Category: Copyright

A Must-Read by Eduardo Porter on “Rents” in the Marketplace

This article specifically caught my attention because the term “rent seeking” has so frequently been misapplied to copyright. Interestingly enough, it is a term correctly used to describe the manner in which, for instance, the major tech platforms enjoy a competition-free market. Porter writes …

“The scholars argue that the American economy is afflicted by “rents” — returns in excess of what investments would yield in a competitive economy, where fat margins are quickly whittled away by competition.

Rising rents will take larger shares of the nation’s income. That will bolster the proportion of income that goes to corporate profits but squeeze the share that flows to workers — in wages and benefits — and to productive capital. This will discourage both work and capital investment. It will weigh on overall economic growth.”

Porter isn’t talking about book authors, filmmakers, photographers, and musicians.  He’s talking about corporations with huge stock valuations and market positions so dominant that they can kill would-be competitors to protect their “rent seeking” models. Sound like any Facebooks or Googles you know?

Yes, a copyright can be described as a kind of monopoly, but it’s a monopoly to which every citizen is entitled in the same way every citizen is entitled to personal sovereignty.  The fact that copyright’s antagonists have thrown around the term “rent seeking monopoly” in defense of corporations that really can be described by those terms only emphasizes the extent to which Big Tech managed to hypnotize the market with its shiny playthings.

Read full article at The New York Times here.

Image by michaklootwijk

Turns Out Money Talks in Silicon Valley

For years, producers of creative content—from individual artists to mass-media corporations—have tried to engage with internet companies (mainly Google) in an effort to stop the facilitation of rampant, unlicensed access to their material. Whether the complaint is millions of unlicensed works on YouTube, or search results leading users to pirate sites, copyright owners are all-too familiar with the dual response We can’t and We shouldn’t. This is shorthand for the internet industry’s standard claim that they can’t effectively police their platforms; and even if they could, they shouldn’t because freedom.

But as reported in January 2017, advertising giant Procter & Gamble issued a warning on behalf of global advertisers who spend a combined $70+ billion on digital, announcing that they were no longer willing to accept can’t and shouldn’t as answers to their key complaints. These were a lack of transparency (i.e. independent audit) in measuring the quality and effectiveness of digital advertising; and an inability to prevent brands from supporting intolerable content. So, terrorist recruiting videos on YouTube brought to you by Colgate just isn’t working for the brand managers anymore.  Yet, strangely, the internet companies and their bevy of think-tankers have not told these advertisers to stop hating the future and change their business models.  (Though I’d like to watch if they did.)

Fast-forward a year and the Wall Street Journal this week reports that Unilever is threatening to substantially reduce its ad buy on Facebook and YouTube if the companies do not more effectively weed out fake news and other divisive content like racism, sexism, and violence. What’s striking about this article is its concluding follow-up report that P&G’s brand officer Mark Pritchard — it was he in 2017, who charged the internet platforms to clean up their act — notes that “progress has been impressive” and that ninety-percent of his demands have been met.

It will come as no surprise to the creative community that, when revenue is at stake, the major internet companies suddenly discover that it is both technically possible and ideologically conceivable to police their platforms a bit more aggressively than they have to date. Artists and creators should follow these developments because the political, social, and financial pressure being exerted on the platform providers can make the companies more vulnerable to potential liability for infringing creative works; and this might make them a bit more cooperative about solving the “unsolvable” issue of mass infringement. By demonstrating a capacity for control (because now they have to), this underscores what should be obvious to most people — that the tradition of shrugging off the interests of rights holders has been a business decision. Period.

No doubt, many “digital rights” activists will prophesy the end of days for democracy in response to this trend toward platform responsibility; but they can take heart knowing that democracy hasn’t exactly thrived under the principles applied thus far. The assumption that all online interactions are protected speech, and that more speech is the only antidote to harmful speech, is still proving to be a destructive fallacy every second of every day. And it turns out the advertisers, whose money pays for these platforms of democracy, don’t accept that the answer to hate-speech and fake news is to just let it ride until our better angels eventually prevail. It turns out this is both bad for society and bad for business. It turns out money talks in Silicon Valley. And if that’s the only way to get internet companies to behave like citizens instead of bullies, then whatever works.

