Tag: Featured

Turkewitz: What to Make of “Unearthed” EU Piracy Study

Everybody loves a scandal, even though sometimes where there’s smoke there’s just more smoke.  German politician Julia Reda (MEP), the sole member of the Pirate Party at the European Parliament was joined by TechDirt and some mainstream news sources in making  a fair bit of noise last week, declaring that the EU Commission buried a study, which concluded that “piracy has no effect on sales.”  But according to Neil Turkewitz, the study itself concludes no such thing.  This is one time when I’m not going to read the entire 300-page study, but it’s true that even it’s Executive Summary states, “In general, the results do not show robust statistical evidence of displacement of sales by online copyright infringements. That does not necessarily mean that piracy has no effect but only that the statistical analysis does not prove with sufficient reliability that there is an effect.”

That sounds more like an indictment against an attempt to statistically analyze a complex system than anything quite dramatic enough to justify hoisting the flag of conspiracy. But everybody loves a scandal. As Turkewitz points out in his article for Hypebot, we know a lot of things without statistics, including the fact that media sales just happened to drop concurrent with the growth of piracy.  In this regard, Turkewitz writes …

“… they could not disprove the null hypothesis. You know, just like scientists couldn’t disprove the null hypothesis about the effect of smoking on health for decades, or present efforts to disprove the null hypothesis on the effect of human activity on the climate. There are about a million reasons for failure to disprove the null hypothesis, but mostly they come down to one thing–understanding causality in complex relationships in which it is nearly impossible to establish control groups is incredibly complex. Essentially economists are looking for a straight line in a ball of thread.”

See full article at Hypebot here.

Everything Online Cannot Be Speech:  The Equustek Story

Suppose you invent something.  A box that makes bitter vegetables taste like candy so kids will eat them. You call it KandyKale.  Then, along comes an imposter, who steals your tech and infringes your intellectual property, and then sets up a bunch of websites that hijack the customers looking for your product in order to sell them the KandeeKale knock-off, which they produced by stealing from you in the first place. Not only would you sue the KandeeKale operators, but you might ask the court to order a search giant like Google to delist the websites while your litigation ensues.

That pretty much sums up the nature of the complaint by Canadian tech manufacturer Equustek against Datalink, which allegedly stole Equustek’s trade secrets then took the counterfeit business “virtual” after a Vancouver court ordered Datalink to stop operating in the province.  As a normal matter of procedure in its fight against the alleged counterfeiters, Equustek sought, and was granted, injunctive relief by a British Columbia court in June of 2015. This included an order that Google de-index, on a worldwide basis, the sites dedicated to selling the counterfeit products.  The decision was upheld by the Canadian Supreme Court.

Google has asked a California district court to enjoin the enforcement of the Canadian order in the U.S., principally on the grounds that the Canadian court “offends” the First Amendment and the Communications Decency Act under U.S. law.  According to the motion filed by Google, Equustek states that it cannot afford to fight the search giant’s appeal in U.S. court, which is both credible and notable. Google rejects Equustek’s assertion that it operates “above the law,” noting that it is in compliance with the order while appealing enforcement. But in regard to this story, is worth considering how any independent business might hope to litigate in a similar dispute with the one company that owns nearly all search and online advertising worldwide.

Why does it matter?  Because at some point, we’re going have to reckon with the fact that every transaction that occurs online cannot be treated as speech.  To conclude otherwise is to sublimate the rights of individuals and small businesses to the whims of corporations that are simply too big to fight.  Although it is true that a Google search result is information and that Google is not breaking any laws by providing that information, this cannot be where the law and policy conversation ends.  When the information provided—perhaps it is even paid for—materially supports criminal conduct, are we truly so confounded by the murkiness of cyberspace that we can only conclude that no legal remedies apply because it’s all speech?

That’s certainly what Wikimedia would have us believe based on the brief it filed on September 15 in support of Google’s position in the Equustek case.  Long on hyperbole and short on substance, most of the brief’s eleven pages are dedicated to extolling the virtues of free speech as a human right, which I imagine the California court already understands.  But on the subject of comity (i.e. the need for the courts of one nation to respect the laws of other nations), Wikimedia employs what reads to me like a lot of misdirection with variations on the following theme:

“Global orders for the removal of content impose one country’s idea of freedom of expression on citizens of the rest of the world. Some countries have high bars for protecting free speech and the right to receive information. And some countries do not share the values expressed in the United States Constitution or international human rights law. If United States courts enforce removal orders from nations like Canada, Germany, and France, perhaps they will also remove content when ordered by Turkey, Russia, or China.”

Essentially, Wikimedia asserts (as does Google) that if global takedown orders like the one in Equustek become common practice, we run the risk that nations which do not respect rights like free speech and free press will dictate terms to those that do. If this seems hyperbolic, it is.  Because the argument assumes that U.S. jurisprudence is ill-equipped to distinguish between information that is exclusively speech and information that materially supports conduct that Americans agree is criminal.  This despite the fact that the U.S. maintains one of the most liberal free speech doctrines in the world, and our courts have been weighing exactly these matters longer than any other nation in existence.

