Tag: Featured

What’s in the Box? Counterfeits and Online Marketplaces

In March, Senators Durbin and Cassidy introduced the INFORM Consumers Act, legislation meant to provide us with greater transparency when shopping through large online marketplaces, which is to say Amazon. In a co-authored editorial in Roll Call, the senators state:

It is well documented that third parties are selling massive amounts of counterfeit, stolen and unsafe consumer products on online marketplaces. The Office of the U.S. Trade Representative reported last year that the “rapid growth of e-commerce platforms has helped fuel the growth of counterfeit and pirated goods into a half trillion dollar industry.” Also last year, the Department of Homeland Security stated that such trafficked goods “threaten public health and safety, as well as national security.”

At this point, we probably all have a pretty good intuition that when we order various goods from Amazon, the source of the product may be questionable. If it’s a phone case for ten bucks, there’s probably no great risk, but as Senators Durbin and Cassidy note, if it’s a carbon-monoxide detector that doesn’t work, that’s another matter. Thus, the INFORM Act proposes to mandate a verification process for online marketplaces to certify some degree of legitimacy and accountability by third-party sellers through the collection of bank, tax ID, and physical address information. Any third-party sellers that fall out of compliance would have to be banned from the marketplace, and the process would be enforced by the USTR.

While the legislation strikes me as a good step toward demanding some accountability from the online marketplace, the platforms’ control over the display of information may yield results that are more translucent than transparent, but time will tell. Further, I believe Congress and other governing bodies around the world should be more aggressive with Amazon in particular.

One reason a platform like Amazon provides such fertile opportunity for counterfeiters is that we tend to shop on the platform quickly while looking at two things:  a photograph and a price. The photograph is easily deceptive, and only when the price seems unrealistically low do we, perhaps, pause to wonder whether there is any deception afoot. All that text, including the meaningless name of the seller, is probably ignored most of the time.

If this describes the habits of millions of consumers, it seems the task at hand is to require Amazon et al do far more to prevent counterfeits from trading on their platforms in the first place. And, of course, one way to achieve that end is to make Amazon or WalMart or Target liable for harm resulting from the transaction of dangerous products. Liability does wonders for cleaning up corporate conduct; in fact, it is often the only thing that does. Amazon et al would say that this is too burdensome, but is it? Durbin and Cassidy write:

… Amazon and the powerful online marketplace lobby say our bill is too onerous. They say that they already do a great job of policing who is selling what from where on their websites and that the best solution is to leave the status quo in place.

Reality couldn’t be further from the rosy picture painted by these companies. We need to take stronger steps to both prevent illicit sales on online marketplaces and to make sure bad actors are held accountable. As The Wall Street Journal recently reported, law enforcement investigators say they struggle to obtain information from Amazon about shady sellers on their marketplace. 

What’s interesting about that reference to Amazon’s opacity and uncooperative posture, if you read the recent story byAditya Kalra and Steve Stecklow for Reuters, is that it seems that one of the “shady sellers” operating on Amazon is Amazon. Because, of course, there are two sides to the counterfeiting narrative—potential harm to consumers and certain economic harm to legitimate manufacturers.

Though it probably comes as little surprise to many, documents obtained by Reuters investigators show that Amazon, at least in India, has been using its proprietary data to track certain brand trends, replicate (knock-off) those attributes in its own house brands, and then ensure that is house brands appear in search results above the same brands they copied. Kalra and Secklow write:

In sworn testimony before the U.S. Congress in 2020, Amazon founder Jeff Bezos explained that the e-commerce giant prohibits its employees from using the data on individual sellers to help its private-label business. And, in 2019, another Amazon executive testified that the company does not use such data to create its own private-label products or alter its search results to favor them.

But the internal documents seen by Reuters show for the first time that, at least in India, manipulating search results to favor Amazon’s own products, as well as copying other sellers’ goods, were part of a formal, clandestine strategy at Amazon – and that high-level executives were told about it.

