I am proud to have been a member of the CopyrightX class of 2014. If you have any doubts about the merits of online education, apply to take this course in 2015. You will be pleasantly surprised at how effective this form of education can be.
While The Author’s Guild copyright suit against Google Books has received most of the attention on the copyright law front, its smaller sibling – the Author’s copyright suit against HathiTrust – has been proceeding on a parallel track. HathiTrust is a consortium of more than 70 institutions working with Google to digitize the books in their libraries, but a smaller number of books than Google Books (only ten million), and for academic use (including an accommodation for disabled viewers), compared with Google Books’s commercial use.
On June 10, 2014, the Second Circuit upheld the federal district court, holding that HathiTrust is protected from copyright infringement under the fair use doctrine. With respect to full-text search (the most legally problematic aspect of HathiTrust), the Second Circuit held:
Citing HathiTrust’s “extensive security measures,” the court rejected as speculative the Author’s argument that “existence of the digital copies creates the risk of a security breach which might impose irreparable damage on the Authors and their works.”*
*note: In an earlier post I discussed the Guild’s argument that Google Books creates the ”all too real risks of hacking, theft and widespread distribution.” As I noted in that post, in describing that risk the Guild leaves nothing to the imagination: “just one security breach could result in devastating losses to the rightholders of the books Google has subjected to the risk of such a breach by digitizing them and placing them on the Internet.” In response to similar arguments in HathiTrust the Second Circuit found that there is “no basis in the record on which to conclude that a security breach is likely to occur.”
HathiTrust is distinguishable from Google Books in one significant respect. Non-disabled users can search the HathiTrust database for content, but unlike Google Books, which displays “snippets” of copyrighted works, unless the copyright holder authorizes broader use the results only show page numbers where search terms appear in a given work.
HathiTrust offers additional features to users with disabilities, who can access complete copies if they can show that they are unable to read a work in print. However, the Second Circuit made short shrift of this issue, holding that “the doctrine of fair use allows the Libraries to provide full digital access to copyrighted works to their print-disabled patrons.”
Even taking into consideration the fact that the non-disabled-access HathiTrust library can be distinguished from Google Books on the grounds that it does not provide “snippets,” it is difficult to see how the outcome will be different in the Guild’s appeal of Google Books. The Second Circuit’s central rationales in support of fair use in HathiTrust — that full-text search is transformative and that the database does not serve as a substitute for the books being searched (the latter factor being true in snippet-enabled Google Books as well as in HathiTrust) — likely foretell the fate of the Google Books case* (link), where the federal district court ruled in favor of Google on similar grounds. (For a full discussion of district court decision in the Google Books litigation, click here).
*note: The Author’s Guild suit targeting Google Books is on appeal to the Second Circuit.
The idea behind statutes of limitations is usually straightforward. If someone commits an illegal act, after a certain period of time they can no longer be liable (or prosecuted) for that act. In civil cases the statute of limitations usually begins to run when the injured party knew or should have known of the illegal act. Once that period has passed, the injured party is barred from filing a lawsuit. For example, in Massachusetts the statute of limitations for most tort actions is three years. If you are the victim of a tort (for example, medical malpractice), you must file suit within three years of the act that caused you harm, or you likely are barred by the statute of limitations.*
*note: Like almost everything in the law, there are exceptions and nuances to this.
The U.S. Copyright Act contains a three year statute of limitations (17 U.S.C. Section 507),* but the way in which the statute is applied is different. A copyright holder may know that a defendant has been selling an infringing product for more than three years, but that doesn’t bar an action for copyright infringement – the defendant may still be liable for any infringing conduct taken during the three year period before the suit was filed. This is described as a “three-year look back,” a “rolling limitations period” or the “separate-accrual rule.”**
*note: The statute provides that “No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.”
**note: A new statute of limitations “accrues” (commences) with each new infringement.
In theory, therefore, a copyright owner can become aware of an infringing use of her work and do nothing for an indefinite period of time – more than just three years – until, for example, she concludes that the infringer has earned profits that could be recovered as damages and therefore justify the cost of a lawsuit. At that point the copyright owner can file suit and the statute of limitations will come into play, but only to limit damages to the preceding three year period. However, if the copyright owner wins her case and the defendant doesn’t settle there is the possibility that the copyright owner will wait three years and then file another infringement suit based on infringing actions taken during the second three year period. And so on, ad infinitum (or so it will seem to the defendant, given the length of copyright protection).
