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.

Internet Platforms Above the Law?

Silicon Valley may have done ‘bare minimum’ to help Russia investigation, Senate Intel Committee told … 

That headline from CNN, and which was echoed in several news stories that began appearing late Monday, will elicit no surprise among my friends and colleagues working in IP law, privacy, publicity rights, security, and various other matters of justice in the digital marketplace.  Those of us who believe that the rule of law is not anathema to the internet are used to the major platforms behaving as though they operate in some alternate universe where the laws of old-model, physical humans do not apply.  After all, these companies and their executives were nurtured on exactly that manifesto when the late John Perry Barlow first read his Declaration of the Independence of Cyberspace at Davos in 1996. 

To put it mildly, Barlow was utterly full of shit when he declared the internet to be a “home of mind” that could not, or should not, be governed by the “weary giants of flesh and steel.”  Perhaps he can be forgiven some poetic license in the service of a sincere hope that the internet might truly be an incorporeal space that would help us transcend human folly and connect to one another through our better angels.  But that’s not what happened.  And debates about cyber policy should stop pretending it can still happen.

Fast-forward to the harsh realities of the present, and the “home of mind” is dominated by glorified advertising platforms, easily exploited by the worst kind of malicious actors and which clearly appeal to our lesser—even our profoundly stupid—angels.  And the sad irony is that, far from operating benignly adjacent to physical society, social media platforms have been exploited to infiltrate, corrupt, demoralize, and degrade the foundations of society in very real and very dangerous ways.

Two independent reports commissioned by the Senate Select Committee on Intelligence investigated the St. Petersburg-based Internet Research Agency (IRA), the professional troll farm erected for the sole purpose of inflaming political discord in the United States and other liberal democracies around the world.   The reports reveal that disinformation on all major platforms was, and still is, more widespread than initially believed; and they describe the methods by which specific groups like African Americans were targeted in an effort to dissuade voter turnout for the 2016 election.

I plan to read both reports and follow up, but for now, I thought it worth highlighting the detail that the reports’ authors allege that the major platforms were far less cooperative than one might hope given the gravity of the circumstances.   As The Washington Post quotes …

“Unfortunately, Google made the unusual choice to provide data to the Committee in nonmachine‐readable format.  The ads data was provided in lengthy PDF format whose pages displayed copies of information previously organized in spreadsheets (Google could have provided the original spreadsheets in CSV or JSON files).”

Think about that one.  Google stifling the use of computers as the U.S. Senate tries to better understand exactly how a foreign and hostile power has been working to fracture the American democratic process.  Further, while skimming the report submitted by New Knowledge, I caught the statement that begins, “Regrettably, it appears that the platforms may have misrepresented or evaded in some of their statements to Congress.”  

In this regard, I was intrigued by the strident tone lately adopted by Senator Ron Wyden in response to Silicon Valley’s less than forthright conduct in these investigations.  Vowing to pass “legislation with teeth,” Wyden has proposed a new consumer privacy bill aimed at restricting what these platforms may do with user data, particularly with respect to the manner in which that data may be leveraged to target disinformation about politics and policy issues.  Further, the proverbial “teeth” in Wyden’s bill would impose substantial penalties, including potential imprisonment for executives, for failing to provide honest and complete testimony to Congress.

For my colleagues who work in copyright advocacy, Wyden has not exactly been the rule-of-law representative when it comes to holding Silicon Valley accountable.  But perhaps the thinking will change as the senator and his colleagues must now address the many indisputable ways in which a liability-free internet industry has, quite possibly, done more harm than good for American democracy.

Meanwhile, despite mounting evidence that the major social platforms are more often a home of mindlessness than mind, Barlow’s Declaration remains the cosmic background noise still ringing in the heads of too many defenders of what we generically call “the internet.”  Whether it’s the Electronic Frontier Foundation or Techdirt or MEP Julia Reda’s anti-copyright campaign in the EU or the Internet Association or even the American Library Association, one can still hear the strains of a misguided faith in a pure internet, unsullied by the taint of law, in the rhetoric deployed against almost any policy that might demand platform responsibility.

