House Introduces Bill Moving Toward USCO Modernization

Photo by maxkabakov

Against the drama of day-to-day Washington—and I’m already exhausted—Rep.  Goodlatte, Chairman of the House Judiciary Committee, introduced a bill that most people won’t notice except the copyright watchers. Unlike certain congressional action making the headlines this week, H.R. 1695 represents years of testimony, proposals, and discussion and can claim 29, bi-partisan cosponsors.

The bill proposes to make the Register of Copyrights an appointee of the Executive with the advice and consent of the Senate, a move that would place the Copyright Office into a more clearly and more appropriately defined context given the functions it actually performs—and has performed for more than a century. The bill enjoys broad support from many parties, perhaps because it is the manifestation of a multi-year discussion; and the Copyright Alliance has recommended that the Librarian of Congress pause in her search for a new Register while the legislative process moves forward.

As I’ve explained in previous posts, the organizational placement of the USCO under the ambit of the LOC is antiquated, and it would be just as antiquated no matter who occupies the White House or controls Congress. Regardless of what some critics have claimed, it really is a coincidence of history that the Register’s initially-clerical role evolved out of changes at the Library that began under President Lincoln. Because the USCO has long been the nation’s agency of authority on copyright law—which is estimated to support over $1 trillion of GDP—it simply makes sense that the Office function as a separate agency from the Library, and with the Register appointed in the same manner as the Librarian.

When Dr. Carla Hayden was first nominated to the position of Librarian, many copyright skeptics cheered, seeing her as an ideological ally.  If anything, this only emphasizes the need for this long-contemplated split between the two agencies. The LOC and the USCO have evolved to perform two distinct functions that require leaders with two distinct types of experience and expertise. This organizational change is simply common sense.  Moreover, in a time of so much stress-inducing upheaval in Washington, this is an important proposal that deserves bi-partisan and general public support.

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FilmOn Not a “Cable Provider” Says Ninth Circuit

A recurring narrative promoted by the internet industry and its cheerleaders is that the old creative industry, which relies on copyright law, is “outdated.”  The major rights holders, they keep saying, “cling to old models,” pretending the future is not happening.  Of course this new v old narrative is more than a misleading PR message—it is a gross hypocrisy if you follow the story behind the tweets, headlines, and comment threads.

Because if we were to summarize the story of copyright in cyberspace, it is generally one in which new business models seek to rely rather heavily on loopholes and loose interpretations of old law in order to succeed.  Time and again, the courts try to wrestle with new business ventures, whose owners hope for favorable interpretations of statutes that were written long before their models were imaginable, let alone possible. And much of the time, these “new” businesses represent various ways to exploit creative works without payment or permission.  Such is the case with a service called FilmOn, which hit a major setback this week in the Ninth Circuit Court of Appeals.

Essentially, FilmOn captures television broadcasts via the airwaves and then retransmits the content to paying customers over the internet. Several broadcasters, who are named collectively in the case as Fox, sued on the basis that FilmOn infringes the exclusive right of publicly performance. Like Aereo, FilmOn had argued in several courts that its service does not “publicly perform” works, but when the Supreme Court held that Aereo’s very similar model did infringe this exclusive right, FilmOn changed its defense strategy.

Instead of going for no licensing, FilmOn has been vying for cheap licensing by arguing that the company can be defined as a “cable provider” under the terms of §111 of the Copyright Act. “Cable providers” are eligible for compulsory, government-set licenses which obviate the need to negotiate with individual rights holders for retransmission of creative works.  A district court agreed that FilmOn qualifies as a “cable provider,” but the Ninth Circuit has now reversed that decision. And although the court has stated that both FilmOn and the broadcasters presented plausible interpretations of §111, the opinion appears to have turned on two factors:  context and deference to the Copyright Office.

