In a new “white paper” released today, Kim Dotcom’s lawyers come to the surprising conclusion that Kim Dotcom is not guilty.

Shocking, right?

Taking your case to the court of public opinion could be a sign that your case in a court of law is not going well. But ever since the US government charged Kim Dotcom, 6 other defendants, and 2 companies, including Megaupload, for charges relating to massive copyright infringement in January 2012, Dotcom has been on a full court press to convince the public that multi-millionaries (like him) should be allowed to rip off working class creators (like Ellen Seidler). 1A study released in March demonstrated that the Megaupload shutdown caused a 6-10% increase in digital film revenues, revenues that not only help fund the continued creation of films but also that directly go to union members in the form of residuals. The latest move is the “white paper”, titled Megaupload, the Copyright Lobby, and the Future of Digital Rights (with the self-aggrandizing subtitle, “The United States vs. You (and Kim Dotcom)”). Part of this public relations campaign has involved an attempt to characterize Dotcom as some kind of hacker hero — the white paper places Dotcom in the same pantheon as Steve Jobs and Steve Wozniak. Really? Kim Dotcom is to hacking what the 1995 movie Hackers is to hacking.

And the conspiracy theories described in this white paper seem one relic shy of a Dan Brown novel. 2Even Techdirt describes them as a “massive exaggeration.”

But what about the legal arguments presented in the paper?

The citations to case law may lead the casual reader to the conclusion that there are valid legal arguments within the paper. But for the most part, the arguments are legal sleight of hand, a series of court quotes that, while true, are inapplicable and immaterial to the point being argued. There is little here that Dotcom hasn’t argued in public or in court (unsuccessfully, so far) before.

No Criminal Liability for Secondary Copyright Infringement

The basic premise of this argument is that in the civil context, liability for indirect infringement derives from the common law, not the Copyright Act. Since criminal law as a rule derives entirely from statute, there can be no criminal liability for indirect infringement.

This argument is a red herring.

First, Dotcom and the Megaupload defendants simply are not being charged under any of the tort-based indirect liability standards — which include contributory infringement, vicarious liability, and inducement. They are being charged with direct infringement, aiding and abetting infringement, and conspiracy to commit infringement. 3See Superseding Indictment. The latter two could be considered forms of secondary liability, but they are criminal, not tort forms, and they are provided for by statute.

Next, the white paper wholly skips over the fact that Dotcom has been charged with two counts of direct criminal copyright infringement. Among the allegations supporting these charges is at least one instance where one of the defendants himself uploaded an infringing copy of a film that had not been commercially released yet to Megaupload. 4Superseding Indictment, pg. 44.

But the indictment also alleges multiple instances where copyrighted works were made available to the public through the Megaupload sites. Many courts, and the leading copyright treatise, view making a work available to the public as an infringement of the distribution right. 5See Nimmer Changes his Tune: “Making Available” is Distribution.

Also conveniently left out of the white paper is that a federal court has already stated, in a separate, civil lawsuit, that Megaupload exercises the requisite volition to be held liable for direct infringement. In Perfect 10 v. Megaupload, the Southern District Court of California said:

Drawing all reasonable inferences in Perfect 10’s favor, Megaupload serves as more than a passive conduit, and more than a mere “file storage” company: it has created distinct websites, presumably in an effort to streamline users’ access to different types of media (e.g., megaporn.com, megavideo.com); it encourages and, in some cases pays, its users to upload vast amounts of popular media through its Rewards Programs; it disseminates URLs for various files throughout the internet; it provides payouts to affiliate websites who maintain a catalogue of all available files; and last, at a minimum, it is plausibly aware of the ongoing, rampant infringement taking place on its websites. Taken together, Perfect 10 has adequately alleged Megaupload has engaged in volitional conduct sufficient to hold it liable for direct infringement. [Emphasis added].

(The lawsuit settled before proceeding much further.)

Substantial Non-Infringing Uses

The White Paper next argues that “the U.S. government cannot even argue that the conduct of Megaupload and its executives gives rise to civil liability for secondary infringement, much less criminal liability” under the Supreme Court’s 1984 holding in Sony Corp v. Universal City Studios. The problem with this argument is that it has thoroughly and repeatedly been rejected by courts in cases involving similar services.

The Ninth Circuit rejected it in 2001. 6A & M Records v. Napster, 239 F. 3d 1004, 1020; “Napster claims that it is nevertheless protected from contributory liability by the teaching of Sony Corp. v. Universal City Studios, Inc. We disagree. We observe that Napster’s actual, specific knowledge of direct infringement renders Sony‘s holding of limited assistance to Napster.” The Seventh Circuit rejected it in 2003. 7In re Aimster Copyright Litigation, 334 F. 3d 643, 651; “We also do not buy Aimster’s argument that since the Supreme Court distinguished, in the long passage from the Sony opinion that we quoted earlier, between actual and potential noninfringing uses, all Aimster has to show in order to escape liability for contributory infringement is that its file-sharing system could be used in noninfringing ways, which obviously it could be. Were that the law, the seller of a product or service used solely to facilitate copyright infringement, though it was capable in principle of noninfringing uses, would be immune from liability for contributory infringement. That would be an extreme result, and one not envisaged by the Sony majority.” And, most importantly, the Supreme Court rejected it in 2005. In MGM v. Grokster, Justice Souter explained, “Sony‘s rule limits imputing culpable intent as a matter of law from the characteristics or uses of a distributed product. But nothing in Sony requires courts to ignore evidence of intent if there is such evidence, and the case was never meant to foreclose rules of fault-based liability derived from the common law.”

Other courts have pointed out that Sony only applies if you’re focusing on liability for the design of a product rather than conduct 8Perfect 10 v. Amazon, 508 F. 3d 1146, 1171 (9th Cir. 2007). or if there is no continuing relationship between the maker of a product and the user. 9CoStar Group v. Loopnet, 164 F. Supp. 2d 688, 697 (D. Md. 2001). But whatever the case, the fact remains that courts have consistently found Sony inapplicable to online service providers like Megaupload for over a decade. It’s telling that this was the strongest argument the white paper could muster.

Rewards Program Not a Contributor to Infringement

Next, the white paper says that the argument that its rewards program encouraged or contributed to infringement is a “glaring falsehood.” Megaupload claims that its program that paid uploaders depending on the popularity of the files they uploaded didn’t encourage infringement because someone’s family photos could just as likely be as popular as a copy of the latest blockbuster film. That’s silly.

More to the point, Megaupload’s rewards program was previously found to support a contributory infringement claim. Again, from Perfect 10:

Tellingly, in its motion to dismiss, Megaupload does not dispute Perfect 10’s allegation that it induces, causes, or materially contributes to infringing conduct. Nor could it, given the allegations that Megaupload encourages, and in some cases, pays its users to upload vast amounts of popular media through its Rewards Programs, disseminates URLs that provide access to such media, and has provided payouts to affiliates who catalogue the URLs for all available media.

