Tag: Featured

New Paper Takes on the Myth of Free

Zeno’s Paradox describes physical change as an illusion. Zeno of Elea, in the 5th Century BCE, postulated that in order to travel any distance, one had to first travel half that distance, and before that half could be traversed, one had to travel half of the first half, and so on. And because space could be infinitely divided, traveling through space would seem mathematically impossible but for the fact that anyone running headlong toward a brick wall will suddenly realize why we call Zeno’s theory a “paradox.” Or as Professor John M. Newman might put it, apropos his recent paper The Myth of Free, the sudden impact with the wall will be an encounter with the “friction of the real.”

Even a casual observer of the real world can reasonably conclude that we are not heading toward a market utopia in which goods and services are both free and abundant. Yet, despite the empirical evidence all around us, Newman’s new paper in the George Washington Law Review asserts that the Myth of Free is not merely pervasive among academic theorists but has been wreaking havoc in applied law and policy for years. He writes …

“Legal institutions have already begun to grant an undeserved protected status to the suppliers of Free products. Such suppliers have received de facto or de jure immunity from certain laws, as well as favorable treatment in close cases. This is so despite the reality that these firms engage in for-profit transactions that are structurally identical to traditional, positive-price transactions. That unjustified protected status undermines the rule of law and distorts natural market competition, harming total welfare.”

Newman’s paper should be required reading by jurists and policy-makers seeking to understand, in economic terms, many of the same principles that artists and creators—the first victims of Free—have been saying anecdotally for quite some time.

Artists and Creators Know This Story Well

Day-to-day arguments about copyright are apt to be about specific points of conflict, like duration of terms, methods of enforcement, application of fair use, court opinions, etc. But the broader social, academic, and political campaign against copyright’s purpose—advocating changes from radical revision to outright erasure—is largely predicated on this economic belief that once the internet became publicly accessible, we crossed some threshold toward a future in which goods and services will inevitably be be both free and abundant. Where scarcity itself would be eradicated.

Newman’s paper is among the first, if not the first, to formally rebut the Myth of Free based on economic analysis. Covering more ground in his 74 pages than I can adequately summarize here, copyright owners and advocates will immediately identify with Newman’s critique of Free’s “major premise,” which asserts that zero (or near-zero) marginal cost drops the natural price of goods and services to zero (or near zero).

“According to the Myth, once information-based products could be reproduced and distributed digitally, the marginal cost of such products began to map onto the ever-halving cost of trendlines of processing, storage, and bandwidth. Eventually costs became so low that prices inevitably dropped to zero. Free was born.”

Authors of creative works will recognize this “marginal cost” premise as the head-banging gibberish they’ve encountered for years from people like Mike Masnick ‘splaining the alleged zero-cost of digital distribution of works while simply ignoring the high cost of development and production of works.

As Newman puts it, “…the Zero-Cost Premise fails to account for both the stubborn persistence of costs and what is referred to herein as ‘the friction of the real.’” To put that in practical terms creators know very well, even if the distribution cost of a movie really were zero, the cost to produce the movie is never going to approach anything like zero. But Newman doesn’t even need to go there, instead demonstrating that even digital distribution is never going to approach zero cost either …

“Digital processing, storage, and bandwidth do not occur in some abstract realm that transcends scarcity. They occur in the real world, which means they come with real costs. Those cost may be quite low, and may decrease lower still, but they cannot reach zero.”

So, even the premise underlying the premise of Free isn’t true, hence Newman’s reference to Zeno’s Paradox in this part of his paper to describe the fact that the cost of bandwidth itself will not continuously halve itself until it becomes “too cheap to meter,” let alone implicate that all goods and services will soon become both free and abundant as a logical extension of this tech-utopian fallacy. “Those who claim the existence of zero marginal costs fall into the same trap as those who chase the elusive dream of perpetual motion,” Newman writes.

