Strong copyright protections in NAFTA renegotiations are needed to protect rights of creatives — Gale Anne Hurd, producer of such films and television shows as the “Terminator” trilogy, “Aliens”, “Armageddon”, and “The Walking Dead”, speaks up in favor of effective copyright provisions in free trade agreements in this op-ed.

U.S. Government, Hollywood Studios Weigh in on Dispute Exploring Reach of U.S. Copyright Law — The case is Spanski Enterprises v Telewizja Polska, currently on appeal to the DC Circuit Court of Appeals. Besides extraterritoriality, the appeal raises the question of whether “volitional conduct” is required for infringement of the public performance right.

The Forgotten Origins of Copyright for Photographs — More excellent historical detective work from Zvi Rosen, who here presents an unsuccessful bill to extend copyright protection to photographs a year before Congress succeeded in passing such legislation.

Website blocking in Malaysia has reduced online piracy, says film makers body — According to the Motion Picture Association, traffic to pirate sites in Malaysia dropped 74% in the six months after the government initiated its sixth effort to block such sites in June 2016.

Re:Creating Reality: NAFTA, Dangerous Harbors & Unfair Use — Neil Turkewitz takes aim at a recent op-ed by the Re:Create Coalition, who is, in Turkewitz’s words, “no fan of copyright.”

On Eve of ‘Blurred Lines’ Appeal Hearing, Richard Busch is the Music Industry’s Most Feared Lawyer — Oral arguments in the “Blurred Lines” case, on appeal after a jury held that Robin Thicke and Pharrell Williams infringed on Marvin Gaye’s “Got to Give it Up” when they created “Blurred Lines.” Rob Levine interviews the attorney who represented two of Gaye’s children in the case. The Ninth Circuit provides live streaming of oral arguments, which you can access here.

A Small Claims Court is on the Horizon for Creators — Great news for creators, as this week a bipartisan group of legislators introduced the Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2017. The bill would establish a voluntary tribunal within the Copyright Office to hear claims under $30,000.

Working in the International Arena: The Special 301 Process — Emily Lanza at the Copyright Office peels back the curtain on that agency’s role in the Special 301 process, which monitors trading partners and identifies countries that deny adequate and effective protection of intellectual property.

Publishers and societies take action against ResearchGate’s copyright infringements — The coalition statement reads in part, “ResearchGate’s primary service is taking high-quality content written and published by others and making as many as 7 million copyrighted articles – 40% of its total content – freely available via its for-profit platform…ResearchGate’s business model depends on the distribution of these in-copyright articles to generate traffic to its site, which is then commercialised through the sale of targeted advertising. ResearchGate often also substantively alters articles for the same purpose, and where corrections or retractions are issued, it fails to update articles accordingly on its site, undermining research integrity.”

U.S. Supreme Court Declines to Review Kim Dotcom Case — Finally, Dotcom, who consistently proclaims his innocence on charges of criminal copyright infringement, loses another attempt to delay actually appearing in court.

Petition of the day — SCOTUSblog highlighted the petition in Perfect 10 v Giganews this week. Giganews initially waived its right to respond, but the Supreme Court has requested a response by October 20. The issue: “(1) Whether the U.S. Court of Appeals for the 9th Circuit correctly held—in conflict with the U.S. Courts of Appeals for the 2nd, 6th, 7th, and 8th Circuits—that a defendant “profits from” direct infringement for purposes of vicarious copyright liability only if a plaintiff proves that its work, as opposed to the totality of the infringing content offered by defendants, was the reason customers were drawn to the defendant’s business; and (2) whether the U.S. Court of Appeals for the 9th Circuit correctly held—contrary to the decisions of the Supreme Court—that a defendant does not engage in direct copyright infringement when it displays, reproduces, or distributes infringing material, so long as that conduct is accomplished through an automated process.”

Italian Supreme Court confirms availability of copyright protection to TV formats — From IPKat: “As reported by DIMT – Diritto Mercato Tecnologia, in its 2017 decision in RTI Reti Televisive Italiane Spa v Ruvido Produzioni Srl, decision 18633/17 (27 July 2017), the Italian Supreme Court (Corte di Cassazione) confirmed that TV formats can be protected under the Italian Copyright Act (Legge 633/1941), and clarified at what conditions such protection is available. The Court recalled that the Italian Copyright Act does not contain a notion of ‘format’. However the definition provided in Bulletin 66/1994 of SIAE, which also allows authors of formats to deposit them, should be taken into account.”

