Next Great Copyright Act Conference: Larry Lessig

Posted on April 4, 2014 by rtushnet

David Nelson Memorial Keynote Lecture

Introduction by Andrew E. Monach, Morrison & Foerster LLP

Lawrence Lessig, Harvard University

Aaron Swartz: How will you ever solve the problem of laws that choke creativity with a government that’s so corrupt. Lessig said that wasn’t his field; he did internet/copyright policy. Swartz: But as a citizen, is it your field? There is a flaw at the core of our democracy.  We have to change the bovine quality of our reaction to this flaw. We have to recognize the threat.

Many people focus on problems of speech, or corporate speech. He locates the problem elsewhere: the fundraising.  Modern American congressperson learns which buttons need to be pushed in order to survive. Develop a sixth sense about how what they do might affect ability to raise money, in every little detail.  “Always lean to the green.”  Not an environmentalist statement.  Time is one problem, but not even the most important—it’s also the problem of the people from whom they raise this money, because of the distribution of contributions.  People whose views matter: .05% of America, the same as the number of people named Lester or perhaps Sheldon.  Either way, a bad system for reflecting the Framers’ objective of representative democracy representing the people, the rich no more than the poor.

This is also an unstable system. When such a tiny number have power, even a tinier fraction has the capacity to block reform, especially for things like the next great copyright act.

COICA: bill never made it to the floor, but came back as SOPA/PIPA, and resulting public campaign.  After a year’s organizing, they were successful in blocking it in House and Senate after important organizations like Google, Reddit, Wikipedia went dark demanding Congress reject the legislation. A victory not just for copyright but for the recognition of the role of special interests—corruption.

SOPA/PIPA fight idn’t build a mechanism for getting needed reform—can’t count on the internet to show up when you press a button.

Another strategy: cooperation. Roosevelt made all sorts of deals with the devil to get reform. What kind of deal might make sense here?  Landes & Posner: indefinitely renewable copyright, in exchange for a real efficient system where unrenewed works would become available.

If we need copyright to internalize positive externalities, need carbon tax to internalize negative externalities—but we had “copyright wars” waged on what Jack Valenti called “terrorists,” which is to say our kids.  Activist, aggressive legislation, but we still have done nothing to solve negative externalities of climate change—the environmental pirates, who don’t believe they should participate in internalizing negative externalities. He’s not a copyright abolitionist/doesn’t believe in piracy. But when he thinks about strategies, he wonders whether there isn’t a role for strategic pro-piracy advocacy.  Imagine the Pirate Party’s platform: so long as there are environmental pirates, people who insist on not paying for the externalities they cause, we will encourage copyright pirates, and renounce it when there’s a deal.

Swartz’s tragedy. Targeted JSTOR because of something he learned when he heard that it would cost $250 million to liberate JSTOR for the third world.  But that was a misunderstanding.  MIT was never asked whether the access was unauthorized; prosecution went on 2 years without anyone ever asking this fundamental jurisdictional question.  Hope was the one thing we didn’t give Aaron; his lawyer was optimistic and his friends were but that wasn’t delivered to Aaron.

Swartz would look at this event as a hopeful one. Even without political reform, maybe, there is a way to think about copyright reform. Because if we think about 10 years ago v. today there’s been extraordinary progress.  End with a call to us as citizens.

Fred von Lohmann: can we democratize the giving of money? Netflix has 40 million subscribers, relatively intensive internet users. Shouldn’t we use the tools we already have to unlock small giving? We can click a button to buy at Amazon; why not click a button to give $10 to a politician who has our views on these issues. If $70 million had been raised in SOPA/PIPA, Judiciary Committee would be saying something very different today.

Lessig: we could deploy that strategy to reform the system, or that could be our reform.  With respect to the first, we’re going to launch an experiment based on work by political analysts. But without public funding/legislation that will never happen at the level of Congress; maybe for president.  But you need tax credits or something else to get candidates to focus on a broad swath of their constituents.
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Next Great Copyright Act Conference, quasi-copyright

Posted on April 4, 2014 by rtushnet

Quasi-Copyright Reforms

Moderator: Hank Barry, Sidley Austin

Rebecca Tushnet, Georgetown Law School

I’m going to talk about managing the interface between copyright and several other rights—in the very first panel of the conference, Wendy Gordon reminded us that various doctrines channel some claims to copyright and others to patent.  I’m going to briefly cover both quasi-copyright rights and their interaction with copyright and also what I’ll call marketing value IP rights and their interaction with copyright.

Two quasi-copyright rights: 1201 and 1202. 

1201 anticircumvention: a disaster.  1201 trips up people who are trying to do the right thing, and doesn’t trip up people who are trying to do the wrong thing. The exemption rulemaking every three years is a bonanza for those firms that charge their clients by the hour and a nightmare for everyone else.  We start preparing for the next round as soon as we finish the last.  We elect presidents less often than we have 1201 exemption proceedings.  In real copyright reform, 1201 should be eliminated and ordinary secondary liability allowed to do any necessary work.  If not, at the very least exemptions should not expire.

1202 copyright management information: starting to see increasing use—sometimes the pattern with a new legal right is that it remains in relative quiet for a while and then is discovered, which may be happening here.  1202 has differential effects depending on medium, because some kinds of copying are inherently likely to preserve CMI and others aren’t: earlier this week, for example, Boatman v. United States Racquetball Association allowed a 1202 claim to proceed to trial based on garden variety infringement of a photograph.  New lawsuits against ordinary reproduction of photos also are starting to include allegations of removed CMI because the way information is attached to photos means that it is very easy to copy the photo without copying the CMI, intentionally or not, and intention is often not an issue that can be decided early on in a case.  E.g., Kelly v. Arriba Soft. Depending on how 1202(b) is read, it’s possible that liability for removing CMI can attach without any underlying copyright infringement, just as it’s possible to violate 1201 in the course of making a fair use. 

My challenge: Has the CMI provision ever been used independently of an infringement case in an appropriate situation?  Was 1202 just another bad congressional prediction about what technology would enable and/or require?  It’s notable that 1202 concerns exactly the information that we expect to get out of the “copyright hub,” but I haven’t heard anyone discuss 1202 as something that is enabling us to get to that solution.  Copyright owners already have the necessary incentives to provide that information. Nor, if we really do want to use CMI as part of automated systems, is it sufficiently clear that 1202 is only for that. I don’t see the current cases as covering instances in which CMI would have assisted in enabling detection of infringement.  Instead, 1202 claims force courts to decide if having a copyright statement on the terms of service page of a website operates as CMI for a poem found on another page on the same site (Personal Keepsakes case, N.D. Ill.), or if a photo credit on the back of a record album is sufficiently connected to the cover photo to count as CMI (Levyfilm v. Fox Sports).  If we do open DMCA issues up, this is a looming one. My suggestion: replace with direction to the Copyright Office to study CMI issues and the power to make rules (and not on a three-year cycle, either).

The other quasi-copyright claims on my agenda are two marketing value rights, the TM/copyright interface and the right of publicity.  These are preemption issues. Conflict preemption and preclusion operates along with §301 and §301 should also be rewritten to the extent necessary to make that clear. 

Dastar said that “origin” in the Lanham Act meant physical origin, not origin of ideas, and that copying an uncopyrighted work was allowed by the copyright law and should not therefore be interfered with by trademark law.  This is preclusion, or as Mark McKenna has called it, channeling.  In the more distant past, Sears and Compco were very clear statements from the Supreme Court that states could not make it a violation of trademark law to merely do that which one was entitled to do as a result of patent law’s negative space, which is to say copy an unpatentable (or patent expired) article.  States could require labeling, but could not prohibit the copying itself on the theory that mere copying was deceptive.  The same result should follow for copyright law, and ideally would be made explicit: it’s not a violation of trademark law to produce a communicative work whose subject is out of copyright.  This would make the Betty Boop trademark case very easy, and have effects on Warner v. X One X (leaving Warner only with copyright claims based on copying elements of The Wizard of Oz and Tom & Jerry that weren’t contained in the copyright-expired promotional materials). 

But courts are at least patchily working their way towards these conclusions now. Legislation could confirm the trend.  The real preemption problem is the right of publicity, where courts (mostly the 9th Circuit) have created rights that directly interfere with copyright owners’ exclusive rights.  The doctrine on this is metaphysical, and badly so, attempting to distinguish an uncopyrightable persona from copyrightable works depicting that persona in the service of controlling the use of copyrightable works. Among other things, this is like saying that because the natural world is uncopyrightable, there’s no conflict preemption problem with a state law right that bars people from commercially exploiting their copyrighted pictures of the natural world, where commercial exploitation includes selling their photos or paintings for decorative purposes.  Just recently, this head-scratcher created yet another tangled loop in Garcia v. Google that distracted from the main issue there.  I’m not a big fan of federalizing the right of publicity, but we should federalize its limits: nonadvertising use of material that is authorized by the copyright owner or by copyright law should be outside the scope of the right of publicity because of its conflict with the objectives of copyright law.

Glynn S. Lunney, Tulane Law School

Where is the radicalism at this Berkeley conference? Maybe copyright doesn’t need radicalism. But we seem to think copyright law isn’t achieving its objectives very well. When was the last great copyright act?  The DMCA?  1790 was pretty good, downhill since then. Protects too much too broadly for too long.  Let’s put more on the table.

The next great copyright act should abolish copyright.  A lawyer who is planning to settle doesn’t start with the drop-dead offer.  Compromise is the end, not the beginning.  Also, he believes we might be better off with no copyright than the Copyright Act we have—long story of public choice inaction leading to law that enriches only a handful at the expense of the rest of us. Would the world look radically different?  Coase: the parties will bargain; the government gets it wrong.  People can work together and contract around a no-copyright rule. Most copyright infringement cases he dealt with were between former partners—architect/client, songwriter/publisher. Converting copyright to contract would be trivial.

Might make difference for stranger infringement, historically anyway.  But now there are EULAs.  Contract could accomplish a lot of what we do today. And it would eliminate need to fight about statutory damages.

Coase cuts both ways. If we get too much copyright from the gov’t, private markets can fix that too.  If you really believe in markets, the private sector can fix it anyway.  Creative Commons = one way. iTunes dropped its DRM. Free & open software. But not universal yet.  Why? Some are not market transactions in the sense we ordinarily think; we don’t want the relevant value commodified. Fair use parodies: we don’t think licensing will work well.  In terms of well-commodified terms still not working well: (1) markets for these works aren’t generally very competitive.  Price competition: all movies $7.50 (lower cost of living in New Orleans, I guess); all iTunes songs $.99 (actually, now it’s $.69, .99, and 1.29, but I take the point). (2) Consumers have limited time/cognitive resources; hard for them to adjust on the fly.  (3) Externalities, such as those imposed by bans on reverse engineering.

Jason Schultz, NYU Law School

Patent and copyright background.  Patent lawyers are stereotyped as more conservative/nerdy, but they’re kicking our ass in legislative reform. We might want to codify some things to be clear, and others to have flexibility. Kirtsaeng: we got there, whether you agree or not—the statute helps in some ways, but interpretation is also important.  What if we took the common law of copyright misuse and nailed some of them down in the statute?  The more some restrictions end up in terms & conditions the more we might want statutory confirmation of rights.

Anticompetitive issues: interoperability, accessing facts/ideas, fair use. Anti-cheating clauses (MDY v. Blizzard).  Information that allows repair by you or third party.  Medical Justice: forms for drs/dentists that claimed copyright in your reviews. Datel flash drives for backing up Microsoft game data.  Anti-exhaustion/anti first sale clauses not just with software and CDs, but also on iPhone/other mobile devices, related to jailbreaking.

All sorts of cases where we might want to address these quasi copyright concerns, because they’re rarely ordinary infringement claims.  Instead it’s interference w/contract or some other concern.  Basic unconscionability doesn’t seem to get the job done, even though these mass market contracts are procedurally unconscionable. Preemption under current §301 and conflict models is insufficient. We could recraft misuse as preemption if we wanted.

To the extent we ID things that are solely for individual benefit, ok, but we shouldn’t necessarily allow people to contravene public policy by private agreement, clickthrough or not.

