Notre Dame Deception Roundtable, part 4

Posted on May 20, 2016 by rtushnet
Session 4 – Contracts and Securities
Discussion Leaders: Greg Klass, Ann Lipton, Andrea Matwyshyn
 
Matwyshyn: there’s a duty to perform in good faith in the
US, but no duty to negotiate in good faith. If you have an integration
provision, conversations leading up to the contract will be excluded from
contract interpretation. If we let people lie leading up to the contract, what
are we showing about our values and also about differences b/t our contract law
and EU, where lies in negotiations may be actionable.
 
Klass: integration clause won’t prevent a defense of
misrepresentation in negotiations, or the tort of misrepresentation.  Good faith is really interesting, but there’s
a separate issue in contract law, the economic loss rule, which will prevent a
claim for the tort of deception in the performance. So if you lie about your
performance of the contract, only breach damages are available. But a
precontractual lie isn’t covered by the economic loss rule.
 
Silbey: Tort cares more about diffuse harms, even if it’s
hard to make out a claim, than contract. 
Contract is about freedom to contract and freedom from contract, while
tort is a different species of social values law cares about.
 
Klass: you want to look at what work the doctrine of
pre-contract good faith does in EU.
 
Matwyshyn: people have sued over term sheets successfully in
the EU.
 
Klass: before contracting, your duty is not to misrepresent;
you don’t have to look out for the welfare of the other party. You can fight
for a larger share of the pie as long as you play by the rules.  Related question: can you contract out of
fraud liability and say that lying is permitted in your negotiations?  Delaware Ch. Ct. case: the court says you may
not do that.  There is an obligation not
to lie that’s fundamental; but you
can include in your contract a representation of no reliance, effectively
precluding any action for misrepresentation. 
In M&A, seller is often worried about misrepresentation claims, so
they want the buyer to sign an agreement saying it’s not relying on anything
outside the agreement. So all you need is the magic words.
 
Lipton: NY has done this w/sophisticated parties.  Mortgage-backed securities/synthetic CDOs
contracting w/German bank.  Court said
that it was misleading of the P because the P represented that it wasn’t
relying on the D’s representations in the contract. 
 
Klass: Maybe one side understands the magic words and the
other doesn’t, and instead of saying “there’s no fraud liability” which would be
very clear they allow confusion.
 
Lipton: Securities is different b/c of the multiple
disclosure obligations.  Deception rules
then implement the disclosure obligations; it’s about setting up an information
market, and thus it’s not just intentional deception that matters but the
quality of information. Capital formation/market structure as well as consumer
protection.
 
Klass: Buell comes to it as a federal prosecutor with
generic anti-fraud statutes; that’s where he starts, and maybe his approach
focusing on deception is more fit to those.
 
Lipton: there is a rather extensive system of claims that
don’t require any showing of intent—either strict liability or negligence. Puffery piece
by David Hoffman: his framework doesn’t work for securities b/c there’s no
intention requirement so his proposal to allow Ds to rebut by showing no intent
to defraud is not helpful.
 
Goldman: why the different rules for securities?
 
Lipton: because this is about capital formation.  May have started as consumer protection, but
evolved to want a deep and effective secondary market for trading. You
therefore need a standardized info package. Lots of products can’t be
investigated and are in some ways interchangeable; there are debates about
whether/why the market wouldn’t generate the info w/o requirements. Billions of
trades a minute.
 
Matwyshyn: it’s all about trust. Risk of investing in low
credibility securities and risks of playing poker sometimes aren’t that
different in terms of the numbers.  Maybe
we are fetishizing this area of the economy in ways we don’t others.
 
McG: because for these other historical reasons and purposes
you have such an elaborate set of disclosures, changes the nature of what
deception means.  Information you’re owed
as a backdrop to define what deception is: there is rough consensus about what
has to be disclosed and how.
 
Lipton: there’s now a circuit split on what fraudulent
omission is.  The big antifraud statute,
10(b): whether it’s deceptive to fail to disclose required info under 10(b). If
you have a background expectation it will be disclosed, 2d circuit says that
yes, it’s deceptive; 9th Circuit says no, there has to be something affirmatively
said.  She doesn’t see the 9th
Circuit’s logic. SEC can definitely bring a claim in either case; the case law
is muddled by a view about how much we trust private plaintiffs to bring these
cases when no one actually read the documents b/c it’s all a fraud on the market
theory anyway.
 
McG: gets it back to who are the right parties to sue—it might
not be the people who are deceived. 
Systemic problems stemming from deceptive omissions.
 
Lipton: fraud on the market is very much an injury to the
market, not to heterogenous consumers. We are supposed to use objective
reasonable person standard, but in fraud on the market courts look through the
lens of sophisticated people and in calls to widows they look through
unsophisticated, even though that’s not the formal doctrine.
 
Matwyshyn: classes of trusted intermediaries have special
roles and liabilities in this regime. 
[And that interacts w/puffery and falsity, b/c things that might be
nonfalse if said by others can be false if said by them.]  Frank Pasquale: new tech means we lose some
checks on intermediation we used to have, as w/sophisticated algorithms that
engage in billions of transactions/minute. 
All it takes is one problem and no one is auditing the code.  Historical example: Brokerages lied about
completing trades in-house b/c they couldn’t keep up w/the market: ended up
w/regulatory intervention, lots of closed brokerages.
 
Eric Goldman: interested in the idea that securities market
needs all this regulatory structure to be trustworthy enough to proceed.  What distinguishes this from other markets,
like the eBays of the world where reputation is enough to build a trust
market?  They’re both pushing stuff.  Type I/Type II errors: people sue b/c stock
price went down; he thinks that’s bad. Should be concerned about both types of
errors. 
 
Lipton: Congress made it really hard to bring a securities
fraud case right now; pleading requirements, discovery bar; Type II errors are
really unlikely.
 
Goldman: shows you that a regulatory structure needs
constant tweaking to avoid the pendulum swinging too far. What about securities
led to us building that oversight?  Case
study of too much regulation.
 
Lipton: eBay as a company has the ability to stand behind
sellers. NYSE used to have ability to stand behind companies. Regulation means
it’s less necessary to be on NYSE b/c I know you have met requirements that the
SEC stands behind. If you come from another country w/lower securities laws and
you list here, that sends a signal to investors that you’re more credible and
you have lower cost of capital.
 
McKenna: it’s also systemic risk. If eBay goes down, it
doesn’t take down the entire economy. 
That’s why you care about structural features—runaway effects of a
crash. Also explains more extensive reporting requirements: thicker info
requirements.  If eBay goes away, you
just have to buy stuff in stores, but you don’t get a Great Depression (it’s
just depressing).
 
Silbey: these disclosures aren’t actually transparent.
 
Lipton: but computers can and do interpret them, and
sophisticated people can look at companies and compare them across an industry,
which helps in trading.
 
Silbey: aren’t they routinely scrubbed and managed?
 
Matwyshyn: some things you can’t scrub. You have to talk
about material litigation, for example. Bird’s eye view into how the company
sees itself.
 
Lipton: I was a plaintiff’s lawyer and I’m skeptical but
even I think there’s information there. 
Commodities disclosures are different. 
Pages of boilerplate disclosures of risks. Earthquakes could affect
Twitter. You may think this is useless, but it turns out that people do
econometric studies and those risk disclosures do affect stock prices.
Computers look for tiny changes in language, and differences are caught that
way.  You can find accounting fraud by
crunching numbers and looking at language choices. When people commit fraud,
they use different language.
 
Matwyshyn: companies in same industry were talking about
tech in very different ways. 2004: Google didn’t disclose risks of security
breaches in the same way Microsoft did. 
You can track learning in the industry. 
 
Lipton: standardized set of disclosures allow you to detect
patterns, not even as extreme as detecting fraud, through human and computer
review.  When companies have bad news,
they use bigger and vaguer words. 
 
McKenna: this is very far to the end of the structural harm
line. Also there are lots of mediating sophisticated parties, so disclosures
can be more useful here than in privacy. Also more standardized, instead of “say
whatever you want and you’re going to be held to it.”
 
McG: there is one standardized disclosure in privacy, and it’s
financial.  You don’t have to use the
standard form, but there’s a safe harbor, so everyone does. Computer scientists
at CMU did a computer analysis of them, which is routine in the securities
space, and came up w/lots of interesting observations about regional
differences, and found some companies breaking the law by their own
disclosures, etc.
 
McKenna: if disclosure is the means to regulate, then should
we require standardized disclosures?
 
Lipton: that’s good, but also need capacity to actually read
them, whether human or computer.
 
Said: so context sensitive: “promotional consideration
furnished by” is standardized but doesn’t solve problem (if problem there is).
Extent to which digital tools are worsening deception problems b/c of ability
to scrape, use hidden info, unsettle expectations; but also digital tools may
be part of solution, whether using info commons or to detect fraud.
 
Perzanowski: nothing stops requiring a disclosure to be
effective.
 
Lipton: that works unless there’s a lot of heterogeneity—experts
in securities help.
 
Klass: misrepresentation in contracts includes nondisclosure,
but it’s a vague standard: reasonable/not disclosing violate goods faith. The
only way it works is that you get repeat situations: if there’s termites in
your house you have to disclose; if you’re an oil company you don’t have to
disclose you know there’s oil on the farmer’s land.  His own take: common law of fraud/contract is
that we have clear norms about affirmative lies, and law piggybacks on those;
that handles new situations. We don’t have strong intuitions on failure to disclose.
 
McKenna: tort is riddled with uncertainties about acts v.
omissions writ large.
 
Matwyshyn: real estate contracts are a good example:
regulatory interventions to explain what you have to disclose. It’s cooperative
set of regimes working together.  Theme
of this session: the focus on methods of detecting deception and fraud when it’s
happening.  Sec reg might be better at
that than some other contexts. 
 
Lipton: clearly there’s a bunch of fraud; sometimes
computers are easier to fool than people, as when there are fake merger
announcements that computers think are real and people could easily detect as
frauds.  However, there’s a lot of money
to be made in early detection, so it also happens.
 
Said: In speech arena, we have lots of worry about chilling
through misreading/understanding whether speech is false.  We haven’t talked about listening or
interpretation here.
 
Klass: pitch for Grice and implicature. A rich theory about
how we interpret not just literal but implied meanings, including irony. Cost-benefit
analysis may be built in. That’s how a lot of the law of deception piggybacks
on extralegal interpretive norms.
 
McKenna: this all sounds like duty to me. Affirmative
misrepresentation v. failure to disclose—this is the difference b/t someone who’s
begun to act and thus has the duty to do it reasonably well, versus when I
never start and have no duty to continue. 
Regulation can also create duty.
 
McG: sometimes untidiness in law is based on different
interests being served by different silos, and we should be willing to be
comfortable w/that.
 
McKenna: but we should be clear about what we mean rather
than assuming it has a fixed meaning.
 
Klass: it’s not common purpose or justification, but that
there’s a common set of design questions that repeats across different
fields.  My way of thinking: most of
those are contained in the common law elements. 
In this area of law: what’s the deal w/scienter? What’s the deal
w/reliance? 
 
Silbey: basic things are missing from TM that could be
borrowed.
 
McG: do you want a scary regulator like the SEC?
 
McKenna: think about why features work in some areas and not
others.
 
Lipton: law keeps the corporation and the stock certificate
relatively stable in what they are, so they’re relatively interchangeable. B/c
of relatively homogeneous set of products, it’s easier to regulate them.
 
Matwyshyn: it takes a “river on fire” moment to have a
meaningful evolution.  If we look
historically at when quality control has meaningfully improved, what would it
take to create change in deception regulation? 
[FDA: it took a lot of dead kids.]
 
Gadja: news sites shifted from anonymous comments to
Facebook in part b/c of all the defamation.
 
Lipton: scandals also produce incremental responses. Bork
issue = just video rentals protected. 
Harder to get overarching response, in the US.
 
McG: though other countries have done it.
 
Silbey: dilution added to TM act as a response to market
forces.
 
McKenna: Even the SCt has no way of thinking about how to
reconcile these different fields, as 1A discussion showed.  Alvarez is totally unsatisfying about why SVA
is unconstitutional but TM is just fine. 
Modern TM law is nothing like history or tradition was, which is why
their explanation was wrong.
 
Silbey: Alvarez was not about TM.
 
McKenna: they think TM law is totally fine; they used TM to
explain why the SVA was bad.
 
McG: Alvarez pro-US briefs tried to brief TM law as “uh-oh,
be careful what you do so as not to destroy it.”  Thus the Court may have been trying to cabin
the force of the opinion.
 
McKenna: gives us reason to think harder about the kinds of
harms at issue. 

Silbey: in fundamental rights cases, the Court spends lots of time identifying
the harms in fundamental rights like marriage cases. They seem unable to do so
in these cases however.
 
McKenna: there’s so much assumption about what deception is.
 
Said: what if we looked for tolerated confusion/efficient
confusion? 
 
Silbey: they had that in the briefing in Alvarez—a lot of
discussion of the benefits of lies.   Flatness of discussion of variety of interests
in IP cases, compared to the discussions of competing values in securities law
etc.
 
Lipton: that’s a public choice issue—hasn’t been people with
lots of money/big megaphone on the other side of IP cases.

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Notre Dame Deception Roundtable, part 3

Posted on May 20, 2016 by rtushnet
Session 3 – Defamation and Speech
Discussion Leaders: Amy Gajda, Rebecca Tushnet, Eric Goldman,
Jessica Silbey
 
Silbey: Alvarez and a theory of deception as speech. The
three opinions are helpfully, though perhaps erroneously, talking about bad
speech in three different ways.  Kennedy:
not problematic b/c it does no harm other than exist.  Idea of “pure speech,” existing in the person
and not expanding out into the world in any way we should care about. Reminds her
of his views of equal dignity/autonomy: individual and relation to their own
speech w/o more. Breyer = speech as relationship-forming, utilitarian view of
what speech does: regulating in terms of an end rather than for itself.  Alito: moral background. Speech forms society
and its values, and that informs his opinion of why the Stolen Valor Act is
good.  Three very different ways of
understanding speech’s function in our lives. Kennedy: Dignity or liberty
enhancing: I can speak b/c of who I am, like Kennedy thinks in Lawrence or
Obergefell: liberty interests have nothing to 
do w/anyone else.  Breyer:
relationships.  Alito: morals.  Contrast captures: when do we care about
particular harms; particular relationships; or background assumptions,
defaults, morals we might care about fostering.
 
RT: How should we think about empirical evidence in
assessing whether deception-based regulations survive First Amendment scrutiny?
If we took the empirical evidence seriously, courts arguably should (1) approve
more outright bans on commercial speech, and (2) strike down more of these
compromise disclosures, with the probable result of decreasing the total amount
of commercial speech regulation.  Silbey
makes the very persuasive case that the Court is blowing smoke with references
to empirics, at least in political speech cases; it just doesn’t care about the
evidence (see also the reformulation of “corruption” to mean … something that
doesn’t happen).  So instead it has a
normative view of non-deception-based harms. 
What about deception-based harms, though?  Silbey suggests that the Court might treat
them differently which is itself of interest, if deception somehow were more
empirical than other concepts in the 1A space. 
 
Silbey: as opposed to autonomy or dignity.
 
