A Slippery Slope: the Facilitation of Fair Use as Fair Use — “Even with the limited nature of the decision, it continues a worrisome trend – permitting a for-profit entity to commit direct copyright infringement because of potential downstream fair uses by third parties. While the fair use doctrine has long been nebulous, it should concern copyright owners that that downstream fair use could justify upstream infringement. Under the court’s reasoning, one could assert that it is not copyright infringement for a street vendor to pirate a copyrighted film and sell it to a film critic so that she may review it because criticism and comment are permissible fair uses.”

Himma on the Unlimited Supply of Information — A fascinating (an d brief) take on the scarcity and nonrivalrous arguments in IP.

An intellectual object of any kind can be reached only through the mediation of some intellectual activity.

This is all the more so of complicated intellectual objects like mathematical proofs, scientific theories, and novels. Intellectual objects are not like fruits on a tree that can simply be picked and consumed; someone has to do something to make them available for consumption. Indeed, it might take hundreds of years of concerted intellectual activity on our part to gain reasonable access to an intellectual object in logical space – as was the case with the proof of Fermat’s Last Theorem.

***

Moreover, and this is crucial, the available supply of intellectual objects can be increased in only the same way that the available supply of material objects can be increased – namely, by deploying a resource that is limited and valuable because it is limited: human labor. Every moment I spend in writing this paper has value to me because I will live for only a limited number of moments. To increase the number of novels available for human consumption, then, someone has to devote her time and her energy, resources of value to any being with a finite lifespan, to produce one. To increase the number of apples available for human consumption (beyond the small number that naturally occur), someone has to devote her time and her energy to it. This is no less true of intellectual objects than it is for material objects.

Copyright, the Internet and Efficient Risk Bearing — Stuart Brotman argues the DMCA could be improved by using an efficient risk-bearing standard. “One of the most basic principles underlying liability rules is that legal responsibility should fall on those who most cost-effectively can limit or eliminate harm. The shape of common law’s tort rules largely is organized around this principle, and so are rules for enforcement of contracts and property rights, including intellectual property rights.”

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions. — “Isn’t it odd that companies like Pandora and Spotify that are not profitable and don’t support artists are thought to behold some kind of gnostic wisdom of economics that defies all logic and reason? Last year Twitter lost $645 million dollars. Record labels have been profitable for over half a century with a sustainable ecosystem that invests in artists and new talent, while also creating hits and stars. It’s time to leave the rainbow unicorn school of economics and faith healing behind and develop real business models based on real economics.”

Smile! Marketing Firms are Mining Your Selfies — So if you’re, say, eating chips in a photo, you’ll be targeted for ads for more chips. Because that’s just how the Internet works.

Common Ground Between Creativity and Innovation — Last week, I was at a conference that explored the similarities between copyright and patent. Here is a summary of that conference.

Is Amazon a Monopoly? — “But on the larger question of whether Amazon is literally and technically a monopoly: Probably not, but the distinction is not all that important. It’s a bully, it’s destroying important institutions, and it’s getting more and more powerful, and its founder now owns the dominant newspaper in the nation’s capital. Amazon controls roughly half the trade in books in the U.S. We may need a new word to describe what it is, but to sit around and debate terminology as we watch the creative destruction seems to me the worst kind of chattering-class hair-splitting.”

Profit, Not Ideology, Motivates Cyberlockers that Facilitate Copyright Infringement — “A vigorous debate has developed in recent years over numerous aspects of copyright protection. There can be little doubt, however, that cyberlockers are profitably inducing copyright infringement on a massive scale. The discussion should thus not be over whether infringement is occurring, but what measures legitimate businesses can take to deter and stop it.”

Creation is Not Its Own Reward: Making Copyright Work for Authors and Performers — Just a few days left to register for this symposium at Columbia Law School in NYC on October 10. The all day event features an impressive lineup of panelists, ending with a discussion featuring US Register of Copyrights Maria Pallante and the USPTO’s Shira Perlmutter.

Music consumption helps drive UK technology sales by £11bn — “A report published by the music industry body BPI suggests music has been a key influence in the demand for smartphones and tablets. The independent study calculates that every 1% increase in demand for music in the UK translates to a 1.4% lift in sales of smartphones, while for tablets the rise is 2.2%.”

Happy Together: Infringement as Conversion — Devlin Hartline takes a closer look at the conversion claim in the recent court opinion finding that owners of sound recordings made before 1972 (the year federal copyright law began securing copyright in sound recordings) have the exclusive right to publicly perform works. Be sure to catch the follow up, Further Thoughts on Infringement as Conversion, for a discussion about the impact (or lack thereof) of the Supreme Court’s decision in Dowling v United States on the analysis.

Veteran Location Manager S. Todd Christensen — Fascinating article on a key but not very well-known role in the making of a film. “First, Christensen reads and breaks down the script, looking at every single location and what it might require. His political skills are necessary as the location manager acts as a go-between, translator and mediator to get things done. They must secure permits and permissions, staff based upon the location’s particulars (this can be hiring anyone from a snake wrangler to a structural engineer), and then manage that location throughout production, making sure it’s left the way it was found.”

Meet Washington Times’ Andrew Harnik, the man behind the camera and photos on your front page — The political and sports photographer talks about his career in this video interview. “It takes years of dedication to perfect this craft.”