Safe Harbor and Beyond

The white paper finally argues that Megaupload should not be liable for the massive infringement it caused and contributed to because it is eligible for safe harbor under the DMCA. That begs the question that DMCA safe harbors are even available for criminal defendants — I’ve written previously that the language of the statute doesn’t support such a conclusion. What’s more, even in the unlikely case a court finds that safe harbors are available in the criminal context, it is difficult to see the service being able to show it complied with the statute’s requirements that protect good-faith, passive service providers. 10See, for example, Megaupload, the DMCA and Lockers in General; Megaupload’s DMCA Shell Games; Why Megaupload Doesn’t Have a DMCA Shelter.

Procedural Arguments

The white paper next turns from making substantive arguments to procedural arguments. It argues that “U.S. federal court lacks jurisdiction over Megaupload” because it “is a wholly foreign corporation; it is not incorporated in the United States, and it has no agents or offices in the United States.” Chief among the support for this argument is that the U.S. cannot serve Megaupload under Rule 4 of the Federal Rules of Criminal Procedure.

Note how this argument begins with such a broad statement about a lack of jurisdiction but ends up being really about a minor procedural point. Note too that this argument has no impact on the case against Kim Dotcom himself, his holding company, or any of the other personal defendants. This argument only involves the corporate entity of Megaupload Limited. So the suggestion that we should be concerned about some breach of the rule of law is a bit disingenuous. The dismissal of charges against Megaupload would have little effect on the case against the other defendants except that it might free up assets to pay for the defendants’ attorneys (and even that is not a foregone conclusion).

Last July, I briefly looked at this argument; its substance has evolved very little since then. Megaupload essentially takes the position that corporations who operate within the United States and violate U.S. laws should get a free pass so long as they don’t have a mailbox in the U.S. Note that this argument isn’t limited to criminal copyright laws — corporations would be able to commit financial crimes, environmental crimes, fraud, and more with impunity. This result defies common sense and the rule of law — I’d imagine quite a few people would disagree with Megaupload’s argument that corporations deserve a free pass from obeying the law.

The court rejected this argument last October, stating that even if Megaupload doesn’t have a “last known address” within the district or a “principal place of business” within the U.S., there are several alternatives available to the U.S. to perfect service. In its most recent filing, the U.S. notes additional alternatives available to serve Megaupload, a company that leased thousands of servers in the United States to operate a service that allegedly violated U.S. laws within the U.S. harming U.S. creators, regardless of where Kim Dotcom picks up his mail. 11The U.S. says in its May 2nd filing “As discussed in prior pleadings, Defendant Megaupload has had at least two addresses within the Eastern District of Virginia — a constructive address at the Commonwealth of Virginia’s State Corporation Commission and an address at the Carpathia datacenter where the company maintained its U.S.-based nerve center.”

This hasn’t prevented Megaupload from continuing to make the argument in court, despite the fact that less than two months ago, a court in the very same district rejected the idea that the mailing requirement in Rule 4 is a jurisdictional requirement. 12United States v. Kolon Industries, 2013 WL 682896, *5–6 (ED Va. Feb. 22, 2013). So now Megaupload persists in making the argument in its white paper here.

The remaining claims made in the white paper follow the same pattern as those discussed above, full of red herrings, already rejected arguments, and faulty logic. No doubt that matters little to those who worship Dotcom as a hero, buying completely into his celebrity-esque posturing.

References   [ + ]

1. A study released in March demonstrated that the Megaupload shutdown caused a 6-10% increase in digital film revenues, revenues that not only help fund the continued creation of films but also that directly go to union members in the form of residuals.
2. Even Techdirt describes them as a “massive exaggeration.”
3. See Superseding Indictment.
4. Superseding Indictment, pg. 44.
5. See Nimmer Changes his Tune: “Making Available” is Distribution.
6. A & M Records v. Napster, 239 F. 3d 1004, 1020; “Napster claims that it is nevertheless protected from contributory liability by the teaching of Sony Corp. v. Universal City Studios, Inc. We disagree. We observe that Napster’s actual, specific knowledge of direct infringement renders Sony‘s holding of limited assistance to Napster.”
7. In re Aimster Copyright Litigation, 334 F. 3d 643, 651; “We also do not buy Aimster’s argument that since the Supreme Court distinguished, in the long passage from the Sony opinion that we quoted earlier, between actual and potential noninfringing uses, all Aimster has to show in order to escape liability for contributory infringement is that its file-sharing system could be used in noninfringing ways, which obviously it could be. Were that the law, the seller of a product or service used solely to facilitate copyright infringement, though it was capable in principle of noninfringing uses, would be immune from liability for contributory infringement. That would be an extreme result, and one not envisaged by the Sony majority.”
8. Perfect 10 v. Amazon, 508 F. 3d 1146, 1171 (9th Cir. 2007).
9. CoStar Group v. Loopnet, 164 F. Supp. 2d 688, 697 (D. Md. 2001).
10. See, for example, Megaupload, the DMCA and Lockers in General; Megaupload’s DMCA Shell Games; Why Megaupload Doesn’t Have a DMCA Shelter.
11. The U.S. says in its May 2nd filing “As discussed in prior pleadings, Defendant Megaupload has had at least two addresses within the Eastern District of Virginia — a constructive address at the Commonwealth of Virginia’s State Corporation Commission and an address at the Carpathia datacenter where the company maintained its U.S.-based nerve center.”
12. United States v. Kolon Industries, 2013 WL 682896, *5–6 (ED Va. Feb. 22, 2013).

Giving a Wide Berth to Artists of Cable TV — David Carr takes a look at Difficult Men: Behind the Scenes of a Creative Revolution a new book by Brett Martin coming out in July. The book details the recent shift in television storytelling toward darker and highly creative dramas, embodied by such shows as the Sopranos, Mad Men, and Breaking Bad. It is an innovation driven not by algorithms and data centers, but by “men who typed for a living.”

MusicTank to focus on piracy site advertisers — Later this month, rock star David Lowery and Google’s UK Policy Manager Theo Bertram will discuss ad-sponsored piracy at a MusicTank Think Tank event in London. Should be very interesting.

Dear Congress: Please Consider These Points for Your Massive Copyright Overhaul… — Paul Resnikoff of Digital Music News presents what he considers are important points worthy of Congress’s attention. Though I may not necessarily agree with all of them, it is certainly a thoughtful and thought-provoking set of points.

Nigeria: Create Sound IP Policies in Nigeria, Microsoft Tells Govt — The software company chaired a discussion in Lagos last week as part of World IP Day. The article notes this remark from popular Nigerian artist Lanre Dabiri on one of the panels: “Piracy suppresses innovation! A lot goes into nurturing an idea or product to fruition. When this idea gets stolen, it means you cannot recoup the resources that went into putting your thoughts together and this is unfair to the artist or property owner.”

Second Circuit Rules Most Appropriation Art is Fair Use: Cariou v. Prince — Paul Fakler of Title 17 has a great write up on the recent appropriation art decision from the Second Circuit. Fakler does an especially good job pointing out some of the procedural corners cut by the court, a point that is concerning regardless of how you feel about the court’s ultimate outcome on the legal issues.

