Do Kim Dotcom’s lawyers think he’s guilty? The answer may shock you.

May 08, 2013 · · 4 comments

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).1 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.2

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.3 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.4

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.5

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 2001.6 The Seventh Circuit rejected it in 2003.7 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 conduct8 or if there is no continuing relationship between the maker of a product and the user.9 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.10

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.11

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.12 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.

Footnotes

  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). [↩]
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Megaupload Megaupdate

July 23, 2012 · · 15 comments

Six months ago, authorities in the United States and eight other countries moved against Megaupload following a grand jury indictment that charged the company and its officers with five federal charges stemming from a “mega-conspiracy” of criminal copyright infringement. Police in New Zealand arrested the site’s founder, Kim Dotcom, and three other Megaupload employees at Dotcom’s mansion (two other employees indicted were arrested a few days later in Europe while the last employee charged in the indictment remains at large). The indictment alleges the company and its employees made over $175 million in illegal profits, and the case is considered one of the largest criminal copyright cases in US history.

There are a lot of moving parts to this case already — no surprise, given its size and complexity — so a quick update may be helpful. The New Zealand Listener has put together a handy timeline of the Megaupload case. Specifically, I want to look at some of the issues that have made headlines recently, including the New Zealand extradition proceedings, a motion to dismiss filed in the US, a New Zealand ruling that certain search warrants were illegal, and a US proceeding seeking access to user data stored on Megaupload servers.

Extradition

The formal request for extradition of Dotcom and three other Megaupload defendants in New Zealand was filed on March 2nd. The hearing was originally scheduled for August, but the hearing has been postponed until at least March 2013, due to the growing legal complications surrounding the case.

Under New Zealand law, extradition is governed by the Extradition Act of 1999 and any bilateral treaty in place.1 The United States and New Zealand entered into an extradition treaty in 1970.2 That treaty lists thirty-two offenses for which subjects can be extradited; criminal copyright infringement is not one of them. However, under New Zealand’s Extradition Act, section 101B, someone may also be extradited for offenses that carry a penalty of not less than one year in the requesting country and involves conduct that would be criminal had it occurred in New Zealand and carries a similar penalty. Extradition of suspects indicted but not convicted require an arrest warrant and any accompanying depositions.

Here, the extradition hearing is likely to hinge on whether the offenses Dotcom has been charged with are offenses in New Zealand that would carry a similar penalty. Admittedly, the primary operation of Megaupload presents a novel set of facts for criminal liability of copyright infringement even in the US, but the indictment also alleges a number of the defendants personally uploaded infringing works to the service, which, by itself, could be sufficient to constitute an extraditable offense under New Zealand law.

And, in an odd twist, the New Zealand judge who had been presiding over the extradition proceeding stepped down last week after calling the US “the enemy” at a copyright conference earlier this month. Judge Nevin Dawson, who granted Dotcom bail in February, will be taking over the case.

Motion to Dismiss

On July 3, Megaupload filed a motion to dismiss for lack of personal jurisdiction. The motion to dismiss applies only to the Megaupload Limited corporation itself — it does not pertain to Kim Dotcom, or the other individual defendants, personally, nor does it pertain to Vestor Limited, the other corporate defendant indicted.3

Corporations, as separate entities, have long been held liable for criminal actions. Said the Supreme Court in 1909 (quoting an earlier criminal law treatise):

Since a corporation acts by its officers and agents their purposes, motives, and intent are just as much those of the corporation as are the things done. If, for example, the invisible, intangible essence of air, which we term a corporation, can level mountains, fill up valleys, lay down iron tracks, and run railroad cars on them, it can intend to do it, and can act therein as well viciously as virtuously.

But, like with individual defendants, before a case can proceed against a corporation, the court must have personal jurisdiction over it, and before a court can exercise personal jurisdiction, the corporation must be properly served.4 Megaupload’s attorneys argue that charges against the company should be dismissed because it wasn’t properly served under Federal Rules of Criminal Procedure 4(c)(3)(C). Under that rule:

A summons is served on an organization by delivering a copy to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process. A copy must also be mailed to the organization’s last known address within the district or to its principal place of business elsewhere in the United States.

Megaupload basically argues that, under the second portion of that rule, a corporation can never be held liable for crimes committed in the United States so long as it doesn’t maintain an office or address within the country.5 The United States responded that Megaupload’s reading of the Rule can’t possibly be correct — “Neither the facts, the law, nor common sense and the interests of justice, which the Federal Rules of Criminal Procedure are designed to serve, support as extreme a remedy as the outright dismissal sought by defense counsel” — and offers a number of arguments against it, as well as alternative methods that could be used to properly serve Megaupload. The court will hear oral arguments on the motion on July 27.

Should the court grant the motion to dismiss Megaupload Limited, the effects are unclear. Vestor Limited and the other indicted defendants, including Dotcom, would still remain. Given the allegations of personal involvement by the defendants, and the fact that Megaupload Limited can be considered merely a corporate “alter ego” of these defendants, dismissal may turn out to be mostly a symbolic victory.

Search Warrant Illegal

On June 28, a New Zealand judge ruled that certain search warrants, used to gather evidence from Dotcom’s mansion during his arrest, were illegal. The search warrants were executed by New Zealand police, on behalf of the US pursuant to New Zealand’s Mutual Assistance in Criminal Matters Act (MACMA). The US had requested the warrants to search Dotcom’s residence for evidence that could be used to “demonstrate that the mega-conspiracy’s directors and employees were aware that Megaupload’s websites were regularly used to reproduce and distribute infringing copies of copyright works, to gain a better understanding of and document the mega-conspiracy’s activities, and to identify additional individuals who were working with the mega-conspiracy.”

The judge concluded that the search and seizure was overly broad and, thus, illegal. She also held that the New Zealand Central Authority breached MACMA when it shipped clones of hard drives seized to the FBI. The immediate impact of the ruling is unknown. New Zealand police and the FBI haven’t responded, and it is highly likely the ruling will be appealed up through the New Zealand court system. If the warrants were illegal, the New Zealand police may be able to cure the defect with new, narrower warrants. Or, some of the evidence may become excludable at trial as “fruit of the poisonous tree.”

I’m not familiar with New Zealand extradition proceedings, so take this with a grain of salt, but I doubt this ruling would affect Dotcom’s extradition hearing. The evidence seized here was for the US criminal trial; the extradition hearing is similar to a preliminary hearing or grand jury in that the judge is primarily concerned with whether there is sufficient evidence for a trial to proceed, evidence which the US had already submitted.6

User Data

The entry of third parties seeking access to their own data that had been uploaded to Megaupload adds a collateral issue to this case. On June 29, a hearing on the motion was held, and a decision is forthcoming.

MegaUpload leased over 500 servers from Virginia based Carpathia Hosting as part of its business. As part of its investigation, the United States served a search warrant on Carpathia. It copied select data from the servers and then released the servers back into the custody of Carpathia.

Carpathia later moved for a protective order regarding the servers. According to the order, it is costing Carpathia thousands of dollars a day to preserve the servers, and the company is losing money because it cannot repurpose the servers for other clients. As the company notes, “Carpathia does not have any legal obligation to preserve evidence on the Mega Servers” — it likely could delete the data on the servers and put them back into use without liability. However, it has so far refrained from doing so because several parties have expressed interest in the data. Those include MegaUpload itself, which wishes to examine the servers for evidence to prepare for its defense in the criminal trial, and the Electronic Frontier Foundation, which, according to Carpathia, ”claims to represent the interests of end users who have non-infringing content stored on the Mega Servers and has requested that the data be preserved in order to facilitate its return to Mega users who have not engaged in copyright infringement.”

In May, an individual who had an account with MegaUpload before it was indicted filed with the court to have his property returned.  In response, the US has reiterated that it has no continuing interest in the servers or data. The MPAA, an interested non party, told the court that it has no position in the matter, but whatever the court decides to facilitate return of user data, “it is essential that the mechanism include a procedure that ensures that any materials the users access and copy or download are not files that have been illegally uploaded to their accounts.”

Demand Progress, a 527 group which specializes in writing strident headlines, added its own two cents with its own court filing. The PAC told the court, ”Our sincere hope is for the immediate return of all property not related to Mr. Dotcom’s indictment and a clear pronouncement that the seizure of the private property of innocent third parties is not countenanced by our Constitution.” But Demand Progress has it entirely wrong: the US never seized Megaupload’s servers in the US and is not exercising any continuing custody over them.