Having a Bubble Bath or Why the “Buried” Piracy Report Got It All Backwards — Per Strömbäck writes, “The main problem is that the study only looks at how sales changed from 2009 to 2013 (this is page 74 and following). This is like checking the temperature ten minutes after I start adding cold water to my bath! The large-scale impact of internet piracy of music started in 1999.”

Compendium of U.S. Copyright Office Practices — A revised version of the Copyright Office’s Compendium is now available and effective as of today. The Compendium details the Copyright Office’s registration and examination practices in a publicly accessible manner and is highly useful for answering questions regarding issues such as copyrightability and originality. The revisions incorporate legal and regulatory changes since the previous version was published as well as public comments received by the Office responding to a draft of the revised version posted this past summer.

A recent copyright decision articulates in clear and direct language the underlying policies that guide copyright law. This past January, several publishers and author estates filed suit against Frederik Colting and Melissa Medina for allegedly infringing their works through a series of childrens’ books called “Kinderguides”. These books were billed as “Learning Guides” to classical works of literature by defendants; they each generally followed a similar format, with a story summary followed by a series of back-pages containing, for example, keywords and quizzes. At issue here were works still under copyright protection: Breakfast at Tiffany’s by Truman Capote, The Old Man and the Sea by Ernest Hemingway, On the Road by Jack Kerouac, and 2001: A Space Odyssey by Arthur C. Clarke. Defendants argued that any potential infringement was excused by fair use.

The court ruled against the defendants in late July, finding that they were liable for infringement and not excused by fair use. On September 7, Judge Rakoff of the Southern District Court of New York issued a detailed opinion describing his reasoning.

Copyright aficianados may remember Colting from the 2010 Second Circuit decision Salinger v Colting, where he was facing allegations of copyright infringement over an unauthorized sequel to J.D. Salinger’s Catcher in the Rye. 1The Second Circuit vacated the district court’s preliminary injunction on the grounds that it did not apply the proper standard, though it agreed with the court’s conclusion that Colting was not likely to succeed on his fair use claim. The parties subsequently settled, with Colting consenting to a permanent injunction barring him from publishing or distributing his unauthorized sequel. The current case demonstrates that he has not strayed far from the type of conduct that landed him in court then.

The case also demonstrates Judge Rakoff’s deft ability to apply the sometimes challenging concepts involved with copyright to determine that the Kinderguides are substantially similar to the original works, despite Colting’s attempt to argue that he only copied unprotected elements from the works. (For example, “Breakfast at Tiffany’s is, according to defendants, just the story of ‘a small town girl with a tough past who has come to the big city'” and thus a stock, unprotected character.)  He also easily rejects defendants’ fair use defense, with a particularly clear and correct articulation of the fourth fair use factor, which instructs courts to consider “effect of the use upon the potential market for or value of the copyrighted work.”

But it is under Judge Rakoff’s examination of “other considerations” within the fair use analysis where this opinion really stands out. He writes that among these other considerations “is whether, as defendants argue, their works should be protected because otherwise the constitutional purpose of copyright law — to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries — would be frustrated.”

The crux of defendants’ argument is that plaintiffs have declined to create children’s versions of their novels, so it would be contrary to the constitutional imperative of copyright for them to be able to use their exclusive rights to bar others from doing so. But, Judge Rakoff replies, “Congress did not provide a use-it-or-lose-it mechanism for copyright protection. Instead, Congress granted a package of rights to copyright holders, including the exclusive right to exploit derivative works, regardless of whether copyright holders ever intend to exploit those rights.

I agree fully with Judge Rakoff, and believe his statement is correct not just for copyright but for all property. Once the decision has been made to vest exclusive rights in a resource to an owner, as government has historically done with property and Congress has done through the Copyright Act, that right remains exclusive regardless of whether a non-owner sincerely believes they may put the resource to better use. At times, the non-owner may even be correct. But absent an exception, property prioritizes the owner’s use (or non-use) over the non-owner’s interest in use because in the aggregate, among other benefits, this facilitates the most productive use of resources. 2See, for example, Eric Claeys, Labor, Exclusion, and Flourishing in Property Law 95 N.C. L. Rev. 413 (2017).

That is not to undervalue the work that exceptions do at the margins, but at its core, this initial allocation of entitlements—property—is exactly what Congress had in mind. It is, indeed, not a “use-it-or-lose-it” mechanism. Rather, it is a “set-it-and-forget-it” mechanism.

But Judge Rakoff is not finished—he takes defendants further to task. Rakoff writes, “Implicit in defendants’ argument, then, is a contention that the Copyright Act itself is unconstitutional. As defendants put it, ‘the original copyright act granted authors exclusive rights for a 14-year term, with the option for a renewal term of the same length. Over the course of the following 200+years, the grant of rights has expanded unchecked, leading us here today.”

