David Newhoff, Author at The Illusion of More

Online Copyright Enforcement Is Not Just About “Artists”

Most conversations (i.e. arguments) about copyright tend to revolve around artists in the traditional sense—musicians, authors, filmmakers, photographers, etc.—wanting to make a living from their work. To those types of creators, the often dismissive responses from the tech-funded intelligentsia range between feigned sympathy and unvarnished antipathy for any author who would presume to earn her living making “art” in the first place.

Somewhere among those personal opinions, creators have been offered a litany of unsolicited advice as to how they might better understand the new economic realities of the digital age and, thus, learn to benefit from avenues of sustenance newly opened, rather than complain about old avenues that have been closed by rampant piracy. The classic example—the one that inspires so much gallows humor among creators—is the imperative that, for instance, musicians should sell more tee shirts rather than cling hopelessly to the idea of ever selling music itself.

But, let’s look at this theme in a different context, especially with regard to the number of people now working in that insecure stratum known as the “gig economy.” What if you heeded the wisdom of the academics, tech pundits, and internet billionaires and launched a venture that channels your creative work as merchandise? In other words, what if the way you sell your art is literally as tee shirts? Do the tech companies who promised you the opportunity of low-cost entry support this venture by facilitating the enforcement of your intellectual property? Meh.

After you invest the sweat equity and financial capital to create and register your original designs, then market, produce, and ship the goods, you can be sure that once your brand attracts customers, it will be counterfeited through ecommerce portals. This is a near certainty.

The counterfeiter/pirate will often be foreign-based, usually in China, and they will post pages on Amazon, eBay, Alibaba, etc. offering knockoffs that not only infringe your copyrighted designs, but also sell those pirate goods on inferior products. So, while the counterfeits are eating into your market, you will also receive calls from customers complaining that you sell poor quality merchandise. Or perhaps they’ll just give you bad reviews on the same wonderful crowd-sourcing platform that empowered the counterfeiters to rip you off in the first place.

Your ability to keep web-enabled counterfeiting and piracy from driving you out of business will depend on a number of factors, namely whether your company has grown large enough to absorb the cost of enforcement plus lost sales. Even for a decent-sized business (say $1-2 million in gross sales), these costs can be sufficient enough to have a substantial negative effect on the operating resources of the enterprise.

If trademarks are infringed, enforcement is a little easier to address as a holistic process; but quite often, a counterfeiter will exclusively infringe copyright by pirating original designs for tees, hats, towels, mugs, etc. This means someone—either an employee or outside counsel—will have to identify each of the items infringed, affirm their registrations, fill out the platform’s complaint forms, and follow the platform’s various steps to request removal of the infringing URLs from the site.

The steps required by each platform can either be fairly straightforward or a unnecessarily labyrinthine, but the sites will generally comply with removals in a timely manner. Nevertheless, the small business owner in this case has the same problem as the musician whose work keeps getting uploaded to YouTube—the game of Whack-a-Mole. The infringements you manage to remove in a period of days will soon reappear at new URLs with apparently new (but probably the same) sellers offering your products. And you get to do the whole process again.

So, the question naturally arises, why don’t the major online retailers use their astounding technological prowess to better automate the identity of likely infringers? It is true that Amazon allows a legit merchant to upload a product shot and have the system search all the places that image appears. This is not a useless tool, but it still implies a lot of extra, costly labor for the business/copyright owner.

Why doesn’t Amazon, for instance, provide a more proactive interface for registered merchants and manufacturers similar to YouTube’s Copyright Match for the community of YouTubers, which alerts a creator when her videos are used by other YouTubers? For instance, how hard is it for an Amazon or EBay to interpret data comprising a) a matching photo, b) a price point about 80% less than it should be, and c) a seller based in a piracy-rich location like China, and flag the URL as a likely infringer? This is too complicated for the most powerful computer companies in the world?

These are corporations that harvest and monetize the most granular data about us as consumers and private citizens. Have a casual conversation with someone about eyewear in the vicinity of your phone and, like magic, you will soon be served an ad for eyewear. Somehow, we accept this creepy invasion with a resigned shrug while simultaneously choosing to believe that these companies simply cannot analyze a basic data relationship between a product-maker and its legitimate products.

Whenever takedown/staydown proposals have been made in the context of the usual copyrighted works like sound recordings, the internet industry and its network of pundit(s) counter that any technology used to identify repeat infringements will be too error-prone, will not be able to identify when a given use is a fair use, and will inevitably stifle free speech. These complaints are debatable enough in the usual context, but such considerations do not apply even hypothetically to the role copyright plays in this kind of counterfeit merchandise.

