Category: Intellectual Property

Intense Accusations in Schneider Class Action

When one files an allegation of fraud in court, one must present evidence. No, I am not referring to that freak show of litigations about the 2020 election that have been tossed out by over fifty federal courts, including the Supreme Court. I’m talking about YouTube. As discussed in this July post, composer Maria Schneider leads a class action lawsuit against YouTube, alleging that the platform knowingly facilitates copyright infringement of the musical works belonging to the putative class.

At the heart of the Schneider complaint is the fact that YouTube makes its copyright management system Content ID available only to institutional rightsholders with huge catalogs, while leaving independent copyright owners to fend for themselves—i.e. one DMCA notice at a time with no automated detection of infringing files. As noted in that earlier post, Schneider’s complaint presents several arguments whereby YouTube could be found to have voided its DMCA safe harbor, including allegations of “red flag” knowledge of infringement. This suit is also occurring at the same time that Congress has been reviewing the DMCA; and the chronic allegation that platforms like YouTube play fast-and-loose with the knowledge standard will very likely be addressed in any proposed legislative changes.

In September, YouTube filed a counterclaim seeking dismissal on the grounds that Schneider’s co-plaintiff Pirate Monitor LTD used anonymized agents to “fabricate infringement claims by having its own agents upload material from its copyrighted works to YouTube.” The platform alleges that Pirate Monitor engaged in this practice in order “to obtain access to [its] copyright management systems.” In addition to its allegation of fraud, YouTube avers that Pirate Monitor’s actions are an example that justifies its policy of limiting access to Content ID because, it states, some parties cannot be trusted with such tools.

That is one lulu of an accusation, to which Pirate Monitor responded in a brief filed in November that YouTube provides no evidence in its counterclaim of any relationship between the anonymized uploaders of the files in question and Pirate Monitor. The response argues that YouTube’s counterclaims “rest solely on conclusory allegations,” that its assertions of fraud do not meet the evidentiary standard under the rules of civil procedure, and that YouTube lacks the standing to request injunctive relief for the alleged harm caused by the alleged fraud. More broadly, the response accuses YouTube of trying to change the subject, “to spin this case away from being about YouTube’s facilitation and inducement of copyright infringement, and make it instead about who can and cannot be ‘trusted’ to use Content ID.”

I am not about to assert any comments of a factual nature without facts in hand. We’ll see what evidence is, or is not, presented. But I will reiterate that the soul of Maria Schneider’s complaint expresses precisely what hundreds, or thousands, of independent creators contend with on a piracy-rich landscape like YouTube. As noted in the first post, this suit reprises several matters of unfinished business left in limbo after Viacom and YouTube settled their copyright infringement suit in 2014.

At issue then, as it remains today, is evidence suggesting (or even proving) that YouTube’s operators have knowingly attracted and retained highly lucrative market-share by walking the razor’s edge of its responsibilities under the DMCA. In that spirit, YouTube’s preliminary statement in its counterclaim is a cue for a spit-take if nothing else. “Since its founding in 2005,” the brief begins, “YouTube has gone far above and beyond its legal obligations to assist copyright holders in protecting their rights.”

That self-congratulatory assertion hardly squares with the record. When Google acquired YouTube for $1.65 billion, the platform had achieved category-killer status based on a policy of copyright infringement. And although YouTube developed Content ID as a semi-compromise with the corporate rightsholders, it has done nothing for the countless small and independent creators whose works are used and monetized without permission. That story doesn’t even satisfy the industry’s bombast about supporting entrepreneurial creators, let alone anyone’s definition of “going above and beyond.”

Google v. Oracle XII : SCOTUS Should Not Remand on Fair Use Review

As mentioned in my last Google v. Oracle post, the Supreme Court devoted considerable attention during oral argument to addressing the standard applied by the Federal Circuit when it determined as a matter of law that Google’s copying of Oracle’s code was not fair use. Google maintains that the Federal Circuit failed to show proper deference to a jury decision, and I discussed the constitutional and historical aspects of this argument in an earlier post. Oracle’s response argues that the Federal Circuit performed essentially the same function on appeal that courts perform all the time at summary judgment, where the vast majority of fair use cases are decided.

The reason why so much fair use jurisprudence occurs at summary judgment is simply a practical reality of litigation. When a party moves for summary judgment—for instance, a defendant who presents a fair use defense to an infringement claim—the court must assume that the facts favor the non-moving party and then consider whether there is any genuine dispute as to a material fact and whether the moving party is entitled to judgment as a matter of law. Once a court rules as to whether (or not) a fair use defense will survive, that decision is so important to the legal positions of the two sides it is often the end of the case.