This is a common argument among copyright minimalists, who point to the 1790 Copyright Act as though it should operate as some ideal baseline for copyright policy, despite the fact that the first Congress spent very little time creating the Act (the majority of it was cribbed directly from England’s Statute of Anne)3See Oren Bracha, The Adventures of the Statute of Anne in the Land of Unlimited Possibilities: The Life of a Legal Transplant, 25 Berkeley Tech. L.J. 1427 (2010). and despite the extraordinary cultural and technological changes since that time. Rakoff spent little time rebutting this argument. “Defendants are no doubt correct in pointing out that Congress’ policy judgments have changed substantially over the course of our nation’s history.”

[B]ut as a legal matter, for the Copyright Act to withstand constitutional scrutiny, it must merely be the case that, in constructing its general scheme, Congress had a rational basis to believe that granting a suite of exclusive derivative rights to copyright holders would advance progress in the sciences and the arts. See Eldred v. Ashcroft, 537 U.S. 186, 208 (2003) (finding that, if the Copyright Act is “a rational enactment,” the Court is “not at liberty to second-guess congressional determinations and policy judgments . . . however debatable or arguably unwise they may be”). As defendants make no effort to show that Congress lacked such a rational basis for providing plaintiffs an exclusive right to exploit derivative works, including children’s adaptations, this Court cannot provide defendants with the relief they are seeking.

Perhaps recognizing the futility of continuing to push this argument, defendants subsequently stated that an appeal of the decision would be “highly unlikely.”

References   [ + ]

1. The Second Circuit vacated the district court’s preliminary injunction on the grounds that it did not apply the proper standard, though it agreed with the court’s conclusion that Colting was not likely to succeed on his fair use claim. The parties subsequently settled, with Colting consenting to a permanent injunction barring him from publishing or distributing his unauthorized sequel.
2. See, for example, Eric Claeys, Labor, Exclusion, and Flourishing in Property Law 95 N.C. L. Rev. 413 (2017).
3. See Oren Bracha, The Adventures of the Statute of Anne in the Land of Unlimited Possibilities: The Life of a Legal Transplant, 25 Berkeley Tech. L.J. 1427 (2010).

HTML5 DRM finally makes it as an official W3C Recommendation — “The World Wide Web Consortium (W3C), the industry body that oversees development of HTML and related Web standards, has today published the Encrypted Media Extensions (EME) specification as a Recommendation, marking its final blessing as an official Web standard. Final approval came after the W3C’s members voted 58.4 percent to approve the spec, 30.8 percent to oppose, with 10.8 percent abstaining.”

Court Rules Copyright is Not a “Use It or Lose It” Right — Stephen Carlisle discusses the recent Southern District Court of New York decision in Penguin Random House v Colting, where Judge Rakoff rejected defendant’s fair use defense regarding unauthorized children versions of classic novels like Breakfast at Tiffany’s and 2001: A Space Odyssey.

CreativeFuture Pushes Back on Internet Industry’s Claim That They Are ‘New Faces’ of Content — “In a letter to Lighthizer, Ruth Vitale, the CEO of CreativeFuture, wrote that ‘while I would take issue with anyone claiming to represent all ‘the new faces of the American content industry,’ I can comfortably tell you that CreativeFuture represents many of the true faces.’ She added that they ‘respectfully disagree with the views expressed by those tech trade associations.'”

Open Markets Opens Shop After Google Dust-Up — The Authors Guild writes, “We’re hopeful that the attention that incidents like these bring to Internet monopolies’ control of our information infrastructure and the related harm they bring to the creative industries is part of a growing recognition that the regulation of Internet giants like Google and Amazon may be required to keep intact the free flow of information in this country.”

Using Things, Defining Property — GMU Law professor Chris Newman this week posted a forthcoming paper on the definition of property, including intellectual property. Smart stuff, as expected.

Artist Rights Watch writes of the above trailer, “If you’re not aware of this indie film about producer Mark Hallman and his Congress House Studios, you really should check it out.  Rain Perry tells the story that we all know from the point of view of a great craftsman. You can rent or buy the picture directly from the film maker here.”

How Silicon Valley is erasing your individuality — “Rhetorically, the tech companies gesture toward individuality — to the empowerment of the ‘user’ — but their worldview rolls over it. Even the ubiquitous invocation of users is telling: a passive, bureaucratic description of us. The big tech companies (the Europeans have lumped them together as GAFA: Google, Apple, Facebook, Amazon) are shredding the principles that protect individuality. Their devices and sites have collapsed privacy; they disrespect the value of authorship, with their hostility toward intellectual property.”

