Wouldn’t It Be Great if Internet Services Had To License Technologies Selected by Hollywood? (Comments on the Very Dumb “SMART Copyright Act”)

March 23, 2022 · by · in Copyright, Derivative Liability, Internet History, Licensing/Contracts

A new entry in Congress’ parade of terrible Internet bills: the ‘‘Strengthening Measures to Advance Rights Technologies Copyright Act of 2022’’ or ‘‘SMART Copyright Act of 2022.’’ The SMART Copyright Act is being pitched as a light update of the quarter-century-old Digital Millennium Copyright Act (DMCA), but as is common with the terrible proposals, that’s a false cover story.

The bill would authorize the Copyright Office to designate technology as “‘designated technical measures” (DTMs) that all UGC services must implement, and copyright owners could sue any services that don’t properly implement DTMs. In practice, copyright owners will force the entire Internet industry to adopt technology preferred by copyright owners–including mandatory filtering technology–and make the Internet services pay for it. If this sounds a little like Trump’s promise to build a wall and make Mexico pay for it, well, welcome to copytrump law in the 21st century.

Background

In 1998, Congress adopted the DMCA, consisting of five different sections intended to update copyright law for the 21st Century. Much of the DMCA has clearly failed to achieve that, or any, important goal. Remember the protections for vessel hull designs?

Even the DMCA’s biggest success, its online safe harbors for user-caused copyright infringement, has mostly failed. 512 provided 5 safe harbors. Two of them (512(b) and 512(e)) have been virtually completely ignored, one (512(d)) has been mostly ignored, and one (512(a)) no longer provides meaningful protection for its intended defendants (IAPs).

As for 512(c), the “notice-and-takedown” provision for user-stored materials, that too has largely failed. Nevertheless, 512(c) still mostly works for incumbents, so I guess that’s a success by Congressional standards.

To qualify for 512(c), a defendant must satisfy a dozen prerequisite requirements, including accommodating “standard technical measures” (STMs). The statute currently defines STMs as:

technical measures that are used by copyright owners to identify or protect copyrighted works and—
(A) have been developed pursuant to a broad consensus of copyright owners and service providers in an open, fair, voluntary, multi-industry standards process;
(B) are available to any person on reasonable and nondiscriminatory terms; and
(C) do not impose substantial costs on service providers or substantial burdens on their systems or networks

(The bill would change this definition to make DTM accommodations another 512 prerequisite).

The current STM definition reflects a failed negotiation between the copyright and tech industries during the DMCA’s drafting. Rather than resolve what qualifies as a STM at the time, they punted the issue to “a broad consensus of copyright owners and service providers in an open, fair, voluntary, multi-industry standards process.” Unsurprisingly, that “broad consensus” has never emerged; and no court has ever held that anything qualifies as an STM.

For now, that renders the STM prerequisite moot–yet another DMCA failure. However, copyright owners still have 11 other 512(c) prerequisites to hold services’ feet to the fire. Yet, as a practical matter, copyright owners rarely bring 512(c) litigation any more–I’ve only blogged a handful of 512(c) cases in the last half-decade–and I doubt the STM issue is the reason why. Thus, the STM issue is functionally irrelevant, as it’s been for a quarter-century.

And yet…copyright owners want to break the quarter-century-old negotiation logjam by eliminating the need for a “broad consensus” about what constitutes a STM. Instead, the SMART Copyright Act would hand over that power to the Copyright Office. This would be a huge win for copyright owners, because they have outsized influence on Copyright Office procedures. Thus, the SMART Copyright Act would help the copyright lobby quietly achieve what they couldn’t get from the DMCA originally.

How the Bill Works

The bill contemplates a new class of technology or business practices called “Designated Technical Measures” (DTMs). The Copyright Office would run a triennial process to designate DTMs. Interested parties can submit petitions to identify new DTMs, and opponents can respond. The Register of Copyrights then recommends petitions to the Librarian of Congress.