§301 is just about rights; nothing about defenses.  What if we said we should have an equivalent for conflicts with state attempts to restrict exceptions and limitations?  This would allow us to avoid identifying particular state issues or particular anticompetitive uses in the statute.  Could also allow “fair” breach of contract where copyright law allowed the conduct for public policy reasons/where the copyright is being misused; could allow actual damages from breach but not prevent it.

Could also do something better than §512(f) where there is an abuse of license; create an affirmative claim. Compulsory license = remedy for abuse, or even statutory damages. Copyright trolling where people exploit the power differential with individuals.

Fred von Lohmann, Google Inc.

Quasi-copyright: live in Title 17 but not really part of traditional system: bootleg rules, 1201, 1202. Doesn’t participate in full set of rights/exceptions/limitations.  Droit de suite.  Also TM claims that abut/interfere with copyright; right of publicity; contract crashing into copyright has created quasi-copyright issues as contract starts to look like right against the world. Also, pre-1972 sound recordings is an emblematic example of quasi-copyright, though not in Title 17—but like others, cause trouble to no one’s ultimate benefit.

Most of these: striking how incomplete they are.  When you look at antibootlegging provisions or even 1201, you have a large body of nuanced copyright law with detailed remedial schemes, registration requirements, limitations and exceptions; when compared to Ch. 11 with no limits/exceptions and enormous ambiguity, we would have been a lot better off with the rest of Title 17 instead of this incompleteness. Similarly with pre-1972 sound recordings: what does state law protection entail? Is there a public performance right? Is there secondary liability? Who knows?

Intermediary liability is where the rubber meets the road for the reality of these provisions. Imagine that §107 were to disappear tomorrow. The day after, YouTube would look pretty much unchanged.  Because the users wouldn’t know—they don’t know §107 today.  If you changed intermediary liability, though, you’d see prompt, immediate, radical changes across platforms. If you care about how copyright is experienced/how it orders the market, you should care a lot about intermediary liability.

1201’s antitrafficking provisions: is that secondary liability? One could argue it is.  Gordon v. Nextel: court just assumed that all copyright rules, including secondary liability, also applied to 1202—what would that look like, though?  Antibootlegging: not clear whether there’s secondary liability; what’s its scope?  How can a provider distinguish a live musical performance from something that’s not covered by Chapter 11?  Pre-1972 sound recordings are currently in litigation, and the cases have come out different ways. One ruling found them to fall within the DMCA safe harbor. Vimeo and Grooveshark cases found that they didn’t because they aren’t part of federal copyright law.  If you think it’s hard to figure out who owns a sound recording, try figuring out when it was made.

Of course it would be nice if we could federalize them, which would fix the problem. But we need not wait that long. 

(1)   We shouldn’t have any more quasi copyright law. Could absorb bootlegging into basic features of Title 17.  Do we really want islands in the body of copyright that aren’t of the body of copyright.

(2)   Or we could try to complete them. Think about limitations, remedies, secondary liability.

(3)   Make preemption more sensible so we know where the lines are drawn between TM/copyright/contract.

(4)   512 has resulted in a lot of people reframing non copyright claims as copyright claims in order to get the power of notice and takedown, and that’s creating a lot of tension. Consider whether 512 was for these edge cases

Barry: would contract be more complicated than copyright?

Lunney: yes, but entire destruction of copyright not likely. Antitrust may be most plausible; misuse may have some potential but hasn’t gotten very far.

Wendy Gordon: why little mention of moral rights?  Doing things with a copy = proper domain of quasi-copyright.  Distribution right blurs the line.

RT: not active, which has to do with distaste for touching §107 and if you don’t do that it’s pointless to talk about moral rights.

Q: we see more reform in patent because patent is formalized—int’l effort, formalities?  Little int’l harmonization of copyright by comparison.  Also wonders about effect on other areas of copyright that haven’t been hit by the digital revolution—design copyrights.  Likes statutory damages—they’re effective for industrial designs.

Von Lohmann: disagrees w/premise: enormous int’l harmonization via WIPO, free trade, multilateral negotiations.

Schultz: patent reform crowd has its act together.  Some is politics, but also hard work organizing people and getting them to speak out—programmers, entrepreneurs, small businesses. Trolling may be worse but also better publicized. We have stories to tell too.

Von Lohmann: whatever else you can say about design copyrights, they are copyrights and we know what the rules are for intermediaries etc.

Q: we were doing well under 1909 Act and a lot of quasi copyright comes from calls to harmonize—especially 1101/bootlegging, which may not even have fair use/duration.  See calls to harmonize for things like database rights and other quasi-copyright rights. So we could start trusting our own judgment and not that of the EU.

RT: I don’t think that’s driving Congress. We ignore int’l law when we want to.

Von Lohmann: need more discussion of harmonization. But we have laws that result from int’l treaty obligations, like Ch. 11 and 12, and he isn’t as optimistic as Tushnet to say that we violate our treaty obligations when we feel like it.  We need to talk about reopening these treaties.

Schultz: Australia, Israel, Canada doing work. There are allies if we want to push back.

RT: first, we need to accept implementations of the kind that we deem appropriate for ourselves.
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Next Great Copyright Act Conference, libraries

Posted on April 4, 2014 by rtushnet

Reforms Affecting Schools, Libraries, Archives, and Museums

Moderator: Tom Hemnes, GTC Law Group LLP & Affiliates

Ruth Okediji, University of Minnesota Law School

Schools don’t play a central role in the last Copyright Act; the next shouldn’t take the same piecemeal/dismissive approach.  Schools and students are changing, and digital tech is a big part of that.  In the current Act, there are disconnected pieces—face to face teaching, TEACH Act (miserable failure), disability provisions, fair use.  Often schools don’t have enough resources/knowledge to use all the pieces.  Act takes a passive view of schools and static view of education, but schools are adapting and adopting new tech all the time, and we should be worried if they don’t.

The purpose of copyright: promoting learning. Other state preambles mentioned education. 

Do we really want to regulate how students learn and how teachers teach in a rights-based approach?  Ecosystem of license processes—no standard rates to fall back on. Educational institutions become overly cautious, and underfunded institutions can’t compete. Little incentive for publishers to negotiate with educational institutions.  Need for translations; much of student body doesn’t speak English, but translation right is in the way.  Teachers’ uncertainty interferes with access and use of digital content.

All this when skills in working with digital content are increasingly important as educational goals.

If fair use is just about transformation, that may not be helpful for schools; Congress does not want to look under the hood of that particular question. It’s not the lack of exceptions that is a problem, but we don’t have exceptions that work or serve our needs. Exceptions thicket: where does face to face teaching apply? where does the TEACH Act apply? Where does fair use apply?  Our three tiered approach has no sense of how each kind of exception should interact.

Safe harbor solutions; open licensing solutions; but broader implications in need of solution. Richer schools may overpay for access and use. Underresourced: won’t access/use works.  Teaching and learning should be frictionless for ordinary educational use; fair use should only be at the margins; Copyright Office guidelines may have a role to play; need a reform with no discrimination between schools—rich, poor, art, film, karate. Structure of Act could be improved: everything dealing with education, not just educational uses, should be one place.  A blanket exception for schools and teachers as schools and teachers is her dream.  Students are a different story.  But if radio can be exempt, then schools can also be exempt.

Ivy Anderson, California Digital Library

Transformation of library collections in the digital age.  Three overarching themes: urgency of digital imperative; need to operate at scale; and how well fair use has served libraries.

Largest libraries hold billions of works; many are still in copyright, and many rare volumes are orphans. Libraries spend $4-5 billion in content purchases/year. Over half of library users buy books by authors they first discovered in a library—the industry’s best advertisers.  $50 billion that ARL members have spent on research material since 1923, equivalent amount in staff/operational costs—and they hold less than half of the 2.8 billion items held by libraries.  $200 billion in stewardship investment at stake in the digital transition.

Can libraries self-regulate? They can and they do. Preservation planning. Sound recording preservation is just one instance of larger preservation challenge. 

Three digital adjustments: preservation, access, and service reconfiguration.

Large scale digitization allows us to preemptively safeguard collections from manmade and natural disasters—Tulane lost 3 million items in the aftermath of Katrina. At UC these aren’t idle concerns; we’re seismically unstable.  Concerns about collections are very real, so we embrace mass digitization—nearly four million volumes from our collections.

Supporting use of digital collections is no less an imperative as students and researchers seek more online access and researchers use data analysis.  If it isn’t online, it doesn’t exist—not just a catchphrase. If we fail, much of the history of human endeavor will go into the dustbin.

In the US we’ve used fair use to move collections online. Four factors are remarkably trustworthy. Frontera collection at UCLA: largest repository of Mexican and Mexican-American vernacular performances.  Rare and fragile recordings, gathered accessbility, allowing wide ranging research in Mexican/Mexican-American culture. But this is exactly the kind of content that we can’t collect today as it’s produced.  Never received a takedown, only thanks (small excerpts available streaming online, full in the library).  Other California collections: Calisphere—for use K-12 and for the public.  Never received a takedown request from a copyright owner, one for privacy concerns.

Also great role of smaller public libraries/cultural heritage organizations in preservation. §108 study group considered whether only large libraries should be eligible, but small ones have unique collections and can stimulate civic activism. Law shouldn’t dictate who gets to do preservation; profession can develop appropriate preservation practices and law shouldn’t dictate those practices.

Archiving the web is increasingly common despite lack of clear exception.  One archive has adopted §108 study group recommendations (clear labels, no public access, offer opt-out).

Collectively we hold more than 1 billion books and journals, and many are running out of space as circulation is declining. Work to reduce physical footprint; groups of libraries are sharing storage and consolidating collections. This goes hand in hand with digitization—books are more findable due to full text indexing of digitized copies. Obscurity isn’t in authors’ interests or readers’. HathiTrust is an important part of making this possible.

Rather than placing backward-looking tax on old books with no active commercial market, scarce library resources are better spent on new authors.  Many of these copies are even properly thought of as replacement copies, given deaccessioning going on. New restriction on digital uses mimicking access restrictions on physical books would be a far better solution.

In the meantime, a HathiTrust project is helping open up works—Copyright Review Management System.  Researches copyright status of books published between 1923 and 1967.  55% are not renewed. A few notable things: beyond that percentage, the project was only possible because of formalities and the existence of a registry; and only possible due to prior digitization, which made a distributed online workflow possible and couldn’t have been done across physical books over 100s of libraries.  Involved hundreds of hours and still only touched 3% of the HathiTrust corpus. Metadata is available online. More cooperation with rightsholders there is desirable.

Also, copyright should prevail over contract, so we don’t have to keep fighting over licenses.

David Hansen, University of North Carolina Library

Many institutions and individuals responded to Copyright Office inquiry on orphan works.  Report carefully collected the many perspectives. Problem: uncertainty even if there is no one who will actually claim the work; fear of large damages.  Productive and beneficial uses forestalled, to no benefit of any author or rightsholder. 

Digitization example: Thomas E. Watson collection—politician of late 19th/early 20th century. Typical special collection—books, speech drafts, letters, all thrown into one bucket (library collections may not follow copyright categories because they’re about a subject).  Tracking down owners: over 8000 documents in the letter subset.  After 80 hours of work, identified 3304 individual names as authors; of those, 2671 were presumably still in copyright.  That investigation took 4 ½ months.  They ultimately found 4 authors w/dependable contact info (you could have spotted these w/o investigation): William Randolph Hearst and 3 other prominent figures; all but Hearst granted permission, and Hearst didn’t respond—its contact info was “send a letter care of the San Francisco Chronicle.” 

They felt comfortable relying on fair use once they’d done this level of investigation. But copyright isn’t always the primary obstacle.  Watson wrote some spicier texts even in public; his personal correspondence could be even more exposed.  Privacy is a question.

Other libraries are gaining comfort with fair use too. Orphan Works best practices in development to document what libraries and archives should do. Jennifer Urban’s great article on using fair use for orphan works.  More comfort with relying on fair use since 2006; the fear of copyright liability has diminished at least for libraries and archives, and best practices initiative further helps them. There remain a category of uses where users aren’t as comfortable with fair use, and some remedy limitations along the lines of the Office’s proposal might be appropriate. But we always wonder whether legislation will make things worse rather than better.

Maureen Whalen, Getty Trust

Museums don’t spend as much as educators but we spend a lot on education. Many museums are free/donation supported.