Labor and Creativity — CreativeFuture’s Adam Leipzig reflects on the critical role labor unions play in our creative culture. “In our rush toward an uncertain future – a future in which creativity and vibrant culture should play a salutary and transformative role – it’s worth remembering the value of creative people in large numbers. Labor unions have protected and enhanced the world we live in and have granted creative people the opportunity to make a living.”

Judge Explains KinderGuides Copyright Case Decision — “Judge Jed Rakoff last week finally issued a written legal opinion in a closely-watched copyright case involving unauthorized ‘children’s guides’ to four classic works, needing just 12 pages to dispatch with defendant Moppet Books’ claims that their works were protected by fair use.”

The Israel Supreme Court adopts the conceptual separability test of the US Copyright Office, rejecting the Star Athletica standard — An interesting case note from IPKat. “After conducting a comparative law analysis, the Supreme Court adopted a three-fold test for copyrightability. The first prong is whether the article is eligible to be registered as a design. If the answer is ‘yes’, then the court should turn to the second prong, whether the work may be separated from the article. If the answer is ‘no’, then the third prong kicks in, namely, whether the work is copyrightable under the Copyright Law.”

Copyright Office Publishes Archive of Briefs and Legal Opinions — Finally, the Copyright Office has published a treasure trove of copyright law documents for your weekend reading pleasure.

‘Game of Thrones’ was pirated more than a billion times — far more than it was watched legallyThe Washington Post has a full rundown of the numbers from anti-piracy analyst firm MUSO. And the reason for such high numbers may surprise you: “A 2015 study commissioned by ScreenFutures, a group of screen producers, found that the main attraction for those who watched or downloaded illegally obtained television shows was that it was free and they weren’t afraid of being caught.”

Update – Ninth Circuit Amends Opinion in Mavrix v. LiveJournal, Clarifying that Websites’ Use of Automatic Content Blocking Software Does Not Weigh Against Eligibility for Copyright Safe Harbor — Brianna Dahlberg of Cowan, DeBaets, Abrahams & Sheppard looks at last week’s amended opinion in the closely watched case involving the DMCA safe harbors.

AG Szpunar advises CJEU on cloud-based recording and private copying exception — Eleonora Rosati has the details on the recent advisory opinion regarding whether Italy’s “private copying exception is applicable in a context in which the act of reproduction is not done directly by the beneficiary of the exception [ie a “natural person”], since copying requires the intervention of a service provider.” The answer is “yes, with a but.”

World’s Largest YouTube Ripping Site Ordered to Shut DownVariety reports, “The music industry has scored a major legal victory, sinking the pirate outfit YouTube-mp3.org, a global ‘stream ripping’ site operating out of Germany that was facilitating the theft of millions of dollars worth of music intellectual property per year.”

Google Critic Ousted From Think Tank Funded by the Tech Giant — On Wednesday, the New York Times dropped a bombshell with this story, detailing how a group whose work on platform monopolies, including Google, was removed from a think tank with strong ties to the internet giant. The story raises legitimate questions about Google’s influence on the many other non-profit and academic organizations it funds. Zephyr Teachout, who chairs the ousted group, penned an op-ed in response, Google is coming after critics in academia and journalism. It’s time to stop them. Also in the wake of the story, others have chimed in to share incidents where the company flexed its muscle, such as Kashmir Hill with Yes, Google Uses Its Power to Quash Ideas It Doesn’t Like—I Know Because It Happened to Me. For a copyright connection, check out Jonathan Taplin’s recent book, Move Fast and Break Things.

Here’s How Google’s Money Really Influences Research — Rob Levine’s take on the above story deserves special mention since he has been writing about Google’s soft diplomacy of non-profits and academics for years, long before the issue made it into the mainstream.

Trump nominates Andrei Iancu to be director of patent office — The managing partner of Los Angeles law firm Irell & Manella is slated to take over the role previously held by Michelle Lee, who was appointed by the previous administration and stepped down in July. And here’s a periodic reminder that, while it’s not apparent in its name, the U.S. Patent and Trademark Office is the Executive Branch’s advisor on copyright policy.

Scholar Takes on Empiricist View of IP — “Empiricism can tell us which notes, instruments, chords, time signature, and lyrics describe Chuck Berry’s recording of ‘Johnny B. Goode’ are on board Voyagers 1 and 2; but these data can hardly explain what it is about Berry’s playing that moves us more than others—or for that matter, why anyone would invent a guitar or learn to play it in a certain way, or why humans would bother building a pair of spacecraft to explore the solar system and then choose Chuck Berry as one of a very few representatives to say, This is who we were.”

