Is the Copyright Royalty Board Unconstitutional?

By , March 19, 2012.

Last month, the DC Circuit Court of Appeals heard oral arguments that raised constitutional questions concerning the Copyright Royalty Board. Intercollegiate Broadcasting Services (IBS) appealed a Board decision last year, and in its appeal it also argues that the appointment of Copyright Royalty Judges violates the Appointments Clause of the constitution.

The US Copyright Act provides for a number of statutory licenses for certain uses of copyrighted works — sound recording licenses for webcasting or internet radio among them. The rates of these licenses are determined by the Copyright Royalty board, an agency in the Library of Congress comprised of three full-time Copyright Royalty Judges who set rates through quasi-judicial proceedings.

IBS makes the same arguments as previous Appointments Clause challenges to the CRB (I touched on a previous Appointments Clause challenge to the CRB before here): either the Copyright Royalty Judges are “principal officers” and must be appointed by the President with the advice and consent of the Senate, or they are “inferior officers”, but the Librarian of Congress is not a head of a department and thus cannot be given the authority to appoint them. It’s an interesting issue, and if IBS succeeds, there’s a potential for huge ramifications in the online music ecosystem, so I thought I’d provide a closer look.

The Appointments Clause

The Appointments Clause, in Article II of the US Constitution, says:

[The President] shall nominate, and, by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

The power to appoint government officials is a significant power, and the Constitutional drafters were aware of its potential for abuse from their experiences with England. The first portion of the Appointments Clause represents a compromise between the drafters of the Constitution who wished to vest appointment power in the legislative branch and those who wished to vest it in the executive. 1See Buckley v. Valeo, 424 US 1, 131 (1976); Hanah Metchis Volokh, The Two Appointments Clauses: Statutory Qualifications for Federal Officers, 10 Journal of Constitutional Law 745, 768(2008). The compromise represented what was thought to be the best way to preserve political accountability of government officials while also ensuring that well-qualified officers are appointed.

The second part of the Appointments Clause, which addresses inferior officers, was almost an afterthought — added with little debate, most likely for pragmatic reasons. 2See Volokh; Andrew Croner, Morrison, Edmond, and the Power of Appointments, 77 George Washington Law Review 1002, 1005 (2009). Even in the 18th century, it was recognized that requiring Presidential nomination and Senate confirmation for every single government officer would be terribly inefficient.

On its face, the Appointments Clause seems fairly straight-forward. But when you get into its details, it can get tricky. What are “officers of the United States”, “inferior Officers”, or “Heads of Departments”? The Constitution doesn’t contain definitions for these terms. There is plenty of detailed scholarship on these questions, but for the purposes of this article, I’ll stick to how the Supreme Court has defined them.

What are Principal and Inferior Officers?

An “Officer of the United States” is, according to the Supreme Court, “any appointee exercising significant authority pursuant to the laws of the United States.” 3Buckley v. Valeo, 424 US 1, 126 (1976). Appointees not exercising such authority could be considered mere employees — the Constitution is agnostic on their appointment. 4See United States v. Germaine, 99 US 508, 509 (1879).

The Appointments Clause implies two classes of officers — principal and inferior — though it does not delineate between the two. The Supreme Court has also shied away from enunciating a precise rule to distinguish between the two types of officers. 5See Edmond v. United States, 520 US 651, 661 (1997): “Our cases have not set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes”; Morrison v. Olson, 487 US 654, 671 (1988): “The line between ‘inferior’ and ‘principal’ officers is one that is far from clear, and the Framers provided little guidance into where it should be drawn. … We need not attempt here to decide exactly where the line falls between the two types of officers, because in our view appellant clearly falls on the ‘inferior officer’ side of that line.” Instead, it has identified factors to help delineate between principal and inferior officers. Key among these factors is whether an officer is subordinate to another officer. That is, the question of distinguishing between principal and inferior officers is one of hierarchy — principal officers answer primarily to the President, inferior officers report to principal officers (though, it should be noted, this is only a necessary, not a sufficient, condition). 6See Free Enterprise Fund v. PCAOB, 561 US ___, *V (2010).

What is a “department”?

As with principle and inferior officers, the Constitution doesn’t define “Departments”, nor do contemporary texts, like the Federalist Papers. So how should it be defined?

As a threshold matter, the text of the Appointments Clause suggests, and the Supreme Court has confirmed, that Departments refer only to agencies within the Executive branch of the government. 7Buckley v. Valeo, 424 US 1, 127 (1976). But which executive agencies? All of them? Or only some of them?

The Supreme Court has not been entirely clear on its answer to this question. In the 1991 case Freytag v. Commissioner, in an opinion that apparently confused four of the nine Justices, 8Said Scalia in the concurrence, “It is as impossible to respond to this random argumentation as it is to derive a comprehensible theory of the appointments power from it.” the Court limited the scope of the term “Departments” in the Appointments Clause to “executive divisions like the Cabinet-level departments.”

But then in 2010, the Court ignored the majority’s conclusion in Freytag and adopted the concurrence’s broader definition and reasoning without comment. 9Free Enterprise Fund v. PCAOB, 561 US ___ (2010). It would seem then that, for the purposes of the Appointments Clause, a “Department” is any “freestanding component of the Executive Branch, not subordinate to or contained within any other such component.”

In short, the Appointments Clause gives the President the exclusive power to appoint all those who exercise significant authority under US law. For subordinate officers, the Constitution allows Congress to vest appointment in the President, courts of law, or the heads of freestanding, top-level Executive departments.

The Library of Congress

On Wednesday, December 23, 1801, a motion was made to have the newly created Librarian of Congress appointed by the President instead of the Secretary of the Senate and Clerk of the House, but that motion failed. On the 29th, the bill was reported to the Committee of the whole House with appointment vested in the Secretary and Clerk. However, the final bill, passed on January 26, 1802, provided for appointment “by the President of the United States solely.” I’ve been unable to find any record of when or why this change was made — though it has been suggested that the final bill was merely the result of Congress being unable to agree on a candidate for the position.

The mode of appointing the Librarian of Congress did not completely escape attention over the next few decades. On January 26, 1816, Senator Eligius Fromentin reported that “it is difficult to conceive why an officer of both Houses of Congress, as much so as the Clerk of the House of Representatives and the Secretary of the Senate are officers of their respective Houses, should not be appointed by the authority to which he is amenable,” and proposed that that provision of the original Act be repealed and appointment of the Librarian be vested in the Joint Library Committee. The proposal never passed.

Nevertheless, little else was said about the method of appointing the Librarian of Congress for most of the 19th century — most likely because, while the the Library greatly expanded in size and collections, it still remained, well, a library. That began to change in 1870, when the Library took on copyright functions. Toward the end of the century, Congress began to look at creating a distinct copyright office within the Library.

At this point, it would be easy to assume that Congress simply failed to apprehend any constitutional appointment issue. Yet, as it turns out, the appointment of what would become the Register of Copyrights did provoke substantive discussion — which proves relevant because both the Register and the Copyright Royalty Judges are appointed in the same manner.

The Register of Copyrights

In an 1897 article, the American Library Association reports on some of this discussion. 10I admit that the introduction to the ALA’s article made me chuckle: “The appearance, the week before Congress opened, of seven members of the American Library Association before the joint committee on the Library of Congress in Washington has been the most interesting happening in the library world since the Cleveland conference.” The then Librarian of Congress, Ainsworth Spofford, had recommended to Congress in 1895 “that the copyright registry should be separated from the management of the library, and a register of copyrights appointed as an executive officer, with his assistants, distinct from the library staff [emphasis added].” Despite this, a clause in an appropriations bill the following spring called for the register to be appointed by the Joint Congressional Committee on the Library. This led to an extensive discussion in Congress, which ultimately came to the conclusion that such an appointment would be unconstitutional.

The Joint Committee held hearings on the topic during the next Congressional recess. Representatives of the ALA recommended a plan that would have a registrar of copyrights and chief librarian appointed by the joint congressional committee to both serve under a director, “to be appointed in the usual manner for heads of departments, namely, by ‘The President, by and with the advice and consent of the Senate’ [emphasis added].” The appropriations committee disagreed with this proposal and countered with one where the Librarian of Congress would be appointed by the President solely and would then have the authority to appoint the register of copyrights.

The ALA concluded with two observations. First, that the Library of Congress had by then grown into an executive agency: “Congress is therefore either in the unconstitutional position of having to manage an executive branch of the government, or it must relinquish what, for a century past, has been part of its organization.” And second, maintenance of a copyright registry was clearly an executive function, which would make it “unconstitutional for Congress to appoint a register of copyrights.”

In the end, Congress was convinced that the Library of Congress “is an executive department and should be under the control of the executive branch.” 1129 Cong. Rec. 318-19 (1896) (Rep. Dockery). Also see William Patry, Copyright Law and Practice, ch. 1 fn. 166 for a comprehensive list of citations to Congressional records on the topic. The final law vested appointment of the Librarian of Congress in the President with the advice and consent of the Senate and appointment of the Register of Copyrights in the Librarian in order to adhere to the Constitution. 12Act of February 19, 1897, 54th Cong., 2d Sess., 29 Stat. 545.

Courts, including the Supreme Court, have implicitly endorsed the constitutional soundness of this arrangement by ruling on regulations promulgated by the Copyright Office 13See, for example, Goldstein v. California, 412 U.S. 546, 567-69 (1973); DeSylva v. Ballentine, 351 U.S. 570, 577-78 (1956); Mazer v. Stein, 347 U.S. 201, 212 (1954). — a power that only executive agencies can exercise. The Fourth Circuit addressed the issue head on (albeit in dicta) in 1978:

[T]he Office of the Register of Copyrights is not open to any charge that it is violative of the Appointments Clause. The Register is appointed by the Librarian of Congress, who in turn is appointed by the President with the advice and consent of the Senate. By the nature of his appointment the Librarian is an “Officer of the United States, with the usual power of such officer to appoint `such inferior Officers [i. e., the Register], as [he] think[s] proper.” …

The Supreme Court has properly assumed over the decades since 1909 that the Copyright Office is an executive office, operating under the direction of an Officer of the United States and as such is operating in conformity with the Appointments Clause.

The Copyright Royalty Judges

Like the appointment of the Register of Copyrights, Congress had considered constitutional implications of appointing the Copyright Royalty Judges.

The existence of the Copyright Royalty Board can be traced back to the 1976 Copyright Act. 14This section relies largely on CARP (Copyright Arbitration Royalty Panel) Structure and Process, Statement of Marybeth Peters The Register of Copyrights before the Subcommittee on Courts, the Internet, and Intellectual Property Committee on the Judiciary (June 13, 2002) and Frederick Greenman & Alvin Deutsch, The Copyright Royalty Tribunal and the Statutory Mechanical Royalty: History and Prospect, 1 Cardozo Arts & Entertainment Journal 1 (1982). During its drafting, Congress knew it wanted to increase the number of compulsory licenses available, but it also wanted more flexibility over the license rates than statutes would offer. An administrative body could provide this flexibility.

An early version of the legislation creating this adminstrative body gave the Register of Copyrights the authority to appoint its members. However, at that time, the Supreme Court handed down its decision in Buckley v. Valeo, which held the appointment of members of the Federal Election Commission by Congress was unconstitutional. Some members of Congress expressed concerns that vesting appointment of a copyright royalty agency in the Register of Congress would pose the same constitutional concerns. The final version of the Act created the Copyright Royalty Tribunal placed the appointment of its members in the hands of the President.