As the Government notes in its brief:

The government does not possess any of Mr. Goodwin’s property, nor does it seek to forfeit it. The government also does not oppose access by Kyle Goodwin to the 1103 servers previously leased by Megaupload. But access is not the issue – if it was, Mr. Goodwin could simply hire a forensic expert to retrieve what he claims is his property and reimburse Carpathia for its associated costs. The issue is that the process of identifying, copying, and returning Mr. Goodwin’s data will be inordinately expensive, and Mr. Goodwin wants the government, or Megaupload, or Carpathia, or anyone other than himself, to bear the cost.

The US later points out, ”Mr. Goodwin does not argue that the actual search violated his rights – he actually argues the opposite. Mr. Goodwin claims that the government’s failure to seize his information led to its abandonment ‘under circumstances in which it was both inaccessible and potentially subject to destruction.’”

From a legal standpoint, I don’t see how the court can exercise its jurisdiction over Megaupload’s servers as Goodwin and Demand Progress have asked. Courts can exercise jurisdiction where the federal government once had property but later gave it away, lost it, or destroyed it.7 But a court can’t force the government to return property it never possessed, as here.8

In the event the court denies any relief, Goodwin is unfortunately in the same situation as he would be had Megaupload stopped paying its bills to Carpathia — he could seek a remedy from Megaupload (highly unlikely, given that Megaupload’s terms of service waived all liability for loss of data) or arrange to recover his data himself from Carpathia.

Footnotes

  1. Extradition Officer, Legal Division, Ministry of Foreign Affairs and Trade, New Zealand: Extradition. [↩]
  2. Treaty on Extradition Between the United States of America and New Zealand (entered into force Dec. 8, 1970). [↩]
  3. According to the indictment, Megaupload Limited is the registered owner of Megaupload.com and Megaclick.com. Vestor Limited owns 68% of the shares in Megaupload Limited, as well as being the sole shareholder of Megamedia Limited, an unindicted corporation that controls Megavideo and other “Mega” companies and sites. Kim Dotcom is the sole director and shareholder of Vestor Limited. [↩]
  4. Murphy Brothers v. Michetti Pipe Stringing, 526 US 344, 350 (1999): “In the absence of service of process (or waiver of service by the defendant), a court ordinarily may not exercise power over a party the complaint names as defendant.” [↩]
  5. “In no event can the Government satisfy Rule 4’s second requirement that it mail the summons to Megaupload’s ‘last known address within the district or to its principal place of business elsewhere in the United States,’ for no such address exists. Megaupload does not have an office in the United States, nor has it had one previously. Service of a criminal summons on Megaupload is therefore impossible, which forecloses the Government from prosecuting Megaupload.” [↩]
  6. See the May 29, 2012 opinion of the New Zealand court presiding over the extradition hearing for more discussion on the purpose and standards of extradition. [↩]
  7. See cases cited in US v. Chambers, 192 F.3d 374, 376-77 (3rd Cir. 1999). [↩]
  8. See US v. Solis, 108 F.3d 722 (7th Cir. 1997). [↩]
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Megaupload and the DMCA

January 25, 2012 · · 15 comments

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.1 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.2

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.

Footnotes

  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].” [↩]
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Dispatches from the SOPAcolypse

November 02, 2011 · · 8 comments

Harold Camping has famously predicted the end of the world three times.

His first prediction — September 6, 1994 — came and went with little fanfare. His second attempt at setting a date for the apocalypse was far more successful. The Internet was abuzz as May 21, 2011 approached. But again, the world did not end.

Undeterred, Camping checked his math and announced a new date. October 21, 2011, would mark the final day of everything we know, for real this time. Wrong once again, the former leader of the California-based Family Radio has apparently retired from his role as apocalyptic soothsayer.

Apocalypse Now?

I mention Camping because a similar phenomenon occurs in the copyright realm. It seems that whenever new legislation is introduced, there are those who are ready to predict that if it passes, it will surely result in the demise of the Internet, or innovation, or some other thing we hold dear.

You can see this in action by taking a look at some of the headlines in response to the US House’s introduction of the Stop Online Piracy Act (SOPA):

This are just a sampling of the dire predictions about the epic catastrophes SOPA would bring if passed — the SOPAcolpyse, if you will.

But, like Camping, copyright’s skeptics have made these predictions before.

Sometimes they are done with striking consistency. Sci-fi author Cory Doctorow says SOPA “might be the worst-ever copyright proposal in US legislative history.” Not one to make use of hyperbole sparingly, Doctorow also declared a 2005 French proposal the “worst copyright law in Europe”; in 2007, it was an EU proposal that would surely be the “worst copyright law in the world!”; little more than seven months later, he stated that a Canadian legislative proposal “promises to be the worst copyright law in the developed world.”

The same goes for copyright activist Lawrence Lessig, a big proponent of the “break the internet” line over the years. Talking in 2003 about his idea for a compulsory license that would cover P2P activity, he said, “We have to buy [music and movie companies] off, so they don’t break the Internet in the interim.” That same year on PBS’s NewsHour with Jim Lehrer, it was DRM: “The response that the music industry has insisted on would be technologies that would essentially break the Internet.” Fast-forward to 2008, and Lessig, speaking at an event hosted by Harvard’s Berkman Center, Google, and the Family Online Safety Institute, again cautions against letting copyright law “break the Internet.”

The Sky is Falling

The doomsday scenarios began on day one. In February 1993, the Clinton administration put together the Information Infrastructure Task Force to study the advancement and development of information technologies, including the burgeoning Internet and infant web. Part of their mandate was examining the intersection of copyright law, digital technologies, and networked communications and exploring what changes were necessary.

The Working Group on Intellectual Property Rights released its report, Intellectual Property and the National Information Infrastructure (the “White Paper”), in September of 1995, sparking the first wave of the “parade of horribles” that would accompany copyright reform from then on out.

Copyright scholar Pamela Samuelson penned an article in Wired magazine that gave a laundry-list of reasons to oppose legislation proposed after the White Paper was released: “your online service provider will be forced to snoop through your files”, it would “transform the emerging information superhighway into a publisher-dominated toll road”, it would “eliminate fair-use rights”, “it can be construed as outlawing many activities widely believed to be lawful.”

Others concurred. “The bill in Congress now, critics say, goes much too far … the Internet’s potential as a source of public education and free expression could be crippled … [it] could instead turn out to be the executioner of the Internet’s real promise.”

The initial legislation evolved to become the Digital Millennium Copyright Act (DMCA), which became law in 1998. Some still weren’t convinced the days of a free Internet weren’t numbered. A writer in the Berkeley Technology Law Journal predicted shortly after the DMCA became law that:

The post-DMCA Internet will feature even more of those damnable “404 – file not found” messages than it currently does. As media companies expand their demand-letter operations from commercial “piracy” to include negative commentary, transformative uses, and what they deem to be a little bit too much sampling or quotation, the ranks of the independent Internet publishers will be radically depopulated.

Ten years later, many of those same critics couldn’t praise the DMCA enough. Wired magazine calls it “the law that saved the web.” “Blogs, search engines, e-commerce sites, video and social-networking portals are thriving today thanks in large part to the notice-and-takedown regime ushered in by the much-maligned copyright overhaul.”

A Decade of Falling Sky

Since the DMCA, most copyright legislation has elicited similar responses.

The No Electronic Theft (NET) Act was passed in 1997, expanding the definition of “financial gain” in criminal copyright infringement and increasing criminal penalties. Among the opponents of the bill was the Association for Computing, which raised concerns that it would restrict dissemination of science, criminalize the transfer of information protected by fair use, and chill free speech in research institutions. Others warned it would greatly expand the scope of criminal infringement; “aggressive prosecutors would abuse their discretion to win convictions” or “bring weak felony cases to get quick misdemeanor plea bargains.”1

None of these concerns materialized. As Eric Goldman concludes after examining the five years following the Act, “the prosecutions to date appear generally consistent with Congress’ objectives for the Act.” None of the convictions could be fairly characterized as “de minimis“, none of the defendants could have raised a legitimate fair use defense, and universities and educators remained untouched by efforts under the Act.2

The Artists’ Rights and Theft Prevention (ART) Act of 2005 added provisions to criminal copyright law that expressly targeted “camming” and distribution of pre-release commercial works. Critics called it draconian, foresaw an uptick in prison sentences, and decried a lack of fair use in the Act. The provisions have instead been used judiciously; prisons have not been filled with cammers and leakers.