Earlier today, the National Research Council of the National Academies has released a long-awaited report, Copyright in the Digital Era: Building Evidence for Policy.

The report aims to identify gaps in available research that the authors suggest can assist in shaping copyright policy. In particular, the Council recommends that further study can focus on the “incentive calculus for various actors”, the “costs of voluntary copyright transactions”, “enforcement challenges”, and the “balance between copyright protection and exceptions.”

The report also examines what it calls the “data infrastructure for an empirical approach to copyright policy research.” It identifies existing sources of data that could be helpful to researchers. It also inquires about reducing bottlenecks to certain private datasets in existence. That is, data that could assist researchers may already be out there, just not easily accessible — for example, it might be in the hands of private firms.

The Trees

Copyright in the Digital Era is substantial and could provide ample discussion among academics, researchers, and policy makers. Indeed, there is much to agree with in the 102 page report.

For example, the Council calls for more data “to assess the magnitude and policy implications of the orphan works problem.” The U.S. Copyright Office has been actively studying orphan works over the past several years to determine if legislation is necessary to facilitate productive uses of works where the copyright owner cannot be identified or located. If comments it has received from potential users of orphan works are any indication, further research could reveal that the magnitude of the problem is far more limited than it has been made out to be. Any legislative fix for orphan works should equally be limited and circumscribed.

The Council also recommends further study of copyright litigation in civil courts. Research in this area could provide a wealth of information concerning costs of litigation, outcomes of lawsuits, and judgments awarded. This data would seem to be very helpful for another Copyright Office project: its study on small copyright claim proceedings.

The Forest

Unfortunately, the report suffers from a number of fundamental errors.

First, it presumes that the aim of copyright is to “encourage creative expression and the dissemination and preservation of creative works without stifling cumulative creativity, technological innovation, or free expression.” It goes on to say that research could help determine, for example, “under what circumstances sources of monetary and/or non-monetary motivation outside of that provided by copyright are effective in motivating creative activity.”

The presumption that copyright exists primarily to motivate the creation of expressive works is common, but not entirely accurate.

Copyright also motivates the commercialization of expressive works. This purpose is just as important, if not more important, than the incentive to create. The Supreme Court made this point less than a year ago in Golan v. Holder.

Nothing in the text of the Copyright Clause confines the “Progress of Science” exclusively to “incentives for creation.” Evidence from the founding, moreover, suggests that inducing dissemination—as opposed to creation—was viewed as an appropriate means to promote science. Until 1976, in fact, Congress made “federal copyright contingent on publication[,] [thereby] providing incentives not primarily for creation,” but for dissemination. Our decisions correspondingly recognize that “copyright supplies the economic incentive to create and disseminate ideas.”

This economic incentive doesn’t come in the form of financial rewards from the government but in the form of exclusive, private property rights secured by the government — rights that allow for private ordering and a functioning market that promotes progress in the same fashion as any free market system. 1Adam Mossoff explores the commercialization policy of copyright in more detail in his recent paper, How Copyright Drives Innovation in Scholarly Publishing.

If you focus solely on the motivation to create, as this report tends to do, than you will end up with a skewed copyright policy that leads to suboptimal results.

I saved the most troubling aspect of Copyright in the Digital Era for last. The report only briefly mentions that “not all copyright policy questions are amenable to economic analysis.” This is an understatement if there ever was one.

Simply put: copyright promotes important noneconomic values. Courts and others regularly recognize that copyright, at times, protects free speech interests. 2“[T]he Framers intended copyright itself to be the engine of free expression.” Eldred v. Ashcroft, 537 US 186, 219 (2003), quoting Harper & Row v. Nation Enterprises, 471 US at 539, 558 (1985). While U.S. law doesn’t recognize “moral rights” of authors in the same way as other countries, the inherent dignity of creators that these rights protect are implicit in many copyright provisions. 3See Photos are worth more than the paper they’re printed on.

On another note, the subject matter of copyright and its purpose of promoting knowledge and culture mean that a lot of its aspects are simply unquantifiable. What is the value of a cat video? What is the value of an episode of Game of Thrones? And if a certain policy favors the creation and dissemination of one at the expense of the other, how do you measure the effect of that trade-off? It’s vital that policy makers remain cognizant that not everything in the copyright world can be reduced to numbers and data.

So long as the noneconomic values that copyright promotes are recognized, and Copyright in the Digital Era is placed in the proper context, it can play a role in aiding copyright policy discussions. But there likely exists a strong temptation to treat the research questions in the report as covering the entire universe of copyright policy questions.

References   [ + ]

1. Adam Mossoff explores the commercialization policy of copyright in more detail in his recent paper, How Copyright Drives Innovation in Scholarly Publishing.
2. “[T]he Framers intended copyright itself to be the engine of free expression.” Eldred v. Ashcroft, 537 US 186, 219 (2003), quoting Harper & Row v. Nation Enterprises, 471 US at 539, 558 (1985).
3. See Photos are worth more than the paper they’re printed on.

House Judiciary Chairman to launch sweeping review of US copyright law — Topping the US copyright news this week was Rep. Goodlatte’s announcement that his Committee will be conducting a series of comprehensive hearings over the next several months with the aim of taking a thorough look at the current state of copyright law. Hilicon Valley reports, with statements from several copyright-related organizations responding to Goodlatte’s announcement.

Why Aereo encourages the wrong kind of innovation — Peter Leung discusses the Aereo decision, with a brief look at cases from Australia, Japan, and South Korea which held that similar services infringed on copyright protections. But the heart of Leung’s argument is that a win for Aereo is a loss for everyone else. “Although IP law is generally supposed to promote innovation, it is strange to think that Aereo’s business plan largely involves creatively engineering its way around the law rather than solving an actual technical problem. Other than Aereo, the clear winners in this are manufacturers of server hard drives and tiny antenna arrays.”

Embedding is no criminal offence, the Brussels Court of Appeal says — A court in Belgium ruled that embedding an infringing YouTube video does not rise to the level of a criminal offense under that country’s laws. Unlike civil liability, criminal liability requires the additional element of malicious or fraudulent intent. Here, the court found that lacking, in part because YouTube’s terms of service prohibit the uploading of infringing content, so it cannot be presumed that the defendant was aware the video was infringing.

Churnalism: Where is Your Journalism Coming From? — A new tool from the Sunlight Foundation allows you to check online news sites and articles to see if passages from Wikipedia or press releases show up without attribution. An interesting tool. Plagiarism Today’s Jonathan Bailey points out, “The big idea behind both versions of Churnalism is not so much to detect all kinds of plagiarism or spot instances of copyright infringement. Rather, the goal is to find instances where journalists recycle content from sources that readers might not deem trustworthy or, in other cases, may take quotes out of context.”