For reasons unrelated to appointment, the Copyright Royalty Tribunal was dismantled in the early nineties. Congress sought to replace the full-time tribunal with ad hoc arbitration panels to administer statutory copyright licenses. Again, Congress took care to ensure the new body operated constitutionally:

Congressman William Hughes, the chairman of the House Subcommittee, asked the Congressional Research Service (“CRS”) for its advice. CRS stated that the panels would be constitutional if the person ultimately responsible for the panels’ decision was a presidential appointee or someone who owed his or her appointment to a presidential appointee. Therefore, the panels could be established under supervision of the Librarian of Congress, a presidential appointee, or the Register of Copyrights, a person owing his or her appointment to a presidential appointee.

Although the House Subcommittee received CRS’ opinion that either the Register or the Librarian could be the supervising official, the House Subcommittee chose to make the Librarian the supervising official. There is no record as to why this choice was made. There is also nothing in the record to suggest that Congress saw any added value in an additional layer of review. The only concern voiced was that a presidential appointee, or someone who answers to a presidential appointee, needed to be placed at the head of the CARP system to satisfy the Supreme Court’s ruling in Buckley v. Valeo. 15Marybeth Peters, CARP.

CARP lasted little more than half as long as its predecessor tribunal. In 2004, the Copyright Royalty and Distribution Reform Act replaced CARP with a full-time Copyright Royalty Board, with appointment by the Librarian of Congress.

Appointments Clause challenges to the CRB

The issue of the appointment of Copyright Royalty Judges made an appearance in two DC Circuit Court cases released within days of each other in July 2009, though in neither case was the issue in front of the court. In SoundExchange v. Librarian of Congress, an appeal from a CRJ determination on satellite radio royalties, Circuit Judge Kavanaugh volunteered his opinion that the appointment of the Board “raises a serious constitutional issue” in his concurrence — though SoundExchange had not raised any constitutional arguments. Judge Kavanaugh seemed inclined to agree with the view that Copyright Royalty Judges “appear to be principal officers — not inferior officers — because they are not removable at will and their decisions regarding royalty rates apparently are not reversible by the Librarian of Congress or any other Executive Branch official.”

The following Monday, the DC Circuit decided Intercollegiate Broadcast System v. Copyright Royalty Board, where an Appointments Clause argument was raised. However, the argument was raised too late, said the court, and was thus forfeited.

It was not until the following February that a court would need to look at the appointment of Copyright Royalty Judges. In Live365 v. Copyright Royalty Board, Live365 asked the DC District Court to enjoin the Copyright Royalty Board from ratemaking proceedings because the Judges were unconstitutionally appointed. The digital radio aggregator argued either that the Copyright Royalty Judges are “principal officers” under the Appointment Clause and must be appointed by the President, or that they are “inferior officers” but the Librarian of Congress is not one of the “heads of departments” who could be authorized to appoint them.

The court rejected both arguments. It determined that Copyright Royalty Judges were inferior officers rather than principal officers because of the “degree and level of supervision exercised over them by the Librarian of Congress and Register of Copyrights.” In additon, it observed that there are “several critical factors that indicate that the Library is an executive department for purposes of the Appointments Clause”, including the fact that “the Librarian is appointed by the President with the advice and consent of the Senate” and “the President, not Congress, has the power to remove the Librarian at will.”

Will IBS Be Successful?

The odds are stacked against IBS ultimately succeeding in its argument. As noted above, no court has yet to be convinced that Copyright Royalty Judges are appointed unconstitutionally.

On whether the Judges are principal or inferior officers, the government lays out a strong case for their status as inferior officers — one that, in my opinion, hews more closely to Supreme Court precedent on the subject. As the government notes in its brief:

The Judges are limited to six-year terms, during which they are subordinate to the Librarian of Congress, a principal officer of the United States appointed by the President with the advice and consent of the Senate. The Judges’ authority is limited to matters relating to the establishment of royalty rates for a small number of compulsory licenses enumerated in the Copyright Act. The Judges are expressly required to “act in accordance with regulations issued by . . . the Librarian of Congress.” Any procedural regulations issued by the Judges themselves, including rules governing royalty ratemaking proceedings, must be approved by the Librarian. The Librarian is authorized to promulgate binding ethical rules and to enforce those rules against the Judges. The Librarian also causes the Judges’ decisions to be published. The Judges lack space or administrative resources, and are wholly reliant on the Librarian for support. And if the Judges find themselves idle between ratemaking proceedings, they may be assigned other duties at the discretion of the Register of Copyrights, who likewise acts under the direction of the Librarian.

As to whether the Librarian of Congress is a head of a department under the Appointments Clause, I believe it is.

The Library of Congress is an executive, not a legislative, agency. The Librarian is appointed by the President, not Congress. The Library’s subdepartments, the Copyright Office and the Copyright Royalty Board, perform executive functions. The executive branch oversees these functions — Congress retains no oversight in the form of a legislative veto or otherwise.

It is called the Library of Congress… but so what? Setting aside the fact that this name is largely vestigial — though the Library was originally intended for use by Congress, it was also open to the President and Vice-President since it was founded, followed by other executive agencies and the Judiciary within a few decades, and eventually open to the public; for over a century there have been those who have argued that it would more appropriately be called the National Library — labels shouldn’t determine constitutional analysis.

In the same vein, the various references to the Library of Congress as a “Congressional agency” in other contexts — IBS cites Keefe v. Library of Congress as an example — carry no legal weight here. “Agency” requires some level of control, and Congress deliberately vested control of the Copyright Royalty Board in the executive branch through the Library of Congress.

I’m not convinced the argument that the Library of Congress is not a “department” within the meaning of the Appointments Clause has any traction either. As noted above, the Supreme Court appears to have backed away from its holding in Freytag that there’s some distinction between the “departments” referred to in the Appointments Clause and other self-contained, non-subordinate executive agencies. And for good reason. It’s difficult to see what constitutional purpose such a distinction would advance. Certainly not separation of power concerns — if we accept that any “department” must still at a minimum be an executive agency, and Congress vests appointment in the Head of an agency that isn’t a “department” under Freytag, it hasn’t encroached on executive power. Other reasons for structuring the Appointments Clause as it is structured, some of which Alexander Hamilton explains in the Federalist 76, also don’t suggest a need to construe “departments” so narrowly.

References

References
↑1 See Buckley v. Valeo, 424 US 1, 131 (1976); Hanah Metchis Volokh, The Two Appointments Clauses: Statutory Qualifications for Federal Officers, 10 Journal of Constitutional Law 745, 768(2008).
↑2 See Volokh; Andrew Croner, Morrison, Edmond, and the Power of Appointments, 77 George Washington Law Review 1002, 1005 (2009).
↑3 Buckley v. Valeo, 424 US 1, 126 (1976).
↑4 See United States v. Germaine, 99 US 508, 509 (1879).
↑5 See Edmond v. United States, 520 US 651, 661 (1997): “Our cases have not set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes”; Morrison v. Olson, 487 US 654, 671 (1988): “The line between ‘inferior’ and ‘principal’ officers is one that is far from clear, and the Framers provided little guidance into where it should be drawn. … We need not attempt here to decide exactly where the line falls between the two types of officers, because in our view appellant clearly falls on the ‘inferior officer’ side of that line.”
↑6 See Free Enterprise Fund v. PCAOB, 561 US ___, *V (2010).
↑7 Buckley v. Valeo, 424 US 1, 127 (1976).
↑8 Said Scalia in the concurrence, “It is as impossible to respond to this random argumentation as it is to derive a comprehensible theory of the appointments power from it.”
↑9 Free Enterprise Fund v. PCAOB, 561 US ___ (2010).
↑10 I admit that the introduction to the ALA’s article made me chuckle: “The appearance, the week before Congress opened, of seven members of the American Library Association before the joint committee on the Library of Congress in Washington has been the most interesting happening in the library world since the Cleveland conference.”
↑11 29 Cong. Rec. 318-19 (1896) (Rep. Dockery). Also see William Patry, Copyright Law and Practice, ch. 1 fn. 166 for a comprehensive list of citations to Congressional records on the topic.
↑12 Act of February 19, 1897, 54th Cong., 2d Sess., 29 Stat. 545.
↑13 See, for example, Goldstein v. California, 412 U.S. 546, 567-69 (1973); DeSylva v. Ballentine, 351 U.S. 570, 577-78 (1956); Mazer v. Stein, 347 U.S. 201, 212 (1954).
↑14 This section relies largely on CARP (Copyright Arbitration Royalty Panel) Structure and Process, Statement of Marybeth Peters The Register of Copyrights before the Subcommittee on Courts, the Internet, and Intellectual Property Committee on the Judiciary (June 13, 2002) and Frederick Greenman & Alvin Deutsch, The Copyright Royalty Tribunal and the Statutory Mechanical Royalty: History and Prospect, 1 Cardozo Arts & Entertainment Journal 1 (1982).
↑15 Marybeth Peters, CARP.

Megaupload and the DMCA

By , January 25, 2012.

Last week’s indictment and arrest of Megaupload and seven of its execs added a strong dose of drama to an already dramatic couple of days in the copyright arena.

The US Department of Justice calls this “among the largest criminal copyright cases ever brought by the United States,” though I wouldn’t be surprised if it is actually the largest such case — I’m not aware of any larger criminal actions. 1The closest seems to be Operation Safehaven in 2003. No doubt the proceedings will be followed closely by many over the next few months.

Already, the arrest has had a sharp effect online, with other cyberlockers scaling back or shutting down altogether.

While the federal government’s action against Megaupload — which had been in the works since March 2010 (months before ICE even began its Operation In Our Sites) — will obviously have many ramifications for the future of copyright law online, I wanted to focus specifically on one of the legal issues that may be implicated in the case.

Does the DMCA apply to criminal infringement?

Perhaps the most novel legal issue that may arise during the Megaupload proceedings is whether the DMCA safe harbors provide the defendants with any defense.

As an initial matter, it seems to be an open question whether the DMCA safe harbors are available to any criminal defendant. The U.S. appears to adopt the view that they aren’t. 2The U.S. is not alone in adopting this view. See, for example, Eric Goldman, A Road to No Warez, 82 Or. L. Rev. 369, 425 (2003), “In the DMCA, Congress putatively provided some facilitators a safe harbor from civil liability for user-caused infringement [emphasis added].”

The indictment notes without further explanation that “Internet providers gain a safe harbor under the DMCA from civil copyright infringement suits in the United States if they meet certain criteria [emphasis added],” although it subsequently offers reasons why the Megaupload defendants wouldn’t qualify for the defense anyway.

The language of the statute plausibly supports this view. Though it references only “infringement of copyright” — which could include both criminal and civil infringement — it merely shields service providers from “liab[ility] for monetary relief, or [in some circumstances] injunctive or other equitable relief.” This is civil lawsuit language — criminal defendants are punished with fines, not liable for monetary relief.

In addition, criminal liability would seem to preclude safe harbor protection solely as a matter of common sense. Criminal copyright infringement requires willful infringement. The DMCA safe harbor only protects service providers from liability for passive infringement. If the evidence shows that a defendant was willfully infringing copyrighted works beyond a reasonable doubt, it doesn’t seem possible that that same defendant could ever meet the requirements for safe harbor protection under the statute.

