyers, and why they are willing to review cases for less than $35 each (assuming the CCI keeps some of the $35 review fee for itself). Perhaps there will be a ready supply of lawyer-reviewers who are truly independent. Given the low financial incentives, another possibility is that the reviewers will be lawyers tied—financially or ideologically—to the content owner community. To ensure that the reviewers remain truly neutral, reviewer resumes should be made public, and checks-and-balances should be built into the reviewer selection process to ensure that the deck isn’t stacked against subscribers from day 1.

Education or Propaganda? The MOU repeatedly emphasizes subscriber education as one of its main goals. Unfortunately, this education won’t offer a very balanced view of copyright, at least if the current version of the CCI website is any indication. That website currently is full of scare-mongering rhetoric decrying the ill effects of so-called “content theft” and stressing the security risks of P2P. As the site is further developed, the executive committee should reject the rhetoric and look instead to the numerous online resources that provide a balanced and nuanced view of copyright law, helping to inform subscribers about their rights as well as their responsibilities when it comes to creative works.

Transparency: The MOU contemplates ongoing evaluation of the system through a variety of reports. That seems like a good idea, but neither subscribers nor the general public get to see or comment on those reports. Similarly, the statement of “prevailing legal principles” used to instruct reviewers also should be made public so that subscribers know how reviewers are interpreting U.S. copyright law. Simply put, if subscribers are supposed to treat the system as credible, they need enough information to determine that the system actually is credible.

Conclusion: This MOU has been in development for years, and we imagine the parties will be reluctant to revisit it. But it has yet to be implemented, which means there’s still time for the parties (and their friends in government) and to address the deficiencies of their proposal from perspective of the subscribers who’ll be paying for it. This deal is never going to be good for subscribers (nor for the artists who won’t see one more red cent as a result of it) -- but it sure could be better.

Posted by Eric at 01:13 PM | Copyright , Derivative Liability | TrackBack

July 15, 2011

17 USC 512(f) Preempts State Law Claims Over Bogus Copyright Takedown Notices--Amaretto v. Ozimals

By Eric Goldman

Amaretto Ranch Breedables, LLC v. Ozimals, Inc., 2011 WL 2690437 (N.D. Cal. July 8, 2011).

I generally like furry critters, but I'm beginning to hate the virtual horses and virtual bunnies for their deleterious effect on Internet law. A prior ruling in this case held that Amaretto (the horses) couldn't claim 17 USC 512(f) when Ozimals (the bunnies) sent takedown notices to Second Life that Second Life didn't act upon. Now, in this ruling, the court says that 17 USC 512(f) preempts all state law claims based on the takedown notices, agreeing with language in the Diebold and Lenz 512(f) cases.

I must confess that copyright preemption baffles me generally. Consistent with that, I couldn't tell if this ruling is relying on statutory preemption (17 USC 301), conflict preemption or field preemption. It might just be my shaky reading skills, but the opinion seemed to imply it was all three simultaneously.

There is a key difference between this case and the Diebold/Lenz cases, however. In those cases, the court said 512(f) was a viable claim. Here, the court has already said 512(f) isn't viable for Amaretto. So Amaretto rightly pointed out that this ruling would leave Amaretto remediless. The court expressly acknowledges this result, saying: yup, that's exactly what federal preemption means.

Amaretto also cited to the recent Rock River ruling, which indicated that 512(f) didn't preempt a tortious interference case. The court distinguishes the Rock River case by saying that case did not involve a 512(c)(3) takedown notice, so the notice never fell within 512(f)'s ambit in the first place and thus 512(f)'s preemption wasn't triggered. The court unfortunately doesn't reference or distinguish Smith v. Summit Entertainment, which survived various state law claims in addition to a 512(f) claim. I don't remember a preemption challenge in that case, but that's perhaps because the case was really about trademarks, not copyrights.

All this leaves me more confused than before. If you're looking for a good but challenging paper topic, the preemptive effect of 17 USC 512(f) looks worth exploring. It also reinforces that 512(f) is a limited solution that may be miscalibrated for its supposed purposes of helping to suppress bogus copyright takedown notices.

Prior blog posts on this case:

* Copyright Takedown Notice Isn't Actionable Unless There's an Actual Takedown--Amaretto v. Ozimals (April 2011)
* Second Life Gets Out of Dispute Between Virtual Bunnies & Virtual Horses (Jan. 2011)
* Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals (Jan. 2011)

Posted by Eric at 07:22 AM | Content Regulation , Copyright , Derivative Liability | TrackBack

July 10, 2011

Comments on the Second Circuit Hot News Decision--Barclays v. theflyonthewall [Catch up post]

By Eric Goldman

Barclays Capital Inc. v. Theflyonthewall.com, Inc., 10-1372-cv (2d Cir. June 20, 2011). My prior blog post on the case.