In its analysis of the exception carved out in §111 with the 1976 Copyright Act, the circuit court notes the balance struck between the interests of copyright holders and the need to serve segments of the population that lived in remote locations.  §111 was designed to enable a network of local cable providers to make the large, capital investments necessary to serve these smaller markets without the added burden of negotiating terms with individual rights holders. Moreover, those cable companies were subject to FCC regulation, including “must-carry” provisions mandating certain content be transmitted just for them to be allowed to operate.  From the Ninth-Circuit opinion …

“… in 1976 the cable industry was a fledgling one; cable systems had little market power and little ability to overcome the considerable transaction costs they would incur if they had to negotiate individual licenses directly with copyright owners. Congress responded to these economic conditions by enacting § 111, which relieved cable systems of the need to sit down with every copyright holder before retransmitting their copyrighted broadcast works. … Fundamentally, however, § 111 was Congress’s attempt to balance the socially useful role cable systems had come to play, on the one hand, against the property interests and creative incentives of copyright holders, on the other.”

By contrast, the court observes that FilmOn is operating in a very different market as a business that a) does not have to make the kind of capital investments as 70s-era cable companies; and b) can reach far beyond a local market to potentially any viewer in the world via the internet.  So, although the court stipulates that FilmOn’s statutory interpretation of §111 is not wholly without merit, the panel ultimately defers to the assumption that Congress intended to maintain balance between protecting copyright and serving the remote markets via the more limited technology that existed at the time the statute was written.

Additionally, in light of its finding that both the broadcasters and FilmOn provide reasonable interpretations of §111, the court gave considerable weight to past testimony by the Copyright Office, which has, since the 1990s, asserted that internet-based companies like FilmOn are not “cable providers” under the terms of the statute.  Quoting from the preambles to the USCO 1992 and 1997 rulemaking proceedings, “… a provider of broadcast signals [must] be an inherently localized transmission media of limited availability to qualify as a cable system.” In other words, the ability to transmit globally via the internet exceeds the intent of §111.

Everything about the rationales applied to write §111, including the three tiers of statutory rates based on system size, is predicated on an analysis of local markets.  This includes matters like local advertisers who pay relatively low rates to reach a local customer base via their “cable providers.”  That small-town hardware store ad you see pays pennies on the dollar compared to a major brand reaching millions via national broadcast, and this factors into the calculus of what makes a “cable provider” eligible for which compulsory license under the terms of the statute.

There is simply no reasonable way to argue that a business like FilmOn, which retransmits a signal to the entire world via the internet, achieves the goals of Congress in establishing the compulsory license regime for “cable providers.” But as I say, this is a recurring theme in the copyright narrative. In the world of PR, these companies portray themselves as new, progressive, forward-thinking, etc.  But in order to avoid paying for the creative works they need to operate, they try very hard in the courts to look like they’re just business as usual.

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Digital Advertising $h*tstorm Hits Europe

Photo by ra2studio

I reported last week that Procter & Gamble had thrown down the gauntlet and demanded that the online advertising ecosystem needs to improve this year.  By the weekend, advertisers in Europe had gone even further with, for instance, Havas Group U.K. suspending all ad buying on Google and YouTube, followed by more UK advertisers pulling their business as of yesterday.  “A slew of big-name companies, advertising firms and government departments have either pulled their adverts from Google and its YouTube video site or are considering whether to do so, with media giant Sky, telecoms group Vodafone and a trio of banks adding their names to a growing list over the weekend,” reports Rob Davies for The Guardian.

Fed up with brand ads being linked to unpalatable content like hate speech or outright terrorist videos, the advertiser exodus grew dramatically by week’s end; and although I have seen no reports of U.S. advertisers suspending their activity yet, they’re certainly paying attention. Lindsay Stein for AdAge writes, “WPP CEO Martin Sorell said in a statement that the agency giant and its media buying arm GroupM have believe [sic] Google, Facebook and others have the same responsibility to safeguard advertisers as any media company. ‘They cannot masquerade as technology companies, particularly when they place advertisements.’”

GroupM announced in September 2015 that it would require all of its partners to become TAG certified, a declaration echoed by Marc Prichard, Chief Brand Officer for P&G this past January.  TAG is a voluntary, ad-industry initiative designed to keep major, brand advertising off untrustworthy and illegal sites, including piracy sites that host almost exclusively infringing content.