For far too long, a false premise undermining copyright enforcement specifically—and almost all other types of enforcement generally—has been that it is better to allow harmful or illegal content to remain online than to risk censoring even a micro-byte of protected speech.  But that premise is, paradoxically enough, a pre-digital-age idea and a blind allegiance to Barlow’s naive cyber-utopianism.  It is a laissez-faire approach, which casually ignores the new reality in which an unfettered amount of harmful or illegal content continues to undermine the values it claims to uphold.  

After all, if an American inadvertently shares a political meme that was written by a malicious actor in St. Petersburg—and whose goal is to weaken global democracy—can anyone honestly say that free speech is fulfilling its purpose in that moment?  This is just one reason why, about a month ago, I personally stopped most activity on Facebook:  because I’m not sure it’s possible to avoid feeding that particular cancer.  At the same time, it is notable that we do not even need bad actors as dramatically well-organized as the IRA to weaponize disinformation on a wide range of issues; but that’s a subject for a different post. 

So, I look forward to reading the Senate-commissioned reports; but for now, I thought it worth noting the allegations that the major platforms are stonewalling and obfuscating in these investigations—still behaving as though they operate outside the rule of law.   Of course. the tragically ironic twist to Barlow’s vision of cyberspace as separate from, and elevated above, “weary” reality is that our present reality too often resembles the craven, mean-spirited, and willfully misinformed cyber-world of social media.

Robot image source by digitalstormcinema

Second Circuit Rules Against ReDigi in Major Decision

VidAngel.  TVEyes.  ReDigi.  

Copyright interests might view these enterprises as the unholy trinity of tech ventures that have attempted in recent years to strain statutory limitations to such extremes that their interpretations would actually vitiate copyright protection itself.  In August of 2017, the Ninth Circuit denied VidAngel’s crusade to push the fair use doctrine beyond any meaningful scope; in February 2018, the Second Circuit held that TVEyes’s methods for making news content available was substantially different from Google Books under the fair use doctrine of “transformativeness”; and yesterday, also in the Second Circuit, ReDigi was rebuffed in its attempts to assert fair use and first-sale doctrine to legitimize its trade in “used” digital files.

ReDigi has been the subject of several rather long posts on this blog, but to recap, the venture was based on administering transactions in “used” digital media.  The concept was that if Consumer A no longer wants to listen to a particular digital audio file (MP3), she would be able to sell that file to Consumer B, via the ReDigi interface, at a “secondary market” price on the basis that the file would be considered “used.”  

The obvious market-based problem with this proposal is that because digital files cannot accurately be considered “used,” a ReDigi enterprise would result not in a secondary market but rather in a substitute for at least some portion of the primary market.  This is the reason why the court held that the Fourth Fair Use Factor (potential market harm to the original works) “weighed powerfully against” ReDigi in its appeal to the fair use defense.  

Further, ReDigi attempted, as many others have done, to assert that its use of the files was “transformative” under the First Fair Use Factor (nature of the use and commerciality), and this was most notably rejected by Judge Pierre Leval, the author of the “transformativeness” doctrine.  From the opinion …

“Even if ReDigi is credited with some faint showing of a transformative purpose, that purpose is overwhelmed by the substantial harm ReDigi inflicts on the value of Plaintiff’s copyrights through its direct competition in the rights holders’ legitimate market, offering consumers a substitute for purchasing from the rights holders.”

This is a very important decision as a matter of doctrine because so many users of works, both large and small, have repeatedly tried to exploit the relative vagueness of the word transformative to argue that merely migrating content from one context to another is sufficient to meet that standard.  In finding against TVEyes, this same court drew essential boundaries to reign in the meaning of the term, and now ReDigi further solidifies that opinion.  

Based on these two decisions, it seems fair to summarize thus:  in order to be “transformative” without authoring a new creative expression, a user of works must a) truly offer society something novel and useful; and b) limit the use of protected works to avoid creating a substitute for fair market access to those works.  For instance, Google Books meets these standards while these other business ventures do not.