[I was traveling in mid-June and a few interesting rulings fell through the cracks. This is a catch-up post.]

Even if I might be persuadable about the merits of a very circumscribed hot news doctrine if I saw sufficient utilitarian evidence (i.e., without hot news protection, society will suffer a demonstrated loss of socially valuable production), plaintiffs will always try to stretch and morph such a circumscribed doctrine into something unrecognizable. Given the transaction costs and error costs associated with this pushing by plaintiffs, I don't think the hot news game is worth the candle. In other words, we'd be better off killing the doctrine outright rather than trying to preserve it as a niche IP. For this reason, I'm cheered whenever I see defense-side hot news wins. Chances are those rulings move us closer to the socially optimal result.

As you recall, this case involved a website's republication of stock recommendations made by brokerage firms. The brokerage firms aimed to give their loyal customers a headstart in trading a stock based on the recommendation. By republishing the recommendations, the website substantially narrowed or eliminated this time advantage. The majority takes a seemingly dim view of the brokerage firms' scheme. In FN29, the majority almost characterizes it as a type of insider trading:

[hot news protection] would ensure that the authorized recipients of the Recommendations would in significant part be profiting because of their knowledge of the fact of a market-moving Recommendation before other traders learn of that fact. In that circumstance, the authorized recipient upon whose commissions the Firms depend to pay for their research activities would literally be profiting at the expense of persons from whom such knowledge has been withheld who also trade in the shares in question ignorant of the Recommendation.

None of this affects our analysis, nor do we offer a view of its legal implications, if any. We note nonetheless that the Firms seem to be asking us to use state tort law and judicial injunction to enable one class of traders to profit at the expense of another class based on their court-enforced unequal access to knowledge of a fact -- the fact of the Firm's Recommendation.

[Although I'm sympathetic to this, isn't this also a defining characteristic of our market economy--that buyers and sellers have differential information that affects their valuation of goods and services? The concurring judge thinks this discussion was unnecessary.]

Based on my standards, there was plenty of good news in the Second Circuit's hot news ruling. The majority says that the website wasn't free-riding because the brokerage recommendations were the news (not a reporting of someone else's news), and the website was just reporting the news created by the brokerage firms. The majority says: "the Firms seek only to protect their Recommendations, something they create using their expertise and experience rather than acquire through efforts akin to reporting." The majority also notes the website attributed the information to the brokerage firms. The majority implies that the website doesn't compete directly with the brokerage firms because it doesn't sell stock trading services, although it says later that it's not addressing the direct competition prong. Finally, the majority seems to treat the standard 5-factor hot news test articulated in the Motorola case as dictum. Although I can see this argument because the Motorola court ruled for the defense, the concurrence disagrees with the dictum characterization, and I suspect most other panels will as well.

Even though the majority and concurrence don't agree on a lot, this case indicates it will be hard to find a successful hot news claim that doesn't involve one direct competitor doing a straight ripoff of the other. Perhaps the INS v. AP facts would still trigger the hot news doctrine, but not much else ought to. Certainly the majority is wary of incumbents' efforts to expand IP doctrines as a way of fighting off new technological innovations. The court says:

The adoption of new technology that injures or destroys present business models is commonplace. Whether fair or not, that cannot, without more, be prevented by application of the misappropriation tort.

Along the way, the opinions express mixed sentiments about one of the recent plaintiff hot news successes, the All Headline News case. Among other things, the majority observes that the case may have interfered with the state-by-state uniformity sought by the copyright preemption doctrine. I wonder if this discussion kills that case as precedent (not that it was very strong to begin with).

Although this ruling gets to a good place, it's too bad the court couldn't embrace what was clearly on its mind--that the Second Circuit screwed up in the Motorola case by revitalizing the hot news doctrine and therefore the entire hot news doctrine needs rethinking.

Posted by Eric at 11:02 AM | Copyright | TrackBack

July 06, 2011

Righthaven Defendant Awarded $3,800 in Attorneys' Fees--Righthaven v. Leon

By Eric Goldman

Righthaven, LLC v. Leon, 2011 WL 2633118 (D. Nev. July 5, 2011). My most recent post on Righthaven.