2017 Fall Conference — Finally, if you are in the DC area October 12-13, I recommend checking out the Center for the Protection of Intellectual Property’s fifth annual fall conference, this one focused on “Real Intellectual Property Reform.” The organization this week released its slate of panels and speakers, promising an interesting and informative event.

The Southern District Court of New York ruled in favor of a YouTube duo (Ethan and Hila Klein, who release videos under the moniker H3H3) facing a claim of copyright infringement for a “reaction video” on August 23, holding that their use of clips from plaintiff’s video constituted fair use. The decision in Hosseinzadeh v Klein garnered significant attention online given that it is one of the first copyright cases involving popular YouTube creators and the wholly YouTubian genre of “reaction videos.” Broadly speaking, reaction videos show people watching other videos, with the focus on the reaction to those vidos. The videos commonly show part or all of the original video, which is rarely created by the creator of the reaction video, raising obvious copyright implications (the court is careful to note that it “is not ruling here that all ‘reaction videos’ constitute fair use).

Setting aside the broader significance of the decision to YouTube creators, I tend to think the actual fair use determination itself is unremarkable—involving a relatively straight-forward and conventional application of the four fair use factors. However, the decision is worth comment for another reason; this is the first reported decision I’m aware of where a claim of misrepresentation for a counter-notice under 17 USC § 512(f) was considered.

17 U.S.C. § 512(f)

The notice-and-takedown provisions of the DMCA require online service providers to remove or disable access to material identified by a copyright owner as infringing in a takedown notice in order to maintain immunity from potential liability for copyright infringement. As part of the notice-and-takedown process, Congress created a counter-notification provision which allows a user affected by a takedown notice to inform the service provider that the material was removed as a result of mistake or misidentification. Upon receipt of a counter-notice, an online service provider must replace the material between 10-14 days unless the original notice sender informs it that it has filed a lawsuit against the user. 117 USC § 512(g)(2).

The DMCA also provides for penalties for misrepresentation for senders of both notices and counter-notices.

(f)Misrepresentations. — Any person who knowingly materially misrepresents under this section—

(1) that material or activity is infringing, or

(2) that material or activity was removed or disabled by mistake or misidentification,

shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer, by any copyright owner or copyright owner’s authorized licensee, or by a service provider, who is injured by such misrepresentation, as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material or activity claimed to be infringing, or in replacing the removed material or ceasing to disable access to it.

In Lenz v Universal Music Corp (the “dancing baby” case), the Ninth Circuit held that the standard for holding a notice sender liable under §512(f)(1) is whether she lacked a subjective good faith belief that a use is not authorized.2801 F.3d 1126 (9th Cir. 2015). That is, there is no liability if someone believed material was infringing even if that belief was mistaken.

But up to this point, no court has addressed the Lenz holding in the context of a counter-notice (§512(f)(2)). The court here said it applies the same. It noted, “If the same standard did not apply, creators of allegedly infringing work would face a disparate and inequitable burden in appealing an online service provider’s decision to remove or disable access to their work. Given the fact that the statutory requirements for takedown notices and counter notifications are substantially the same, the DMCA plainly does not envision such a scheme.”

Here, the Defendants responded to Plaintiff’s takedown notice within three days of receipt with a counter-notice, stating that their video was not infringing since it was, “among other reasons, a fair use and ‘noncommercial.’” Plaintiffs disputed both, alleging the video was not a fair use and was commercial, claiming, “the Defendants’ YouTube channel belongs to the Freedom! advertising network which is a YouTube partner that helps YouTube contributors, such as the Defendants, grow their advertising revenues generated from content that they publish to YouTube.” Plaintiffs included in their complaint a claim under 512(f) seeking relief for the alleged misrepresentation, saying they were harmed since the DMCA and YouTube’s policies forced them to file a court action “in order to secure the ultimate removal of the Infringing Video from YouTube.”

Having earlier determined that defendant’s use of plaintiff’s material was fair use, the court dismissed the misrepresentation claim since the statements in the counter-notice were factually accurate. But it went on to say that even if the video was not fair use, it would still dismiss the misrepresentation claim since the record showed that the defendants did form a subjective good faith belief that their video was not infringing, and plaintiffs offered no evidence contradicting this.

I think the court is exactly right, as the plain text of §512(f) provides no distinction between the standard for liability for misrepresentations made in notices as in counter-notices.

