Category: Intellectual Property

Petitioner Asks SCOTUS to Hear ReDigi Case

A new business called OmniQ has filed an amicus brief urging the Supreme Court to grant cert in ReDegi v. Capitol Records, alleging that the Second Circuit’s opinion in December 2018 effectively brings an end to the First Sale doctrine.  The company is developing a patent pending model that (presumably) would facilitate an online market for “used” and hard-to-find motion pictures.  Its brief contends that the lower court erred in its plain text reading of “reproduction” under the copyright law and would permanently “outlaw” the kind of technology they propose to introduce.

It is unlikely the Supreme Court will agree to hear ReDigi, not least because, as Hollywood Reporter’sEric Gardner rightly notes, “The issue of whether the First Sale Doctrine has survived the digital age may make for good scholarly articles, but is the Supreme Court really going to devote its limited bandwidth to technology that’s already outdated?”  ReDigi proposed to facilitate trade in “used” digital music files at the same time that subscription streaming was on the rise and may, therefore, be considered obsolete at inception. But in its brief, OmniQ implies that its business model fulfills an unmet need in the market by addressing what it claims is dwindling access to classic motion pictures …

…the public has already lost access to vast libraries of motion pictures and other audiovisual works, simply because modern technological solutions like the one at issue here are lacking.

…the breadth of choice in movies was many times higher 20 years ago than it is today.

I personally find the brief’s argument about the lower court’s interpretation of “reproduction” somewhat persuasive when it states “there is no ‘reproduction’ without the multiplication of copies.” If in fact a file can be moved from my hard drive to your hard drive so that you now have it and I do not, then it there is a plausible argument to be made that “reproduction” has not occurred.  But from there, I think OmniQ’s claims overreach, blaming copyright protections for phenomena fostered solely by the market and technological change.

First Sale Probably Does Not Survive the Digital Age

Even if the Supreme Court were to agree with OmniQ that the Second Circuit misread “reproduction” in ReDigi, this would not rescue the fact that the proposed business model exceeded the purpose of the First Sale doctrine because it would create a “used” market in name only—one that could theoretically become a substitute for the primary market.  In 1908, the Supreme Court held…

“It is not denied that one who has sold a copyrighted article, without restriction, has parted with all right to control the sale of it. The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.”

And for the next century, physical copies of books, records, DVDs, etc. were sold in second-hand stores, garage sales, or rented through outlets like Blockbuster.  But the fact that a “used” digital file is identical to a “new” digital file is a technological reality that reshapes the meaning of “second-hand” material, and this at least alters—if it does not outright extinguish—the First Sale principle.  

Further, the potential for a transaction facilitator (which OmniQ presumably aspires to be) to foster a parallel trade in “used” digital files operating at internet scale is a vastly different consideration from the scope and nature of the secondary market that emerged between 1908 and the digital age. 

Finally, these same technological changes have spawned a primary market that (despite persistent complaints that all media should be free) is both cheaper and more abundant than the primary market of 20 years ago.  For example, The Criterion Collection, while perhaps not wholly satisfying to all film buffs, allows an account-holder to stream a library of motion-picture classics for about 27 cents a day—access that was unthinkable 20 years ago.  

In the still-evolving digital market, therefore, a petitioner like OmniQ should at least be required to demonstrate that its purpose is to facilitate a “second-hand” trade in material that is not likely to become available via licensed distribution systems—whether online or as physical copies.  And in this regard, the brief makes an emotional and cultural plea that fails to present a problem caused by copyright law.  

“1960 Doesn’t Exist on Netflix”

To demonstrate the market need for its business model, OmniQ relies almost entirely on one article written by Zach Schonfeld in 2017 for Newsweek.  It is an engaging piece on the theme that motion pictures from the oeuvres of Hitchcock, Truffaut, Fellini, Kubrick, et al are disappearing from mainstream cultural literacy.  The spirit of the piece which focuses almost exclusively on Netflix, is well captured when Schonfeld quotes blogger Nora Fiore (a.k.a. The Nitrate Diva) …

“If you’re the biggest name in film streaming services, the less you offer in classic movies, the more you imply that classic movies have less to offer.  It’s a terrible message to put out there.”

Perhaps this is a fair observation about contemporary culture and the movies, but the reasons for these changes have little or nothing to do with copyright law and everything to do with the inevitability that Netflix was going to transition to become a producer of new material. 