Two points about the triennial process:

First, it follows the same framework as the rulemaking process for DMCA 1201 exceptions. In 20+ years, I’ve never heard a single person say a single good word about the 1201 rulemaking process. It’s universally reviled by everyone. So, the SMART Copyright Act seeks to embrace that much-hated process? Very smart, indeed.

Second, you can see why the copyright lobby is salivating at the prospect of running DTM petitions through the Copyright Office. They will borrow another tactic from Trump and flood the zone with a mix of meritorious and dubious petitions–on the theory that the Copyright Office can’t reject them all, plus opponents will be too resource-constrained to oppose all the petitions. Any petition they can get through the Copyright Office will give them more than they are currently getting from the DMCA STM requirement. Furthermore, given their familiarity with office procedures and the revolving door between the Copyright Office and copyright owners, repeat copyright players have a significant procedural advantage over the opponents in any Copyright Office proceeding. They will be like poker pros playing at a table full of weekend warriors. (As the standard poker maxim goes: “look around the poker table; if you can’t see the sucker, you’re it”).

The rule-making process will facilitate rent-seeking in at least two ways. First, the copyright lobby will push technologies that help them maximize their profits, especially technologies that expressly or implicitly provide more control over their works than copyright law would otherwise permit. Second, the bill expressly permits proprietary DTMs so long as they are available on a “reasonable royalty basis.” Every technology vendor will push their technology as a DTM because, if the petition succeeds, the Copyright Office would force the entire Internet industry to buy it. CA-CHING.

[Note: “FRAND” licensing (fair, reasonable, and non-discriminatory) comes up often with respect to standards-essential patents. The SMART Copyright Act uses the “reasonable” and “non-discriminatory” terms from FRAND, but not the “fair” part. Why not? Anyone familiar with FRAND negotiations/litigation would not offer it as a model procedure for anything. UPDATE: For a deeper dive on this point, see this Project Disco post.]

Once something is designated a DTM, a “covered service provider shall use commercially reasonable efforts to accommodate and not interfere with designated technical measures that apply to that covered service provider.” Any copyright owner aggrieved by a breach of this requirement can sue for statutory damages of between $200-$25k per violation (max of $150k) or actual damages (these numbers escalate for recidivists and potentially deescalate for innocent DTM violations) and get an injunction.

Conclusion

The SMART Copyright Act is a thinly veiled proxy war over mandatory filtering of copyrighted works. Copyright owners are eager to evangelize the EU Copyright Directive Article 17 throughout the world, and this DTM process would advance that goal without asking Congress directly to bless mandatory copyright filters. I won’t repeat the many arguments against mandatory filtering here, but I’ll reinforce two points: mandatory filters are error-prone in ways that hurt consumers, and they raise entry barriers in ways that reduce competition.

More generally, the SMART Copyright Act would give the Copyright Office a truly extraordinary power–the ability to force thousands of businesses to adopt, at their expense, technology they don’t want and may not need, and the mandated technologies could reshape how the Internet works. That’s an enormous amount of power to put into the hands of any government agency. It’s especially puzzling to give that enormous power to the Copyright Office given its relatively narrow focus. The Copyright Office is not expert at Internet technology, content moderation, or the inherent tradeoffs in publication processes. If Congress really thinks DTMs are worth pursuing, that’s a massively consequential decision for the Internet. It’s an important enough decision that Congress should solicit a multi-stakeholder study conducted by an entity with broader expertise than just copyrights, and Congress should vet and approve the recommendations itself through regular order rather than letting an administrative agency make such important decisions without further supervision from Congress.

It’s almost always a bad idea for governments to mandate that an entire industry adopt any specific technology. In this case, the proposal is also cynically rent-seeking and anti-Internet. Sadly, those are exactly the reasons why Congress might actually take it seriously.

Prior Blog Posts on the 117th Congress’ Efforts to Kill the Internet