The Unsuccessful Push for a Stricter Standard

What’s ironic is that the Electronic Frontier Foundation (EFF) represented Lenz in her lawsuit against Universal and pushed for a tougher objective standard for imposing liability under 512(f). That is, one would be liable even in the event they were mistaken in their belief about infringement. In its cert petition to the Supreme Court, the EFF said that the Ninth Circuit’s holding “that a copyright holder cannot be held liable for causing the takedown of lawful content as long as it subjectively believes the material is infringing—no matter how unreasonable that belief may be” would “give[]a free pass to the censorship of online speech, particularly fair uses.”3The EFF’s cert petition was supported by amicus briefs from the Organization for Transformative Works and Public Knowledge, the Yes Men, and a group of online service providers that included Automattic, Google, Tumblr, and Twitter.

The EFF and its amici either overlooked or ignored the fact that, as confirmed here in Hosseinzadeh v Klein, the tougher standard would also apply to senders of counter-notices. The result would certainly deter internet users who sincerely believed their material was not infringing or was fair use—under an objective standard, not only would a counter-notice expose them to the risk of a lawsuit for copyright infringement, but if they were mistaken in their belief, they would face additional penalties under §512(f). One could say that the user communities that EFF seeks to protect were fortunate that the EFF did not succeed in Lenz.

References   [ + ]

1. 17 USC § 512(g)(2).
2. 801 F.3d 1126 (9th Cir. 2015).
3. The EFF’s cert petition was supported by amicus briefs from the Organization for Transformative Works and Public Knowledge, the Yes Men, and a group of online service providers that included Automattic, Google, Tumblr, and Twitter.

On Thursday, the Ninth Circuit issued its decision in Disney Enterprises v VidAngel, affirming the district court’s order enjoining VidAngel after it was sued by several studios alleging copyright infringement.1Unless otherwise specified, the quotes in this article come from the decision. VidAngel operated an unauthorized, on-demand video streaming service that allowed viewers to filter out objectionable content, such as swearing or nudity, and argued that doing so was permissible for a variety of reasons, most notably that it was exempt from liability pursuant to an exception created by the Family Movie Act of 2005 (FMA).2Codified in 17 USC §110(11). The Ninth Circuit disagreed.

VidAngel might be considered one of the latest companies to engage in legal parlor tricks, creating a service that was functionally the same as an infringing service but purportedly sticks to the letter of the law. Other examples include MP3.com,3UMG Recordings v MP3.Com, 92 F.Supp.2d 349 (SDNY 2000) (“although defendant seeks to portray its service as the ‘functional equivalent’ of storing its subscribers’ CDs, in actuality defendant is re-playing for the subscribers converted versions of the recordings it copied, without authorization, from plaintiffs’ copyrighted CDs.”). Zediva,4Warner Bros. Entertainment v WTV Systems, 824 F.Supp.2d 1003 (CD Cali 2011) (“Although Defendants are clearly transmitting performances of Plaintiffs’ Copyrighted Works, Defendants argue that their service offers “DVD rentals” rather than transmissions of performances.”). Aereo,5American Broadcasting Co. v Aereo, 134 S.Ct. 2498 (2014) (“In Aereo’s view, it does not perform. It does no more than supply equipment that ‘emulate[s] the operation of a home antenna and [digital video recorder (DVR) ]’…  having considered the details of Aereo’s practices, we find them highly similar to those of the CATV systems in Fortnightly and Teleprompter. And those are activities that the 1976 amendments sought to bring within the scope of the Copyright Act.”). and ReDigi.6Capitol Records v Redigi, 934 F.Supp.2d 640 (SDNY 2013) (“At base, ReDigi seeks judicial amendment of the Copyright Act to reach its desired policy outcome.”). But just as courts rejected those companies’ convoluted arguments, the Ninth Circuit here saw through VidAngel’s smoke and mirrors and found it infringing via a straightforward (and unfiltered) application of the copyright law.

VidAngel’s Service

As the Ninth Circuit explained, VidAngel offers over 2,500 film and television episodes to consumers. At the time of the lawsuit, VidAngel operated by first purchasing DVDs or Blu-ray discs of the titles, ripping them to a computer, creating intermediate files that breaks the works into segments that can be tagged for objectionable content, and storing these segments, which make up the entirety of the movie or television episode, on cloud servers.

Customers could then “purchase” a title for $20. That is, VidAngel assigned the specific disc of the title to the customer’s unique ID but retained physical possession of the disc. At this point, the customer, after selecting what types of objectionable content they wished to avoid, could stream the work online from the cloud servers. The customer then had the option of “selling” the disc back to VidAngel, minus $1 per night ($2 for high-definition videos). You can be forgiven if you think that this sounds more like an on-demand streaming service than a Blockbuster, and indeed, the record demonstrates that that is how VidAngel’s customers used the service—VidAngel only ever shipped out four physical discs to purchasers, with virtually all customers selling back their titles within five hours of purchasing them.

