Author: David Newhoff

David is an author, communications professional, and copyright advocate. After more than 20 years providing creative services and consulting in corporate communications, he shifted his attention to law and policy, beginning with advocacy of copyright and the value of creative professionals to America’s economy, core principles, and culture.

The Cox $1 Billion Copyright Damage Award is Not as Big as You Think

When it was announced last week that a jury awarded the major record labels a one billion-dollar-damage award in its copyright infringement case against COX Communications, certain anti-copyright voices were predictably shrill in their astonishment at such a stratospheric number.  Specifically, the plaintiffs represented by the RIAA were awarded $99,830.29 per infringement of just over 10,000 songs, which is actually less than the maximum statutory damage award of $150,000 per infringement.  

Regardless, the big price tag prompted Mike Masnick at Techdirt to do his shrieking mandrake bit (from Harry Potter), describing statutory damages for copyright infringement as “crazy,” “messed up,” and even “unconstitutional.”  And because comment threads are what they are, one reader at that Ministry of Disinformation opined, “the fact that .50-1.00 dollar [sic] songs magically become worth just under one-hundred thousand each simply highlights just how utterly insane copyright law is.”  

I’m not eager to pick on some anonymous commenter who does not appear to have a rudimentary knowledge of what he’s talking about; but then, many people do think Masnick knows what he’s talking about, which is one reason all this whinging nonsense seeps into public perception.  So, let’s review what Cox Communications did in this case; what statutory damages are for; and why the retail price of an individual song (or DVD, or movie ticket, or whatever) has nothing whatsoever to do with damages that may be awarded in a lawsuit.

Cox Was Not Merely Lax in Complying with the DMCA 

The Digital Millennium Copyright Act (1998) provides a liability shield (the “safe harbor”) to internet service providers whose customers use their services to commit copyright infringement—but only if the ISP meets certain conditions.  One of these conditions is that a service provider must have a policy in place whereby repeat infringers eventually face account termination for refusing to cease their infringing activity after receiving warnings sent by the provider. Separately, any party that materially contributes to a form of actionable conduct (including copyright infringement) may be held either civilly or criminally liable for the conduct.

Although the DMCA statute does not mandate how a “repeat infringer policy” must be structured, it was proven in the precedent and related case BMG v. Cox, that the defendant implemented a “thirteen-strike” policy, after which Cox still avoided account termination and was further shown to have taken affirmative action to avoid “knowing” about the scope of infringement claims it was receiving.  For instance as the record labels’ complaint states, “Rather than working with Plaintiffs to curb this massive infringement, Cox unilaterally imposed an arbitrary cap on the number of infringement notices it would accept from copyright holders, thereby willfully blinding itself to any of its subscribers’ infringements that exceeded its ‘cap.’”  [Emphasis added]

In his post, Masnick sweeps the evidence proving Cox’s “willful blindness” under his own invented narrative in which Judge Liam O’Grady of the Virginia Circuit Court simply “does not like the internet,” set in a world in which rightsholders expect ISPs to “wave magic wands to eliminate piracy.”  That’s all very cute and distracting, but what Masnick is really suggesting is that he and others think the liability shield for ISPs should be unconditional; that no internet user should ever face account termination for any reason; and that statutory damages for contributory copyright infringement—especially to the tune of a billion dollars!—are purely functions of greed on the part of the rightsholders.

Those are opinions that copyright critics are free to express and argue on the merits if they can, but I would remind them and everyone else that it was the ISPs themselves (originally AT&T, Verizon, et al) who proposed the “safe harbor” provisions (Section 512) of the DMCA in the late 1990s; and one of the premises upon which they argued this cause was the fact that they were technologically capable (without the use of magic wands) of substantially mitigating copyright infringement on their platforms.  This promise to use the tools at their disposal to collaborate with rightsholders was part of the deal that earned them the safe harbor in the first place—a bargain that has never actually been fulfilled.  

According to the evidence presented in BMG (which also controls in the subsequent suit by the labels), Cox clearly made executive decisions that went far beyond Masnick’s flabby description that the ISP did “not adequately follow its own repeat infringer policy,” as though the conduct at issue were a mere lapse in maintaining compliance, rather than one of engaging in non-compliance as a matter of company policy.  One email entered into evidence written by the former head of Cox’s Abuse Group stated, “Fuck the DMCA,” which appears to characterize the attitude that caused the ISP to lose so badly in these suits, and also why statutory damages are actually essential when giant players like this are involved. 