Now that advertisers are actually pulling business in response to the platforms’ inability to limit the amount of illegal and malicious content on their sites, we can expect to see one of two outcomes:   either Google, Facebook, et al will discover new capacities for controlling content on their sites; or the advertisers will seriously reevaluate their investment in digital. Odds are, we’ll some combination of the two since many of the problems described by the advertisers go beyond the issue of toxic material and beg broader questions about overall value for their brands.

Either way, this is likely to be a big story for the Web this year, and copyright holders are going to be keenly interested in watching what happens. For instance, when it comes to mitigating infringement on a site like YouTube, the general rebuttals are “free speech” and “innovation”—two vague answers that I doubt will mollify advertisers asking, What have you done with my money?  The rights holders have always known these answers are nonsense, so we’ll see what happens when the platforms actually stand to lose rather than gain revenue from their inaction.

Yes, it’s a challenge.  A huge volume is uploaded daily, and Google doesn’t want to flag any content that doesn’t deserve it.  In fact, as MIT Technology Review reports, even a product called Perspective that Google designed for publishers to weed out “toxic” comments from their pages doesn’t seem to work very well. So, nobody should pretend the task is easy.  Still, the free speech rhetoric is oversold by Google and over-bought by consumers who seem to believe that web platforms are driven by constitutional principles rather than marketing dollars.

As noted in the past, these corporate-owned platforms don’t really have First Amendment responsibilities.  They can accept or reject any kind of content they choose, and I think we’re about to see that they’re going to choose what’s good for their real customers—the ones paying them billions of dollars.  As CNN reports today, Google executive Matt Brittin has publicly apologized to the advertisers and says that the company can and must do better.

This acute pressure from advertisers comes at a time when the creative community is stepping up its pressure on Congress to fix the flaws in the DMCA that inadvertently create incentives for platforms to turn a blind eye to copyright infringement.  And it’s a safe bet that if the major advertisers can induce the platforms to weed out toxic content, the major rights holders are likely to insist that parallel measures can be taken to limit the volume of infringing material on these otherwise legal sites. After all, the advertisers have stated their displeasure with inadvertently supporting any criminal activity, including infringement, particularly since many of the advertisers are themselves major rights holders.

I will add that I’ve personally been a skeptic about many digital advertising promises since first encountering them in the days of Web 1.0. I never believed, for instance, that the kind of “targeting” people used to talk about was either achievable or desirable. It’s been nearly 20 years since those meetings, and let me guess how you feel when you see one of those ads on Facebook for a product you just bought:  creeped-out and cynical? Yep. Me too. But that’s a topic for another post.

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Will the EFF Tolerate Any Copyright Enforcement?


Maybe the folks at the Electronic Frontier Foundation could save themselves a lot of repetitive work if they just write a blanket statement declaring once and for all that they believe copyrights should never be enforced online in any context whatsoever.  Because no matter what proposal they encounter, it seems they will always grab their box of fridge-magnet hyperbole and cobble together a statement designed to make it sound underhanded and nefarious.

Of course we’ve come to expect that if a proposed copyright measure is legislative, the EFF will call it something like “government overreach.” But apparently, if a proposed action is part of a voluntary initiative by industry, they’ll call it “shadow regulation.”  That’s exactly how Jeremy Malcolm, Senior Global Policy Analyst for the EFF, refers to a recent agreement in the UK reached by Microsoft, Google, and representatives of major copyright holders. Brokered by the UK Intellectual Property Office, the parties negotiated a voluntary “code of conduct” with the purpose of demoting search results for URLs that have received a certain (undisclosed) number of DMCA takedown notices.