Deduplication and the DMCA

Regardless, the indictment alleges that even if the DMCA safe harbors are available to criminal defendants, the Megaupload defendants failed to satisfy the conditions for eligibility.

Among other things, Megaupload used deduplication, a common technical process used by online services to reduce the amount of storage needed for data. In Capitol Records v. MP3Tunes, Capitol argued that a similar process made the defendant liable for public performances of sound recordings, but the Southern District Court of New York disagreed, calling it a “standard data compression algorithm that eliminates redundant digital data” that didn’t give rise to liability.

It was a small win for MP3Tunes, however, since the court held that its failure to remove the actual files stored on its service when it received a DMCA takedown notice, rather than just links to the files, disqualified it from safe harbor protection.

The indictment alleges that Megaupload operated much the same way. When a user uploads a file already present on the system, “the system provides a new and unique URL link to the new user that is pointed to the original file already present on the server. If there is more than one URL link to a file, then any attempt by the copyright holder to terminate access to the file using the Abuse Tool or other DMCA takedown request will fail because the additional access links will continue to be available.”

If the Eastern District of Virginia follows the same reasoning as the MP3Tunes court, this doesn’t necessarily mean Megaupload is ultimately liable, but it would mean that it wouldn’t be protected by the DMCA.

I don’t know for certain how big a role the DMCA safe harbor will play in the case; only time will tell. But I’ll definitely be keeping a close eye on the legal developments of what promises to be a watershed moment in copyright history.

References

References
↑1 The closest seems to be Operation Safehaven in 2003.
↑2 The U.S. is not alone in adopting this view. See, for example, Eric Goldman, A Road to No Warez, 82 Or. L. Rev. 369, 425 (2003), “In the DMCA, Congress putatively provided some facilitators a safe harbor from civil liability for user-caused infringement [emphasis added].”

Hey, what happened to Wikipedia? (An intro to SOPA)

By , January 18, 2012.

With sites like Wikipedia and Google holding a protest today, many people are likely hearing about proposed copyright legislation — the Stop Online Piracy Act in the House and the Protect IP Act in the Senate — for the first time today. So I figured I’d dispense with my usual writing — footnotes and all — to provide a brief introduction and explanation to the bills.

To call some of what is being said about these bills “hyperbole” would be an understatement. Then again, hyperbole is what the internet does best, second only to cat videos. If you’re looking for a somewhat more rational look at these bills before coming to an informed conclusion, read on.

What is the Problem?

Nearly everyone, even those who oppose the bills, agree that piracy is a problem. “Copyright industries” — everything from newspapers and periodicals, to motion pictures, recorded music, radio and television broadcasting, and computer software — are vital not only to our economy but our society as a whole. Online piracy has led to lost jobs and revenues in these industries.

Online piracy hurts creators. Many outside the creative industries are ambivalent to this. In large part, this is because the issue of online piracy has been framed as one affecting only record labels and movie studios — and rock stars and movie stars don’t evoke much sympathy. While everyone deserves protection of the laws, the ambivalence is understandable.

But the fact is that, while piracy certainly affects larger entities, it is the smaller and independent producers that bear the brunt of piracy’s harm. The James Camerons and Lady Gagas of the world will survive the transition to a digital age. Independent producers and the next generation of creators, however, are hurting.

And this should be a concern, because these creators so often make the most valuable contributions to our culture. They express views that are not always expressed by mainstream producers. They take creative and financial risks. They also, unfortunately, do not have the resources to respond to commercial pirates online.

For example, in a recent Huffington Post piece, Kathy Wolfe, who runs a company that distributes gay and lesbian films, notes how difficult it is to “compete with free.”

The artists I work with and the films I have been privileged to be associated with have changed countless lives. Without a secure, fair and functioning online market, these stories of diversity will cease to be told and this “Freedom of Speech” will be compromised. American companies that are in the business of creating and distributing content shouldn’t be sacrificed to protect large-scale pirate profiteers who knowingly and blatantly flout the law and common sense.

Attorney Dorrissa D. Griffin expressed similar sentiments in an article last October. Said Griffin, “Minority artists are impacted the most by this kind of theft because minority artists, writers and filmmakers often have little wealth (the wealth gap being as vast as it is) – except for their intellectual property. And once that gets stolen, nothing is left.”

In an article last spring, Jason Reitman (Up in the Air, Juno) worries about what the future holds for art and entertainment in general if piracy continues unchecked:

Reitman has a term for the type of motion picture facing extinction because of piracy. He calls them “tweeners”—the movies between the $10,000 YouTube home videos and the large-budget studio productions. Reitman sees the “tweener” as the lifeblood of the creative industry—producing movies as culturally significant and economically successful as Lost in Translation, American Beauty, and Pulp Fiction. It’s these movies, he believes which “push cinema forward,” producing the Sofia Coppolas and Quentin Tarantinos who then go on to make bigger budget and more lucrative movies.

Why is New Legislation Needed?

To understand SOPA and PROTECT IP, you have to first understand the law now. Under current law, anyone who copies, distributes, or publicly performs a work has infringed. A copyright owner can sue an infringer in federal court — which typically requires an attorney and thousands of dollars, with no guarantee of success. This makes sense if the infringer has deep pockets or is profiting off piracy. It makes less sense if the infringement is decentralized and dispersed, as often happens online.

Recognizing this, Congress passed the Digital Millennium Copyright Act in 1998. The DMCA protects sites that accept material uploaded by users — like YouTube and Facebook — from infringement liability if they comply with the law’s requirements. One of those requirements is taking down infringing material like a video or picture if the copyright owner sends a takedown notice to the service provider. Though users who upload material to such sites are still liable for copyright infringement, the notice-and-takedown regime has effectively shielded ordinary users from this liability as well. As the EFF has said:

As far as we know, no typical YouTube user has ever been sued by a major entertainment industry company for uploading a video. We have heard of a couple special cases, involving pre-release content leaked by industry insiders, but those aren’t typical YouTube users. And there have probably been a few lawsuits brought by aggressive individual copyright trolls. But no lawsuits against YouTubers by Hollywood studios or major record labels. That’s right — millions of videos have been posted to YouTube, hundreds of thousands taken down by major media companies, but those companies have not brought lawsuits against YouTube users.

There’s certainly plenty of room for improvement in the DMCA. But most will agree that the balance it struck has generally worked in the past decade, allowing new venues of expression to flourish — sites like YouTube, Facebook, and Wikipedia, for example — while creating some semblance of a functioning market that provides consumers with legal and innovative ways to access movies, music, and other creative works online — whether through Netflix, iTunes, Hulu, or Spotify.

So why is SOPA/PROTECT IP needed? It’s still trivially easy to set up a site that offers illegal content and profit from it from advertising and subscriptions or sales. And when such sites are operated overseas, they are effectively impossible for copyright holders to reach through DMCA takedowns or an ordinary copyright infringement lawsuit, yet such services are available to anyone in the US with an internet connection.

These sites profit off the talents of creative Americans, stall the development of legal services for consumers, and give nothing back.

What Would the Bills Do?

SOPA and PROTECT IP would give the Attorney General and copyright holders more effective remedies designed to cut off the money flowing to these types of sites.

The internet is filled with misinformation about both bills, much of it inadvertant, some of it deliberate (as with any legislation). A lot of this misinformation could be remedied simply by reading the bills (H.R. 3261 and S.968). Not all of it, of course. Legislation can be difficult for even lawyers and Congressmen to understand — and copyright law is an especially difficult subject to grasp.

So a brief word first about what these bills don’t do.

Much of the early criticism over these bills centered around provisions that would allow courts to order service providers to block access to websites. These provisions have since been removed and are not likely to come back. All that talk about “censorship” or “blacklists” or “breaking the internet” (all characterizations I absolutely disagree with) is moot.

These bills do not change what is or isn’t copyright infringement; instead, they limit the availability of these remedies to only a narrow subset of illegal behavior. Under SOPA, for example, the remedies are only available to a copyright holder if a site is “primarily designed” for offering goods or services that infringe copyrighted works, “for purposes of commercial advantage or private financial gain, and with respect to infringement of complete or substantially complete works.” (Emphasis added). A stray infringing clip on a blog or social networking site won’t cut it under this definition.

If a copyright owner wishes to take action against such a site, it must file a lawsuit in court, where the site owner is protected by the same due process safeguards as any civil defendant. The copyright owner may then move for court orders against any advertising or payment provider whose services are being used by the site to profit off piracy. If the court approves these orders, the providers must discontinue their services to that site.

It should be noted that both bills expressly limit the remedies available to copyright owners to these court orders — copyright owners can’t collect any monetary damages from sites under these bills.

In addition, advertising and payment providers are only required to take “technically feasible and reasonable measures” if served with a court order. Even then, they are only liable for court assessed penalties if they “knowingly and willingly” refuse to comply.

Finally, these remedies are not permanent. At any time after an order has been entered, a site owner can move to modify or vacate the owner if it disputes the original finding that it was primarily designed for infringement, if it has since changed its site so it no longer infringes, or even if “the interests of justice require” modification.

This “follow the money” approach would give copyright owners tools they don’t currently have to help reduce the harmful effects of online commercial piracy. It does so in a way that is fully compatible with our constitutional and civil rights and preserves the openness that has made the internet such a vital part of our everyday lives.

Ninth Circuit Rules on UMG v. Veoh

By , December 21, 2011.

Yesterday, the Ninth Circuit held that video sharing site Veoh is immune from copyright liability under the DMCA in what will likely become a seminal ruling for copyright and the internet.

Plaintiff Universal Music Group had asked the Circuit Court to reverse the lower court’s holding that Veoh qualified for the DMCA safe harbor on several grounds:

  • “[T]he alleged infringing activities do not fall within the plain meaning of ‘infringement of copyright by reason of the storage [of material] at the direction of a user'”
  • “Veoh had actual knowledge of infringement, or was ‘aware of facts or circumstances from which infringing activity [wa]s apparent'”
  • “Veoh ‘receive[d] a financial benefit directly attributable to . . . infringing activity’ that it had the right and ability to control.”

The Circuit Court rejected all of these arguments. The full opinion is available here. Some preliminary thoughts follow.

Infringement by Reason of Storage

The court’s conclusion that Veoh’s operations fall within the scope of § 512(c) is not a surprise. It interpreted the statute’s “by reason of” language broadly — protecting service providers from any infringing activity that occurs on their site stemming from a user’s upload.

But while this interpretation may be reasonable in light of how the internet has developed, it is no doubt an expansion on the original intent of the language. The court says “if Congress wanted to confine § 512(c) exclusively to web hosts rather than reach a wider range of service providers, we very much doubt it would have done so with the oblique ‘by reason of storage’ language.” But of course, this reasoning begs the question. When Congress passed the DMCA, “user-generated content” had yet to even enter the lexicon — Congress couldn’t have factored a type of service provider that didn’t exist yet into the law.

I’ve talked previously about how sites like Veoh, YouTube, and other Web 2.0/UGC sites are arguably beyond the scope of protection of 512(c). The provision was drafted at a time when storing content at the direction of a user was primarily a collateral or passive function of service providers. For UGC sites, this “storage” is the sine qua non of their business model.

I’m certainly not saying such sites should be strictly liable for infringement by their users, or even required to monitor or prescreen uploads. But I also don’t think the only thing they need do to qualify for the DMCA safe harbor is respond to takedown notices. Unauthorized content unquestionably subsidizes many UGC sites — it’s perfectly reasonable that such sites subsidize copyright enforcement. As unavoidable as the expansion of the scope of this safe harbor might be, it may be the case that the language may need to be revisited at some point down the road.