Gadja: Alvarez and a right to be forgotten in the US: this
case supports that idea, in a sense. We can in fact change our past in a way
that might be protected, if not in a tort sense we still can’t be punished for
it, especially w/r/t deception and changing the past.
 
Hartzog: a question of identity. We thought about what
information was owed to consumers; this question is what info do we owe to
those who deal with us, and to what extent does deception play a role in
that?  Goffman: we all play different
roles in our lives.
 
Gadja: then, when can other people reveal your deception?
 
Silbey: Kennedy: Sense that there’s something truly private
about certain falsity.
 
Klass: does he mean that there’s no harm?
 
Silbey: that’s not what he says, but it appears that it’s
what he means.
 
Gadja: he does mention fraud and other history/traditions of
finding causes of action.
 
McGeveran: classic problem of privacy—old law recognized
certain harms as entitlement of individual, but not the invasion feeling around
pure privacy.  Path-dependent. The plus
factor beyond the falsity is historically bound.
 
Klass: “Stolen Valor Act”—sounds in property right.  Trespassing or free riding. 
 
Matwyshyn: lying on a dating site is so common, it can’t be
wrongful?
 
Silbey: you meet people you think are exaggerating a
lot.  You generally let them pretend and
don’t counterspeak; it doesn’t get you anywhere. Alvarez and Gay Olympics cases
say things abou the quality of the thing being designated—we’re uncomfortable
with the gov’t carving out that category of things we care about. 
 
Said: compare Rachel Dolezal: passing oneself off as a
different race.  Transgender people, some
of whom will transition and some who will never present in any fixed way.
 
Silbey: Alvarez and gender performance.
 
Klass: you might be happy in a world where you can’t know
whether genetic sex and gender match. [But are those examples of falsity or
unfalsifiability?] Very different from perspective of Stolen Valor Congress:
they want to live in a differently structured world.
 
McGeveran: scarcity of the honor as the harm—fake Silver
Stars. What made the SVA different was the problem of fraud on the market—changing
understanding of scarcity of the honor. Even if we ran around debunking, we’d
still have that problem, but the Court is saying too bad. In other cases, we
look at aggregate effect of bad info.
 
McKenna: there’s scarcity and there’s the reliability of
anyone’s particular claim to have this thing. 
While the former is a general harm, the latter is very particularized:
it hurts the actual honor holders in very specific circumstances, like job
applications.
 
Hartzog: also, scarcity gives you an incentive to lie: you
can avail yourself of that scarcity to benefit yourself [free riding].  Look for incentives to lie, and cost of
challenging the lie which may be socially costly.  Calling someone a liar is uncomfortable!  Should that matter in a more formal way than
it does.
 
Citron: giving people 5th Amendment immunity is a
nudge allowing/perhaps encouraging lying.
 
Hartzog: Dan Ariely says we lie all the time.
 
Matwyshyn: we do seem to value impeachment, allowing
evidence otherwise inadmissible for the purpose of impeachment.
 
Silbey: Kennedy’s thumb on the scale of liberty makes sense
if we lie all the time.
 
McKenna: but contrast it with the parts of the decision
where they talk about TM law. [ughs from all around.] They’re more persuaded
that the harms TM is trying to police, so even on the same balance the harms
win.
 
Klass: this punishment is just too much: a year in
jail.  Our 1A doctrine doesn’t allow us
to distinguish between levels of punishment; wonders whether the case would
have come out the same way if it had been a $50 fine.
 
Citron: NYT v. Sullivan says that civil penalties can be
more coercive; also true in overbreadth cases. 
 
Silbey: Kennedy says truth doesn’t need handcuffs or a badge
for vindication.  He’s not talking about
truth for TM.
 
Matwyshyn: Impersonating a recipient of a public award v.
impersonating a product in TM law.
 
Hartzog: Sullivan’s breathing room: we need tolerance for
false speech to protect true speech. 
[Not applicable to commercial speech, which explains something about TM,
but not why TM extends to noncommercial speech like movies.]
 
McKenna: could you say it’s illegal to lie for “personal
benefit” instead of “material gain”?
 
Silbey: Kennedy’s distinction between Gay Olympics is SVA is
incoherent.  False statements in any
setting, w/o regard for whether lie was for purpose of material gain—he sees TM
as different b/c commercial, even though that’s not accurate about the scope of
the Olympics law or of TM law.
 
RT: same move is made in In re Tam: §2(a) disparagement is
subject to strict scrutiny b/c it’s not commercial speech, but the deception
bars in §2 are totally ok because Central
Hudson.  [Cue my head spinning
around]
 
McGeveran: invaded interest in SVA is totally diffuse and
generalized, aggregate v. individual, as opposed to the person whose TM
interest looks like it’s been invaded [though as McG would agree, I think, it’s
the law that has decided that there’s been a harm rather than the TM owner
having to show a harm].
 
Silbey: There is an allergy to identifying diffuse harms;
think also about campaign finance.
 
Klass: but the owners of these medals are a discrete group.
 
Silbey: but they’re not the owners of the honor. 
 
McG: we could call that property.
 
RT: property, a question of law, is distinct from value, a
question of fact.  What about Spokeo? 
General SCt hostility to derogation from the common law, not just in 1A
but also Article III standings.
 
McG: the case is a complete hash; says sometimes Congress
can create new causes of action and sometimes it can’t. The problem here was
that the error was procedural; Spokeo didn’t do all the things it was supposed
to do in creating his profile.  Court
punts on when Congress can define an injury that gives standing.
 
Silbey: In re Tam might turn on registrability v. right to exclusive
use.  Is the lack of registration an
injury that Congress has created different from nonregistration?
 
McG: In Spokeo, they saw enough bad consequences if they
ruled broadly that they punted.  Either
history or Congress could be enough; in TM, history alone will probably be
enough to find a harm worth legislating over. 
[Though query why that would extend to substantive registration, to
dilution, or sponsorship/affiliation confusion, none of which predate the
1920s.]
 
McKenna: Alvarez says some forms of lying unattached to harm
that you can’t remedy; defamation is on the other end of the spectrum. Where do
other things fall? Is it about diffuse v. concentrated harm? Is it about kind
of harm—economic, emotional?  Is it about
historical pedigree?  Is it about
empirical evidence?
 
Klass: Value of speech and degree of harm are both
dimensions.  Public concern/private
concern.  Commercial speech, defamation
of public figures, defamation of nonpublic figures.
 
[RT: I’d add retail v. wholesale, which may be a component
of empirical evidence. Can you presume from circumstances that harm is so
likely that individual harm need not be shown?]
 
Silbey: Lying as self-definition; disparaging mark as
self-definition—changes the value of the speech from commercial to self and
self-actualization rather than material gain. 
[But then why do the Slants want a TM registration?]
 
RT: it may be true that my self-actualization requires me to
suppress your speech, but it’s very hard to characterize a right to suppress
someone else’s use of a mark as self-actualization with no impact on other
specific people. Which is not to say the SCt won’t do it.
 
Said: takeaway: notion of harm can shift based on interests
balanced against it.  If you have
intent/actual malice requirement, your harm showing will have to be much lower. 
 
[discussions about disclosure requirements.]
 
Matwyshyn: disclosures can be lead-ins to future
regulations.  FTC does studies on whether
more aggressive regulation is necessary. 
 
Said: that seems different, if you use disclosure to signal
the problems [to whom?].
 
Matwyshyn: to study the industry to understand the market
dynamics. Disclosure to the regulator may then turn into public-facing
disclosure.  [I think that has nothing to
do w/deception, though.]
 
Hartzog: disclaimers that try to inform you about what’s
actually going on v. disclaimers that try to make you skeptical.  Privacy: “these are what we collect and these
are who we share it with.”  That could be
meaningless to consumers/too complex. Or “there’s a good chance this info could
be used next time you apply for a job.” 
People would be in the dark, but might know enough to avoid harm.
 
Klass: big literature on what’s an effective compelled
disclosure.
 
Lipton: some disclosures may be so onerous or awful that the
company will stop doing the thing in order to not need to make the
disclosure.  SEC does that a lot.

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Notre Dame Deception Roundtable, part 2

Posted on May 20, 2016 by rtushnet
Session 2 – Privacy and Technology
Discussion Leaders: Ryan Calo, Aaron Perzanowski, Woody Hartzog,
Danielle Citron
 
Matwyshyn: attempts to create commonality/familiarity
w/consumer—good feeling.  Can also be a
part of having ads be artistic expression.
 
Ryan Calo: important role of information in figuring out how
to deceive well. Deception is a goal that someone might have, but it often
fails. The more you know about a person, the better you are able to lie to
them.  That’s an important reason to
guard information about yourself. If you can monitor a person very closely,
including their “honest signals,” you can tell when a person is being deceptive
even in the absence of being able to check independently. Increasingly ways to
determine deception, some of which feel awfully invasive.  [Here his definition of deception requires
belief.]
 
Said: differences b/t influencing, persuading, deceiving
someone.  Manipulation might be in
between persuading and deceiving. 
Puffery: when does info take advantage of foibles like wanting to believe we’re enjoying NY’s
best coffee.  When is something just vague
and unverifiable and what happens when an advertiser knows we will fall for a
puff?
 
Klass: do you mean believe or do you mean change your choice
when you say “fall for”?
 
McGeveran: point out the small-l liberal supposition that there
is a true self making pure choices. If that’s not true then we have a problem.
 
Klass: if the law feels comfortable marking out statements
that cause false beliefs as illegal, that presupposes a highly cognitive
liberal subject. That’s not necessarily bad but it has a lot of assumptions
baked in. 
 
Citron: if you don’t know the info the salesperson has about
you, you may be deceived into thinking that you’re dealing on more equal terms
w/her than you are.  Adding privacy to
deception gives us greater purchase on what’s troubling/deceptive.  The disguised expert who knows how to
schmooze you. [But would disclosure fix anything?]
 
Lipton: Someone who pretends to like the same movies &
sports you do is setting up an affinity fraud. [Hee!]  At least I understand that Amazon is tracking
my search history.
 
McGeveran: good salespeople create affinity in the store w/o
prior information; they just chat you up. The background information doesn’t
make it any more deceptive, if it’s deceptive.
 
Calo: machine learning is more powerful; can leverage social
cues with bots.  There are limits on what
people can do in the moment; designing the interaction is more powerful and you
can compare it to what other people are doing.
 
McKenna: if what you’re talking about works, then it can be
people giving you information consistent w/what your true self wants. And yet
it feels yucky: the manipulation isn’t tied to changing your decision from what
you’d otherwise make, it’s something else.
 
Hartzog: authenticity fraud: you don’t understand that there’s
a mechanism hidden behind the interaction by which this stuff is delivered to
you.
 
Calo: the Truman Show: if you didn’t know you were on a reality
show, you’d be under a deep deception about what was happening and who was
watching even if you weren’t manipulated or making decisions you wouldn’t
otherwise make. 
 
McKenna: that’s a different understanding of deception/a different
set of harms.
 
Silbey: social trust: salesperson is talking to you under background
assumptions.
 
Citron: is this more dignitary?
 
McGeveran: if the interaction w/the digital all-knowing
salesperson is wrongful, is it still wrongful if you don’t ultimately buy
anything?
 
[from several] Depends on what the harm you fear is.
 
Klass: Salesperson treats us as means not ends, but we have
a background understanding about that. 
Violating the background: whenever you cheat/don’t play by the rules,
there’s deception. The wrong is not the deception that comes w/cheating, but
rather that you’re not playing by the rules you’ve agreed on; the deception is
only needed so you get away with it. The wrong is that others think you’re
playing by the same rules.  This is Sam
Buell’s Badges of Guilt: how can we tell whether someone’s violating social
norms? When they have to hide what they’re doing.
 
Silbey: but when doctors hide information from you, is that
a violation of social norms?
 
Klass: not all hiding is violation, but when you’re
cheating, you will have to hide.  So if
they know you’re a Cubs fan and send a real Cubs fan out to work with you, that
is manipulative; the role that deception plays here is that the concealment of
why they chose her is a signal that they’re violating the rules of the game.  [But is it?]
 
McKenna: suppose the salesperson isn’t really a Cubs fan but
pretends to be. Where’s the harm?
 
Matwyshyn: phatic communication—communication is substantive
info transfer + phatic communication, which is relationship-building; creates friends
and colleagues. Cubs fan matching may not be bad, just a communication building
measure.  The not apparent assistance
from tech is where the problem arises for privacy.  When you walk in with a Cubs shirt, you’re
projecting your poor taste in baseball teams. But if you walk in w/your
cellphone and they mined your fandom from your phone, the loss of info control
going into creation of phatic bond is jarring.
 
McGeveran: Calo’s
article is about power imbalances; deception is subsidiary if even
important at all. Whether people know that this info is held by other party or
not; how much detail they have; all is subsidiary to the main problem of extra
leverage given to people who already have too much power.  Deception is far down the list of problems,
and not very persuasive.
 
Gadja: how about dignity? 
 
Said: Quiz Show scandal: game shows rigged by sponsors so
winners favor sponsors in particular ways. American Idol: judges drink drinks
provided by sponsors; waiting room is painted Coca-Cola red to create positive
associations. That seems to be different from Quiz Show, but it’s also phatic,
and also disturbing to many people, even though it may not be a cognizable
harm. Is that parallel to privacy, where hidden decisions are being made? 
 
McKenna: privacy’s concern is w/interpersonal harm from the
deception/interaction, not from subsequent actions/harms. More dignitary than
consequential.
 
Silbey: but background assumptions about rules of game may
also break down. So that’s about consequences.
 
Klass: in Minority Report,
when the Gap ad scans the eyeball, there’s no deception, just information
collection and use.
 
RT: there is deception! Tom Cruise isn’t Mr. Hashimoto!  And that’s not just a joke—it’s important
that deception here appears as a privacy strategy.
 
Hartzog: Deception as weapon of the weak. A certain amount
of power you have about your personal info: other people want it b/c they don’t
have it, and you can use that as a weapon.
 
Klass: it’s great if you enter into an illegal contract you
don’t intend to perform—disrupting trust among thieves is a good, not a bad.
 
Hartzog: delay, disrupt, disperse.
 
Matwyshyn: Surveillance by city: used Google Maps logo to
create a false sense of security about who’s doing the surveillance.  Goes to double-edged sword of deception;
police can lie all the time. What’s permissible deception? Does interference
w/TM interests matter any more than other deception?  Political activists use deception all the
time to disrupt control over information.
 
Lipton: if army pretends to be journalists, journalists aren’t
safe; military can’t use red crosses on military vehicles—it’s destructive to
the larger enterprise.
 
McKenna: in a perfect world your lie would go
undetected.  [Though the market for
lemons means that even if undetected it might fail, along with the truth.]
 
Said: whose perspective are we adopting when talking about
consumer/subject interests?  If we take
individual preferences, we need to know something about those, but from a more
paternalistic/value-driven view we might not.
 
Silbey: one of the productive comparisons b/t Anita Allen’s
and other work was that Allen discussed harm to individuals v. harm to systems
or organizations. Privacy harms need to be identified as structural/social v.
individual.
 
Citron: of course it’s both.
 
Klass: more one than the other.
 
Lipton: Disclosing an invasion may mitigate the harm to the
individual but creates the harm of people feeling invaded.
 