MPAA Supports Meaningful Treaty for Visually Impaired — Chris Dodd of the MPAA writes, “We believe that access for the blind to books and other publications is a cause worth promoting. We also believe in the fundamental principles of copyright that empower creators and encourage creativity around the world. Unlike those who seek to weaken copyright protection, we believe these two objectives are not mutually exclusive.”

What Hunter S. Thompson Really Said About the Music Industry… — Paul Resnikoff digs up an interesting tidbit showing that the oft-quoted line attributed to Thompson is not entirely accurate.

Facebook Home Propaganda Makes Selfishness Contagious — Not copyright related per se, but the ethics observed in the article are shared by some who argue against effective copyright protection. The author writes, “This isn’t intended to be a “get off my lawn!” argument, though it is indeed old-fashioned to believe everyone deserves respect. Back in the 1700’s, German philosopher Immanuel Kant made a big deal out of these ideals, asking what right we have to be self-absorbed while expecting others to rise above indifference. My argument is that some convictions deserve to be innovation proof.”

Time to Think About ‘The Next Great Copyright Act’ in the US? — Emmanuel Legrand takes a thorough look at US Register of Copyrights Maria Pallante’s recent call for broad copyright revision. “She admitted in her statement that the list of issues she wanted to tackle ‘is long’: ‘clarifying the scope of exclusive rights, revising exceptions and limitations for libraries and archives, addressing orphan works, accommodating persons who have print disabilities, providing guidance to educational institutions, exempting incidental copies in appropriate instances, updating enforcement provisions, providing guidance on statutory damages, reviewing the efficacy of the DMCA, assisting with small copyright claims, reforming the music marketplace, updating the framework for cable and satellite transmissions, encouraging new licensing regimes, and improving the systems of copyright registration and recordation.'”

Creators need copyright protection — Speaking of copyright revision, Neil Portnow, president and CEO of the Recording Academy, discusses three principles that should be central to any discussion of such an effort. “The more art is created, the more businesses that rely on content will succeed. It’s not content versus innovation — content drives innovation.”

“It Is What It Is” // an interview with Sound Fix owner James Bradley; store to close after nine years this saturday (Record Store Day)Freeloading author Chris Ruen interviews the proprietor of an indie record store that has finally decided to close shop. “…we created this atmosphere that people warmed up to. The idea of a place where you can soak up the whole experience, where music was performed and sold and embraced and artists came there.”

Not all change is innovation — “Advertising, which yields about 90% of Google’s extraordinary wealth, has no independent, intrinsic value; it must be pegged to products and services that do have intrinsic value in the consumer market. We literally cannot all be in sales and marketing; some of us have to make things. Hence, any business practice that dilutes intrinsic value for the sake of advertising value is not only not innovative, but is a form of cannibal economics over the long term.”

How YouTube “Monetizes” Your Songs to Sell Illegal Goods — “They can pay $500,000,000 in punishment to the government, but they can’t quite manage to find a way to tell advertisers or songwriters that their songs or ads are being used to push drugs to YouTube’s young audience.”

If Only the Tech Industry Understood the Music Industry They Want to ‘Replace’… — Says Helienne Lindvall: “Copyright without control, without the ability to say no, creates a race to the bottom as far as being able to monetise “content” – it lines the pockets of the distributors (YouTube, The Pirate Bay et. al.) but not those who created it.”

The exclusive right to publicly perform a copyrighted work 117 U.S.C. § 106(4). has been the source of a fair amount of confusion over its history. The Second Circuit’s 2008 decision in Cartoon Network v. CSC Holdings (“Cablevision“) added to this confusion; though, at the same time, it provided “a clear roadmap that other businesses could use to evade their obligations under the public performance right.” 2See Brief for Copyright Alliance as Amicus Curiae in Support of Petitioners, Cable News Network v. CSC Holdings, pg. 24, 129 S.Ct. 2890 (2008) (No. 08-448). Indeed, earlier this month, the Second Circuit all but said outright that, but for its decision in Cablevision, online service Aereo would be liable for publicly performing the television broadcasts it retransmits to paid subscribers. 3WNET v. AereoNos. 12-2786-cv, 12-2807-cv (2nd Cir., 2013). A few weeks prior, a California court not bound by Cablevision’s precedent granted a preliminary injunction against Aereokiller, a service using essentially the same technology as Aereo. 4Fox Television Stations v. Barrydriller Content Systems, Civil Minutes, No. CV-12-6921-GW (JCx) (CD Cali Dec. 27, 2013).

And things are just starting to heat up. Aereokiller has appealed its loss to the Ninth Circuit; if the Circuit Court upholds the lower court’s decision, it would create a circuit split that may make a trip to the Supreme Court more likely. Before then, though, TV broadcasters have petitioned the Second Circuit for an en banc rehearing on Aereo.

I’ve written a number of times on both cases, 5Aereo, ivi, and the Public Interest in Protecting Copyright, Aereo, Cablevision, and the “Missing Link”, Aereo Takes its Tiny Antennas to Opposite Town, EFF Files Amicus Brief in Aereokiller, You Keep Using that Word: Aereo and “Innovation”. but I have yet to delve into a legal analysis of Cablevision, the case that looms large over these current cases. In my opinion, Cablevision — at least that portion that addressed the public performance issue — was decided incorrectly. The Second Circuit committed a number of logical errors that culminated in a conclusion that doesn’t follow from the plain meaning of the statutory text and stands in opposition to the clear intent of Congress when it drafted the public performance provisions of the 1976 Copyright Act.

But the problems of Cablevision go beyond logical infidelity. The decision drifts away from copyright law’s technology-neutral ideal and elevates form over function. Most importantly, it runs contrary to the public interest. We are, some might argue, in a new golden age of television, with shows that are enjoyed by millions. This is possible in no small part because of the robust marketplace secured through copyright law.

So how exactly did the Cablevision court go astray? Let’s start with a brief discussion of the public performance right in U.S. law.

Public Performance Under the 1976 Copyright Act

Along with exclusive rights to reproduce, distribute, and make derivative works, copyright law secures the exclusive right of a copyright owner to publicly perform her work. The Copyright Act defines performing a work publicly in the following manner:

(1) to perform 6“To ‘perform’ a work means to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.” … 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 7“To ‘transmit’ a performance or display is to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent.” or otherwise communicate a performance … 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 … receive it in the same place or in separate places and at the same time or at different times.

The first definition is easy to conceive — a band in a concert hall is clearly performing a musical work publicly. The first part of the second definition (transmitting the performance of a work to a public place) is also not difficult to imagine — replace the band with giant television set. It is the last part of the second definition — the “separate places/different times” language — that confused the Cablevision court.

This language was added in the 1976 Copyright Act to cover services like cable television and radio broadcasters — services that perform a work to the general public even if each individual performance is ultimately perceived in a private setting. 8On Command Video v. Columbia Pictures, 777 F. Supp. 787, 790 (ND Cali. 1991), citing H.R.Rep. No. 83, 90th Cong., 1st Sess. at 29 (1967). Although such performances were initially considered public under the previous Copyright Act, 9See Buck v. Jewell-LaSalle Realty, 283 US 193 (1931). a series of Supreme Court decisions beginning in the late 1960s casually dismantled this interpretation. 10Twentieth Century Music v. Aiken, 422 US 151 (1975); Teleprompter v. Columbia Broadcasting System, 415 US 394 (1974); Fortnightly v. United Artists Television, 392 US 390 (1968).