2008 brought the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act, a broad bill that amended civil and criminal provisions of the Copyright Act and created the Intellectual Property Enforcement Coordinator position, currently held by Victoria Espinel.

The response? Michael Seman of NetSherpa wrote, “The passing of the PRO-IP act is the latest in a string of actions taken by the U.S. Government that result in further constricting the free exchange of ideas,” one that “means we’re close to losing the flow of culture that the Internet so greatly facilitates.” Mike Masnick said, “All it will actually serve to do is to limit more creative forms of expression and much more innovative business models from being allowed to thrive.” And noted copyright scholar William Patry remarked, “The dangers in the new Zero Tolerance to copyright go far beyond the individuals swept within its net, although that is bad enough: the Zero Tolerance approach threatens respect for law itself.”

Grokster pt. 2

Legislative proposals aren’t the only things that brings out the freedom and innovation pessimists.

The Supreme Court issued its decision in Metro-Goldwyn-Mayer Studios v. Grokster in 2005, holding that “one who distributes a device with the object of promoting its use to infringe copyright” may be liable for the resulting infringing acts by its users. In its amicus brief to the Grokster court, the National Venture Capital Association warned that a rule holding Grokster liable would “have a chilling effect on innovation.”

However, since Grokster:

[V]enture capital in the media and entertainment sectors grew faster than the rest of the VC market in four out of the six years. By comparison, in the five years before the Grokster decision, growth was lower in four of them. From 2000 to 2004, media and entertainment venture capital accounted for about 4.6 percent of total VC dollars invested. From 2006 through 2010, media and entertainment VC dollars grew to 7.1 percent of total VC dollars.3

This year alone, in a down economy, music-based startups have received nearly half a billion dollars in funding. And some of these startups are far more exciting than the mere hoarding of music files that Grokster and other P2P services offered.

Little difference that makes though. In a letter to Congress on the proposed PROTECT IP Act, a group of venture capitalists offer the same warning: the bill would “throttle innovation” and “chill investment.”

It’s the End of the World as We Know It

Despite this history, critics of the Stop Online Piracy Act promise that the bill spells the end of innovation, culture, freedom, and the very Internet itself, for real this time.

It won’t.

In the long term, the public benefits the most when both creators and innovators succeed. And our laws should continue to adapt to make sure that happens.

Footnotes

  1. Eric Goldman, A Road to No Warez: The No Electronic Theft Act and Criminal Copyright Infringement, 82 Oregon Law Review 369 (2003). [↩]
  2. Id. 392-96. [↩]
  3. Greg Sandoval, VCs to Congress: Antipiracy will ‘chill’ tech investment, CNet, June 24, 2011. [↩]
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htmlComics: Domain Name Forfeiture Before Operation in Our Sites

September 07, 2011 · · 5 comments

Before Operation in Our Sites, there was htmlComics.

Though the US Government’s seizure of over 100 domain names as property facilitating the commission of copyright infringement over the past year has received a lot of attention, the story of htmlComics has mostly stayed out of the limelight (except within the comics community).

The case of htmlComics.com is, as far as I know, the first time a domain name has been forfeited under 18 USC § 2323(a) as property “used, or intended to be used, in any manner or part to commit or facilitate the commission of” criminal copyright infringement.1 For this reason, it’s worth taking another look at — although the circumstances are very different than the forfeiture case against the Rojadirecta domain names (the only domain name seized during Operation in Our Sites that has been disputed so far).

It’s just like a library

A man by the name of Gregory Hart (no relation) registered the htmlcomics.com domain in December 2008, and shortly after began creating a large library of digitized comic books. The site soon grew to include hundreds of thousands of complete copies of comics, attracting thousands of visitors and plenty of speculation over its legality.

Several online postings by Hart shed some light on his motivations for creating the site. In one, he says he’s never “read even one entire comic book!!!!!!!” and created the site as a sort of proof of concept of a large-scale digitized library project. In another, he asks about legal issues relating to the site, operating under the assumption that his site is no different from any public library.

htmlComics.com quickly attracted the attention of most major comic book publishers. Some sent cease and desist letters, but soon, a consortium of publishers — including Marvel Comics, DC Comics, Dark Horse Comics, Bongo Comics, Archie Comics, Conan Properties Int’l LLC, Mirage Studios Inc., and United Media — enlisted the aid of the FBI.

The Feds Get Involved

The FBI began an investigation of the site and Hart in July 2009. On April 20th, 2010, agents executed a search warrant on Hart’s residence, seizing various paper records and computer equipment. On May 27th, the FBI filed a complaint for forfeiture of the htmlComics.com domain name (along with five related domain names). A warrant for the seizure of the domain names was made the same day.

Like the forfeiture complaints filed against the domain names seized during Operation in Our Sites,2 the htmlcomics.com complaint alleges that the domain name is subject to forfeiture under 18 USC § 2323(a) because it is property used to facilitate the commission of criminal copyright infringement.

Hart filed a claim as an owner of the domain names and represented himself in the forfeiture proceedings. He filed his answer to the complaint on June 29th, along with several counterclaims against the government. The answer denied any wrongdoing. Hart repeated his assertion that the site was just like any public library:

The presentation of htmlComics.com was not in violation of U.S. Statutory laws. If it is, then so too is every private library within an apartment community, libraries within private clubs, every schoolhouse library, every prison library, and every military base library.

Hart counterclaimed for violations of the First Amendment, Fourth Amendment, Privacy Protection Act (42 USC § 2000AA), and trespass to chattels.

The US moved to dismiss the counterclaims, arguing that they were a “legal nullity” — the defendant in an in rem proceeding is the property, not the claimant, and any claim the claimant may have against the government must be brought in a separate action. As for the constitutional counterclaims, the US further argued that

the only conceivable basis for the Court’s subject matter jurisdiction is Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971), under which an individual may bring a cause of action “against a federal agent who, while acting under the color of federal law, has violated the constitutional rights of [the] individual. Bivens actions are brought directly under the Constitution, but damages can be obtained only when (1) the plaintiff has no alternative means of obtaining redress, and (2) no “special factors counseling hesitation” are present. In essence, a plaintiff must meet heightened pleading requirements to even pursue a claim under Bivens. Under this standard, the Claimant’s First and Fourth Amendment counterclaims are grossly deficient and must be dismissed.

The court granted the motion to dismiss Hart’s counterclaims. The only success Hart would have came early on, when the court dismissed the claim against one of the six domain names because, unlike the others, it pointed to a blank page.

By January 2011, the US and Hart reached a pretrial settlement agreement, where Hart agreed the remaining five domain names were subject to forfeiture and released any future claims against the US and the FBI. The court entered the final judgment of forfeiture on February 2, 2011.

htmlComics, Operation in Our Sites, and the PROTECT IP Act

The differences between this case and Operation in Our Sites are obvious. This was a singular action, investigated by the FBI, against a specific site while Operation in Our Sites constituted a broader, coordinated enforcement effort by ICE. htmlComics.com hosted infringing content on its own servers while many of the domains seized by ICE, including Rojadirecta, did not host the content themselves — though, under the language of the forfeiture statute, this is not as relevant a distinction as some critics of the operation make it out to be.

It’s the similarities, however, that I find interesting. Both involve the use of 18 USC § 2323 to forfeit the domain names of websites aiding piracy. Both htmlComics and Rojadirecta raised First Amendment arguments against the seizures — though not too much should be read into the failure of the argument in htmlComics since it flopped procedurally, and the outcome of Rojadirecta’s arguments are still pending. This case especially highlights the advantage of the forfeiture provision, added by the PRO-IP Act in 2008 — it gives the federal law enforcement agencies more options to carefully craft efforts to reduce online piracy. The FBI could have brought criminal charges against Hart himself or the comic book publishers could have sued Hart and his company in civil court. Instead, it proceeded in rem against the offending site itself, which is probably the most direct route. In the same way, ICE has targeted the domain names of rogue sites through the forfeiture process, making it more difficult for them to operate and profit.