So, not only should Amazon’s extraordinary data-driven advantage disqualify it from becoming a counterfeiter on its own marketplace, but having demonstrated its effectiveness at doing so, we should also conclude that it has the resources to comply with the INFORM Act, and a lot more. If Amazon has the ability to track specific sizing trends in a brand of men’s shirts for the purposes of copying the products and undercutting the brand’s market, surely it has the ability to connect a few data points to keep products like counterfeit smoke and carbon-monoxide detectors off its pages. Again, Kalra and Stecklow write:

The 2016 document stated a goal: offer Amazon’s own goods in 20% to 40% of all product categories on Amazon.in within two years. Amazon would achieve profitability in its private-brand business by ‘only launching products that will provide more margin than comparable reference brand products’.

We get it. When Amazon calls proposals like the INFORM Act “burdensome” this is shorthand for the fact that they like making money better than they like spending it. No kidding. But as the senators also note, Amazon seems to have plenty of money to burn on rocket fuel. So, it can probably bear the “burden” of protecting buyers and sellers on its platform.

Facebook and Big Tech’s “Big Tobacco” Moment

In response to the breaking news on Sunday that Facebook’s latest, and perhaps most consequential, leaker identified herself as former employee Frances Haugen, the questions are being asked once again:  How much do we blame Facebook, and for what shall it be blamed? For instance, in response to the allegation that the social platform played a role in the insurrection of January 6—both as an amplifier of disinformation and as a communications hub for some of the premeditated actions of that day—spokesperson Nick Clegg responded that it is “ludicrous” to blame Facebook. “The responsibility for the violence of Jan. 6 lies squarely with the people who inflicted the violence and those who encouraged them, including President Trump,” Clegg told CNN.

Clegg is dutifully responding to a straw man by reframing the accusation, as if Facebook were being accused of direct responsibility for the assault on the Capitol. In reality, of course, the company is accused, most recently by Haugen, of either ignoring or obfuscating evidence that its operational decisions are conducive to terrible outcomes for both individuals and whole societies. The company has allegedly engaged in willful blindness with respect to its role in aggravating different forms of suicidal tendencies—among teenagers being negatively affected by Instagram, and among adults negatively influenced by disinformation to the point of assaulting the constitutional order of the United States.

Haugen, who testified with tremendous poise on Tuesday before the Senate Commerce Committee, is a data scientist initially hired by Facebook as a member of the “civics integrity team.” She leaked tens of thousands of documents and stepped into the light, at considerable personal risk, with the intent to prove to legislators, federal agencies, and the public that when Facebook leadership is presented with evidence that its operational decisions cause harm, it will consistently choose profit over the mitigation of that harm. “Haugen has also detailed how she says Facebook quickly disbanded its civics integrity team—responsible for protecting the democratic process and tackling misinformation—after the 2020 U.S. election. Shortly afterward, came the Jan. 6 insurrection at the U.S. Capitol, in which organizers used Facebook to help plan,” writes Jaclyn Diaz for NPR.

That Facebook will behave like many other corporations (i.e. protect its bottom line) is not a revelation. At least, it shouldn’t be. Neither should there be any doubt that we are still wandering uncharted territory when a private company needs a division to be “responsible for protecting the democratic process and tackling misinformation.” Haugen’s testimony that Facebook maintained such a unit for the shortest time possible is damning, but the fact that we have collectively and voluntarily ceded so much power to a social media company is the bigger problem. And many of the consequences of that transformation cannot wholly be fixed by “fixing” Facebook.

The bipartisan committee members who questioned Haugen sounded unanimous in their intent to take legislative action soon, especially in response to evidence that Facebook is aggravating health risks to teens and tweens. Senators Blumenthal and Markey have already introduced the KIDS Act, which would proscribe the use of various “interface elements” that would manipulate a minor’s experience on a given platform. In that sense of “fixing,” the Big Tobacco metaphor applies because we can associate Facebook’s lack of transparency with identifiable health risks like eating disorders and depression. Meanwhile, in terms of our collective mental health as a society, I am not sure why the same prohibitions should not exist for adult users, who also do not recognize that social media is a narcotic—one that can produce good feelings even from very bad conduct.

