Judge Rakoff’s Kinderguides Decision

By , September 26, 2017.

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

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

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

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

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

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

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

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

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

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

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

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

References

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

Friday’s Endnotes – 09/22/17

By , September 22, 2017.

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

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

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

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

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

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

Friday’s Endnotes – 09/15/17

By , September 15, 2017.

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

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

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

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

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

Friday’s Endnotes – 09/08/17

By , September 08, 2017.

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

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

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

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

Friday’s Endnotes – 09/01/17

By , September 01, 2017.

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

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

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

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

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

The 512(f) Standard: An Equal and Opposite Reaction

By , August 31, 2017.

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

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

17 U.S.C. § 512(f)

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

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

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

(1) that material or activity is infringing, or

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

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

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

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

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

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

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

The Unsuccessful Push for a Stricter Standard

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

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

References

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

VidAngel, VidAngel, Appeal Denied

By , August 28, 2017.

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

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

VidAngel’s Service

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

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

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

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

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

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

Family Movie Act

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

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

is not copyright infringement.

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

Fair Use

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

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

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

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

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

Circumvention of access control measures under the DMCA

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

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

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

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

Conclusion

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

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

References

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

Friday’s Endnotes – 08/25/17

By , August 25, 2017.

The tech of ‘Terminator 2’ – an oral history — A thorough story of the groundbreaking work done on the 1991 film. The FX team didn’t just create the memorable shots, they had to develop the tools to create those shots. “On my first day at work, I came in the door, they sat me down, and they showed me the storyboards, and they went through this binder. And I’d point to a page and say, ‘Oh, well that looks interesting. How are you going to do that?’ And they’re like, ‘Oh, we don’t know yet.’”

Appeals Court Rejects VidAngel’s Bid to Overturn Injunction — The Ninth Circuit delivered a solid win to copyright owners in another case involving a “Rube Goldberg-like contrivance” hoping a laundry list of cute legal theories could allow it to provide on-demand streaming of film and television episodes without authorization.

Appeals Court Grapples With Digital Files, and the Business of Selling “Used” Songs — On the other side of the coast from the Ninth Circuit, the Second Circuit heard oral arguments in Capitol Records v Redigi, on appeal to consider whether copyright law permits a service to operate an online marketplace where digital files of copyrighted works can be “resold” via digital transmission.

Dubset makes Sony the first major label legalized for remixing — A very interesting development: Dubset has secured a licensing deal with one of the three major labels to allow it to provide user-uploaded unofficial remixes and DJ mixes incorporating Sony recordings on its site. Dubset’s technology allows it to automatically recognize those recordings, much like YouTube’s Content ID.

Friday’s Endnotes – 08/18/17

By , August 18, 2017.

Court Confirms the Obvious: Aiding and Abetting Criminal Copyright Infringement Is a Crime — Devlin Hartline has a great analysis of the recent decision to not dismiss criminal charges against the owner and operator of alleged pirate site Kickass Torrents, Artem Vaulin. Among other things, Vaulin argued that the Copyright Act contains no criminal provisions for secondary liability. Hartline explains why the court rejected that argument.

Don’t be bound by Binded.com — Carolyn Wright has some important words of caution about a new service from Binded that promises a fast and easy way to register copyrights in images.

The Invisible Artists Behind Your Favorite Comics — Asher Elbein of the Atlantic takes a look at some of the “behind the scenes” artists involved in creating comic books: colorists and letterers. Elbein writes, “Colorists are the cinematographers of graphic narrative, laying hues over art to control mood and style; letterers are the sound designers, crafting fonts, effects, and speech balloons to bring noise to a silent medium.”

Discogs Curbing Sale Of Unofficial Releases — Besides operating an impressively thorough database of music albums and releases, Discogs also runs an online marketplace to buy and sell records. So it’s great to see it continue to focus efforts and resources on ensuring that marketplace is operated responsibly and doesn’t facilitate the trade of infringing and bootleg recordings.

Some content about content — “Soon, everybody began calling things content. Copywriters became known as ‘content specialists,’ news websites became known as ‘content providers,’ and libraries became known as ‘shrines to content.’ It was the greatest societal shift since Johannes Gutenberg invented the content machine in 1440.”

Copyright and the Historical Record

By , August 16, 2017.