Google asserts that the Federal Circuit erred when it decided the fair use question. Indeed, several amici in support of Google argued that overturning the jury in this instance was a misstep under the rules of civil procedure and a violation of the Seventh Amendment. Counsel for Oracle, Joshua Rosenkranz, noted at oral argument that Google went so far as to assert that “only a jury can balance the [fair use] factors.” Assuming Oracle’s characterization of Google’s argument is accurate, Google is simply incorrect. Obviously, fair use is a matter that may be considered exclusively by the courts, since most of the time, it is. As the Federal Circuit opinion in this case states:

“The fair use question entails … a primarily legal exercise. It requires a court to assess the inferences to be drawn from the historical facts found in light of the legal standards outlined in the statute and relevant case law and to determine what conclusion those inferences dictate….the exercise of assessing whether a use is fair in one case will help guide resolution in all future cases.”

The Supreme Court may consider whether remanding to the Federal Circuit for review “under a more deferential standard [of review],” as Justice Gorsuch put it, would have a deleterious effect on future summary judgment proceedings. And I may be over-speculating here, but remand seems unlikely. If the Court finds that the Federal Circuit correctly applied its fair use analysis and solely weighed questions of law, then any lingering matters regarding deference—if they are found to exist at all—do not seem compelling enough to delay the Court from ruling on both the review standard and the fair use finding. After all, this case is already more than ten years old.

No Reasonable Jury…

According to Oracle, the Federal Circuit correctly applied the “no reasonable jury” standard in deciding fair use as a matter of law. Does this mean the jury was unreasonable? No. It means fair use, to put it in technical terms, is a pain in the butt. Professional creators struggle with it; attorneys struggle with it; and courts struggle with it. And the trickiest aspect of fair use is acquiring a sensitivity to the interdependence of the four factors, which, unsurprisingly, a jury is unlikely to possess.  

What the Federal Circuit determined was that the jury resolved disputes of historical fact in favor of the verdict (and this was reviewed with deference), but that the jury arrived at incorrect legal inferences drawn from those facts (and this was reviewed de novo). Thus, the appellate court found that, even deferring to the fact finding, Google’s copying was not fair use.

I suspect the Supreme Court will not find that the Federal Circuit applied the wrong standard, unless there is some arcane bit of civ pro flaw in the mix that eludes me and the litigants. The appellate court followed Ninth Circuit precedent (because that is where the parties would have filed had there not originally been a patent claim in the suit), and it seems to have very clearly articulated how it separated questions of fact from questions of law before proceeding with an in-depth fair use analysis. And the review considered the same questions of law judges consider on summary judgment, where fair use is so often decided. For these reasons, I imagine the Supreme Court will not remand but will instead rule on the fair use analysis itself and either agree or disagree with the Federal Circuit’s findings.  

Separating the Factual from the Legal in Fair Use

Under factor one (the purpose and character of the use), the Federal Circuit correctly separates the factual question of a use with a commercial purpose from the legal implication of a use with a commercial purpose. The opinion notes that Google’s commercial intent here is undisputed (how could it be when Android is worth billions?) and that the jury was instructed that commerciality generally weighs against fair use as a matter of law. The court then correctly identifies transformativeness as a legal question and spends nearly six pages explaining why Google’s use of the Java code superseded the purpose of Oracle’s original work and was, therefore, “not transformative as a matter of law.”

Under factor two (the nature of the work), the analysis is generally dominated by separating factual works, which are more often subject to fair use, from expressive works, which are less often subject to fair use. Acknowledging that computer code can be complicated because it is an expressive work of a highly functional nature, the Federal Circuit sensibly held that the jury could have decided that the functionality favored fair use under factor two, but that the factor itself did not weigh heavily overall. This opinion should be little surprise to Google and several of its amici, as they have made precisely the same argument in cases involving the use of expressive books and photographs.

The more that a single factor teeters on the centerline, the more determinative the other factors become. But to reiterate the broader point, there appears to be nothing novel about the Federal Circuit’s approach to separating the factual from the legal and opining solely on the legal under factor two.