Until recently infringers were not wholly at the mercy of this strategy. They were able to raise the common law legal doctrine of “laches,” a doctrine which may bar a lawsuit based on an unreasonable, prejudicial delay in commencing suit. In many cases defendants successfully arged that a copyright owner should not be permitted to wait beyond three years before filing an infringement suit.
These two legal principles — the three-year copyright statute of limitations and the laches doctrine — came into collision when Paulla Petrella brought a copyright suit against MGM. Since 1981 Petrella has been the heir to her 
father Frank Petrella’s copyright interest in a book and two screenplays about the life of Jake LaMotta, the central character portrayed in the film Raging Bull. She asserts that Raging Bull is a derivative work of the book and screenplays, and that she is entitled to royalties based on MGM’s distribution of the film during the three years preceding her suit.
Ms. Petrella had threatened MGM with a suit for copyright infringement as far back as 1998, but she didn’t actually file suit until 2009. In fact, Raging Bull was released in 1980, and there is evidence that Ms. Petrella was aware of her copyright infringement claim as far back as 1981, in which case she delayed for almost 30 years before filing suit for copyright infringement.
MGM raised the defense of laches, and the Ninth Circuit Court of Appeals agreed, dismissing the suit. The Supreme Court took the case and reversed in a 6-3 decision, holding that, except in “extraordinary circumstances,” laches cannot be invoked to preclude a claim for damages that falls within the three-year window. However, this was not a clear win for Petrella or others in her position: oddly, the Court held that delay is relevant to equitable relief which (the Court stated), includes not only an injunction against further public display or distribution of the copyrighted work, but also damages based on the infringer’s profits that are attributable to the infringement.
Whether this decision leads to a flood of hitherto dormant copyright suits remains to be seen, and may be influenced by how the lower 
courts interpret and apply the decision. For example, given the Supreme Court’s comments it is uncertain that Ms. Petrella will be able to obtain an injunction against future sales of Raging Bull, and the Court’s statement that a delay in bringing suit is relevant to determining damages based on MGM’s profits during the three year period may limit any recovery by allowing MGM to use its investment in the film prior to the three-year look-back period to offset profits earned during those three years. Therefore, the extent of any potential monetary recovery is unclear.
*note: Although, as discussed above, assuming Petrella establishes liability (an issue yet to be addressed in this case) and MGM continues to distribute the film, in theory Petrella could file a series of lawsuits every three years seeking MGM’s profits for the preceding three year period. After the first suit MGM would be on notice that it is exploiting a copyright-protected work, and would likely have little choice but to to settle the case, rather than have this sword of Damocles hanging over its head.
Many observers in the copyright community think that Petrella may lead to a wave of lawsuits by copyright holders who had assumed, until now, that their claims might be barred by laches. A prominent example suggesting this may be the case is the May 31, 2014 lawsuit filed by the Randy Craig Wolfe Trust against the members of Led Zeppelin. Wolfe, the deceased founder and creative force behind the band Spirit, had believed since the mid-’90s (and perhaps as far back as 1971) that the intro to Stairway to Heaven had been copied from Taurus, a song on a Spirit album released in 1968. It seems unlikely that this case, filed less than two weeks after the Petrella decision, was not encouraged by the outcome in Petrella.
Petrella could also have implications for application of the laches doctrine under patent law. As the Supreme Court noted in Petrella, the Federal Circuit has held that laches may be used to bar patent damages prior to the actual commencement of suit. The courts may conclude that the rationale of the Supreme Court in Petrella applies under the patent statute as well, making it easier for patent plaintiffs to take advantage of the full six year statute of limitations under the patent statute.
Petrella v. Metro-Goldwyn-Mayer, Inc., No. 12-1315 (May 19, 2014)
On November 26, 2013 I wrote a post titled “Oracle v. Google: How Google Could Lose on Appeal” (link). After oral argument before the CAFC a couple of weeks later I wrote a follow-up post, “Oral Argument in Oracle v. Google: A Setback for Google?” (link).
I thought I was being a bit paranoid on Google’s behalf, but I was wrong – if anything, I was being too optimistic. The CAFC reversed California federal district court judge William Alsup, upholding almost every argument made by Oracle.
Interoperatibility Goes To Fair Use, Not Copyrightability
In the “How Google Could Lose” post I noted that Oracle had a good argument that interoperability is properly raised in connection with a copyright fair use defense, not to determine whether the plaintiff’s work is copyright-protected in the first instance. The CAFC agreed, stating
Whether Google’s software is “interoperable” in some sense with any aspect of the Java platform … has no bearing on the threshold question of whether Oracle’s software is copyrightable. It is the interoperability and other needs of Oracle—not those of Google—that apply in the copyrightability context, and there is no evidence that when Oracle created the Java API packages at issue it did so to meet compatibility requirements of other pre-existing programs.