McGeveran: deception as interface presenting itself as
neutral when it’s really not neutral—google search results, FB news feed, etc.
etc.  That sharpens the problem of
backdrop assumptions and what they communicate to you. To what extent do people
approach tech interactions differently from interpersonal, and which assumptions
are we willing to honor? Intuitions will differ in new spaces.  McGeveran doesn’t mind the FB emotions
experiment b/c he has a set of assumptions about the news feed (it’s always
already curated). 
 
Lipton: Craswell’s
cost-benefit analysis is what tells you what’s deceptive in the first
place. Show the alternative disclosure that would have made it less
deceptive. 
 
[RT: Lipton’s point v. McGeveran & Hartzog’s: what is the
alternative to having FB control? Very hard to think through what the
difference might be if users had “more control.” Evgeny Morozov might have some
ideas.]
 
Hartzog: in mediated environments online, there’s one entity
in charge of the experience, so there’s more opportunity for wrongful control.  Images of little padlocks are everywhere—what
does that mean?  It signals and
imposes/relieves transaction costs, whether through symbols or sign.
 
Lipton: you think it’s a sign but it’s not, is the problem.
 
Hartzog: sometimes the lock signals safety (https) and
sometimes it’s privacy settings (notoriously bad).  It’s a bait/invitation. Ambiguity in design:
designers can use that to their benefit, and they know people won’t investigate
even if there is a full explanation somewhere.
 
Said: could trustmarks do work online?  These things do catch consumers’ eyes.
 
Klass: formal definitions from government, like “organic.”  We do give certain signals fixed legal
meaning. 
 
Lipton: then companies lobby to change it, and also people
evade it.
 
Klass: nonsophisticates don’t understand the law.
 
Lipton: what happens when everything is disclosed?  The person being watched now wants to create
defensive deception. Teenagers and people in China use codes to talk in front
of other people. Disclosure of one inspires deception on another side.
 
Matwyshyn: one person’s deception is another person’s
safety.
 
McGeveran: privacy as set of norms eventually legally
enforced. You have to have a policy; the next step is to hold you to the
statements you make in your privacy policy and then say any departure from the policy
is deceptive. Yet we know that end users do not read such policies.
 
McKenna: just a baseline-setting exercise.  The FTC becoming the regulator in privacy,
using deceptiveness to do it, was our starting point. But is there any real
deceptiveness there?
 
Hartzog: FTC is trying to have it both ways.  Fissure that must ultimately come out. A line
of FTC cases say that consumer expectations are the key; it doesn’t matter what
you disclose in the fine print.  Sears
case: can’t disclose spyware in fine print. On the other hand, FTC says that if
you lie in the privacy policy you are deceiving people. 
 
Silbey: two different values: protecting consumer
expectations, and then the benchmark thing is different—we care about you
standing by your words.
 
RT: and if the FTC had statutory authority to set benchmarks
that would be ok.
 
Hartzog: the fine print stuff is also unfairness, which they
do have statutory authority.
 
Klass: two audiences: many people don’t read, but a few
people do and will be norm entrepreneurs.
 
RT: but then that argument should apply to all ToS/fine
print issues; those silly FB memes about “giving up your ©” show that.
 
Hartzog: David Hoffman just
published a paper w/empirical work on what people think aboiut enforceability—generational
divide; older people assume ToS don’t apply, but younger people think it is
enforceable but will never be applied to me.
 
Klass: 10 years ago the shrinkwrap cases, pay now/terms
later, were very offensive to my students and now they’re totally ok. 
 
McGeveran: regulatory shift to looking at interface issues
that deal w/implications about security, e.g., Snapchat. FTC is consciously
picking cases and moving internal jurisprudence away from boilerplate.
 
 
Citron: Google spoofed browsers to turn off no-tracking
settings.  FTC brought a case against
Google w/thin theory: you promised not to track cookies when they had no track enabled.  State AGs said this was inherently deceptive
even w/o a promise to respect people’s privacy.
 
McGeveran: that’s unfair not deceptive.
 
Eric Goldman: Audience heterogeneity means a lot—privacy discussion
turns on consumer expectations, but they don’t mean a single thing to the wide
range of consumers, based on their particular community/background. Information
truthful to some may be not heard by some and deceptive as to others.  When we shift from face to face to mass audiences
we have to account for heterogeneity.
 
Klass: but law is not exogenous.  False advertising law: FTC’s reasonable
basis/substantiation rule. Per se implied representation that you have a
reasonable basis for your factual claims. That’s not based on empirical
evidence of how consumers read ads, but saying we want a marketplace where, if
you make those claims, you have evidence for them.  Maybe state AGs are making the same move
w/r/t certain kinds of privacy activities. 
Advertisers impliedly represent that they aren’t changing your privacy
settings unless they say explicitly that they are.
 
Matwyshyn: Design flaw that happens all the time in products:
Sears: though there was language about spyware buried in the terms, there wasn’t
even an opportunity to read the terms until the end of signup.
 
Goldman: probably some consumers did read to the end and
weren’t deceived.  [In this particular
case, I’m not sure that’s true.] You have to decide whether you’re going to
protect the subset of deceived consumers.
 
McKenna: how is the default rule about deception?  It doesn’t have a meaningful existence
outside the rule.
 
Klass: Disagree. First question is: what was said. Second:
is it true or false? We typically answer the first question by asking what a
reasonable person would have understood. 
We could say, as a matter of law, that the default representation is X,
allowing people to opt out if it’s not true.
 
McKenna: if not based on what people actually receive, you
can’t show reliance and harm.  The Sears
case proceeded from the assumption that people don’t know or read the privacy
policies.
 
Perzanowski: but we might be so confident about the answer
to the empirical Q through repeated experience that we can define the default,
just like some matters are per se material.
 
McKenna: that’s different from what Klass was saying.  That’s a good justification for the
reasonable basis substantiation requirement. 
Klass was saying something different.
 
RT: quite often consumers may have not formed assumption at
all about the privacy policy.  One way to
cash that out is that they haven’t thought about it because they presume that
the policy is acceptable.  And if they
knew that the program would turn their camera on surreptitiously they’d
definitely care, so there is a material omission.
 
Lipton: if you spoof the computer (as Google did) have you deceived?  Have I engaged in insider trading if I broke
in?  If I fooled the computer into giving
access, then yes, the Second Circuit said, there’s deception.  But if I just broke it open w/a hammer, no.
 
McGeveran: you can only find omission by having an
understanding about what information you were owed. Are these empirical
definitions or information-forcing legal rules as Klass would say?  Moreover, dynamic changes in the situation—extremely
difficult to have stable understanding of stable assumptions are; dangerous to
use deception reasoning to get to them.
 
Said: zoom out to larger q: aims of deception law.  Market governance, shaping corporate
behavior? 
 
McKenna: you could start from consumer protection and seek
information forcing measures out of a broader consumer protection goal to
improve the environment in the long role.
 
Klass: formal rules in securities law: structured to create
certain info enviro; individual harms are much less important, unlike
corrective justice/common law tradition.
 
RT: you can’t really tell the difference b/t empirical
definitions and information forcing legal rules, in part b/c of the issue
w/things like “organic.” I don’t fully understand the definition, but I know
there is one, so I can act w/relative confidence in the market and deception is
possible w/r/t “organic.”
 
Said: we ought to disagreggate b/c of the heterogeneity
problem, which we take more seriously if we start w/the consumer.  Sophisticated investors v. nonsophisticated
investors.

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Notre Dame Deception Roundtable, part 1

Posted on May 20, 2016 by rtushnet
Deception Roundtable
Notre Dame Law School, Chicago
 
Session 1 – Advertising and Trademark
Discussion Leaders: Bill McGeveran, Mark McKenna, Zahr Said
 
Mark McKenna: deception comes up in many fields, but people
aren’t talking to each other/citing each other across legal fields. So we
wanted to put together a group thinking about similar ideas in other
areas. 
 
Woody Hartzog: General questions, such as role of hearer’s
skepticism.
 
McKenna: articles often take for granted that there is a
thing called deception and then there are legal questions to be worked
out.  Very few ask: how does deception
differ from confusion, from lying, etc. 
I too have taken for granted that we can ID the thing called deception.
 
Danielle Citron: convergences—notions of harm—manipulating someone,
altering their situation b/c of deceiver’s intent. Corruption as deception?
Secrecy?  The harms seemed to resonate
throughout—undermine person’s autonomy, trust.
 
Andrea Matwyshyn: “situation-altering utterances” doesn’t
presume an understanding of what’s going on either on the part of the  speaker or the perceiver.
 
Greg Klass: I’d put in act or omission.  Most general: an act or omission that
wrongfully causes a false belief in another. 
Then we have to figure out duty and causation—what kind of causal
relationships matter.
 
Matwyshyn: you could dodge causality by saying it’s
contextually determined.
 
Klass: when you paint the ceiling to hide water damage in
your house, I don’t think that’s a “representation” though it is deceptive.
 
Zahr Said: thinks that is a representation: an implicit
warrant.  Way that deception attends to
different understandings of harm through frameworks of contracts, torts, and
property.  Seana Shiffrin’s writings:
contracts perspective, not torts.  Harms
might be the same but remedies differ.
 
McKenna: doctrinal buckets v. concepts that span buckets—is this
the law of deception, or rather privacy and torts and contracts with deception
doing different work in each situation? 
If there’s some coherence to the idea of what deception is, then it’s
more transubstantive.
 
Bill McGeveran: middle ground—a word attached to concepts
that play out differently in different buckets, and we learn about each by
consulting the others.  Not a grand
theory but not independent terms of art in each field.
 
Ann Lipton: communicative acts v. signs that communicate.  See umbrellas: you infer that it’s raining,
but no one intended to communicate to 
you that it was raining by raising the umbrella. In the case of painting
over the damage, that’s something where you don’t recognize there’s a
communication (I’m not sure I’d draw that conclusion—the reason for painting
over it is to hide the damage and the effect the damage has on observers,
whether or not it’s merely aesthetic).  Contractual
view  of speech: we have an agreement
about how to interpret words.
 
Matwyshyn: In a different culture, umbrellas would mean that
it’s really sunny outside/people are promenading.
 
Danielle Citron: who do we care about?  Threats doctrine—is it that we care about the
recipients and their reaction, or do we care about the bad intent of the person
uttering the statement? 
 
McKenna: regulating deception for the sake of deception, or regulating
advertising and deception happens to play in?
 
Klass: Shiffrin would say deception is a moral issue.
 
McKenna: but then why would we split it into different
areas? Is it policy purposes, or a sense of what’s wrong about deception and no
reason for it not to exist in its own coherent form.
 
Said: Assault is regulated under two different regimes.  There was a time when deception was thought
of as more of a coherent concept. 
Advertising scholars like Lilian BeVier had a discussion about
deception, probably b/c of FTC’s actions at the time.  So do we need something trans-disciplinary or
not?  Many other things cross substantive
areas of law.
 
Woody Hartzog: similar to discussions in privacy law about
what privacy is.  Solove’s taxonomy: is
it a family of resemblances, as Solove says of privacy?
 
Amy Gadza: would advertisers themselves agree that deception
was the evil that they are supposed to be avoiding? 
 
Matwyshyn: may have different view about appropriateness, such
as remotely turning on the mike on your phone when you’re using an app—they think
you’re engaging w/them and have consented to use the app, and it’s just another
data stream.  Other people say: that’s
totally awful and illegal (even if it was in the EULA).
 
McGeveran: lumping TM and advertising together is itself a
very interesting and meaningful choice. Even in these two cognate fields, materiality
and therefore what counts as deception (the harm that matters) differs.  Information costs: it would waste everyone’s
time and energy if all info were disclosed; TMs are info about source of goods
[and perhaps other things]; Shiffrin
presumptively talks about advertising and McKenna
talks about TM, but both have concerns about how to efficiently arrange the
duties to get the right amount of info disclosed.   Also leads to Qs of consumers’ duties to pay
attn to the info in advertising. Minimal duties here, and that connects to the
efficiency issue: we don’t necessarily want to have high expectations of
listeners/the law generally doesn’t.
 
Aaron Perzanowski: are we training consumers to be ignorant?
Closer to getting that right on false advertising side than on trademark.
 
McKenna: Modern TM law has abandoned deception for
confusion; advertising, more concerned about harm, is working out more
questions about how much we should expect from consumers.  That’s b/c modern TM law is to protect TM owners,
with consumers just used as a mechanism.
 
Klass: like trespass, not requiring harm.
 
Said: suggests existence of dignitary interest, as
w/trespass.
 
Klass: or a mistake about scope of law!
 
Said: we’re not all on the same page on harm. Little FTC Acts
don’t require harm.
 
Citron: but they do in practice, according to state AGs.  Aggregate understanding of harm.
 
Said: class actions happen all the time.
 
Citron: no, they don’t.
 
Matwyshyn: we haven’t chosen the lowest possible
denominator. We’ve eliminated that subjective standard.
 
McGeveran: true, there’s a range, and of course a range b/t
judges applying the doctrine.  There’s an
understanding baked into McKenna’s statement that there is a difference b/t
confusion and deception.  One could say,
using a mark in a way that creates confusion among consumers is deceptive.   
 
McKenna: it’s no accident that when TM was focusing on
passing off it used “deception” all the time. Courts deliberately moved away
from that word when they wanted to expand the law. Significant semantic shift,
meant to be a broadening.
 
McGeveran: also takes away judgment of bad intent—it’s
merely causing a result.
 
Klass: on its face, confusion would be a false belief.
 
McKenna: sometimes it’s just a state of uncertainty
(difficulty in understanding) v. false actual belief.
 
Klass: confusion is less harmful by nature than harm.  Confused = don’t know what to do, can’t rely
on your confusion; you know you don’t know.
 
McKenna: classic passing off: I sell you falsely labeled
Coca-Cola, to trick you into thinking it’s the familiar beverage. [The
horror!]  Instead, if you have a picture
of a Coca-Cola can in your movie and people wonder/think that Coca-Cola
sponsored the movie, that’s confusion. The core isn’t gone from TM.
 
Lipton: some confusion can cause harm: if you can’t rely on
a label, you can have a market for lemons problem.
 
Said: scienter, reliance, etc.—things that are usually very
hard for consumers to prove in common law fraud, also including intent and
materiality. On the other side of the spectrum: ambiguity.  Confusion? 
 
McKenna: as compared to modern TM law, advertising law does
concern itself w/harm. P must show some harm to itself. Courts just assume the
TM owner can sue, except in some remedies contexts.  Fanciful theories of harm, and courts just
say, yeah, it’s your TM.
 
Said: sponsorship is a big red herring, not the real
confusion issue.
 
McKenna: what’s the harm of people thinking that two
products are produced by the same entity? Very little evidence that one will be
punished for low quality of other.  TM
law doesn’t care; advertising law does.
 
McGeveran: there’s a difference b/t counterfeiting and using
a similar shape/name—not passing off, but free riding on general confusion a
consumer will feel about being drawn to my product—TM has found that wrongful
even though that wouldn’t qualify for a rigorous definition of deception.  Person thinks it looks familiar, but doesn’t
necessarily have a crisp mistaken belief.
 
Citron: so the harm there is a kind of dignitary harm to the
TM owner?
 
Said: that may be how we understand dilution; brands get to
assert certain things.
 
Lipton: repeated distinction in law b/t false and misleading—securities
has that too.
 
