Category: Copyright

Article 11 of the EU Directive Should Not Be So Controversial

As many readers know, the EU has been considering various proposals to better protect copyright owners in the European digital market.  In all cases, proposed legislation focuses on large, for-profit platforms that reap substantial revenues by exploiting copyrighted works without license or compensation.  And as usual, the large, for-profit platforms have sought to describe these proposals in hyperbolic terms—as threats to the rights and interests of internet users—rather than what they are:  an end to free lunch for the world’s largest corporations.

In simple terms, the twisted logic alleges that if, for instance, Google has to pay licensing fees for any of the content exploited on its platforms, the internet as we know it will be destroyed.  Fortunately, this kind of overwrought fear-mongering has lost a lot of mojo over the last two years, now that the internet giants have been outed as companies whose practices are antithetical to the pro-democracy values they had pridefully claimed to have improved upon through “disruption.”  

As reported in a guest post on The Trichordist, the apparent large-scale, grassroots reaction against the EU copyright directive online was not exactly manifest on the “Day of Action” asking flesh-and-blood citizens to attend various rallies in Germany.  “A projection based on 15 of the total of 27 events throughout Europe, which attracted a total of around 400 participants, suggests that the maximum number of participants across Europe would be 800, as there were also locations with no shows. Even in the home country of the Pirate Party, Sweden, more precisely in Stockholm, there were only 15 participants,”  writes Volker Rieck. So, one parenthetical irony to this broader narrative is the challenge, unique to this moment, that we must separate the real citizens from the bots making their voices heard on the issues.

Anyone who reads this blog regularly, knows that I think the entire premise that “the internet is the greatest tool for democracy” is untenable nonsense that should never have be taken seriously in the first place.  So, in that regard, “destroying the internet as we know it,” is not necessarily a bad thing, depending on what one means by “destroy” and “the internet.”  But more specifically, it is notbable that among the responses to the Russian-hack/Facebook fiasco of 2016, which ignited the ensuing “tech backlash,” we saw a dramatic increase in paid subscriptions to traditional news sources. (And this was after tech-utopians like Cory Doctorow et al predicted that subscriptions were the kind of “old model” impulses that would be fatal to those institutions.)  

What happened instead was that many people were so shocked by the rampant expansion of utter bullshit—including straight-faced lies being proclaimed from a new White House—that they seemed to lose their taste for “citizen journalism” and rediscovered an interest in sober reportage.  It is in this context, therefore, that I view the criticism by the internet giants and its network of cronies and ideologues, who have opposed Article 11 in the EU Directive, which would create a “publishers right” for the producers and publishers of news.  This adjacent right would allow the major news publishers to negotiate license fees to be paid by major news aggregators. 

Never a qualm about scaring the public, though, opponents to Article 11, many of which are funded by the internet industry, have labeled the proposal a “link tax,” and that is some high-octane spin, implying that individuals or small-scale users would have to pay for hyperlinking to articles.  This is not only untrue, it most certainly would not be “tax,” since taxes are paid to governments and not private entities. 

At present, and still in development, the current draft of Article 11 is designed to apply solely to large-scale, for-profit aggregators of news.  So, a European blogger or not-for-profit organization would continue to hyperlink for free just as they do now, without disruption.  Opponents of Article 11 have cited examples of the “failure” of similar policies implemented in Germany and Spain, but those declarations appear to be overblown or simply misleading.  In Germany, for instance, there is no evidence of success or failure since the legislation itself has been challenged and is still being litigated.  

In Spain, “failure” has been defined as Google shutting down Google News in that country for a period, which is an odd way to interpret what looks a lot more like one corporate giant using its market-dominant position in an effort to bully policy in its favor.  (Truly a “my rules or I’m taking my ball and going home” response.)  Regardless, the Spanish market has apparently rebounded from that initial reaction, and various publishers have negotiated licensing agreements with aggregators other than Google.  

In a future post, I will try to dig into more detail regarding Article 11, but for now, it looks pretty simple.  Creators who produce works want large corporations that exploit those works to pay for the use.  And the parties opposing this proposal are distorting it into yet another (I know I’ve lost count) existential threat to the internet.  Whatever the that means.  

Streamlined 1201 Rule-Making Procedure & EFF’s Constitutional Challenge

In July of 2016, the Electronic Frontier Foundation filed a lawsuit alleging that Section 1201 of the Digital Millennium Copyright Act (DMCA) is unconstitutional.  More recently, in September, Cory Doctorow announced the EFF’s “Project Apollo” vowing to “end DRM within a decade.”  I personally tend to think of such high-drama tilting at windmills as mostly a fund-raising strategy for EFF, and one detail from the Copyright Office’s Final Report on the Seventh Triennial Proceeding demonstrates why.

