Copyhype

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

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

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

Some more detailed thoughts and questions about the bill:

Comparison to SOPA and PROTECT IP

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

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

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

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

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

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

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

OPEN Act and DMCA

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

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

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

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

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

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

How Different are the Definitions?

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

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

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

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

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

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

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

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

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

More US Control over the Internet?

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

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

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

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

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

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

(iv) a statement that the operator of the site

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

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

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

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

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

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

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

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

Is the OPEN Act Constitutional?

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

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

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

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

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

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

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

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

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

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

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

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