A Billion Here a Billion There

Especially where major corporate entities are engaged in any kind of wrongful conduct, it is axiomatic that if damages awarded in litigations are not punitive, the prospect of further legal action can be factored into the cost of doing business and will, therefore, have no effect in correcting the underlying harmful conduct.  Yet, bizarrely, Masnick points to the fact that the RIAA made a little under $10 billion in 2018 as a rationale for describing a damage award one-tenth that size a form of insanity.  This is no less naïve than the aforementioned Techdirt commenter, who seems to have no frame of reference at all for how the law actually works.  Damage awards in a wide range of litigation are not based solely on recouping the “street value” of the estimated financial loss to a plaintiff.  This would never do as a form of justice.

Take this subject out of copyright law for a moment and imagine a man who is maimed as the result of negligence by some corporation.  If he can no longer work as a janitor, should his damage award from a lawsuit be limited to his annual janitor’s salary multiplied by the number of years he can be expected to live?  Though many might prefer such a cold and narrow remedy, it would neither deliver adequate justice to the injured party nor satisfy society’s compelling interest in punishing the corporation for its negligence severely enough that it would incentivize remediation of the harmful conduct.  Damage awards that exceed these parallel aims may be held by a court to be excessive violations of due process (hence Masnick’s allusion to constitutionality); but is the Cox award actually excessive in context?

Cox has about six million subscribers.  If just 20% of those customers are chronic users of pirate sites—this is below statistical piracy averages—that would be roughly one million customers whom Cox could potentially be required to warn and possibly cancel under the provisions of the DMCA.  This subscriber base is worth around two-billion dollars in regular access fees each year,* which gives us a rough idea of the kind of revenue an ISP like Cox may be seeking to protect by engaging in “willful blindness” with regard to its consumers’ scope of infringement.  

So, if we consider that one-billion dollars is one half of one year’s revenue from about one-sixth of Cox’s total customer base, this damage award begins to look like what a damage award is supposed to be—painful enough to effect change in the defendant’s (and related providers’) behavior, but not wildly out of scope with the business dynamics in the circumstance at issue.  Or we can do the math in reverse and even reduce the chronic piracy number to 10% of Cox’s users (i.e. one-billion in revenue per year), and a one-time fine of one-billion dollars is not quite as madly disproportionate as it looks in the headlines.  

Masnick is not wrong to allude to the fact that a damage award can be unconstitutional, but he is wrong to imply that statutory damages are inherently unconstitutional, or immoral, just because he and his friends do not like (or seem to understand) copyright.  People are free to hate the RIAA or Cox or both, but if they’re not willing to unpack any of the pesky details in these cases, then the simple, objective story here is that two different juries concluded, based on evidence, that one big-ass entity willfully harmed the interests of other big-ass entities; and this does tend to result in what looks like big-ass money changing hands.  And there is nothing all that crazy about it.   

___________

*Average bill of $120-160 times 1 million.

Google v. Oracle Part I: Or Why You Really Don’t Have to Know WTF an API Is

I freely admit that one reason I procrastinated when it came to digging into Oracle v. Google (now Google v. Oracle) is the fact that this nine-year litigation, now headed to the Supreme Court, deals with software.  Unlike most creative arts in which I have some background and knowledge, software might as well be magic spells that make our devices run (or not); and although this form of authorship is generally invisible or incomprehensible to most of us users, the code-writers say it entails creative expression, and so does the copyright law since 1980.  

This clash-of-titans lawsuit, which currently stands with two rulings (in 2014 and 2017) in Oracle’s favor at the Federal Circuit Court of Appeals, will now ask the Supreme Court to settle two main legal questions:  1) whether the specific code (part of Oracle’s Java API) used by Google without a license in the development of Android is copyrightable in the first place; and 2) if that code is protected by copyright, whether Google’s use is protected by the fair use doctrine.  I will actually address the legal narrative and issues in subsequent posts because on top of the triable matters and doctrinal debates, is a business and PR story that should probably be addressed first. 

From Google’s perspective—and that of its defenders, who include many prominent copyright critics—the future of software innovation itself hinges on Google ultimately prevailing in this case.  These parties allege that developers everywhere depend on using programs like Java API (originally developed by Sun Microsystems) without license; and if they cannot do so, software evolution as we know it will be in jeopardy.  But without even getting into what an API is, and whether it can be copyrighted, let us keep in mind that this is Google we’re talking about—a market-killing, competitor-squashing, policy-manipulating, rights-infringing monopsonist that lacks any street cred to be speaking on behalf of the start-up entrepreneurs out there. 