Many of the footnotes in The Myth of Free read like a Who’s Who of “Freeconomics” hucksters—Mike Masnick, Chris Anderson, Mark Lemley, Jeremy Rifkin, Amanda Palmer et al, but I was particularly struck by the attention Newman gives to rebutting the premises of Professor Lemley in context to previous posts on this blog. Readers may remember that Lemley is the academic who has accused some of his colleagues—and by extension advocates like me—of endorsing a “faith-based IP” doctrine that he claims ignores empirical evidence. But as Newman makes quite clear in this paper, proponents of Free are engaged in magical thinking that goes beyond anything we might generously describe as faith and can more accurately describe as denial.

“…those who foresee a coming of age of abundance tend to miss—or misunderstand—a crucial element of the dynamic, long-run view: demand is a moving target. With that element in place, such techno-optimism is revealed as misguided. It is, as those who espouse the Myth of Free rightly recognize, a mistake to view technological innovation solely through the lens of short-run employment effects.”

In other words, when people like musical artists say the math of Free doesn’t add up, it’s not because they’re “clinging to old models,” trying to sell buggy-whips in a market of driverless cars.  It’s because the math of Free doesn’t add up.

As mentioned, it’s hard to imagine anyone observing the world today and believing that we are trending toward a post-scarcity utopia. But I suspect this particular idealism happened to emerge during a period when the failure to reign in certain excesses of capitalism demoralized the same generation that was being fed the hip and ebullient economics of Free. Quite simply, because the Napster generation collided with a market that was transparently bloated, corrupt, and offering dwindling opportunities, the conditions were probably ideal for evangelizing a vision of a post-scarcity future.  A vision of “sharing” that would somehow transcend market realities by virtue of “free” technology, which isn’t free at all.

Meanwhile, Newman describes in this TEDx talk that Free also has a specific neurological effect, which rewards gluttony and is consequently having a detrimental effect on both human activity and fundamental economics. “We as a society are dumping billions of dollars into developing ever more creative ways to first addict ourselves, then to extract from ourselves as much of our time and attention and personal privacy as possible, and then auction it off to the highest bidder.”

As if to underscore the point, Newman’s talk about the addictive nature of Free has just over 200 views, while Top 100 Viral Videos of 2107 has over 31 million.

CA Supreme Court in Hassell Reveals Sec. 230 is a Catch-22

First, a refresher. The broad immunity provision known as Section 230 of the Communications Decency Act was adopted in 1996 as an incentive to internet service providers to take affirmative steps to remove material. Congress wanted to encourage sites to take down certain types of offensive or obscene content (e.g. child porn), and the ISPs asserted, quite reasonably, that taking such action should not render them “publishers,” which would then leave their companies vulnerable to endless litigation stemming from unlawful content posted by users.

Since then, however, Section 230 immunity has been interpreted in court cases, and portrayed in the blogosphere, as a blanket protection allowing sites to take no action to mitigate harm by removing unlawful or harmful content. For the past 20 years, Section 230 has provided the statutory basis for ISP claims of universal neutrality—the “just a platform” argument—no matter what occurs on their sites. This premise was soundly rejected by both parties in Congress during hearings conducted in response to evidence that Russian agents had purchased American political ads on major platforms.

Hassell v. Bird

The facts of this case are quite simple. Ava Bird posted three reviews of Dawn Hassell’s law firm on Yelp, and these were held by a California trial court to be defamatory. No party disputes the unlawfulness of the reviews. Hassell successfully sued Bird and purposely did not name Yelp as a defendant in her litigation. The court ordered Bird to remove the reviews and also issued an order to Yelp to remove the content even though it was a non-party to the litigation.

Yelp, along with a host of amici, argued that the court order violated both Section 230 and its right to due process. A California Court of Appeals upheld the injunction, but this week, the State Supreme Court reversed, with the majority holding that the injunction indeed violates Section 230 and, thus, it was unnecessary to rule on the due process claim. Nevertheless, a concurring opinion by Justice Kruger does address the due process issue and holds that Yelp is correct in asserting that it had a right to its “day in court.”

So, as a practical matter, if you were in Hassell’s position, here’s the Catch-22 emphasized in this case: Section 230 forecloses the option of suing a web platform for harm stemming from unlawful conduct by a user. BUT, in this case, because Hassell did not name Yelp as a party, it then claimed that it was denied due process and, therefore, should not have to comply with a court order to remove Bird’s reviews. If that sounds like the platform gets to do whatever it wants, that’s because it is.