4th Circuit Remands BMG v. COX, But …

Good news for authors, creators, and sanity was delivered yesterday by the 4th Circuit Court of Appeals. Despite remanding the case back to the district court for retrial on a specific matter of jury instruction, the opinion eviscerates two of COX’s most strained interpretations of copyright law, either of which could have had devastating effects for rights holders. BMG Rights Management sued ISP Cox Communications for contributory infringement in 2014 and was awarded $25 million in damages in December of 2015. Cox appealed, and these posts from January 2017 and November 2017 detail the company’s key defenses with my commentary.

DMCA Safe Harbor Still Doesn’t Apply

In its appeal, Cox argued that the district court erred in denying it the safe harbor defense as provided in the DMCA. As noted many times, despite the rhetoric of “digital rights” activists, the safe harbor is not unconditional; and one of the conditions is that a service provider must have a repeat-infringer policy in place that ultimately leads to account termination. The circuit court agreed with the lower court that Cox’s “thirteen-strike policy,” which only tended to lead to account reinstatement did not fulfill the intent of the DMCA that a policy should act as a deterrent to repeat infringement.

Most bizarrely Cox argued on appeal that the term “repeat infringers” in the statute could only mean people who’ve been held liable for multiple infringements in a court of law. As noted in my January 2017 post, this would be almost nobody since very few individuals are ever defendants in a single copyright infringement case, let alone one that actually goes to trial. The appeals court rejected Cox’s claim in less prosaic terms, including the citation of congressional reports on the drafting of DMCA, which the court summarizes thus:

“The passage does not suggest that they [users] should risk losing Internet access only once they have been sued in court and found liable for multiple instances of infringement. Indeed, the risk of losing one’s Internet access would hardly constitute a ‘realistic threat’ capable of deterring infringement if that punishment applied only to those already subject to civil penalties and legal fees as adjudicated infringers.”

Denied Appeal to Sony

The other extraordinary appeal by Cox was its assertion that the jury in the district court should have been instructed to consider the ISP’s protection under the principle established in the 1984 Sony case, namely that its internet service can be used for substantially non-infringing purposes. As explored at length in my November 2017 post, were Cox to prevail on this point, it would effectively immunize all internet providers against any form of liability for copyright infringement, and this begs the question as to why the ISPs petitioned for the DMCA safe harbors in the late 1990s if Sony had already established this immunity.

The 4th Circuit called Cox’s appeal to Sony “meritless,” stating that in Grokster (2005), the Supreme Court clarified that simply because a product is “capable of substantial lawful use,” this does not preclude the possibility that the producer or provider can never be held liable for contributory infringement. “Because the instruction Cox requested misstates the law, the district court did not err in refusing to give it [instruction to consider Sony],” states the opinion.

Remand for Retrial

Where the appeals court agreed with Cox, and the reason for remanding for retrial, was in regard to the district court’s instructions to the jury on the standard of intent for contributory infringement. Again citing Grokster the opinion quotes, “[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement.” Thus, the word intentionally suggests a distinction between “knowledge” of infringing activity (or any crime for that matter) and “negligence” that may cause a party to inadvertently contribute to criminal activity. Because the district court instructed the jury to consider whether “Cox knew or should have known of such infringing activity,” the circuit court held this to be in error. The term “should have known,” is described in the opinion as equivalent to “negligence,” which is often insufficient to establish secondary liability for criminal conduct.

It will be interesting to see whether Cox opts for a retrial or proposes a settlement. The facts presented have already been viewed by a district court judge, a jury, and now an appeals court panel as compelling evidence that Cox knew about repeat infringers and adopted a policy of avoiding account termination in its own financial interests. In fact, my favorite example cited in the 4th Circuit opinion is this one quoting a company email:

“But when Cox received another complaint, a manager directed the employee not to terminate, but rather to ‘suspend this Customer, one LAST time,’ noting that ‘[t]his customer pays us over $400/month’ and that ‘[e]very terminated Customer becomes lost revenue.’”

So, even with new jury instructions, evidence like this suggests Cox would have a hard time convincing anyone it had no knowledge of infringing activity. But the reason this quote is my favorite is that it’s a twofer—not only implicating an ISPs attempt to stretch the law beyond reason but also giving lie to so many rationalizations for media piracy by users. I mean this dude has the money to pay his ISP about $5,000 a year for bandwidth but won’t pay for music, movies, games, etc.? Damn that’s some big-ticket hypocrisy right there. He could probably pay an ISP about 35% of that total, acquire his entertainment legally, and still save money.