When Russians thought the Internet would make them free — “Two decades later and it’s hard to find the traces of our belief in the Russian Internet. The only thing we inherited from the nineties and the Samizdat are the torrents and e-libraries. Copyright is dead: almost any film and any book can be downloaded for free after a five minute search. The film distributors have to make arrangements with pirates about ‘two week vacancies’ after theatre premieres, but the small publishers are just bankrupt. I’m not sure it’s the great result we dreamt in early years of the Internet.”

On Monday, a federal district court held that Escape Media, which operates streaming music service Grooveshark, was liable for copyright infringement, “creating a business model that was based upon the unlicensed sharing of copyright protected material.” According to the court [Opinion], Escape’s Chairman “bet the company on the fact that [it] is easier to ask forgiveness than it is to ask permission” — now he will get the chance to test that claim.

The lawsuit was filed in 2011 by Universal Music Group along with eight other record labels.1 Universal had earlier filed a lawsuit against Escape in a New York state court (more on that below). During those proceedings, Universal discovered evidence that Escape employees were personally uploading copyrighted sound recordings to Grooveshark. Universal, joined by the other sound recording plaintiffs, quickly filed suit in federal court following this revelation for copyright infringement against Escape Media and its two co-founders, Samuel Tarantino and Joshua Greenberg.

Universal moved for summary judgment this past February and now the court has released its decision.

Groovin’ on up

As the court explains, Grooveshark began in 2006 as a peer-to-peer network that allowed users to copy and distribute digital music files among other Grooveshark users. Tarantino and Greenberg formed Escape Media with the ultimate goal of creating a business around the network, a business that the company knew “depended upon the use of infringing content.” However, in its early days, “Grooveshark did not have a large user base to leverage as a source for content.” So Escape turned to its employees, instructing them “to create Grooveshark user accounts and to store hundreds of thousands of digital music files on their computers in order to upload or ‘seed’ copies of these files to other Grooveshark users.”2

In June 2007, Escape switched from a peer-to-peer model to one using centralized servers. Not only did it update its software to “automatically copy every unique music file from each of its users’ computers and upload them to the storage library,” but it continued to instruct employees to manually add copyrighted content to the servers. In 2008, the company evolved from a file-sharing service to an on-demand music streaming service, its present form. Uploading infringing files remained “a regular part of Escape employees’ job responsibilities up and until the initiation of the present litigation.” In addition, “Escape’s senior officers searched for infringing songs that had [been] removed in response to DMCA takedown notices and re-uploaded infringing copies of those songs to Grooveshark to ensure that the music catalog remained complete.”

Universal specifically alleged that Escape is liable for direct infringement as well as indirect infringement in the form of vicarious liability, inducement, and contributory infringement. Universal also brought claims against Tarantino and Greenberg personally. If ever there was an open and shut case for infringement, this is it, a fact that even Escape seemed to recognize. The court notes:

In support of these claims, plaintiffs have created a substantial and largely uncontroverted record of evidence. Confronted with this body of evidence, defendants have chosen a purposeful litigation strategy. As discussed above, defendants have primarily mounted procedural and evidentiary challenges to plaintiffs’ copyright infringement claims. Defendants devote very little of their summary judgment memorandum to actually engaging with the substance of plaintiffs’ copyright claim.

And indeed, while the court discusses each of these claims, there is never any doubt as to its conclusions.

Though Escape has suggested an appeal is possible, its chances of success seem highly doubtful. The parties are now briefing on the scope of permanent injunctive relief.

Groovesharknado

This isn’t the only lawsuit Escape Media is currently facing. As mentioned above, this lawsuit resulted from a still ongoing New York state action brought by Universal for common law claims pertaining to pre-1972 sound recordings (which are not protected under federal copyright law3 ). In April 2013, a New York state appellate court dismissed Grooveshark’s DMCA defense, holding that the federal safe harbors do not protect against state and common law copyright claims.

Last week, Universal moved for summary judgment on its claims that Escape infringed its common law rights of distribution, reproduction, and public performance (UMG is also seeking summary judgment on an unfair competition claim) — infringement alleged to occur independently of Escape employees and officers uploading copyrighted content themselves. Universal argues in its memorandum of law supporting the motion that “At all relevant times, Escape employed a business model for Grooveshark that was based upon the use of infringing content.”

[R]ather than obtaining… licenses, Escape made a calculated business decision to launch Grooveshark, utilizing infringing label content in order to grow faster, reduce costs and attempt to strike more favorable licensing deals… Indeed, Escape’s officers openly discussed the possibility that they would never have to pay for their unauthorized use of copyrighted content. Specifically, they hoped that by illegally growing their user base, they could collect valuable data about Grooveshark users’ listening habits, which they could then sell to the labels for more than Escape would have to pay in licensing fees.

Additionally, a separate federal lawsuit with Capitol Records (d/b/a EMI) as the sole plaintiff was filed against Escape in the Southern District Court of New York in 2012. EMI had previously sued Escape in 2009. The two companies settled and entered into a distribution agreement, “which granted Escape the right to distribute digitally EMI’s content on Grooveshark.” However, Escape repeatedly breached the terms of the license and failed to make payments, leading EMI to terminate the agreement. It sued again for infringement occurring after the termination.

The magistrate judge assigned to that litigation recommended this past May that Escape’s DMCA defense be rejected and summary judgment be “granted in favor of EMI on its claims for direct infringement of the right of performance under federal law, secondary infringement under federal law for both contributory and vicarious infringement, and direct and secondary infringement under New York common law for copyrighted works not covered by the Copyright Act.” Escape subsequently filed objections to that report, meaning a district court judge must review the findings de novo, a review that remains pending.