Copyright history is replete with this recurring theme:  one business or industry would prefer to circumvent or deny copyright protection to a particular class of work and declares that, if their argument does not prevail accordingly, the death of [insert industry here] will ensue, and the public will suffer for the loss.  In this sense, note Google’s very broad statement in its petition asking the Supreme Court to grant certiorari …

“Given the ubiquity of smartphones today, it is easy to forget the challenges that developers initially faced in building the operating systems that allow modern smartphones to perform their myriad functions. Among other things, developers had to account for smaller processors, limited memory and battery life, and the need to support mobile communications and interactive applications.”

Notice how the narrative thrust here positions Google as just another developer doing good works for society, almost as though the company had no interest whatsoever in becoming one of two—count them, two—smartphone platforms now being used in several major markets.  But Google is, of course, not just another developer.  According to Oracle’s brief in opposition to granting cert …

“Google faced an existential threat.  People with mobile devices were not using Google’s search engine, causing Google to lose significant advertising revenue.  It needed to quickly develop a platform tailored to mobile devices that would promote Google search.”

Perhaps Google would dispute this fact pattern, but it sounds substantially more realistic—and is wholly consistent with the company’s market behavior to date—than the tech giant’s alleged, post hoc concern for “developers everywhere.”  In order to move as quickly as possible into the mobile market, and encourage developers to create apps for what would become Android, Google describes …

“In 2005, Google and Sun began discussing a partnership that would have allowed Google to adapt the entire Java SE platform for smartphones. Google and Sun conducted negotiations but were unable to reach an agreement. In the absence of such an agreement, Google used the freely available Java language (and its declarations) to develop its own libraries of methods that enabled developers to build smartphone applications for use on Android devices.” (Emphasis added)

Note that I highlighted a couple of terms in order to draw your attention to what reads like a contradiction.  If indeed a software is “freely available,” why was a party like Google “negotiating” with Oracle for its use in the first place?  It seems almost as though some piece of that story is missing, which, not surprisingly, Oracle fills in with its brief, stating, “Google rejected the condition Oracle demanded of all commercial licensees: make Android ‘compatible with the Java’ platform and ‘interoperable with other Java programs.’” (Emphasis added)

Again, I will leave the matter of copyrightability of the specific code Google appropriated to a future post; but even without understanding what Java or an API is, the whole existential-threat-to-software-development narrative starts to look a little squishy.  Instead, this story begins to read like a typical scenario in which a commercial user (one of the biggest commercial users in the world) did not like the licensing terms to which several other commercial users had subscribed and, so, opted to go permissionless and sort it out later.  With regard to its licensing regime, Oracle states that app programmers (e.g. those folks who make games and guitar tuners etc.) can obtain a free Java platform license for development.  But …

“Oracle recoups its investment in the Java platform mainly by licensing it to (1) hardware manufacturers who copy the platform onto their devices…and (2) competing platform developers who want to use Oracle’s programs to commercialize their own platforms.  Any platform developer that does not want to take a license is free to develop its own platform with identical functions without copying the Java platform.  Apple and Microsoft did it.”

Assuming these statements are undisputed facts—and we need not understand the technology here—what exactly was Google’s problem with agreeing to the “interoperability” term of the license agreement, which other platform developers like Blackberry, Nokia, et al had signed?  Could it possibly have been that the “interoperability” condition was a barrier to Google’s ambition to have something proprietary and, thereby, own as much of the mobile market as they could acquire?  Sounds pretty Googley to me.

So, for all the chatter surrounding this litigation about the importance of “innovation, competition, and future software development,” it must at least be plausibly entertained that Google sought to leverage Oracle’s IP in order to expedite time-to-market while also insulate itself from any liabilities that might obstruct its eventual market dominance.  That would certainly be consistent with the kind of conduct many rights holders in other media have witnessed (see YouTube), and so would Google’s couching its own interests in broad statements like this one: 

“If allowed to stand, the Federal Circuit’s approach will upend the longstanding expectation of software developers that they are free to use existing software interfaces to build new computer programs. Developers who have invested in learning free and open programming languages such as Java will be unable to use those skills to create programs for new platforms—a result that will undermine both competition and innovation.”

Given the different tiers of licensing available for the Java platform, including the free license for app developers, that doomsday prediction does not ring entirely true and, therefore, belies the broad narrative that the future of all software development is under siege by Oracle’s claim.  This is, of course, a familiar pattern among Silicon Valley corporations—especially Google—whereby they emphasize the general value of a system (e.g. a smartphone, a search engine, a social platform) while understating their own interests in the market itself.  And they often achieve this sleight-of-hand by misdirecting public attention to hypothetical “competitors” in the abstract, while in reality, these tech giants have a habit of killing potential rivals before they get out of the lab.  