Studios sued VidAngel, alleging it infringed their rights of reproduction and public performance and also that it had circumvented technological measures controlling access to copyrighted works in violation of §1201(a)(1)(A). VidAngel denied both claims and raised the defense of fair use and legal authorization by the FMA. Studios sought a preliminary injunction. The district court granted the injunction, finding that VidAngel violated §1201(a)(1)(A) when it ripped the DVDs and Blu-ray discs, infringed the studios’ right of reproduction when it copied the works to its computers and third-party cloud servers and right of public performance when it streamed the works to customers. It also rejected VidAngel’s defenses. VidAngel appealed.

The Ninth Circuit provided a wholesale rejection of all of VidAngel’s arguments.

On the infringement claim, VidAngel argued that it was entitled to copy the works to its computers under the first sale doctrine because it had lawfully purchased them, but the court said that doctrine only applies to disposition of “a particular copy” of a work and doesn’t entitle an owner to reproduce the work. This issue is currently squarely in front of the Second Circuit, which recently heard oral arguments in Capitol Records v Redigi. (Indeed, within hours of the Ninth Circuit’s decision, attorneys for Capitol Records had informed the Second Circuit).

Having concluded that the studios were likely to succeed on their infringement claim, the court turned to VidAngel’s affirmative defenses.

Family Movie Act

The FMA was passed in the shadow of litigation over a tool that automatically muted or skipped over objectionable material on ordinary DVDs. The legislation created an exception from liability for such tools, codified in 17 USC § 110(11), which provides that

the making imperceptible, by or at the direction of a member of a private household, of limited portions of audio or video content of a motion picture, during a performance in or transmitted to that household for private home viewing, from an authorized copy of the motion picture, or the creation or provision of a computer program or other technology that enables such making imperceptible and that is designed and marketed to be used, at the direction of a member of a private household, for such making imperceptible, if no fixed copy of the altered version of the motion picture is created by such computer program or other technology

is not copyright infringement.

The exception specifically requires that the performance or transmission comes “from an authorized copy.” VidAngel argued that because it begins its process with an authorized copy, it meets this requirement. The Ninth Circuit disagreed, saying “from an authorized copy” is different from “beginning from” or “indirectly from” an indirect copy, which is how VidAngel interprets the statute. It goes on to say the statutory context and legislative history of the provision supports its interpretation. “More importantly,” said the Ninth Circuit, “VidAngel’s interpretation would create a giant loophole in copyright law, sanctioning infringement so long as it filters some content and a copy of the work was lawfully purchased at some point. But, virtually all piracy of movies originates in some way from a legitimate copy.”

Fair Use

The Ninth Circuit also rejected VidAngel’s fair use defense. The service argued that the district court abused its discretion with respect to the first factor—the “purpose and character of the use”—and the fourth factor—the “effect of the use upon the potential market for or value of the copyrighted work.”

On the first factor, the circuit court easily agreed with the district court that VidAngel’s service adds nothing new to Plaintiff’s works and merely “transmits them for the ‘same intrinsic entertainment value’ as the originals.” As the court said, “Star Wars is still Star Wars, even without Princess Leia’s bikini scene.”

Given that VidAngel’s use was both not transformative and commercial, the Ninth Circuit said it was “not error to presume likely market harm” under the fourth factor. But still, VidAngel tried to argue that “its service actually benefits the Studios because it purchases discs and expands the audience for copyrighted works to viewers who would not watch without filtering.” No dice, said the court. As a matter of law, alleged positive benefits do not excuse defendants from usurping markets directly derived from unauthorized reproduction. And factually, the record showed that, contrary to VidAngel’s argument, “49% of its customers would watch the movies without filters,” demonstrating that the service acted as an effective substitute for unfiltered works.

Of note, VidAngel also advanced two alternate fair use arguments, both of which were decisively rejected by the Ninth Circuit. First, it argued that its service is “a paradigmatic example of fair use: space-shifting.” But the court said, far from being paradigmatic, “The reported decisions unanimously reject the view that space-shifting is fair use under § 107.” And even if space-shifting could be fair use, the court says, “VidAngel’s service is not personal and non-commercial space-shifting: it makes illegal copies of pre-selected movies and then sells streams with altered content and in a different format than that in which they were bought.”

Second, VidAngel argued that the copies it made were “intermediate” copies, which it said are considered “classic fair use.” In a footnote, the Ninth Circuit responded that, “The cases it cites are inapposite, because VidAngel does not copy the Studios’ works to access unprotected functional elements it cannot otherwise access.”