Congress is back in session this week, and work on the proposed PROTECT IP Act is expected to begin shortly. The bill will give the US an additional option to use against pirate sites. Through a process similar to the in rem forfeiture proceedings used in htmlComics and Operation in Our Sites, the Attorney General will be able to request court orders against the often unwitting partners of pirate sites — advertising and financial service providers. This process is especially useful for taking the profit out of pirate sites where the operators are, unlike Hart and htmlComics, unknown or operating overseas.

Footnotes

  1. I’ve uploaded some of the court filings for this case to Scribd. The rest are available through PACER, or at the RECAP archive. [↩]
  2. Along with Rojadirecta, the US has filed a complaint against tvshack.net, movies-link.tv, zml.com, now-movies.com, thepiratecity.org, planetmoviez.com, and filespump.com. [↩]
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Friday’s Endnotes – 08/26/11

August 26, 2011 · · 5 comments

Consumption is a Human Right? — Another great post from Faza, taking on the weakness of the “access to culture” argument. “As human rights go, access to culture is a rather weak one. I mean, seriously, whatever happened to food, housing and healthcare? Compared to a lack of any of those, not being able to listen to the new album from [X] is a minor tickle. So why aren’t we getting any of those for free?”

Bill would help combat copyright offenders on the Internet — The Washington Post weighs in on the PROTECT IP Act. “[It] takes pains to protect Internet service providers, search engines and others that may have done business with a rogue site … But there is a need for a legal tool that stops those who persistently leech off of the innovations of others.”

Ontario Court of Appeal Rules In Tucows v. Renner: Domain Names Are Personal Property — Before this, no Canadian appellate court had reached the issue. Matt Lonsdale of IP Osgoode examines the decision, which aligns Canada with the dominant view that domain names can be treated as property, a view shared by US courts.

HSI agents arrest website operator for illegally streaming copyrighted sporting events — ICE announced it had arrested the operator of one of the sites whose domain names had been seized as part of Operation in Our Sites. The owner of HQ-Streams.com and HQ-Streams.net has been charged with one count of criminal copyright infringement for allegedly streaming live sporting events through the website.

Hollywood Buzz in Cleveland, Ohio — Film production creates jobs and boosts local economies. Recent local news channels highlighted these positive effects in Cleveland, currently home for production of The Avengers and I, Alex Cross.

The Jobs Program — Rob Levine weighs in on Steve Jobs resignation and the success of Apple despite the company doing the opposite of what technology pundits consistently preach.

Petition of the Day: Pilgrim Films & Television v. Montz — SCOTUSBlog highlights this petition to the Supreme Court from Pilgrim and NBCUniversal, stemming from a dispute between them and a parapsychologist, who alleged the idea for the Syfy program Ghost Hunters was taken from him without compensation. The 9th Circuit ruled in favor of him; Pilgrim appeals to the Supreme Court on the basis that such a claim should be pre-empted by the Copyright Act.

Bestselling Self-Published Author Signs Deal with Simon & Schuster — John Locke, who became popular in the blogosphere after selling millions of copies of his self-released books, becomes the latest in the line of such authors to join forces with a traditional publisher.

Crowdfunding Concerns — It’s all fun and games till someone gets poked by the IRS. “Crowdfunding”, or micro-patronage, is becoming a popular alternative for raising money for a variety of creative endeavors. However, as Leslie Burns explains, creators interested in crowdfunding a project need to be careful to consider tax considerations and other legal issues before beginning.

The Potential Cost of PROTECT IP: Our Take — The MPAA comments on the Congressional Budget Office’s $47 million cost estimate for implementing the proposed legislation.

The Copyright Alert System — A couple of recent pieces exploring July’s announcement of an agreement between US ISPs and the music and film industry to fight online piracy. Songwriters Guild of America president Rick Carnes discusses the agreement at the Arts+Labs blog, while the Kluwer Copyright Blog looks at it in the context of similar international and European measures.

Book Review: Robert Levine, Free Ride — The Cynical Musician reviews Levine’s Free Ride. “Levine’s single biggest contribution to the debate on the future of online media is that he manages to demonstrate, very clearly, that rather than a question of morality or ideology, it is one of economics.”

Stop Criminalizing Our Kids: Google Drugs Pays Record $500 Million Fine to Avoid Jail … For Now — Chris Castle discusses the record forfeiture of Google’s profits in connection with ads for illegal importation of prescription drugs. The settlement agreement between the Department of Justice and Google is available here.

Documenting how a bill becomes a law — Many of the documents produced during the legislative process are available online, but compilations of a bill’s entire legislative history are not as readily available, meaning lawyers and researchers have to do a lot of legwork to piece together the reports, hearings, committee prints, and draft bills that shed light on the intent of a law. The US Department of Justice has just released a collection of compiled legislative histories for a number of landmark bills that its staff uses internally. Kudos to the DOJ for making this valuable resource available to the public.

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Rojadirecta: Barking up the Wrong Tree?

August 09, 2011 · · 1 comment

Of the 100+ domain names seized by ICE since it began Operation in Our Sites last summer, only one has raised a challenge. Rojadirecta, which allegedly catalogs hundreds of links, primarily to live sporting events streaming online, has enlisted no less than six lawyers in its effort to prevent its domain names from being forfeited by the US government.

On Friday, Rojadirecta’s petition for release of seized property was denied by the court.1 On the same day, it filed its motion to dismiss in the Government’s forfeiture proceeding against its domain name. The Government’s response is due by August 26th, and Rojadirecta’s reply to the response is due September 2nd.

Was the court correct in refusing to release the domain name to Rojadirecta? Will Rojadirecta succeed in getting the Government’s forfeiture complaint dismissed?

The short answer to these questions are, in my opinion, yes and no. For the gory legal details, read on.

Petition to Release Seized Property

Civil forfeiture is based on the idea that property can be “guilty” — a strange idea, but not a new one.2 But other than the defendant being property rather than a person, a civil forfeiture proceeding largely mirrors any other civil lawsuit. It begins with a complaint filed in court, proceeds through motions practice and discovery, and (if it makes it this far) ends in trial and judgment.

In a previous post, I wrote how the petition to release seized property largely mirrors the procedure of a criminal defendant being released on bail pending trial. Viewed this way, it’s easy to see why Rojadirecta didn’t succeed with its petition. Essentially, Rojadirecta’s lawyers made two arguments: “our client should be released on bail because he’s innocent” and “our client should be released on bail because he was wrongfully arrested.”

Those are certainly valid arguments, just not in this context.

As I detailed in my previous post, a petition like this is only granted if a claimant is suffering a substantial hardship due to the seizure. Most deprivations of property will cause some level of hardship, obviously; Congress added this procedure to reach those situations where the seizure would be devastating — situations like “preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless.”3

Rojadirecta failed to argue any of these.

It did argue, in part, that its users were suffering a substantial hardship due to the seizure because their First Amendment rights had been infringed. The court rejected this argument, causing some to scratch their heads, since it sounds like the court is saying it doesn’t think a loss of First Amendment rights is a substantial hardship.

That’s not what the court is saying, however. Infringement of free speech certainly causes substantial, if not irreparable, hardship. But the definition of “substantial hardship” in this particular statute is far more limited than the general meaning of the phrase. In addition, Congress didn’t intend to include free speech violations under this statute because those rights are already protected.

Claimants can challenge the legality of a seizure during the forfeiture proceeding itself or through existing procedures — for example, a Bivens action or a motion to suppress.4 The 983(f) petition is an additional layer of procedural protection on top of existing procedures, designed for a specific purpose. Rojadirecta simply raised this issue in the wrong place.

Judging by the brevity of the order, the denial of Rojadirecta’s petition was, as I had predicted, an easy call for the court to make.

Rojadirecta’s Motion to Dismiss

A motion to dismiss will be granted if the complaint is insufficient on its face.

Civil forfeiture complaints are governed by the Supplemental Rules in the Federal Rules of Civil Procedure, which state in part that the Government must ”state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial.” “However,” as one court explains, “the Government is not required to allege in the complaint all of the facts and evidence at its disposal.”

It is sufficient for the Government to simply plead enough facts for the claimant to understand the theory of forfeiture, to file a responsive pleading, and to undertake an adequate investigation. The issue is one of pleading, not proof at trial. And it is for this reason that “[n]o complaint may be dismissed on the ground that the Government did not have adequate evidence at the time the complaint was filed to establish the forfeitability of the property.”5

What does the Government have to show to establish the forfeitability of property?