Judge Navarro ordered Righthaven to pay $3,815 to the attorneys for one of its defendants, Michael Leon. This award came about because Righthaven did not properly serve Leon's complaint. In light of this, the court in April gave the parties a choice: Righthaven voluntarily dismisses the complaint without prejudice and pays attorneys' fees, or Righthaven dismisses the case with prejudice and Leon gets nothing. The parties agreed to the latter. (It's not clear from the record why Righthaven agreed to this solution). Leon retained the Randazza Legal Group on a pro bono basis to represent him at the April hearing. Because the Randazza firm came in pro bono and based on the parties' discussions, it appears Righthaven assumed it was going to write a check to charity. Instead, the judge switched this up and put the money in the Randazza Legal Group's pocket.

Because Righthaven had agreed to this payment previously, this fee award doesn't represent a judicial condemnation of Righthaven's practices. (That will come soon enough). Nevertheless, Righthaven's failure to properly serve Leon is yet another costly but avoidable litigation error made by Righthaven. I don't know if it's their staff turnover, general incompetence or something else, but Righthaven has made a surprisingly high number of unforced errors for a company whose sole business is litigation.

Beyond this case, there are several pending Righthaven defendants' motions for fee shifts under copyright's fee shifting statutes. There are also some pending sanction motions against Righthaven that could further require Righthaven to pay the defendants. This case's relatively small award of attorneys' fees won't break Righthaven's bank, but I think it symbolically represents that Righthaven's profitability has crested. Going forward, I predict Righthaven's cash meter will start running in reverse with some frequency as judges make Righthaven write checks to its defendants. How many of those checks will Righthaven write before until it acknowledges that it has no chance of profitability?

Posted by Eric at 07:39 AM | Copyright | TrackBack

July 05, 2011

"Can IP Be Protected in the Internet Age?" Panel Recap from Russian Economic Development Conference

By Eric Goldman

In June, I attended the St. Petersburg International Economic Forum ("SPIEF"), organized by the Russian government's Ministry of Economic Development. This was a major event drawing thousands of participants to St. Petersburg, including the heads of state from Russia, China and several other major countries. The conference was designed to advance Russia's economic development, which seems to focus on natural resource extraction from Siberia. However, the conference included a few Internet-related panels, and conceptually they fit nicely with the theme of how Russia can develop its economy.

I participated on a panel entitled "Can IP Be Protected in the Internet Age?" Right away, I trust many of you find the titling odd. This is the kind of panel we had in the United States in 1996 and 1997. I can't imagine that anyone in the United States would organize a panel seriously asking that question in 2011. But the question seemed oddly appropriate given Russia's awkward status as a developed nation that bears some commonalities with the economies of the developing world.

Putting the titling aside, this was easily one of the most bizarre panels I've ever been on. The panel consisted of SIXTEEN presenters for a 75 MINUTE panel (one didn't show, so 15 actually spoke). Yes, you read that right. Doing the math, each speaker was allocated a little over 4 minutes (not surprisingly, some ran over). I should add that the Russian government paid thousands of dollars to cover my travel expenses so I could participate in this panel, making this a jaw-droppingly high per-hour rate for my time!

They sat the 16 panelists around a round table. You can see the room set-up in this photo. As you can see, it was a tight fit around the table. You can also see the monitors overhead and the videocameras pointed at the table; so audience members who couldn't see the speaker (for example, because they sat behind the speaker) could watch on the overhead monitor. At the peak, there may have been about 60 people in the audience (although I'm not sure how many of those were staff members). In the back left is the translator booth--about half the speakers spoke in English; the other half in Russian. One final thing to note is that everyone you see in the photo was an SPIEF staffer, meaning that the ratio between staffers and panelists approached 1:1. You've heard the stereotypes about Russian efficiency; this panel seemed to exemplify it.

Because there were too many panelists for the time allotted, not surprisingly the panel devolved into a series of short position statements not dissimilar to the "interaction" at an OECD workshop or other international forum. Some of the later speakers commented on the remarks of earlier speakers, but there was no audience Q&A or panelist back-and-forth. The panel moderator was Igor Drozdov, Director for Law and Legal Matters, Skolkovo Foundation, and he had the unenviable task of herding too many cats in too little time.

I'm not exactly sure why the panel was organized as it was, but it turns out, this event became another iteration in the dialogue between the Russian and United States governments over Russian copyright law. Because Russia's economy is still developing, Russia isn't faithfully toeing the US line on draconian copyright laws. Techdirt does a nice job summarizing some of the recent considerations for Russian copyright reform--something about baking Creative Commons into the copyright statute, which doesn't really make sense but reflects the theory that not every copyright owner needs nuclear-grade copyright rights. It's the kind of discussion we could never have in Congress because US copyright law is exclusively on a one-way ratchet to become more draconian. The US government isn't responding to Russia's flirtation with weaker copyright laws with smiles, and some of that tete-a-tete spilled over to this panel.