The language can no doubt provoke some challenging applications. On the one hand, it is very broad: a public performance includes transmissions by any device or process, in the same place or to separate places, at the same time or at different times. 11As noted in the legislative history: The definition of ‘transmit’ . . . is broad enough to include all conceivable forms and combinations of wires and wireless communications media, including but by no means limited to radio and television broadcasting as we know them. Each and every method by which the images and sounds comprising a performance . . . are picked up and conveyed is a ‘transmission,’ and if the transmission reaches the public in[any] form the case comes within the scope of . . . section 106. H.R. Rep. No. 94-1476, at 64 (1976). But on the other hand, there necessarily must be a limit; if Congress didn’t intend there to be nonpublic performances, it needn’t have bothered limiting the right to only public performances.

The district and circuit court in Cablevision approached this sphinxian language differently. But first, it may be helpful to take a look at how the product involved in the Cablevision decision — the Remote Storage DVR System (“RS-DVR”) — operated.

The RS-DVR

Like any other cable service, Cablevision licenses television programming from broadcasters and cable channers and offers it to paid subscribers. In 2006, Cablevision began offering RS-DVR to its customers. The service operated like any set-top DVR, allowing a TV viewer to record and store programs for later viewing, but the hardware was all located centrally at Cablevision facilities. Cablevision gathers the streams from the various television stations it is licensed to provide into a single signal, which is then split. One stream is routed to customers’ homes in real time (as happens with most cable providers). The second stream is transmitted to the RS-DVR servers, where programs are stored according to subscribers’ requests.

Both these transmissions — one to a customer in real time, one to a customer’s storage for later viewing — are transmissions of public performances. Cablevision had a license for the former; it is unclear whether that license covers the latter. 12The Second Circuit notes that plaintiffs argued “Cablevision publicly performs a work when it splits its programming stream and transmits the second stream to the RS-DVR system.” It appears to conclude that this performance is a private one by extension of its general reasoning, but does not indicate whether this transmission, from Cablevision to RS-DVR, is distinct from the transmission from RS-DVR to customer. I would argue that they are distinct. But television broadcasters 13Plaintiffs included The Cartoon Network, Cable News Network, Turner Broadcasting System, Turner Network Sales, Turner Classic Movies, Turner Network Television, Twentieth Century Fox Film, Universal City Studios, Paramount Pictures, Disney, CBS, and NBC. argued (among other things) that the performance from the RS-DVR to a customer’s home when she hit “play” was an additional performance, and a public one at that.

Cablevision didn’t contest that this was a separate performance, just that it isn’t liable for it, and advanced several arguments in support.

The district court rejected as flawed Cablevision’s argument that its performances were private since each streaming came from a distinct copy that was unique to each individual customer. 14Twentieth Century Fox Film v. Cablevision, 478 F.Supp. 2d 607, 622 (SDNY 2007). It said that Cablevision was engaged in public performance under the plain language of the transmit clause. “Cablevision would transmit the same program to members of the public, who may receive the performance at different times, depending on whether they view the program in real time or at a later time as an RS-DVR playback.” The district court also found it relevant that the relationship between Cablevision and its customers was a commercial one, as courts have held that such a relationship has an inherently “public” character. 15Id. at 623, citing On Command Video Corp. v. Columbia Pictures Indus., 777 F.Supp. 787, 790 (N.D.Cal.1991).

On appeal, the Second Circuit would reverse the district court’s holding on this issue. It began by looking at the “transmit clause” anew. To the Second Circuit, “it is evident that the transmit clause directs us to examine who precisely is ‘capable of receiving’ a particular transmission of a performance.” Under this interpretation, the district court’s suggestion that, “in considering whether a transmission is ‘to the public,’ we consider not the potential audience of a particular transmission, but the potential audience of the underlying work (i.e., “the program”) whose content is being transmitted” is wrong. Instead, says the Circuit Court, “That clause speaks of people capable of receiving a particular ‘transmission’ or ‘performance,’ and not of the potential audience of a particular ‘work.'”

After marching through its argument, the Court says “Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances ‘to the public,’ and therefore do not infringe any exclusive right of public performance.”

Several scholars have identified the court’s treatment of the terms “transmission” and “performance” interchangeably as its primary error. 16See, e.g., 2 Paul Goldstein, Goldstein on Copyright, § 7.7.2.2, at 7:168 (3d ed. 2013); Jeffrey Malkan, The Public Performance Problem In Cartoon Network LP v. CSC Holdings, Inc., 89 Oregon Law Review 505, 536 (2010); Jane C. Ginsburg, Recent Developments in US Copyright Law – Part II, Caselaw: Exclusive Rights on the Ebb? 26 (Colum. Pub. L. & Legal Theory Working Papers, No. 08158, 2008). But they aren’t synonymous; they are each defined separately in the Copyright Act.

This error contributed the most to the Second Circuit’s ultimate conclusion. But its reasoning was riddled with other errors, some of which I’ll look at in more detail below.

An Unexplained Logical Leap

First, look at the court’s response to plaintiff’s argument that “to determine whether a given transmission of a performance is ‘to the public,’ we would consider not only the potential audience of that transmission, but also the potential audience of any transmission of the same underlying ‘original’ performance”:

Like the district court’s interpretation, this view obviates any possibility of a purely private transmission. Furthermore, it makes Cablevision’s liability depend, in part, on the actions of legal strangers. Assume that HBO transmits a copyrighted work to both Cablevision and Comcast. Cablevision merely retransmits the work from one Cablevision facility to another, while Comcast retransmits the program to its subscribers. Under plaintiffs’ interpretation, Cablevision would still be transmitting the performance to the public, solely because Comcast has transmitted the same underlying performance to the public. Similarly, a hapless customer who records a program in his den and later transmits the recording to a television in his bedroom would be liable for publicly performing the work simply because some other party had once transmitted the same underlying performance to the public.

The court doesn’t explain why accepting an interpretation that looks at the potential audience of a work by one performer necessarily means looking at the potential audience of all performers of a work. The fact is that the latter doesn’t follow the former.

The Second Circuit is not entirely at fault for making this unexplained leap. Its analysis is drawn from and mirrors Melville Nimmer’s in his eponymous copyright treatise. Nimmer looks at the definition in question, “which provides that a work is performed ‘publicly’ regardless of ‘whether the members of the public capable of receiving the performance … receive it in the same place or separate places. …'” 17Nimmer on Copyright, § 8.14[C][3].