As stated, I will do my best to dig into some of the specific copyright matters in Google v. Oracle in future posts; but as these stories tend to seep into public dialogue in layman’s terms and PR messaging, this seemed like the right place to start.  The general premise that Google’s needs are inherently society’s needs has worn very thin.  And it’s about time.  

Announced Departure of Register Temple Provokes Tired Anti-Copyright Rhetoric

I know it seems like we have ample government shenanigans to watch on TV right now, but in case you missed the real barn-burner yesterday, it was announced that Register of Copyrights Karyn Temple has been named as the next Senior Executive Vice President and Global General Counsel at the Motion Picture Association (MPA).  Why?  What were you paying attention to?

You see in the trenches of the so-called “copyright war,” the Antis delighted in this news about Temple’s career move because it appears to fulfill their conspiracy-theory narrative that a “revolving door” exists between the Copyright Office and major, corporate creators, mainly “Hollywood.”  This was a big theme being promoted by Public Knowledge et al at about the same time (Fall 2016) that Dr. Carla Hayden was first appointed Librarian of Congress and, within weeks, dismissed then Register Maria Pallante, leaving Temple to serve as Acting Register and then appointed Register in March of this year.  

I responded to this “revolving door” allegation in a post, which cites former Copyright Office Senior Counsel Steven Tepp’s rebuttal noting, among other pesky facts, the wide variety of private sector jobs that USCO employees have taken outside proverbial Hollywood.  This includes the widely respected William Patry, who became Senior Copyright Counsel at Google.  Such realities did not stop the righteously uninformed to take to Twitter and declare “Told ya so!” about Temple’s move to MPA, and some folks even rather inscrutably dragged the Restatement of Copyright Project into the same complaint.  Who better than Mike Masnick to represent the kind of logic being applied as follows …

Anyone who would conflate these subjects really needs to breathe into a bag for a while.  Because it is strenuous work to imply so many inaccuracies in a single tweet; but, for one thing, the MPA was neither the first nor the most vocal critic of the Restatement Project.  Next, Congress is not “silencing” anything by expressing its concern about the fact that the American Law Institute has NEVER EVER published a Restatement on any matter of federal law in its nearly 100-year history. In fact, there is nothing Congress can do to stop the publication of the Restatement. So, the snarky allegation that a) the USCO’s criticism of the Restatement is MPA-driven, or b) that concern over the project is just a “silly spat” is typical of the unprincipled theatrics infecting so much debate in all directions.

Whether it’s the foreign service, the intelligence community, or the modest little Copyright Office, deference for institutions, how they got that way, and what they actually do is lately under assault by rampant conspiracy theory (thank you internet) and a blinkered zeal by one faction or another to rewrite the rules according to their own dogmatic agendas.  Although the consequences and characters are substantially different, there is little intellectual distinction to be found between the radicalized partisan who says, “the FBI is broken” and the one who insists, “the Copyright Office is broken.”  Both are guilty of the same ahistorical, self-defeating brand of fallacy, epitomized in Masnick’s accusatory tweet that almost no senior Copyright Office employee ever goes to “work for the public’s interest.”  

The USCO is the public interest! What Masnick really means is that he and his friends have their own definition of “public interest,” (which does seem to coincide quite often with the interests of major internet companies), and they have decided in their cloistered wisdom that the public can only be well-served if the Copyright Office is led by people who are as skeptical about copyright as, say, Andrew Wheeler is about climate change.

We saw this attitude peak in October of 2016 when Dr. Hayden surprised a lot of people, including Members of Congress, by effectively dismissing Register Pallante, who was being contemporaneously smeared by the aforementioned anti-copyright groups for being (well) pro-copyright.  As I said at the time, you’ll get that with people who work for certain public offices:  they tend to believe in the purpose of the office.  And I would argue that we have lately witnessed the dire consequences of maligning this kind of professional commitment in order to achieve political/ideological ends. 

So, now that Dr. Hayden will be tasked with appointing the next Register, I hope she does not exhibit the habit of every other egotist in America who suddenly feels it is his/her mission to radically transform (i.e. weaken) yet another federal organization.  As described in this post, the Copyright Office, from its inception, has always been functionally distinct from the Library, even when it was formed as an extension of the Library’s own foundation as a public institution in 1897.  Consequently, I think the Librarian would best serve the public by showing deference to that history—and to Congress for that matter—in exercising her prerogative to appoint the next Register.  This may be a small victory to hope for in a storm of mass organizational disruption, but, as it was in the founding period of the nation, protecting the value of authorship is never a bad place to start.    

Photo by fizkes