The court was also not persuaded by ReDigi’s defense under the doctrine of first sale.  As discussed in detail in those other posts, first sale is the limitation in copyright law that allows you to resell your personal copies of works for whatever price a secondary consumer is willing to pay, whether that’s a quarter at a yard sale or thousands of dollars in a rare book shop.  The first sale doctrine dates back to 1908 and, as I have theorized in the past, the principle itself may not ever have been written in a purely digital market where “copies” themselves are no longer limited to one-off, physical objects like paper, plastic, vinyl, etc. 

With regard to ReDigi, the courts agree that our digital music files qualify as “phonorecords” under copyright law and that we consumers have the right to resell our phonorecords.  The problem is that the law also holds that files are “reproduced” in the process of transferring from one device to another.  Even if the ones and zeros that compose “Silent Night” on my computer are erased while they are written onto someone else’s computer, this act is legally held to be one of “reproduction,” which is not exempted by the first sale doctrine.  

Add the interim step of copying the data temporarily to ReDigi’s servers, plus the mass-market implications of such an enterprise, and the company’s first sale defense strays very far from the individual’s right to resell one legally-acquired copy of a work one time.  

ReDigi and its proponents seem to have hoped to make a case that this “reproduction” transaction is, in principle, analogous to the transfer of used copies in the physical world that spawned the first sale doctrine; but as the court held in its opinion, it would be the job of Congress to rewrite the statute to say what they seem to wish it said.  Meanwhile, I suspect that if such a legislative proposal were to be attempted, then history, case law, and market analysis would dictate that the first sale doctrine is untenable in a purely digital market. 

In this regard, it is funny how often copyright proponents are accused of clinging to our metaphorical buggy whips.  Because when the Supreme Court ruled in favor of retailer R.H. Macy in the case that established the first sale doctrine, New Yorkers were in fact still taking hansom cabs to go shopping! 

Relatedly, as I opined in one of those previous posts, it seems both futile and myopic to propose amending the copyright law in order to foster “resale” of digital files in a market that has already shifted so dramatically to streaming nearly everything on demand.  So, ReDigi was not so much clinging to old models as it was seemingly trying to cobble together a legal framework to support a new business model that may already be obsolete.    

Either way, rights holders should be very pleased with the outcomes in what I’ve called the unholy trinity of VidAngel, TVEyes, and ReDigi because the courts have upheld the principle that copyright’s limitations are meaningless if they stray so far as to eradicate its protections. 

Spotify Still Wrangling with Songwriter Royalties

On January 8 of this year, The Trichordist ran a story that the Huffington Post apparently rejected in which indie musician Blake Morgan describes a closed-door meeting between Spotify executives and a group of musicians.  According to Morgan, he actually had to explain that Spotify’s “product” is not Spotify itself but music—music that Morgan and his friends make, and which Spotify monetizes.  And that’s fine, even welcome, if the company pays for licenses.

But Spotify has a big—potentially very big—problem when it comes to paying for mechanical licenses, which compensate songwriters and composers for their compositions, regardless of which artist(s) perform the work.  These licenses are required for reproduction under §106(1) or distribution under §106(3) of the Copyright Act; and based on precedent, a streaming service like Spotify is held to both reproduce and distribute musical compositions.

Unfortunately, the company has allegedly failed to pay for mechanicals for thousands of compositions, which is why it currently faces litigation from several complainants with potential damages running into billions of dollars.  Biggest among these is the Wixen Publishing suit, filed on the eve of the Music Modernization Act (now law) first being introduced in committee.  The suit implicates around $1.6 billion in damages for failure to license works by songwriters including Tom Petty, Stevie Nicks, Neil Young, et al.

With such prominent names in the mix, one might think that Spotify’s original defense (i.e. that rights holders are hard to find) would not have held up very well.  And it did not hold up very well, as exemplified by the comparatively modest Lowery/Ferrick class-action suit, which settled in May 2017 for a $43 million fund to various songwriters.   