That same definition goes on to provide that a work is performed “publicly” regardless of whether such members of the public receive the performance “at the same time or at different times.” The Senate and House Reports offer no explanation of this latter phrase, and it is difficult to believe that it was intended literally. It would mean, for example, that the performance of music on a commercial phonograph record in the privacy of one’s home constitutes a public performance because other members of the public will be playing duplicates of the same recorded performance “at different times.”

Again, it is not clear to me what is happening here. Aggregating performances by other performers doesn’t follow from the text of the definition, and doesn’t make sense from a legal perspective.

For Nimmer, at least, interpreting the transmit clause to look at performances of the same copy of a work rather than performances of the work was intended to avoid the absurd result of private performances turning into public performances based on the unrelated actions of third parties. Yet creating a “same copy” requirement doesn’t directly address this problem — a result that Nimmer himself recognizes:

In the abstract, it may be argued that the practice of renting a given videocassette of a motion picture to various members of the public gives rise to “public” performances of the work, although each such performance of the work on a home television set is received only by an individual or family group. Nevertheless, the same copy gives rise to numerous performances, which are received by the public “at different times.” Therefore, under the wording of the Act, and by reason of the underlying rationale of what constitutes a “public” performance, it may follow that each individual rental performance is a “public” performance.

In other words, Nimmer — and later, the Second Circuit — created a requirement that wasn’t present in the statutory text in order to solve a problem that didn’t logically follow from the requirement’s absence, and the newly created requirement doesn’t even entirely solve that problem.

Two for me, none for you

In a bit of verbal sleight-of-hand, the court next states, “Plaintiffs contend that it is ‘wholly irrelevant, in determining the existence of a public performance, whether `unique’ copies of the same work are used to make the transmissions.’ But plaintiffs cite no authority for this contention.” Did you catch that? The court invented a “unique copies” requirement that does not appear in the statutory text (or legislative history) and then chides plaintiffs for not citing any authority that the statute does not contain such a requirement.

What makes this worse is that plaintiffs had cited authority to this effect. Specifically, they cited a 1967 House Committee report that discussed what would become the definition in question. This report noted that the definition of “to the public” was intended to cover transmissions “capable of reaching different recipients at different times, as in the case of sounds or images stored in an information system and capable of being performed or displayed at the initiative of individual members of the public [Emphasis added].” The House Committee literally described Cablevision’s RS-DVR service nearly four decades before it was released, and said the Copyright Act’s public performance language would cover such a service. In what could only be described as chutzpah, the Second Circuit dismisses outright this on-point bit of legislative history, saying only that “We question how much deference this report deserves.”

A Minor Fallacy

Finally, the Second Circuit rejects the lower court’s argument that the commercial relationship between performer and viewer supported the conclusion that the performance is a public, rather than a private, one. It calls the argument “untenable” and not supported by the statutory language. But then it states, “In addition, this interpretation overlooks, as Congress did not, the possibility that even non-commercial transmissions to the public may diminish the value of a copyright.” The court is saying that if all commercial performances are public performances, then that also means that only commercial performances are public performances. This is an obvious logical error.

Stay Tuned for More

Cablevision‘s reasoning on the public performance issue leaves a lot to be desired. Yet, at the same time, I believe the court could have reached the same result — that Cablevision’s transmission of programming that it licensed from broadcasters from the RS-DVR servers to subscribers would not require additional licensing — without creating a mess of the public performance provisions in the Copyright Act. As the subsequent decision in Aereo shows, the consequences of Cablevision have been wider than the Second Circuit anticipated.

In future posts, I hope to look at how Aereo made things worse by not only extending Cablevision beyond its specific facts, but misapplying it as well. I also hope to take a stab at providing a workable definition of the Copyright Act’s public performance language that is more consistent with the statutory text, Congressional intent, and the goals of copyright law.

Special thanks to Copyhype contributor Devlin Hartline (who blogs at Law Theories) for providing useful feedback in writing this post.

References   [ + ]

1. 17 U.S.C. § 106(4).
2. See Brief for Copyright Alliance as Amicus Curiae in Support of Petitioners, Cable News Network v. CSC Holdings, pg. 24, 129 S.Ct. 2890 (2008) (No. 08-448).
3. WNET v. AereoNos. 12-2786-cv, 12-2807-cv (2nd Cir., 2013).
4. Fox Television Stations v. Barrydriller Content Systems, Civil Minutes, No. CV-12-6921-GW (JCx) (CD Cali Dec. 27, 2013).
5. Aereo, ivi, and the Public Interest in Protecting Copyright, Aereo, Cablevision, and the “Missing Link”, Aereo Takes its Tiny Antennas to Opposite Town, EFF Files Amicus Brief in Aereokiller, You Keep Using that Word: Aereo and “Innovation”.
6. “To ‘perform’ a work means to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.”
7. “To ‘transmit’ a performance or display is to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent.”
8. On Command Video v. Columbia Pictures, 777 F. Supp. 787, 790 (ND Cali. 1991), citing H.R.Rep. No. 83, 90th Cong., 1st Sess. at 29 (1967).
9. See Buck v. Jewell-LaSalle Realty, 283 US 193 (1931).
10. Twentieth Century Music v. Aiken, 422 US 151 (1975); Teleprompter v. Columbia Broadcasting System, 415 US 394 (1974); Fortnightly v. United Artists Television, 392 US 390 (1968).
11. As noted in the legislative history: The definition of ‘transmit’ . . . is broad enough to include all conceivable forms and combinations of wires and wireless communications media, including but by no means limited to radio and television broadcasting as we know them. Each and every method by which the images and sounds comprising a performance . . . are picked up and conveyed is a ‘transmission,’ and if the transmission reaches the public in[any] form the case comes within the scope of . . . section 106. H.R. Rep. No. 94-1476, at 64 (1976).
12. The Second Circuit notes that plaintiffs argued “Cablevision publicly performs a work when it splits its programming stream and transmits the second stream to the RS-DVR system.” It appears to conclude that this performance is a private one by extension of its general reasoning, but does not indicate whether this transmission, from Cablevision to RS-DVR, is distinct from the transmission from RS-DVR to customer. I would argue that they are distinct.
13. Plaintiffs included The Cartoon Network, Cable News Network, Turner Broadcasting System, Turner Network Sales, Turner Classic Movies, Turner Network Television, Twentieth Century Fox Film, Universal City Studios, Paramount Pictures, Disney, CBS, and NBC.
14. Twentieth Century Fox Film v. Cablevision, 478 F.Supp. 2d 607, 622 (SDNY 2007).
15. Id. at 623, citing On Command Video Corp. v. Columbia Pictures Indus., 777 F.Supp. 787, 790 (N.D.Cal.1991).
16. See, e.g., 2 Paul Goldstein, Goldstein on Copyright, § 7.7.2.2, at 7:168 (3d ed. 2013); Jeffrey Malkan, The Public Performance Problem In Cartoon Network LP v. CSC Holdings, Inc., 89 Oregon Law Review 505, 536 (2010); Jane C. Ginsburg, Recent Developments in US Copyright Law – Part II, Caselaw: Exclusive Rights on the Ebb? 26 (Colum. Pub. L. & Legal Theory Working Papers, No. 08158, 2008).
17. Nimmer on Copyright, § 8.14[C][3].