On August 18, 1787, James Madison proposed to the Constitutional Convention what would become Article 1, Section 8, Clause 8 of the Constitution, granting Congress the authority to make copyright (and patent) laws. To mark 230 years since that occasion, I’m posting the text of a brief talk I gave during the Center for Protection of Intellectual Property’s fourth annual fall conference October 2016 (video of the talk available here). The text is mildly edited for style, since I talk less grammatically correct than I write.

Lawyers rely on history a lot in practice. Common law itself is built on history—we rely on precedent—and when we are interpreting statutory and constitutional provisions, we’ll often turn to history to find insights and help us guide our interpretation.

But, of course, there’s always a danger with using history. Someone who’s trying to make a point may try to find evidence in the historical record to support that point, so there’s a danger of abuse. And perhaps there’s no period more prone to this type of myth and mischief then the Founding period, the period beginning after the end of the Revolutionary War, through the drafting and ratification of the Constitution, and through the first Congress. Because this is when the Constitution was drafted, so a lot of people discussing hot-button topics will try to look at the historical record from the Founding era to find some support for the positions that they are advancing.

And that’s true for copyright law as well, because the constitution does authorize Congress to enact copyright legislation—as well as patent legislation in the same clause, but I’ll be focusing here on copyright (though there is some overlap).

One of the unfortunate trends that a few people have observed is that supporters of a more minimalist copyright, of drawing back the current scope of copyright protection and enforcement, have been trying to advance this narrative that the Founding Fathers would be appalled if they looked at copyright law today, that they intended something completely different from what we see in the statute and in practice.

For example, a few years ago the Electronic Frontier Foundation wrote an article in response to some comments, saying, “Don’t be so sure you’ve got the Founders on your side.” They said, “We suspect that if anyone had described today’s copyright system to, say, Thomas Jefferson, he would have been shocked.”1Mitch Stoltz, EFF, “Looking Deeper into MPAA’s Copyright Agenda” (June 17, 2013).

Instead they advance this alternate narrative, which goes something like this: the Founders conceived copyright for a very narrow utilitarian purpose; authors’ interests aren’t at the central part of this equation; and they are only given protections begrudgingly through a narrow government privilege in order to advance this narrow utilitarian purpose.

The problem is when I look at the historical record that we have in front of us, I don’t see a lot of evidence for this view. Instead, I see evidence for something different about what the Founders intended.

Very briefly, I think it’s good to get some context of the timeline we’re looking at here before delving into the details. The Revolutionary War ends, and the Continental Congress is put together. Around the early 1780s, a number of authors started asking the states to pass copyright legislation. Chief among them was Noah Webster, whose dictionary bears his name, and he was lobbying a number of state legislatures to pass copyright legislation, along with others like John Ledyard, who petitioned the Connecticut General Assembly.2William Patry, Copyright Law and Practice (1994). In 1783, Connecticut was the first of the states to pass its own copyright legislation.3Copyright Office, Copyright Enactments, 1783-1973 (1973).

Around that same time, the great poet Joel Barlow petitioned the Continental Congress to—while they didn’t have the authority to pass copyright laws on their own—recommend to the remaining states to pass their own copyright laws.4Letter from Joel Barlow to the Continental Congress (1783), Primary Sources on Copyright (1450-1900), eds L. Bently & M. Kretschmer, www.copyrighthistory.org. The Continental Congress agreed, they passed this resolution, and eventually twelve out of the thirteen states did pass their own copyright laws.5Copyright Enactments. Delaware was the only state to fail to pass a copyright bill before the drafting of the federal constitution.

That brings us to the drafting of the Constitution. By August 6 during the Constitutional Convention, there was a first draft.6Madison Notes on the Debates in the Federal Convention, August 6, Avalon Project. It did not mention copyright or patent law in it, but in the middle of August, James Madison proposed that Congress does have the power to pass copyright and patent legislation, and that was added without debate—or without controversy—and sent to the Committee on Style, which came up with the language that we see today in Article I, Section 8, Clause 8.7Patry.