In the trenches: orphan works exemption would be useful. We don’t believe any type of work should be excluded (e.g., photos or unpublished works). Safe harbor for nonprofits. We will do due diligence and record metadata and make rights info available to the public. 

Need improvement in the public display right to allow us to display video art—the current rule allows only display of one image at a time. But video art doesn’t work like that. In exhibitions it’s treated like sculpture but in law it’s treated like film.  Exhibit/display should be permitted despite public performance language—only limited to video art, similar to definitions in VARA, limited-edition works (not feature films).  Would that harm incentives?  No; museums would feel more comfortable collecting video art if they weren’t facing concerns about how they could display it/having to negotiate complicated contracts for each piece.

Q: as a practical matter, aren’t damages limited in orphan works cases?  Attys taking cases wouldn’t think that damages would be high. That should be part of risk analysis.

Hansen: that’s a big factor; most library collections don’t face statutory damages as part of the equation because most works are unregistered and also libraries are pretty protected.

Mike Carroll: Push back on schools as institutions and more on educational uses writ large.  What about the teacher exception/works for hire? Multibillion dollar system runs on the assumption that teachers can transfer copyright but maybe they can’t. Should the next act clarify?

Okediji: struggles with that; isn’t sure wants to rock that boat. But academic authors do need to think about how much we’re giving away and how we want to walk the talk. Legislative position might lead to unwanted consequences.

Peter Jaszi: Inspiring call to action, but difficulties in achievability. Just at the moment educators recognizes the need, the content community sees the opportunity for an educational market.  There is value in interim solutions to the big problems Okediji describes.  Code of Best Practices in Fair Use for Media Literacy Education as a small solution—makes differences in daily practice in that area by relaxing inherent conservatism of educational institutions.  Another area of conservatism has been embrace of open textbooks as interim solution. What could we do in the near term to encourage this movement?

Okediji: Scale is an issue—if only 5-10 schools are involved, then other schools are nervous about being early adopters.
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The Next Great Copyright Act Conference, exceptions and limitations

Posted on April 4, 2014 by rtushnet

Exception & Limitation Reforms

Moderator: Andrew Gass, Latham & Watkins

Jessica Litman, University of Michigan Law School

Saying that the most important reason for copyright is to encourage readers etc. to experience works of authorship might suggest that readers etc. have interests the law should pay attention to, and that’s controversial, though it shouldn’t be. Owners have concluded that attention to readers would limit their rights.  Thus we’ve heard “there are no users’ rights under copyright law” and “fair use is a privilege, not a right.”   But cyberradicals didn’t invent the concept that the public—readers, listeners, viewers—has interests that are sometimes more important than those of authors; appears in almost every SCt case in the 20th century and throughout the legislative history. Why is it suddenly scary?

Evolution of digital networks/markets has been very fast; looks like scary machine for disseminating millions of copies. Also, conviction not grounded in law or history that © owners ought to control all uses of their works.  Some owners have gotten used to arguing that it ought to be true. Copyfetish: any appearance of any part of work anywhere is a copy that needs a license or excuse, whether or not anyone will ever see the copy, whether it’s incidental to lawful use, etc. This inspired Authors Guild to sue HathiTrust over copies that no one will ever see. Copyright owners have been losing lawsuits they wouldn’t have brought if they didn’t feel obliged to protect themselves from all unlicensed copies—devotion to the RAM copy.  Litman thinks the 9thCircuit just made a mistake, but if we cling to the idea that RAM copies are always actionable, then playing a DVD, reading an ebook, using an MP3 player are all actionable reproductions. That would be major incursion on interests of readers, listeners, etc. who have counted on freedom to use works they purchase or license.

Another fetish: describing HathiTrust decision as “Plessy v. Ferguson.”  No one sees these copies; no one reads them; they are instead indexed and used to perform sophisticated analysis and attach metadata. They can be searched and users can find that a word is in a book, but can’t see a snippet of text.  They can generate readable copies for print impaired readers, which is expressly permitted. The only objection is dignitary: that the library has a whole bunch of copies it didn’t license.  Copyfetish means that when I say you have to consider the interests of readers, listeners and viewers, some in the room stop listening.

Legislation happens when lawyers for institutions get together and find a compromise they can live with.  Until now, readers have not gotten a seat at the table, and even NGOs representing them are banished to the children’s table.  Explains CONTU and section 108 study group.  So we can predict short shrift for readers’ rights, which should worry all of us. Every one of us who writes, makes movies, etc. wants to convey our works to audiences so they can enjoy them, interact with them, learn from them. Copyright works because it encourages authors to create and audiences to read, listen to, etc. those works.  Now for some the primary goal is to get paid, and allocation problems are real (see last panel), but that isn’t the problem of readers.

We should value imaginative readers as we value imaginative authors. If there is to be expansion, there should also be statutory readers’ rights.  Pretty modest list (unless you’re a copyfetishist). Someone who lawfully owns or lawfully accesses a work should be entitled to make incidental uses: copies, adapt to her needs, entitled to extract & use any material not protected by copyright, even if doing so means making a copy or defeating tech protections; she should be able to time-shift; loan, sell, give away; encouraged to respond to it and share her response with others; should have expectation that intellectual privacy would be respected. These aren’t radical. These were completely lawful before wide deployment of networked digital technology. Links of networks don’t change essence of reading, and engagement with works is as crucial today as it was 40 years ago.

We see impulse to control/suppress reader creativity motivated by panic about online piracy, but creative reader reaction isn’t what causes piracy and usually redounds to © owner’s bottom line’s benefit. More importantly, it’s good for the creative system.

Proposals to subject reading, listening, watching to tight control will not discourage people from stealing access to works they’re unable to buy. Instead they’re more likely to discourage them from buying access to works they’d otherwise be eager to see. Even if © owners came up with a perfect tech, if controls interfered with reading, listening, and viewing, it would harm half of the system.  When talk of reader’s rights discomfits authors it’s because the sense is that compensation is already shockingly inadequate, and reader’s rights might shave off more of the teeny tiny share of money that goes to creators from the sloshing pile of money. But that’s the fault of the architecture, and hamstringing readers won’t put any money in authors’ pockets.  Congress has repeatedly tweaked © law to enhance owners’ control over works, and none of those tweaks put more money in authors’ pockets.  If the point is to help authors, ratcheting up owner control yet again is unlikely to get the job done: instead restructure system to make getting money to authors a higher priority.

Aaron Perzanowski, Case Western Reserve School of Law

The idea that you own the stuff you buy from online retailers was deemed an extreme digital view.  Here to defend that idea. If you accept property rights framework, must accept that creators are not the only ones with ownership interests at stake: users own the copies of books and albums they have. The Q is which rights deriving from ownership will survive transition to digital marketplace. Analog world drew line using exhaustion. Exhaustion is not an unfortunate loophole exploited by scofflaw competitors and rogue librarians. It’s a fundamental component of ©’s balance between copyright owners and consumers. Exhaustion allows copyright owner to set initial price.  Rightsowner receives reasonable return for that particular copy.

Incentives for consumers: by making sure consumers have property rights in their purchases, encourages them to participate in the market in the first place. © asks consumers to pay supracompetitive prices for works available for free everywhere. How to convince them? Statutory damages are sticks; exhaustion is a carrot.

§109 makes digital first sale very hard now. ReDigi court is fixated on reproduction v. distribution; digital transfers demand reproduction, so §109 can’t make sense of digital first sale. Copy ownership is the trigger, but ownership isn’t defined in the Act and courts aren’t giving much clarity. 9thCircuit: decides based on unilateral statements in license agreements; also sometimes 9th Circuit does opposite and looks at economic realities of transaction.

What does digital exhaustion look like?  (1) Detailed list of exceptions spelling out rights reserved for consumers and rights for copyright owners. Would not let 15 people read the “same” copy of a book as long as they weren’t all reading at once.  (2) Look at what’s really going on. Should think about how transaction is characterized to consumer, not in 15,000 word terms of use but if they’re clicking on a button that says “buy.”  Digital exhaustion is both workable and wise; real extremism would be elimination of consumer property rights.

Jane Ginsburg, Columbia Law School

Not a copyfetishist, but fair use has run amock.  Two fateful and related developments in the doctrine of fair use: First, its expansion from its historical role of encouraging creation of new works by providing follow-on authors the breathing space to write commentaries, analyses, parodies, and so forth without being infringing derivative works. Played that role even before Folsom v. Marsh in the doctrine of fair abridgement. Sony consecrated fair use in new forms of dissemination/technological fair use, with complete copies of existing works without transforming those works into new works, for largely the same purpose of enjoying the work.  Second: the transformation of “transformative” use, coined by Judge Leval.  Transformed to transformative “purpose,” allowing complete copies of the same work, for supposedly different purpose but it seems that often means new business models. Transformative use has a stampeding effect, as Barton Beebe says, on the four factor analysis. If a court finds a use transformative, well, we never cared about factor two anyway. The third factor might be thought to mean “not the whole work” but we got over that in Sony. Factor four repeats factor one: a transformative use is likely to be in a transformative market and thus doesn’t negatively affect the market for the copyright owner’s work.

Wonderful and publicly beneficial use = must be fair use! She thinks that’s the bottom line in HathiTrust and Google Books, whether or not one thinks it’s a good outcome.

We get there because fair use is an on/off switch, all or nothing.  Proposes a middle route. (I remember when it was copyright restrictionists who wanted a fair use payant (like the domaine public payant), to allow more uses to be free of copyright owners’ veto power.  It’s a sign of the change that Ginsburg is talking about that it’s now a rearguard proposal by expansionists.)   Some, like libraries, should get, if not a free pass, a heavily discounted rate; proper source for that subsidy might be the author/copyright owner.  With market failure where use would otherwise be foregone there could be fair use, but it’s not the same normative justification as for new works or for subsidization; logically, if a market develops it should no longer be a free pass.  

Even with a totally functioning license market, we might still think that some people should be subsidized.  She doesn’t agree w/the case, but it’s an example: Georgia State litigation over e-reserves.  Georgia State court made up a 10% fair use quantum.  Above that, judge made up a rule: license it or lose it. If they offered a reasonable license, no fair use; if not, fair use.  10% off the top is the straight subsidy and license it or lose it was the rest—she wants to put that in broader context.

US is outlier in having capacious fair use that doesn’t compensate copyright owners at all for redistributive uses (she is not proposing to reform new creative uses cases—those have problems but they are problems we’ve had forever).  By and large, the rest of the world, with respect to the social subsidy uses, has: license or lose solutions; license or gov’t compulsory license; extended collective licensing; new French law on unavailable books supposed to foster mass digitization. If a book published before 2000 is not in commerce, and if the publisher doesn’t object, a gov’t society administers licenses for digitization and distribution, society composed half of authors and half of publishers; half the money goes to authors. Countries with intermediate solutions pay the authors for the uses.  Recognizes that a number of differences b/t US and EU exist, including antitrust, scope of collecting societies, and our all-purpose fair use doctrine, but still instructive.

What is to be done? We have compulsory licenses and bargaining in their shadow.  Should we have more? Reading §119 is a good answer to that question.  But license it or lose it has a certain appeal. The problem is that it has to be convenient and reasonable according to Georgia State—who is to decide? Will every court be a rate court?  So she’s working through a proposal for a form of “last best offer” arbitration before CRB.  Owning parties and using parties, who might be represented by bargaining agent, would come in, each with last best offer, and CRB then picks one. There are huge details to be worked out.  If we did something like this it should have a five-year sunset, because compulsory license is a problem because they just stick around. Market licensing mechanisms should be encouraged, and sunset would encourage that.

Alfred Yen; Boston College Law School

The problem of costless overreaching. Copyright concepts are ambiguous.  One can also be big about rights one claims; this goes both ways (people post things they don’t own); people send invalid takedowns or claim rights they don’t have.  Amendments to the Copyright Act over past decades have been explicitly designed to fight the aggressive copyright user.

As casebook author, my publisher wants everything cleared, including exhibits in federal court decisions. We dutifully cleared everything: including with Rogers in Koons v. Rogers.  Once this happens, we have copyright creep; the practice becomes more audacious about what ought to be licensed—Jim Gibson, Jason Mazzone, etc. have documented this. We should recognize that people who aren’t infringing are exercising free speech and we shouldn’t accept interference with that as a fait accompli.