The CA Supreme Court described Hassell’s decision not to name Yelp a “litigation strategy” employed to “accomplish indirectly what Congress has clearly forbidden them to achieve directly.” If Congress chooses to address some of the the unintended consequences of Section 230, this seems like a statement worth underlining. Because Hassell’s decision not to sue Yelp—to hold them in no way liable for the harm done by Bird—appears to this reasonable observer as entirely consistent with the intent of 230 to shield platforms from costly and chronic litigation. As Justice Liu states in his dissent …

“No one has burdened Yelp with defending against liability for potentially defamatory posts. Here, the trial court ordered Yelp to remove postings that have been already adjudicated to be defamatory. Hassell sued Bird, not Yelp, and the litigation did not require Yelp to incur expenses to defend its editorial judgments or any of its business practices.”

That is the heart and soul of Section 230 at its origin, and it is consistent with recent declarations by both parties in Congress that the immunity in the CDA was never designed to obviate all platform responsibility. To the contrary, it was designed to encourage that responsibility. So, to the extent the majority opinion in this case rests on a plausible, or even reasonable, reading of the statute, this case may serve as guidance to Congress for considering revision of Section 230.

Is the language of 230 problematic?

Specifically, the majority opinion holds that Section 230(e)(3) bars this injunction against Yelp as a non-party due to the wording, “No cause of action my be brought and liability may be imposed under any State or local law that is inconsistent with this section.” Thus, if it is this court’s understanding that the order for Yelp to remove unlawful content is a prohibited “cause of action,” but that a plaintiff is simultaneously barred by the same statute from actually suing Yelp, then it may be time for Congress to reconcile exactly this discrepancy.

I agree completely that Yelp should not be sued, or otherwise held liable, for any harm that may have been done to Hassell through the unlawful conduct of Bird. But in the realities of the digital market, where serious harm is both easily and cheaply effected, there is no justice in holding that a platform’s immunity from costly liability extends to an immunity from taking responsible, mitigating action which costs nothing.  In this regard, Justice Kruger’s concurring opinion also recognizes the difficult realities of the statute, stating…

“Section 230 has brought to an end to a number of lawsuits seeking remedies for a wide range of civil wrongs accomplished through Internet postings—including, but not limited to, defamation, housing discrimination, negligence, securities fraud, cyberstalking, and material support of terrorism.”

And in fairness, she further states…

“Whether to maintain the status quo is a question only Congress can decide. But at least when it comes to addressing new questions about the scope of section 230 immunity, we should proceed cautiously, lest we inadvertently forbid and even broader swath of legal action than Congress could reasonably have intended.”

Justice Cuéllar concurred with the opinion on the basis that a proper finding of fact was not made regarding Yelp’s conduct that would render it properly a subject to an injunction as a non-party. But at the same time, he had this to say about Section 230 immunity …

“To the extend the Communications Decency Act merits its name, it is because it was not meant to be—and it is not—a reckless declaration of the independence of cyberspace. Nothing in section 230 allows Yelp to ignore a properly issued court order meant to stop the spread of defamatory or otherwise harmful information on the Internet.”

Ouch. That allusion to Barlow is a pretty solid kick right in the EFFin gut. And that’s from a justice ruling in Yelp’s favor—for now. Suffice to say, there is plenty in this decision that stops short of the internet activist view that Section 230 immunity is both absolute and sacrosanct. Even the majority opinion is tempered by editorial comments acknowledging that platform irresponsibility causes tangible social harm.

As a final comment, I’ll pose the following food for thought:

Once a court has vitiated the role of the original author of some unlawful content (i.e. Bird has been found guilty and ordered under pain of contempt to remove her reviews), how is it that the platform which continues to publish the unlawful content is not then held to be the “author” of that content? If I plagiarize a work, I am guilty as the “author” of the plagiarism; and if I further use plagiarized material to defame someone, the original author is not liable for the defamation; I am.

Moreover, if Bird requests that Yelp remove her reviews and they do not, is Yelp not violating her First Amendment rights by means of coerced speech; and are they also not potentially liable for forcing her into a state of contempt of court by means of that coerced speech?