If an online retailer were to more systematically remove repeat infringers from E-Commerce sites, they could alleviate some of the burden for start-up and smaller companies. And since this kind of entrepreneurism is exactly what the web industry claims to have enabled, it does seem like the right thing to do.

Of course, this has always been the fine print in Silicon Valley’s generous offer of free-to-use platforms for new, independent enterprise. Their interest in either ignoring copyrights, or even funding efforts to weaken copyright law, has always been an underlying flaw in their ebullient commands to “embrace the new models.” In reality, however, even if your rock band really could offset the loss of not selling music with the sale of tee shirts, the tees themselves would be infringed, and the major retail platforms will apparently be of very little help.

Fair Use Error in Seuss/Trek Mash-Up Case Not Good for Small Creators

In order for copyright law to work for all the Whos in Whoville—the small and the tall—legal reasoning must apply equally whether the plaintiffs are major enterprises or kitchen-table start-ups. While it is understandably common in the court of public opinion to favor smaller defendants being sued by larger copyright owners, the fact is that when an error of law disfavors a large owner, it can have an even more profoundly negative effect on smaller creators. This is a significant problem with the district court holding in Dr. Seuss Enterprises v. ComicMix LLC.

In 2016 a group of creators, working under the name ComicMix copied Dr. Seuss’s iconic imagery from several classic works and combined these with themes and characters from Star Trek in order to produce a “mash-up” book called Oh, the Places You’ll Boldly Go!. According to the creators’ testimony, the “Boldly” book was painstakingly designed to mimic Seuss—not only in illustration style, but composition, coloring, etc.—and a side-by-side comparison of the visual works shows that ComicMix “slavishly copied” nearly all of Seuss’s expressive elements in its pages.

Dr. Seuss Enterprises (DSE) sued ComicMix for copyright infringement, and the District Court for the Southern District Court of California held that “Boldly” is a fair use because it is “highly transformative.” So, once again, this nettlesome doctrine is confusing courts as to the nature of derivative works.* Because “Boldly” is not a work of commentary about — or parody of — the original, and is merely a different use of Seuss’s expressive elements, the district court erred by not recognizing it as a derivative work, which is the exclusive right of the copyright owner to produce. Or not produce as he/she sees fit. (See also, Stephen Carlisle posts here and here discussing this case.)

Fourth-Factor Fair Use Analysis is Troubling for Small Creators

Concurrent with this case being appealed to the Ninth Circuit, Copyright Alliance filed an amicus brief, which points to a specific error in the district court’s unfounded reasoning in its application of the fourth prong of the fair use test. If the court’s rationale were to be upheld, it would be especially troubling to small, independent, and start-up creators.

The fourth fair use factor considers the potential market harm to the rightsholder if the contested use were allowed; and that word potential is critical to this analysis because authors do not always know how, when, or why their protected work may be profitable in some new way. Hence, the aforementioned exclusive right to prepare derivative works is a big part of that potential value, and exploiting that right is neither mandatory nor limited by a timeframe (other than the expiration of copyright itself). Write a novel next year, and it is up to you to decide when—or if—you want to develop or approve a film adaptation. The right to exploit your novel for a motion picture does not wane if you choose never to enter the film market or to enter that market many years after publication.

Consequently, when weighing potential market harm, one question the court is supposed to ask is whether the allegedly infringing work would be considered a derivative work under the exclusive rights granted by the copyright act. If the answer to that question is yes, this weighs in favor of a finding that the contested use does present potential market harm. And this is true regardless of a plaintiff’s ability to quantify the presumed value of that derivative market—especially if it implies a market she has not yet entered!

So, because the district court erred in failing to recognize “Boldly” as a derivative work, it then exacerbated this problem by inventing what Copyright Alliance calls a “bright line standard” that does not exist in caselaw, whereby a plaintiff would be required to present evidence to prove the “substantial” market harm caused by the contested use. Now, forget about being a major player like Seuss for a moment and think about being the smallest Who on the dust-speck.

Imagine being an indie comics author just beginning to get some recognition for your work on Instagram when you discover that some other party has started making merch or animated clips from your characters without license. Then, when you sue to defend your work, the court says, Well, you weren’t in that market, so you can’t demonstrate how you could have sustained market harm. Or as the CA brief describes in its footnotes …

“One can readily imagine the first-time author whose only market data consists of modest profits from a first novel, with no existing licensing or sequel revenues, failing to show “substantial” harm after a playwright sells a script that co-opts the author’s central plot points and characters.”

This Catch-22 logic is the antithesis of the principle that fair use is meant to extend the purpose of copyright law. Instead, this court’s reasoning merely transfers the author’s derivative works right to another party for no reason other than the fact that the using party was the first to exploit a particular idea for a derivative. By framing this ruling in those terms, it should be clear why a larger entity, which could expedite time-to-market, may be more likely to do harm to a smaller entity, or an individual, than the other way around.