Federal civil forfeiture statutes, including those applying to criminal copyright infringement, are subject to CAFRA, the Civil Asset Forfeiture Reform Act of 2000. Under CAFRA, the Government must show that the defendant property is subject to forfeiture by a preponderance of the evidence. When the defendant property is alleged to be an instrumentality of a crime, the Government must also show that there is a substantial connection between the property and the alleged crime.

If the Government can show both, the only way a claimant can win is by rebutting the showing of a substantial connection or raising an affirmative defense to the forfeiture — the claimant is an “innocent owner” of the property, for example. Under CAFRA, an innocent owner is one who “did not know of the conduct giving rise to forfeiture; or upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property.”6

18 USC § 2323(a)(1)(B) subjects the following to forfeiture: “Any property used, or intended to be used, in any manner or part to commit or facilitate the commission of an offense referred to in subparagraph (A).” Subparagraph (A) refers to criminal copyright infringement offenses, including those set out in 17 USC § 506, which states:

(1) In general.— Any person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18, if the infringement was committed—

(A) for purposes of commercial advantage or private financial gain;

(B) by the reproduction or distribution, including by electronic means, during any 180–day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; or

(C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.

Facilitation “occurs when the property makes the prohibited conduct less difficult or more or less free from obstruction or hindrance.”7 As one court noted, “It is ‘[i]rrelevant whether the property’s role in the crime is integral, essential or indispensable.’ A single incident of facilitating criminal activity is sufficient to trigger forfeiture.”8

Notice what is not required in civil forfeiture proceedings.

First, the Government does not have to prosecute or convict anyone of the underlying crime to seek forfeiture of property that facilitates that crime.9

Second, the forfeiture proceeding is not directed at the site operators of Rojadirecta, but at the domain name itself.10 The culpability of the site’s owners is irrelevant.11 In fact, the civil forfeiture has been described as an “essential tool” when the government “can prove that the property was involved in a crime, but cannot prove who the wrongdoer was.”12

With this in mind, let’s turn to Rojadirecta’s general argument supporting its motion to dismiss. It states, “the Complaint, which focuses entirely on Puerto 80’s actions, fails to allege facts that, if proven, would suffice to show that Puerto 80’s operation of the Rojadirecta site constitutes criminal copyright infringement.”

As we’ve just seen, the Government’s forfeiture complaint doesn’t have to allege such facts. In other words, Rojadirecta is barking up the wrong tree with its entire argument. The question of whether or not the operators of Rojadirecta are directly or indirectly liable for criminal copyright infringement — as well as the question of whether or not criminal copyright infringement even allows for indirect liability — is completely unrelated to the question of whether the domain name can be forfeited for facilitating the commission of a criminal copyright offense.

I doubt, then, that Rojadirecta can succeed with its motion to dismiss. Its argument doesn’t apply to the Government’s claim that its property was used to facilitate the commission of criminal copyright infringement.

Limits on Forfeiture

Some have wondered what limits the Government from seizing just about any web site’s domain name, considering the seemingly broad reach of civil forfeiture law. I’ve previously discussed some of the legal limitations preventing a seizure free-for-all; I want to briefly mention one more.

The Eighth Amendment’s prohibition of excessive fines places limits on civil forfeiture. The 2nd Circuit analyzes property forfeiture for excessiveness by considering the following:

(1) the harshness, or gross disproportionality, of the forfeiture in comparison to the gravity of the offense, giving due regard to

(a) the offense committed and its relation to other criminal activity,

(b) whether the claimant falls within the class of persons for whom the statute was designed,

(c) the punishments available, and

(d) the harm caused by the claimant’s conduct;

(2) the nexus between the property and the criminal offenses, including the deliberate nature of the use and the temporal and spatial extent of the use; and

(3) the culpability of each claimant.

It adds, “Determining the excessiveness of a civil in rem forfeiture is necessarily fact-intensive and the ‘quantum, in particular, of pecuniary fines neither can, nor ought to be, ascertained by any invariable law.’ Given the impossibility of establishing a formula for an excessive fine with surgical precision, this framework provides a useful template for the fact-finding process and the ultimate excessiveness inquiry.”13

A more detailed look at how this inquiry works in practice is beyond the scope of this article.

Footnotes

  1. The petition was actually filed by Puerto 80 Projects, the company that owns the Rojadirecta site. To keep things simple, I’ll refer to both the site and the site’s owners and operators as Rojadirecta for this article. [↩]
  2. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663, 680-684 (1974) where the Supreme Court traces the history of forfeiture laws since Biblical times. [↩]
  3. 18 USC § 983(f)(1)(C). [↩]
  4. US v. PlayboyMonthly.com, United States’ Motion to Dismiss Claimant’s Counterclaims, No. 8:10-cv-1214-T-27TBM (MD Fla. 2010); US v. $80,633, 512 F.Supp.2d 1196 (MD Ala. 2007). [↩]
  5. US v. $22,173.00 in US Currency, 716 F. Supp. 2d 245, 248-49 (SDNY 2010. [↩]
  6. Van Hofe v. US, 492 F.3d 175, 179-80 (2nd Cir. 2007). [↩]
  7. In re 650 Fifth Avenue and Related Properties, Memorandum Opinion and Order, No. 1:08-cv-10934-RJH (SDNY March 30, 2011). [↩]
  8. US v. LAM, No. 3:07-CR-374, Memorandum Opinion (ED Va. March 28, 2011). [↩]
  9. See, for example, Van Hofe at 179, US brought civil in rem forfeiture action against residence used to facilitate commission of drug crime without indicting and prosecuting owners personally; Austin v. US, 509 U.S. 602, 627 (1993) (Scalia, J. concurring in part and concurring in judgment), conviction irrelevant to forfeiture proceeding; The Palmyra, 25 US 1, 15 (1827), “no personal conviction of the offender is necessary to enforce a forfeiture in rem in cases of this nature”; US v. One Parcel of Real Estate Located at 7715 Betsy Bruce Lane Summerfield, 906 F. 2d 110,111-12 (4th Cir. 1990), “In civil forfeiture cases, property is subject to forfeiture ‘even if its owner is acquitted of — or never called to defend against — criminal charges.’” [↩]
  10. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 US 663 (1974). [↩]
  11. See US v. Cherry, 330 F.3d 658, n.16 (4th Cir. 2003). [↩]
  12. Stefan D. Cassella, Overview of Asset Forfeiture Law in the United States, United States Attorneys’ Bulletin, Vol. 55, vol. 6, pg. 17 (November 2007). [↩]
  13. Van Hofe at 186. [↩]
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Rojadirecta Seeks Return of Seized Domain Names

July 13, 2011 · · 5 comments

A company owning domain names that had been seized by ICE as part of its efforts to fight online piracy is seeking their return pending the outcome of the Government’s forfeiture proceeding against them. On Monday, the US filed its memorandum of law opposing the return.

“Rojadirecta.com” and “Rojadirecta.org” were seized on February 1, 2011, as part of ICE’s third phase of Operation in Our Sites. The owner of the domain names, Puerto 80 Projects, and its legal counsel engaged in informal discussions with the government to return them, but Puerto 80 ultimately refused to accept the government’s condition that it stop facilitating copyright infringement in order to get its domain names back.

On March 22, Puerto 80 filed Seized Asset Claim Forms, identifying itself as owner of the domains and giving the US 90 days to file a forfeiture complaint in federal court. The US filed the complaint within the time frame, on June 17.

A few days earlier, Puerto 80 filed a petition for release of seized property. The petition and memorandum of law in support are available here. The EFF filed an amicus brief as well, available here.1

On Monday, July 11, the US filed its memorandum of law in opposition to the petition.

If the court grants the motion, it doesn’t mean Puerto 80 wins, it just means possession of the domain names will be returned to Puerto 80 during the forfeiture proceedings. The court may also enter any order necessary to ensure the property’s value is maintained while the proceeding is pending (like requiring Puerto 80 to post a bond), and the government may place a lien on it to prevent its transfer to another person.2 If the government eventually wins its forfeiture case, than the domain names are given back to be destroyed.

In many ways, this procedure is similar to a criminal defendant being released on bail after arrest and before trial.