Before I go on, I have to interject that it is curious that in one moment, copyright is alleged to be a framework for nostalgic fuddy-duddies who don’t understand the future, but in the next moment, it is the nostalgic fuddy-duddies who are blaming copyright for stifling connection to the past.  Or I might also note that one of the complaints about copyright terms is the false allegation that creators will not produce anything new as long as they retain copyrights on older material they can keep reselling.  Maybe there are forces at play that are not really about copyright?

Speaking as one nostalgic fuddy-duddy who would rather watch Day for Night than Game of Thronesany day, the problem (if we agree it is a problem) with the apparent loss in status of classic films in the cultural mainstream is not a licensing issue.  Netflix could make all these films available tomorrow, and I predict that younger audiences will, by and large, think they’re being told to eat their vegetables.  

It isn’t copyright’s fault that a whole generation has been feasting on a steady diet of short-attention-span, handheld video clips for more than a decade.  The young mind does not easily transition from TikTok to Tarkovsky, and availability of the latter alone is not going to fill the apparent gap in cinematic literacy. Piracy statistics bear this out year after year as even illicit access worldwide continues to favor major, contemporary works like blockbuster movies by substantial margins.  

As an observer of culture and a cineaste, I would love to join Schonfeld and the film historians, academics, and buffs he cites for a drink to mourn the apparent loss of interest in the classics, but this was to be expected in a market destined to expand and become more segmented.  It should be little surprise in a world where we can have “liberal news” and “conservative news,” that entertainment is going to be even more distinctly subdivided.  

On the plus side, we get a diverse range of material and subject matter because investors are not restricted to appealing to the safe middle every time.  On the negative side, we no longer share a common film culture as we once did.  But this is a change borne of technological innovation in distribution systems that has nothing to do with copyright per se. 

Further, I think Schonfeld’s article is unduly harsh on allNetflix offerings as being substandard when he writes, “The universal power of boredom guarantees that any piece of Netflix programming will be watched by millions simply by virtue of being plastered across the Netflix homepage.”  This complaint that Netflix does not host a library of classics that Schonfeld et al believe it should is not especially helpful to OmniQ’s purpose.  After all, this is familiar territory. When David Lynch’s Blue Velvet was released in 1986, the box-office winner that year was Top Gun. It was ever thus.

Which Market is OmniQ Really Trying to Serve?

Serious film buffs have long been a niche audience who, by and large, have had to spend extra resources in the pursuit of their passion.  In many ways, I can only imagine that film-buffery is easier today because one can enter a title into various search tools and locate, for instance, a used DVD someone is willing to sell.

Presumably, OmniQ wants to facilitate the same kind of one-to-one transactions in titles that would-be sellers own as digital files on hard drives rather than plastic disks.  And it is not an unreasonable premise to claim that First Sale should apply to this kind of trade so long as the number of copies in circulation remains fixed and never increases.  A problem arises, however, when an enterprise facilitates this trade at scale in works that are available through licensed channels; and it is not clear which market OmniQ proposes to serve.

If OmniQ is focusing on the serious collector looking to obtain a digital file of a hard-to-find title by Ernst Lubtisch, they may have a reasonable legal argument, but possibly not a viable business.  If instead, the company is responding to a declining interest in classics like The Apartmentor Spartacus (both named in the Schonfeld’s introduction), availability is not the underlying cause of this cultural phenomenon.  These and other popular classics are widely available through existing channels, including streaming, and this weighs against OmniQ’s claim that First Sale remains relevant in the digital age.  

As mentioned, it seems highly unlikely the Supreme Court will hear ReDigianyway, but even if it were to overturn the Second Circuit opinion on “reproduction,” I suspect OmniQ would still have a lot of homework to do in order to prove that its business operates within the spirit of First Sale.  I do not think one magazine article, no matter how much I personally agree with the spirit of its commentary, is going to support OmniQ’s argument with regard to copyright law.  

Masnick Calls CASE a Big Media Bill?