Actual and Apparent Knowledge

The court’s holding that “general knowledge that [a service provider’s] services could be used to post infringing material” is insufficient to eliminate DMCA safe harbor protection is consistent with what other courts have held. 1See, for example, A & M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001); Viacom v. YouTube, 718 F.Supp.2d 514, 523 (SDNY 2010); Corbis Corp. v. Amazon, 351 F.Supp.2d 1090, 1109 (WD Wash 2004).

The court does, however, engage in a bit of curious reasoning to come to this conclusion. It notes:

Further, Congress’ express intention that the DMCA “facilitate making available quickly and conveniently via the Internet . . . movies, music, software, and literary works” — precisely the service Veoh provides — makes us skeptical that UMG’s narrow interpretation of § 512(c) is plausible. S. Rep. No. 105-190, at 8.

This is curious because the quote used by the 9th Circuit used is not referring to the purpose behind the DMCA safe harbors, it is referring to the purpose behind the anti-circumvention and copyright management information provisions of the DMCA. 2The HRCC has a copy of S. Rep. No. 105-190 available on its site. The relevant portion in full reads:

Due to the ease with which digital works can be copied and distributed worldwide virtually instantaneously, copyright owners will hesitate to make their works readily available on the Internet without reasonable assurance that they will be protected against massive piracy. Legislation implementing the treaties provides this protection and creates the legal platform for launching the global digital on-line marketplace for copyrighted works. It will facilitate making available quickly and conveniently via the Internet the movies, music, software, and literary works that are the fruit of American creative genius. It will also encourage the continued growth of the existing off-line global marketplace for copyrighted works in digital format by setting strong international copyright standards.

At the same time, without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet. In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites. Many service providers engage in directing users to sites in response to inquiries by users or they volunteer sites that users may find attractive. Some of these sites might contain infringing material. In short, by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.

By conflating the purpose of stronger digital protections for copyright owners with the purpose for limiting the liability of service providers, it essentially creates a logical absurdity within the Copyright Act: promoting the progress of the arts and sciences through exclusive rights is accomplished when ignoring those exclusive rights is made easier.

The Ninth Circuit leaves us still with little meaningful distinction between actual knowledge and apparent — so-called “red flag” — knowledge. It says “that the burden” for bringing red flags to service provider’s attention “remains with the copyright holder rather than the service provider.” The summary conclusion is that “Veoh’s general knowledge that it hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag.”

But it does mention one way a service provider can have apparent knowledge, at least in theory. The Ninth Circuit notes that if “notification had come from a third party, such as a Veoh user, rather than from a copyright holder, it might meet the red flag test because it specified particular infringing material.”

Right and Ability to Control

The clear discussion of the interplay between safe harbor and common law vicarious liability is to be commended. As court explains, the two are independent: Congress intended the safe harbor to protect against vicarious liability if the statute’s conditions are met, even though the requirement that a service provider doesn’t have the “right and ability to control” infringing activity seems synonymous with the common law articulation of vicarious liability. Yet some courts still get tripped up by this concept.

However, I am a bit troubled by court’s interpretation of “right and ability to control” as being dependent on scope of service:

Where, as here, it is a practical impossibility for Veoh to ensure that no infringing material is ever uploaded to its site, or to remove unauthorized material that has not yet been identified to Veoh as infringing, we do not believe that Veoh can properly be said to possess the “needed powers . . . or needed resources” to be “competen[t] in” exercising the sort of “restraining domination” that § 512(c)(1)(B) requires for denying safe harbor eligibility.

You hear this often from DMCA maximalists: it’s just too hard to control infringement on the internet. But this seems similar to a “too big to fail” argument — eventually, a service provider becomes “too big to be liable for infringement.”

Viewed this way, the interpretation doesn’t seem to comport with real world views on liability. Imagine a factory owner who says he dumps a lot of stuff into the river, and it’s not possible as a practical matter to ensure that none of that stuff is toxic. Or imagine a government that says it arrests a lot of people, and it doesn’t have the needed resources to exercise the type of restraining domination to ensure that none of them were wrongfully arrested.

Yes, there are differences between offline services and online services. But I don’t know if that should mean a complete departure from liability principles — especially since sites like Veoh and YouTube did not sprout online, organically and fully-formed. The fact remains that sites like these were purposely designed to provide content acquired through user uploads, just as services like Hulu and Netflix were purposely designed to provide content acquired through licensing.

As I said earlier, I’m not suggesting in the least that sites like Veoh should be responsible for every upload. Just that “the right and ability to control” shouldn’t necessarily hinge on popularity.

Finally, it is good to see the Ninth Circuit reaffirm the fact that “willful blindness” can constitute knowledge under this section:

Accordingly, we hold that the ‘right and ability to control’ under § 512(c) requires control over specific infringing activity the provider knows about. A service provider’s general right and ability to remove materials from its services is, alone, insufficient. Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge.

What’s Next?

The Ninth Circuit affirmed summary judgment on the DMCA safe harbor and dismissal of the claims against the Investor defendants, who had been sued along with Veoh. It remanded to the lower court only for determination of whether Veoh can collect certain costs, excluding attorney’s fees, under FRCP 68.

That means the lawsuit is essentially over, barring an appeal by UMG to the Supreme Court.

The Second Circuit, of course, is currently considering similar issues in Viacom’s lawsuit against YouTube. It isn’t bound to follow the ruling here, but it will most likely have a look at the opinion. That opinion, of course, is still months away.

References

References
↑1 See, for example, A & M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001); Viacom v. YouTube, 718 F.Supp.2d 514, 523 (SDNY 2010); Corbis Corp. v. Amazon, 351 F.Supp.2d 1090, 1109 (WD Wash 2004).
↑2 The HRCC has a copy of S. Rep. No. 105-190 available on its site. The relevant portion in full reads:

Due to the ease with which digital works can be copied and distributed worldwide virtually instantaneously, copyright owners will hesitate to make their works readily available on the Internet without reasonable assurance that they will be protected against massive piracy. Legislation implementing the treaties provides this protection and creates the legal platform for launching the global digital on-line marketplace for copyrighted works. It will facilitate making available quickly and conveniently via the Internet the movies, music, software, and literary works that are the fruit of American creative genius. It will also encourage the continued growth of the existing off-line global marketplace for copyrighted works in digital format by setting strong international copyright standards.

At the same time, without clarification of their liability, service providers may hesitate to make the necessary investment in the expansion of the speed and capacity of the Internet. In the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. For example, service providers must make innumerable electronic copies by simply transmitting information over the Internet. Certain electronic copies are made to speed up the delivery of information to users. Other electronic copies are made in order to host World Wide Web sites. Many service providers engage in directing users to sites in response to inquiries by users or they volunteer sites that users may find attractive. Some of these sites might contain infringing material. In short, by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.

OPEN Act: Some Opening Thoughts

By , December 12, 2011.

Senator Wyden, a vocal opponent of the PROTECT IP Act in the Senate and Stop Online Piracy Act in the House, has criticized the bills by saying that online piracy “is not an issue where we should use a bunker-buster bomb when a laser beam would do.”

But does the OPEN Act, draft language of which was unveiled last week by Wyden and other opponents of the existing bills, resemble the metaphorical laser beam, or is it more like a World War I dreadnought — expensive, unwieldy, and not very suited to today’s world? 1Wyden’s original metaphor makes little sense to me. On the one hand, “bunker-buster” bombs are used against targets that conventional weapons can’t take out and are designed for high accuracy and minimal collateral damage — precisely the type of remedies creators need online. Laser beams, on the other hand, are currently a long way from being useful as weapons.

Though I’m encouraged that opponents of the existing bills recognize the harm that online commercial piracy causes creators, I think the OPEN Act resembles too much the latter. The definitions are far too narrow — it’s difficult to conceive of any site, even the most egregiously infringing site — that would fall within their scope. Its shift to the International Trade Commission would require a questionable expansion of federal bureaucracy. The resources required to bring a case in front of the ITC would place the bill’s remedies out of the hands of all but the largest copyright holders. All of this for what would amount to little more than a cease and desist letter to ad and payment service providers.

Some more detailed thoughts and questions about the bill:

Comparison to SOPA and PROTECT IP

SOPA and PROTECT IP provide for both actions by the Attorney General and actions by copyright holders, the OPEN Act provides only for actions by copyright holders. One of the major differences between the bills is venue: while SOPA and PROTECT IP actions would take place in federal courts, the OPEN Act specifically provides for such actions to occur in the International Trade Commission, a quasi-judicial, independent federal agency that specializes in unfair trade practices.

Like the private rights of action in SOPA and PROTECT IP, the right of action in the OPEN Act is limited to remedies against advertising providers and payment service providers.

I find some of the support of this change of venue interesting. For example, the EFF writes:

The International Trade Commission (ITC), an independent agency, would be tasked with investigating complaints from content owners. The ITC’s process, one which is currently used in the patent context, is transparent, quick, and effective. Both parties would have the opportunity to participate and the record would be public. The process would include many important due process protections, such as effective notice to the site of the complaint and ensuing investigation as well as the ability to challenge any final permanent injunction in a federal court.

This is interesting because there is little difference in theory between this and a federal court. Court proceedings are transparent and effective and provide due process protections. These kinds of statements are overly simplistic, since they gloss over the differences in practice between the ITC and a federal court proceeding.

I have yet to dive into the differences, but it strikes me as premature to declare an action through the ITC as inherently better or more fair than a court action. Federal courts are governed by the Federal Rules of Civil Procedure, administrative agencies have different procedural rules. Both venues have different rules of evidence. Both have different standards for keeping confidential business information accessible by the public.

And is it true that an action through the ITC would be quicker and cheaper than a court action?  According to one article, the average cost of an action through trial at the ITC is $2-3.75 million and takes 15-18 months, while the verge cost of a patent lawsuit through trial in federal court is $3-5 million and takes 2-3 years. It would seem that the ITC is quicker and cheaper, but as the article points out, 95% of patent lawsuits settle or are disposed before reaching trial, bringing the cost and time involved down significantly. Compare that to the ITC, where 40-50% of cases reach trial.

OPEN Act and DMCA

Some critics of SOPA warned that the bill would damage DMCA safe harbors 2For example, David Sohn of the Center for Democracy & Technology has said, “This is a bill that would eviscerate the predictable legal environment created by the DMCA”; Markham Erickson of NetCoalition has said, “Both bills gut the Digital Millennium Copyright Act (DMCA)”; and Corynne McSherry of the Electronic Frontier Foundation has said SOPA “would also threaten to effectively eliminate the DMCA safe harbors.”  — which immunize service providers engaged in certain, specific functions from liability for copyright infringement if they adhere to the provisions of the DMCA.

The OPEN Act looks to address this criticism. It states that a site is not subject to action under the bill if it “engages in an activity that would not make the operator liable for monetary relief for infringing the copyright under section 512 of title 17, United States Code.” This is a roundabout way of saying that if a site qualifies for one of the four DMCA safe harbors cannot be held liable in the ITC.

But what does that mean? The provisions for DMCA safe harbors are complex, and their interpretation has been subject of many court cases since their introduction in 1998. Appeals  dealing primarily with the meaning of 17 USC § 512(c)(1)(A)(ii) — so-called “red flag” knowledge — are currently pending in the Second and Ninth Circuits, for example, and may impact how sites like YouTube must operate in order to remain protected under the safe harbor.