The Purpose of Copyright? Examining the Retracted Republican Study Committee Brief — From the Bolt, an online offshoot of the Berkeley Technology Law Journal, comes a look at Derek Khanna’s infamous copyright memo, and my response to it here last November.

Fair Use is Fair Game: MPAA Files Amicus Brief in NFL Intellectual Property Case — Earlier this week, the MPAA filed a brief in support of a filmmaker’s fair use of a Baltimore Ravens logo appearing on screen. That the MPAA would defend fair use in court surprised only those who have become convinced of their own caricature of the organization as being “copyright maximalists.”

MPAA and Fair Use: A Quick History — Ben Sheffner at the MPAA responds to “the suggestion in some of the commentary about our brief that the MPAA and its members somehow “oppose” fair use, or that our embrace of it in the Baltimore Ravens brief represents a  shift in our position. That’s simply false, a notion that doesn’t survive even a casual encounter with the facts. Our members rely on the fair use doctrine every day when producing their movies and television shows – especially those that involve parody and news and documentary programs. And it’s routine for our members to raise fair use – successfully – in court.”

WNET v. Aereo: Split Appellate Panel Rules That “Remote-Storage DVR” Decision Insulates Provider of Internet Streaming from Liability — Eleanor Lackman examines the recent Second Circuit decision involving internet TV rebroadcaster Aereo. Great analysis and timely, as a similar case with a different outcome (Aereokiller) is set to appear in front of the Ninth Circuit.

Mossoff on Copyright & Innovation in Scholarly Publishing — The Legal Theory Blog highlights Adam Mossoff’s latest, must-read article that details the investment and innovation that scholarly publishers provide to help disseminate academic works.

Jurassic Park is Frightening in the Dark — The best dinosaur movie ever is celebrating its 20th anniversary with a theatrical release in 3D. While the film incorporated stunning advances in computer generated imagery, it also featured equally groundbreaking “real-life” props by Stan Winston Studios. Here is a collection of videos showing a behind the scenes look at how some of these props were built.

Google’s Design Defect of Moral Hazard — “Just like the iconic exploding gas tank, it is clear that Google’s current product creates an unsafe environment for consumers.  From illegal drugs, to human trafficking to copyright infringement, Google is the leading source of criminals making their wares available to unsuspecting consumers. Not only does Google’s advertising of legitimate brands on illegal sites create the veneer of respectability, Google holds itself out to the public as a reliable source of information.”

 — Copyright infringement? Or just an incredibly inefficient way to print articles from the web?

“Innovation” is one of the Internet’s favorite words (along with “disruption”). 1Its overuse by some borders on unintentional parody; for example, this recent article on Techdirt features an amazing four instances of some form of “disrupt” and three instances of some form of “innovate” in the first paragraph alone.  It’s a glittery word — who can be against innovation! — and seems to be used to express just about any concept that is needed. The word was once a pejorative; “A spirit of innovation is generally the result of a selfish temper, and confined views,” wrote Edmund Burke. Its normative meaning has since flipped. 2A 2009 literature review found that only 1 in 1,000 social science articles discussing innovation studied the undesirable consequences of innovation, suggesting a strong pro-innovation bias in recent decades.

On April 1st, the Second Circuit affirmed the denial of an injunction against Aereo. The company had been sued by several television broadcasters alleging copyright infringement for retransmitting programs without permission. Last year, a district court refused to grant a preliminary injunction after finding that the broadcasters had been unable to distinguish Aereo’s system from a system held not infringing in the earlier Second Circuit decision in Cartoon Network v. CSC Holdings (“Cablevision“). On appeal, the Second Circuit agreed with the lower court, holding “Plaintiffs have provided us with no adequate basis to distinguish Cablevision from the Aereo system.”

Technology advocates celebrated the decision. The Disruptive Competition Project wrote that it considers Aereo a perfect example of the type of “disruptive innovation” it champions. Consumer Electronics Association CEO Gary Shapiro called the decision a “big victory for innovation.” Public Knowledge hailed the decision as a victory for “video innovation.” The EFF proclaimed the court decision as a Victory for Aereo, TV Watchers, and Innovation Without Permission 3One might find it telling how consistently internet focused civil society groups are aligned with the consumer electronics industry. Even Aereo itself has proudly proclaimed that it is on the side of innovation, progress, and consumer choice.

But how innovative is Aereo? From a viewer’s perspective, the system is largely indistinguishable from cable TV, which has been around for decades. Pay a monthly fee, watch television.

At least one of the Second Circuit judges didn’t see anything particularly innovative about the company. In a dissenting opinion, Judge Chin called Aereo’s “technology platform” a “sham”, describing it as “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.”

Aereo is doing precisely what cable companies, satellite television companies, and authorized Internet streaming companies do — they capture over-the-air broadcasts and retransmit them to customers — except that those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee. By accepting Aereo’s argument that it may do so without authorization and without paying a fee, the majority elevates form over substance. Its decision, in my view, conflicts with the text of the Copyright Act, its legislative history, and our case law.

The decision also seems to conflict with the idea, as expressed above, that Aereo is innovative.

To put it another way: imagine the reaction to Aereo if it was in all respects identical — e.g., same channel lineup, same price — except it was licensed to retransmit programming. Would we still be hearing about how innovative the service is? I don’t think it would be too far off to imagine such a service being greeted by yawns, or even derided as outdated. That is, it seems plausible that the primary feature that makes Aereo lauded as an innovation is the fact that it is unlicensed.

It is heartening to see that others besides Judge Chin recognize this. In When copyright leads to wasted innovation, Alex Hern observes, “All of this innovation – the tiny antennas, better transcoding technology, and office placed with line-of-sight to the Empire State Building for perfect reception – isn’t being focused towards making life better for customers, or even just making money for Aereo. Instead, it’s just being used to get around the law.” I disagree with Hern, however, when he concludes that “The government could render all that effort useless overnight by just allowing Aereo to stream signal from one aerial to all its users at once.” Aereo is allowed to do this under current law, it just doesn’t want to bother seeking the necessary permission from the owners of the programs it wants to retransmit or pay the necessary licenses.

So how is it that so many celebrate this type of free-riding as innovation?

Part of the blame may be the vague definition of “innovation” itself by those who employ it the most. Author Evgeny Morozov recently wrote of this phenomenon

While the brightest minds of Silicon Valley are “disrupting” whatever industry is too crippled to fend off their advances, something odd is happening to our language. Old, trusted words no longer mean what they used to mean; often, they don’t mean anything at all. Our language, much like everything these days, has been hacked. Fuzzy, contentious, and complex ideas have been stripped of their subversive connotations and replaced by cleaner, shinier, and emptier alternatives; long-running debates about politics, rights, and freedoms have been recast in the seemingly natural language of economics, innovation, and efficiency. Complexity, as it turns out, is not particularly viral.