The recommendation is clear that even if employees didn’t personally upload any files, the service would still be liable for facilitating and profiting off of massive infringement. Most significantly, the magistrate judge found that Escape did not implement a policy for terminating repeat infringers, one of the conditions for safe harbor protection under the DMCA.

Courts have recognized a wide range of procedures and practices for implementing a repeat infringer policy that constitute “implementation” under § 512(i)(1)(A), and they should continue to do so. Thus, there is a high bar for a plaintiff to show that a service provider, as a matter of law, does not “implement” its repeat infringer policy within the meaning of the DMCA. The undisputed facts before the Court, however, point only to that conclusion. Escape does not have a repeat infringer policy or an alternative policy that serves the same purpose; does not keep records of repeat infringement sufficient to enforce an adequate repeat infringer policy; permits an extensive amount of repeat infringement to occur without taking action or making a record; depends upon a small number of repeat and flagrant infringers to supply a substantial amount of the content available on Grooveshark; takes action in response to copyright owners’ DMCA notifications of infringement that fails to actually make the song unavailable or prevent it from reappearing immediately on Grooveshark; prevents copyright owners from collecting the data necessary to issue DMCA notifications in a meaningful way; and, finally, has never terminated a repeat infringer’s account and has no policy or procedure for doing so. For these reasons in combination, the Court finds that Escape does not “implement” a repeat infringer policy under § 512(i)(1)(A) and is thus ineligible for DMCA safe harbor.

Groove is in the Shark

Monday’s decision should be welcomed by everyone. Even the most ardent copyright minimalist would agree that the law should, at the least, provide a remedy for intentional, wide-scale, commercial piracy. The real question is whether the DMCA, as it is currently interpreted, provides too much cover to companies engaged in this type of large scale piracy. Evidence of employee uploads was only uncovered after years of litigation by major record companies (never mind that employee uploads still only made up a minority of songs available through the site). Up til then, Grooveshark was able to operate a largely unlicensed commercial music streaming service in the open, with a plausible claim that the DMCA shielded it from legal liability because of how courts have interpreted the safe harbor.

Grooveshark is not that different from other online services. Escape’s belief that it’s “easier to ask forgiveness than it is to ask permission” is as close to a Silicon Valley mantra as you will find, where “permission” is often considered a dirty word. Throughout its tenure, it has cloaked itself in buzzword-laden innovation talk. Its founders parrot the same “music should be free” talking points heard all too often and claim that the problem in the music industry is outdated business models, not rampant online infringement.

But this court decision reveals that this was all just a smokescreen to obscure the fact that Escape Media was illicitly profiting off the work of others, to the detriment of the public interest.

This illustrates how the DMCA has failed in its goal of providing “strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the digital networked environment.”4 Escape Media’s wanton infringement would not have been discovered had it not been possible for record labels to move forward with litigation in state courts because of the distinct treatment of pre-1972 sound recordings under the federal Copyright Act, a quirk unavailable to other types of copyright owners — makers of film and television programs, photographs and works of visual arts, or books, for example.

Earlier this year, US Representatives Judy Chu and Tom Marino wrote that the DMCA is not only ineffective but actually “favors non-compliance.” Grooveshark is the poster child for this effect. Media companies end up having to send millions upon millions of takedown notices and spend years in litigation just to be able to continue to create and distribute the works that consumers want. The situation is worse for small businesses and individual creators; they are faced with choosing between spending time and resources they don’t have going after infringers or giving up entirely, a point vividly make in last week’s Ars Technica article, Bugging Out: How Rampant Online Piracy Squashed One Insect Photographer by (former) professional photographer Alex Wild.

Footnotes

  1. Atlantic Recording Corporation, Zomba Recording, Elektra Entertainment Group, Arista Records, LaFace Records, Warner Bros. Records, Arista Music, and Sony Music Entertainment. []
  2. One message from Greenberg written in 2007 that the court quotes is quite colorful. In it, he instructs employees to “Download as many MP3’s as possible, and add them to the folders you’re sharing on Grooveshark. Some of us are setting up special ‘seed points’ to house tens or even hundreds of thousands of files, but we can’t do this alone… There is no reason why ANYONE in the company should not be able to do this, and I expect everyone to have this done by Monday… IF I DON’T HAVE AN EMAIL FROM YOU IN MY INBOX BY MONDAY, YOU’RE ON MY OFFICIAL SHIT LIST.” []
  3. See Federal Copyright Protection for Pre-1972 Sound Recordings, A Report of the Register of Copyrights (2011). []
  4. H. Rep. 105-796, 105th Congress (1997). []

Bugging Out: How rampant online piracy squashed one insect photographer — Ars Technica presents this story from Alex Wild, telling the far too common tale of the difficulties of earning a living as a photographer. An absolute must-read.

Vast Majority of Top Films, TV Shows are Available Legally Online — You often hear that piracy is caused by a lack of legal options, but a study released this week shows that nearly all recent popular and critically acclaimed television shows and films are available online, legally. The study, by KPMG, found that 94% of 808 top films and 85% of 724 top TV shows were available through at least one of 34 competing legal online video-on-demand services like Netflix or iTunes.