The ITC (as far as I can tell) 3Generally, courts in common law systems are bound by stare decisis to follow precedent of all courts above them. Since ITC decisions are appealable to the Federal Circuit, I assume the ITC is bound by Federal Circuit decisions, though I haven’t been able to confirm this.  is bound to follow precedent from the Supreme Court — which hasn’t weighed in on the language of § 512 — and the Federal Circuit — which hasn’t either. The ITC would approach the DMCA from a blank slate. Far from being predictable, this means that guessing how the ITC interprets the DMCA is pure speculation.

But this point may be moot, as the OPEN Act also excludes action against sites that have “a practice of expeditiously removing, or disabling access to, material that is claimed to be infringing or to be the subject of infringing activity after notification by the owner of the copyright or trademark alleged to be infringed or its authorized representative.”

This is like a dystopian version of the DMCA safe harbors. A site can be protected under the OPEN Act even if it directly infringes and directly profits off infringement, so long as it “expeditiously” removes material when it is notified. There are also none of the protections of the DMCA — no counter-notification requirement, no provisions for misrepresenting the contents of a notification.

How Different are the Definitions?

The OPEN Act defines an “Internet site dedicated to infringing activity” as one that “has only limited purpose or use other than engaging in infringing activity and whose owner or operator primarily uses the site to willfully engage in infringing activity.”

Compare this to the definition of an “Internet site dedicated to theft of U.S. property” in SOPA, which would include a site that “is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates” copyright infringement; or a site where the operator “is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the . . . site to carry out acts that constitute” copyright infringement, or “operates the . . . site with the object of promoting, or has promoted, its use to carry out acts that constitute” copyright infringement “as shown by clear expression or other affirmative steps taken to foster infringement.”

SOPA’s definitions have been criticized as being too vague and broad. 4For example, Ryan Radia of the Competitive Enterprise Institute has said, “The scope of websites encompassed by these provisions appears to be potentially vast”; Parker Higgins of the EFF has said, “the broad definitions and vague language in the bill could place dangerous tools into the hands of IP rightsholders”; Larry Downes of TechFreedom has labelled the definitons as “a new category broadly defined by the bill.” But are the two definitions, though worded differently, really that different?

I wrote earlier how SOPA’s definitions don’t create new liability, only new remedies. Websites that are engaged in the actions described in SOPA would largely be liable for copyright infringment under existing law. SOPA’s definitions explicitly incorporate these principles. The Open Act’s definitions don’t make reference to these principles — but that doesn’t mean they no longer exist.

Here’s one example: under the OPEN Act, action can be brought against a site where the operator “uses the site to willfully engage in infringing activity.” Willful infringement includes both direct and indirect infringement — vicarious and contributory infringement. 5See, for example, Sega Enterprises v. Maphia, 948 F.Supp. 923, 936 (ND Cali 1996), finding willful infringement for contributory copyright infringement. Contributory infringement generally requires that someone has knowledge of direct infringement and materially contributes to the infringement. 6Gershwin Publishing v. Columbia Artists Management, 443 F.2d 1159, 1162 (2nd Cir. 1971). “Knowledge” can mean actual knowledge, but it can also mean willful blindness. 7See In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th Cir. 2003), “Willful blindness is knowledge, in copyright law… as it is in the law generally.”

The Supreme Court has defined “willful blindness” as taking “deliberate actions to avoid confirming a high probability of wrongdoing.” 8Global-Tech Appliances v. SEB, 131 S.Ct. 2060, 2070 (2011). Coincidentally, Global-Tech was an appeal from a Federal Circuit decision. In other words, a site operator who “uses the site to willfully engage in infringing activity” can include, by definition, a site operator who is “taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the . . . site to carry out acts that constitute” copyright infringement.”

Speculation? Consider this: less than two weeks ago, the ITC reversed an ALJ’s finding that a manufacturer had induced patent infringement based on the Supreme Court’s formulation of willful blindness. 9Commission opinion, In the Matter of Certain Ink Jet Cartridges, No. 337-TA-723, pp. 15-16 (ITC, Dec. 1, 2011).

Another example of where a site operator can willfully engage in infringing activity is by inducing copyright infringement. DMCA safe harbors don’t protect such service providers. 10See Columbia Pictures v. Fung, 2:06-cv-05578-SVW-JC (CD Cali Dec. 21, 2009) “inducement liability and the Digital Millennium Copyright Act safe harbors are inherently contradictory. Inducement liability is based on active bad faith conduct aimed at promoting infringement; the statutory safe harbors are based on passive good faith conduct aimed at operating a legitimate internet business”; Arista v. Usenet, 663 F.Supp.2d 124, 142 (SDNY 2009), “if Defendants … encouraged or fostered such infringement, they would be ineligible for the DMCA’s safe harbor provisions.” Inducement, as described by the Supreme Court in MGM v. Grokster, is promoting the use of a product or service to infringe, “as shown by clear expression or other affirmative steps taken to foster infringement.”

Again, this means that the difference in definitions between the two bills is one of wording: SOPA explicitly incorporates existing principles of liability, the OPEN Act incorporates existing principles implicitly.

More US Control over the Internet?

The following portion of the OPEN Act jumped out at me:

(5) LIMITATION ON INVESTIGATIONS OF DOMAIN NAMES; CONSENT TO JURISDICTION. Notwithstanding any other provision of this section, the Commission may not initiate an investigation under paragraph (1) with respect to a domain name if the operator of the Internet site associated with the domain name

(A) provides in a legal notice on the site accurate information consisting of

(i) the name of an individual authorized to receive process on behalf of the site;

(ii) an address at which process may be served;

(iii) a telephone number at which the individual described in clause (i) may be contacted; and

(iv) a statement that the operator of the site

(I) consents to the jurisdiction and venue of the United States district courts with respect to a violation under section 506 of title 17, United States Code, a criminal offense under section 1204 of title 17, United States Code, for a violation of section 1201 of such title, or a violation of section 2320 of title 18 of such Code; and

(II) will accept service of process from the Attorney General with respect to those violations and the offense set forth in subclause (I); and

(B) upon the filing of any civil action in the appropriate United States district court

(i) for infringement of copyright under section 501 of title 17, United States Code,

(ii) under section 1203 of title 17, United States Code, for a violation of section 1201 of such title, or

(iii) under section 32(1) of the Lanham Act, accepts service and waives, in a timely manner, any objections to jurisdiction as set forth in the statement described in subparagraph (A)(iv).

In short, this portion says that an action can’t be brought against a foreign website if the website owner consents to being sued in the US for copyright infringement. Foreign websites who don’t consent can be sued in the ITC, those who do can be sued in a US court. That means, if the bill passes, a US copyright owner would have the ability to bring legal action against every website in the world.

While I agree that the US and its residents should have some recourse against sites tht engage in US commerce and infringe against US rights, this part of the OPEN Act seems to go overboard in that regard.

Is the OPEN Act Constitutional?

Administrative agencies like the ITC exercise a mix of government functions — executive, legislative, and judicial — but (most) nominally reside in the executive branch. Very few people seriously argue that agencies in general are unconstitutional, but whenever an agency is granted new powers, it’s important to make sure that such a grant is constitutional.

“Separation of powers” and “checks and balances” should be familiar concepts to anyone in the US. Article III of the Constitution establishes an independent judiciary, providing that any judge is appointed for life, keeping judges free from undue influence by the executive or legislative branches.

But the Supreme Court has recognized three exceptions to this rule, where Congress can delegate judicial functions to agencies and courts that don’t provide for life tenure or otherwise aren’t a part of an independent judiciary. Congress can create non-Article III courts to govern U.S. territories, to administer courts-martial, and to adjudicate “public rights.” 11Northern Pipeline v. Marathon Pipe Line, 458 US 50, 64-67 (1982).

As is often the case, the Court didn’t nail down a precise definition of “public rights.” It merely noted:

The distinction between public rights and private rights has not been definitively explained in our precedents. Nor is it necessary to do so in the present cases, for it suffices to observe that a matter of public rights must at a minimum arise “between the government and others.” In contrast, “the liability of one individual to another under the law as defined,” is a matter of private rights. Our precedents clearly establish that only controversies in the former category may be removed from Art. III courts and delegated to legislative courts or administrative agencies for their determination. Private-rights disputes, on the other hand, lie at the core of the historically recognized judicial power.

A much earlier Court provided some examples of cases involving “public rights”:

Familiar illustrations of administrative agencies created for the determination of such matters are found in connection with the exercise of the congressional power as to interstate and foreign commerce, taxation, immigration, the public lands, public health, the facilities of the post office, pensions and payments to veterans. 12Crowell v. Benson, 285 US 22, 51 (1932).

Administrative law judges in the ITC, who would preside over cases arising from this bill, are not Article III judges. The agency doesn’t preside over a U.S. territory or hear cases involving military regulations, so the question is whether cases under OPA involve “public rights.”

The Federal Circuit has heard a constitutional challenge to the ITC involving this question. It upheld the ITC’s authority to adjudicate international patent disputes, saying, “§ 337 and its predecessor provisions represent a valid delegation of this broad Congressional power [the power to regulate commerce with foreign nations] for the public purpose of providing an adequate remedy for domestic industries against unfair practices beginning abroad and culminating in importation.” 13AKZO NV v. US International Trade Commission, 808 F.2d 1471, 1488 (Fed. Cir. 1986).

Assuming the Federal Circuit’s reasoning is correct, I still wonder whether it extends to the new powers the ITC would have. For starters, a website engaging in digital piracy is quite different from a manufacturer importing infringing goods into the US. Online infringement involves unauthorized exercise of the exclusive rights of copyright, not commerce — and copyright has historically been adjudicated in Article III courts, not specialized legislative courts.

In addition, there’s less of a case to be made for copyright as involving “public rights” as there is for patent. A patent grant is a quid pro quo with the public: an inventor is given an exclusive monopoly on an invention in exchange for disclosing to the public the methods of the patent. Copyright includes no such quid pro quo — protection is automatically vested upon creation of a work. 14See Eldred v. Ashcroft, 537 US 186, 214-17 (2003).

Even if constitutional, at the very least, this expansion of agency powers should raise concerns, especially considering the expense that would be involved. Congress should have a little more to go on than speculation about the effectiveness of an agency approach before devoting considerable time and resources to it.