Perzanowski: misleading is about where you direct someone’s
attention.  Water bottle (or other) copying
is about capturing someone’s attention. Maybe sometimes that causes harm.  Disclosures on TV ads that coordinate
w/eyecatching events in video—you’ve captured and focused attention in a way
that might lead them to a false conclusion about a product.  Can also be done by limited ability to
understand statistics.
 
McKenna: manipulating—what does that mean?  All our certainty goes away—what is truth,
what is falsity?
 
Lipton: the issue w/ the similar water bottle shape &
name is that maybe it’s confusing, but maybe it’s just indicating that the
water is in competition w/the market leader. 
If you like X, you will like Y.
 
Said: people don’t have the same starting points on how much
influence is ok, and on what counts as influence—malls are designed in
particular ways to encourage shopping/spending.  Influence and deception are not the same
thing.
 
Hartzog: are we really asking about what false beliefs count?
 
RT: That’s why I don’t agree that misleading is about
attention; it’s about increasing the likelihood that you will act in a way that
you wouldn’t want to act if you knew the true state of affairs.
 
Klass: you can have undue influence w/o a misrepresentation.
It’s important, but outside the law of deception.
 
Matwyshyn: in contracts, you’re out of the box if you’re a
minor. You can’t make an agreement.  Is
that saying that we assume you’re going to be deceived?
 
Lipton: it’s not just about deception: judgment about making
trades, even if you completely understand them. 
[it’s about understanding one’s own best interests, which does connect
up to deception: the theory is that if you truly understood what you were
giving away you would not give it away.]
 
Jessica Silbey: how do we define manipulation v. influence?
Purpose to induce reliance, and does induce reliance?
 
McGeveran: scienter to trick the person, or scienter to
influence the person—might differ.
 
McKenna: all advertising is purposeful attempts to influence
behavior; most advertising (by hypothesis) isn’t unlawfully manipulative, so
the question is when the line should be crossed.
 
Silbey: what does the normative moral policing is
falseness/misrepresentation. 
Misrepresentation is defined through falseness and materiality. 
 
Said: can be an omission, though.  Fraudulent concealment, failure to disclose.
 
Silbey: so if we fit manipulative advertising into the tort
of deceit, how would we do it?  Could we
do that?
 
Klass: manipulation only sometimes involves
misrepresentation.
 
Said: need a framework more based on empirical evidence
about consumer behavior, or folk psychology, as suggested by Greg Klass.
 
Amy Gadja: PR firms now post online with positive rules.
 
Said: FTC does have disclosure rules about this.
 
McGeveran: FTC says the company has an affirmative obligation
to tell the reviewer to disclose the free sample.  Says that it’s deceptive not to do that.
 
McKenna: what are the background things that shape our
expectations and are by default ok.
 
Silbey: differences between contexts—manipulativeness depends
on the market sector.  [What is putting
cereal on a low shelf for kids to look at the mascots?] 
 
McKenna: have generally decided to draw the line at
deception, not persuasion, when it comes to advertising. TM has gone much
further, and so if we can give more concrete meaning to deception, that would be
a sensible line but it should be noted that’s not the line in all areas and the
question here is why.
 
Lipton: manipulations are not necessarily deceptive but can
still cause me harm—I see it, but now I have to spend mental attention figuring
out what I should do in response.  E.g.,
companies that change women’s clothing sizes to make us feel better (or worse).
 
Klass: Shiffrin maps law onto morality in a lot of her work;
annoying things don’t necessarily deserve legal regulation.
 
Lipton: Reads Shiffrin as saying that consumers shouldn’t
have the burden of figuring that out.
 
McGeveran: But McKenna makes the point that this solicitude
for consumers doesn’t work so well in TM.

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1201 roundtable, renewal of previously granted exemptions

Posted on May 19, 2016 by rtushnet
SESSION 3
Rulemaking Process – Renewal of Previously Granted
Exemptions
This session will explore the process for renewal of
exemptions granted under a prior rulemaking, including consideration of
proposals for presumptive renewal when there is no meaningful opposition.
 
Andrew Moore, Kevin Amer, Regan Smith, Jason Sloan
 
Ben Sheffner, Motion Picture Association of America:
Consensus that there should be some sort of streamlined process as to
previously granted exemption: waste of time for proponents and CO staff to go
through full process w/no meaningful opposition. Even w/in details, there aren’t
dramatic differences.  How we think this
should work: proponents of previously granted exemption should make a very
simple filing stating they’d like the exemption to be renewed and why they
think it should be renewed, 1-2 pages. If an opponent wants to come forward and
wishes to oppose, it can briefly give the reasons, then it would go into
regular process.  Under existing statute,
CO could do this and allow the exemption. 
Should be limited to renewal of particular exemption granted; it’s been
the exceptional case where there have been opponents to previously granted
exemptions—we’d opposed some in the past, but if people came back and asked for
a renewal, we didn’t oppose extensions. 
We wouldn’t want to cover expansions; burden should be on proponent to
make their case.
 
Andrew Goldman, Knowledge Ecology International: should be
presumptive renewal of previously granted exemptions. Burden should shift to ©
owner.  Waste of time, difficulty,
especially when exemptions unopposed as for literary works for blind/print
disabled.  Exemptions have gotten
increasingly complex/lengthy over time. 2010: 100 word exemption became 750
words in 2015; this shouldn’t be so complicated and burdensome for people
trying to make noninfringing use.
 
Jonathan Band, Library Copyright Alliance: Sheffner’s
proposal is a good start.  CO can do a
lot right now, without any amendment. 
Way too much deference to one sentence in one committee report directed
to a different rulemaking, one to be conducted by NTIA.  No need for any deference, but even if you
did want deference, de novo determination doesn’t mean de novo evidentiary
submissions.  Even if there is
opposition, should still be truncated so that new evidence doesn’t need to be
submitted. If we want additional info, we can, and so can opponents, but the
whole record should be included and considered.
 
Q: we’d be interested if you agree that under current law
there is flexibility.
 
Decherney: Time doesn’t stand still, so it’s unusual to have
a renewal that would look exactly the same. 
Should start where we left off, not necessarily w/expansions but just
accounting for current state of tech. 
 
Q: consensus about short form filing prior to
rulemaking.  Would that work?
 
Gabe Cazares, National Federation of the Blind: Need to be
fleshed out, b/c current procedures are too burdensome.  Look at how many disability organizations
participated—demonstrably lower than other groups b/c of burdensome evidentiary
requirements, inconsistencies in triennial cycles; coming up with a sensible
proposal would be an interesting conversation.
 
RT: Goldman and Band are right about current law: of course
there’s flexibility, not just from legislative history. That’s what de novo
means for courts! It doesn’t mean new factfinding.  Incorporating by reference: we do that
already; why isn’t that a way to put in all the previous analysis?  Interacts w/proper definition of classes.
 
Q: do you think that you have to make a new showing? You did
submit new evidence.
 
RT: We didn’t think so, but the CO’s current position made
it uncertain.
 
Sam McClure, Institute of Scrap Recycling Industries, Inc.:
should be purely presumptive renewal without even the initial filing.  Then we can give notice. W/r/t meaningful
opposition—just a filing of an opposition shouldn’t immediately kick people
back into the regular process.  Opponents
of old exemption should have to show that the facts have changed.
 
Turnbull: agree w/Sheffner. 
Bringing forward the evidence from the record—you can see previous
comments and hearings.  The notion would be
that w/r/t exactly what was done before, if there’s no meaningful opposition,
that goes forward, and the argument becomes about the difference, not the whole
overall issue.  Would help streamline and
minimize burden on either party.
 
Q: statute requires determination in rulemaking proceeding
that persons who are users are / are likely to be adversely affected.  Can you really say enough in one
sentence? 
 
Brandon Butler, University of Virginia Library: Be cognizant
of who the participants are and how they’re represented.  Big collective action problems; a different
student team every 2 years; our representation ends after the process ends, so
it’s not one responsible atty.  Trap for
unwary problem of having to file a one-pager, if you had the help of a clinic
three years ago.  One option is the TM
registration practice—have an institutional email address, and when relevant
events happen, there could be a notification system.  Let past proponents know. That would be
fairly simple.  There is substantial
reliance on these exemptions in big institutions—educational exemption has been
granted/renewed for long enough that they buy DVDs in part based on the value
proposition of being able to make clips: $30,000/year for UVa.
 
Q: is that a reason to do the renewal, or to have a
permanent exemption?  Supposed to be a
fail-safe; exemption might become ossified.
 
Butler: absolutely permanent! Third best is renewal, after
permanence and legislation supporting fair use. 
VHS tapes that have never been put into subsequent format; those tapes
are still being used and digitized. The same thing will happen w/DVDs.  We (libraries) will always need to decrypt
DVDs. That’s in the nature of the way tech works.
 
Sofia Castillo, Association of American Publishers: AAP open
to some sort of streamlined proceeding. 
Not a presumption, but some form of improving the renewal process. But
might be problematic to have complete burden shifting so opponent has to oppose
an exemption that has already been granted. 
Opponent doesn’t have all the evidence necessary to show it’s no longer
necessary or has been used in the past three years or is likely to have adverse
impact.  Automatic renewal presumption
would be similar to permanent exemptions, and for purposes of renewal it’s
important to take into account that having it every three years helps account
for changes in the marketplace.  [Though the
only time they rejected a previously granted exemption due to market changes,
Congress didn’t like that much.]
 
Harley Geiger, Rapid7: we hire lots of white hat hackers,
without legal assistance/knowledge; they get threat letters with vague DMCA
threats.  Burden of initial filing: we
support automatic renewal.  1-page wouldn’t
hold for very long, so the opponents ought to make the filing.  If restricted to single page, once again you’ll
need legal expertise.  “Meaningful”
opposition—not the right standard.  If anybody
objects, then we go back to the initial process, but we’ve seen in previous
rulemakings that the same arguments are trotted out again and again, and there’s
no reason to think that wouldn’t happen here. 
Instead of “meaningful” opposition, material change in circumstances—changes
in marketplace, tech.
 
Q: so burden would be on opponents.
 
Geiger: yes!  If we’re
talking about an expansion, we think that the process ought to be about that
expansion, not expansion + original. We don’t think that non-© interests ought
to figure into the denial of the exemption, including rebutting presumption.
 
Q: lack of meaningful opposition.  Is there an alternative?  Presumption automatic?  If standard is meaningful opposition, would
the © Office have discretion to determine how meaningful an opposition is?
 
Sheffner: we do oppose presumption of renewal. CO’s own
reasoning in 2000.  Statute with
exemptions—those rules of statutory construction and admin law say the
exemptions should be construed narrowly and that the burden should be on the
proponent of the exemption.  No change in
general principles of statutory construction or admin law.  This is anyway largely academic: (1) at least
in the last round, there is virtually no opposition to previously granted
exemptions. (2) burden should remain on proponents; if there is a presumption
of nonrenewal, the proponents start at 49% and opponents at 51%. But minimal
evidentiary showing will overcome that.
 
Turnbull: Burden on making an initial statement, yes we want
to review, could be a check box on a form. CO could email that to prior
proponent.  Shouldn’t be a burden.  But under the statute, CO needs to go through
the process of actually getting a request, using the prior evidentiary record
as the basis.  The opposition issue: it’s
true that making the same argument over again is a waste of time, but some kind
of changed circumstances—change in law, abuse of the exemption, or a
circumvention tool that turned out to be a huge marketplace problem–can
justify looking at this again.
 
Band: changed circumstances—to some extent this whole
discussion of presumptions and burden shifting isn’t appropriate to a
rulemaking. Those are adjudicatory terms. 
This rulemaking has over time taken on more of an adjudicatory quality,
but that’s not necessary.  If we want an
expansion, that’s on us, but just a renewal. Evidentiary burdens could be
considered in the course of a rulemaking context as opposed to an adjudicatory
proceeding.
 
Q: from a rulemaking perspective, can we speak more about
building upon a declaration
 
RT: Can a one-page statement meet the statutory burden as
the CO has interpreted it?  Yes, if it
says “nothing has changed.”  Other administrative
proceedings: facts that aren’t contested are routinely accepted, even without
going back to the bedrock.  PTO works
that way.  PTO is allowed to treat an
uncontested claim of 5 years of exclusive use not just as true, but also as
having legal consequence (making a descriptive term registrable, in that
case).  Meaningful opposition: “our
arguments apply to both existing and proposed exemptions, but we do not oppose
renewal”—that’s what we hear. How is that to be interpreted?  Does that represent meaningful opposition to
the existing exemption?  Law prof hat: If
that evidence is relevant to both existing and proposed exemptions, then
adjudicatory model allows you to ignore that fact because parties are allowed
to make strategic concessions, but a rulemaking model might not.  (Statement somewhat against interest, I know.)
Decide what this proceeding will be and then some of the answers will follow.  Quality: as a practical matter, they keep
coming up with new screencapture programs. 
So we’d always be fighting anew again.
 
McClure: if you don’t presumptively renew, you get one
organization tied to the exemption. But it’s something that benefits the public
at large; shouldn’t have to depend on whether they come back year after year.
 
Peter Decherney, University of Pennsylvania: comments we always
get are: we are not opposed in general, but we propose these 10 limits.  Even though it says it’s not an opposition,
it is in fact an opposition.  Another
structural issue: if you draft the exemption well, you stop the harm from
occurring, so you can’t show that harm will continue.
 
Turnbull: The CO has appropriately taken our concessions as
concessions, but that wouldn’t be possible in a renewal model. The procedure
would naturally eliminate the problem and identify whether there was a change
we wanted to argue w/r/t the old exemption, or whether we only want to argue
w/change. Should be renewable by anyone taking advantage of the exemption.
 
Cazares: NFB fully supports presumptive automatic
renewal.  2010 cycle: another
organization, AFB, came very close to losing the exemption it had secured b/c
of evidentiary requirements. There’s something to be said about the statute and
its limitations, but it’s also safe to say particularly the blind/print
disabled, our status isn’t going to change and it can be argued that we’d be
adversely affected by not having an exemption.
 
Geiger: more consensus on what meaningful opposition ought
to look like: change in circumstances. Relates also to evidentiary
standard.  In thinking about renewing,
interests that don’t have to do w/copyright rights, including access, shouldn’t
be weighed.  Most of the opposition w/r/t
security research has no relation to ©. It’s about safety.  Hacking cars and nuclear power plants are
already illegal. By and large, the DMCA issues for us are about computers the
researcher already owns.  © and 1201 are
not the right tools to protect the asserted interests. 
 
Q: 1201(j): should it be updated for permanence? 
 
Geiger: 100% yes. 
Less preferable than updating permanent. Tech evolves; so will security
research; probably not new circumstances relating to copyright, though, so they should be dealt with by other agencies
with expertise.
 
Q: relying on prior record. 
Is there some point in time at which that old record would get
stale?  What about 10 years? 20
years?  Determination is whether users are or are likely to be adversely
affected, says statute.
 
Band: I would imagine that, even after we check the box,
someone will show up at the hearing. Don’t make it more complicated than it
needs to be.  Are people still making
remixes?  Yes, they are.  The question is whether we need a zillion new
examples from the past three years.
 
Q: triennial: short, medium, long could get complicated
quickly.  Don’t increase the complexity
of an already complex rule.
 