Factor three (the amount and substantiality of the portion used) tricks a lot of people. A user might copy a fraction of a work and be justly found guilty of infringement because the third factor is a qualitative analysis that asks whether a user has copied the “heart” of the work. Alternatively, a user might copy a whole work and have the use fall within the fair use exception.  This is not to say that the fair use analysis is capricious—rather, this is one case where we really see the interdependence of the four factors.

Google argued that it only copied the bare minimum of what it needed to achieve its purpose, and it further adds that it used only a fraction of all Java code. But this ignores the Federal Circuit’s finding that the parties did not dispute that only 170 lines of code were necessary to “write in the Java language.” Thus, the appeals court found it significant that Google copied 11,330 more lines of code than it needed. Further, the Federal Circuit opined that “no reasonable jury could conclude what was copied was qualitatively insignificant, particularly when the material copied was important to the creation of the Android platform.”

Related to this consideration, note that although the word “purpose” is not stated in the third factor, Google’s defense and the Federal Circuit’s reference to how much code Google “needed to” copy demonstrates how the third prong consideration is influenced by the first factor finding. Purpose is highly determinative of fair use.  For example, in Campbell v. Acuff-Rose, the Supreme Court made clear that 2 Live Crew’s intent to parody “Oh, Pretty Woman” allowed a very liberal taking of the “heart” of the original material.

Every user has a purpose, and juries can be tripped up when that purpose results in something new and significant like a mobile operating system that attains Android’s market share. But it is important not to be distracted by the fact that Android is a big deal because this market reality does not tell us whether Google made a transformative use of Oracle’s code as a matter of law. And if transformativeness does not exist under factor one, then copying what may seem like a small portion of a work is more likely to tilt away from a finding of fair use under factor three. Ultimately, the Federal Circuit found that the third factor was either a tie or weighed against fair use.

Under the fourth factor (effect on the actual or potential market for the original work), if factor one weighs against fair use—especially with a commercial use—then odds are that the effect upon the potential market for the original author will be considered harmful. Further, under the fourth prong, the courts assume that upon a finding of fair use that the use in question will be repeated by other users. Thus, courts take an expansive view of “potential” market harm in the factor four analysis.

Here, the Federal Circuit held that the jury drew incorrect inferences about potential market harm and held that no reasonable jury could have imagined that no actual or potential market harm would fall upon Oracle’s protected work. It rejected Google’s arguments that Oracle 1) is not a device maker; and 2) had not yet built its own smartphone platform. To the untrained juror, these two points seek to emphasize Google as innovator using a work to exploit a market the original author never intended to enter, but the appellate court rightly observes that these facts are irrelevant as a matter of law under factor four.  

The problem with Google’s arguments here is that they both clearly ignore that a copyright owner has a right to the potential market for lawful derivative works. One does not say to an illustrator that because she has never been a comic book producer, she is denied the exclusive right to license her imagery for a graphic novel. One also does not say to the sculptor that if another party makes tea cozies out of her designs, she’s out of luck because she did not think of doing so first. These would be errors of law, both with regard to fair use factor four and Section 106(2) of the Copyright Act, which provides the exclusive right to prepare derivative works.

So, based on my rereading of the Federal Circuit fair use opinion, it appears to have properly and extensively separated the factual and legal considerations in Google v. Oracle, considered the legal questions de novo, and correctly found as a matter of law that under the historical facts, no reasonable jury could have found fair use. I will be very surprised if the Supreme Court does not agree with the appellate court’s analysis and, therefore, even more surprised if they find any complaint about the standard of review compelling enough to remand.

As DMCA Review Gets Real, Anti-Copyright Rhetoric Gets More Surreal

Among the reasons I defend copyright is that I firmly believe it is inadvertently one of the most profound expressions of democratic principles in the American Constitution. When the Framers essentially transposed English copyright into Article I of the Constitution, they could not possibly have imagined the full value—cultural, economic, and political—of vesting authors, with both the moral and pecuniary rights that would be embodied in copyright law. But as much as I will eagerly advocate those rights, I will not betray broader principles to achieve that goal. If the current precariousness of the Republic should remind us of one lesson above all, it is that, in America, means remain vastly more important than ends.

Sadly, too many Americans across the political spectrum have broken faith with that principle, including those who would weaken, or even destroy copyright. For instance, Techdirt founder Mike Masnick appears to be a Democrat (based on his tweets and other writings), and is certainly not a Trumpian. Nevertheless, the site he edits published a post on November 18 by Daniel Takash that begins as follows:

I’m certainly not the first person (especially on Techdirt) to point out that if conservatives are really concerned about online censorship, they should be putting copyright law under the microscope, rather than, or at least in addition to, Section 230.