Then, with the pending Music Modernization Act, which would bring an end to new litigation over failure to obtain mechanicals, late 2017 saw a spate of new complaints against Spotify for its apparently sweeping failure to secure these licenses.  And perhaps it was the extinction-scale degree of the potential damages that then inspired fresh creativity in Spotify’s defenses.

In a September 2017 post, I described the suits filed by Bluewater Music Services and songwriter/musician/producer Robert Gaudio.  In its initial response to this complaint, Spotify implied that, as a streaming platform, it was never obligated to pay for mechanical licenses.  This drew immediate reaction from the National Music Publishers Association and CEO David Israelite’s declaration that the platform was then “in a fight with all songwriters.”

Spotify’s rationale in that brief was that streaming only implicates the right of public performance and not distribution; but as I noted in that post last September, even if a court agreed with this interpretation (and that is a big IF), this would still leave the reproduction right, for which a mechanical license is still required.  This no-license-needed defense remains among Spotify’s arguments in its current filings, but according to a recent article by Eriq Gardner in The Hollywood Reporter, the streaming company has introduced a new theory to the Bluewater case.

Because Bluewater administers copyrights for publisher clients, but is not the owner of those copyrights, Spotify questions whether the company has standing to sue for infringement of the mechanical right for all the titles named in its complaint.  Spotify’s theory turns on the premise that because a) Bluewater is not empowered to license for less than statutory rates without written consent of its publisher clients; and b) because any party can obtain a mechanical license at the statutory rate by filing a Notice of Intention (NOI) with the Copyright Office, then Bluewater’s authority to grant the license is non-exclusive. If that’s the case, Spotify contends, then Bluewater does not have standing to sue for these alleged infringements.

Spotify’s argument hinges substantially on the fact that mechanical licenses are compulsory.  No songwriter/composer can deny any party a mechanical license to use a musical work as written.  On the other hand, these owners can authorize parties like Bluewater to administer those rights on their behalf, so if this reads like a very fine parsing on Spotify’s part, it will be interesting to see whether the court thinks so, too.  In either case, a mechanical licensing after January 2018 is subject to the terms of the MMA, so it seems doubtful that the Sixth Circuit opinion will have substantial effect going forward regardless of how it rules.

It was Devlin Hartline at the Center for the Protection of Intellectual Property (CPIP) who shared this story on Twitter, so I asked his view, and he replied …

“It’s quite noteworthy that Spotify summons no support in the case law for its newfound position that there can be no exclusive licensee of the mechanical rights in a musical work at the statutory rate since there’s no exclusivity given the compulsory license. The compulsory mechanical license has existed since the Copyright Act of 1909. If the argument had any merit, you’d think Spotify would be able to find at least some precedent in support. Instead, this move comes across as another desperate attempt by Spotify to avoid paying for the works that it failed to license properly in the first place.”

Further, Hartline opined in his tweet Spotify counsel Christopher Sprigman’s presentation of this unique defense might be another reason to be concerned about his leading the Restatement on Copyright Law initiative at the American Law Institute.  As described in a January post, some prominent copyright skeptics have pushed for this Restatement project, which is unprecedented in the annals of all statutory law—not just copyright.  As I wrote in that post …

ALI Restatements have never been written for comprehensive federal laws like copyright because these are already statutory, or black-letter, laws.  Congress writes the statutes, the judiciary interprets them, and attorneys make their arguments; but everybody’s working from the same statutes and a much more narrow body of case law than common law entails.   Hence, this request for a Restatement of copyright law represents an end-run around Congress—an effort to reshape the Copyright Act without a legislative process.

Sprigman is counsel for Spotify; he’s the lead Reporter on this ALI Restatement project; and he’s the co-author of a paper called The Second Digital Disruption (see two-part response here), which rather speciously asserts that because market data reduces risk, this obviates the author’s need for strong copyright protections.  Not that I generally like picking on any one individual, but it just so happens that Sprigman’s name seems to feature in a trifecta of the anti-copyright agenda—litigation, policy, and academia—and largely in the service of billion-dollar tech companies like Spotify that don’t even know they’re in the music business.