Just yesterday, I saw that a woman, whose work I admire on constitutional issues, was harassed on Facebook by a stranger who did not engage her to debate the Second Amendment but merely to unpack his favorite sexist pejorative and tell her to kill herself. If the incident were reported, Facebook is unlikely to cancel the guy’s account, especially when there are tens of millions of customers just like him. So, not only has the great “information revolution” failed to produce a more nuanced—let alone historically informed—discussion about 2A et al, but Facebook exacerbates the worst behaviors by providing users with the little dopamine hit that comes from self-righteous, remote-control harassment.

It was not very long ago that examples like this would elicit a big eyeroll from the bro-culture of what we used to call netizens—not only because the conduct was presumed to be anomalous, but because cyberspace was presumed to be innocuous. Just words rather than sticks and stones. That was false. It was clear to many observers that the increase in anti-social and indecent conduct online was spilling over into the so-called real world. The boundary between clicks and sticks was steadily being eroded and, as it became clear on January 6, that boundary no longer exists at all for many of us.

Every time Zuckerberg or someone representing Google or Twitter or the EFF et al has asserted free speech as the rationale for an unregulated, barely moderated internet, they have been making the argument, however unwittingly, that anarchy works. Let everything flow, and people will make rational choices, and the good will outweigh the bad. That was the prevailing argument before 2016 and the so-called techlash, and it is an argument which is still being revived despite all evidence that, as a social experiment, it has been a disaster.

Miss Haugen’s testimonies are compelling and will likely be catalytic to long-overdue change at Facebook and elsewhere in the industry. The most significant discussion to emerge this week may be the proposals, including by FCC Chairman Wheeler, to create a new federal agency charged with oversight of major internet platforms. Whatever comes next, I think the era of laissez-faire appears to be over for Big Tech, and that is at least a step in the right direction.

Fair Use and Politics: Trump Denied Dismissal in Suit with Eddy Grant

This week, the SDNY denied the motion to dismiss requested by Donald J. Trump et al in the copyright suit filed by singer/songwriter Eddy Grant. The complaint stems from the unlicensed use of Grant’s song “Electric Avenue” which was synched with an animated, political video satirizing then candidate Joe Biden in 2020. The video was distributed via social media, including on Trump’s own Twitter account on August 12th. The defendants based their petition for dismissal on the grounds that use of the song was a fair use.

It is difficult in general to win a dismissal of a copyright claim based on a fair use defense. But that procedural standard notwithstanding, the fair use argument presented in this case is well-trod territory and, therefore, short work for a court in the Second Circuit, which is replete with copyright precedent. Specifically, Trump et al employed a familiar tactic by arguing a too-broad interpretation of what it means to “use a work for a different purpose” than its original purpose at creation. This argument is made under the first prong of the fair use test, which considers the purpose of the use, including whether the use is transformative. Here, the SDNY was clear:

While it is true that the animation is partisan political commentary and the song apparently is not, the inquiry does not focus exclusively on the character of the animation; rather, it focuses on the character of the animation’s use of Grant’s song. As the Second Circuit Court of Appeals recently stated: ‘where a secondary work does not obviously comment on or relate back to the original or use the original for a purpose other than that for which it was created, the bare assertion of a ‘higher or different artistic use’ is insufficient to render a work transformative.’

So, as I say, the court is not breaking any new ground in finding that the fair use test would most likely favor Grant in this case and that it must, therefore, deny the motion to dismiss. If this litigation proceeds, I believe Trump et al will continue to find that there is no precedent on which its fair use defense can survive; and considering the much darker legal clouds gathering around Trump’s world, I would not be surprised if this little civil dispute with one musician is settled in the coming weeks or months.

Is Political Speech a Little Different?

What can be tricky for many observers with this kind of case—and the court here alludes to the matter—is that political satire is a “rich part of our First Amendment tradition.’” The the anti-Biden video was satirical in general and produced by a third party, albeit as an endorsement of Trump for President. But the reason the transformative test fails is that no comment upon “Electric Avenue” itself is present in the use. The fact that the overall message of a work may be satirical does not favor a fair use any more than if the overall message is deadly serious. The essential ingredient that must exist under prong one of the fair use test is some comment upon the work being used without license. But what if a political video is satirical overall and achieves parody of a work being used?