I'm going to relay my notes from the panel, but my usual caveats apply--these are my impressions of the discussion, not faithful transcriptions, so you should double-check before quoting or relying on my summary. In this case, capturing the discussion was even more difficult because I was working on very little sleep and relying on the English translations for the Russian speakers, and the translators cut out during a few speakers. If you want to watch the panel yourself and draw your own conclusion, go here. You can also read the organizers' official summary, which doesn't really capture the dynamics. You can also see the organizers' pull quotes.

Miriam Sapiro, US Deputy Trade Representative, started the discussion. Her bio and a Q&A where she lists her work on ACTA as her favorite moment--uh oh. Her remarks were what you would expect from a US trade rep. She rattled off the typical content owner talking points: IP theft is no less illegal than the theft of tangible property; IP protection is essential in the Internet era; legislation should provide for secondary infringement when service providers have the object of promoting infringement.

She tossed out a few Russia-specific quips, including:

* a concern about mandatory licensing of content to a monopolist--presumably a warning that Russia should not officially embrace Spotify as a private compulsory license;
* an expectation of vigorous government enforcement against Internet infringement, including cyber-lockers and BiTorrent.
* advocacy that Russia should join the WTO--and ACTA.

Svetlana Mironyuk, Editor-in-Chief, RIA Novosti. She expressed frustration with the work required to police their rights against UGC, which she says requires a team of 20 lawyers. They brought only 1 case, which they won, but she said the victory doesn't solve the whack-a-mole problem, and enforcement actions aren't good public relations.

Tom Rubin, Chief Counsel for Intellectual Property Strategy, Microsoft Corporation. Tom offered up the DMCA online safe harbor as a good example of how rightsowners' and technologists' interests can be balanced. It has promoted vibrant online innovation, helped proliferate legitimate commercial platforms, and led to voluntary cooperation between content owners and technology platforms that supplement the legal rules. He said there is a problem with rogue websites that have no legitimate purpose--these should be easy for content owners to remove. Creative Commons and other permissive licensing schemes are a complement to copyright law, not a substitute.

Oliver Metzger, Senior Copyright Product Counsel, Google Inc. IP enforcement works well when there is a shared responsibility between IP owners and websites. IP owners are in the best position to know when there is an infringement. We should not require websites to monitor UGC. Monitoring is hard for big companies and a crushing obligation for small ones. He pointed to Content ID as an example of a voluntary IP enforcement mechanism that YouTube has adopted.

Eric Goldman, Associate Professor, Santa Clara University School of Law. My remarks: Copyright protection is a good thing. Unfortunately, this leads to the mistaken assumption that more copyright protection is better.

In the Silicon Valley, much of the innovation takes place in the "unregulated spaces," i.e., the cracks in the regulatory structure. (I know many people have advanced this argument, but I acknowledge Mark Lemley's recent evangelism of this point). Regulation often creates barriers to entry, in many cases at the request of incumbent players.

In contrast, expressly creating unregulated spaces, through safe harbors and immunities, can spur entrepreneurship around those safe spaces. For example, the 17 USC 512 notice-and-takedown scheme. Service providers still feel the takedown process is onerous, but at least they know the rules of engagement and can find profitable ways to implement it, which has led to UGC success stories like YouTube.

From the perspective of content creators, there's an emerging recognition that copyright isn't their only solution. Information asymmetries are unstable on the Internet (an application of the idiom that "information wants to be free"), which reflects the nature of information as non-rivalrous. Many content creators are embracing the instability of information asymmetries by treating non-rivarlous content as marketing for rivalrous goods and services. As just one example, bands voluntarily post recordings of their live performances as marketing for future live performances.

Ivan Zasursky, Head of New Media and Communications Theory, Faculty of Journalism, Lomonosov Moscow State University. I didn't get any notes from him.

Andrei Loginov, Plenipotentiary Representative of the Russian Government in the State Duma. I'm not sure what his title means, but he spoke from a librarian's perspective. He noted that content creators' interests aren't always commercial, and increased commercialization of Internet content can increase piracy.

Yuri Lubimov, Deputy Minister of Justice of the Russian Federation. The traditional copyright owner's rhetoric is that we should do more to bust pirates. He thinks we should consider different perspectives. Paper-based rules are increasingly outdated. There is a decrease in the circulation of traditional media, and TV content is eroding in quality. We may not want to enforce existing rules; instead, we should anticipate when copyright rules will fall apart by finding new ways to monetize content in new technological environments. We can't protect content using the same means as we used to protect paper-based content. If we don't develop new methods to monetize content, then the old system will fail and a new system won't come online.