In addition to creating a burden of proof for the plaintiff that has no basis in the history of fourth-factor analysis, the district court in Seuss v. ComicMix went so far as to dismiss evidence that DSE had already pursued various derivative-works collaborations and is preparing to do more of same in the future. So, even with a plaintiff who could come rather close to providing quantifiable evidence of potential market harm, this court still dismissed DSE’s claim in this regard as “merely hypothetical.”

More specifically, as the Copyright Alliance brief describes, the court “penalized [DSE] for both non-entry into a market and successful entry into other, existing markets.” In other words, ComicMix’s fair use defense was supported by the fact that DSE had not yet entered the specific mash-up “opportunity” ComicMix had exploited; BUT the defense was also strengthened by the fact that DSE had been successful with other derivatives in general.

Presumably, the “logic” here seeks to define “potential market harm” as the extent to which an infringer may capture some fraction of the rightsholder’s market—as long as the rightsholder is already financially successful. That is not the purpose of fair use; and upholding this reasoning could be devastating to the author with much shallower pockets than a DSE.

Courts do not weigh fair use based on which owners have been “successful enough” to tolerate a particular infringement. Among other problems, such reasoning literally penalizes success. “This unfair double-standard would effectively force copyright owners who wish to protect their works to enter all markets while at the same time being careful not to be too successful in those markets,” states the Copyright Alliance brief. That is an aberration of the purpose of copyright law and, therefore, the purpose of the fair use doctrine.

* A brief written for this case by Professors Peter S. Menell, Shyamkrishna Blaganesh, and David Nimmer cites both Judge Leval, the author of the “transformative” doctrine, and Justice Souter’s opinion in the seminal Campbell case stating, “it is clear they did not intend for fair use to swallow a large portion of the right to prepare derivative works.”

Crying Wolf in the Section 230 Debate

After the 2016 election and news began to break about the amount of fake information and manipulative content that was being financed by various parties, it seemed clear that Section 230 of the Communications Decency Act (1996) would soon be the number-one cyber policy issue in the United States. Recently, in response to the latest horror show of back-to-back spree shootings—and after it was reported that the El Paso shooter posted his white-supremacist manifesto on the basement-dwellers’ board 8Chan—the subject of platform liability once again blew up across news outlets large and small.

Defenders of the online service provider (OSP) liability shield known as Section 230 insist it is the keystone legislation that makes the internet as we know it possible. But this only begs the first question for framing any reasonable discussion about the broader issue: Who said the internet as we know it is ideal?

Naturally, the folks who make billions from the web’s current design think it’s perfect in much the same way those who make billions in the extractive industries think the environment is doing just fine. And the network of organizations and academics who receive substantial funding from Silicon Valley also like to promote the message that we have Section 230 to “thank” for all the wonderful things the internet does for us. But how true is that statement?

Even before addressing the statute itself, it is important to remember that 100% of internet services that do not depend upon users publishing content to a public platform have nothing to do with Section 230. In other words, most e-commerce, navigation, reading news, downloading e-Books, streaming movies and music, making travel reservations, emailing, document sharing, and searching databases and archives, etc. are all benefits of digital life that owe little or nothing to the existence of Section 230. So, when the pundits repeat the imperative, “Save the internet as we know it” this is a tad overwrought because the statute concerns one form of internet use—and not necessarily its best use by a long shot.

Facebook, YouTube, Twitter, WordPress, Reddit, Yelp!, and similar providers are entirely dependent upon user-generated content (UGC); and many platforms that are not wholly dependent on UGC (e.g. The New York Times) still consider it beneficial to host comments by their readers. Even this blog hosts comments, and I would certainly not want to be liable for inadvertently “publishing” material by a third party that could trigger some cause of action. And that’s where the Section 230 saga begins—with an anonymous user posting defamatory comments on a financial bulletin board in 1995.

“They were drunk on youth, fueled by greed, and higher than kites.” – Jordan Belfort –

The Martin Scorsese film Wolf of Wall Street, starring Leonardo DiCaprio, dramatizes the memoir of Jordan Belfort, who co-founded the sham investment firm Statton Oakmont in 1989 to engage in pump-and-dump schemes—manipulating stock prices and defrauding investors while making millions for Stratton’s employees. Belfort and his partner Danny Porush were indicted in 1999 for securities fraud and money laundering, but four years earlier, while still riding high in every sense of the word, they were ballsy enough to sue online service company Prodigy because somebody on the “Money Talk” chat board opined that the Stratton guys just might be criminals.