Federal judicial forfeiture actions are governed by Supplemental Rule G of the Federal Rules of Civil Procedure. Those rules state that someone seeking return of seized property pending the outcome of a forfeiture proceeding may petition the court under 18 USC § 983(f).3

Section 983(f) lays out five conditions that must be met for a court to release property that is the subject of a forfeiture proceeding. It requires that:

(A) the claimant has a possessory interest in the property;

(B) the claimant has sufficient ties to the community to provide assurance that the property will be available at the time of the trial;

(C) the continued possession by the Government pending the final disposition of forfeiture proceedings will cause substantial hardship to the claimant, such as preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless;

(D) the claimant’s likely hardship from the continued possession by the Government of the seized property outweighs the risk that the property will be destroyed, damaged, lost, concealed, or transferred if it is returned to the claimant during the pendency of the proceeding; and

(E) none of the conditions set forth in paragraph (8) applies.

Paragraph (8) states that release of seized property is unavailable if the property:

(A) is contraband, currency, or other monetary instrument, or electronic funds unless such currency or other monetary instrument or electronic funds constitutes the assets of a legitimate business which has been seized;

(B) is to be used as evidence of a violation of the law;

(C) by reason of design or other characteristic, is particularly suited for use in illegal activities; or

(D) is likely to be used to commit additional criminal acts if returned to the claimant.

In its petition, Puerto 80 says it meets all these requirements. The substantial hardship caused by the continued possession of the domain names that Puerto 80 claims include a reduction in traffic, a loss of business goodwill, and deprivation of its users’ and visitors’ First Amendment rights.

The US responds that Puerto 80 hasn’t shown it satisfies the requirements of 983(f) and doesn’t mince words in doing so:

In attempting to provide justification for granting this extreme remedy, Puerto 80 seeks to characterize the website it operated under the Rojadirecta Domain Names as an online discussion forum and, in so doing, would have this Court decide, on an expedited basis and without a fully developed factual record, a variety of issues that are more properly raised either in a motion to dismiss the Government’s Verified Complaint or following a period of discovery. Indeed, through its petition, Puerto 80 is attempting to use a limited provision of forfeiture law designed to provide relief in only the rarest of circumstances in order to mount a broader challenge to a widely employed tool of law enforcement.

Specifically, the US argues that the hardships cited by Puerto 80 are not the substantial ones Congress intended when it wrote 983(f). Looking at both the case law and legislative history, the US points out that, especially in light of the examples given by the statute — ”preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless” — potential loss of goodwill and a 1/3 drop in traffic don’t qualify.

The US states that Puerto 80′s inclusion of the impact on the First Amendment rights of its users as a substantial hardship borne by Puerto 80 “borders on frivolous.” If there’s a First Amendment issue here, Puerto 80 must raise it in the forfeiture proceeding, not shoehorn it into a 983(f) petition.

Finally, the US states says the return of the domain names is likely to result in their further use in committing criminal copyright infringement, since it has no reason to believe Puerto 80 will stop the acts that led to the domain names being seized in the first place.

This portion is worth a read, as the US takes the time to elaborate on its theory of the case against the domain names — why it believes they facilitate criminal copyright infringement. It says “Puerto 80′s attempts to liken itself to an Internet search engine is wholly unavailing. Unlike a search engine or other site that aggregates links to existing content neutral material on the Internet, Rojadirecta organizes links to very specific content in a precise and targeted way.”

The US goes on to argue that even if Puerto 80 isn’t engaged in direct infringement on its website, it “certainly has engaged in contributory infringement, and has aided and abetted the infringement of others.”

My thoughts: this seems like an easy call for the court to make in favor of the US. Courts have read the “substantial hardship” requirement for these petitions strictly. An example given in the statute is “preventing the functioning of a business” — the case law suggests a substantial hardship is closer to completely preventing, ie a business would be forced to declare bankruptcy without the property seized, the functioning than significantly impeding the functioning.

The various substantive issues raised by Puerto 80 are more appropriately raised in the forfeiture proceeding itself. I don’t doubt they’ll do exactly that. But the 983(f) petition is a limited remedy, and I’d be surprised to see a court rule on substantive issues at this point.

Some other thoughts: Puerto 80 and the EFF devote considerable time to arguing that these seizures amount to an improper prior restraint under the First Amendment, and many in the blogosphere have shared this view. Those concerns extend to the pending PROTECT IP Act, since its provisions will largely depend on domain name seizures such as this.

The US disagrees, and its brief remarks on the issue in its memorandum suggest it’s approaching the issue similarly to how I’ve approached it here in previous posts.4 The government notes that the discussion forums remain on Rojadirecta’s site and are still accessible through other domain names, where case law dealing with seizures and the First Amendment have focused on whether or not the seizure actually removes expressive material from circulation.

In a footnote, the US states: “Indeed, it is clear from the record before this Court that the Government’s seizure of the Rojadirecta Domain Names was prompted by enforcement of the criminal copyright laws, and not as regulation of speech or other expressive conduct. As such, the seizure is not properly viewed as a prior restraint. See, e.g., Arcara v. Cloud Books, Inc., 478 U.S.697, 706 n.2 (1986).”

Finally, a word about the Spanish court decision finding Rojadirecta not liable for copyright infringement. The US notes that this doesn’t preclude Rojadirecta for being liable for violating US copyright law. Generally, any business that operates in a country is subject to that country’s laws; you can’t, for example, operate a mail-order marijuana business in a country where that substance is legal and ship to US customers without getting into trouble.

The EFF argues, however, that the district court should give the Spanish court decision preclusive effect under the principle of comity. I don’t find this argument convincing.

A nation’s courts aren’t required to take a foreign court’s decisions into consideration (except when specifically required by a treaty agreement between the two countries).5 But they generally will do so under the concept of comity, unless there’s a strong policy reason not to. Comity is based on respect between nations and the presumption that other nations will reciprocate.

Typically, comity shows up when someone asks a court to enforce a foreign court’s judgment. The EFF states, however, that “the principles apply more broadly.” They do, but not in the general sense the EFF suggests.

Giving effect to a foreign court decision means treating it as if it was a US court decision. That means it prevents the relitigation of either the same claim between the same parties that had already been decided (“res judicata”) or the same issue that had already been decided in an earlier case involving one of the parties (“collateral estoppel”).

I don’t think either res judicata or collateral estoppel preclude the forfeiture of these domain names. The parties are different: the Spanish case involved Spanish copyright owner Audiovisual Sport S.L. and the operators of Rojadirecta, this case is between the US government and the Rojadirecta domain names. The issues are largely different too: the primary issue in the Spanish case was whether the website infringed on copyrights, the primary issue here is whether the domain names facilitated the infringement of copyrights. Indeed, the Spanish court even said in its decision, “The actions of making available and advertising the games that are transferred facilitate download”.6

The court has 30 days to rule on Puerto 80′s petition unless both parties consent to an extension. More on this case as it develops.

Footnotes

  1. I’m curious to know if this is the first time anyone has filed an amicus brief for this type of petition. [↩]
  2. 18 USC § 983(f)(7). [↩]
  3. FRCP Supplemental Rule G(8)(d)(i). [↩]
  4. See COICA: First Amendment, Domain Name Seizures Don’t Violate First Amendment, ICE Seizures Criticism: Magic Words A Response to ‘Supporters of DHS Domain Name Seizures Undervalue Important Constitutional Protections’, and Responding to Sellars: Copyright and Content-based Regulations. [↩]
  5. By contrast, US states are required to recognize judgments made in another state’s courts under the Full Faith and Credit Clause of the Constitution. [↩]
  6. Declaration of Igor Seoane Miñán, Exhibit 1. [↩]
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Commercial Felony Streaming Act FUD

July 06, 2011 · · 12 comments

I know an internet meme has hit the mainstream when my mother asks me about it.

“Did you hear they want to throw people who post videos of lip-synching online in jail?” she asked me the other day.

She was referring to bill S.978, the Commercial Felony Streaming Act. The bill has raised considerable consternation online, with fears that it will be used against people engaged in all sorts of conduct that has up to now escaped legal attention, like posting videos on video-sharing sites or embedding videos on blogs. I had previously written about why those fears are overblown.

But those fears continue. Today I want to address the bill more in depth from a legal perspective to allay those fears.

The bill is addressed toward only large-scale, commercial piracy, and the bill is drafted accordingly.

To see why, I’ll show how the language creates several high bars to prevent it being applied to other types of infringement. But first, a little background.