Kevin Lawric, President, Sony Europe and Africa. He acknowledged that rightowners had made bad decisions for years. [We all know this is true, but it's still refreshing to hear from a music exec.] He pointed to Spotify as a success story that was aided by government nudging. He gave the example of Sweden and Pirate Bay. The government pressured the illegitimate sites, and the legitimate services (Spotify) got licenses.

Ekaterina Chukovskaya, Secretary, Deputy Minister of Culture of the Russian Federation. Her talk seemed especially interesting but it was hard to tell with the translation. She started out by noting that IP owners have different perspectives. They understand the best monetization model for them, and we should give authors the right to do what they want, including sometimes not taking the full package of copyrights. [I believe this is part of the idea of baking Creative Commons into the statute.]

She also appeared to be interested in revitalizing formalities. She indicated there was thought about a digital registration process that libraries could implement. The author could register his/her interest; but if not, the author lets it go.

[At this point we had gone about 70 minutes of the 75 minute panel and we still had 5 speakers left. For reasons that weren't entirely clear, Miriam Sapiro said she had to leave. There was no graceful way for her to leave. She could have just left, but there were Russian government officials around the table and they might have perceived her departure as US government disinterest in the discussion. At the same time, announcing her departure consumed more time from speakers who hadn't been given their chance. She decided to do the latter and shared a few parting words:]

Miriam Sapiro (again). There is consensus around the table that (1) protection of IP is a universal right, (2) rightsowners, and not the government, should make the decision what to do with their rights. [In fact, I don't think there was any consensus around the table. The Russian government representatives were saying some pretty funky things that we'd never hear a US government official say in his/her official capacity.]

Benoit Ginisty, Director General, International Federation of Film Producers' Associations. "Free" isn't a sustainable business model, and it disturbs concepts of right and wrong. Their content is a value driver for ISPs.

Alexander Maslov, State Secretary, Deputy Minister of Telecommunications and Mass Communications of the Russian Federation. They surveyed Russian users. 80% will support pirated content despite its dangers, but 83% don't object to advertising, and many will pay if they can get timely access to content (no windowing). So there's no reason to be pessimistic if lawmakers adapt their laws and IP owners adapt their business models.

Tim Renner, Managing Director, Motor Entertainment GmbH. Intellectual property rights on the Internet are illusory. All control is lost. We need to ramp up legal options like Spotify. There will always be geographic locations where pirates can find a safe haven, so it's not possible to stop them.

Peter Jenner, Producer, Music Manager, ex-Manager of Pink Floyd and The Clash, Visiting Professor in Music and Entertainment Industry Economics. We need to find business models that are consistent with consumer behavior. We need to work with consumers, not against them. Consumers have different levels of enthusiasm for content, so content owners need to be more subtle with their pricing. We can compete with "free" by making content "feel like free," such as a flat tax paid through IAPs. He asked where the money to Spotify is going? It's not going to the artists. If consumers don't feel like the money is going to the right people, they are less willing to pay. [I'd like to see some social science backing that assertion up.] He also advocated for developing content registries as a formality.

Artemy Troitsky, Russian rock journalist and music critic. Talented artists and scientists will never stop, but we need to remove intermediate publishers from the system and we need to overcome greed. [The translation was garbled so I didn't catch what he was saying at the end, but something in his conclusion made the crowd go wild--his impassioned remarks produced a rousing ovation from an otherwise completely passive audience. Maybe the audience was just happy to reach the end of a frenetic and completely non-interactive panel before dark.]

After the conference, I did some tourism around St. Petersburg. I will post a comprehensive recap of that to my personal blog. In the interim, you can see my photo gallery.

Posted by Eric at 01:05 PM | Copyright , Derivative Liability | TrackBack

July 03, 2011

June 2011 Quick Links, Part 1 (Copyright & Trademark Edition)

By Eric Goldman

Copyright

* Good news: the US government is funding alternative networks that dissidents can use to communicate when the Internet is censored by repressive regimes. Bad news: the US government is teaching the rest of the world how to censor the Internet through DHS domain name seizures and COICA/PROTECT IP Act. Maybe the US-funded alternative networks will help out those censored by the US government?

* Speaking of which, the EFF and Mark Lemley are fighting back against the DHS ICE domain name seizures. The EFF has more on the topic.

* Warner Bros. settled the Hangover 2/Mike Tyson tattoo lawsuit. Prior blog post.