Two ideas: Someone who is trying to silence a critic v. expedient overreachers who do it because it’s costless.  Attorneys’ fees provisions aren’t enough because so few people ever fight back. There should be costs.  Suit for bad faith. Bad faith insurance claims have caused insurers to be a little less greedy. Like §512(f) but broader.  Should be able to elect treble damages, statutory damages, or punitive damages. Should be enforceable by declaratory relief.  To establish bad faith, the would-be defendant has to explain to the © why the claim is bogus. The owner can choose to insist or withdraw the claim.  Someone who declines to respect an assertion of fair use could potentially face a bad faith claim.

Would also like to embellish effect of a putback notice: create 6 month statute of limitations. If you don’t file a suit against a putback, you should very quickly lose your right to sue.  You know about the infringement; could put up or shut up.

Gass: for Perzanowski: if users value ownership, why won’t a market emerge?

Perzanowski: Apple and Amazon seem to be looking at that; this might be a reasonable compromise in some respects, but there are still reasons to worry.  Licensed resale markets within particular ecosystems lead to worries about platform lock-in. Also doesn’t take care of transaction cost/information cost problem. Uniformity emerging from legal process has value.

Litman: waiting for licensed market has big problems, losses, while waiting for markets to arise. Barriers are less about tech and more about business.

Ginsburg: unless you think we need an entire world of ratesetting because we think that authors/owners ought to make only so much (the content of the so much is unclear), she thinks we should leave it to the market. Her proposal is a stopgap for when the market hasn’t formed (but we think it should).

Q: what about we do about people who want to resell but keep their copies?

Perzanowski: we’ve never asked people to prove they haven’t made copies before they resell their copy at a used bookstore (or before they resell their used CDs).  So this isn’t new, but there are possible solutions, with technological measures.

Q: prior notice of intended fair use sounds reasonable when you’re doing it, but I worry about a trolling problem.

Yen: like lawyers run around setting up insurance companies for bad faith claims?  Although I’m not entirely enamored of insurance practice, on the whole it’s a good thing. When people say they’ll be trolled, it’s easy to protect yourself: if it’s a reasonable use proposed, don’t object.

Ginsburg: a way of trying to compensate artists is the resale right; that’s for the physical object, but it’s a similar theory that the artist ought to get a percentage of resale, though not any continuing control. This is the subject of a directive in the EU. It was in California, but now preempted. Doesn’t think there’s much prospect of it at the federal level but the impetus was the feeling that artists weren’t enjoying the increased value of their works, while copyright gave rewards to other kinds of authors who got royalties. Don’t confuse author’s right with copyright.  Based on the physical object, and copyright isn’t.

Peter Jaszi: another form of costless overreach: over the top C&D letters. May be based on nominally plausible claim but asserts statistically impossible damages claims.  Any remedy for that?

Yen: you need some savviness on the part of the recipient, which is why I want to educate people. 

Q: §108 study group—recommended preservation exception for qualifying libraries, because there should be speed bumps/obligations to protect and manage content, even though digitization is wonderful. Thoughts about responsibilities for digitizing organizations?

Litman: the preservation problems posed by digital media are very serious, b/c digital media degrade much faster than books. Seems a good thing for libraries and archives to be more aggressive in preservation than a narrow reading of §108 would support. The difficulties of updating §108 has forced many to rely on fair use to carry out their mission of making sure copies endure.
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The Next Great Copyright Act Conference, music

Posted on April 3, 2014 by rtushnet

Music Industry Specific Reforms

Moderator: Lydia Loren, Lewis & Clark Law School

Rube Goldberg-like design of rules, antitrust degrees, licenses, etc.: reform is hardest to contemplate, but most desperately needed.  So we need some ideas.

Gary Greenstein, Wilson Sonsini Goodrich & Rosati

What do music people want? Artists complain they aren’t collecting enough; not getting enough from labels. Labels are concerned with illegal alternatives, fair rates. Publishers/songwriters: losing mechanical royalties, as physical and digital downloads peak; too little money vis a vis the record labels; reform of the consent decrees. Services: too complicated/takes too long to get a license; if you get it wrong damages can be crushing.  Proposal for reform: creation of a unitary music license.  Digital services use music; they don’t care about musical work/sound recording; public performance/reproduction/communication to the public. They want to build a product. If you create a unitary license you could mandate a split to individual creators, or better yet copyright owners decide how to allocate the pool of money—cable and satellite compulsory licenses, where money is paid in and then different interest groups decide about allocation.  Universal Publishing and Universal Music could decide their own split, rather than fighting about “parity” (which doesn’t make sense based on the costs and risks in sound recordings); services wouldn’t have to get in between in that fight. Make it easier to reach the consumer, who’s often forgotten.

Other alternatives: reform §115’s mechanical license—for distribution to the public primarily for personal use.  You have to give advance notice to the copyright owner, but you may not know who they are.  Unitary license could solve that problem.  Another: expand §114 statutory license to include interactive services like Spotify, Rhapsody.  3 primary labels control vast majority of catalog that gets paid; there are MFN provisions. The economics of those deals are widely known: percentage of revenue per subscriber. High degree of certainty in industry now: make it statutory, so that industries can predict and won’t get socked with higher fees that won’t get passed to artists anyway.  Ephemeral statutory license: conditions on the license include destroying server copies every 6 months. If there is a worse provision in the Copyright Act he doesn’t know. It’s wasteful, environmentally destructive, and nobody is actually complying with it—could mean willful infringement.

SoundExchange is now collecting 100s of millions in royalties, potentially up to $1 billion. No gov’t oversight, self-perpetuating board. There should be mandatory transparency on how they handle money and resolve disputes. There should be reports to Congress and greater disclosures. They’re still using an outdated annual report. With all this money and people complaining it’s not going to creators, you want to have that information.

Zahavah Levine, Google Inc.

More incremental short-term suggestions. Right now there’s no transparency about who owns what; hard to license 100s of millions of works. Agents that represent groups can’t tell us accurately or reliably what songs they represent which makes it hard to value their licenses.  If you can’t find the owner, the compulsory license is broken. Untenable choice: don’t include works, which isn’t good for users and no one gets paid; or include the work with best intentions and try to pay, but nonetheless be exposed to crushing liability. Reduce fragmentation of licensing landscape. Combining all the different rights into one would have fantastic effect of making her job obsolete, but probably unlikely any time soon.  But incremental steps to break down fragmentation: complexity is not so much on the sound recording side, where labels have pretty much all the rights whether it’s streaming or downloads.

Publishing is much more complex for historical reasons. Reproduction, distribution, and synchronization are all different. In the old world, it was not as big a problem because it was more either/or. Europe has done an agency that manages both performance and reproduction rights together—one-stop shopping for musical works. We could do the same. Right now public performance is by consent decree, and reproduction is done by ratesetting at CRB; we would need to figure out reasonable nondiscriminatory terms, and comprehensive public database for transparency/valuation. Plus we’d need some protection/safe harbor for a service that does use the public system and escrowing funds for works that weren’t identifiable.

Steve Marks, RIAA

Would like to reduce friction/inefficiencies for everyone in the market, to leave more money left over for everyone. We agree that music publishing is something to focus on, because no one is happy: songwriters, publishing companies, record labels, and services. Everyone thinks it’s broken because it was built over years for other marketplaces. Inefficient, complicated, balkanized. Because of the way §115 works now, you could need up to 215 licenses for an album—you have to license work by work, and you have to license for every use; if you have a music video that’s not covered by the album license; then there’s many owners for each works, so you might need license from each of 10 people who own a share, which is very common in certain genres.  Arduous process just to get it out the door. Now multiply by services looking for millions of compositions.

Brian Zisk, Future of Music Coalition

Interests of authors are intertwined with interests of public. Immediate effect is fair return, but ultimate goal is to stimulate creativity for the general public good. In the vast majority of major label contracts: royalties are reduced for broken goods, because the album might break, still being taken on digital goods; new media deductions are still being taken on CDs. If a digital download lacks characteristics of sale, such as resale right, it should be treated as license, so artists are compensated at the higher license rate. Controlled composition clauses: labels insist that songwriters are paid 75% of minimum statutory right, and cap on number of tracks per CD. It’s as if industry has agreed to pay 75% of minimum wage, and also cap despite making you work more hours than we pay for. These are silly provisions. Money retrieved through litigation should come to the artists.  This practice carried over from record clubs (big advance, small payment to artists). 

Other incentives that labels and copyright aggregators should have: fiduciary duty to account properly to artists. The royalty statements are unintelligible, lack sufficient info (e.g. “sample”).  Royalty statements should be signed under penalty of perjury, which is what we ask of digital services.  When there’s a negotiation to put out an album, it shouldn’t be forced on the artist to agree that it is a work for hire, where the album was created before the contract was entered into. Reversion/termination of transfer should be less complex, with clear right to recapture instructions. Bad faith objections to termination should be sanctioned. Artists are filing, but know they’re facing a fight from a well financed opponent.  Better tracking of chain of title, as with Bitcoin; even the labels agree. 

Appropriate fees: 90% to artist, 10% to service.  Should have terrestrial broadcast right too, with same split.

Q: including pre-1972 sound recordings in compulsory licenses: safe harbors too?

Marks: there are complicated questions about federalization and we’re trying to figure out how to do that. We’re in favor of federalizing under the right conditions if term and ownership are dealt with.

Levine: we need parity in rates between internet and terrestrial stations. Right now terrestrial stations pay nothing to labels.  Purely historical/sound recording right was created when digital was in its infancy.  Rates are crazy out of whack; Pandora has a discount and is paying 55% of revenues; 5-15% for cable/satellite; 0 for radio. We need parity for rates, no discrimination against any medium in delivering music services to users. Rate should foster growth of radio services.

Marks: everyone here agrees that terrestrial radio should be paying (interruption: Levine says she wants parity, which could be no one paying; Zisk says he can’t agree; some discussion about payola).  If broadcasters would agree to free market rate for our exclusive rights we’d be all for it. It’s not correct to say that satellite and cable as categories pay under a different rate standard.  (I think we can see how even with some people not at the table, such as terrestrial radio, this is not going to be easy.)  Some services pay other rates; we’re talking about 1000s of services. Every service under the compulsory license except for 3 companies pays willing buyer/willing seller.  This discount for 3 companies should not be the model, but rather the 2000 services that pay willing buyer/willing seller, if we’re going to restrict the exclusive rights of the copyright owner.  Get rid of existing exemption.

Levine: so you’re saying everyone should pay 55% (or more).

Marks: rates have been going down as they monetize.

Greenstein: grandfathering was included when record industry first got a right that was intended to be limited.  Five services in two industries: subscription services and satellite radio.

Marks: the categories specifically state the companies. So it doesn’t allow new entrance.

Greenstein: so rate was established in 2002 by biggest players like AOL and Microsoft. Small Webcaster Settlement Act was the result; Congress granted authority to SoundExchange to enter into alternative arrangements. Second webcaster proceeding in 2007; Greenstein and Marks were on the same side then against Levine, but what happened was a rate standard and then a Congressional intervention with two pieces of legislation.  You’ve got the largest, most efficient radio service—Pandora—is a public company that reports content acquisition fees. They’ve recently gone below 50%, but until Q3 of last year it was over, and at times in the 60% range.  And they’re the most efficient in monetizing, but they’re paying 46% for the sound recordings; they’re paying rates negotiated with SoundExchange under an extraordinary proceeding; and they’re excluded from being used as a comparator in the CRB proceedings. Their rate would equate to roughly half of the supposed willing buyer willing seller rate, which means that 92% would go to labels.  Now you see the problem of “parity” with the publishers.  184% of revenues to rightsowners isn’t a sustainable business model.

When we talk about efficiency, the record labels want publishers to be subject to regime where they give up all their rights and the labels are the gatekeepers. If you’ve ever seen a record label agreement, that’s not frictionless, and that’s not an agreement in which artists get paid, not even pursuant to their contracts.  Label licenses iTunes, but doesn’t pay as if it’s licensed.  All of a sudden it’s a sale with a low royalty rate. The structure of the industry is broken. There’s 100s of millions getting paid in, but not going out; that’s why people attack Pandora, Spotify, and YT; it’s not that they’re unwilling to pay, but they’re being held up and there’s too much friction.