Band: reduce number of classes: we’ve gone from educational
and noncommercial to 8-9 in the same category. We don’t need 11-12 exemptions
on embedded software; we need one and you wouldn’t have to worry about the auto
industry. These things can work in tandem to streamline.
 
RT: Mr. Cazares’ point interacts w/Band’s: patterns of
protected uses and users persist over time.
 
Q: how should we separate statutory or admin change for new
exemptions/tech v. renewal of previously granted exemptions?  Accommodate evolution.
 
Sheffner: Stale, old evidence. We wouldn’t not oppose
incorporation by reference of evidence submitted in previous rulemaking.  Self-correcting in revised system. If proponent
files one-page, potential opponents can look at that and consider whether the
evidence has gone stale b/c the situation has changed in case law or business
model or new tech. This would be rare, but the opportunity to oppose would
exist.
 
Q: what about 4K instead of Blu-Ray—how do we deal with
renewal + new issues?
 
Sheffner: we would support a streamlined process for dealing
with renewal of exact same exemption. If people want an expansion, in practice
it may be streamlined, but burden should remain on proponents. Smaller fight
than fighting over whole thing.
 
Butler: largely true that it wouldn’t apply to increase from
Blu-Ray to 4K, but the logic underwriting the presumption should also mean that
arguments could be shorter, b/c we’d agree that the planned use was lawful—if it’s
fair use of a Blu-Ray, it’s fair use of 4K, and the adverse effect/pedagogical
need for using in classroom would already be in the record.
 
Turnbull: there is a difference b/t a new tech and one that’s
10 years old in terms of harm to development of the market. [Does this mean
that all the stuff in the morning about enabling the new markets is now
obsolete?] Blu-Ray is now 10 years old, and enabling market matters.  [I thought last year he was telling us that
granting a Blu-Ray exemption would destroy the market.]
 
Band: [expresses unease about great agreement w/Turnbull and
Sheffner] Building on identified issues, the CO can help manage, w/aim of
reducing workload: you know by now what the issues are in general terms w/DVDs,
educational use, remix use.  One can
easily imagine there’s a way to treat renew + expand with something like a
prehearing conference where you can figure out what you need to know from us. That
could reduce our burden as well as yours. 
We’re talking about a relatively small universe of clusters—motion-picture-related;
screen readers; a couple of others. 
 
Q: So if the CO provided guidance about what evidence they
wanted, could avoid some of the burden?
 
Band: yes.  Be a
little more informal; that could make it work better.
 
Butler: flip side of what Turnbull is saying about a young
format’s market realities—there will be a mirror image on the side of
proponents. When a format is young, we’ve typically shown that there are one or
two titles with unique content—but then the answer is that that’s one or two,
which is because they’re young formats. 
So recognize how that plays out on both sides.
 
Turnbull: agrees w/Band. 
Always a hybrid b/t adjudication and notice and comment, which is
inevitable in the process. Unrealistic that CO would go out and know what
people were doing w/any given © work. People who have the need to use something
have the info to come forward. End of day, CO has obligation to have a rule
reflecting the evidence.  Proposed rule
process would be more like notice and comment, but leading up to it would be
factfinding [driven by parties, I think he means].
 
Q: streamlined rejections—how about that? 
 
RT: No: structurally unequal; if the proponent wins, © owner
can still go to court on infringement/secondary infringement, but if the
proponent loses, they can’t even try that. So mirror image treatment is
inappropriate. Also, such a rule would have to deal with situations like
exemptions that have changed over time. Could you not go back to the original
44-word educational exemption because in some sense it’s been “rejected” by the
additional restrictions added over time? 
That would be inappropriate.
 
Band: no, circumstances change and rightsholders get more
comfortable w/certain activities. If proponent will work to amass new evidence.
If rightsholder was confident before, they can stay confident of past arguments
incorporated by reference.
 
Butler: right, it’s enough work that people who don’t have a
real interest will be deterred.
 
Q: we get a lot of repeat players.

Q: meaningful opposition: we talked about showing that the exemption wasn’t
used, or there’d been changed circumstances/harm.  How much opposition would be needed?  If proponent is just checking a box, it could
be a minimal showing to oppose that. Where should the line be?
 
McClure: need to know how much of the new record is pulled
in.
 
Band: Not sure you need to specify the precise level of how
material the opposition is.  If
Turnbull/Sheffner’s clients make submissions, you’ll look at them and decide
whether to kick it over.  Hard to
challenge that decision in court; you’ll have a lot of discretion one way or
the other.
 
Sheffner: we weren’t terribly specific but I envision it: a
prescreening process that the CO would employ before the regular process.  See if there’s a real fight in the rare case
of opposition to a previously granted exemption.  Identify why there’s meaningful opposition:
they’ve discovered great harm.
 
Q: if prescreening determined it insufficient, could we ask
for more?
 
Sheffner: sure: wouldn’t want to make it too
complicated.  Screen out fake fights.
 
Turnbull: Add that the nature and quantum of
evidence/argument will depend on the previous grant. If it was a close case
might be different v. if previous was 3 times granted.  Might need to describe the new tech in order
to reopen evidentiary hearing.  Would
have discretion to prompt opponent for more info.
 
RT: Not “just” checking a box any more than checking a box saying
you’ve submitted truthful information your tax return is a meaningless or
trivial act, it is an affirmation that the conditions underlying continue to
exist—an opponent of renewal should have to show that those conditions and laws
have changed.  If you want me to, I will
submit the entire record from the last three rulemakings as attachments so that
you can consider them submitted but that seems trivial—I would be happier if
you considered the checkmark to be me making that submission.
 
Geiger: Also would be good to let proponent show the
opposition isn’t meaningful, which could inform CO’s discretion before the
whole process starts again.
 
Butler: getting complicated! 
We need to know what the reasons are; opponents should disclose that, or
sometimes that one page will be on its face rejectable.  As long as everyone’s ok with being killed at
that stage and not going forward.

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1201 roundtable, evidentiary and procedural issues in rulemaking process