Filtration for Interoperatility Should be Performed Ex Ante, Not Ex Post
In “How Google Could Lose” I noted that:
under Altai it is the first programmer’s work (in this case Oracle) that is filtered, not the alleged infringer’s work (in this case Google), and the filtration is performed as of the time the first work is created (ex ante) not as of the date of infringement (ex post). When Oracle created the Java API it did not do so to meet compatibility requirements of other programs. Thus, copyright protection of the Java API was not invalidated by compatibility requirements at the time it was created.
The CAFC agreed, stating:
[W]e conclude that the district court erred in focusing its interoperability analysis on Google’s desires for its Android software … It is the interoperability and other needs of Oracle—not those of Google—that apply in the copyrightability context, and there is no evidence that when Oracle created the Java API packages at issue it did so to meet compatibility requirements of other pre-existing programs.
Lotus v. Borland Is Not the Law in the Ninth Circuit
In the “How Google Could Lose” post I noted that
“a close reading of Judge Alsup’s decision in Oracle/Google could lead one to conclude that this was the sole basis on which Judge Alsup found the structure of the Java API declaring code to be uncopyrightable, and therefore affirmance or reversal may depend on whether the CAFC concludes that Judge Alsup properly applied Lotus in Oracle/Google. . . . The CAFC could even reject Lotus outright, and hold that a system of commands is not a “method of operation” under §102(b). Both the Third and Tenth Circuits have indicated that the fact that the words of a program are used in the implementation of a process should not affect their copyrightability, and the CAFC could conclude that this is the appropriate approach under Ninth Circuit law.
In fact, this is exactly what the CAFC concluded:
[T]he Ninth Circuit has not adopted the [First Circuit’s] “method of operation” reasoning in Lotus, and we conclude that it is inconsistent with binding precedent. Specifically, we find that Lotus is incompatible with Ninth Circuit case law recognizing that the structure, sequence, and organization of a computer program is eligible for copyright protection where it qualifies as an expression of an idea, rather than the idea itself.
The only consolation that Google can take from this decision is that the court rejected Oracle’s argument that Google’s adoption of the Java declaring code did not qualify for fair use. Instead, the CAFC sent the case back to the federal district court for reconsideration (summary judgment motions and perhaps a trial) on that issue. Or, actually, a retrial, since the first jury trial on fair use resulted in a hung jury. However, as I read the decision, it seems to favor Oracle’s position on fair use, and I predict that Google will be hard pressed to justify its copying of the Java API declaring code based on fair use.
Perhaps the case will settle now, but Larry Ellison is not one to back down when he has the advantage. I suspect there are intellectual property damages experts across America dreaming of the case of a lifetime this weekend.
I gave an extensive presentation on Oracle v. Google at the Boston Bar Association on November 13, 2013. To see the slides, click here.
Can a state court order assignment of a defamatory posting on Ripoff Report to a prevailing plaintiff?
That may be the central question in Small Justice LLC, et al. v. Xcentric Ventures LLC, pending the U.S. District Court for the District of Massachusetts.
Here are the basic facts.
A Boston attorney* was defamed by a litigation adversary on the Ripoff Report (a website owned by Xcentric Ventures). The former adversary party, Richard Dupont, claimed that the lawyer was a perjurer with “a history of persecuting the elderly, especially, wealthy elderly women.” The lawyer was accused of filing “baseless lawsuits in order to seize assets from clients, from adversaries and even from his own family.” The posting urged readers to contact the FBI and the Securities and Exchange Commission with similar complaints, and claimed that the attorney had “a history of child abuse, domestic violence and bi-sexuality,” as well as an “addiction to illicit substances.” None of this is true.
*note: The lawyer is not named in this post, to minimize further negative publicity.
The lawyer brought suit against Dupont in Massachusetts state court, where he obtained a default judgment. However, this did him no good as far as the defamatory post was concerned. Ripoff Report is infamous for refusing to remove third-party postings, and the Communications Decency Act (“CDA”) (47 USC § 230) renders it almost impervious to suit by victims of third-party defamation, such as the lawyer victimized in this case.