This is what happens when someone cares more about a specific agenda than they do about the broader, moral implications of how they advocate that agenda. Here, Techdirt is so determined to blast copyright law that it publishes a post in which Takash gives credence to the false narrative that social platforms have been censoring conservative views. As I have argued in several posts, this accusation only has merit if one’s definition of “conservative” is an ideology of lies and wild conspiracy allegations that undermine the rule of law, basic decency, and public safety. That is a stigma the GOP is going to have to resolve as the Trump effect (we can only hope) begins to wane, but at the moment, it is a dangerous narrative that should not be given air in the service of any policy goal. Period.

Noting that the discussion about Section 230 emanating from the White House, and oozing into congressional hearings, can best be described as incoherent and futile, Takash is effectively asking that the same kind of inarticulate vitriol be slung at copyright law in the name of “conservatism.” His post alludes generally to “Trump’s troubles” with the use of copyrighted works in campaign videos and rallies, as if to imply first, that rightsholders have no interest in how their works are used; and second, that the use of works in political statements is not a complex issue. Instead, Takash simply invites “conservatives” to adopt the view that copyrights are tantamount to censorship.

Maintaining sound copyright laws has enjoyed bipartisan support throughout the history of the country, and many of its strongest advocates have been Republicans. One of my favorite colleagues with whom I regularly discuss copyright is a lifelong Republican, and the fact that we approach policy from different ideologies only adds to the richness of the conversation. That’s the way Congress used to work (at least more than it does now), and in the tiny, obscure world of copyright law, it still works that way—a bipartisan conversation in which nearly every Member agrees with the premise that American creators are essential and that copyright law is a constitutional principle that has capably stood the test of time.

Section 230 should be reviewed soberly and rationally—not because it shields platform “censorship,” but because it shields criminal conduct that destroys, or nearly destroys, people’s lives. But that has nothing to do with copyright law, which is being reviewed appropriately and apolitically. In contrast to the Section 230 noise that has lately rumbled on Capitol Hill, the review of the Digital Millennium Copyright Act (DMCA), led by Chairman Tillis of the Senate Judiciary Committee has been orderly, rational, and not in any way subsumed by the political circus that has distorted a wide range of other policy matters.

Last week, Chariman Tillis published an open letter asking stakeholders to provide input for potential revision to the DMCA. Comments are due on December 1, and after review of that input, the committee is expected to present draft legislation on December 18. The Tillis letter poses fifteen questions spanning many topics for consideration. These points summarize the findings by the committee after its yearlong process hosting hearings and conducting internal review into whether the DMCA has fulfilled its purposes as Congress intended 22 years ago. The topics in the letter also echo the Copyright Office report on Section 512 of the DMCA, which recommends the law should be updated.

As most readers know, copyright owners, especially small and independent owners, have told both House and Senate Judiciary Committees that DMCA Section 512 does not come anywhere close to working as intended. The statute, which provides conditional immunity for online service providers that unintentionally host copyright infringing material, has been a complete failure for the independent creator, and extraordinarily burdensome for the institutional copyright owner.

The day-to-day reality of implementing Section 512 betrays Congress’s expressly stated anticipation that OSPs and rightsholders would collaborate to keep infringement down to a manageable scale. Instead, the immunity provided by the statute has functioned as a disincentive for OSPs to mitigate infringement, thereby allowing some of the biggest companies in the world to profit from infringement at a scale worth billions of dollars over the past two decades.

Because Section 512 shares a core principle with Section 230 (i.e. the premise that the OSP should not be liable for the conduct of its users), the two statutes are often conflated in the blogosphere, and occasionally confused by the press, which might carelessly refer to 230 and copyright in the same sentence. But because the two provisions grant different types of legal immunity to some of the most powerful companies on Earth, another attribute they share is that Big Tech will spare no expense defending the status quo of both laws. And in that endeavor, they can be counted upon to exploit all the confusion they can muster. This is the simplest explanation for Takash’s illogical (and frankly immoral) appeal to “conservatives” to embrace a copyright is censorship ideology.

As legislative proposals become available, I will follow up with commentary on the nuts-and-bolts in that process. But as a preliminary observation, it is hard to imagine that at least some revision to 512 will not be proposed, and creators should be prepared for Silicon Valley’s network of anti-copyright proxies to launch a well-funded assault to defend the territory it has so effectively usurped.