Seventh Circuit Criticizes Second Circuit’s ‘Transformative Use’ Approach to Fair Use — “Kienitz is not the first critique of Cariou‘s interpretation of the fair use doctrine or, in particular, the significance of a work’s ‘transformative use’ on the fair use analysis. … However, as Kienitz is the first Circuit-level critique of Cariou, the opinion represents the genesis of a noteworthy Circuit split on the correct application and significance of a work’s ‘transformative use’ on the fair use inquiry.”

Stanford Promises Not to Use Google Money for Privacy Research — The search giant is essentially paying academic institutions to not study privacy. “Stanford’s Center for Internet and Society has long been generously funded by Google, but the center’s privacy research has proved damaging to the search giant in the past two years. Two years ago a researcher at the center helped uncover Google privacy violations that led to the company paying a record $22.5 million fine. Stanford and Google both said that the change in funding was unrelated to the previous research.”

The Various Views of Volitional Conduct — Devlin Hartline takes a look at responses to a recent Copyright Office inquiry on “volitional conduct” in direct copyright liability.

Dotcom’s Internet Party Fails to Enter New Zealand Parliament — After nearly a year of bluster, the Dotcom founded Internet Party only managed to secure 1.26% of the vote in the New Zealand Parliamentary elections, which, coincidentally, is roughly the same percentage of content on his former MegaUpload service that was non-infringing (joke).

The Little-Known Story of How The Shawshank Redemption Became One of the Most Beloved Films of All Time — A fascinating recap of how the box office dud, released twenty years ago, steadily moved to the top of many people’s list of favorite movies.

Building the Sensational Sets of the Maze Runner — From The Credits, this a-maze-ing behind the scenes look at all the hard work that went into creating the maze landscape of the current box office film. “Fisichella and his team built the Maze walls sixteen feet tall to allow room for lighting above. Visual effects then extended those walls to a hundred feet in post. One of the art department’s biggest engineering tasks was creating a set of practical gates for the Maze. ‘The doors themselves were each 20 feet deep and 20 feet tall, with a 20 foot opening,’ Fisichella said. ‘They were mechanical, so they actually opened and closed on cue and we could have the actors running through them, which makes the film more dynamic than shooting it on blue screen.’ The gates weighed seven thousands pounds each, and the doors were moved by the set’s visual effects crew. ‘It was a challenging installation, to say the least, since we did it out in a field far from our home base,’ he adds.”

On Thursday, the Digital Citizens Alliance released a report revealing how profitable copyright infringement can be for cyberlockers. The study by NetNames, Behind the Cyberlocker Door, found that the top fifteen direct download cyberlockers and top fifteen streaming cyberlockers rake in over $96 million a year. This represents absurdly high profit margins — 63.4% for direct download and 87.6% for streaming — due in no small part to the exploitation of infringing content. The study estimates that “78.6 percent of files on direct download cyberlockers and 83.7 percent of files on streaming cyberlockers” infringe.

One interesting question that emerges from the report is whether one can draw a distinction between cyberlockers and legitimate online storage providers. The NetNames report provides a useful guide.

Copyright implicates tricky questions when it comes to services that enable copying. Copying is no doubt a useful function: think of photocopiers, VCRs, or even your hard drive, which copies as a matter of function. Yet copying is also one of the exclusive rights of a copyright owner; unchecked copying of copyrighted works can undermine the system of property rights that has resulted in the wealth of cultural prosperity we see today.

Sony Sheep and Grokster Goats

The Supreme Court first broached the question of copyright and copying devices in Sony Corp v Universal City Studios, concerning an infringement case brought against the manufacturer of one of the earliest consumer home video recorders. The district court had found that Sony could not be directly liable for user infringement; it does not “loan or otherwise provide the copyrighted work”, and “The copying occurs not in a store operated and managed by the defendants but rather in a person’s home, a location in which individual privacy is constitutionally protected and over which defendants have no control. Furthermore, defendants’ acts of selling the Betamax and blank tapes to consumers can easily lead to noninfringing uses.” On appeal, the Supreme Court looked at indirect liability. Specifically, it asked when the provision of copying devices gives rise to liability. It answered this question by saying that the mere “sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes.”

A touch over thirty years later, the Court was asked to look at the liability of companies that provided software that allowed peer-to-peer trading of computer files in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. Unlike the manufacturer defendant in Sony, the defendants in Grokster provided the ongoing infrastructure needed for users of their software to distribute files of all types. In addition, there was clear evidence that defendants “clearly voiced the objective that recipients use [their software] to download copyrighted works, and … took active steps to encourage infringement.”

The Supreme Court was asked to apply the Sony test in Grokster, a rule that “barred secondary liability based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement.” However, the Court declined. It said:

Sony‘s rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.

The Court went on to describe how one could be liable for inducing infringement, holding, “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”

After Grokster, it was clear that there was a line between legitimate services that might be capable of infringement and illegitimate services that were intended to facilitate infringement, but it was less clear where that line would fall in every case — a question of increasing relevance given the explosion of online services that come into contact with copyrighted works. Columbia Law professor Jane Ginsburg refers to this inquiry as “separating the Sony sheep from the Grokster goats.”1 She observes that many cloud services are “dual purpose.”