A Case for CASE in Brammer v. Violent Hues?

Following up on yesterday’s post about Brammer v. Violent Hues, it occurs to me that this narrative—at least as much as is publicly available—lends itself to a rationale for the proposed CASE Act, which would create a small-claim copyright tribunal at the U.S. Copyright Office. I won’t repeat all the particulars of the bill itself (see post here), but one of the challenges to the efficacy of CASE is that it is a voluntary alternative to federal court.

When copyright critics like EFF malign the CASE Act, they employ standard hyperbole, claiming it will create a cash-cow for every copyright troll in America. This claim obfuscates the actual mechanisms in the proposal, not the least of which is that a defendant has to voluntarily agree to the tribunal as a dispute resolution. This response is then countered by the prediction that if the small claim option is voluntary, it will never be used, thus making it a boondoggle of a proposal. Admittedly, the voluntary aspect does raise this very question, but after learning about the Brammer case, it seemed like a pretty good example as to why both parties might have opted for a small claim alternative had it existed.

A Relatively Simple Matter Complicated by Litigation

Based on the available evidence, Russell Brammer does not appear to be rabidly litigious; and Fernando Mico of Violent Hues does not appear to be ideologically determined to infringe. Mico made a mistake, perhaps an unwise mistake; but the fact that he removed Brammer’s image from his website upon receipt of a C&D letter indicates that he did not firmly believe he had a right to use the photograph. (This should have weighed against his fair use claim, but that’s another matter.)

At the same time, although Brammer is obviously willing and able to litigate, he cannot be expecting a very high damage award in this particular case. I have no idea whether he requested a settlement fee before proceeding to litigation, which would be normal in this kind of circumstance; but whether he took that step or skipped it, both he and Mico could, theoretically, avoid the up-front cost of litigation by mutually agreeing to move the venue to the proposed USCO tribunal. (Note that I make no judgment about Brammer’s motives or whether I think he should have sued. I’m only looking at the legal process based on his right to make a claim and Mico’s right to a defense.)

The Small Claim Tribunal Would Make Short Work of This Case

The fact that the Virginia Court mucked up the ruling so badly—straining against legal doctrine—emphasizes the value of the small claim option for plaintiffs and defendants in this kind of dispute. Not only is Brammer now forced either to drop his claim or appeal at greater legal cost, but Mico is likewise required to defend himself as the case moves up to the appellate court. And this appeal is only necessary because the district court made egregious errors of law—mistakes the USCO would be unlikely to make—on a relatively straightforward case.

One advantage of the small claim tribunal is that the proposed panel is only expert in copyright law, which is not at all true of federal judges. This can be beneficial to defendants as well as claimants, as there will naturally be cases that favor defendants just as plainly as Brammer favors the plaintiff.  So, yes, I would expect that the USCO tribunal to readily find that Violent Hues had infringed, but I also predict the appeals court will come to the same conclusion, only much later and for legal costs that will exceed the amount of an award the USCO tribunal would likely allow in this instance.

So, looking at the available facts, if Brammer had offered Mico the option of resolution via the small claim tribunal, while making clear that he was able to pursue federal litigation, it seems not unreasonable that Mico might voluntarily choose the small claim venue. Since the alternative would be to opt out and wind up exactly where this case is now, why not take a shot at a simpler and cheaper resolution?

I do not presume to truly know the motives or mindsets of other people. And I also admit to interpolating a bit from the data. But at the same time, this kind of infringement—one creator improperly using the work of another creator—is exemplary of “garden variety” copyright cases. And the whole purpose of the CASE Act is to provide one option—in addition to out-of-court settlements, and other resolutions—to more affordably and efficiently address these low-level conflicts.

For sure, the EFF is wrong to claim that the CASE Act will conjure all manner of copyright mischief, which is simply not possible within the provisions of the bill. At worst, the small claim tribunal won’t work; not enough people will use it, and it will be scrapped as a good intention. But even the known particulars of this Brammer case are so familiar to thousands of rights holders and defendants, that it suggests to me the CASE proposal is likely to be more widely applicable than many critics might assume.