The lawyer, however, attempted a clever work-around to avoid what he knew would be Ripoff Report’s CDA defense. As part of the remedy in state court the judge assigned to an LLC created by the lawyer — Small Justice LLC — the copyright in the defamatory posting. Small Justice, the copyright owner, then demanded that Ripoff Report take down the copyrighted material. Ripoff Report refused, and Small Justice sued Ripoff Report in federal court in Boston for copyright infringement (and libel, interference with contract, and violations of Massachusetts’ unfair competition statute).
Ripoff Report moved to dismiss (memo in support here), and Judge Denise Casper issued a decision on the motion on March 24, 2014 (Order here).
As the decision implies, however, Ripoff Report may have anticipated Small Justice’s copyright strategy. Ripoff Report’s terms of service required Dupont to check a box before posting his report, granting Ripoff Report an irrevocable license to display the post, as follows:
By posting information or content to any public area of www.RipoffReport.com, you automatically grant, and you represent and warrant that you have the right to grant, to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute such information and content and to prepare derivative works of, or incorporate into other works, such information and content, and to grant and authorize sublicenses of the foregoing.
Relying on this license, Ripoff Report argued that whatever rights Small Justice acquired from Dupont by reason of the state court transfer of ownership were subject to the license Dupont granted to Ripoff Report.
Judge Casper did not totally buy this argument, at least at the motion to dismiss stage. Relying on Specht v. Netscape Comm’ns Corp., 306 F.3d 17 (2d Cir. 2002) and Craigslist Inc. v. 3Taps Inc., 942 F. Supp. 2d 962 (N.D. Cal. 2013), Judge Casper held that:
Whether [the quoted paragraph] . . . was sufficient to transfer the copyrights in the Reports from Dupont to Xcentric depends on whether it was reasonable to expect that Dupont would have understood he was conveying those rights to Xcentric. … the Court cannot resolve the issue of the ownership of the copyrights on the present record. Although the process by which users posted to the Ripoff Report appears to be similar to the … context in Specht, the Court cannot say, on this record now before it, what a reasonably prudent offeree in Dupont’s position would have concluded about license.
Accordingly, the motion to dismiss the copyright claim was denied.
Admittedly, the outcome in this case is offensive.* The fact that a person can be defamed in this manner, and that Ripoff Report can use the CDA and contract law to render itself immune from suit, is appalling, at least on first impression (whether the defamed attorney would want to represent anyone naive enough to believe Dupont’s obviously bogus post might be a question worth asking).
*note: An editorial in Massachusetts Lawyers Weekly opined, “[the lawyer] is unquestionably pushing the envelope, but the Ripoff Report’s response to his libel suit makes clear that it’s time for a fresh approach to the growing problem of gratuitous attacks in online reviews. Casper should reject the defense’s motion to dismiss and allow his suit to go forward.”
Hopefully, Judge Casper’s decision will lead to a settlement in which the offending post is removed. However, Xcentric may feel it needs to litigate this case to conclusion to maintain the integrity of the (thus far successful) legal barrier it has created against liability. If that proves to be the case, the law and the facts in this case seem, unfortunately, to favor Xcentric.
Small Justice LLC, et al. v. Xcentric Ventures LLC, 2014 WL 1214828 (D. Mass. Mar. 24, 2014).
Update: Click here for the court’s 2015 summary judgment decision in this case.
According to my count, I’ve written seven posts on the Viacom v. Youtube DMCA copyright case. The first time I mentioned Youtube and the DMCA was in October 2006, over 7 years ago. Referencing Mark Cuban’s comment that Youtube would be “sued into oblivion” I stated:
Surprisingly few observers have asked the pertinent question here: do the Supreme Court’s 1995 Grokster decision and the DMCA (the Digital Millennium Copyright Act) protect YouTube from liability for copyright-protected works posted by third parties . . ..?
In fact, Youtube was acquired by Google for $1.65 billion. It was then sued by a group of media companies, resulting in a marathon lawsuit that never went to trial, but yielded two district court decisions and one Second Circuit decision on the issues I identifed in 2006. As I described in a two-part post in December 2013/January 2014, the second appeal to the Second Circuit had been fully briefed and was awaiting oral argument. Now the case has settled, on confidential terms of course. However, demonstrating the extent to which the interests of the media companies and Youtube have converged, the joint press release contained the unusual statement that the “settlement reflects the growing collaborative dialogue between our two companies on important opportunities, and we look forward to working more closely together.”