So why did they include copyright? Why did the Founding Fathers think copyright was important enough both at the state level and eventually to be given to the federal congress in order to enact? I think we could get some idea if we turn to the proponents who were pushing for copyright. When Noah Webster wrote a letter to one of the Connecticut representatives in favor of passing copyright legislation, he said, “America must be as independent in literature as in politics, and as famous for arts as for arms.”8Oren Bracha, Commentary on the Connecticut Copyright Statute 1783, in Primary Sources on Copyright (1450-1900), (2008). citing Noah Webster, Letters of Noah Webster ed. H.R. Warfel (New York: Literary Publishers, 1953), 1-4. In the same fashion, Joel Barlow, when he wrote to the delegates of the Confederate Congress, said, “America has convinced the world of her importance in a political and military line by the wisdom energy and ardor for liberty which distinguish the present era. A literary reputation is necessary in order to complete her national character. And she ought to encourage that variety and independence of genius in which she is not excelled by any nation in Europe.”9Letter from Joel Barlow.

So they thought this was important for the country as a whole, to complete its national character, and set it on equal stage among its international brethren. And how did they propose doing this? Here let’s look at Thomas Paine, who was very influential in the ideas of the American Revolution and the ensuing country. He wrote in 1782, around the same time, that “the state of literature in America must one day become a subject of legislative consideration, for hitherto it has been a disinterested volunteer in the service of the Revolution, and no man thought of profits. But when peace shall give time and opportunity for study, the country will deprive itself of the honor and service of letters in the improvement of science unless sufficient laws are made to prevent depradations of literary property.”10Paine, On the Affairs of North America: In Which the Mistakes in the Abbe’s Account of the Revolution of Amreica [sic] are Corrected and Cleared Up (1782).

So the idea was that we’ll give property rights to authors, we’ll create a market for these types of expressive and cultural works, and this will induce people to create these types of great works for the benefit of the public.

Property, of course, was central to the Founding Fathers in general. John Adams famously said, “Property must be secured, or liberty cannot exist.”11Discourses on Davila : A Series of Papers on Political History first published in the Gazette of the United States (1790-1791). Property was really important, and they saw copyright as a type of property. By giving authors these exclusive rights, it enabled this marketplace for creative works. This is consistent with other things you hear. When the Continental Congress recommended to the states, the Committee that made that recommendation said they were “persuaded that nothing is more properly a man’s own than the fruit of his study and that the protection and security of literary property would greatly tend to encourage genius, to promote useful discoveries, and to the general extension of arts and commerce.” You’ll see this elsewhere, where they talked a lot about how this property regime would encourage the types of works that they thought would really benefit culture and the nation as a whole.

Which is curious, because if you do see proponents of weaker copyright protections or more minimal copyright protections, they’ll sometimes say they don’t see a lot of “property talk” in the Founding era12See, e.g., Siva Vaidhyanathan, Copyrights and Copywrongs: The Rise of Intellectual Property and How it Threatens Creativity (2003).—which is just not evidenced by the historical record. Or they might recognize that, yes, they talked about property, but this was property in the sense of a statutory creation. It was a utilitarian instrument created in order to advance these goals, it wasn’t something that came from the natural rights of the authors.

But again, I don’t see a lot of evidence in the historical record for this. As noted in the passage above from the Continental Congress, the Founders explicitly mentioned natural rights.

And indeed, you’ll see a lot of other references to natural rights as the source of this property for authors. For example, the Massachusetts Copyright Act, which was passed before the Constitutional Convention, said that “the principal encouragement such persons can have to make great and beneficial exertions of this nature must exist in the legal security of the fruits of their study and industry to themselves and as such security is one of the natural rights of all men there being no property more peculiarly a man’s own than that which is produced by the labor of his mind.”13Copyright Enactments. Over half of the states that passed copyright legislation included such an explicit reference to natural rights as the source of these property rights.14Those states were Connecticut, Georgia, Massachusetts, New Hampshire, North Carolina, New York, and Rhode Island.

I think one of the things that underlies this alternative historical narrative used by supporters of weaker copyright is this fallacy that the interests of authors—and authors rights—is somehow distinct from the interests of the public; that we stick one on each end of a scale, and if authors’ rights are too strong then the public’s interest suffers. But I don’t think this is the case. It seems more accurate to say that authors interests and the public’s interests are interrelated and mutually reinforcing. And I think you could see, looking back at the Founding generation, that this is consistent with how they saw property.