Posted on May 19, 2016 by rtushnet
SESSION 2 Rulemaking Process – Evidentiary and Procedural
Issues
This session will explore the general operation of the
triennial rulemaking process under section
1201, including the evidentiary showing required for an
exemption, and the procedural aspects of the rulemaking.
Andrew Moore, Kevin Amer, Regan Smith, Jason Sloan
40,000 written comments.
Participants noted significant effort/burdens.  How is it working?
Rebecca Tushnet, Organization for Transformative Works: 500-600
hours; burdensome.  Cyberlaw
Clinic eloquently runs through the evidence about legislative intent and
appropriate interpretation of the requirements, won’t rehearse here.
In terms of what a showing of adverse impact on
noninfringing uses should require: The Copyright Office should consider actual
knowledge and behavior among potential users of the exception when interpreting
whether there are alternatives to circumvention—that is, it should consider
whether the alternatives are in fact known and used.  CO has not even addressed this argument,
which we have made across three rounds of rulemaking, much less given a reason
to reject it.  That is frustrating as
well as contrary to due process principles and notice and comment rulemaking.
Bruce H. Turnbull DVD Copy Control Association and Advanced
Access Licensing Administrator, LLC: In general, it works well. Basic approach
is correct: those who seek the exemption have the necessary info.  Some issues about number of rounds.  Respondents: we had one opportunity but
proponents had multiple opportunities.
Q: was there something you had left unsaid?
Turnbull: Other than through the hearings, imperfect way of
doing it, there were things in the responding round from the proponents that we
would have liked to have an opportunity to respond to.  CO could reject new evidence, or give another
round, but there were definitely times we would have responded.
Raza Panjwani, Public Knowledge: we filed general comments
at the outset: identification of classes of works; standard for identifying
noninfringing uses; adverse effects.
Cyberlaw clinic’s comments on adverse effects were very
appropriate.  Distinguishing tablets and
phones; distinguishing K-12 students and college students and teachers;
distinguishing Blu-Ray and DVD—not clear where these distinctions come from,
and increases lots of burdens.
Expectation that proponents must ID affirmative precedent showing
noninfringement, as opposed to showing that there’s no precedent showing
infringement; given 1201, there’s a lack of opportunity for case law
development in that case. Effectively denies courts jurisdiction to define what
copyright law is in certain areas.
Q: statute requires finding of likely noninfringement.
Krista L. Cox, Association of Research Libraries:
Extraordinarily time-consuming. Lucky to have clinic assistance; otherwise it’s
not doable in time in resources.  Write a
brief on why your use is noninfringing.
Takes a year or more.  Public
interest resources/time are extremely limited.
Putting together evidence is difficult b/c courts have lacked the
opportunity to develop precedent in the area. Turnbull says that proponents
have info necessary, but there’s an asymmetry of interests, where the
corporations opposing the exemptions v. public interest groups w/o resources
have to walk through this complicated and burdensome and formalistic system.
Chris Mohr, Software & Information Industry Association:
Distinguish problems w/statute and problems w/rulemaking. The statute is
working quite well overall, encouraging new business models. This was designed to
be a fail-safe.  Specifically, statute
has to be a source of causation of harm; rather than inconvenience—it has to be
the statute causing the adverse effect.
To the extent the rulemaking has gone off the rails, might be useful to
examine how closely the library has hewn to that standard.
Q: Elaborate?
Mohr: Library changed its position on whether an exemption
can issue to a class of user.  Allowing
users makes it a lot fuzzier.  Other
statutes may prohibit a course of conduct, and if both statutes are valid and
proscribe the same same conduct, 1201 can’t be identified as a cause; has nothing
to do with ©.  Tie goes to no
exemption.  That’s what I mean by
statutory causation.
Matt Williams, Association of American Publishers, Motion
Picture Association of America, and Recording Industry Association of America:
Comments contain criticism, but you also deserve good bit of praise for taking
tricky statute and making it overall work quite well. It’s not broken, so be
careful trying to fix it. Functioning as intended. Frequently unhappy with some
outcomes, and we have suggestions for improvement. We’d love to see an advanced
draft of the language in order to comment on drafting choices.  One filing v. three, we also felt that there
were some things left unsaid, in part b/c at the hearings proponents were given
a lot of opportunity to explain their cases, so we ran out of time.  PK raised the issue of distinguishing b/t different
types of users; grew out of the alteration of the approach to consider a class
of users, though my clients have come to find that change helpful, though we do
have some concerns.  Band raised the
issue of how it will keep growing and growing until the whole building works on
it, but that’s a result of the CO trying to accommodate proponents and make
their case and alter the definition of a class; you have to take a little bad
with a lot of good, which is why the proceeding has grown.  1201 inhibiting the development of normal ©
case law: never understood that argument. You have to counsel a client to
address both. If there are the number of threats that exist, there are lots of
ways to pursue declaratory relief w/o connection to the 1201 threat and still
pursue their argument; other exceptions-related cases that have nothing to do
w/1201.
Q: how to define a class of works: subsequently have defined
w/ reference to set of users.  If this
were to define wider pool, would there be fewer exemptions?
Peter Decherney, University of Pennsylvania: Not a question
of larger or smaller, but about bringing the exemptions in line with fair use
law; makes the logic of exemptions much cleaner.  The obsolete video games exemption is really
about archivists.  Should rethink de novo
review etc.  How evidence is preserved
and used and reused for the future.
Q: reform for renewals might take some pressure off.
Panjwani: Clinic help is not sustainable.  Consumer appliances aren’t covered w/any exemptions;
that will be an additional class. Comment periods: in my limited experience,
the party w/burden of proof gets opening and reply; surreply is typically not a
matter of right. If the burden is on proponents, you can have your exemption
denied w/o any opponents as happened w/recommendation exemption for blind in
2010.  Cyberlaw clinic delineates 9
factors CO apparently considers, but you can’t ID them from any one place, you
have to parse the NOI and the NPRM.
Office has to use classes but grant exemptions for
noninfringing uses, which creates a problem. There’s a middle ground. Motion
pictures for classes of fair use, instead of types of formats, where that gets
too sliced thin.  Urge a movement away
from current level of specificity.
RT: Agree.  Too
difficult.  Witnesses testify about good
pedagogy, not about media studies and film studies or about kindergarteners or
5th-graders or 12th-graders.  That justifies an exemption going to
teaching, not to K-12 or college students.
That also tracks the statute and fair use cases, which talk about
education not about particular grades.
Turnbull: Focus on K-12 and different types of higher
education has enabled exemptions; a broader category resulted in no exemption.  Broader category = much more likely to find
that there isn’t a real problem.
Williams: Agree w/Turnbull.
If you only altered that approach, it would be narrowed. You have to
decide that the use is noninfringing,
not just likely noninfringing; but even w/likely noninfringing, you have to
engage in the linedrawing being criticized, like uses of short portions. That
helps you get to the conclusion that it’s a lawful use.  Also need conclusion that there are no
reasonable alternatives, which requires you to consider different formats. DVD
quality footage needs aren’t Blu-Ray quality footage needs.  Allows compliance w/statute (though he
disagrees) as well as giving proponents some of what they want.
Burden of proof was debated in 2000 and 2003; lots of
disagreements b/t NTIA and CO but both agreed that burden was on proponents, in
legislative history.  Fed. Reg. 64588:
initial reasoning about burden on proponents.
Cox: Use-based definitions make sense.  K-12 and disciplinary distinctions don’t make
sense b/c we’re talking about educating students. Drawing distinctions makes
the text of the exemptions less usable.
Most recent process: 2006 exemption for educational uses was 44 words
long; now 1000 words long.  Average
teacher has a much easier time understanding the former than the latter.  Would make the process less long and drawn
out if you focused on uses and not on slicing users apart.
Robyn Greene New America’s Open Technology Institute: CO
should be uniformly applying a standard of “likely noninfringing”—Cyberlaw clinic’s
comments.  Narrow interpretation of
adverse effects also allows for better implementation.
Decherney: in 2006, we were criticized for limiting to media
professors; we had support from many different fields, AAUP support.  DVD/Blu-Ray distinctions are not about
noninfringing uses; level of need/quality/useful for education—what is the standard?  Not clear to us, and possibly not to you.
Q: Burden of proof: CO has said that the burden of proof is
on the proponent.  Substantive and
procedural: reforms that give less opportunity to submit evidence?
Mohr: administrative notice could streamline the
proceeding.  Someone who’s proven an
exemption should be able to provide abbreviated info that they’ve used it,
provided that all that’s being sought is the exact same exemption unless
someone comes forward and shows the exemption is being abused or that it should
be revisited.  As admin agency, have more
flexibility in how you handle that going forward.  [Actually, a court could exercise “de novo”
review without revisiting any facts.]
Q: is there agreement than preponderance is the proper
baseline framework?  Or do we have
latitude?
Panjwani: we don’t take issue with the preponderance as such
but what we have to show.
RT: No, don’t change the process to give us less opportunity
to make our case, but burden of proof/preponderance on what?  The statute’s requirements: noninfringing
use, adverse effects, not the 9 things added.
In terms of interference w/ development of case law: (1) my
own experience, counseling remixers who wanted to counternotice—how was this
footage made; mostly it was through DVD ripping because that’s the best way to
get high quality source—before the exemption they couldn’t counternotice no
matter how committed they were to fair use because they’d lose regardless; now
that we have the exemption they can go ahead and be ready to make the fair use
case; no counternotice I have worked with has ever proceeded to a case; (2) dicta
in the Corley case opining on what was not before it—quality—explicitly disavowed
by subsequent 2d Cir precedent but still haunting us 16 years later.
Williams: confusion in the comments about what the standard
means: more likely than not, which isn’t very difficult to meet.  Comments seemed to think it meant something
different. You could clarify that in NOIs. Manager’s report: Don’t come to us
with hypos, philosophical issues, only real world issues. Burden has been
handled properly.
Q: re totality of circumstances.
Greene: Manager’s report is not appropriate legislative
history. Text of the statute doesn’t say any of that. It says likely to be
adversely effected by virtue of the TPM. The appropriate standard is whether or
not the use is likely noninfringing, which would be in keeping with
preponderance of evidence.  Seek to
determine adverse effect as a result of TPM, not heightened standard as to
level of adverse effect.  Not the report
from a single member of Congress—no substantial adverse impact contemplated.
Panjwani: Breaking Down Barriers to Innovation Act offers
amendments by explicitly placing into statutory factors a lot of the things we’ve
talked about here. Still our position that statute can be interpreted to allow
for many of the things if not all.  DVD
space-shifting, which we apply for every 3 years. CO disagrees w/us in analysis
of case law, but NTIA looking at same case law comes to the same conclusion as
us; same happened with NTIA and narrative film clips for fictional filmmakers.
The appropriate authority to settle that dispute is a federal court, and the
only way we can do that is to get it to a federal court w/an exemption.
Q: how could we fix that?
Would you tip the scales in the case of disagreement?
Panjwani: appropriate application: barring affirmative
caselaw saying it’s infringing, the tie should go to noninfringing as that
element. If CO is wrong, rightsholders can close that exemption off by bringing
suit.
Q: is that disagreement w/outcome or process?
Panjwani: both: if done right, fact of agency disagreement +
no affirmative precedent = should have come out differently.
Mohr: Statute says nothing about affect by TPMs; now says
affected by the prohibition. That change is the manager’s report issue—that textual
change wasn’t mentioned in the Harvard Cyberlaw submission, and that’s fairly
significant.  W/r/t manager’s report
itself, Sutherland on Statutory Construction—nice summary of case law.  Statements by managing committee’s member—general
rule, properly applied by CO, is contained there.
Turnbull: Puzzled by statutory background; changes made
later on, but the need for evidence was emphasized by the committee that
created the process, though the process was changed later on and moved from
Commerce Dep’t to CO.  Commerce became
advisor.
Cox: exemption for the blind/ereaders.
Came with number of books they couldn’t access, and Joint Reply from AAP
etc. said that the submissions didn’t give any indication that the exemption had
been used, and no evidence that exemptions helped.  Difficulty around this is confusion about
what you need to show: that the past exemption has made things better?
Difficult to get that for the blind. Should be enough to show that there are a
significant # of inaccessible literary works out there. Touches both about
evidentiary standards and difficulty of the process.
Q: Would statutory change help?
Cox: renewal w/o showing things have changed would help.
Williams: Commerce Committee and Manager’s report are both
completely valid legislative history, but either way there are other reports
taking the same position.  Likely
noninfringing: likely to be adversely effected in their ability to make
noninfringing uses—a judge doesn’t tell you that it’s likely that this is what
the law is.  The CO has taken a different
approach, but is already favoring proponents by saying “likely” noninfringing.
To take it further and require adverse precedent against proponents upends ©
b/c default is that you’re making a copy you’re committing an act of
infringement; you then have a burden
RT: compare © preemption in 301: the statute was changed
after the report came out, and courts have agreed again and again that the
legislative history is not helpful. Same here.
Commerce became advisor and not decisionmaker: that isn’t a trivial
change, it’s a complete revision, changing both the entire branch of gov’t in
which the decision sits and the competence/focus of the decisionmaker, not to
mention the other changes made to the process. “Upends ©” in previous comment:
making a copy is not the point of 1201.
The people I represent, for example, have legitimate access; they want
to make remix.
Decherney: some of these issues are matters of degree. We
might all agree that a remix is noninfringing, but what is the level of quality
is needed? This is not really a measurable issue, though we can have anecdotes.
Q: should the period be longer or shorter?
Panjwani: both too short and too long. For dealing with
advances in tech, too long.  For coming back
again and again, too short.
Williams: no perfect solution.  3 years has worked pretty well.
Mohr: fine from our perspective. Resist the premise that a
change requires tinkering w/the statute.
[Not what the content folks said at 512 hearings, though in fairness that occurs on our side too; as Mohr pointed out to me in a followup, SIIA in particular did not ask for changes to 512.]
Cox: Panjwani is right.
To resolve this, could have a shorter period for a new exemption,
keeping up with advances in tech, but permanent or streamlined process for
existing exemptions.
Decherney: 3 years can be a long time for an educator.  Recognize that law school clinics, which do a
lot of the representation, have an academic calendar—that would help a lot.
Post-hearing questions complicate things.
Q: If we stay in this sandbox, what can we do to make this
better?
Williams: Hearings should take place when students can attend
and do oral advocacy.  Currently hearings
come just after students leave for the year.
We’d love to see drafting approaches at the end of the process.  Time is a concern, but given the period for
post-hearing letters built into the process, if drafting issues were just
presented to people who appeared at the hearing, we could give you some
feedback, and that would be helpful.
Hearings are often very helpful, but if we prepare a fact witness that
relates to every way that a studio uses access controls, it’s relevant across
all different proposals.  Last cycle, it
wasn’t clear whether the CO could use the testimony from one proposal in
considering another, and that harms both proponents and opponents.  [This is one consequences of too much
splitting.] More clarity on what evidence can be presented for the first time
at a hearing.  Would be helpful to
clarify.
RT: how to make this better?
Cyberlaw clinic’s suggestions.  Picking
up on Adler, who talked about how access was special: access/rights controls have
now been merged by actors making strategic use of 1201, destroying balance
Congress intended. The CO has referred to this problem several times in its
rulings.  Remixers have lawful, paid-for
access; what they need is the ability to make creative, fair uses. This is the
problem of the merged access/rights control.
Could recognize that as “other factor” justifying exemption, both w/in
traditional © categories and outside them.
Congress may have been contemplating Celestial Jukebox, but definitely
not celestial fridge or tractor!
Greene: making rulemaking more accessible by allowing
proponents to submit confidential versions, particularly in the context of
security research but also in some other circumstances. Sometimes we withhold
info for fear of liability, confidential business info, or info that could
allow others to exploit existing vulnerabilities.  SEC etc. allow.
Q: just for CO?
Public version & private version?
Greene: yes, there should be public version and full public
discussion about parameters.
Turnbull: no problem with confidential submissions, but we’d
like a protective order allowing some witnesses/opponents access to the
information w/o exposing it to the public.
There are a number of precedents for that in other admin proceedings.   On access
v. rights: the access granted in a DVD is to that content in a particular
context in a particular form/format and under the rules of the system. In the clear
on the TV, but not in a usable way in the system.  They own it, but they have access only
visually & if they want to point a camcorder at the screen go ahead [Can I
quote that?] [That is exactly the problem I’m ID’ing about the merger of access
and rights controls: you configure it as an access control so that you can control the rights.] Clear that Congress
contemplated this rulemaking to deal w/the uses of the content in the context
of the access control. That’s why it’s 1201(a) rulemaking and not 1201(b).  Mischaracterize the nature of this
proceeding, which is about uses in the context of access control.
Williams: Agree w/Turnbull.
Wrong to think that Congress didn’t anticipate that some access controls
would also be copy controls; that doesn’t mean that in every case an exemption
should result.  If it is both access
& use control and inhibits a lawful use, you go through the factors and see
if there are alternatives.  Red herring
to say merger has created unanticipated problems.  [Tony Reese has
a good article about this.]  No
problem w/confidentiality; we might also like to file confidentially, and
counsel should be allowed to see them.
Q: will certainly look at confidentiality. But 3-year
rulemaking is a much quicker pace than what other federal agencies do, so we
wouldn’t want a year of fighting over a protective order.
Q: statutory language about “such other factors.”  Role of non-copyright issues.  Several commenters argued that CO shouldn’t
consider non-copyright issues.  Is it
within our authority to reach out to other agencies or are we limited to
consulting with NTIA.
Mohr: as long as you disclose your sources, you can amass them—though there
should be public comment on them.  Get
information from experts on particular subject matter and weigh their views
even if you didn’t agree with them.
Panjwani: “Other factors” are directed at the fact that the
proponents must prove noninfringement, allowing CO to consider other harms;
interagency process isn’t necessary to figure out whether exemption is
warranted. The q is whether © liability will attach—TPMs weren’t supposed to
cover anything under the sun, from product safety to medical devices. Conflation
of “there’s software in here and that’s expression” with “that’s our issue”—medical
devices have existed for a long time, and law and policy have developed to deal
with that, e.g., whether you can modify your car to defeat emissions; if you’re
not VW, we have annual inspections to deal with that. This isn’t the appropriate
venue.
Q: petition about internet of things.  Examples of hacking subway system, nuclear
power grid. Should we entirely ignore public safety?
Panjwani: Hackers are going to hack regardless of whether
there’s a 1201 prohibition.
Williams: reiterate: be careful about what constitutes a
core © concern. That would have to be carefully defined to have any real
benefit. There is a distinction b/t access and copy controls, and Congress
clearly intended to protect unauthorized access to works available for
subscription/on demand [but not fridges and tractors; movies on demand].  A work
protected by both access and copy controls: you could hack for access and watch
the movie, and without circumventing the copy control there’d be no nexus to
infringement; Congress clearly intended to bar that.
Decherney: All these considerations often cut both ways—found
out about hearings that VW was actually the problem, not hackers.  Same is true w/fair use: that is the
foundation of many productive businesses and economic successes.
Turnbull: other factors include the integrity of our
licensing system, which doesn’t interact w/fair use—whether the system can
continue to exist. More generically, as you address “not core copyright” you
need to be really careful not to eliminate considerations that matter in the
context of expressive works.
Panjwani: role of legislative history: Mohr’s correct about
approaches, but in the specific case of the House Manager’s report, there are
specific criticisms.  “Substantive
diminution” language in the report, specifically criticized by Nimmer in his
article on DMCA legislative history.

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1201 roundtable, relation of 1201 to infringement, consumers, and competition

Posted on May 19, 2016 by rtushnet
Copyright Office, 1201 Roundtable, DC
James Madison Building, Mumford Room
NB: I won’t be here tomorrow because the Office had the
temerity to schedule the roundtables after I committed to a different exiting
roundtable, this one at Notre Dame on deception.  I wish I could be at both.
 
Session 1 Relationship of Section 1201 to Copyright
Infringement, Consumer Issues, and Competition
This session will explore the role and effectiveness of
section 1201 in protecting copyrighted content, and will consider how the
statute should accommodate interests that are outside of core copyright
concerns.
 
CO: Jason Sloan, Kevin Amer, Regan Smith, Abi Mosheim
 
Smith: 1201 is part of DMCA; Congress recognized that TPMs
could be deployed not only to prevent piracy but also support new ways of
dissemination of © material to users digitally. 
Protects access controls, trafficking in circumvention tech for access
and rights controls.  Regulatory process
has become burdensome, particularly upon renewal; permanent exceptions may not
have adequately foreseen developments. 
 
Amer: big picture: overall role and effectiveness of
1201.  Many comments noting the different
distribution models TPMs facilitated; other comments questioned the
relationship between legal protection of TPMs and effectiveness of TPMs. 
 
Jonathan Band, Library Copyright Alliance: lawyers like to
feel we have an impact on the world, but TPMs, to extent they’ve been
effective, it’s b/c the TPMs have been technologically effective. Saw early on
ineffective measures such as CSS, very easy to hack, and the tech to hack it
was widely available. There was some hacking, some not, but we now are
generations beyond that, especially w/r/t content in the cloud behind
paywalls.  The law has nothing to do with
the effectiveness of those systems, especially w/r/t the general public.  What makes those work is the tech, not the
legal protections.  Hacking into systems
is the purview of the CFAA and state anti-hacking statutes. [Not to mention
that many of these threats are foreign and also by dedicated lawbreakers; not
deterred by anything we can do.]
 
Allan Adler Association of American Publishers: Recognized
early on [that is, before there was evidence], b/c this legislation was the
result of an int’l treaty determining that legal protections were important.
Common sense that ability to use locks means nothing w/o legal restrictions
against violating locks or creating devices [like secondary liability?].  Compared this to breaking into a locked room
to get a copy of a book.  [Yeah, that’s
totally what vidders do.]  Convenient,
cut expenses, make works easier to find: but access online had to be secure in
the face of all the ways in which online networks are susceptible to
unauthorized activities.  [There will be
no cars on the information superhighway without perfect protection!]  Wild success.
 
Jonathan Zuck, ACT | The App Association: remembers buying
Copy2PC, in my younger unruly days—I copied software I wanted to use; it took
creating software to respect it, in my case. [Which is why we should make it
hard for people to create new stuff via remix …]  It’s not the availability that matters, it’s
the inability to walk into Best Buy and get the software that matters—practical
availability, not binary connection.
 
Raza Panjwani, Public Knowledge: WIPO treaty thought
necessity to provide protections to © owners to encourage them to provide
digital goods and distribute them online. We’ve seen DRM unnecessary to various
business models—iTunes, game distribution platforms, Tor book distribution.  Not necessary; 1201 burdens noninfringing
uses to provide protection, and CBA is justified—do we still need high barriers
to encourage distribution? We should also ask how effective 1201 has been at
discouraging piracy, not just
“circumvention”—comments decry how much piracy there is. [Including, not for
nothing, Adler for the APA, as I recall from a few weeks ago.  Zuck has a point about Best Buy, but the
corrollary is that a digital copy in the wild circulates freely once any DRM
has been circumvented once. Bittorrent doesn’t require you to walk anywhere.]  The content allegedly made available by
circumventing DRM and the content existing in marketplaces is the same—don’t
conflate correlation with causation.
 
Q: how do we get at that? 1201 actions: relatively common or
not?
 
Stanley Pierre-Louis, Entertainment Software Association:
new consoles, games, are possible b/c of goals of DMCA: the thought was that we
want to expand consumer access to broadband and new tech, and encourage that by
getting © content online and on devices. We’ve seen that growth, which makes
our industry a growing one, $23.5 billion—we know that our investment in our
tech and software will get protected. 
When we’re talking about DRM-free content, that’s a choice; 1201 doesn’t
require it.  [Unsurprising evasion of the
question.] 
 
Q: do you use 1201 in court?
 
Pierre-Louis: we’ve had a lot of success in preventing
access, so we don’t make legal claims; but we know that have that as a
backstop. Internationally as well.  [Even
in places w/o 1201 style law?]
 
Troy Dow, The Walt Disney Company: There is real value in
the tech.  The law was also
important.  DMCA was directly relevant to
adoption of CSS, allowed intro of DVD, which was fastest growing device.  That was hacked, but that also spawned
precedent of DMCA in enforcement litigation. Not to say that these techs are
hack proof, but that you keep them out of the mainstream.  Zuck talks about Best Buy: when we were in
litigation with 321 Studios, that was exactly the issue. 1201 keeps that at the
fringes.  Business side: availability of
legal tools was directly relevant to getting into these markets—ACS, 4k, over
the top TV, streaming TV through authentication—1201 a factor in all those things.
 