Malcolm correctly observes that Google was already using DMCA data to demote certain sites in its search results, but the EFF is still sounding alarm bells over two factors in the development of this agreement:  1) that the meetings themselves, and some of the agreed-upon terms are secret; and 2) that the agreement was allegedly reached in response to an “explicit threat” by the UK government to take legislative action if the parties could not come to terms.   So, referring back to my original accusation, if the government mandates that platforms mitigate copyright infringement, the EFF thinks it’s wrong; and if the platforms voluntarily collaborate with rights holders to mitigate copyright infringement, the EFF still thinks this is wrong.  See where I’m going with this?

The EFF complains that “the public” is not represented in these “shadow regulation” agreements—an accusation that earns a cartoon double-take because this proclivity for exaggeration only feeds the illusion that the public has any say in the operation of these search companies in the first place.  We have a measure of market power, as we do with all companies, but Google and Microsoft do not seek public debate on the manner in which their search algorithms function or are adjusted. And it should be obvious to users by now that Google’s search results reflect some combination of Wikipedia, paid priority, and popular trend—none of which guarantees that the most relevant or best-quality results will top the list every time.

How good is search these days anyway?

With regard to my last post about advertisers seeking better value online, and the role of fake news in that story, I happened to do a Google search for the term “pizzagate.”  And what do we get?  Results #3 and #4 are both utterly bogus sites designed to attract users who may be inclined to believe that Hillary Clinton really was running a child sex ring through a D.C. pizzeria. Y’know, because search quality.

Result #4 is a classic example of what happens when some opportunist buys a URL based on a trending topic and then populates a page with keywords, videos, images, and links that optimize SEO in order to generate revenue with traffic to posted ads. It’s a site full of garbage that probably makes its registered owner some money, but which provides no social value of any kind; and it sits above the fold on the first page of Google’s search results because that’s how the system works.

This capacity to manipulate search results—all in the name of unfettered “innovation”—has done considerable harm to journalism, scientific knowledge, authors of creative works, local businesses, major advertisers, users, and even the democratic process itself.  So, unless Google and Microsoft have ready solutions for improving all of that, the EFF can spare us its hand-wringing over the search-result demotion of websites that engage in chronic copyright infringement.  Yet, Malcolm writes, “[Google] must be very careful that its acquiescence to this shadowy regulation doesn’t escalate into a series of capitulations to copyright holder demands.”  Fridge magnets.

As reported yesterday, Google may be about to “capitulate” to new advertiser demands because (hold onto your beers) this is all just business. People really should stop pretending the internet industry is something special—as if the decisions made are not business decisions and as if those business decisions are not going to require negotiation with other business interests and with government.

But because we’re talking about the internet, the EFF and others seem to imagine that the public enjoys general oversight—as if Google were Congress.  We’re just customers, either happy with the services or not.  If anything, the pervasiveness of Google’s control over so many aspects of the digital market should be a far greater concern than whether or not the company agrees to work with rights holders to mitigate infringement. And in fairness, this is where the EFF’s strengths as a public advocate seem best directed.  Real issues of concern like privacy should give that organization plenty to do, particularly in the current political climate, but copyright enforcement really isn’t the side door to social injustice they keep portraying it to be.

In general, copyright enforcement in the digital age benefits consumers and creators just like it did before the digital age. The only players who substantially benefit from zero enforcement are the major web platforms, and the EFF should stop doing PR (even if it’s not their intent) for these multi-billion-dollar companies. Meanwhile, if the platform owners and creative industries collaborate to foster a more legal, fair, and sustainable digital market for creative works, this will benefit consumers, creators, and economies overall.

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Advertisers Demand the Web Get Better in 2017

Photo by sorsillo

In January, Proctor & Gamble’s Chief Brand Officer Marc Pritchard put the digital advertising world on notice that his company will no longer tolerate the waste or opaqueness of the advertising ecosystem. “We’ve been giving a pass to the new media in the spirit of learning,” Pritchard stated in his keynote address to the International Advertising Bureau (IAB).  “We’ve come to our senses. We realize there is no sustainable advantage in a complicated, nontransparent, inefficient and fraudulent media supply chain.”  With over $7 billion in online spending, P&G is the largest among U.S. advertisers; and where they lead, the rest of the industry is likely to follow.