That is, they are not inherently pernicious; they can in fact be put to perfectly lawful and socially desirable uses. If the technology itself is at least in theory neutral, does this pose an insoluble quandary: either enforce copyright at the expense of technological evolution, or promote technology at the cost of copyright? Or can we have it both ways, fostering both authorship and technological innovation? To reach that happy medium, we need to ensure the “neutrality” of the technology as applied in a given business setting. If the entrepreneur is not neutral, and is in fact building its business at the expense of authors and right owners, it should not matter how anodyne in the abstract the technology may be.

Reaching this “happy medium” is particularly challenging when it comes to cloud storage services, since their essential purpose is to serve as repositories of files for third parties. The ability to remotely store and share files is valuable. But it can also allow for a damaging level of copyright infringement — a prospect which, given the profit margins mentioned above, serves as a strong temptation to those willing to risk getting away with it.

Cyberlockers vs Cloud Storage

Prior to the NetNames report, a few observers have discussed ways to distinguish between “legitimate” services — like Dropbox — and services which tend to facilitate infringement — like Megaupload, which was indicted by a grand jury in 2012 for “massive worldwide online piracy.” In Hotfile, Megaupload, and the Future of Copyright on the Internet: What can Cyberlockers Tell Us About DMCA Reform?, Ross Drath highlights four features “that copyright owners (and governments) typically find objectionable” when it comes to remote file storage services: “(1) public (as opposed to password-protected) sharing capability; (2) direct linking; (3) lack of search function; and (4) rewards programs.”2

Carrie Bodner describes a taxonomy of cyberlockers in Master Copies, Unique Copies and Volitional Conduct: Cartoon Network’s Implications for the Liability of Cyber Lockers.3 On one end of the spectrum are services like Dropbox, SkyDrive, and Amazon Cloud. These services are marketed “primarily as a backup service, similar to an external hard drive,” and thus such services tend to be employed for productive or business uses rather than entertainment. Some services are more geared toward entertainment uses — for example, Amazon Cloud Player and Google Music, both of which provide storage specifically for music files — but Bodner notes that some have nevertheless “avoided an illicit reputation,” citing close ties to reputable businesses and legitimate online music stores.4 On the other end of the spectrum are “one-click file hosts” such as “Rapidshare, Hotfile, Megaupload, MediaFire and 4Shared.” The primary difference is that these services lack any restrictions on who can download files that have been uploaded. Other distinguishing characteristics include the offering of monetary incentives to users who upload content that is downloaded frequently and premium accounts that remove restrictions on download speeds and waiting periods.

The distinction drawn in the NetNames report largely tracks that made by Bodner and Drath. According to the report, cyberlockers (as opposed to “legitimate cloud storage services”) generally place no limits on who can download or stream a file and frequently offer “affiliate programs that reward users when their uploaded content is accessed.” In addition, cyberlockers often delete files that haven’t been accessed after a period of time and don’t offer synchronization with a user’s devices, indicating that their purpose is not personal storage and access. Finally, cyberlockers are lax when it comes to enforcing repeat infringer policies.

In short: for cyberlockers, the client is the downloader. For legitimate cloud storage services, the client is the uploader. Yes, both allow users to store files remotely, but the similarities end there. For cyberlockers, the goal of spreading files as widely as possible permeates every aspect of the service.

That’s not to say that any of the characteristics described above, by itself or taken together, necessarily does or should render any given service liable for copyright infringement. In fact, Behind the Cyberlocker Door calls on credit card processors to take steps to prevent cyberlockers from profiting off the work of others. Outside of the report, voluntary efforts to mitigate piracy from all the various participants in the online ecosystem continue. These efforts are aided by a clear distinction between cyberlockers and legitimate cloud storage services.

Footnotes

  1. Jane Ginsburg, Separating the Sony Sheep from the Grokster Goats, 50 Arizona Law Review 577 (2008). []
  2. 12 J. Marshall Rev. Intelli. Prop. L. 205, 212 (2012). []
  3. 36 Columbia Journal of Law & the Arts 491, 498-504 (2013). []
  4. Bodner does not mention this in her article, but most of the major services also have explicit agreements with major rightsholders governing features of their cloud storage services that more directly impact copyrighted works. See, e.g., Amazon’s music cloud is licensed by all top labels. []

The Cult of Jeff Koons by Jed Perl (via CultureCrash) — Jeff Koons is known in the copyright world as a defendant in at least two major decisions involving appropriation art (Rogers v Koons and Blanch v Koons). Here, the New York Review of Books runs a gutting critique of his latest exhibition, a retrospective of his work at the Whitney Museum of American Art in New York City. “Koons, simply put, is Duchamp with lots of ostentatious trimmings. This is not a pretty sight. Duchamp’s readymades have an almost monastic austerity. Koons has bulked them up, transforming the ultimate insider’s art into the art that will not shut up.”

U2 and the Irony of “Permission Rage” — “All those folks busy downloading all that music for all those years that just seemed to be out there for the taking: do you think they were getting anyone’s permission? All the music sitting there on all the torrent sites, waiting to be taken, 24 hours a day—how much of that is up there with anyone’s permission? But oh my goodness, dare to insert 11 U2 songs into my iCloud storage area and suddenly I am Lord High Minister of Permission? Ironic, ain’t it?”

Using Search Results to Fight Piracy — Smith, Sivan, and Telang released a new study this week that examined how the prominence of pirate and legal sites in search results impacts consumers’ choices for infringing versus legal content. Their “results suggest that reducing the prominence of pirate links in search results can reduce copyright infringement.”