George P. Slover, Consumers Union: It’s not the intended
uses, it’s the overbroad unintended/uninvisioned uses that are a problem.  “Breaking into a house to steal a book”:
compare “my wife has baked a cake she intends to take to church; she can tell
her hungry son not to touch the cake on the counter or she can lock him out of
the entire kitchen.” Reconfigure to focus on the protection against
infringement, not interoperability and less closely related side benefits to
industry of denying access.
 
Q: Dow said 1201 successful for motion pictures. Has 1201
played a useful role in the markets for 3D printers or cars?
 
Aaron Lowe, Auto Care Association: Aftermarket is a huge
industry in the US. Use of software in virtually every component. We can’t tell
if it’s functional or simply to make it difficult to make aftermarket parts.
1201 is used to keep our industry from reverse engineering and even servicing
cars. We see more and more parts with chips on them making it difficult for
aftermarket to exist.
 
Brian Weissenberg, Institute of Scrap Recycling Industries,
Inc.: Exactly—last year, when we asked for phone unlocking, phone co. said we
rely on DRM to protect our business model, but that’s not a © interest.
 
Zuck: Non-DRM business models do exist; the people that make
use of DRM don’t like it.  It increases
consumer support costs, but it’s a necessary antipiracy tool. Successful in
software market; distinction b/t software and content is increasingly blurred.
App that teaches yoga positions: 
sometimes piracy is pulling content out of app and repurposing it.  Final point: expanding beyond intention—I’m
not a lawyer, but my understanding is that where adjudication occurred they’ve
interpreted the DMCA more narrowly for garage door openers and printers [unless
you’re in the 9th Cir.].  The
system worked—jailbreaking exception from Congress. Be cautious about upending
success.
 
Band: There have been relatively few 1201 cases, especially
relative to 512. Keep in mind its role in larger construct.  One reason why so few is that it’s really
broadly drafted; talks about active circumvention and 1201(b) trafficking;
early cases were strongly in favor of rightsholders; there hasn’t been a need
for litigation because it’s so broad. 
Then the action has shifted to the rulemaking b/c of all these adversely
affected people. You have 2 choices: go ahead and hope that in the event of
litigation you’ll end up in the Fed. Cir. or the 6th Cir. and not in
the 9th Circuit.  Good luck on
ensuring that!  Or you can go to the
rulemaking. That’s where the energy and activity has all shifted. That’s why so
many of us are so intent on getting it to work better.
 
Robyn Greene, New America’s Open Technology Institute:
Agrees with Band re: not much litigation. 
It’s impossible to calculate the chilling effect on the market. Entrepreneurs
trying to enter a marketplace don’t want to take the chance that all their efforts,
expenses etc. are all for naught even if they eventually win litigation.
Litigation has been pushed to rulemaking, and that’s still a chill, especially
for activities very clearly unrelated to infringement, such as security
research, due to the burdens of the exemption process.
 
Q: add an infringement nexus to 1201?
 
Adler: there’s already an infringement nexus, but not in
1201(a); access is not part of exclusive rights under 106, but that’s the
threshold issue w/r/t uses that implicate exclusive rights will occur. Congress
structured 1201(a) to deal w/ access independent of the issue of infringement
b/c access was whether consumers could exploit the marketplace for these work
and whether there’d be a market to exploit. 1201(b) doesn’t address
circumvention of TPMs that protects rights of a copyright owner b/c it
recognizes those rights are themselves subjects to exceptions like fair use—have
to look at questions differently. Access isn’t about infringement. [Which is
why (c) owners have merged access and rights controls.] 1201(b) is where the
balance w/exceptions and limitations were struck. [But merger destroyed that
balance, and you guys did that, not us.]
 
Band: yes, but Congress was thinking about access to
something you hadn’t paid for, such as access to premium cable you hadn’t paid
for.  Not the situation that Lowe deals
w/in auto context, a person not being able to access her own software in her
own car to make sure she doesn’t pay marked up prices for repair parts.  No policy reason for restrictions on rights
to access their own copies for which they have paid.  That’s why we think changes make sense.
Whether through statutory change or liberal application of the rulemaking in
the case of at least software where we see this problem most pervasively, we
could simplify the CO’s work considerably and not regulate the entire US
economy.
 
Q: is your theory dependent on owning the good, rather than
renting? Fear that consumers may have paid for a penny but want to access a
pound? Does it matter whether you own the refrigerator or just lease it?  Is it different w/ a book?
 
Band: there are various ways to slice the loaf; if amending
1201(a), the best way would be requiring a nexus to infringement.  [The only reason fridge makers now assert
that consumers aren’t really fridge owners is the legal exploitability created
by 1201.  It was uncontroversial that your
thousands of dollars bought you a
fridge until then; they don’t take it back if you breach your “license”; the
legal regime is driving the ownership characterization and that’s bad.] 
 
Q: would nexus encompass the paradigm “access to watch”?
 
Adler: problem w/requiring infringement nexus is fails to
recognize that access has its own independent value w/o regard to whether
someone will infringe. We hear all the time about print v. digital that reading
a book isn’t something that exploits one of the exclusive rights of a © owner.
True, but purpose of putting a book on the market is ultimately to have people
read it. [Won’t that involve copies, digitally speaking, especially given the
RAM copy doctrine that Adler surely endorses?] 
Only way to control access is to not require infringement nexus.
 
Band: could be drafted; if I rent a book for a week, and I
fiddle w/software so I can keep it another week, that might get into what we’re
actually interested in, especially since “reading” involves RAM copies of more
than transitory duration.  Even in that
case, it could be drafted to be w/in the scope of amended 1201.
 
Dow: Adler is right; absence of nexus to infringement is
deliberate; proposals to require nexus were rejected b/c that would make it duplicative
of 106.  What Congress saw was a world in
which value to consumer and © owner was derived from access, not 106
rights.  Doesn’t require copying, distribution,
public performance, but just access: celestial jukebox. Congress had that in
mind.  [But not the celestial fridge!]
 
Panjwani: Nexus could help a lot.  “Exclusive right of access for authors” is
the claim of Congress’ intent.  So: Let’s
have a debate about right of access, not circumvention. If Congress had wanted
to do that, they could have put it in 106. 
Instead, Congress said it wanted incentives to enter digital markets,
and thought this was a necessary step. Let’s now evaluate that. WIPO treaty says adequate protections for TPMs employed by authors
in the protection of their existing
rights. Adler/Dow: underestimate ability of plaintiffs’ counsel to find 106
violation: lawfully possessed after the rental expired?  Unlikely! 
Doesn’t require such a broad prohibition, burdening all other
noninfringing uses.
 
Q: speak to distinction between access and copy controls in
1201(a) and (b).
 
Panjwani: Antitrafficking provisions’ distinction in
implementation has not worked.  Access
control and copy control are the same in practice.
 
Q: b/c they’re merged in industry?
 
Panjwani: yes, in practice.
 
Pierre-Louis: in our industry that’s not the case.
Publishers and disk manufacturers have separate types of access and copy
controls.  We’re not trying to ID
infringers, but cultivate consumers. Access to work helps distinguish users—some
want it mobile, some online, some on disk. These rules let us meet customers
where they are. Nexus to infringement harms the consumer, b/c right now
possession of the work isn’t infringing, it’s the uses.  That access control allows them to make uses.
 
Slover: Ownership v. rental: Ownership is the core focus.
The rights of a consumer who owns a product to use it. Be careful: ownership
can be written around by lawyers so a consumer thinks she owns something but
doesn’t.  Concept: consumer’s rights and
dominion about the product they paid for. 
It’s a useful starting point to clear the smoke around the tech.
Traditional incidents of ownership should matter. Auto software: if consumer could
do it in garage w/screwdriver in the past, it wasn’t a © issue.  In the new world, may require access to
software to make adjustment; the fact there’s a TPM on top shouldn’t change the
ultimate calculus.
 
Q: software embedded devices study: could we treat those
TPMs differently than TPMs protecting expressive works, instead of infringement
nexus?
 
Slover: not a © lawyer, and Consumers Union came into this
from phone unlocking. Can’t speak too definitively, but sees a big picture
conceptual distinction b/t core creative works like books, movies, songs and
products that you now can’t use unless you have software inside them.
 
Adler: Panjwani suggested that Congress could have included
access w/in exclusive rights of © owner. 
Presumably his constituents would vigorously oppose that, b/c it would
make access a property right as the other aspects of 106 are [hah!] as opposed to
encouraging use in a market and ability to assert terms & conditions of
availability & use by controlling access in the first instance.  Concerned by emphasis in notice on 1201 “outside
of core copyright concerns.” Not sure what that means, but mistake to equate
that w/notion of nexus to infringement, b/c © concerns drive far more than
whether one of the exclusive rights is violated. Incentives to create works of
original expression in the first place, which is driven by © incentives [for
fridges, sure].  Access can occur w/o
infringement and that is a core © concern and we shouldn’t treat that narrowly
so that we don’t think that only infringement raises core © concerns.
 
Q: goes to Slover’s point: is there a way to reform 1201 to
include things like circumventing TPM to watch movie for free, but excluding
garage door openers?  One idea: permanent
exemption for software essential to operation of a device. Would that strike a
proper balance?
 
Zuck: Discussion on embedded software roundtable was quite
robust, but the same dynamism in product offerings still applies to “embedded
software market” as well. Tivo: the hardware was given away as a loss leader,
and the embedded software and services associated w/it created the value. [You
could do that w/cars too—but usually you do that with leases, and there isn’t
an obvious case to be made that you should be able to do that by preventing
replacement parts from being used.] Couldn’t support broad exclusion of
embedded software. 
 
Panjwani: a permanent exemption for embedded software would be
a good start, addressing overhang of issues like 3D printers. There are also a
number of issues around traditional expressive works.  [As indeed software must be to be protected
by ©.]  Exemptions involve appropriate
balance b/t access for fair use purposes; 1201 also substantially burdens those
uses.  Caution that any attempt to create
a permanent exemption would instead turn into a fight about what a software-enabled
device is; could spend years hashing out a definition. End result would be
fighting not about © infringement but about the device definition.
 
Pierre-Louis: tread carefully w/blanket exemptions.  Software is expressive: we use software to protect
software.  Blanket rule could swallow
entire industry. Games are played on game consoles; TV; movies; all manner of
distribution b/c consumers demand it.  So
we have to tread carefully b/c implicates more than just a tractor.
 
Band: Switching hats to Owners’ Rights Initiative: we could
support that, though a nexus requirement would be better. Embedded software
exemption would be a good start.  There
could be exceptions to the exception for game software.  Bigger point: Congress in 1201, and I was part
of those discussions, wasn’t thinking about tractors. Fact that we’re talking
about tractors does suggest a serious problem. 
Internet of things: CO as sudden regulator of the entire manufactured
world.  We went from 2 exemptions to 22;
in the next cycle it will continue to grow geometrically. 
 
Lowe: Emphasize parts on a car that used to be repairable
using mechanical means now require software access. The software is equivalent
to the parts; taking away the right to repair threatens our industry. People should
be able to modify their cars in their garages; your suggestion is a good
one.  Mechanical functions taken over by
software, including windshield wipers: the noncopyrightable function should not
be protected.
 
Dow: Embedded software “necessary to make a device run”—I’m
not sure how to interpret that, which highlights difficulty of drafting.  Thinking back to early cases, RealNetworks—authentication
sequence; you needed to authenticate your device to ensure you were talking to
a real server.  If you spoof the
authentication sequence, that was really software, and a lot of what goes on in
TPMs is authentication. Urge caution of impact on totally different contexts.  [Which is exactly what the car folks are
saying!]
 
Q: devices w/ and w/o expressive content?  One testimony said that the software was the same
no matter what the device does. Can we distinguish based on what the device
does?
 
Pierre-Louis: we have consoles; we have servers in the
cloud. We have different kinds of interoperability/authentication.  It takes a lot of thinking about how those
work before we get into rules.  Software
that operates the machinery might be copyrightable, but I don’t know enough
about the tech to say it shouldn’t count. Some of these other areas, they are
probably doing copyrightable things, and it’s not for me to judge. There are rationales
behind each of our uses of software, and there are unintended consequences. For
us, the leaks are the business; once they’re out, they’re out.
 
Zuck: There’s certainly software itself; we are interested
in using these protections.  A lot of
different licensing models for software itself, and protecting dynamism is
really important. Allows different models of making software available to
different sectors.  I’d rather approach this
from the other end. 1201 process in place: maybe it’s better to try to
streamline renewals, once you’ve identified a clearly acceptable use.  Seems to be a working process [heh]. Rather
than trying to go through and predict legislatively into the future.  [Because the 1201 prediction was so bad … no,
wait, that’s not your position.  Everyone
likes predictions that predict that they should continue to make money.]  The current system is working. I don’t mind
the default answer being no.  The notion
that people are afraid to start new businesses b/c of © liability is not a
problem—it’s not that confusing what is and isn’t legal. [Uh, ok.]
 
Greene: We spent a while on marketplace implications of
effectiveness/ineffectiveness of TPMs, but not on public safety. Consider
chilling effect on security research. Geometric increase in connected devices;
1201 is a tremendous obstacle to security research to ensure that cars,
airplanes, fridges, or TV sets are in fact secure. When we set access as the
threshold and tell them that 1201 is meant to stop that, as opposed to
protecting against infringement, then we’re telling the public that market
interests are more important than public safety and health.
 
Adler: w/r/t those concerns, they’ve been addressed to some
extent by Congress in exemptions in the statute, and every 3 years we revisit
many of those issues in rulemaking. Goes back to the Q of whether the issue of
infringement becomes the tail that wags the dog of 1201. 1201 was a recognition
that wholly apart from infringement there was value to access that had to be
w/in rightsholder to control, otherwise they wouldn’t provide it online.  Courts haven’t had any difficulty dismissing
the notion that fair use contains a right of access to a copyrighted work. It
never has.  [Our folks have lawful,
paid-for access; what they need is the ability to make creative uses. This is
the problem of the merged access/rights control.]
 
Panjwani: the discussion we’re having now about embedded
software highlights the danger of setting defaults as no. The growth of these
other issues shows that what we thought was small actually implicates a vast
range of economic activity. Reevaluate whether the default being no still makes
sense! The examples of successes—Chamberlain & Lexmark—exist, but MDY v.
Blizzard and RealDVD are counterexamples rejecting the rationales of those
cases.  We never get to core © issues b/c
of 1201.  Adler says access is a right:
but that’s not what Congress said—they said they were creating an ancillary right
for the purpose of discouraging infringement of 106, due to easy
reproducibility of digital content; not a standalone right.
 
Zuck: Public safety: it’s equally important to recognize
that there are public safety implications to tinkering w/embedded
software.  Medical devices.  [The CO is clearly the correct decisionmaker
here, amirite?]
 
Adler: for my industry, library elending or print on demand
or rental on demand, the issue is software being used to provide access to the
expressive work that’s protected by ©. Don’t let difficulties created by dual
ID of software as expressive work and uses to control access to a separate work
to place those works in a position Congress didn’t intend. Right of access wasn’t
considered only w/r/t piracy—it was specifically that Congress sought to create
online markets for © works.  That’s why
access had to be controlled v. what you intended to do with the work once you
had access.  [What would the Framers have
thought about cell phone unlocking and digital tractors?  Originalism is often unhelpful.]
 