Marks: Every industry has some contractual disputes.  Argument by anecdote. 

Zisk: It’s an anecdote about a standard contract clause.

Marks: record labels pay more than 25% of revenues as royalties to artists.  (Zisk disagrees.) Costs for artist royalties have risen by almost 40% over past ten years. Myth of advances not getting paid is simply not true.  Better for us to focus on something like streaming.  Clearly a transition to streaming services.  Consumers are now viewing them as attractive. Artists withholding them repertoire makes services less attractive, and consumers go elsewhere for free; YT pays much less than Spotify. Need to come together to offer consumers the services they want.

Levine: music industry alone has gotten more than $1 billion from YT in past few years.

Q from Chris Sprigman: deals with distributors are most effective antipiracy campaigns.  Why wouldn’t your strategy be growth now, extract later.

Marks: not saying they’re extracting now.

Zisk: equity in Spotify pays off later.  When the labels cash out, the money isn’t going to go to artists. (Marks says don’t assume that; Zisk says he will because it’s not in the contract.) Beatz and Spotify are creatures of the labels.

Marks: we absolutely want to grow the market. But they aren’t scaled yet. 6 million subscribers in the US; Netflix has over 40 million. Once those services scale, and hopefully that’s quick, through distribution and bundling deals, debates over fractions of pennies should fall by the wayside.

Greenstein: If you’re paying out 70% of revenue because of per-subscriber minimums, marketing is harder to fund.  A $5 package bundled with every cellphone would make you more money, but the labels still want to hold on to the revenue stream from CDs.  Industry is grabbing for digital and afraid to let go of physical. Crushing advances prevent investment; don’t be surprised if more services fail. Yahoo! and AOL left the streaming business. 

Marks: but they’ve got a lot of funding. (Levine: Have they turned a profit?) Well, it takes time to earn a profit.

Peter Menell: the irony here is that the most important potential marketer isn’t here. Artists aren’t plugging these services.  They all agree that these services aren’t really designed for them, or to encourage the next generation of artists. Consumers join the services for convenience. Marketing idea: could we come up with deals like Eminem’s 50/50 split of digital? The costs of delivery are so minimal; labels wouldn’t have to solve the marketing problem because artists would tell consumers to join.  Maybe you take a little less now, but there’ll be a lot more later if everyone joins.

Marks: a handful of artists don’t support the services; many others do support the services and disagree.

Levine: we agree.  There are vocal holdouts, but that’s largely from lack of scale.

Marks: artist marketing would be great, though that hasn’t been part of their day to day experience.

Zisk: artists promote Bandcamp because they believe they’ll get paid, and they do get paid.

Marks: bands didn’t do commercials for their albums back in the day.  (Hunh?)  Would love for that to happen, but would be fairly remarkable change.
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The Next Great Copyright Act Conference, part 3

Posted on April 3, 2014 by rtushnet

Secondary Liability and Safe Harbors

Moderator: Andrew Bridges, Fenwick & West LLP

Shira Perlmutter, USPTO

§512 was intensively negotiated and complex; intended to be a very careful balancing act, so carefully balanced that the participants would’ve told you that every small twig was important to the entire edifice.  Protection against monetary remedies for those ISPs who acted responsibly.  Initially controversial, but did begin to function as alternative to litigation, and over the years exported widely as a model, including to the European Union, Japan, and China, and others primarily in Asia. 15 years later, strains inevitably began to appear (RT: which is of course why they called it the Digital Millennium Copyright Act) as flaws from real life application and technological evolution occurred.  Target in 1998 was websites hosting infringing content, but now we have P2P, cloud services/cyberlockers, and streaming services (some licensed and others not). The four covered activities still broadly cover ISP activities—transmitting, hosting, caching, and search. But the big question is whether the law is still fit for purpose.

Many issues have been or still are playing out in the courts. Among the questions: who qualifies as ISP?  How do safe harbors relate to inducement liability after Grokster?  What’s the meaning of red flag knowledge?  Settlement of Viacom v. Google makes that more elusive.  What kind of financial benefit is relevant? What are appropriate repeat infringer policies? What’s the scope of the subpoena process laid out in §512? 

What isn’t covered today and needs attention? What needs fixing in § 512? Those are the basic debates. Some things people complain about: P2P, though may be lessening in importance.  Addressed in voluntary copyright alert system.  Other area pointed to (RT: by whom?): foreign sites dedicated to infringement, SOPA/PIPA, spectacular failure.  Also some voluntary initiatives using the “follow the money” approach with advertisers and payment providers.

Operation of notice and takedown: 3 main issues.  (1) Inefficiencies in the system, including huge volume of notices, and phenomenon of rapid reappearance of content taken down.  (2) Misuse of notices for fair use, political campaigns, copyright trolls.  (3) Special difficulties for individuals and small and medium sized enterprises, whether rightholders or ISPs.

Initiatives on Capitol Hill: copyright review sparked by Pallante’s speech. Dep’t of Commerce Internet Policy Task Force—Green Paper.  All sectors perceived problems with the notice and takedown system, though some entities within each sector were ok.  Some entities wanted to see legislative change, but most of them strongly opposed reopening the statute. Given the nature of the problems identified and given problems of moving copyright legislation forward, especially in the online enforcement area (that is the most beautiful euphemism of the day), we decided to move forward with stakeholder talks to improve the situation.  Judiciary Committee held a hearing; similar concerns to what we heard were expressed, but House members were very interested in seeing what Commerce approach could accomplish on a voluntary basis before considering legislation.

Initial meeting of multistakeholder forum on notice and takedown has occurred—archived if you want to listen.  Clear messages to group: the topic before us was not legislative change, but improvement within context of current law. True multistakeholder driven process, not decided by USPTO. Inclusiveness and transparency are key goals. We want to see an outcome by the end of the year—best practices, memorandum of understanding. Success is (1) establishing a constructive process that enables real discussion among stakeholders and (2) making some improvement.  Initial meeting was setting agenda: consensus on a way forward.  Periodic public meetings every 6 weeks, alternating between DC and California.  Looking first at standardization of notices, delivery, and processing.  Next meeting, May 8. Focus on challenge of small/medium size enterprises; will establish a smaller working group involving self-selected representatives of different constituencies, looking for people with practical/technical operational expertise. Chatham House rules: no identification of who said what, but outcome publicly reported. Larger group will be empowered to take decisions. Nothing will be decided until everything is decided.

Mitch Singer, UltraViolet (I’m sure Singer’s an excellent lawyer, but I can’t see the name of his institution without also seeing red at my horrible Veronica Mars experience, in which the promised digital download on opening day turned out to be, after I finally, finally reached the overloaded website, a digital stream locked to the UV platform, which then didn’t work despite multiple tries.  I ended up with a refund and an increased contempt for anticircumvention measures that interfere more with legitimate, paid consumption than with people who want stuff for free.)

People who believe copyright bars innovation see it differently than the rightsholder who says copyright is a property right; all these views are legitimate. §512 struck a balance.  Disruption: new tech, new court cases. 

Paramount has sent out 75 million takedown notices in the last month; add up all the notices and ask whether it’s really impacted illegal hosting sites’ ability to deliver infringing content.  Notices are inefficient and insufficient.  Even in whack a mole sometimes there’s no mole, but in cyberlockers and P2P, content is often uploaded faster than we can send notices.  The question is: is this really working?  While it may be working here, it isn’t working in int’l territories that lack enforcement mechanisms.  EU doesn’t required actual knowledge.  Instead, reasonableness: ISP/cloud service is in the best position to protect against infringement, and reasonable measures are required. Much more flexible (for whom?) and tech neutral (for whom?) and makes a lot more sense given today’s filtering tech. Content ID: YT puts content in its database and stops uploads. That’s lots better than notice and takedown. It places some burden on a locker, but is much more efficient/less costly.

ECJ confirmed that blocking infringing sites is a balanced approach to protect consumers’ fundamental rights. Probably you don’t think that’s right for the US (SOPA/PIPA), even if the ISP isn’t perfect, if it seriously discourages access to illegal websites it’s the right balance.  Rightsholders like that, recognizes that ISP is in best position to stop the infringement (how do you know what’s infringing?); doesn’t allow ISP to turn a blind eye. 

Until 2012, we had difficulty getting red flag acknowledgement—courts shut the door with Perfect 10, YouTube, and Veoh.  Post-2012, he’s encouraged that the pendulum is swinging: MP3Tunes jury found that Michael Robertson was liable for copyright infringement, because he turned a blind eye to piracy—red flag knowledge. That changed the way we think about level of proof we need. Two other cases: Hotfile and Isohunt—focused on red flag knowledge. Maybe things are shifting. Even in Grokster Court had to reach to patent inducement to find liability against a bad actor.

What should we do in the digital age?  (Insert repeat snark about DMCA.)  If we knew then what we knew now about filtering, would we have required filtering?  Are we going to look at the EU approach and put a heavier burden on ISPs? Are we going to recognize that they’re in the best position to stop infringement? Are we going to require filtering like they do on iTunes and other UGC sites? Are we are going to look at blocking infringing sites?  What are we going to do about foreign infringement? What are we going to do about digital first sale?  Digital rights portability? 

If he had to guess about opening up safe harbors, it will sway in favor of rightsholders because of tech advantages today not present in 1998 (RT: if you have enough money/design capacity/don’t worry about infringing someone else’s filtering patent/etc.).

Michael Carroll, American University, Washington College of Law

Legal aesthetician in him would address: (1) identify theory of liability from which you’re given safe harbor protection; (2) verbs don’t align with exclusive rights—9th Circuit needed 5 pages to explain what rights “storage at the direction of the user” came up with. §512 hallmarks of last-minute legislative deal, but courts are accustomed to providing interpretation to that. What’s the proper allocation of jobs between Congress, courts, and Copyright Office?

Any revisiting could be worse than what we have; private dealmaking going on now may make revisions unneeded.  (They’re never going to stop complaining about foreign sites, though.)

“If we knew then what we know now, we’d do it differently.” Well, maybe, but Congress in the 1990s was all about highly detailed industry specific enforcement. How’s AHRA working for you now?  That’s what legislation often does. The courts felt the need to expand theories of indirect liability, such as in Napster. Control and supervision theory once based on respondeat superior expanded so that any terms of use might trigger it; plus aggregation of users with no business model could trigger the financial benefit concept.  People from 1998 still bear scars of the fight.

Theory of the framework, which was wrong: The deal was: we need to make the internet safe for content.  Rightsowners will sit on their content, won’t make it available digitally, unless/until internet is rendered safe. We’ll lock down the internet/have notice and takedown for leaks. But that’s the wrong measure of success. Do we see the progress of science & useful arts?  Do we see people creating and people distributing? That should be the measure of whether safe harbors are working.  And from that perspective the deal is working out pretty well.

Who knew in the 1990s? It depended on where you looked. §512(c) did in fact have the digital landlord in mind. But the idea that UGC business models weren’t contemplated comes from people who weren’t paying attention. GeoCities was on the radar, and GeoCities was YouTube: we give you space, we give you a template, and we run ads on your website. That’s YouTube. Litman’s Digital Copyright has more on the deal.

We just heard about takedowns being ineffective. Ex parte relief plus DRM was supposed to make content safe; Paramount can’t keep its movies offline. We can stipulate that’s true. But what we need to know is whether a legislative fix is needed. 75 million takedown notices: is that inefficient?  Prima facie too big an amount?  We now have robots sending notices and robots automatically taking content down. And we’ve heard the story of disproportionate effects on small authors.

Response: we’re in early days. (I’d also say that 75 million ought to be compared to the number of links Google indexes.)  Also we hear that takedowns are unfair because Google is making too much money. But: Would you have gotten Content ID if Congress had drafted the requirement for what Content ID should look like? He submits that you would not.

Others say: Maybe we should have a sunrise period for owners to inspect content before it goes online. Or maybe we should require filters. These are the sort of proposals. Or some sort of burden shifting on staydown/generalized notice. This shifts balance in favor of rightsholders and not public interest. We are seeing an explosion of creativity, even if certain highly capitalized business models are unable to adapt; progress is not under threat and there’s no reason to reopen this particular deal especially given the kind of institution that Congress is.