Common Ground: How Intellectual Property Unites Creators and Innovators — And if you’re in the DC area in October, consider attending this CPIP conference, with a keynote by Richard Epstein and two days of fascinating panel discussions.

In 1985, the Supreme Court said, “The fair use doctrine is not a license for corporate theft, empowering a court to ignore a copyright whenever it determines the underlying work contains material of possible public importance.”1 Last week, a court held to the contrary.

In a September 9th order, the Southern District Court of New York granted summary judgment in favor of TVEyes, a media monitoring company, on the issue of fair use. Fox News Network had filed a lawsuit against TVEyes for recording its station continuously and creating a searchable database out of its content and the content of 1,400 other television and radio stations.

Like other media monitoring services, TVEyes allows subscribers to track news coverage of particular events or issues. The service begins at $500 month; in 2013 the company had revenues of $8 million, with over 2,200 subscribers. Fox News Network owns and operates Fox News Channel and Fox Business Network, delivering twenty-four hour news and business coverage. It also actively licenses video clips to third parties. Fox News asked the court to order TVEyes to stop using Fox content without permission for its service, and both parties moved for summary judgment. In last week’s order, the court only addressed the copying and distribution of Fox News clips to TVEyes subscribers — the service also allows subscribers to “save, archive, download, email, and share clips,” features that the court needs more evidence to rule on.

But in finding this wholesale, commercial copying to be fair use, the decision stands as an example of just how dramatically — and fundamentally — the fair use doctrine has been transformed in just a few decades. What was once a bounded exception allowing reasonable use of copyrighted works when necessary for specific purposes has become a broad and sweeping mechanism that allows courts to seemingly ignore copyright at their own discretion.

Transformative Use

The modern conception of “fair use” — an independent, affirmative defense against copyright infringement that takes into account a number of factors such as the purpose of the use — does not seem to have consistently established itself in US courts until the mid-1950s. This was also the same time that the Copyright Office released a study on fair use as part of the revision process that would eventually result in the 1976 Copyright Act. The 76 Act marked the first statutory reference to fair use. Section 107 of the Act reads:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

But perhaps just as important to the development of the fair use doctrine is a 1990 law review article by federal judge Pierre Leval, Toward a Fair Use Standard. The prescriptive essay argued that the “heart” of the fair use inquiry was the first factor, the purpose and character of the use, and that the answer to the inquiry lied in determining whether the challenged use is “transformative.” Leval wrote:

The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test; in Justice Story’s words, it would merely “supersede the objects” of the original. If, on the other hand, the secondary use adds value to the original–if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings– this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society.

Four years later, the Supreme Court referenced Leval’s “transformative” framing, and lower courts have followed its lead since.2 But regardless of how descriptively accurate this framing might be, the TVEyes decision demonstrates its shortcomings as an actual standard.

For one, it is ill-defined, an incoherence revealed by the TVEyes court at the outset. The court begins its discussion by stating that “Transformation almost always occurs when the new work ‘does something more than repackage or republish the original copyrighted work.'” But that sentence is immediately followed by this one: “A use ‘can be transformative in function or purpose without altering or actually adding to the original work.'” Perhaps these two seemingly contradictory statements — both from Second Circuit decisions from the past year — can be reconciled, but the court spends no time doing so. Instead, it offers the following conclusory analysis:

Unlike the indexing and excerpting of news articles, where the printed word conveys the same meaning no matter the forum or medium in which it is viewed, the service provided by TVEyes is transformative. By indexing and excerpting all content appearing in television, every hour of the day and every day of the week, month, and year, TVEyes provides a service that no content provider provides. Subscribers to TVEyes gain access, not only to the news that is presented, but to the presentations themselves, as colored, processed, and criticized by commentators, and as abridged, modified, and enlarged by news broadcasts.

In other words, “the use is transformative because TVEyes copied the entire work verbatim, and don’t worry if that is indistinguishable from the definition for infringement.” The court does little to shed more light on its reasoning when it later endorses TVEyes’ assertion that “monitoring television is simply not the same as watching it.” Along the same lines, I suppose you could argue that it’s fair use to copy reality television shows so long as you watch them ironically.

Fortunately, less than a day ago, the Seventh Circuit explicitly rejected the transformative use test, noting that “To say a new use transforms a work is precisely to say that it is derivative and thus, one might suppose, protected under §106(2).”3 Instead, said the court, “We think it best to stick with the statutory list…”

Commerciality

Another dramatic turn in fair use doctrine is seen in the treatment of “commerciality” in the first factor. Traditionally, courts have given wider berth to scholarly and non-profit users of copyrighted works. In its 1984 Betamax decision, the Supreme Court observed that every commercial use of copyrighted material is presumptively unfair. However, a decade later, the Court would retreat from that holding and remove the presumption. In Campbell, the Court explained that, “If, indeed, commerciality carried presumptive force against a finding of fairness, the presumption would swallow nearly all of the illustrative uses listed in the preamble paragraph of § 107, including news reporting, comment, criticism, teaching, scholarship, and research, since these activities ‘are generally conducted for profit in this country.'” Instead, the Court adopted a sliding scale approach, where commerciality should be treated as merely “a fact to be ‘weighed along with other[s] in fair use decisions.'” Nowadays, commerciality has little, if any, role in the fair use doctrine.4

TVEyes continues this trend. The court does note that “Clearly, TVEyes is a for-profit company, and enjoys revenue and income from the service it provides.” But it follows this with a recitation of the above language from Campbell without a word more.