Circumvention of access control measures under the DMCA

The Ninth Circuit also upheld the district court’s finding that the Studios are likely to succeed on their DMCA claim. Here, the question was whether, in ripping DVD and Blu-ray discs to digital files, VidAngel circumvented “a technological measure that effectively controls access to a work”, an act prohibited by 17 USC § 1201(a)(1)(A).

VidAngel conceded that it used software to decrypt encryption access controls on the discs it purchased. (The Ninth Circuit observed in a footnote that the software VidAngel employed for this purpose, “AnyDVD HD”, is sold by “a Belize-based company run by former employees of a company convicted overseas for trafficking in anti-circumvention technology and identified by the United States Trade Representative as selling software that facilitates copyright violations.” Interesting choice for a family-friendly service.) But the court rejected VidAngel’s argument that the Studios had authorized DVD buyers to circumvent encryption technology, saying “Rather, lawful purchasers have permission only to view their purchased discs with a DVD or Blu-ray player licensed to decrypt the TPMs.”

VidAngel also tried raising on appeal for the first time the argument that technological measures cannot serve as both “use controls” and “access controls”, which are each separately addressed under §1201. The statute prohibits trafficking in devices that circumvent both use and access controls, but it only prohibits the actual act of circumvention of access controls. VidAngel thus argued that the technological measures at issue were use controls and that it engaged only in their circumvention, not in trafficking tools to allow circumvention. The Ninth Circuit said even assuming this argument was not waived it fails, since “the statute does not provide that a TPM cannot serve as both an access control and a use control.”

The remaining preliminary injunction factors fell in the studios’ favor. On irreparable harm, the Ninth Circuit observed that “the district court had substantial evidence before it that VidAngel’s service undermines the value of the Studios’ copyrighted works, their ‘windowing’ business model, and their goodwill and negotiating leverage with licensees.” It rejected VidAngel’s argument that damages could be calculated based on licensing fees, noting that many of the harms it cited are non-monetary and “cannot readily be remedied with damages.” On the balance of equities, it noted that the only harm VidAngel alleged was “financial hardship from ceasing infringing activities”, which does not outweigh the harm to the studios absent an injunction. Finally, on the public interest, VidAngel had argued that its service was the only filtering service on the market available for streaming digital content, a fact that was contradicted by the record. On the other hand, said the Ninth Circuit, quoting the district court, “the public has a compelling interest in protecting copyright owners’ marketable rights to their work and the economic incentive to continue creating television programming.”

Conclusion

Though in hindsight, the Ninth Circuit decision seems unsurprising, the risk of a bad decision here was high, not just for studios but for many businesses in the media and publishing fields. Besides the legal holdings, the decision provides positive language about the value of copyright and ability of copyright owners to exercise their marketable rights. The unequivocal decision will likely be welcomed by many copyright owners, and should prove helpful in other fora.

But it remains to be seen whether this is the end of this particular litigation. VidAngel had retained a high-powered legal team and has been active on Capitol Hill. So its efforts in court should not be discounted, and one can likely expect the company to file for en banc review by the Ninth Circuit followed by a Supreme Court petition unless it reaches a settlement agreement with the Studios.

 

References   [ + ]

1. Unless otherwise specified, the quotes in this article come from the decision.
2. Codified in 17 USC §110(11).
3. UMG Recordings v MP3.Com, 92 F.Supp.2d 349 (SDNY 2000) (“although defendant seeks to portray its service as the ‘functional equivalent’ of storing its subscribers’ CDs, in actuality defendant is re-playing for the subscribers converted versions of the recordings it copied, without authorization, from plaintiffs’ copyrighted CDs.”).
4. Warner Bros. Entertainment v WTV Systems, 824 F.Supp.2d 1003 (CD Cali 2011) (“Although Defendants are clearly transmitting performances of Plaintiffs’ Copyrighted Works, Defendants argue that their service offers “DVD rentals” rather than transmissions of performances.”).
5. American Broadcasting Co. v Aereo, 134 S.Ct. 2498 (2014) (“In Aereo’s view, it does not perform. It does no more than supply equipment that ‘emulate[s] the operation of a home antenna and [digital video recorder (DVR) ]’…  having considered the details of Aereo’s practices, we find them highly similar to those of the CATV systems in Fortnightly and Teleprompter. And those are activities that the 1976 amendments sought to bring within the scope of the Copyright Act.”).
6. Capitol Records v Redigi, 934 F.Supp.2d 640 (SDNY 2013) (“At base, ReDigi seeks judicial amendment of the Copyright Act to reach its desired policy outcome.”).