This is an idea that was most famously put by Adam Smith, who a lot of the Founders were familiar with.15See, e.g., Robert L. Hetzel, The Relevance of Adam Smith. He famously said that “it’s not from the benevolence of the butcher, the brewer, or the baker that we can expect our dinner but from their regards to their own interests. By directing that industry in such a manner that produces of greatest value he intends only his own gain and he is in this as in many other cases led by an invisible hand to promote an end that was no part of his intention.”16Adam Smith, Wealth of Nations. So, in other words, the promotion of the public interest is inherent to the pursuit of self-interest and not something that is external to it.

If we look then to the Founding generation, there is one single reference to the copyright and patent clause in the Federalist Papers, Federalist 43, which was written by James Madison. It’s very brief, but one of the few things that James Madison mentioned about the copyright and patent power is that “the public good fully coincides in both cases with the claims of individuals”. He’s basically echoing Adam Smith’s sentiment here that private interest is what drives the public interest.

This is not an obsolete idea. We saw this recently in Eldred v Ashcroft, a Supreme Court case decided in 2003.17537 US 186. Justice Breyer had made in his dissent this balance argument consistent with what other copyright minimalists might make, and the majority responded to Justice Breyer in a footnote saying, “Justice Breyer’s assertion that copyright statutes must serve public and not private ends misses the mark. The two ends are not mutually exclusive… copyright law serves public ends by providing individuals with incentives to pursue private ends.”

Or, to put it bluntly, society benefits when creators get paid. The private right that copyright secures is what advances the public’s interest in new expressive works.

I think looking back at this historical record—and I don’t want to draw too strong conclusions, especially in such a brief essay—but I think we could say that maybe the Founding Fathers wouldn’t be so shocked if they looked at the copyright law today. They would see that it is rather consistent with the ideas that they had in mind when they were creating the copyright and patent power. I think especially if they looked at the success of US creative industries and copyright industries today—Hollywood, the record industry, the publishing industry—all these creative contributions to our economy and culture,18In 2015, the core copyright industries contributed $1.2 trillion to U.S. G.D.P. and employed over 5.5 million U.S. workers. Stephen Siwek, IIPA, Copyright Industries in the U.S. Economy: The 2016 Report (2016). I think they would feel validated that their approach has led to what they intended it to lead to.

References

References
↑1 Mitch Stoltz, EFF, “Looking Deeper into MPAA’s Copyright Agenda” (June 17, 2013).
↑2 William Patry, Copyright Law and Practice (1994).
↑3 Copyright Office, Copyright Enactments, 1783-1973 (1973).
↑4 Letter from Joel Barlow to the Continental Congress (1783), Primary Sources on Copyright (1450-1900), eds L. Bently & M. Kretschmer, www.copyrighthistory.org.
↑5 Copyright Enactments. Delaware was the only state to fail to pass a copyright bill before the drafting of the federal constitution.
↑6 Madison Notes on the Debates in the Federal Convention, August 6, Avalon Project.
↑7 Patry.
↑8 Oren Bracha, Commentary on the Connecticut Copyright Statute 1783, in Primary Sources on Copyright (1450-1900), (2008). citing Noah Webster, Letters of Noah Webster ed. H.R. Warfel (New York: Literary Publishers, 1953), 1-4.
↑9 Letter from Joel Barlow.
↑10 Paine, On the Affairs of North America: In Which the Mistakes in the Abbe’s Account of the Revolution of Amreica [sic] are Corrected and Cleared Up (1782).
↑11 Discourses on Davila : A Series of Papers on Political History first published in the Gazette of the United States (1790-1791).
↑12 See, e.g., Siva Vaidhyanathan, Copyrights and Copywrongs: The Rise of Intellectual Property and How it Threatens Creativity (2003).
↑13 Copyright Enactments.
↑14 Those states were Connecticut, Georgia, Massachusetts, New Hampshire, North Carolina, New York, and Rhode Island.
↑15 See, e.g., Robert L. Hetzel, The Relevance of Adam Smith.
↑16 Adam Smith, Wealth of Nations.
↑17 537 US 186.
↑18 In 2015, the core copyright industries contributed $1.2 trillion to U.S. G.D.P. and employed over 5.5 million U.S. workers. Stephen Siwek, IIPA, Copyright Industries in the U.S. Economy: The 2016 Report (2016).
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