Amount and Substantiality Used

The implementation of the third fair use factor, which looks at “the amount and substantiality of the portion used in relation to the copyrighted work as a whole” has also noticeably shifted in recent decades. In fact, until Betamax, it was virtually axiomatic that copying an entire work could never be fair use.5 But Betamax held, in part, that home taping of broadcast television by VCR owners was a fair use, despite the fact that exact duplicates of complete works were being made. This holding drew a sharp rebuke from the four Justices on the dissent, who said, “Fair use is intended to allow individuals engaged in productive uses to copy small portions of original works that will facilitate their own productive endeavors. Time-shifting bears no resemblance to such activity, and the complete duplication that it involves might alone be sufficient to preclude a finding of fair use. It is little wonder that the Court has chosen to ignore this statutory factor.”

Since then, the floodgates have been opened. Last year, for example, the Southern District Court of New York held that the wholesale copying of twenty million books (by a for-profit corporation) was a fair use.6

In TVEyes, the departure from third factor tradition is even more striking. Not only is TVEyes copying entire works, it’s copying entire stations. There is nothing Fox News airs that TVEyes doesn’t copy. Yet, not only does the court not consider this a negative that might otherwise be outweighed by the other three factors, it suggests that this factor favors TVEyes. Said the court, “One cannot say that TVEyes copies more than is necessary to its transformative purpose for, if TVEyes were to copy less, the reliability of its all-inclusive service would be compromised.” Or, you can copy everything if your purpose is to copy everything.

Public Benefit

The final area of fair use transformation is seen in the court’s consideration of the fourth factor, “the effect of the use upon the potential market for or value of the copyrighted work.” The court here says, “The fourth factor requires a balance between the ‘benefit the public will derive if the use is permitted, and the personal gain the copyright owner will receive if the use is denied,'” (emphasis added) citing to the Second Circuit’s 2006 decision in Bill Graham Archives v. Dorling Kindersley L’td. Since that language appears nowhere in the statute, it’s worth taking a closer look at where it came from. Bill Graham itself cites an earlier Second Circuit decision: MCA, Inc. v. Wilson. There, the court said of the fourth factor, “where a claim of fair use is made, a balance must sometimes be struck between the benefit the public will derive if the use is permitted and the personal gain the copyright owner will receive if the use is denied.” (Emphasis added). So already we’ve made the jump from a balance that “must sometimes be struck” to an absolute requirement. But if we look even closer, we see that the cases MCA cites to support its proposition are not discussing the fourth fair use factor specifically but fair use in general. This makes sense, since fair use is a doctrine where courts strike a balance between public and private interests. But somewhere along the lines, the Second Circuit duplicated this principle into the fourth fair use factor.

Leaving the doctrinal history aside, TVEye‘s discussion of the public benefit leaves much to be desired (never mind the fact that the service is, as noted by the court, not available to the general public). It essentially boils down to this: TVEye offers a useful service. Of course, most businesses offer useful services; otherwise, they wouldn’t remain in business long. And the operation of business does benefit the public in the broadest sense. But this definition of the public benefit if too wide to be of much use here — and, more importantly, it doesn’t explain why a for-profit business that provides a service involving the regular copying of copyrighted works should be privileged under the law from licensing those works. Maybe I’m old-fashioned, but I don’t think asking a business to pay its suppliers is unfair.

And the Supreme Court would agree, at least thirty years ago. After its line about fair use and corporate theft, quoted at the beginning of this article, the Court in Harper & Row continued:

In our haste to disseminate news, it should not be forgotten that the Framers intended copyright itself to be the engine of free expression. By establishing a marketable right to the use of one’s expression, copyright supplies the economic incentive to create and disseminate ideas.

***

It is fundamentally at odds with the scheme of copyright to accord lesser rights in those works that are of greatest importance to the public. Such a notion ignores the major premise of copyright and injures author and public alike. “[T]o propose that fair use be imposed whenever the `social value [of dissemination] . . . outweighs any detriment to the artist,’ would be to propose depriving copyright owners of their right in the property precisely when they encounter those users who could afford to pay for it.”

Footnotes

  1. Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 US 539, 558, quoting Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., Inc., 621 F. 2d 57, 61 (1980). []
  2. Campbell v. Acuff-Rose Music, Inc., 510 US 569, 579 (1994). []
  3. Kienitz v. Sconnie Nation, No. 13-3004 (7th Cir. 2014). The court characterized the discussion of transformative use in Campbell as a “suggestion.” []
  4. See Matthew Sag, Predicting Fair Use, 72 Ohio State Law Journal 47, 77 (2012) (finding commercial use as a factor insignificant in a study of 280 fair use decisions from 1978-2011); Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978–2005, 156 U. PA. L. Rev. 549 (2008) (finding commerciality has no significant impact on case outcomes in study of 306 fair use decisions from 1978-2005). []
  5. See Williams & Wilkins Company v. United States, 487 F. 2d 1345, 1366 (Ct of Claims 1973); Public Affairs Associates, Inc. v. Rickover, 284 F.2d 262, 272 (DC Cir. 1960); Benny v. Loew’s Inc., 239 F.2d 532, 536 (9th Cir.1956); Leon v. Pacific Telephone & Telegraph Co., 91 F.2d 484, 486 (9th Cir.1937) (“Counsel have not disclosed a single authority, nor have we been able to find one, which lends any support to the proposition that wholesale copying and publication of copyrighted material can ever be fair use.”). []
  6. Authors Guild, Inc. v. Google Inc., 954 F. Supp. 2d 282 (SDNY 2013). Though, to be fair, the court did note that the third factor weighed “slightly against” a finding of fair use. []

Monkey Selfies & Animal Artists — An interesting take on the frequently discussed monkey selfie from a philosophical perspective.