Criminal Infringement of the Public Performance Right

If you take away only one thing from this article, take away this: S.978 doesn’t change what is legal and what is illegal.

Copyright is really a bundle of rights: the right to reproduce, distribute, and publicly perform, among others. Infringing any of these rights can trigger criminal infringement prosecution. Criminal infringement of reproduction and distribution has long carried felony charges in certain circumstances, but criminal infringement of other rights like public performance has been a part of the law since 1897 and has included the possibility of jail time.

Online, the distinction between what right is implicated by certain conduct blurs. Some courts have made a distinction between “downloading” and “streaming” to draw a line between reproduction and public performance,1 though that doesn’t entirely clear up the confusion.

The distinction between downloading and streaming is not really a technical one. As Cory Doctorow explains in a 2009 column “Streaming will never stop downloading,” streaming is really only a subset of downloading. A work is still being copied, except with “streaming”, a user can start watching or listening before the entire work is finished copying, and generally, the copy isn’t permanently stored where it can easily be accessed later.

Legally, there is a difference between copying and a public performance. Ideally, that would translate online to a distinction between downloading and streaming, but as I just mentioned, that’s a difficult distinction to make.

Meanwhile, copyright owners are harmed just the same whether a site owner offers a movie that can be downloaded first and watched later or watched as soon as the downloading starts. Some copyright owners are particularly harmed by streaming: sports events are nearly always streamed since much of the experience comes from watching the event live.

Newly minted Register of Copyrights Maria Pallante explained the scope of this harm last June:

During its 2009-2010 professional basketball season, the NBA identified 2,975 unauthorized streams on just eight websites/services, while in the current 2010-2011 NBA season, the NBA identified more than 2,700 unlawful streams of games on just one foreign website alone. According to industry sources, monthly traffic to ten of the cyber lockers that provide unauthorized access to streamed content grew by 13 million separate users per month during 2010, to 105 million separate users per month. And a recent NBC Universal-commissioned study found that one site that provided access to pirated movie streams had 6.5 million unique users each month, while another similar website had 5 million unique users each month. Recent legal challenges involving claims of unauthorized streaming include a complaint by the Ultimate Fighting Championship (UFC) against life-casting website Justin.tv alleging that more than 50,000 viewers watched illegal streams of a live UFC bout, “UFC 121 Lesnar v. Velasquez” through the site, and that UFC vendors removed over 200 infringing feeds during just that live event.2

Bill S.978 seeks to address these problems by standardizing the penalties for large-scale, willful, commercial infringement of a public performance with the penalties for the same type of infringement of the reproduction and distribution right. S.978 amends the criminal copyright infringement provisions in part to add the following, stating that any person who willfully infringes a copyright:

(2) shall be imprisoned not more than 5 years, fined in the amount set forth in this title, or both, if–

(A) the offense consists of 10 or more public performances by electronic means, during any 180-day period, of 1 or more copyrighted works; and
(B)(i) the total retail value of the performances, or the total economic value of such public performances to the infringer or to the copyright owner, would exceed $2,500; or
(ii) the total fair market value of licenses to offer performances of those works would exceed $5,000

The language of the statute sets forth several bars to arbitrary and unreasonable application of the law, including its requirement of willfulness and the value necessary to trigger it. Let’s take a look at both of these in turn before looking at some more general bars to its application.

Willfulness

Civil copyright infringement is a strict liability tort — the intent or state of mind of an alleged infringer is irrelevant, and “innocent” infringement is not a defense.3

Criminal copyright infringement, however, requires intent. The infringement must be “willful.” Courts have interpreted this to mean an “intentional violation of a known legal duty.”4 In other words, in a criminal copyright trial, the government must prove a “bad purpose” or “evil motive” rather than merely an “intent to copy and not to infringe.”5

This is a high standard. In addition, it is a subjective rather than an objective standard, meaning the question is not whether a reasonable person would have known certain conduct infringed a copyright but rather what the alleged infringer himself thought, even if he was obviously wrong.

A good example of this distinction is found in the case law. In US v. Moran, the owner of a “mom-and-pop” movie rental store was charged with criminal copyright infringement after an investigation revealed that he was making a copy of every movie he got to rent out, keeping the originals in storage.

The owner testified that he did this as “insurance” because movies frequently became damaged or vandalized as they were rented out, and he was under the impression that, while piracy is illegal, his type of conduct was not. On this point, he was wrong, but the court noted that he honestly believed he was operating within the law, so the standard of willfulness hadn’t been met.

Obviously there are limits to this. Bad-faith claims or outright lying won’t save a willful infringer. Neither will disagreement over the validity of copyright law itself.6

But it does mean that someone posting a mashup that they think is a fair use won’t find FBI agents at their door,7 nor does it mean an online intermediary with a legitimate DMCA policy in place will find itself in criminal court anytime soon.

Value

The second bar that has to be passed for a conviction under S.978 is establishing value. The proposed bill establishes two separate measures of value: either 10 or more performances within 180 days where the total retail value (or total economic value to the infringer or copyright owner) exceeds $2,500 or where the total fair market value of licenses to offer performances would exceed $5,000.

Contrary to some of the commentary I’ve seen, these numbers — retail value, total economic value, or fair market value — can’t be pulled out of thin air. They mean what they say they mean, not whatever a copyright owner or the government wants them to mean.

Retail value is simply what an authorized version would cost at the store. Felony provisions for reproducing a copyrighted work use the same measure of value.8 So a bootlegger copying a $20 DVD would need to make 125 copies in 180 days before coming within the scope of the felony provision.

What is the value of a performance? It’s equivalent to the fee for streaming or renting. New movie releases can be streamed online from places like Amazon and iTunes typically for $3.99. Pay-per-view events like UFC fights generally hover around $50.

Things like clips or cover songs would have values that are fractions of these. Your ordinary blogger won’t come close to reaching this bar. But a website operator pulling in 5 figures a year for offering hundreds (if not thousands) of unauthorized movies, TV shows, and sporting events (as evidence from Operation in Our Sites has shown was common for the sites whose domain names were seized) will.

Other Bars

Perhaps the biggest reason not to worry about this bill is that the government must prove willfulness, the total value, and all other elements of criminal copyright infringement under S.978 beyond a reasonable doubt. In a civil trial, a plaintiff only has to prove the elements of the case by a preponderance of the evidence — it is more likely than unlikely that a certain thing is true. It is far easier to be found civilly liable than it is to be found criminally guilty — just ask OJ Simpson.

The rule of lenity acts as another bar in criminal law. Criminal courts must construe any gray areas in a statute in favor of a defendant.

Finally, in my previous post, I talked about why prosecutorial discretion acts as a bar, a discussion that some have interpreted as me saying “trust the government.” That’s not the case.

The discussion here shows why the law itself prevents S.978 from being applied to conduct that many fear it applies to. These legal principles, however, prevent such convictions. Prosecutorial discretion — specifically, the government’s incentive to only bring cases it knows it can win and its limited time and resources to prosecute cases — means that those cases in the bubble between clearly legal and clearly illegal conduct won’t be prosecuted in the first place.

Conclusion

To sum up, Bill S.978 can’t be used to prosecute the uses that many fear it applies to. It doesn’t change what conduct is legal and what conduct is illegal. It is designed to apply only to outright pirates who profit off the streaming of unauthorized copyrighted works, and the language reflects this design.

Footnotes

  1. See, for example, US v. ASCAP, 485 F.Supp.2d 438 (SDNY 2007). [↩]
  2. Promoting Investment and Protecting Commerce Online: The ART Act, the NET Act and Illegal Streaming, Statement of Maria A. Pallante, Register of Copyrights, before the Subcommittee on Intellectual Property, Competition, and the Internet Committee on the Judiciary United States House of Representatives, 112th Congress, 1st Session (June 1, 2011). [↩]
  3. Although innocent infringement may reduce the minimum statutory damages available if the plaintiff seeks them. [↩]
  4. Prosecuting Intellectual Property Crimes, USDOJ, pg. 30, Third Edition (2006). [↩]
  5. US v. Moran, 757 F.Supp. 1046, 1048 (D. Neb. 1991). [↩]
  6. See Cheek v. US, 498 US 192 (1991). [↩]
  7. The Prosecuting IP Crimes Manual says fair use has “rarely” been developed in criminal cases, in part because of the willfulness standard. I have yet to see a criminal copyright infringement case that presented a colorable fair use defense. [↩]
  8. 18 USC § 2319(b). [↩]
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Fears of Felony Streaming Bill Overblown

June 07, 2011 · · 19 comments

The Senate Judiciary Committee is set to consider legislation that would make unauthorized public performance of a copyrighted work a felony.