From the Techdirt Sycophants Department

In his post of May 28, Mike Masnick dutifully opened his hymnal and joined the chorus in a rendition of “How to Criticize the CASE Act,” lending his bel canto to the refrain that the new law would create a “copyright trolling court.”  As explained here and here, this is an inscrutable criticism because the Copyright Claims Board will actually be a lousy venue for copyright trolls—principally because it is a voluntary resolution option.  But if you don’t believe me about that, Mike’s further implication that CASE is a Big Media proposal and the product of “soft corruption,” is so transparently illogical that you may dismiss the allegation by applying a modicum of common sense.

Wanting readers to believe he speaks truth to power, Mike employs a little misdirection with the following innuendo about two of the bill’s lead sponsors:

“We should note, that the House bill is sponsored by Rep. Hakeem Jeffries, along with Jerry Nadler. You may recall that those two Congressman were recently seen hosting a giant $5k per ticket fundraiser at the Recording Industry’s biggest party of the year, the Grammys. And, right afterwards, they suddenly introduce a bill that will help enable more copyright trolling? Welcome to the world of soft corruption.”

Yes, that’s what happened.  The CASE Act was drafted on the back of a napkin at the Grammys party. (Stand by for Mike to accuse me of straw man because he did not literally say this.)

In Reality Land, I suppose we can ignore the fact that a small claim copyright proposal has been floating around Capitol Hill longer than Rep. Jeffries has been a Member of Congress—and, for that matter, longer than the bill’s other main sponsor Rep. Doug Collins of Georgia.  But I guess Collins wasn’t at the Grammys and so doesn’t fit Masnick’s conspiratorial narrative?  We might also ignore the fact that CASE has solid bi-partisan support, even from Silicon Valley Rep. Zoe Lofgren, and that the only effective (albeit unreasonable) opposition in the last two or so years has come from the Internet Association and the Computer and Communications Industry Association.  But what readers should not ignore is their own basic ability to reason, which ought to sound something like this …

BIG MEDIA COMPANIES DON’T GIVE A DAMN ABOUT COPYRIGHT SMALL CLAIMS.

Mike’s implication that Jeffries and Nadler partied with the RIAA and “suddenly” introduced a bill is just wrong as a matter of public record, but even if nobody wants to bother looking that up, you might then ask what possible interest major record labels or movie studios or any other Big Media companies have in creating a voluntary, small-claim, alternative-dispute provision for copyright infringement?  As Mike himself is very fond of reminding people, these are powerful corporate entities with high-octane attorneys on staff.  There is nothing in the CASE Act for these companies.

I know it’s hard to fathom, but the CASE Act is a rare example of bi-partisan legislation designed for regular people—middle-class creators who have almost no affordable path to remedy unlicensed uses of their works.  And thanks in no small part to tech-evangelists like Techdirt, online infringement is both rampant and misconceived as acceptable, even by commercial users who ought to know better. 

Mike should go back through all the articles and public statements he’s ever made on the theme that he “supports creators” but wants “balanced copyright” and feel obliged to eat every one of those words.  CASE is about balancing copyright.  It proposes to level the playing field for little guys who are getting clobbered by the policies and practices of the tech giants, which only makes Mike’s implication that it’s a Big Media bill all the more offensive.  I know attorneys who think CASE might not work, which is at least thoughtful criticism based on its actual mechanisms, but misrepresenting the Copyright Claims Board as a processing center for invalid damage awards is just mean-spirited considering the kind of people it is designed to help.

At this point, it would be grand if Mike and the legal pundits who write the songbooks from which he so often sings would just admit they don’t like copyright and will vigorously oppose any kind of enforcement no matter what.  That would at least be honest.  Still obnoxious, but not patently absurd.

Has the Server Rule Reached its End of Service Date?

“Solicitude for certain current Internet practices fails to acknowledge the troubling effect the server rule has had on creators and copyright owners, particularly photographers, whose works become subject to mass unauthorized and uncompensated exploitation through third-party embedding.  By converting the display right into an atrophied appendage of the reproduction right, the server rule ignores Congress’s endeavor to ensure that the full “bundle” of exclusive rights will address evolving modes of exploitation of works.”  

Can I get an Amen?

A new paper published in the Columbia Law Journal by Jane C. Ginsburg and Luke Ali Budiarjo anticipates what the internet could look like without the so-called server rule and, in conclusion, asserts that to most users, it would look very much the same but that copyright owners could see a significant improvement in their ability protect their “making available” rights, primarily the right of “public display.” 