Real problem: failure to license. If more Paramount movies were on Netflix, they’d be sending fewer takedown notices. (I note he said nothing about more Paramount movies on UltraViolet.)  Netflix is not “unsafe,” but they can’t agree on the price of content on demand. Consumers are Roger Daltrey: “I want it.” Rightsholders are Pete Townsend: “You can’t have it.” Consumers should and ultimately will prevail.

Are we getting enough creativity?  Look at Frozen. We are getting smash hits; we are getting big investments.

What of small producers who find their works on YouTube? That’s a problem. Next YouTube startup is also a small producer, and shift in §512 penalizes them.  Small/independent authors are put up in the legislative conversation but they’re not the real drivers of reform. They’re better off with the battle of the titans, which will lead to a licensing scheme they can use too. 

If we did do something, we should address abusive takedown notices, giving users right to use lawful use/fair use flag constituting preemptive counternotice, requiring direct suit against the uploader and preventing suit against the ISP.  Not everyone will use, but will have powerful educational effect.

Brianna Schofield, UC Berkeley School of Law, Samuelson Law, Technology & Public Policy Clinic

Need for further research: difficult to know how §512 should change, if at all, if we don’t know how it’s actually working.  Takedownproject.org: go to our website.  A lot of hidden decisions on both sides: senders and recipients. Recent and growing automation has led to vast amounts of data.  We’ve begun collecting and coding.  Coding whether the notice requirements are met; who’s the owner; how many links per notice; how the allegedly infringing work is identified. Designed to tease out answers about validity, whether it’s targeting something that’s not a copyright claim but might be something else, like a privacy claim. Transparency has been an uphill battle; ISPs have been hesitant despite confidentiality promises because of fear of scorched earth litigation. Rights enforcement agencies sometimes use transparency as a portfolio of their work.

We have been asking ISPs about form notices. Some say this leads to a significant decrease in notices, while others say dramatic increase. Overall, form notices do seem to lead to greater compliance with statutory requirements, but not clear if that relates to underlying validity of claim.

Notice and staydown: Not practically/financially feasible for many ISPs.  Content ID took hundreds of engineers and $60 million to build; not all ISPs can afford that. Competitive disadvantage; effectively lock out new and innovative services. Filtering doesn’t account for things like fair use, licensed use, etc.

What about abusive notices?  Notices are used to target competitors’ content, critical speech, claims masquerading as copyright but really about TM or privacy. The counternotice provisions are ineffective.  Even problematic notices: the safest thing for an ISP to do is comply. Once they do that, they notify the users, but that’s super intimidating, especially for those who wish to engage in anonymous speech. Insufficient legal disincentives for senders. §512(f) is expensive, timeconsuming, with little prospect of damages.

ISPs still maintain that §512 is vital: woven into how the internet functions.  Reform must not disrupt benefits of system.

Bridges: from the trenches, the safe harbor is not safe once you get into litigation.  It’s great when the system works.  Perlmutter says designed as alternative to litigation; but if one has to litigate the safe harbor, life is hell. Even though you should advise an ISP to do it as the first thing, it should be the last thing litigated, because defending against every theory of copyright infringement is too hard. D can win sj by winning three issues: direct (no volition); contributory (no intent); right and ability to control (vicarious). If you win those you win the case without safe harbor. If you litigate the DMCA you have to win on eight issues, which is a ton more expensive. Many of the biggest cases have taken an extraordinary financial toll on defendants—Google is rumored to have spent over $100 million defending itself.  Veoh: the company that did it all right, complying with DMCA and signing voluntary MOU on UGC principles. The idea was a peace treaty. But Veoh got sued, and it won a significant flat-out victory on the DMCA, and went bankrupt winning the case despite starting with a lot of money.  If you talk about a voluntary system in which “stakeholders” agree, how will that protect anyone from expensive litigation by aggressive copyright owners?

Perlmutter: she doesn’t know much about Veoh and won’t express an opinion on the outcome, but voluntary agreements aren’t intended to be a shield against litigation, though if they can be that’s great.  (So what are they for?  Staving off legislation?) Only legislation is a shield, and even then there’s no guarantee, because there won’t be clear bright lines because it will always be a balance.  Best practices approach: meant to be a model. Courts might look at that, but no one will be bound. Or binding agreement between particular entities, such as the Copyright Alert System, which could include promises not to sue each other if there’s compliance.  Green Paper: stakeholders will decide what type of output there will be and whether it will be best practices or binding, but she’d guess it will end up closer to best practices given diversity.

Clarification: we are not in the Green Paper process endorsing a call for standardization, but asking whether it could be beneficial.

Bridges for Singer: you were concerned about actual knowledge as too lenient for ISPs.  Safe harbor comes in only in damages analysis—you’re still entitled to relief. If we take actual knowledge away, what is the remaining underlying standard for contributory infringement, where Sonysaid constructive knowledge wasn’t enough? Should Sony be overruled?  (Grokster may have changed the standard from knowledge to intent, but assuming knowledge is still in play, then what?)

Singer: He doesn’t know. He’s not making a particular proposal. There’s something broken with notice and takedown, and there’s a better way (that he doesn’t know). Not sympathetic when someone knows that the majority of content posted will be illegal and then says they have no obligation other than to respond to notices.  Can’t go into detail about requisite knowledge, but at some point when you receive notice after notice for the same movie that’s in theatrical release, there has to be something more. Tech exists to take reasonable measures.  Other panelists think notice is greatest thing in the world (not quite) but there has to be a better way.

Carroll is odd to say that because people are stealing your content and you can’t stop them, you need to change your business model. No one should change a business model because people are stealing their stuff. That’s not the right kind of disruption.  (Well, that depends on the alternatives, is I think the point.)  We wouldn’t get to show films in theaters if we had immediate online distribution.  The response should be “how can we work together to stop trafficking in stolen goods.”

Carroll: his point is descriptive. You can’t stop the internet, whether you like it or not. If you don’t shift the business model, you will get a higher level of unauthorized use than you would in a different model. I’m not telling you to change, I’m telling you about unsatisfied demand.

Bridges: SOPA was called “stop online piracy.” But there have been at least a dozen laws since 1982 whose purpose was to “stop” piracy. What was the metric for “stopping” piracy?  What is the acceptable level without collateral damage to the broader ecosystem of speech?  Microsoft’s goal: it should take more than 20 minutes to find an illegal copy.

Singer: we won’t stop online piracy. His metric is his son, who says he can watch a movie within seconds. That’s not the kind of metric he likes to hear. Difficulty! Accepting notice and takedown isn’t enough. Why not have a filtering standard, and if you filter you get better treatment?  The environment is different for us than for music, because we don’t release movies except in theaters for the first four months. The source of that content online is taken from a movie theater, not from someone’s personal copy. We can make progress just by focusing on that content.
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The Next Great Copyright Act Conference, part 2

Posted on April 3, 2014 by rtushnet

Exclusive Rights and Infringement

Moderator: Kristen McCallion, Fish & Richardson

Gerard Lewis, Comcast

Courts have enshrined various business models—is that a good model going forward?  Public performance: relatively new right. History of figuring out whether communication to the public was a public performance.  Move of radio and then TV from foreground experience to background/pervasive. Change in technological limitations—innovation to improve the experience. Court initially said that cable TV wasn’t a public performance, just an enhancement of the transmission.  Congress acted: framed exclusive right broadly, definition of public performance broadly. Exemption for homestyle receivers in public places was framed very narrowly.  Made a number of assumptions about tech: tech available for private homes would remain distinct from that available to commercial establishments, an assumption no longer as valid now.  Technical and detailed factors—number of receivers, length of wires, money taken in by establishment; contrast to broad definition of exclusive rights.  Result: Fairness in Music Licensing Act, expanding the exemption, nearly 600 words.  Next copyright act: don’t want to count bytes or other technical factors; that doesn’t seem to work.

Predictability and certainty are desirable, but worry about purpose built and specific provisions, such as AHRA model, where tech quickly becomes obsolete and doesn’t provide guidance.

Felix Wu, Cardozo Law School

Judge Chin in Aereo: Courts should resist the temptation to look under the hood.  Aereo feels a lot like a cable system—functionally, is it the equivalent?  A different case: ReDigi: tried to create a market for digital first sale. SDNY said there was no digital first sale, because there was reproduction and not distribution. If you didn’t look under the hood, the result might have been different.   Not obviously a principle that favors owners/nonowners.

So what should we do going forward? Not clear that Congress has led/signalled at all. One key question to answer in the next formulation of exclusive rights: how much will we look under the hood and how much define in functional terms.  (Why not go all the way to making available?)

We need to know the underlying goals of © law to have a functional definition.  So his concept might be access. Reproduction might have been an attempt to mediate access to a work. Counting the number of books printed gave you some idea of how many would have access, though there’s not a pure 1-to-1 correspondence.  But access is now potentially on both sides of the equation, not just incentives v. access.  Consumptive/productive access. Is there a better way to split consumptive from productive uses? Though of course those categories are tied up.

Neil Netanel, UCLA Law School

Conducting empirical study of infringement/substantial similarity cases.  Trying to figure out what the tests are, whether there’s any correlation with outcomes, types of work, identity of parties, etc.  Paul Goldstein said the most important rule is that Disney never loses; wants to test that empirically (now that it has Lucasfilm, it at least inherited a loss or two!).  Do courts filter out unprotectable elements, and how do they define those? For which issues do they rely on expert testimony? How often do defendants admit copying or access? When there’s an exact copy, a prima facie case has been made: defenses will either be ownership, noncopyrightability, or another affirmative defense. Most interesting/troublesome cases involve comprehensive nonliteral similarity (like the recent Disney/Snowman case, which may also provide a data point).  Second Circuit and Ninth Circuit offer the major approaches. 9thCircuit’s extrinsic test seems to cover both “copying in fact” and “wrongful copying,” and then its intrinsic test seems similar to the 2d Circuit’s test.  There are lots of variations on these themes even within the circuit.  Students invariably ask whether the tests make a difference.  We don’t yet know, and that’s why we need a study.

Lots of criticisms of these tests; Pam Samuelson & Mark Lemley prominent among them.  Both argue for some version of inverting the stages, or bringing more objectivity from first stage to second.  Initial results suggests it’s even more a mess than we thought.  Initial survey was developed based in part on Second Circuit’s distinction between copying in fact and wrongful copying, and we asked if courts actually made that distinction, or applied the inverse ratio rule.  We found out in the pilot that our RAs had no idea what we were talking about because even in the 2d Circuit courts often make no distinction whatsoever between copying in fact and wrongful copying; they just talk about “copying” or “unauthorized copying” w/o making it clear whether that meant license or authorized by law, or “protectable expression” without saying how much or what that meant. Redesign: ask RAs to identify statements about what would support a finding of infringement, and then determine which statements go to copying in fact/wrongful copying.

What should be the locus of reform?  Preliminary experience suggests that some clear pronouncement of the test and the relevant factors is needed, whether from Congress or the SCt.

Christopher Sprigman, NYU Law School

To an antitrust lawyer, much about copyright seems odd, including the prima facie structure of a copyright case.  On one end of spectrum, massive commercial infringement—copies of recent blockbuster. At heart of copyright law: consumptive, compete with originals in market, displace demand otherwise satisfied by legitimate work.  At other end: parents post video of toddler dancing to a Prince song—not displacing, not a valid licensing market. Yet copyright law prescribes the same sort of prima facie case for either, despite the different effects on authors/markets.  For an antitrust lawyer, this seems odd.  Antitrust is based on the view that competition is efficient; copyright holds that unrestrained competition among copyists results in market failure. Sprigman has no quarrel with this more pessimistic account of competition in some ways, but different acts pose different risks, and the law should deal with it better.

Antitrust has the same problem and does deal with it better. Some conduct is highly likely to be harmful, like cartels. Exclusive deals may sometimes harm competition, sometimes be irrelevant, and sometimes help competition. Antitrust marks out a category for per se violation of the law: Ps need not prove market power or harm to competition; such harm is conclusively presumed. For all other conduct, antitrust uses a rule of reason. P is required to show market power and likely harm to competition. Makes sense: where we believe that conduct is very likely to do damage and very unlikely to produce benefit, we give P a cause of action that is essentially strict liability. For other conduct, we put P to the proof that the P ought to be in a position to produce.  What’s in the category changes over time—minimum resale price maintenance has been moved into rule of reason.