It is fundamental to the principle of comity in this case that a U.S. court would likewise consider this type of injunction in Equustek a reasonable remedy because Datalink’s activities allegedly violate intellectual property laws that we likewise support in this country.  Conversely, by the same principles of comity, there is no reason whatsoever to jump to the conclusion that a U.S. court would capriciously offend our most sacred laws, namely the First Amendment, in order to enforce a ruling made by a nation whose sense of law is radically divergent from our own.

Wikimedia is guilty of overstating its own importance in the world and that of the internet in general as a conduit of information.  If the current political climate has not sobered many citizens to the reality that “information” can be a siren call to smash on the rocks of ignorance, I’m not sure what it will take.  Meanwhile, as real life is now unavoidably transacted in the the global market of cyberspace, the assumption that the internet must remain a universe beyond legal boundaries will continue to fail ordinary citizens and entrepreneurs in the interest of securing legal immunities for some of the world’s richest corporations.

The ineffably twisted logic still plaguing policy in cyberspace is represented by the very first sentence of the Introduction to the Wikimedia brief.  “This case involves an order issued by a Canadian court to compel Google to remove truthful information from its search results—not just in Canada, but around the globe,” it says.  Indeed.  “Truthful information” that just happens to link consumers to a company that is allegedly selling counterfeit goods. A fairly young child, still refusing to eat his kale, can make the distinction. So, it is reasonable to hope that U.S. courts can do the same.

Internet Association Wants to Encode Safe Harbors in New NAFTA

As debate over renegotiating NAFTA heats up, the copyright interests will be duking it out with the internet industry over the inclusion, or not, of “safe harbor” provisions akin to Section 512 of the DMCA and Section 230 of the CDA.  In a letter dated August 31 to USTR Ambassador Robert Lighthizer, the Internet Association sang its standard refrain on the absolute necessity of these liability shields for the growth of the digital economy and the protection of American jobs that are increasingly dependent on the tech and internet sectors.  No surprise there.  And at least some truth.

More bizarrely, though, the letter claims that the Internet Association represents “the new faces of the American content industry, winning Emmys and Oscars, providing digital distribution for streaming-only Grammy winners, while also creating services that address the challenge of piracy by allowing consumers to legally access content globally.”

Ruth Vitale, CEO of CreativeFuture took exception to this claim in a letter of her own addressed to Ambassador Lighthizer. In her response, Vitale explains the well-documented history of the unintended negative effects of the DMCA on creative producers of every size.  “Why should these provisions be in an updated NAFTA — undermining the protections for American creatives overseas?” writes Vitale. “Please don’t export a system that does nothing but shelter the most powerful internet companies, rather than the start-ups that these trade associations often claim are the beneficiaries of safe harbor.”

The only reason the IA was able to insert this plug about award-winning “content creators” is because its membership includes companies like Netflix and Amazon; but as I addressed in an older post, Netflix-like models are neither truly “internet” businesses, nor a particularly new model for content-production.  Netflix is a motion picture exhibitor and producer—one that has as much interest in the copyrights vested in the products it makes as Sony or MGM.

Moreover, Netflix remains something of an unknown quantity, if we’re looking at big-picture economics.  Presently, we are witnessing a period when the company is spending a fortune in raised debt to produce work at a blistering pace in order to grow fat with content in its bid for global market-share.  But profitability is another question altogether; and there will come a time when the growth flattens. Netflix, Hulu, Amazon Originals, etc. are really just the new HBOs, Showtimes, and FX Networks on the block; and no matter how the landscape looks in five or ten years, there is no reason to believe that the copyright interests of the leading producers, whoever they may be, will be any less relevant than they are today. Even more to the point, the copyright framework is essential for the independent writer currently banging away on a new work that she hopes to sell to one of these entities.

Similarly, for all the talk of growth and vitality—and there is evidence of both—the major internet platforms still imply futures that cannot easily be measured by the metrics of the current market.  It wasn’t all that long ago that we all jumped onto Facebook, which is now considered an essential platform for both individuals and businesses. But if my 15-year-old and her friends are any indication, Facebook’s future is questionable because these teens have abandoned the platform as a place for “old people.” This does not mean Zuckerberg and Co. won’t come up with a way to regain that market as it enters adulthood, but it does suggest that the social media market we have today may not look anything like what we will have in the relatively near future (see MySpace).  And if anybody can claim to know the precise role of safe harbors in this uncertain future, then I suspect a crystal ball is somewhere in the room.

The Crystal Ball in the Room

Speaking of fortune-telling, the most substantial quote from the Internet Association letter may be the one which states that “One recent study found that weakened safe harbors for online intermediaries would eliminate over 425,000 American jobs and lead to an annual loss of $44 billion in US GDP.”  Sounds compelling if nobody reads the study, which the IA can assume will be the case. But I read the study (which was not surprisingly commissioned by the Internet Association) authored by Christian M. Dippon, PhD at the private firm NERA Economic Consulting.