In Stratton Oakmont v. Prodigy, the Supreme Court of New York held that because the platform exercised editorial control over “Money Talk,” this meant the company was a “publisher” of users’ comments and, therefore, liable for any cause of action stemming from those comments. (On a side note, I am curious as to how the comment(s) met the standard of defamation when Stratton Oakmont was under almost constant scrutiny by securities officials, but older state court records can be hard to locate, and I cannot find the original complaint.)

The important point about the Prodigy case for cyber policy is that the fledgling internet industry justifiably freaked out at the decision. At that time, Congress was still drafting the CDA, which was designed to encourage — not discourage — platform responsibility and moderation. For instance, among the stated goals of the provision …

(5) to ensure vigorous enforcement of Federal criminal laws to deter and punish trafficking in obscenity, stalking, and harassment by means of computer.

So, how is it that Section 230 came to actually shield sites that either refuse to mitigate some of that conduct, or worse, purposely profit from that conduct? Well …

The “Good Samaritan Clause”

In response to the Prodigy ruling, early internet developers and entrepreneurs presented a very reasonable complaint: If the government wants service providers to moderate content, but the courts find that moderation will make them liable for users’ material, nobody will ever invest in the development of internet platforms that rely on user-generated content. The potential liability is just too great, and nobody can effectively scrutinize millions of inputs every hour.

Thus, the ‘Good Samaritan’ Clause was drafted as a statutory remedy to ensure that good-faith efforts to moderate content would not trigger liability. Specifically, the statute refers to material that users or providers may consider “obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.”

In other words, platforms were encouraged to maintain what is often referred to now as “community standards,” and in return, the government made it clear that enforcement of such standards would not render the service provider liable for harmful material posted by their users. From the statute …

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,

(2) Civil liability No provider or user of an interactive computer service shall be held liable on account of—

(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or

(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1).[1]

The Current Reality

That was twenty years ago. The publicly available internet was new and nobody could be quite sure what kind of platforms would emerge as the industry leaders. Over the intervening years, the courts largely interpreted Section 230 as a blanket immunity for service providers, often citing the statute as grounds to dismiss almost any complaint against almost any service provider. Consequently, the platform owners enjoyed the financial bounty that comes from hosting EVERYTHING while characterizing their reluctance to remove even harmful material as an ethical mandate to “protect free speech.”

The predatory, monetize-everything culture of Silicon Valley, supported by Section 230, is how Facebook wound up supporting (and receiving money from) Russian agents targeting the American electorate with disinformation campaigns. It is how Cloudflare rationalized hosting 8Chan until this month, when the troglodytic chat board was identified in the mainstream media as a crucible for hate-mongering, and where the El Paso shooter published his pre-assault “manifesto.”

But remember that the statute expressly reminds service providers that it is not their job to protect free speech; and this is just a clue as to how the internet industry, with the help of the courts, turned the intent of Section 230 inside out. Rather than use the government grant of a broad liability shield to engage in responsible moderation, many platforms asserted 230 as absolute immunity and, therefore, shirked moderation—even where clear harm is being done. Then, to further aggravate matters, the industry promoted this laissez-faire policy as a public benefit.

Section 230 is the statutory support for conduct like revenge porn, or (perhaps most ironically) it is the law that enables a website to intentionally trade in defamation as a business enterprise. That’s right. A Congressional response to a bad defamation ruling in 1995 now protects a site owner who literally uses defamation as salacious content to generate advertising revenue. That’s how screwed up the current application of the law is.

If Stratton Oakmont was emblematic of the financial-sector corruption that typified the 1980s and 90s, today’s big-ticket hucksters are the internet companies selling the story that our interests are best served by their unfettered ability to monetize not just every bit of content—but our data profiles. And while many citizens and lawmakers have lately seen through that charade, the tech-utopians will continue to say that recent calls for greater platform responsibility is a “moral panic,” that we have been overreacting to events since 2016.

As the drumbeat grows louder for revision for of Section 230, the vast and well-funded industry voices will cry wolf once again. They will once again declare that the internet faces an existential threat, and they will once again not clearly define what they mean by “the internet.” Because, frankly, the companies that will spend the most capital defending Section 230 are the ones whose platforms are not doing the world nearly so much good as they like to believe.

The Facebook scandals that have unfolded since early 2016 demonstrate clearly that user-dependent sites like social media platforms are opaque in their operations; and there is no evidence whatsoever to indicate that more online “engagement” has produced a more enlightened, rational, civilized, or thoughtful discourse in the collective management of the Republic. On the contrary, if anyone thinks social media has not been the primary catalyst driving people apart, I’ve got some old Stratton Oakmont positions to sell you. So, let’s maintain a little perspective as we approach what seems like an inevitable debate over Section 230 reform.

Author: David Newhoff