Contrast with ©, where no P is required to show harm as an element of the prima facie case, even when the conduct seems unlikely to cause harm.  Castle Rock: never showed that they wanted to enter the quiz book market, but court just hypothesized that they could and thus hypothesized harm. 

Could we import this mechanism into the next great copyright act? Yes, we could have a category of per se copyright infringement—current liability structure should be for this category. Everything else should be rule of reason and P should be required to show harm as part of the prima facie case.  He has suggestions, but they are a first cut—copyright litigation should be an engine of learning, which allows Ps to provide evidence about what causes harm (and what doesn’t), so the categories’ content can change over time.

(1)   Only registered works should be in the per se category. Registration is a signal about potential harm.  Registration should produce a bigger difference in treatment.

(2)   In addition, use of work must also be consumptive/likely to displace demand. Thus it must be exact or near exact copy/performance.

Everything else should be rule of reason: derivative works, unregistered works, licensing markets not involving exact copies.  Sprigman’s article on this proposal covers this in more detail.

Q: what about antitrust power of large aggregations of copyrights? ASCAP/BMI consent decrees ended up in pretty workable licensing scheme. Is there any point in looking at major film companies, etc. for something like that?

Sprigman: antitrust consent decrees are example of antitrust’s ability to learn. Price-fixing is possible, but blanket licenses also lower the cost of licensing, which requires ingathering copyrights. Blanket licenses are procompetitive, plus safeguards to prevent abuse. Safety valve: resort to court determination of rate; rules against exclusive licensing.  SESAC is now under antitrust attack from private plaintiffs, and got past the motion to dismiss case because SESAC has struck exclusive deals for what Ps say are must-have categories of music and raised prices substantially. Conduct comes in various forms—antitrust can look at this as copyright hasn’t except a bit in fair use analysis.  Need more because fair use is subject to a chilling effect.

Q: isn’t this too expensive to prove market harm, as in antitrust?

Sprigman: doesn’t think so, but we can learn over time.  Could have various presumptions to help Ps.  Antitrust has a sunny view of markets—tends to see them as resilient to anticompetitive conduct, while copyright doesn’t, and he thinks the empirics suggest copyright is wrong—markets adjust to piracy. May not adjust optimally, but we don’t actually know what the optimum is.

Q: could fair use get us to that world? How would a rule of reason reduce chilling effects more than fair use?

Sprigman: fair use has gotten more capacious relatively more recently. We’re seeing some market harm principles enter through the back door, but that’s not efficient. Channel litigation according to whether market harm can be shown.

Q: format shifting is becoming more relevant—backups, Kindle to hard drive, etc. Is there a way to bring this into formalization?  (Private copying exceptions that plenty of other countries have, maybe?) 

Wu: that’s an example of figuring out what we mean by access. Why would format shifting even be a problem? Because we’re focused on reproduction. If instead we focused on access, that would suggest that format shifting isn’t something we would care too much about.

Glynn Lunney: public performance right used to be against competitors; there used to be natural monopolies, with only one large theater in town, one or two TV stations. How should we structure public performance now that’s not true?

Lewis: transmit clause tries to deal with that, but doesn’t necessarily do it well. Physical natural monopolies are largely past (RT: um, at the content level maybe, not at the Comcast level!).  Cloud services—can rent space on Amazon and be as much of a cloud provider as Netflix or Dropbox.  Wu’s point about looking under the hood: we might not like what we see, or we might need to figure out what counts as a hood.  Need to know the problem we’re trying to solve.

Q: of the various tests for nonliteral infringement, do any adequately address software?

Netanel: Typically in software cases the test is much more abstraction and filtration based.  Merger, etc.

Sprigman: the way they vary it has to do with competition. Filtration is a decision about competition.
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The Next Great Copyright Act Conference, Berkeley: part 1

Posted on April 3, 2014 by rtushnet

Copyright Subject Matter and Formalities

Moderator: Daralyn Durie, Durie Tangri

Tony Reese, UC Irvine Law School

Revising the © Act will require defining the scope of subject matter; not recently controversial but important threshold question—hard to evaluate rights and remedies w/o subject matter. Represents Congress’s decision about which types of authors’ creations need © protection. No major controversies now, as sound recordings were in the 70s, but wants to propose principles for drafting.

How we got here: gradual expansion of © subject matter over time.  1909 approach: “all the writings of an author,” plus a list of classes in which works can be registered—familiar list.  Courts/© Office generally treated the list as comprehensive.  1976: extends © to all “works of authorship,” expressly undefined, but another list of categories included. 1990: added architectural works.

(1)   Statute should expressly enumerate all of the categories of subject matter that Congress intends to protect. Current statute doesn’t do that.  Given the substantial, long-lasting exclusive rights given to anyone who fixes a minimally creative work of authorship, many people might want to claim statutory protection. Recent controversies: yoga poses; artistically planted flowerbeds.  Perfume/fragrance (controversy in Europe); culinary dishes; fireworks displays; typography; digitally recorded smells; golf course design; invented languages; tactile sensory enhancement for books. We should avoid these undefined, open-ended, residual claims. Whether we protect a work with © is a policy question Congress should answer: is protection needed for perfume to encourage sufficient production/dissemination, and do the benefits of protection outweigh the costs? Constitution commits the Q to Congress and is better positioned to answer in general rather than facing one copier and one copied claimant.  Restitutionary impulse of courts fights against the empirical/policy analysis needed for whether protection is generally justified. Congress can also tailor protection if/when necessary. Congress could choose sui generis regime for perfume if something is needed.  (E.g., no derivative work right for perfumes, as the rules differ for sound recordings/architectural works.) Otherwise, © will be binary: if perfume is protected, there is a derivative works right. If perfume is protected, anyone who’s copied w/in the statute of limitations is on the hook; but Congress typically adds subject matter on a forward-looking basis, and can deal better w/timing and retroactivity. Given all this, it’s unsurprising that courts and the © Office have generally declined to take up the statute’s invitation to discover new categories.  1960s: when Office registered computer programs, it did so as books (like how-to books).

(2)   Statute should protect compilations and derivative works only if they fall within one of the enumerated categories; current statute is ambiguous. Consider a zoo: current definition says the collection and assembling of preexisting materials. If it’s original and the collection is stable enough to count as fixed, then a zoo is a compilation even though it’s outside all the enumerated categories. A menu could be protectable; disc of digitally recorded smells.  No clear need to protect such compilations outside the categories; the Act should be clear. The Office so interprets the Act but it should be clearer.

(3)   Statute should define each enumerated category; currently define only 5 of 8, and definitions could help.  Choreographic work: would help know whether yoga, sports routines, bicycle ballet count as choreographic works. Definition of dramatic works might help in Garciawhether an actor’s individual performance counts as a dramatic work.

(4)   Congress shouldn’t just punt by going to the constitutional power. 

Wendy Gordon, Boston University Law School

Subject matter and exclusive rights can be reformulated so each means the other; useful articles are a good example.  Reese’s suggestion about compilations/collective works is great and should be adopted.

Problem: historic division between patent and copyright. Patent’s negative pregnant: things that aren’t patentable/patented but functional—therefore in the public domain, at least as far as in rem exclusive rights are concerned.  This preserves competition/incentive for people to pursue patents for patentable subject matter. Patent wants to secure progress; we don’t want © with its long term and broad scope to get in the way, but there are a lot of beautiful objects that aren’t functional.  So it feels wasteful to deny © to pretty things that aren’t inventive enough to patent.  However sad that fact might be, © isn’t the place for expansive protection, though she has no objection to a narrow sui generis design right (or design patent, which needs improvement but does exist).

Ok, so we have this bifurcation into © and patent subject matter.  Ordinarily, other IP laws defer to patent and its negative pregnant.  But there’s a struggle to keep finding some compromise to allow the aesthetic aspects to be sheltered by some sort of exclusive claim when no real harm to patent would occur.  Baker v. Selden was right to focus not on the intangible itself but the purpose it served.

What are the appropriate subjects of ©?  Educate, enthrall, allow us to dance—none of these belong in patent. When these functions are served, no special scrutiny need apply.  Current statute describes useful article for items whose creativity resides in shape and line: intrinsic utilitarian function not merely to portray appearance/convey information.  This works for visual works, but not for things like dance, music—need a slightly different definition. Drassinower: © is about communication and works that don’t communicate shouldn’t be protected, but CONTU turned its back on that some time ago. Whether or not we adopt © as communication or something more visual and shape oriented, some conception of object- or purpose-limited definitions of subject matter makes sense.

What of a musical tone that releases your phone messages? Vocalization that encodes an encrypted file that is unlocked by voiceprint?  Those are things we wouldn’t want copyright to protect: they are functional.  Visually pleasing pattern of notes made into wallpaper: likewise.

Separability has caused much heartburn, caused not just by inevitable differences in perspective but by awkward drafting of test: whether features can exist independently of utility has very little to do with the policy at issue, which is to keep things that help utilitarian progress stay public domain or governed by patent law. Test should be switched to make that point more clearly. Has statutory amendments to propose.  Copyright in a picture of a object doesn’t extend to any right to control making the object. And rights in the object don’t extend to rights that would impair the public’s ability to copy the utilitarian aspects.

Rob Kasunic, U.S. Copyright Office

Time for big revision instead of legislating on margins, according to Register Pallante. Hearings on copyright issues have begun.  Many roundtables at Office and PTO/NTIA have begun. Hearing on subject matter was an eclectic mix.

Encouraging provision of standardized unique identifiers of works/authors/owners could foster a more efficient market and reduce orphan works. Lots of recent press on UK’s Copyright Hub as central source for info collection/provision. We have 150 years of data on this through public registry/recorded documents.  That is our Copyright Hub, which we need to improve and modernize. This needs funding! Invest in unique attributes of public registry, which can then interact with private registries that serve specific communities/needs. We can be a model for the international community if we make it happen. 

Registration is the foundation of the Office and the national copyright system as a whole. We must teach people what registration is and does. Most © text books only spend a few pages on this, and most law profs don’t know just how great a role registration plays.  But enormous effect on litigation.  Practitioners are well aware of registration questions. On an average day a registration employee does the equivalent of 5-6 copyright final exams.  Issues w/useful articles and compilations are both significant questions for the Office. We are required to examine claims/deposits and issue or refuse certificates.  Has recommended creating a registry of refusals, which would be useful to the public. We also require claims to be amended/clarified/unsupported statements to be removed; we annotate certificates to clarify their scope.  Claims depicting useful articles will be annotated with §113 language; claims that seem to talk about an idea will be annotated with §102 language; we may register under a rule of doubt—expects rulemaking on computer programs/intersection of copyright and trade secret.  It’s troublesome if there’s an infringement action based on something no one at the Office ever reviewed/redaction for trade secret, and claims are on the rise.

We serve as a check on overreaching, and help courts when they give us a chance.  Kasunic drafted policy statement on compilations that don’t result in copyrightable subject matter—not just the Office’s whim, but following from legislative history. This allowed court to resolve a lawsuit on Bikram yoga that was pending for years; court quoted heavily from policy statement. Compilation authorship must be perceptible in the deposit, which matters for things like numbers, putting us at odds with two courts of appeals. We’ve defined choreography for rejecting social dance/end zone dances. We’ve rejected synthetic DNA claims. We’ve stuck to our useful articles/separability analysis, and the 9th Circuit has given us deference in the recent hookah case.

Registration system has had significant victories in the last years: Proline, court agreed it had no authority to order issuance of certifications of registration.  Court deferred on what info has to be in an application. Brownstein: 9thCircuit found no authority to order Office to cancel registration. We get deference if we are reasoned and logical and show our work.

Threats: private registries will not fulfill these goals; they may provide info, but they do not provide a filter.  Second threat: the application approach that some courts follow, allowing jurisdiction before issuance of registration; undermines registration/national copyright system.

Solidify and invest in this role through the revision process.