Part may also be the embrace of “permissionless innovation” as a norm. The idea was once defined rather narrowly, referring to the fact that one could deploy an online service or website without needing any sort of prior approval by any central governing body. 4See, for example, Vint Cerf in 2009: “Many now-successful companies have deployed their services on the Internet without the need to negotiate special arrangements with Internet Service Providers, and it’s crucial that future innovators have the same opportunity. We are advocates for “permissionless innovation” that does not impede entrepreneurial enterprise.” Since then it has been expanded to include an absence any sort of obstacles to Innovation, both online and off.

An unqualified endorsement of such a broad definition of permissionless innovation is troublesome, not least of which because it contradicts the centrality of consent and rule of law in any free society. But to the concept’s proponents, permission is simply an obstacle to Innovation that must be torn down. “Permission” can be required by governments in the form of regulations and laws. These are often described solely as rent-seeking by incumbent firms, holding no legitimate purpose on their own and existing only to keep “disruptive innovators” out of the market. 5Larry Downes, for example, said in a recent article, Ready to Innovate? Get a Lawyer, “But more often the imposition of legal constraints comes indirectly, the maneuverings of incumbents caught off-guard by something dramatically better and often cheaper than their core products and services. Performing a bit of regulatory judo, they often respond to such threats by pressuring regulators who oversee their own activities to declare the innovator illegal or otherwise in violation of rules that were never designed to cover it.” But permission can also be required from other individuals. Copyright and other forms of intellectual property, held by individuals or other entities, are characterized as the quintessential obstacle to innovation. This is essentially the core thesis in Lawrence Lessig’s 2003 book, Free Culture: The Nature and Future of Creativity: copyright is a restriction that creates a “permission culture“, as opposed to a free one.

Is copyright a restriction that blocks innovation? I say no. As Ronald Cass and Keith Hylton note in their new book, Laws of Creation: Property Rights in the World of Ideas this view is premised on the erroneous “zero sum” view of intellectual property that has become engrained in copyright skeptic thinking.

[T]he modern academic view treats intellectual property law as a set of rules determined in a zero-sum conflict between rights-holders and members of the public. Beyond some modest realm, for one side to gain, the other side must lose. The individual is encouraged y this view to choose a side: either you are with the public or with the rights-holders. For some writers, the choice is put in even more loaded terms: either you side with those who are rooted in the past or line up with the vanguard of the future, freed of entangling rights. 6Pp. 209-10.

But copyright is not a zero sum game. Cass and Hylton explain that IP protection, including copyright, comes with static costs, but it produces dynamic benefits. IP protection benefits society when those dynamic benefits are greater than the static costs, leading Cass and Hylton to conclude that, while not perfect, “existing legal rules are generally defensible within an analysis of their costs and benefits.” 7Pg. 220.

George Mason law professor Adam Mossoff has recently provided a real world example of this equation in action. In his latest article, How Copyright Drives Innovation in Scholarly Publishing, Mossoff looks at an area that has been especially fertile to charges of copyright as an obstacle. In his abstract, Mossoff writes

Today, copyright policy is framed solely in terms of a trade off between the benefits of incentivizing authors to create new works and the losses from restricting access to those works. This is a mistake that has distorted the policy and legal debates concerning the fundamental role of copyright within scholarly publishing, as the incentive-to-create conventional wisdom asserts that copyright is unnecessary for researchers who are motivated for non-pecuniary reasons. As a result, commentators and legal decision-makers dismiss the substantial investments and productive labors of scholarly publishers as irrelevant to copyright policy. Furthermore, widespread misinformation about the allegedly “zero cost” of digital publication exacerbates this policy distortion.

This paper fills a gap in the literature by providing the more complete policy, legal and economic context for evaluating scholarly publishing. It details for the first time the $100s millions in ex ante investments in infrastructure, skilled labor, and other resources required to create, publish, distribute and maintain scholarly articles on the Internet and in other digital formats. Based on interviews with representatives from scholarly publishers, it reveals publishers’ extensive and innovative development of digital distribution mechanisms since the advent of the World Wide Web in 1993. Even more important, this paper explains how these investments in private-ordering mechanisms reflect fundamental copyright policy, as copyright secures to both authors and publishers the fruits of their productive labors. In sum, copyright spurs both authors to invest in new works and publishers to invest in innovative, private-ordering mechanisms. Both of these fundamental copyright policies are as important today in our fast-changing digital world as they were in yesteryear’s world in which publishers distributed scholarly articles in dead-tree format.

True innovation grows the entire pie. The type of false innovation of services like Aereo simply shift the pieces around — and, if such a service negatively affects those providing the television programs that Aereo relies on to attract subscribers, then, in the long run, nobody wins.

References   [ + ]

1. Its overuse by some borders on unintentional parody; for example, this recent article on Techdirt features an amazing four instances of some form of “disrupt” and three instances of some form of “innovate” in the first paragraph alone.
2. A 2009 literature review found that only 1 in 1,000 social science articles discussing innovation studied the undesirable consequences of innovation, suggesting a strong pro-innovation bias in recent decades.
3. One might find it telling how consistently internet focused civil society groups are aligned with the consumer electronics industry.
4. See, for example, Vint Cerf in 2009: “Many now-successful companies have deployed their services on the Internet without the need to negotiate special arrangements with Internet Service Providers, and it’s crucial that future innovators have the same opportunity. We are advocates for “permissionless innovation” that does not impede entrepreneurial enterprise.”
5. Larry Downes, for example, said in a recent article, Ready to Innovate? Get a Lawyer, “But more often the imposition of legal constraints comes indirectly, the maneuverings of incumbents caught off-guard by something dramatically better and often cheaper than their core products and services. Performing a bit of regulatory judo, they often respond to such threats by pressuring regulators who oversee their own activities to declare the innovator illegal or otherwise in violation of rules that were never designed to cover it.”
6. Pp. 209-10.
7. Pg. 220.

Pick a side BUT don’t call it piracy… — There has been a lot of discussion swirling over the “artists vs. artists” billboard in Times Square this week. Ellen Seidler pins down one of the biggest problems with the promotion. “When artists choose to give their work away, they’re not choosing to support piracy, they’re choosing to offer their creations to the public at no cost.  It’s a distribution decision any artist is free to make, but please don’t call it piracy…”

Associated Press v. Meltwater: Associated Press Scores Significant Copyright Victory — Simon Pulman of Cowan DeBaets Abrahams & Sheppard does a great job analyzing last weeks Meltwater decision upholding the importance of journalism to a free society and the need for commercial services copying significant portions of news articles to seek proper licenses.

Google’s Bonfire of the Vanities: The Human Drones of Google Glass Coming to a Venue Near You — “It appears that Google has finally developed the means to monetize human conversation.” See also “Stop the Cyborgs” launches public campaign against Google Glass.

Copyright Hub gets £150,000 Government funding — 1709 Blog reports on this week’s announcement of the UK government’s funding of a one-stop online shop for licensing copyrighted works.