For review, Section 1201 of the DMCA contains the statutes prohibiting the circumvention of technical protection measures (TPM) used to protect copyrighted works stored on digital media.  Also known as Digital Rights Management (DRM), technical measures generally means encryption software used to prevent access to digital files like movies stored on DVDs or the software running systems in our cars.  

By law, the USCO must conduct a triennial review of Section 1201 and consider petitions for exemptions to its prohibitions.  Petitioners are grouped into various “Classes” based on proposed rationales for exemptions.  For instance, exempted classes have included researchers, who want to circumvent TPM in order to test safety or security systems; teachers, who want to “rip” film clips from DVDs for use in classroom instruction; or creators like documentary filmmakers who circumvent TPM in order to copy segments of motion picture clips for their films. 

Does the New Streamlined Process Militate Against the Constitutional Challenge?

A key allegation in EFF’s constitutional challenge to 1201 is that because the triennial review is slow and cumbersome, the process amounts to a prior restraint on otherwise protected speech.  In particular, the need for an exempted class to re-petition the USCO every three years places a substantial burden on parties wishing to engage in conduct protected by the First Amendment—and which has previously been exempted by the Copyright Office. 

But, as alluded to in my July post, one flaw with this challenge on First Amendment grounds is that the USCO actually agreed with the complaint about the re-application process and so implemented a new rule mandating that previously exempted classes need not reapply unless new objections are raised that require fresh review, for instance based on a change in law or market practices.

This most recent rulemaking procedure was the first implementation of the new streamlined process, and it appears to have had the desired effect.  Nine Classes of exemptions were renewed, including seven sub-categories in the Audio-Visual Class.  So, for instance, the teachers exempted three years ago are still exempted without the need to reapply.  In another example, the Motor & Equipment Manufacturers Association has now endorsed the exemption it objected to during the last rulemaking process, now referring to the USCO decision “as striking an appropriate balance between encouraging marketplace competition and innovation while mitigating the impact on safety, regulatory, and environmental compliance.”  

Another notable detail from this review, relative to EFF’s lawsuit, is that the Acting Register of Copyrights recommended expanding an exemption originally made for documentary filmmakers to now include a “subset of fictional filmmakers” who wish to use small portions of existing motion pictures in ways that would likely be considered fair uses.  In its lawsuit, the EFF hihglighted the USCO’s prior failure to include any “narrative” filmmakers in the last rule-making process as evidence of 1201’s “adverse impact on speech.”

One broad expansion of 1201 exemptions sought by EFF and others in this recent rulemaking procedure was a “Single Overarching Exemption for Purposes of Comment and Criticism.”  This proposal was rejected by the Acting Register, who found the petitioners’ approach too broad relative to the case-by-case analysis applied when considering fair use.  Characteristic of most parties determined to vitiate copyright, this proposal looks like yet another attempt to imply that copyright’s exceptions should be so overreaching as to render its protections meaningless.  

The USCO/LOC filed its Final Rule in this triennial procedure with the US District Court for the District of Columbia, and the EFF filed a response offering to provide a supplemental brief to support its allegation that 1201 is a “speech-licensing regime.” Otherwise, there has been no movement in the past two years on this litigation. 

On that score, even if the EFF’s 1201 case does proceed, I maintain that the decade or more of its prospective journey represents another anti-copyright boondoggle—a PR campaign akin to Lenz v. UMG—designed to keep donors and supporters active while achieving nothing.  As I mentioned in 2016, it seems absurd for EFF to dedicate its resources to this improbable constitutional challenge to 1201 rather than collaborate with the USCO, which continues to demonstrate a nuanced approach to balancing copyright’s protections with important exceptions to those protections.  

Will SCOTUS Close Cy Pres Loophole in Class Action Litigation?

Suppose there were a company whose minions went around whacking people in the head with two-by-fours.  Then, suppose that in response, the multiple victims of said whacking joined a class-action lawsuit against the corporation and won their case.  Now, imagine that rather than any damage award going to the plaintiff class members, the money instead went to various organizations, including non-profit and academic institutions, that advocate policies favoring two-by-four head-whacking by the very industry that includes the defendant company.  If that seems absurd, welcome to the often maddening outcome known as the cy pres award in the world of class-action litigation.

From the French cy près comme possible, meaning “as near as possible,” cy pres is supposed to provide a reasonable alternative to awarding damages stemming from class-action lawsuits where the members of the injured class cannot effectively be compensated by the penalties collected in settlement.  So, in my exaggerated example above, if ten million class members are whacked by two-by-fours, and the company settles for $20 million, it may not be practical to distribute two bucks a head (literally) to the class, especially after the plaintiff attorneys take their cut (more about them below).