* We don't have too many publicly announced settlement amounts for Righthaven. The latest: Righthaven settled with the US Marijuana Party for $1k. It's hard to see a profitable business model in that.

* Righthaven's dwindling inventory of cases: it filed 25 in March, 2 in April, 9 in May and ZERO in June.

* Are major US IAPs about to voluntarily implement a graduated response program?

* Murphy v. Millennium Radio (3rd Circuit June 14, 2011). Cropping the "gutter credit" from a photo violates 17 USC 1202.

* Friedman v. Guetta. Photographer gets summary judgment against an artist who copied photos from the Internet and remixed them.

* Jonathan Basamanowicz and Martin Bouchard, Overcoming the Warez Paradox: Online Piracy Groups and Situational Crime Prevention, Policy & Internet, Vol. 3, Iss. 2, Article 5 (2011). Abstract:

US federal law enforcement operations occurring between 2001 and 2005 attempted to disrupt the online piracy scene, targeting copyright piracy rings known as 'warez groups'. Previous work on warez groups has demonstrated a paradoxical situation where attempts to curtail warez group activities through policing and advancements in DRM only further encourage such groups to crack and distribute content. This study collected data on 93 convictions from these policing operations to construct a crime script of these groups' motivations and modus operandi in the release process. The results confirm previous findings that attempts to disrupt the activities of warez groups are counterproductive. To avoid the paradox, this study suggests that industry account for the motivations and modus operandi of these groups by creating DRM technologies which allow un-cracked content to seep through the testing step of the script, thereby placing a group's ability to obtain prestige at risk. Law enforcement should focus on apprehending crackers, as they are the most significant step in the release process.

See my complementary article, The Challenges of Regulating Warez Trading, from 2005.

Trademarks and Domain Names

* I'm not 100% sure what happened when ICANN approved the rollout of new gTLDs, but I'm pretty sure a lot of lawyers are going to find it lucrative for them.

* Scooter Store, Inc. v. Spinlife.com, LLC, 2011 WL 2160462 (S.D. Ohio June 1, 2011). Court allows a litigant to obtain discovery on its opponent's keyword ad buys. As I blogged in 2007, I'm surprised we don't see those discovery requests more frequently.

* Best Buy is chasing lots of folks to enforce its "Geek Squad" trademark. A prior blog post on other trademark litigation involving "geek."

* GoForIt Entertainment, LLC v. DigiMedia.com L.P., 2011 WL 2516163 (N.D. Tex. Jun 23, 2011). Plaintiff's theory that third-level domains were "domain names" for ACPA purposes did not justify awarding attorneys' fees as an "exceptional" case. Prior blog post.

* Lens.com v. 1-800 Contacts complaint. An antitrust lawsuit predicated on 1-800 Contacts' overzealous TM enforcement efforts (what some might call trademark bullying). Wendy Davis' writeup. Prior blog posts on the 1-800 Contacts v. Lens.com litigation (1, 2).

* ISystems v. Spark Networks, Ltd., 2011 WL 2342523 (5th Cir. June 13, 2011). The dating website Jdate's efforts to obtain jdate.net through a UDRP was not reverse domain name hijacking.

* Video from the March STLR Symposium panel on Emerging Issues of Secondary Liability in Trademark Law.

* Evan Williams: Five Reasons Domains Are Getting Less Important.

Posted by Eric at 06:49 AM | Copyright , Domain Names , Trademark | TrackBack

June 29, 2011

Recapping Righthaven Developments from the Past Two Weeks

By Eric Goldman

I blogged about Righthaven two weeks ago ("Righthaven Benchslapped in Ruling Saying It Lacks Standing") and then went offline during a business trip to Russia (I have more to say about that trip shortly, but you can see the photos now). A lot has happened in the intervening two weeks, and this post catches up on the action.

Righthaven v. Hoehn, 2011 WL 2441020 (D. Nev. June 20, 2011)

In the Democratic Underground case, Judge Hunt said that Righthaven lacked standing because it didn't own or have an exclusive right to the copyright when it filed the complaint. In this ruling Judge Pro, also in the Nevada district, reaches the same conclusion as Judge Hunt. Judge Pro says:

the rights in the copyrighted Work retained by Stephens Media deprive Righthaven of everything except the right to pursue alleged infringers, a right that is still subject to Stephens Media’s oversight

Judge Pro went further than Judge Hunt and rejected the "clarification" amendment between Stephens Media and Righthaven. (Judge Hunt had cast doubt on the amendment's efficacy in a footnote but resolved the case without reaching the amendment's validity). Embracing substance over form, Judge Pro says the amendment "provides Righthaven with only an illusory right to exploit or profit from the Work."