Carl Malamud, Public.resource.org

Public.resource.org puts public databases on the internet, when unavailable perhaps because of misguided fee structure or agency says it’s too hard to do or nobody cares about info (that’s what we heard from SEC and PTO, even though patent database is specifically called out on Constitution). We are suing IRS to get e-file data online. We put video online—14,000 hours of congressional hearings; 6000 videos on YouTube and Internet Archive, with 50 million views.

We do the law. All courts of appeals—many times retyped.  Court documents, with full privacy audit.  One of our most important tools is “government works” clause, which must be reaffirmed. Unique to US and very important tool for online info.

Another doctrine, not explicit in the law: “edicts of gov’t”—the law has no ©.  Wheaton v. Peters, reaffermed over and over, e.g. in Veeck. But: Mississippi AG has threatened us with $1000/day fine per law, claiming under state law.  In Georgia, the head of judiciary committee in Senate has sent us multiple takedowns for posting the only official code of Georgia—© is asserted by the state. Delaware Code: says that anyone who uses code w/out authority of secretary of state shall be fined or imprisoned.  Harvard law students sought a license to speak the law.

Half the cities in California asserted copyright, but we’ve found cities remarkably cooperative.  Volunteers have gone in and taken codes, and made dramatically better versions: dccode.org is a dramatically better product. It’s partly democracy and partly innovation: better tools for citizens and lawyers.

Legally mandated public safety codes and tech documents: building, fire, elevator, boiler, etc. codes. In some ways the most important laws, and when ignored you get a 1000 foot wall of flame in a gas refinery explosion. These laws are typically enacted at state level, but we also have many in the CFR—hazmat transfer, pipeline safety, workplace safety. We’ve begun posting these in 2008. We redraw graphics so that they can be resized; we recode the formulas so they can be read by accessible readers. 19,000 public safety codes for the country of India.  Train safety; food processing; water testing; toy safety; etc.

This isn’t a theoretical issue—we’re being sued in DC for having posted the national electrical code mandated in all 50 states. We’re being sued in Germany for having posted the standard of safety in Europe for baby pacifiers. We have 28,000 documents: theoretically could be billions in statutory damages. But the concept that the law is not copyrightable because it is owned by the people is crystal clear in the common law. Requiring a license to speak the law is fundamentally undemocratic, but this muddled state has a huge chilling effect on innovation. Codify “edicts of law” exclusion. Breyer: if the law isn’t public, it isn’t the law.

Durie: the world is changing; there will be new things we can’t imagine—why should we make an exclusive list?

Reese: there’s been no case made that any of the examples I mentioned are underproduced without copyright protection.  We certainly don’t want to exclude blog posts because they’re not books, but of course the broad interpretation of “book” in the 1909 act would have allowed that.  We have broad categories now, and they can take care of new technologies. To the extent really new tech comes along, like digitally recorded smells, or changing your heart rate with a character in a book as you read, it seems fine to say that judicial or administrative interpretation shouldn’t let that in and Congress should act.

Durie: should we reject copyright protection for unfixed performances, or rethink that?

Gordon: we don’t have constitutional freedom to do that. Main thing needing clarification: unfixed works look like they can be protected by state law, but the §301 kind of saving clause shouldn’t be read literally, and protection for unfixed works should be preempted when it would interfere with the objectives of federal copyright.

Kasunic: in many cases the question comes down to “what is the work?”  Fireworks, food on a plate—the images thereof could be a work, but sometimes people get confused about what’s protected. Portrayal of uncopyrightable subject matter can sometimes be copyrighted; this causes enormous problems in registration system, and we’re trying to at least separate the issues. People don’t send parks to us in the mail, or fireworks.  We get ID material, and that material is always some other kind of work, and getting clarity there is important.  Same with unfixed works. In order to talk about infringement, you have to fix the work!

Durie: magic tricks—Office’s view?

Kasunic: Teller’s magic trick was registered, very thorough description with step by step description and drawings. The question is the scope: §102(a)/§102(b)—at some point you always reach an idea, system or process.  We could ask Congress to resolve this, but Learned Hand said it well: nobody will ever fully define that line.

Reese: Congress could give some help by defining pantomime or dramatic work, but left us at sea.
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mandatory disclosure doesn’t have to correct deception

Posted on April 2, 2014 by rtushnet

American Meat Institute v. United States Department of Agriculture, No. 13-5281 (D.C. Cir. Mar. 28, 2014)

The court rejects challenges to meat labeling rules that demonstrate once again that commercial speech regulation and the post-Lochner settlement are inextricably linked. Here, the Department of Agriculture’s Agricultural Marketing Service adopted a rule implementing Congress’s requirement of country of origin labeling (COOL) for meat. Under the relevant statute, a US label is reserved for animals exclusively born, raised, and slaughtered in the US, while animals from multiple countries have to be labeled with their countries of origin.  The rule requires retailers of “muscle cuts” (meat other than ground meat) to list the countries of origin in which the source animals were born, raised, and slaughtered, distinguishing among those acts where required. The previous rule merely required the phrase “Product of” followed by a list of the countries of origin, and allowed commingling (in which cuts from animals of different origins, but processed on the same day, could all bear identical labels).  Canada and Mexico filed a WTO complaint against the previous rule, and a panel found against the US, apparently based on “an objection to the relative imprecision of the information required by the 2009 rule.”

Under the new rule, acceptable labels (assuming the truth of the statements) are “Born, Raised, and Slaughtered in the United States,” “Born in X, Raised and Slaughtered in the United States,” “Born and Raised in X, Slaughtered in the United States,” etc.  There’s no longer an exception for commingling.  The court of appeals first affirmed the district court’s ruling that the regulation didn’t unlawfully ban commingling.  The rule doesn’t ban any element of the production process; it just requires accurate labeling.  Under current practices, meat packers can’t provide accurate labels if they are engaged in commingled production.  The necessary changes may be costly, but that doesn’t “force segregation” as the plaintiff complained, “except in the sense that compliance with any regulation may induce changes in unregulated production techniques that a profit-seeking producer would not otherwise make.”  Here, the objection isn’t a First Amendment objection—it’s more in the nature of substantive due process.

The court turned to the First Amendment argument.  First, the plaintiff argued that Central Hudson ought to apply, not Zauderer, because this wasn’t an anti-deception regulation.  The court held that the disclosure was “purely factual and non-controversial,” and, unlike the challengers in United States v. United Foods, Inc., 533 U.S. 405 (2001), or R.J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1212, 1216-17 (D.C. Cir. 2012), the plaintiff didn’t object to the content of the mandatory message.  It objected to the term “slaughtered,” but retailers are allowed to substitute the euphemism “harvested.”  (Harrumph.  The court recognizes that this is a euphemism; slaughtered is the factual and noncontroversial term—the animals’ lives are deliberately ended in a systematic way.  Producers may fear that consumers will be squeamished if reminded in any way that their meal once had a face, but that just shows how misguided the idea that disclosures should be “noncontroversial” is.  It’s a manipulable and ultimately meaningless standard.)

The plaintiff relied on International Dairy Foods Association v. Amestoy, 92 F.3d 67 (2d Cir. 1996), which invalidated a Vermont law requiring dairy manufacturers to put a blue dot on milk products from cows treated with recombinant Bovine Somatotropin (rBST), which the FDA had found to have no significant effect on the milk.  The government disagreed with Amestoy(yes!) but also distinguished it since the dot might have been seen by consumers “as a concession that the treatment might affect the quality of the milk.”  And here we get some lovely casual empiricism based on the court’s guesses about what consumers are like:

Although the government later seeks to justify the COOL requirements as possibly reassuring consumers who are anxious about potentially lax foreign practices, it seems a good deal less likely that consumers would draw negative hints from COOL information than from the required declarations about use of rBST. Reference to an apparently novel additive on milk cartons might well lead to an inference that the additive might have a dangerous effect, whereas the appearance of countries of origin on packages of meat seems susceptible to quite benign inferences, including simply that the retailers take pride in identifying the source of their products.   

So, without agreeing or disagreeing with Amestoy, the court found it distinguishable. 

Under Zauderer, a commercial speaker has only a minimal First Amendment interest in not providing purely factual information with which it does not disagree, as long as disclosure is reasonably related to the state’s interest in preventing deception.  Plaintiff argued that this meant that non-deception-related interests weren’t subject to relaxed Zauderer scrutiny, but rather to Central Hudson. But the court found that Zauderer extended to factual disclosures that did something other than correcting deception.  Other circuits have similarly extended it to, for example, “government interests in telling buyers that mercury-containing light bulbs do contain mercury and may not be disposed of until steps have been taken to ‘ensure that [the mercury] does not become part of solid waste or wastewater,’ and in alerting health benefit providers of the background decisions made by pharmacy benefit managers in their sales to the providers.”  Zauderer’s characterization of the speaker’s minimal interest in avoiding disclosure was “inherently applicable beyond the problem of deception.” To the extent that previous DC Circuit decisions seemed to say otherwise, they didn’t because they didn’t involve purely factual and uncontroversial information, though the panel suggested that the court go en banc to provide a clear ruling on the issue.

So what are the government’s interest in COOL?  Plaintiff argued that, as in Amestoy, disclosure was just a matter of consumers’ curiousity.  But the court found non-frivolous values advanced by the disclosure: “Obviously it enables a consumer to apply patriotic or protectionist criteria in the choice of meat. And it enables one who believes that United States practices and regulation are better at assuring food safety than those of other countries, or indeed the reverse, to act on that premise.” These interests weren’t so trivial or misguided as to fall below the threshold that would sustain a minimal intrusion on commercial speakers’ First Amendment interests.

Without likely success on the merits, the rule couldn’t be enjoined.  “There is, moreover, a public interest factor that we did not consider in our constitutional analysis, that of allowing the United States’s effort to comply with the WTO ruling to take effect. We are clearly in a poor position to assess the effects of any noncompliance.”  (But does this really matter? If the First Amendment barred the law had Congress adopted it on its own, could WTO compliance change the calculus?)
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It’s an ex-competitor: plaintiff whose service shuffled off this mortal coil lacks standing

Posted on April 1, 2014 by rtushnet

Think Computer Corp. v. Dwolla, Inc., No. 13–CV–02054, 2014 WL 1266213 (N.D. Cal. Mar. 24, 2014)

Think is a money service business (MSB) and developer of a mobile payment system platform called FaceCash, launched in April 2010.  Defendants were money transmitters (MSB defendants) and venture capital funds and individual investors (investor defendants). MSB defendants included Airbnb, ActBlue, Facebook, Square, and Stanford.  Think alleged that the MSB defendants hold and transmit funds on behalf of third parties and were its direct competitors.  Think alleged that they operated without required money transmitter licenses in violation of a California law that became effective in mid-2011 and that imposed various capital and other requirements on money transmitters. The investor defendants allegedly helped/directed the MSB defendants. 

Think didn’t acquire the necessary license and voluntarily stopped running FaceCash when the California law went into effect.  Think had no paying customers for payment services. It alleged violations of California Unfair Competition law, the Lanham Act, and unjust enrichment. The court only analyzed the federal claim, finding no Article III standing (this may be a misnomer, though the result seems foreordained to be the same under Lexmark).

Under now-probably-superseded 9th Circuit precedent, Lanham Act standing requires “(1) a commercial injury based upon a misrepresentation about a product; and (2) that the injury is ‘competitive,’ or harmful to the plaintiff’s ability to compete with the defendant.” This requires some kind of competition for the same dollars from the same consumer group.  Think shut down FaceCash, so it can’t have had diverted sales after the California law went into effect.  Plus, to the extent Think alleged that statements in certain defendants’ terms of service before mid-2011 were deceptive, Think didn’t allege that Think suffered commercial injury as a result. Once Think voluntarily shut down FaceCash, it couldn’t show that it competed or suffered commercial injury, so the complaint had to be dismissed.

A bit of a wrinkle: the UCL “unlawful” claims were based on both state and federal law. But the Ninth Circuit has held that, “where there is no federal private right of action, federal courts may not entertain a claim that depends on the presence of federal question jurisdiction under 28 U.S.C. § 1331.”  The alleged federal violations concerned laws criminalizing unlicensed money transmission businesses and mandating record-keeping, neither of which created a federal private right of action. As a result, the state law claims didn’t involve substantial questions of federal law, and the court declined to exercise supplemental jurisdiction.
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