Yes, Internet TV is near, but there’s too much money in cable to go there — “‘What is the appropriate way to market your product? Is it good to go directly to the consumer? Is it appropriate to be streaming? What is the future, how do we grow these businesses?’ Moonves asked. ‘I don’t think there is a media guy you’ve got up here that isn’t involved every week’ in those discussions.”

The concept of parody and the legitimate interests of parodists and copyright holders — Kluwer Copyright Blog examines a recent CJEU decision concerning parody.

D.C. door swinging Google’s way — It may soon be the case that the best way to get into government work is to start at Google. And vice versa.

Google Is Target of European Backlash on U.S. Tech Dominance — “Accusations are mounting that Google unfairly exploits its dominant position in search, giving a competitive edge to its growing stable of businesses, like YouTube videos, its Google Play app store and its news alerts.”

LouFest 2014: Cake’s John McCrea Talks Follow-Up To ‘Showroom of Compassion,’ Disdain For Tech Companies, State Of Music Industry, And More (via Trichordist) — McCrea: “And there are people, mostly in the tech industry, who say, ‘Oh, music shouldn’t be a job, you should have a day job and then play music on the side.’ But most day jobs don’t allow you to go on tour. So that’s why friends of ours have quit because you can’t just take off from your day job and go on tour for a month. There is a choice. So I see it as rather disingenuous of an industry that is actually monetizing our work and making really good money off it but not even thinking to share that money with artists to tell us that we can’t have a professional career. It is kind of selfish and sh*tty.”

The Classical Cloud (via CultureCrash) — “If I were a music-obsessed teen-ager today, I would probably be revelling in this endless feast, and dismissing the complaints of curmudgeons. No longer would I need to prop a tape recorder next to a transistor radio in order to capture Bruckner’s Sixth Symphony. The thousand-year history of classical music would be mine for the taking. But there is a downside to the glut of virtual product and the attendant plunge of prices. As the composer-arranger Van Dyke Parks has argued, in a recent essay for The Daily Beast, the streaming model favors superstars and conglomerates over workaday musicians and indie outfits. Its façade of infinite variety notwithstanding, it meshes neatly with the winner-take-all economy. And if it ever comes crashing down—streaming services have struggled to turn a profit—hoarding may return to fashion.”

On Scalia’s Aereo Dissent — Devlin Hartline takes a closer look at the dissent from this summer’s Aereo decision and finds it lacking, primarily because it applies case law concerning the reproduction right to a question involving the public performance right.

Book Excerpt: “Showrunners: The Art of Running a TV Show” — Very interesting look behind the scenes of television production. The book combines an informative look at the art of creating and running a TV show with interviews with showrunners from popular shows.

Google Accord With Harvard Tie Fails Judge’s Smell Test — Another cy pres settlement rejected because money from Google would be funded to institutions it enjoys close relationships with. For an in-depth look at this topic, be sure to read Google and Facebook’s new tactic in the tech wars.

More on How a Fox News Lawsuit Might Impact the Future of News — This week, summary judgment motions from parties became publicly available. The lawsuit pits Fox News against media monitoring service TVEyes, with the former alleging the latter runs a commercial service reproducing and distributing copyrighted content without permission. TVEyes is asserting a fair use defense.

Getty Images sues Microsoft over new online photo tool — “In effect, defendant has turned the entirety of the world’s online images into little more than a vast, unlicensed ‘clip art’ collection for the benefit of those website publishers who implement the Bing Image Widget, all without seeking permission from the owners of copyrights in those images,” said Getty.

Intellectual property and economic prosperity: Friends or foes? — Mark Schultz and Adam Mossoff: “Looking at the bigger picture, the broad sweep of economic history indicates that when it comes to economic prosperity and innovation, the U.S. and a few other nations have been doing something right for the past two centuries. The U.S. and Great Britain led the world into unprecedented prosperity and development through the Industrial Revolution, and the U.S. remains responsible for a vast amount of the innovation and creativity driving global prosperity – from the world’s most successful creative industries to smartphones to life-saving drugs.”

Behind the Best Pictures From Ferguson, With Getty Photographer Scott Olson — Olson, who was briefly arrested while covering the protests in Ferguson, Missouri, talks to New York Magazine about some of the popular and powerful photographs he has so far captured.

How Social Media Silences Debate — The New York Times points to a study that finds that people are less likely to express dissent on issues online than they are in person, contrary to what some had predicted.

Meet The Publisher Who Ditched Amazon And Is Selling More Books Than Ever — “In a turn of events that might offer some solace to other publishers, White recently announced that EDC has not only survived the leap into the unknown but just had its best year ever in net revenues. July sales were up 28% over the same month last year, and first-quarter revenues came in 20% higher than 2013’s numbers.”

How do writers find their voices? — Interesting preliminary results from a survey of writers. “One particularly startling finding has been that many writers are unable to ‘see’ the faces of their protagonists. The main character often registers as a blank – or, in one case, pixelated like a censored photograph.”

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