While stipulating that I may be undervaluing some aspect of Dippon’s work, the general approach of the study hopes to provide evidence to support this conclusion:  that altering (i.e. weakening) safe harbors would lead to crippling litigation that would then result in higher prices passed onto consumers.  This would in turn reduce demand for certain services, costing jobs and investment in the otherwise robust tech and internet sectors. Both the premises and the research appear flawed.

For one thing, it is false to assume that readjusting corporate liability through legislative reform can only lead to “crippling litigation.”  To the contrary, if the statutory provisions of the safe harbors were amended to restore their original intent while mitigating their unintended harm, this would more likely lead to changes in the best practices of those corporations seeking to avoid liability than it would inexorably lead to more litigation.  It is in fact the worst practices of many service providers where rights-holders find fault—practices that have often been obscured by the dysfunctional DMCA as a tool of enforcement.

In fact, the lack of rigor in the study in this regard is revealed by its reference to the BMG v Cox case as exemplary of the kind of litigation that would supposedly run amok under an amended safe harbor regime.  Having acknowledged in the early part of his paper that DMCA is a conditional shield for service providers, Dippon then fails to recognize that Cox lost that case precisely because it failed to meet those statutory conditions.  Given that the internet industry has tried to portray Cox in a similar light, its emphasis in this study suggests that the IA perhaps fed NERA this example and that nobody at NERA did careful research into the case.

Specifically, the study seeks to support its conclusions by means of consumer surveys on the use of search and cloud storage services, determining that a rise in prices for cloud storage would reduce demand for these services; and determining that increased exposure to more intrusive advertising would reduce the demand in search.  These increases in prices and/or intrusive advertising are assumed to result from the aforementioned increase in litigation, which is itself highly speculative.

Perhaps most telling is that in order to calculate the potential price increase for cloud storage, the author references MP3Tunes, which was found guilty of copyright infringement and paid damages of $41.5 million.  Perhaps this case would be a valid baseline if it were not possible for consumers to use a cloud storage service that is not also in the copyright infringement business. But this is not a reality.

For instance, like a lot of consumers, I use Dropbox, which is neither in the infringement business nor presently more vulnerable to litigation as a result of the MP3Tunes outcome.  This legal storage business will also not be more vulnerable to litigation under the kind of amended safe harbor regime rights holders seek domestically; and it especially would not be more vulnerable to litigation if we do not transpose our current safe harbor language into new trade agreements.

There are a number of large leaps, assumptions, and omissions in the NERA study, despite IA’s leaning on it to predict potential economic losses like 425,000 jobs.  For instance, while it is true that a high-paying tech job does support several other jobs in the economy, this is too broad a view to take without also accounting for the ways in which several of the IA member companies simultaneously threaten many jobs in various sectors.

While exporting the safe harbor provisions through FTAs may be of tremendous value to a provider like Google, one cannot take the “job-killer” position seriously without weighing the unprecedented market power of these near monopolies and their capacity to bully the diverse, entrepreneurial middle class on which the economy actually depends.  And that brings us back to the rather insulting notion that these companies represent the “new face of content.”

Inherent Contradiction

Frankly, the Internet Association making this claim is kind of like a state highway department saying it’s the “new face of farming” on the grounds they build and maintain the roads that get food to market. That’s not just me being flip; it’s a comment on the nature of how the safe harbors are meant to function. Remember that the safe harbor provisions are predicated on the assumption that the service provider is not in the content business but is rather in the highway-building business and, therefore, not liable for how people might use the highway.

That’s an analogy the internet industry has employed for years to explain their neutral status vis-a-vis liabilities for copyright infringement and other claims.  And I have to say it takes a deft bit of rhetorical salesmanship to imply to the USTR that these liability shields have substantially contributed to the growth of content-producing platforms like Netflix or the production division of Amazon. The DMCA safe harbors contributed like crazy to the growth of infringe-now-settle-later models like YouTube, but that’s apples-and-oranges relative to a Hulu winning awards for a major production like The Handmaid’s Tale.  Meanwhile, for all the successful YouTubers out there—and they do exist—that’s still not an economy; and the day it becomes the economy, we’re screwed because one company owns the whole damn thing.

So as the rhetoric flies across social media about the absolute necessity of safe harbors to protect free speech, innovation, and jobs, readers should keep in mind that copyright is fundamentally predicated on the right of the individual to exploit his own creative labor, while safe harbors are based on limiting the liability of giant corporations, which has so far enabled them to infringe the rights of many individuals.  So, I agree with the Internet Association that “balance” is key in these provisions, but I disagree with their assertion that the status quo has achieved anything of the kind.

Image sources:

Digital Umbrella by maxkabakov

NAFTA Map by michal812

Crystal Ball by Kzenon