References

References
↑1 Wyden’s original metaphor makes little sense to me. On the one hand, “bunker-buster” bombs are used against targets that conventional weapons can’t take out and are designed for high accuracy and minimal collateral damage — precisely the type of remedies creators need online. Laser beams, on the other hand, are currently a long way from being useful as weapons.
↑2 For example, David Sohn of the Center for Democracy & Technology has said, “This is a bill that would eviscerate the predictable legal environment created by the DMCA”; Markham Erickson of NetCoalition has said, “Both bills gut the Digital Millennium Copyright Act (DMCA)”; and Corynne McSherry of the Electronic Frontier Foundation has said SOPA “would also threaten to effectively eliminate the DMCA safe harbors.”
↑3 Generally, courts in common law systems are bound by stare decisis to follow precedent of all courts above them. Since ITC decisions are appealable to the Federal Circuit, I assume the ITC is bound by Federal Circuit decisions, though I haven’t been able to confirm this.
↑4 For example, Ryan Radia of the Competitive Enterprise Institute has said, “The scope of websites encompassed by these provisions appears to be potentially vast”; Parker Higgins of the EFF has said, “the broad definitions and vague language in the bill could place dangerous tools into the hands of IP rightsholders”; Larry Downes of TechFreedom has labelled the definitons as “a new category broadly defined by the bill.”
↑5 See, for example, Sega Enterprises v. Maphia, 948 F.Supp. 923, 936 (ND Cali 1996), finding willful infringement for contributory copyright infringement.
↑6 Gershwin Publishing v. Columbia Artists Management, 443 F.2d 1159, 1162 (2nd Cir. 1971).
↑7 See In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th Cir. 2003), “Willful blindness is knowledge, in copyright law… as it is in the law generally.”
↑8 Global-Tech Appliances v. SEB, 131 S.Ct. 2060, 2070 (2011). Coincidentally, Global-Tech was an appeal from a Federal Circuit decision.
↑9 Commission opinion, In the Matter of Certain Ink Jet Cartridges, No. 337-TA-723, pp. 15-16 (ITC, Dec. 1, 2011).
↑10 See Columbia Pictures v. Fung, 2:06-cv-05578-SVW-JC (CD Cali Dec. 21, 2009) “inducement liability and the Digital Millennium Copyright Act safe harbors are inherently contradictory. Inducement liability is based on active bad faith conduct aimed at promoting infringement; the statutory safe harbors are based on passive good faith conduct aimed at operating a legitimate internet business”; Arista v. Usenet, 663 F.Supp.2d 124, 142 (SDNY 2009), “if Defendants … encouraged or fostered such infringement, they would be ineligible for the DMCA’s safe harbor provisions.”
↑11 Northern Pipeline v. Marathon Pipe Line, 458 US 50, 64-67 (1982).
↑12 Crowell v. Benson, 285 US 22, 51 (1932).
↑13 AKZO NV v. US International Trade Commission, 808 F.2d 1471, 1488 (Fed. Cir. 1986).
↑14 See Eldred v. Ashcroft, 537 US 186, 214-17 (2003).

Stop Online Piracy Act [Walkthrough]

By , October 27, 2011.

Yesterday, a dozen Democrat and Republican House members introduced the Stop Online Piracy Act. The bill, H.R. 3261, targets rogue sites that infringe on US intellectual property rights.

Full text of the bill.

Debate over the Stop Online Piracy Act has already hit full throttle, but I’ll leave that for another day.

Today I want to “walk through” the bill so that readers and creators know exactly what is in it and what to expect if it passes. I’ve tried to keep the legalese to a minimum here. This is not meant to be a comprehensive look at every bit and piece of the bill, but hopefully I’ve hit all the major points.

If you look at the text of the bill, you’ll notice that there are several sections I haven’t mentioned below — provisions that increase criminal penalties for trafficking in inherently dangerous counterfeit goods, for example. I don’t mean to suggest these aren’t as important as the ones directly related to copyright enforcement.

Attorney General actions against foreign infringing sites

The first section of the bill applies only to foreign infringing sites — sites where the domain name is not registered within the US. The Attorney General may commence an action under this section if one of these sites is directed at the US (meaning it is used by US users, and the owner of the site would be subject to personal jurisdiction in a traditional infringement lawsuit), the owner of the site is committing or facilitating a criminal copyright offense, and the site would be subject to seizure if it were a domestic site (like the domains seized by ICE over the past year).

This suit would then be filed against the site operator personally. If the operator cannot be found or doesn’t live in the US, the Attorney General may file an in rem action against the site itself. The statute also details how notice of the suit must be served.

Once begun, the AG files for a temporary restraining order, a preliminary injunction, or a permanent injunction against the site, ordering it to stop its infringing activites. A court would issue these injunctions under the same rules that govern every federal lawsuit — with both parties presenting their case (except in the case of a temporary restraining order, which can be issued ex parte but is limited to 14 days) and the injunction issuing only if the AG meets its burden. A preliminary injunction, for example, requires establishing likelihood of success on the merits and irreparable harm (among other factors).

The AG can then, after approval by the court, serve court orders on specified entities, requiring specified actions by each entity. In all cases, the entities are only required to take “technically feasible and reasonable measures” to comply with the orders.

(1) An online service provider must prevent access by its subscribers to the infringing site, including preventing the domain name from resolving to the site’s IP address. The service provider is not required to modify its “network, software, system, or facilities” in order to do this, and its DMCA safe harbors are not affected.

(2) A search engine must prevent the infringing site from being served as “a direct hypertext link”.

(3) A payment network provider must prevent or suspend transactions between US customers and the infringing site from completing. The payment network provider has no continuing duty to monitor transactions after it has taken these steps.

(4) An Internet advertising service is required to prevent providing advertising services to or relating to the infringing site. Like payment network providers there is no continuing duty to monitor once the advertising service has put its measures into place.

That’s it.

What happens if one of the entities above doesn’t comply with the order? The AG can bring an action for an injunction against the provider to order it to comply. 1Under this section, the AG can also bring an action for injunctive relief prohibiting any entity that has knowingly and willingly offered a product or service designed or marketed for circumventing the measures taken by the above entities. The failure to comply must be knowing and willing, and this injunctive relief is the only legal remedy available here. 2A failure to comply with any injuction issued may result in contempt of court.

In addition, in this action, entities are given a defense against failure to comply if they can show they do “not have the technical means to comply with this subsection without incurring an unreasonable economic burden.”

Finally, any of the above individuals and entities may move to modify or vacate the orders at any time after they are issued. The court may grant this relief if it finds that the site at issue has stopped, or never was, infringing, or if “the interests of justice otherwise require” it.

DMCA 2.0

This next section borrows the notice-and-takedown procedure of the DMCA and applies it to preventing profit from piracy.

Both foreign and domestic US-directed sites are subject to this section, but only if they are “dedicated to theft of US property.” The section defines this as either (1) a site that “is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates” copyright infringement or circumvention of technological measures; or, (2) a site where the operator has either remained willfully blind to a high probability of infringing acts occuring on the site or induced infringement through the site.

A copyright holder that has been harmed by one of these sites may serve a notice on payment network providers or Internet advertising providers that service the site. When a provider receives a notice, it is required to take the same technically feasible and reasonable measures described in the first section or reply with a counter-notification disputing the notice. As with the DMCA, copyright holders are liable for any monetary damages that may occur if they knowingly and materially misrepresent that a site is dedicated to the theft of US property.

If a provider serves a counter-notification or fails to comply with a notice under this section, the copyright holder can initiate an action very similar to the one the Attorney General can initiate under the first section of the bill. Court orders in this section are limited to the advertising and payment providers involved.

Commercial Streaming

Sorry, Justin Bieber is still not going to jail under the House’s version of the Commercial Felony Streaming Act included in SOPA. The language is largely the same, but there is one key difference.

To be convicted for criminal copyright infringement, the government must prove beyond a reasonable doubt that the defendant acted willfully. Most courts have interpreted willfulness strictly: an intentional violation of a known legal duty. But a small number of courts have instead adopted a lower standard: the intent to do the acts at issue without knowledge that they constituted infringement. 3Prosecuting IP Crimes Manual. The lower standard has caused some worry, especially when it comes to criminal copyright statutes applied to online infringement.

SOPA takes care of this. It says:

Any person acting with a good faith reasonable basis in law to believe that the person’s conduct is lawful shall not be considered to have acted willfully for purposes of the amendments made by this section. Such person includes, but is not limited to, a person engaged in conduct forming the basis of a bona fide commercial dispute over the scope of existence of a contract or license governing such conduct where such person has a reasonable basis in law to believe that such conduct is noninfringing. Nothing in this subsection shall affect the application or interpretation of the willfulness requirement in any other provision of civil or criminal law.

The bill offers a lot to digest, and I’ll be sure to have more analysis in the coming weeks. My initial thoughts: this is a well-crafted bill, providing effective remedies against the narrow problem of rogue sites. Anyone who makes a living creating knows it’s impossible to stop all piracy — that’s been true since the beginning of copyright — but at the very least, our laws should be able to reliably prevent individuals and companies from profiting off of online piracy. And this bill promises to be a big step in that direction.

The House Judiciary Committee is scheduled to hold a hearing on the Stop Online Piracy Act on November 16, 2011.

References

References
↑1 Under this section, the AG can also bring an action for injunctive relief prohibiting any entity that has knowingly and willingly offered a product or service designed or marketed for circumventing the measures taken by the above entities.
↑2 A failure to comply with any injuction issued may result in contempt of court.
↑3 Prosecuting IP Crimes Manual.

Free Ride by Robert Levine Available Today

By , October 25, 2011.

Just a quick note today to point readers to Robert Levine‘s wonderful Free Ride: How Digital Parasites are Destroying the Culture Business, and How the Culture Business Can Fight Back, which is available in the US today. (And if you haven’t already, be sure to check out his blog.) 1I apologize if this seems like a shameless plug. Rob’s a friend, and I helped him with some legal research for the book. But I’m not getting paid to talk it up — I just think it’s a great book.

I previously wrote a more thorough review of Free Ride on this site, but to sum up: the book offers a well-researched look at copyright issues in the digital age over the past decade and a half. The reality is a far cry from the narrative you often hear from copyright’s critics — one of greedy dinosaurs who failed to adapt their business models and instead relied on ever-stronger enforcement.

The difference between that narrative and reality is not a historical accident, as Levine shows. The businesses and industries that benefited the most from weakened copyright protection and devalued digital content facilitated and funded many of the civil and academic proponents of those same ideas.

I think Free Ride is a must-read for creators, policy makers, and copyright wonks. It’s also entertaining, and should interest anyone who’s gotten into debates over file-sharing, digital media, or the future of the content industries.

References

References
↑1 I apologize if this seems like a shameless plug. Rob’s a friend, and I helped him with some legal research for the book. But I’m not getting paid to talk it up — I just think it’s a great book.

Justin Bieber is not going to jail

By , October 24, 2011.

By now, you’ve probably heard of the “Free Bieber” Campaign. Since it was announced, it has been widely reported on many blogs and news sites, including Hillicon Valley.

According to the campaign:

A new bill in Congress makes posting a video containing any copyrighted work a felony– with up to 5 years in prison.

But wait… didn’t Justin Bieber get famous by posting YouTube videos of himself singing copyrighted R&B songs? Yep.
If this bill passes, he could get 5 years in jail.

The rest of the website (store coming soon!) is filled with the usual diatribes against the mean record labels and movie studios.

But what makes this campaign truly absurd is that it is completely wrong about what this new bill will do. Not wrong in a “we’ll agree to disagree” sense, but wrong about the plain meaning of the text of the legislation.

The bill referred to hear is S.978, the Commercial Felony Streaming Act, introduced in the Senate last May. I wrote about the bill, what it does, and why it’s needed several times in the past (see Fears of Felony Streaming Bill Overblown and Commercial Felony Streaming Act FUD).

The individuals behind the “Free Bieber” campaign are either completely ignorant about how copyright law works or being deliberately disingenuous  to stir up opposition against a minor, albeit judicious, piece of legislation. Anyone who uploads video to YouTube faces no increased risk of criminal penalties if this bill passes.

Justin Bieber is not going to jail.

Uploading Video is Not a Public Performance

Copyright is made up of several, discrete rights: the right to reproduce, distribute, prepare derivative works, and publicly perform (or display) a work. 117 USC § 106. The Commercial Felony Streaming Act only concerns the public performance right. It aligns the maximum criminal penalties for infringement of public performances to the equivalent, already existing penalties for infringement of reproduction and distribution of copyrighted works.