Simply stated, the server rule holds that when a user embeds code that causes a work to appear on a web page, this conduct never infringes the public display right solely because the user is “pointing” to the file on a server he does not control.  The “rule” stems from the 9th Circuit decision in Perfect 10 v. Amazon in 2007 and has generally served as a blanket immunity for this type of linking, most commonly when displaying photographs and other visual works.

The problem for creators is fairly obvious.  When any party causes a work to be publicly displayed without permission, the method by which that display is made is both invisible to viewers of the work and irrelevant with regard to the copyright statute.  If you see a photograph on this blog or in a news article, you perceive it as a seamless display in conjunction with the text, and it makes no difference to the owner of that photograph whether I’ve uploaded it to the bit of server space I control or have embedded code to point to the photo on some other server I don’t control.  

This meaningless distinction from the photographer’s point of view is what the quote above means by saying the server rule has been “converting the display right into an atrophied appendage of the reproduction right.”  Both rights are protected by statute, so the distinction that the infringing use of a work is permitted because “no copy has been made” does not suit any reading of the law.  

Ginsburg and Budiarjo reject what they call the “fulminating” of the Electronic Frontier Foundation, which has asserted via amicus brief that any weakening of the “server rule” would (you know the drill) break the internet.  And it is important to note that we’re not talking about all forms of linking in this context, though this would not necessarily stop EFF et al from launching a #savelinking campaign if the courts continue to amend their positions on the server rule as they have done lately.

On May 30, photographer Justin Goldman reached a settlement with Time Inc. in the litigation stemming from the unlicensed display of his photograph made by several news media organizations. (See posts here and here.)  This settlement follows a decision in a New York District Court in February of 2018 that, according to Ginsburg and Budiarjo, is exemplary of a trend in which the courts have begun to take a more nuanced look at the 2007 Perfect 10 decision  and have recognized the effect of the server rule on the display right and the copyright owners of visual works.  Judge Katherine B. Forrest concluded in Goldman …

“Having carefully considered the embedding issue, this Court concludes… that when defendants caused the embedded Tweets to appear on their websites, their actions violated plaintiff’s exclusive display right; the fact that the image was hosted on a server owned and operated by an unrelated third party (Twitter) does not shield them from this result.”

Thus, Ginsburg and Budiarjo explore in their paper what the effects might be if courts were to continue in this vein and un-write the twelve-year-old server rule. Their main conclusion is that largely un-litigated aspects of the DMCA already lay the foundation for sufficient liability shields for both individuals and platforms but that the “server rule” has largely prevented courts from considering “whether embedding content via a hyperlink qualifies for the §512(d) safe harbor defense because such an act was, as a matter of law, not copyright infringement.”

If this sounds like a distinction without a difference, the important shift (to the extent that I can fairly summarize a sixty-page paper) is that rather than blanket immunity based entirely on the method of effecting a display, the liability shield would be properly placed, as DMCA anticipated, on a user’s knowledge that his/her/its use is infringing.  For instance, the paper contends that a user who embeds code that unintentionally points to an infringing host of a work would be shielded from liability by the provisions of the DMCA and, therefore, does not need the server rule.  

Meanwhile, this shift in jurisprudence would enable owners of works like photographs to enforce their display rights and, therefore, control and license the means by which their works may be used, whether they are copied or “pointed to” by embed code.  Ginsburg and Budiarjo lay out various reasons why this change would not lead to a “flood of strict liability claims against everyday Internet users,” but they instead argue that reversal of the server rule would produce enough change in the practices of major platforms that one result would be a general shift in awareness that not every work within reach of a cursor is free to exploit online.   

“…the reversal of the server rule may chip away at the widespread belief that the Internet is a realm in which the intellectual property rules of the offline world do not apply….Internet users may perceive, over time, that the online services they use every day and perhaps take for granted will change—whether as a result of lawsuits from copyright owners or negotiated agreements with the agencies or collectives who represent them—in ways that signal that dominant technology companies are not exempt from the laws that govern the dissemination of works of authorship simply because they do business in cyberspace.”

Can I get another Amen?

There are a lot of moving parts in this paper for the hard-core copyright wonks; but perhaps the most essential general takeaway for everyone is that it very reasonably observes that the “rules” of the still-evolving internet must also be still-evolving.  And those who seem to feel that decisions made ten or twenty years ago are sacrosanct deserve more than a little skepticism.