In fact, this is close to what occurred in Henley v. DeVore in which Don Henley’s songs were used for political purposes, and about which the court in Grant writes, “In Henley, the defendants changed some of the lyrics to the copyrighted songs and even provided their own vocals. And because the defendants there used the songs as vehicles for their political messaging, in one instance to poke fun at Henley himself for his political affiliations, the court found that the secondary works were satire and parody, respectively.”

The Grant court notes that the fair use test still failed due to the amount of Henley’s work used for the purpose, but I underline the example to make the point that a political advertisement could conceivably be parody of a work and a satire at the same time and, therefore, be held a fair use of a protected work at issue. But might this raise an acute tension with the First Amendment?

It is considered self-evident that political speech is a paradigmatic subject of the speech right, but if this is so, then compelled political speech is a paradigmatic infringement of the speech right. Thus, when a copyrighted work is used without license in a political message, the use has greater potential to result in an especially egregious form of compelled speech. This principle is exacerbated in the current climate, where political divisions are sharp and hostile, but also in the digital landscape, where the distinction between the political satirist and the political operative is almost invisible.

Any smartass with a smartphone can, and does, make potentially very persuasive political commentary and distribute same via social media. And, of course, the low-cost tools of production and distribution are available to the many PACs and other third parties who are not in the satire business like South Park or The Daily Show, but are instead in the professional campaign business. Meanwhile, as viewers, we do not pay much attention to the sources of all the memes and videos that shape or reinforce our views and opinions—even where that information is available at all.

In principle, a court looking at a satirical video, whether it is produced by a PAC or SNL, should consider fair use in the same manner. As the court in Grant notes, “…denying the defendants’ fair use defense in this case—especially at this early stage in the litigation—will not chill legitimate political satire. Creators of satirical videos like the one at issue here must simply conform any use of copyrighted music with copyright law….” On the one hand, it is sensible that a court view the Biden satire video as it would any other “legitimate political satire” with regard to the fair use analysis; but on the other hand, it strikes me that if the creator of a political satire is a political operative with a clear political purpose (e.g. to win an election or advance a specific policy), that the speech rights of the copyright owner should perhaps weigh more heavily against a finding of fair use than might be considered in a use that does not have such a clear political purpose.

While it is true that the unlicensed use of a work to promote a brand or a message may feel to the copyright owner like a form of compelled speech (and may even violate his right of publicity), these private sector infringements lack the state action  necessary to implicate the First Amendment. And even though a work of political satire may be produced by a party like a PAC, which is in the private sector, when the satire’s purpose is arguably an extension of a political campaign—especially of an incumbent office-holder—the copyright owner may justifiably feel a more acute form of compelled speech than with a typical commercial infringement.

Specifically, when a sitting President uses his social platform to distribute a video endorsing his reelection, and the video is enhanced by an unlicensed copyrighted work, the compelled contribution by the rightsholder to that message may consider the experience awfully close to a constitutional, as well as a personal, violation of his speech rights. This may be true even with an incumbent who is more disciplined than Donald Trump when it comes to the distinctions between the office and the individual. The fact that this form of compelled speech will generally skirt a constitutional violation is a technicality mired in the tangles of campaign finance rules and the role of PACs, but the bottom line for the copyright owner is likely something like this: “The sitting President just used my voice to support his reelection, and I don’t support him.” But should that violation be allowed, if the use also succeeds in commenting upon the work at issue within the same political message? Perhaps, but alas …

Sadly, we no longer live in a world in which political theater plays a fractional role within a broader competition of ideas. Instead, our political process is too often nothing more than theater. No politician in modern history both exploited and exemplified this circus atmosphere more than Donald Trump, and no platform has ever amplified the cacophony like social media. It is simply too easy today to cobble together pictures and sounds into political performances that go viral; and at the very least, the authors of the works being used should be accorded the right to allow or disallow the exploitation of their creative expressions for those purposes.

The underlying principles of the fair use exception in copyright law are high-minded in theory. The exception supports the speech right—especially the right to comment upon protected works—and this, in turn, animates the foundation of copyright to promote more expression. But when considering fair use in regard to using unlicensed works for political speech, perhaps the identity of the user and the precise nature of his political intent should be considered under factor one—the purpose of the use—in deference to the copyright owner’s speech rights.

Photo source by: melis82