It should first be pointed out that a “performance” requires two parts: an active and a passive component, the performer and the audience. “Broadcasters perform. Viewers do not perform.” 2Fortnightly Corp v. United Artists Television, 392 US 390, 398 (1968). Only a performer is liable for an unauthorized public performance; viewers and listeners are not infringers in this situation. 3Twentieth Century Music v. Aiken, 422 US 151, 159-60 (1975); Jerome H. Remick & Co. v. General Electric, 16 F.2d 829 (SDNY 1926): “Certainly those who listen do not perform, and therefore do not infringe.” So someone who merely watches or listens to unauthorized streaming media is not infringing on the copyright owner’s public performance right. 4Whether or not such activity infringes on the reproduction right is an entirely different question for another day.

The key to understanding public performance is pinning down what activity constitutes a performance and who is acting as the performer. (And don’t confuse the legal definition of a “performance” within copyright law with the every day meaning of the word.)

You may recall that earlier this month the Supreme Court denied cert in US v. ASCAP. That lawsuit provides a good starting point for learning how to answer these questions. ASCAP had argued that a download of a music file is not only a reproduction but also a public performance of the work. Both the District and Circuit Courts rejected this argument.

Said the 2nd Circuit:

The ordinary sense of the words “recite,” “render,” and “play” refer to actions that can be perceived contemporaneously. To “recite” is “to repeat from memory or read aloud esp[ecially] before an audience”, to “render” is to “say over: recite, repeat,” and to “play” is to “perform on a musical instrument,” “sound in performance,” “reproduce sound of recorded material” or to “act on a stage or in some other dramatic medium.” All three actions entail contemporaneous perceptibility.

These definitions comport with our common-sense understandings of these words. Itzakh Perlman gives a “recital” of Beethoven’s Violin Concerto in D Major when he performs it aloud before an audience. Jimmy Hendrix memorably (or not, depending on one’s sensibility) offered a “rendition” of the Star-Spangled Banner at Woodstock when he performed it aloud in 1969. Yo-Yo Ma “plays” the Cello Suite No. 1 when he draws the bow across his cello strings to audibly reproduce the notes that Bach inscribed. Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener.

The final clause of the § 101 definition of “to perform” further confirms our interpretation. It states that a performance “in the case of a motion picture or other audiovisual work, [is] to show [the work’s] images in any sequence or to make the sounds accompanying it audible.” The fact that the statute defines performance in the audio-visual context as “show[ing]” the work or making it “audible” reinforces the conclusion that “to perform” a musical work entails contemporaneous perceptibility. ASCAP has provided no reason, and we can surmise none, why the statute would require a contemporaneously perceptible event in the context of an audio-visual work, but not in the context of a musical work.

The downloads at issue in this appeal are not musical performances that are contemporaneously perceived by the listener. They are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive. The downloaded songs are not performed in any perceptible manner during the transfers; the user must take some further action to play the songs after they are downloaded. Because the electronic download itself involves no recitation, rendering, or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work, as defined by § 101. [Emphasis added]. 5US v. ASCAP, 627 F.3d 64, 72-73 (2010).

Though it was specifically addressing downloading a file, the reasoning applies just as well to uploading a file. And, in fact, the District Court spoke more directly, saying “Although we acknowledge that the term ‘perform’ should be broadly construed, we can conceive of no construction that extends it to the copying of a digital file from one computer to another in the absence of any perceptible rendition.” 6US v. ASCAP, 485 F.Supp.2d 438, 443-44 (SDNY 2007). Other courts seem to agree: “Napster users who upload file names to the search index for others to copy violate plaintiffs’ distribution rights. Napster users who download files containing copyrighted music violate plaintiffs’ reproduction rights.” 7A&M Records v. Napster, 239 F.3d 1004, 1014 (9th Cir. 2001). “Downloading and uploading copyrighted files from a peer-to-peer network constitutes, respectively, reproducing and distributing copyrighted material in violation of 17 U.S.C. § 106.” 8Maverick Recording Co. v. Goldshteyn, No. CV-05-4523, 2005 WL 2892371, *3, 2006 U.S. Dist. LEXIS 52422, at *8 (E.D.N.Y. July 31, 2006).

Uploading a video to YouTube, then, may infringe on someone else’s reproduction or distribution rights, but it doesn’t infringe on someone else’s public performance rights.

We can compare users who upload to YouTube to record labels who provide songs to radio stations. Most commonly, record labels and recording artists control only the rights to the sound recording, while music publishers and songwriters control the rights to the underlying song. 9See Brian Day, In Defense of Copyright: Record Labels, Creativity, and the Future of Music, 21 Seton Hall Journal of Sports and Entertainment Law 61 (2011); Licensing Music: Cover songs, samples, public domain, CDBaby, July 23, 2010; Brooke Wentz, Understanding the Roles of Copyright Holders: Publishers and Labels, RightsWorkshop, July 29, 2010. A recording artist needs permission from a songwriter to reproduce a song onto a sound recording — generally called a “mechanical license.” A radio station needs permission to perform the song on air 10Though, at least in the US, it does not need permission to perform the sound recording on air since the Copyright Act only recognizes a limited digital public performance right for sound recordings, see 17 USC § 106(4), (6). — permission that is granted through blanket licensing by Performance Rights Organizations (in the US: ASCAP, BMI, and SESAC). The record label, however, doesn’t need a public performance license in this scenario because giving the sound recording to a radio station is not a performance.

In the same way, someone who uploads a video to YouTube is not performing the video — YouTube is.

Someone uploading a video to YouTube still needs permission for any reproduction or distribution of someone else’s copyrighted work that occurred during the creation and uploading of the video — but that’s always been true. The Commercial Felony Streaming Act adjusts the penalty only for unauthorized public performances.

In short, the proposed legislation changes no law that would effect someone uploading a video to YouTube.

It’s Still Copyright Infringement Without S.978

As an aside, I want to address the idea that creating and uploading videos to YouTube that use copyrighted material without permission is (and has always been) copyright infringement. Judging by some of the comments on sites reporting on the “Free Bieber” campaign, this idea is news to many people.

But despite the fact that creating and uploading a video using copyrighted material without permission is, in many cases, infringement, and despite much ink spilled worrying that such “user-generated content” could subject the user to copyright law’s various penalties, these worries have failed to materialize.

I’m not talking about a video being removed pursuant to a DMCA takedown notice — service providers take users’ videos down when they are notified by a content owner to protect themselves. A user may not like seeing his video come down, but a DMCA takedown is not legal action against the user and has no bearing on any liability for infringement the user may be exposed to.

I’m also not talking about lawsuits filed against individual P2P users for uploading and downloading music and movies through P2P networks. Filesharing is a markedly different activity than uploading content to a UGC sharing site like YouTube.

I’m talking specifically about legal action taken against users of YouTube and other sites who upload videos that may infringe on someone else’s copyright.

The EFF, certainly not biased in favor of copyright enforcement, is clear that this has not been a problem:

As far as we know, no typical YouTube user has ever been sued by a major entertainment industry company for uploading a video. We have heard of a couple special cases, involving pre-release content leaked by industry insiders, but those aren’t typical YouTube users. And there have probably been a few lawsuits brought by aggressive individual copyright trolls. But no lawsuits against YouTubers by Hollywood studios or major record labels. That’s right — millions of videos have been posted to YouTube, hundreds of thousands taken down by major media companies, but those companies have not brought lawsuits against YouTube users.

Given that over 48 hours of video are uploaded to YouTube every minute, the percentage of people who face liability for copyright infringement on the site is effectively zero.

In his response to the “Free Bieber” campaign, Thomas Sydnor allays these worries even further. He notes that “Neither existing law nor S. 978 criminalizes the act of being a kid or consumer who does not understand the nuances of performance-right licensing”, “Even if posted years ago, Bieber’s videos were probably licensed,” and “Federal prosecutors have never, nor will they ever, prosecute ordinary consumers for technical infringements unworthy of even a takedown notice.”

We can disagree over legitimate concerns over any proposed legislation — its effectiveness, whether potential harms outweigh potential benefits. But these are not legitimate concerns. The worries expressed are not, in any sense, implicated by S.978.

 

References

References
↑1 17 USC § 106.
↑2 Fortnightly Corp v. United Artists Television, 392 US 390, 398 (1968).
↑3 Twentieth Century Music v. Aiken, 422 US 151, 159-60 (1975); Jerome H. Remick & Co. v. General Electric, 16 F.2d 829 (SDNY 1926): “Certainly those who listen do not perform, and therefore do not infringe.”
↑4 Whether or not such activity infringes on the reproduction right is an entirely different question for another day.
↑5 US v. ASCAP, 627 F.3d 64, 72-73 (2010).
↑6 US v. ASCAP, 485 F.Supp.2d 438, 443-44 (SDNY 2007).
↑7 A&M Records v. Napster, 239 F.3d 1004, 1014 (9th Cir. 2001).
↑8 Maverick Recording Co. v. Goldshteyn, No. CV-05-4523, 2005 WL 2892371, *3, 2006 U.S. Dist. LEXIS 52422, at *8 (E.D.N.Y. July 31, 2006).
↑9 See Brian Day, In Defense of Copyright: Record Labels, Creativity, and the Future of Music, 21 Seton Hall Journal of Sports and Entertainment Law 61 (2011); Licensing Music: Cover songs, samples, public domain, CDBaby, July 23, 2010; Brooke Wentz, Understanding the Roles of Copyright Holders: Publishers and Labels, RightsWorkshop, July 29, 2010.
↑10 Though, at least in the US, it does not need permission to perform the sound recording on air since the Copyright Act only recognizes a limited digital public performance right for sound recordings, see 17 USC § 106(4), (6).

Golan v. Holder Argument Preview

By , October 05, 2011.

This afternoon, the Supreme Court will hear oral arguments in Golan v. Holder. I previously wrote about the case here, which has bounced around between the District Court and the 10th Circuit several times over the past 10 years before landing here. Check out SCOTUSblog for links to each side’s briefs as well as the numerous amici briefs for both sides.

Golan involves the constitutionality of the restoration provisions that were passed as part of the Uruguay Round Agreements Act of 1994 (URAA). 1Those provisions made up § 514 of URAA and are codified at 17 USC § 104A. Those provisions restored copyright protection to foreign works which were still protected in their source country but that had fallen into the public domain in the US prior to 1996 because of failure to comply with formalities (like lack of proper notice), because of lack of national eligibility, or because the work was a sound recording made before 1972. The Act excluded liability for any use of restored works prior to restoration, limited the remedies available for existing derivative works based on restored works. “Reliance parties” — parties which exploited the work before copyright restoration — could continue to exploit the work without liability unless the owner of the work serves a notice to enforce his rights.

Whether the restoration provisions here stand or fall will have little effect beyond reliance parties like Golan and the other plaintiffs because of the limited scope of the law, but many who support Golan’s position are hoping to use a Supreme Court victory as a broader vehicle for affirming the values of the public domain in general and finally getting independent First Amendment review applied to copyright law to serve as a limitation on Congressional policy in that area — policy they often disagree with.

The Supreme Court is presented with two questions. Do the restoration provisions of the URAA exceed Congress’s authority under the Copyright Clause? Or, does this law run afoul of the First Amendment?