Band: there’s a big difference b/t access to something you
paid for and access to something you didn’t pay for.  Congress did create some permanent exceptions,
but there wasn’t one for the testing of the VW for purposes of determining that
they were committing an enormous fraud on consumers around the world. No one is
stealing the VW to do the testing; they’re buying the VW and trying to figure
out how the software works, but much of that isn’t covered by the exemptions
that exist.  Yes, there are people who
take the risks, but many of them have decided it’s not worth it. If you’re at
an institution and you know there are colorable legal issues and you have
funders to please, people decide not to go there—it’s hard enough to get tenure
without that. Consumer protection issues, safety issues, many other things not
covered and to hope that rulemaking will continue to work for you every 3 years
is insufficient; we could make relatively simple narrowing changes to the DMCA.
 
Greene: Reiterate chilling effect. Public safety concerns: I
wasn’t suggesting that’s an equity for the CO to weigh; in fact, the inquiry
should be limited to whether the proposed use would constitute an infringement.
Making the point that by expanding the inquiry beyond infringement implicates
significant public policy concerns.  The
idea of access as a threshold—the industry is trying to have its cake and eat
it too.  Other industries can’t protect
their products w/© for the underlying work. At some point 46% of Americans engaged
in piracy; clearly it’s not working, yet the vast majority ended up buying more
digital products than those who didn’t. 
So we should rethink ithe value of limiting access; it doesn’t seem to
be doing what it was supposed to do.
 
Q: how prevalent is it for 1201 to be used for what you
might regard as anticompetitive purposes or to enforce 1201 against consumer
products?  We’ve heard about Chamberlain and
Lexmark, but those are older and Ps lost, but we’ve heard about chilling
effect.
 
Dow: What I see is largely anecdotal and in context of
rulemaking.  27 sought and 22 granted, so
the process is working.  To Panjwani: not
correct that access was not separate from infringement.  House report said: TPMs can be deployed not
only to prevent piracy but also to support new ways of disseminating and
safeguarding legitimate uses.  Purpose:
incentivize new business models.  Those
are the business models we’re engaged in. We have apps allowing you access to
our TV channels, watch on the go.  Access
is controlled through authentication.  [And
you wouldn’t sue someone for © infringement for unauthorized use?]
 
Panjwani: We assume that many people are law-abiding; if the
activity would be prevented by 1201, then much of the activity wouldn’t be out
there. We filed to clarify the legal ruling on 3D printers, which led to a
voluminous opposition by Stratsys. Another competitor just announced end of
life of one of its printers, which had lock-in to proprietary filament, showing
need for exemptions.
 
Pierre-Louis: 1201 succeeded in getting works online. [The
same way I succeeded in getting rain to fall the past week.]  Businesses like certainty. Invest more when they
know they can get a return. That’s been proven. [Except if you attended the
content industries’ presentations at the 512 hearings.]
 
Weissenberg: Tracfone filing: has used the DMCA to enforce
its anticompetitive lock-in many times.
 
Band: Trump thinks unpredictability is a virtue, but it’s
not good for clients.  After DMCA passed,
plain reading of 1201(a) showed it could be used anticompetitively.  Had to counsel clients that way.  Chamberlain allowed a change, but then
Blizzard v. MDY came by and rejected Chamberlain—now has to tell clients they
can’t compete in the aftermarket if they’re in the 9th Circuit.  Look at who is opposing exemptions to see its
anticompetitive use: market leaders in phones, 3D printers, auto
manufacturers. 

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First Amendment/commercial speech conference in NYC, June 13

Posted on May 18, 2016 by rtushnet
On Monday, June 13th (8:45 a.m. – 2:30 p.m.) the Floyd Abrams Institute for Freedom of Expression will host a major conference on the commercial speech doctrine. The event will take place in New York City.
→ Click here to register for the event.
This conference on the commercial speech doctrine will focus on its changing and varying definitions, the regulation and potential liabilities based upon it, and the potential impact of Sorrell and Reed, two Supreme Court decisions. The discussion will center on its impact on the content creation community, lawyer speech, food and drug and other areas of corporate speech
Interview: Who’s Afraid of Commercial Speech? — 26 Years Later
Ron Collins (Harold S. Shefelman Scholar, University of Washington, School of Law) will interview Judge Alex Kozinski (U.S. Court of Appeals for the Ninth Circuit). 
The Shifting Boundaries Between Commercial & Non-Commercial Speech
A look at the varying definitions of commercial speech, historical basis for the commercial speech doctrine, and the likely impact of the Supreme Court’s decisions in Sorrell v. IMS Health, Inc. and Reed v. Town of Gilbert.
  • Floyd Abrams, Partner, Cahill Gordon & Reindel LLP
  • Jack Balkin, Knight Professor of Constitutional Law and the First Amendment, Yale Law School
  • Tamara Piety, Phyllis Hurley Frey Professor of Law, University of Tulsa College of Law
  • Martin Redish, Louis and Harriet Ancel Professor of Law and Public Policy, Northwestern University School of Law
Moderator:  Vince Blasi, Corliss Lamont Professor of Civil Liberties, Columbia Law School
Commercial Speech:  The Definition Matters
“Commercial speech” is a dividing line between free expression and potential multimillion dollar liabilities in many areas of law.  A specific look at that divide in attorney, trademark, corporate-financial, and food and drug commentary.
  • Steven G. Brody, Morgan, Lewis & Bockius LLP
  • Denise Esposito, Covington & Burling and Former Chief of Staff to the Commissioner of the U.S. Food and Drug Administration (FDA)
  • Joshua M. King, Chief Legal Officer, Avvo, Inc.
  • Rebecca Tushnet, Professor of Law, Georgetown Law School
Moderators:  Chris Beall, Levine Sullivan Koch & Schulz LLP and Bruce Johnson, Davis Wright Tremaine LLP
Brand Journalism, Sponsored Content and the First Amendment
Difficult issues involving rights of publicity, copyright fair use and consumer protection disclosures arise in the First Amendment No Man’s Land between obvious commercial advertising and editorial speech by traditional media.  This panel examines the disparate jumble of legal tests and standards that apply when brands sponsor, influence or author news stories, features or commentary on matters of public concern and considers whether they can be harmonized with evolving commercial speech doctrine.
  • Deirdre Sullivan, The New York Times Company
  • Rick Kurnit, Frankfurt Kurnit Klein + Selz PCMary K. Engle, Federal Trade Commission, Associate Director, Division of Advertising Practices
  • Allison Lucas, BuzzFeed, General Counsel
Moderator:   Scott Dailard, Cooley LLP
Strategic Issues:  What questions are we asking now? Where is the law going?
An all room discussion on the strategic issues that should be raised in litigation concerning commercial speech and the First Amendment.
Moderator:  Timothy L. Alger, Greenberg Traurig LLP
The conference is sponsored by: Avvo Inc., Cooley LLP, Davis Wright Tremaine LLP, Frankfurt Kurnit Klein & Selz PC, Greenberg Traurig LLP, and Levine Sullivan Koch & Schulz, LLP.

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Et tu, Copyright Office?

Posted on May 18, 2016 by rtushnet

Authors’ rights are for other people, apparently.  (I don’t actually begrudge them this release, but it does say something about the difference between “reasonable for me to want” and “reasonable for you to want.”  OK, a little more snark: “irrevocable,” LoC?  Are you sure about that?)

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Second Circuit narrowly interprets materiality for Lanham Act purposes

Posted on May 18, 2016 by rtushnet
Apotex Inc. v. Acorda Therapeutics, Inc., — F.3d —-,
2016 WL 2848911, No. 14–4353–cv (2d Cir. May 16, 2016)
 
The parties compete to make tizanidine, a drug for treating
spasticity. Apotex alleged that Acorda (i) filed a sham citizen petition with
the FDA to hinder approval of Apotex’s competing formulation in violation of
Section Two of the Sherman Act, and (ii) violated the Lanham Act’s proscription
on false advertising. The factual dispute focused on the relative efficacy of
tablets or capsules in controlling somnolence, one of the key side effects of
tizanidine; tablets and capsules aren’t bioequivalent, and there’s a substantial
difference in drug absorption when capsules are taken with food.  Taking the capsules with food thus diminishes
sleepiness as a side effect, and Acorda had a patent on capsules while Apotex
sold generic tablets.  The district court
dismissed the claims and the court of appeals affirmed, in the process hinting
at the instability that Caronia has
introduced into advertising law.
 
As for the antitrust claims, “Although precedent supports an
inference that a citizen petition is an anticompetitive weapon if it attacks a
rival drug application and is denied the same day that the application is
approved, that inference has been undercut by recent FDA guidance.”
 
False advertising: capsules carried an FDA label instructing
doctors to distinguish between tablets and capsules and between taking the drug
with food and without: “The prescriber should be thoroughly familiar with the
complex effects of food on tizanidine pharmacokinetics.”  The label also had a graph showing “Mean
Tizanidine Concentration vs. Time Profiles for Zanaflex Tablets and Capsules (2
x 4 mg) Under Fasted and Fed Conditions.” The peak for the curve representing
tizanidine capsules (taken with food) was lower, and occured later than the
peak for the curve charting concentration over time for tizanidine tablets
(taken with food).  As the label
explains, pharmacokinetic differences between the fed and fasted state may
affect the frequency and onset of certain adverse events, including sleepiness.
 
Once Apotex’s ANDA for capsules was approved, Acorda “countered
with its own authorized generic version.” 
Apotex argued that Acorda’s sales reps misrepresented to doctors that
its capsules reduced the maximum concentration of the drug in comparison with
tablets, and then improperly used reduction in that measure as a proxy for
decreased sleepiness.
 
On the Lanham Act claims, the court spends a bit of time
hammering home that its old “inherent quality or characteristic” language
really, really just means materiality, like every other circuit requires.  Then the court explicitly holds that “representations
that are wholly consistent with an FDA label” aren’t subject to Lanham Act
liability, for some reason not mentioning Pom
Wonderful.  A footnote cautions that “Lanham
Act liability might arise if an advertisement uses information contained in an
FDA-approved label that does not correspond substantially to the label, or
otherwise renders the advertisement literally or implicitly false.”  However, the general rule “reflects proper ‘deference
to the expertise’ of the FDA as the regulatory agency responsible for issuing
the label by respecting the exhaustive process preceding the issuance of a
label.”  Furthermore, this rule “insulates
pharmaceutical companies from liability when they engage in First Amendment
speech that is consistent with the directive of the regulatory body having
oversight of product labels.” 
 
A couple of things: of course, assuming Central Hudson is still good law, the Lanham Act also insulates companies from liability
when they engage in truthful, nonmisleading commercial speech (presumably what
the court means by “First Amendment speech,” since even false advertising is covered by the First Amendment, albeit
not protected).  That is, the Lanham Act regulates less than what Central Hudson supposedly allows, because false/misleading
commercial speech may simply be banned. 
In that regard, there is no need to refer to the FDA, unless the First
Amendment requires a safe harbor for FDA-approved speech.  I think a rather more complex theory would be
required to justify that claim, and
it’s also inconsistent with what the Supreme Court has held with respect to
product liability claims about drugs, not to mention arguably (though not
necessarily) with Pom Wonderful.
 
Separately, when the court of appeals says that, “in order
to avoid chilling speech that ought to be protected, Acorda’s advertisements
cannot form the basis for Apotex’s claims to the extent they were in line with
the FDA-approved label,” it is a bit disingenous about its own precedent. The
court is surely aware of its own decision in US v. Caronia, holding that the First Amendment protects much, much
more than FDA-approved statements, but it is shying away from the implications
of that decision for other regulatory regimes. 
As this awkward attempt foretells, the day of reckoning can only be
staved off so long.
 
The court mostly found that the challenged statements were
supported by the FDA-approved label.  E.g., a rep said, “I explained to [the doctor]
that the [C]apsule[ ] [is] really unique in that it counteracts a lot of the
drowsiness when you dose it with food. He said he would give that a try and see
how well it works for his patients.”  “When
Acorda learned that its representatives may have made unauthorized promotional
claims for Zanaflex Capsules, Acorda’s head of sales sent a memorandum to the
sales team explicitly forbidding promotions that Zanaflex Capsules had fewer
side effects and less sedation than the tablets.”  Though representations that capsules provided
more “flexibility” than tablets weren’t on the label, Apotex’s burden was to show
falsity, not just lack of FDA approval. 
And there was no evidence that claims about flexibility were false or
misleading.  Nor did the reps’ claims
explicitly or implicitly represent test-proven superiority in sleepiness, only that
the pharmacokinetic results suggested less sleepiness.  “It is immaterial that no study has shown a
reduction in somnolence associated with Zanaflex Capsules; … Apotex must show
falsity, not merely uncertainty.” 
Moreover, the FDA label backed up the sleepiness claims—something that
the court specifically called a “harbor,” albeit not a “safe harbor”—because the
label warned that adverse events such as sleepiness might occur when switching
between tablets and capsules in the fed state.
 
In a brochure, Acorda superimpsed “30% INCREASE FOR TABLETS”;
“20% DECREASE FOR CAPSULES” on the FDA-approved graph.  Apotex argued that this was misleading,
because the graph showed mean
tizanidine concentration, which is the average drug concentration at different
points in time, while the text relates to the maximum drug concentration and,
by definition, was different from the mean drug concentration.  
 
The court of appeals found that there was a triable issue of
fact on falsity only with respect to the graph. 
The brochure also used sun and moon graphics and discussed day and night
dosing, but that wasn’t an unambiguous representation about efficacy against
sleepiness and there was no consumer reaction evidence.  And here the court implicitly rejects case
law suggesting that deliberate attempts to mislead can substitute for consumer
reaction evidence: “Apotex relies on internal marketing statements from Acorda
focusing on reduced [maximum concentration] and somnolence; but Acorda’s
motivations for launching the gatefold brochure do not constitute extrinsic
evidence as required.”  This isn’t a full
rejection, though, because of the issue with respect to falsity about the
concentration-sleepiness link: an intent to make an unsubstantiated claim doesn’t
translate into an intent to make a related false claim.
 
Apotex argued that the district court erred by examining the
brochure in isolation while ignoring the context of Acorda’s launch letters and
other documents detailing Acorda’s marketing efforts. “But the relevant context
of the advertisement is the overall message conveyed by the brochure. The
district court was not required to consider external marketing documents.”
 
The only real issue was the graph with the superimposed
text.  Since maximum concentration values
aren’t time dependent, and the graph displayed mean drug concentration over
time, a jury could find literal falsity. However, a jury could not find
materiality.  Apotex argued that literal
falsity allowed a factfinder to infer materiality, but that’s not so, despite
statements in case law indicating that “consumer deception is presumed, and
‘the court may grant relief without reference to the advertisement’s [actual]
impact on the buying public.’ ”  The
falsity here was only an exaggeration of the scale of the differences, and
there was no record evidence that this “inaccuracy” would deter capsule
purchases.  [Surely the court means “tablet”
purchases.] “Apotex fails to make the necessary showing that the specific
misrepresentation in the graphic—in any of Acorda’s advertisements—was likely
to influence consumers’ purchasing decisions.” 
Just how broadly the Second Circuit means this statement to stretch–for example, whether plaintiffs will be required to show that ads without the false statement at issue were less persuasive, versus whether they’ll be required to show that the claim is the kind of thing consumers care about–remains to be seen.

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