So, in lieu of paying the class members themselves, the court may order a cy pres award to an organization, or organizations, that, in theory, work to benefit the class members’ interests indirectly.  For example, the money in my hypothetical scenario might go to the American Society for the Prevention of Two-By-Four Whacking.  But this is often not what happens.  

In fact, just the opposite occurs according to the petition granted cert by the Supreme Court in Frank v. Gaos, for which oral arguments will be heard tomorrow.  The petition alleges that district courts too-frequently approve cy pres awards without “rigorous analysis,” and this results in (among other problems) victim classes winning settlements that only serve to fund institutions who advocate on behalf of the very parties they sued.  

Cy Pres Awards Fund Google’s Anti-Copyright Agenda

The aberrant nature of cy pres awards is the basis on which three musician/copyright activists—David Lowery, Blake Morgan, and East Bay Ray—filed an amicus brief in Frank v. Gaos, written by attorney Antigone G. Peyton. The brief describes how cy pres awards, resulting from lawsuits Google has settled, end up funding policy advocacy that favors Google, including the company’s global assault on copyright law.  “Artists such as amici watch in powerless amazement as the lower courts allow millions in cy pres awards to be funneled to Google’s academic and nonprofit influencers through dubious class action settlements, …” the brief states.

For instance, the Electronic Frontier Foundation apparently received $1 million of the $17 million Google paid in 2011 to settle a consumer privacy lawsuit (the Google Buzz case) filed by the Federal Trade Commission.  An otherwise reasonable circumstance for issuing a cy pres award, this is just one example where Google wins for losing—paying a “fine” for one transgression that directly funds organizations that generally advocate public policy in its favor.  Plus, Google gets a tax break for giving money to non-profit institutions!

Thus, Lowery et al demonstrate, in context to the larger complaint against cy pres, how copyright owners are injured through what almost amounts to shadow funding of organizations and academic institutions that consistently attack copyright through litigation and amicus briefs, academic papers, and public communications. Other parties named in the brief as receiving Google money through cy pres settlements include Public Knowledge, the Center for Democracy and Technology, the Berkman Center, and Stanford’s Center for Internet and Society.  

The Bigger Picture

Naturally, the broader complaint in Frank v. Gaos demonstrates the negative effect of cy pres awards in class actions beyond complaints against the internet industry, although the litigants here do arise from yet another Google privacy violation case settled in 2010. The petitioners’ complaint lays out the means by which an $8.5 million settlement in that case first paid class counsel a substantial fee and then funded organizations with existing relationships to Google.  From the petition …

“There are recognized conflicts of interest between class counsel and the class, because the defendant cares only about its total cost of settlement, while every dollar going to class members is a dollar that will not go to class counsel’s fees.  In the absence of legal rules explicitly forbidding such gamesmanship, class counsel and settling defendants have a variety of gimmicks available in a class-action settlement to maximize class counsel’s proceeds while minimizing the cost of settlement to the defendant.”

Essentially, the courts’ tendency to “rubber stamp” cy pres awards in these settlements creates a powerful incentive for class counsel to abrogate its responsibility to the class members because counsel’s interests and those of the defendant become deviantly aligned.  To put it in stark terms, the attorney who graduated from Harvard Law has an all too-tempting opportunity to earn a substantial fee for himself and also negotiate a donation to his alma mater and call it a “win” for his clients, who get nothing.  

Further, the petition asserts a constitutional complaint arising from the fact that a cy pres award may infringe class members’ First Amendment rights by way of forcing them to support organizations or institutions they would never choose to fund.  For instance, because the AARP was one of six recipients of the cy pres award in this particular Google settlement, the petition states, “Petitioners also objected to being compelled as a class member to subsidize the AARP’s advocacy and lobbying on controversial policy issues, which petitioner Frank often opposes.” 

Few readers of this blog need to be convinced that “digital rights” organizations such as those mentioned above present themselves as a public-serving groups while advocating policy positions that are often insidiously industry-serving.  But at least direct donations by Google to EFF et al are clearly identifiable, while cy pres awards create a layer of obfuscation between the effective “donor” and the recipient of substantial operating funds.  

From the broader petition, it seems that every citizen who doesn’t want to be whacked by a metaphorical two-by-four has an interest in the Supreme Court’s decision in this case; but copyright owners should be keenly aware of the outcome in Frank v. Gaos for the reasons described.  As the amicus brief concludes, “Allowing cy pres awards to continue along their current path means that the courts are complicit in allowing Google to fund its network of academics, think tank partners, and friendly nonprofits at the expense of class members.”