Separately, Judge Pro ruled in favor of Hoehn on fair use. The four factor analysis:

* Nature of use: Hoehn didn't and couldn't profit from the article. Plus, Hoehn was facilitating "comment" when "he posted the Work to foster discussion in a specific interactive website forum regarding the recent budget shortfalls facing state governments."
* Nature of the work: The court says "Roughly eight of the nineteen paragraphs of the Work provide purely factual data, about five are purely creative opinions of the author, and the rest are a mix of factual and creative elements." This is not enough to consider the work a "purely creative work." Plus, this factor "is not terribly relevant."
* Amount used: Hoehn took the whole article but this doesn't preclude a fair use finding.
* Market effect: Righthaven failed to show any evidence that Hoehn's republication harmed it. "Merely arguing that because Hoehn replicated the entirety of the Work the market for the Work was diminished is not sufficient to show harm."

This last point is interesting because fair use is an affirmative defense, so normally the burden is on the defendant to establish the elements. Citing the Ninth Circuit Napster case, the court shifts the burden on the fourth factor to the plaintiff. I think this burden-shift is completely appropriate, especially because everyone (except Righthaven and the newspapers) believe the Righthaven defendants haven't caused any harm to the newspapers. Kudos to the judge for demanding more than Righthaven bluster. (On that front, check out the EFF's mockery of Righthaven's bluster).

Note that Judge Pro didn't rest his fourth factor analysis on the fact that Righthaven acquired the copyright as Judge Mahan did in the Jama/CIO case. Thus, Judge Pro broadened the bases on which the fourth factor could count against Righthaven.

Judge Pro's discussion on the second point (nature of the work) has attracted some criticism, perhaps justifiably so. It's difficult to say that a 19 paragraph editorial doesn't have the same level of creativity as other highly creative works. I tend not to obsess about the details of any fair use analysis given its nature as an equitable defense. The judge was twisting the analysis to make it clear Righthaven should lose. Denigrating the editorial's creativity is an awkward way to get there, but it demonstrates that judges aren't buying what Righthaven is selling.

Overall, Righthaven has lost the following three fair use rulings:

* Realty One. The defendant republished an excerpt, and the court granted the fair use defense on a motion to dismiss.
* Jama/CIO. Full republication of an article qualified as fair use.
* Hoehn. This case also says a full republication is a fair use.

Judge Mahan didn't grant summary judgment on fair use in the Choudry case but I still think Righthaven has a low chance of winning that case. The VCDL case (discussed in a moment) rejects fair use on a motion to dismiss; we'll have to see what the judge thinks after the case is more fully developed.

As a jurisprudential corpus, this fair use caselaw is becoming quite defense-favorable. Steve Green revisits the irony:

Thanks to Righthaven, newspapers and other media organizations now have less copyright protection for their hard-earned content than they did just three months ago. And that’s more than a little odd, given Righthaven’s stated mission of protecting newspapers from online content infringers.

Righthaven v. Barham, 2011 WL 2473602 (D. Nev. June 22, 2011) and
Righthaven v. DiBiase, 2:10-cv-01343-RLH-PAL (D. Nev. June 22, 2011) (see a prior ruling in the DiBiase case)

Citing the Democratic Underground and Hoehn cases, Judge Hunt dismisses both cases for Righthaven's lack of standing. He also dismisses both defendants' counterclaims against Righthaven because Righthaven isn't the copyright owner.

Righthaven v. Virginia Citizens Defense League, 2011 WL 2550627 (D. Nev. June 23, 2011)

Judge Navarro rejected a motion to dismiss on personal jurisdiction grounds. I can't recall Righthaven losing on personal jurisdiction grounds--am I forgetting something?--so that ruling isn't very surprising.

Her next two rulings indicate that she's not a fan of using 12(b)(6) motions to clean out bogus cases early. Many judges have differing views/styles about how aggressively they manage their docket. Judge Navarro appears to subscribe to the "better safe than sorry" approach.

Judge Navarro rejected fair use as grounds for a 12(b)(6) dismissal. The Realty One case notwithstanding, it's rare to win a fair use defense on a motion to dismiss, so Judge Navarro's caution isn't unusual. She does give some guidance about her considerations for a summary judgment motion, including a tidbit that "posting the entire article weighs against fair use if it was feasible for Defendants to just post a link on its webpage." I hope the VCDL defendants will help Judge Navarro understand why a link to the article isn't always as useful as a republication. See, e.g., Steve Green's article on FluTracker's responses to Righthaven's in terroram campaign.