The Copyright Clause

On the first question, Golan essentially is asking the Supreme Court to draw a line in the sand: once a work falls in the public domain, it stays there. It paints a picture of the history of copyright law as one showing an “unbroken respect for the integrity of the public domain”. Under this view, the URAA restoration provisions represent a departure from this history. Golan worries that if the Court doesn’t draw a line here, it would put everything in the public domain into question, as Congress would have no barrier to removing works from the public domain whenever it wishes anytime in the future.

The US argues that much of Golan’s arguments are merely a restatement of Eldred’s failed assertion that the Copyright Clause embodies a quid pro quo between the public and authors. This assertion reads the preamble of the Copyright Clause — the “to promote the progress of science” language — as an independent limitation on Congressional authority. But, as the US points out, the Eldred Court rejected that interpretation and gave deference to Congress for crafting copyright legislation that best advances the goals of the preamble.

The US also argues that restoration doesn’t violate the “limited times” limitation because it doesn’t extend the length of the term restored works are protected for, it only protects them for as long as they would have been protected but for their lack of adherence to pre-Berne Convention US copyright law.

Finally, the US disputes Golan’s characterization of an unbroken history of leaving public domain works untouched. The very first Copyright Act (1790), in fact, conferred “federal copyright protection upon many works that were previously subject to unrestricted exploitation by the public.”

First Amendment

When the Supreme Court decided Eldred, it said that heightened First Amendment review of a copyright statute is unnecessary when “Congress has not altered the traditional contours of copyright protection.” The 10th Circuit ruled that Congress had altered these contours when it passed the URAA in its first decision. 2Golan v. Gonzales, 501 F.3d 1179 (2007). When Golan reached the appeals court the second time, the court held that copyright restoration was a permissible content-neutral regulation. 3Such regulations don’t violate the First Amendment if they advance “important governmental interests unrelated to the suppression of free speech” and don’t “burden substantially more speech than necessary to further those interests.”

Golan agrees with the 10th Circuit’s review of copyright restoration as a content-neutral regulation but argues that it fails this review. It claims the free speech rights at stake are too important and the government’s interest — which Golan describes as conferring “windfalls directly on foreign authors in the hope that this may create later windfalls for U.S. authors” — is not even a “legitimate” interest, let alone an important one. What’s more, Golan alleges that Congress lacked substantial evidence that the URAA would actually advance this interest. Golan lastly argues that even if this was an important interest, Congress could have drafted the restoration provisions more narrowly to decrease their burden on free speech interests.

The US argues the polar opposite: copyright restoration shouldn’t be subjected to further First Amendment review at all. It says the 10th Circuit misread Eldred’s statement about the First Amendment and the “traditional contours” of copyright protection as though the Court had created a new test for deciding when to apply independent First Amendment review to a copyright statute. Even if Eldred had created a “freestanding inquiry”, the URAA hadn’t altered the traditional contours of copyright protection. Uses of restored works would still be protected by copyright’s built-in free speech safeguards, the idea/expression dichotomy and fair use.

The US concludes its argument by saying that even if further First Amendment scrutiny is required, copyright restoration is constitutional. It supports this conclusion with testimony and congressional hearings that shows it had a significant interest in passing this legislation, and the restoration provisions were only as broad as necessary to advance that interest.

What to expect?

In many ways, Golan is a sequel to Eldred v. Ashcroft. Both cases were part of a series of challenges to copyright law changes in the mid-90s brought in part by Lawrence Lessig. Golan initially included a claim identical to Eldred — that the CTEA was unconstitutional. This claim was stayed when the Supreme Court granted cert and dismissed after its decision. 4Golan v. Ashcroft, 310 F.Supp. 2d 1215 (D. Colo. 2004). Now at the Supreme Court, Golan presents the same dual questions regarding the extent of Congress’s authority under the Copyright Clause and the First Amendment limitations on the exercise of that authority. In addition, the First Amendment issue in Golan relies heavily on the Court’s holding in Eldred.

Finally, in Eldred, the plaintiffs had attempted to draw a parallel between the CTEA and the laws struck down in US v. Lopez and US v. Morrison. In those cases, the same Justices that would rule on Eldred had ruled that two recently-passed laws were outside Congress’s authority to regulate interstate commerce, an authority that before than had been steadily expanding to the point where it seemed unlimited. Eldred hoped to convince the Court that the CTEA was like those laws — an expansion of Congress’s authority under its copyright power that would continue indefinitely unless the Court places a constitutional limit on it.

This argument, of course, failed, and Lessig — who had argued the case in front of the Court — publicly shouldered the blame for that failure. It will be interesting to see how Golan’s legal team approaches such a similar case with the lessons of Eldred, presumably, in mind.

Hopefully we get to see the Court push both parties on the relevant history of copyright law, since it plays a starring role in the question of whether and how Congress’s copyright power is limited, and both parties present such different versions of that history. Interestingly, the DC Circuit of Appeals rejected strikingly similar arguments against the URAA’s restoration provisions in Luck’s Music Library v. Gonzales. 5407 F.3d 1262 (2005). It notably took the same view of the relevant copyright law history as the US argues here: the Copyright Act of 1790 and the wartime restoration acts placed public domain works under copyright protection, lending support to the constitutionality of such action.

It will also be interesting to see if the Court asks about the then Solicitor General’s remark during oral arguments at Eldred about a “bright line” separating the constitutionality of extending existing copyright terms from granting protection after the term expired. Golan characterizes this remark in its brief as an acknowledgment by the US that it is prevented from restoring copyright to public domain works; the US responds that Golan misreads the remark — it was anything but a concession of a constitutional limitation.

References

References
↑1 Those provisions made up § 514 of URAA and are codified at 17 USC § 104A.
↑2 Golan v. Gonzales, 501 F.3d 1179 (2007).
↑3 Such regulations don’t violate the First Amendment if they advance “important governmental interests unrelated to the suppression of free speech” and don’t “burden substantially more speech than necessary to further those interests.”
↑4 Golan v. Ashcroft, 310 F.Supp. 2d 1215 (D. Colo. 2004).
↑5 407 F.3d 1262 (2005).

Supreme Court declines download royalty dispute

By , October 04, 2011.

The US Supreme Court began its October 2011 term on Monday, a term that many foresee will be exciting and important. That no doubt holds true for copyright law buffs in particular — the Court will be hearing oral arguments in Golan v. Holder on Wednesday.

But the Court has already addressed one case dealing with copyright law. Yesterday, it denied ASCAP’s petition to overturn a Second Circuit decision holding that downloads of a song do not constitute a public performance of the underlying musical composition.

This was not a big surprise.

In the lower courts

ASCAP administers public performance right licenses in the US — it, along with BMI and SESAC, grants licenses to radio and TV stations, physical venues, and internet services that wish to publicly perform musical compositions on behalf of songwriters and composers.

Since 1941, ASCAP has operated according to a consent decree with the United States after the Department of Justice alleged that its blanket licenses violated anti-trust laws. That decree has been amended several times over the past 60 years and currently provides that the Southern District Court of New York acts as a “rate court” to determine license fees when ASCAP and a licensee cannot agree on a reasonable rate. 1ASCAP Second Amended Final Judgment, Sec. IX, June 11, 2001.

This dispute began when AOL, Yahoo, and RealNetworks couldn’t reach such an agreement with ASCAP. During the rate proceeding, the issue of whether a download is a public performance — which would mean any service providing downloads would require a license from ASCAP — arose.

The District Court held that it was not. 2United States v. ASCAP, 485 F.Supp 2d 438 (2007). Drawing on the language of the relevant statutes, case law, and interpretations from agencies like the US Copyright Office, it said that downloads only constitute a reproduction of a musical composition, not a public performance.

ASCAP appealed the decision (and two subsequent decisions determining the method for calculating the fees in question). The Second Circuit affirmed the District Court’s holding regarding downloads. 3United States v. ASCAP, Nos. 09-0539-cv (L), 09-0542-cv (con), 09-0666-cv (xap), 09-0692-cv (xap), 09-1572-cv (xap) (Sept. 28, 2010). It said that “Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener.”

ASCAP, pointing to the definition of “publicly” in § 101, argues that a download constitutes a public performance. Section 101 defines “[t]o perform or display a work ‘publicly'” as follows:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

ASCAP argues that downloads fall under clause (2) of this definition because downloads “transmit or otherwise communicate a performance,” namely the initial or underlying performance of the copyrighted work, to the public. We find this argument unavailing. The definition of “publicly” simply defines the circumstances under which a performance will be considered public; it does not define the meaning of “performance.” Moreover, ASCAP’s proposed interpretation misreads the definition of “publicly.” As we concluded in Cartoon Network LP v. CSC Holdings, Inc., “when Congress speaks of transmitting a performance to the public, it refers to the performance created by the act of transmission,” not simply to transmitting a recording of a performance. ASCAP’s alternative interpretation is flawed because, in disaggregating the “transmission” from the simultaneous “performance” and treating the transmission itself as a performance, ASCAP renders superfluous the subsequent “a performance… of the work” as the object of the transmittal.

ASCAP again appealed, this time to the Supreme Court.

At the Supreme Court

In its petition for a writ of certiorari, ASCAP argued that the Second Circuit’s decision improperly narrowed the public performance right, contradicts US obligations under intellectual property treaties, and creates profound implications for the American music industry.

ASCAP’s petition was joined by amici, including music publishers, 4These publishers and publisher associations included the Association of Independent Music Publishers, Church Music Publishers Association, Music Publishers’ Association of the United States, National Music Publishers’ Association, Production Music Association, the Songwriters Guild of America, the Society of Composers and Lyricists, the Recording Academy, the Game Audio Network Guild, and the Nashville Songwriters Association International. BMI, and former US Register of Copyrights Ralph Oman.

The United States argued in its brief that Supreme Court review was unnecessary. It reiterated why it believed the Second Circuit’s holding was correct and noted that no other case contradicted this holding. ASCAP’s claim that the holding violates international agreements, said the US, was also without merit.

As for ASCAP’s argument about the impact of the court’s decision on the music industry, the US said this worry is unfounded:

[D]ownloading music files clearly implicates the authors’ rights to re­produce and distribute copies of those musical works. [ASCAP]’s members are therefore paid each time a copyrighted work is lawfully downloaded. To be sure, a different agent licenses those mechanical rights, but the composer or author ultimately benefits regardless of which agent grants the license.

The Supreme Court was ultimately unconvinced by ASCAP’s petition and declined to take up the case, meaning the Second Circuit’s decision stands.

While ASCAP plays a vital role in standing up for its member songwriters, its legal arguments here were a longshot. The Second Circuit’s decision was a sound one, and the Supreme Court had little reason to revisit it.

References

References
↑1 ASCAP Second Amended Final Judgment, Sec. IX, June 11, 2001.
↑2 United States v. ASCAP, 485 F.Supp 2d 438 (2007).
↑3 United States v. ASCAP, Nos. 09-0539-cv (L), 09-0542-cv (con), 09-0666-cv (xap), 09-0692-cv (xap), 09-1572-cv (xap) (Sept. 28, 2010).
↑4 These publishers and publisher associations included the Association of Independent Music Publishers, Church Music Publishers Association, Music Publishers’ Association of the United States, National Music Publishers’ Association, Production Music Association, the Songwriters Guild of America, the Society of Composers and Lyricists, the Recording Academy, the Game Audio Network Guild, and the Nashville Songwriters Association International.
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