I wrote in December 2015 about a report published by the IAB, which revealed that significant flaws in the digital advertising supply chain—invalid traffic, infringed content, and malware—were costing advertisers just over $8 billion/year in waste. That represented about 16% of global, digital ad purchases.  Although ad spending has continued to grow since that report was written, if Pritchard’s address represents the mood of advertisers, they’re frustrated with two things above all:  the inability to control where their ads appear, and the lack of consistency and transparency in reporting by the major platforms.

In response, Pritchard has laid out the new demands P&G will be making of its advertising partners for 2017, including third-party measurement of metrics (rather than self-reporting by the platforms) and an insistence that all partners become TAG-certified.  It was in February of 2015 that the Trustworthy Accountability Group (TAG) launched this industry-led, voluntary initiative to separate the quality, legal sites from the garbage of the internet. TAG was seen by copyright holders as a major step forward because the initiative sought, among other things, to keep brand advertising off the large-scale piracy sites.

The Ad Exchange is Too Opaque

The underlying problem for advertisers is the automated exchange in which ad impressions are purchased from the available supply—a system that provides advertisers with limited control over where their ads appear and no standardized reporting on the return received for their investments.  An advertiser buys, say, a million impressions, and when those impressions are reached, the advertiser buys another million impressions; but there is very little insight into the nature of those impressions.  It’s a process Prichard calls “murky at best and fraudulent at worst.”

The recent “discovery” of Fake News illustrates the problem.  Appropriately used, the term fake news refers to hucksters who figured out that they can make up to several thousand dollars a month just by inventing provocative, click-bait headlines that draw traffic to sites that have nothing to do with actual news.  These site owners do considerable harm to the world while siphoning value from advertisers who would not otherwise choose to feature their brands among this kind of junk content.

Recently, the News Media Association (NMA) of the UK asked the British government to investigate the impact that Google and Facebook are having on legitimate news by supporting fake news with their “murky” advertising platforms; and the NMA also cites what appears to be a growing problem of ads supporting terrorist propaganda. As I’ve reported in the past, the lack of control in these ad exchanges is why major brand commercials end up on sites like YouTube alongside ISIS recruiting videos or other violent-extremist propaganda.

Brooke Singman for Fox News, notes that year’s Hyundai Super Bowl spot, which pays tribute to U.S. troops serving overseas—and which cost Hyundai about $5 million to run on TV—appeared on one of YouTube’s terror-linked channels. And while YouTube’s official statements express a zero-tolerance policy for terror-supporting accounts and videos, the problem persists while parent company Google remains typically unclear about its ability to remove targeted content or accounts.

With over 300 videos uploaded to YouTube every minute, I don’t think anyone doubts the scope of the challenge; but it is certainly true that the copyright holders, for instance, often see Google as magically omniscient where its own interests are at stake and then mortally fallible in the service of others’ interests. So, I imagine if P&G and other advertisers are truly drawing lines in the sand this year, Google may suddenly discover an extraordinary capacity to weed out terrorist, criminal, and other undesirable content from the YouTube platform.

In fact, Eric Feinberg, CEO of GIPEC says that he can very quickly identify and organize questionable content on major platforms with the system his company has developed for scanning hashtags in multiple languages. “Because our technology can anticipate key communications strands and images being used by terrorist and hate-speech groups, the system can block, quarantine, and sandbox this kind of content for review before it’s published, thus reducing the chance that ads will appear before or next to undesirable content.”

Where this issue overlaps with security, it is possible that the major social media platforms will begin to feel more pressure from the government to stop profiting—however inadvertently—from terrorist propaganda on their sites.  Depending on what form that takes, we are likely to see some civil-libertarian backlash to these policies and also to expect reality to get lost in the rhetoric on all sides.  But for sure money talks. And if the advertisers are demanding that “new media” start to clean house and provide some of the accountability and quality they’re used to from “old media,” my guess is they’re going to get what they want or find other ways to spend their $200 billion.

Posted in Advertising | Tagged , , , , , | 5 Comments