Judge Navarro also rejects the standing issue as grounds for a 12(b)(6) dismissal. She says "the extent of the assignment is generally best determined through the discovery process." In a footnote, she acknowledges the Democratic Underground case, which came out after the defendant briefed the case. My guess is that she will be persuaded on summary judgment.

Despite this failed 12(b)(6) motion to dismiss, it seems inevitable that Righthaven's pending cases will fall like dominoes on the standing ground--if not on 12(b)(6) motions to dismiss, then on summary judgment. Righthaven could amend its agreements with newspapers to fix the standing problem and refile the cases, but this will degrade its already questionable margins. Otherwise, as I mentioned in my Democratic Underground post, losing the standing battle effectively acts as a reset on Righthaven's entire business.

Assessment

Righthaven's business is in tatters. Consider:

* Their existing inventory of cases is shrinking rapidly as judges clear their dockets.
* They are rarely expanding their inventory by filing new cases, probably because they have their hands unexpectedly full fighting tooth-and-nail over their existing cases.
* They have completely alienated the district court judges deciding their cases. As Steve Green says, "it appears federal judges don’t appreciate their courtrooms being used as ATM machines by Righthaven."
* They unquestionably will be writing checks to some defendants in due course, and that's going to take a huge bite out of their revenues to date.
* Given how amateurish Righthaven looks plus the risk of public relations and legal blowback, I can't imagine any new newspapers will sign up for their services in the foreseeable future.
* They have been plagued by staff turnover.
* They are potentially going to answer to the professional disciplinary authorities--a risk exacerbated by their harsh benchslap in the Democratic Underground case.

Short of completing a hail mary pass in the Ninth Circuit, there is only one possible endgame for Righthaven, and it won't be pretty.

Amazingly, Steve Gibson, Righthaven's CEO, continues to publicly deny that his business is going down the toilet. Watch this hilarious video interview where Gibson characteristically engages in misdirection and tendentious sophistry as the moderator justifiably works him over mercilessly.

Disclosure note: One of my ongoing clients was sued by Righthaven and settled its case.

Posted by Eric at 11:52 AM | Copyright | TrackBack

June 15, 2011

Righthaven Benchslapped in Ruling Saying It Lacks Standing--Righthaven v. Democratic Underground

By Eric Goldman

Righthaven LLC v. Democratic Underground, LLC, 2:10-cv-01356-RLH-GWF (D. Nev. June 14, 2011)

This is another stinging defeat for Righthaven. The judge emphatically rejects Righthaven's substantive arguments about its copyright assignment from Stephens Media and harshly criticizes Righthaven's procedural conduct.

Regarding the assignment, the court focuses on the contract's effect: it was designed to give Righthaven only the right to sue and get the resulting cash, but Stephens Media retained all other control over the copyrighted asset. Thus, Stephens Media never assigned any portion of a Section 106 copyright right.

The opinion indicates that Stephens Media and Righthaven could fix this by giving Righthaven more control over the asset. I believe the contract amendment tried to do that, but it may not have gone far enough. Judge Hunt intimates as much, saying he "expresses doubt that these seemingly cosmetic adjustments change the nature and practical effect of the SAA." I remain skeptical that Stephens Media wants to give up enough control to Righthaven to satisfy the standing requirements.

The judge then indicates that Righthaven can't fix the existing contract defect for the existing litigation because standing is measured when the complaint is filed. This could lead to dismissal of all pending Review-Journal litigation and, depending on the exact wording of the MediaNews contract, possibly the Denver Post litigation as well.

If Righthaven can't get this opinion reversed on appeal and other judges defer to this opinion on the standing question (which I think it likely), Righthaven may be back at square one with its entire business. Thus, I assume Righthaven will appeal this decision. However, this is a pretty well-constructed opinion, so Righthaven will have an uphill battle overturning it on appeal. I wonder if the other pending cases will go on hold until an appeal is resolved.

Democratic Underground's declaratory judgment suit of non-infringement also survives dismissal. In doing so, the judge cites an unnecessarily inflammatory editorial posted by former Las Vegas Review-Journal publisher Sherman Frederick, who threatened to introduce his “little friend called Righthaven” to people who republished Las Vegas Review-Journal content. This quote invokes a famous line from the climatic scene in the film Scarface, where Al Pacino's "little friend" was an M-16A1 machine gun with a grenade launcher. I have always been baffled by the implicit symbolism of Frederick's analogy. Did he really mean to analogize Righthaven to a murderous weapon used by a drug lord to mow d