Currently, only unauthorized reproduction and distribution can incur felony charges under criminal copyright infringement provisions — violation of other exclusive rights, like public performance, is considered a misdemeanor.

Bill S. 978 (referred by some as the “Commercial Felony Streaming Act” or “Commercial Felony and Streaming Act”), introduced May 12, 2011, provides for a maximum 5 year prison sentence if “the offense consists of 10 or more public performances by electronic means, during any 180-day period, of 1 or more copyrighted works; and the total retail value of the performances, or the total economic value of such public performances to the infringer or to the copyright owner, would exceed $2,500; or the total fair market value of licenses to offer performances of those works would exceed $5,000.”

The MPAA explains the reasoning behind the proposed legislation:

While existing law provides felony penalties for willful copyright infringement, such penalties only apply to defendants who illegally reproduce or distribute the copyrighted work. Due to technological advances since enactment of these penalties, copyrighted content can now be illegally streamed, not just downloaded, online. However, it is unclear whether Internet streaming constitutes distribution of copyrighted works, and therefore eligible to be prosecuted as a felony.

Internet streaming of copyrighted works clearly implicates the public performance right, and thus can be subject to criminal liability currently if done willfully and “for purposes of commercial advantage or private financial gain.” Due to the lack clarity surrounding the felony offense, however, prosecutors are reluctant to pursue cases against even the most egregious, illegal Internet streaming services. Indeed, prosecutors tend to focus their limited resources and manpower on prosecuting felony offenses that might result in significant jail time because such prosecutions have the greatest deterrent effect.

Newly appointed Register of Copyrights Maria Pallante testified to the Judiciary Committee in support of the legislative goals of the Act earlier this month. Echoing the MPAA’s explanation for the need of the bill, she added:

One might ask why it is not sufficient to prosecute streaming as a misdemeanor.  The fact is, as a practical matter, prosecutors have little incentive to file charges for a mere misdemeanor. This means that, compared to similar infringing conduct involving the large-scale making or distributing of copies (e.g. DVDs of a movie), streaming is not only a lesser crime on the books, it is a crime that may never be punished at all.  As a matter of policy, the public performance right should enjoy the same measure of protection from criminals as the reproduction and distribution rights; prosecutors should have the option of seeking felony penalties for such activity, when appropriate.

Though the proposed legislation makes only a nominal change in the law and is broadly supported, it has attracted some concern that it could cover a wide range of common activities online — some have even suggested that if the bill passes, the government will start throwing people in jail for embedding infringing YouTube videos.

What counts as a “public performance” online?

The US Copyright Act gives creators of “literary, musical, dramatic, and choreographic works” the exclusive right “to perform the copyrighted work publicly.”1 It also states that “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.”2 Finally, the Act states that “to perform or display a work ‘publicly’ means—(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.”

Though the application of the public performance right continues to evolve in the online arena, the law generally distinguishes between downloading and streaming, with downloading constituting a reproduction and streaming constituting a performance.3

The Second Circuit has taken a broad view of who can be directly liable for infringement of the public performance right online. The court has adopted the conclusion of the Southern District in New York that “Congress intended the definitions of ‘public’ and ‘performance’ to encompass each step in the process by which a protected work wends its way to its audience.”4 In other words, the fact that one service provider has permission to publicly perform a certain work doesn’t by itself give users or services permission to “re-publicly perform” that work — the same is true in the offline world, which is why public establishments like bars and restaurants need a license to play music for their customers even when that music comes from a radio playing music from stations that themselves are licensed to publicly perform works.5 Other circuits seem to embrace this interpretation as well.6

Perhaps the broadest interpretation of what is a public performance was made by a district court in Texas in Live Nation Motor Sports v. Davis.7 There, the court found a defendant liable for copyright infringement for merely linking to (rather than embedding) the plaintiff’s webcast without permission. Though this case rightfully raised concerns, its interpretation doesn’t seem to have been adopted by any other court.

Some have argued that the Ninth Circuit uses a different test for determining liability for direct infringement of the public performance right, based on that court’s decision in Perfect 10 v. Amazon.8 The court there used what it called the “server test” — direct infringement of a public display right only occurs when the content is copied on the service provider’s own server — not, for example, when it is displayed through inline linking or framing (though such a server provider may still be indirectly liable).

But I think the Ninth’s holding in Perfect 10 is only limited to the public display right and doesn’t extend to the public performance right. The Copyright Act defines the display right as showing a “copy” of a work, and the court based its conclusion largely on this inclusion of the word “copy” in the definition.9 It said, “Instead of communicating a copy of the image, Google provides HTML instructions that direct a user’s browser to a website publisher’s computer that stores the full-size photographic image. Providing these HTML instructions is not equivalent to showing a copy.”10

Unlike the definition of “display”, the definition of “performance” in the Copyright Act doesn’t require a “copy”. Thus, the question of where the actual content is hosted is irrelevant to whether a public performance has occurred. As far as I can tell, no court has applied the “server test” in the public performance context, so I think it’s reasonable to say there’s an open question about whether the Ninth Circuit takes a different approach than the Second in determining who is liable for violating the performance right online.

Will S.978 Put You in Jail for Embedding Infringing Videos?

Despite the breadth of the public performance right, civil lawsuits against individuals alleged to have infringed it online are rare — Live Nation Motor Sports is the exception rather than the rule. The worry that S.978 will lead to prisons overflowing with people for sharing online videos that happen to be infringing is overblown.

The standard for establishing criminal copyright liability is much higher than civil liability. Prosecutions for criminal copyright infringement under existing law are rare. According to the Administrative Office of the US Courts, less than 50 people are charged with a criminal copyright offense every year.11 There’s no reason to think that this number will change drastically because of S.978.

Other factors support the idea that most internet users have no reason to worry about this bill. The Department of Justice’s Prosecuting IP Crimes Manual lists several considerations for US Attorneys to keep in mind when deciding whether to bring charges. Among the considerations specific to IP crimes:

  • Federal criminal prosecution is most appropriate in the most egregious cases.
  • Limited federal resources should not be diverted to prosecute an inconsequential case or a case in which the violation is only technical.
  • Federal prosecution is most appropriate when the questions of intellectual property law are most settled. Victims have a broad range of civil remedies that include restitution, damages, punitive or quasi-punitive damages, injunctions, court costs, and attorneys’ fees.
  • The sources or manufacturers of infringing goods and services are generally more worthy of prosecution than distributors.

There are many other considerations that limit the application of criminal copyright infringement laws to only the most egregious pirates. No one need worry about facing jail time for sharing videos online should S.978 pass.

Footnotes

  1. 17 USC § 106(4). [↩]
  2. 17 USC § 101. [↩]
  3. See, for example, US v. ASCAP, 485 F.Supp.2d 438 (SDNY 2007). [↩]
  4. David v. Showtime/The Movie Channel, Inc., 697 F. Supp. 752, 759 (1988), quoted in NFL v. PrimeTime 24 Joint Venture, 211 F.3d 10, 13 (2nd Cir. 2000). [↩]
  5. See Broadcast Music, Inc. v. Claire’s Boutiques, 949 F.2d 1482 (7th Circuit 1991). [↩]
  6. For example, the 7th Circuit cites to David in Video Views v. Studio 21, 925 F.2d 1010, 1020 (1991) to support its statement that “the Copyright Act contemplates a broad interpretation of the concept of ‘public performance.’” [↩]
  7. No. 3:06-CV-276-L. (ND Texas 2007). [↩]
  8. For example, Evan Brown, Enthusiast website owner enjoined from streaming webcasts of racing events, Internet Cases blog (Dec 22, 2006); Jason Lunardi, Guerrilla Video: Potential Copyright Liability for Websites that Index Links to Unauthorized Streaming Content, 19 Fordham Intellectual Property Media and Entertainment Law Journal 1077, 1113-14 (2009). [↩]
  9. 17 USC § 101. [↩]
  10. 508 F. 3d 1146, 1160 (2007). [↩]
  11. Caseload Statistics 2010. [↩]
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