We may never know the terms of the settlement, but rumor has it that the plaintiffs received no money in this settlement. My guess is they recovered a token amount, if anything. All three decisions favored Youtube, and Viacom’s case had been whittled down to next to nothing, even if it had been able to persuade the Second Circuit to crack the door a bit and remand the case a second time for damages on a limited number of video clips.
However, the settlement leaves some important questions unanswered:
It’s likely that other cases presenting these issues will make their way to the Second Circuit (arguably the nation’s most influential copyright court), but it could be years before that happens. The industry could have used additional guidance in the meantime, and one consequence of this settlement is that it will get it later rather than sooner, if at all.
An old legal saw warns that “hard cases make bad law.” The Ninth Circuit Court of Appeals decision in Garcia v. Google may be a good example of this maxim.
The issue facing the Ninth Circuit was whether an actress can claim a copyright interest in her performance in a film and, if so, under the unusual circumstances in this case, whether the actress could use that copyright to compel Google to remove the film from Youtube.
The facts in this case were very hard. The plaintiff, Cindy Garcia (pictured on left) was paid $500 to act in an independent film for a few days. She was told she was acting in an adventure film set in ancient Arabia. However, the film turned out to be an anti-Islamic movie, and her voice was overdubbed so that she appeared to be asking, “is your Mohammed a child molester?” The movie, titled “Innocence of Muslims,” let to a fatwa, and Garcia received death threats.
After Youtube (owned by Google) refused Garcia’s request to takedown the film (rejecting multiple DMCA notices from Ms. Garia), she brought suit for copyright infringement, make a novel legal argument. Rather than arguing that the film was a joint work under copyright law (which might have entitled her to a share of profits, but wouldn’t have achieved her goal of forcing Youtube to remove the film), she argued that she retained a copyright interest in her contribution. Calling this “a rarely litigated question,” Chief Judge Alex Kosinski, writing for a divided 3-judge panel, avoided the question whether Garcia qualified as a joint author of the film (it seems clear that, under Ninth Circuit precedent such as the Aalmuhammed case, she would not). Instead, he wrote that “nothing in the Copyright Act suggests that a copyright interest in a creative contribution to a work simply disappears because the contributor doesn’t qualify as a joint author of the entire work.”
The opinion concludes that Ms. Garcia may claim a copyright interest in “the portion of the film that represents her individual creativity.”
The court rejected Google’s argument that Ms. Garcia’s performance was a work made for hire (she was not an employee), or that she had granted the filmmaker an implied license (her participation had been induced by fraud, precluding that argument). And, Ms. Garcia had never assigned her rights to the filmmaker in a written document.
Lastly, the court found that Ms. Garcia had suffered irreparable harm (“death is an irremediable harm, and bodily injury is not far behind”), and that she had satisfied the causation requirement. The court “rejected Google’s preposterous argument that any harm to Garcia is traceable to her filing of this lawsuit.”
The district court had denied an injunction, which the Ninth Circuit reversed, ordering Youtube to take down all copies of “Innocence of Muslims.”
It’s difficult to predict whether this case will be a significant legal precedent. The idiosyncratic facts were sympathetic to Ms. Garcia, who appears to have been the victim of a fraudulent filmmaker, and who suffered unusual harm as a consequence. However, independent of these facts, the Ninth Circuit has held that an actor or actress owns an independent copyright interest in a film performance, reminding every non-fraudulent film producer to obtain a written copyright assignment from every performer.
[Catch-up Post] In an unusual application of the copyright fair use doctrine, on January 27, 2014, the Second Circuit held that Bloomberg’s copy of an investor conference call by Swatch was protected from copyright infringement under the fair use doctrine.
The facts are unusual. Swatch transmittd, recorded and promptly registered the copyright for a 2011 earnings call. Bloomberg recorded the call separately. Swatch claimed that Bloomberg’s recording infringed Swatch’s recording.
Although, technically speaking, Bloomberg did not copy Swatch’s copy of the call (it recorded it simultaneously, an issue I’ll return to below), the district court judge based his decision of non-infringement on fair use and the Second Circuit affirmed.
Analyzing fair use utilizing the four statutory fair use factors,* the Second Circuit held that Bloomberg’s purpose was to deliver important financial information to investors, and that this was analogous to news reporting, an activity often favored under the fair use doctrine. The fact that Bloomberg’s reproduction was not transformative was not an obstacle to a finding of fair use since, as the Second Circuit said, cases of news reporting favor “faithfully reproduc[ing] an original work rather than transform[ing] it.”
*note: Abbreviated, the factors are (1) the purpose and character of the use;(2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market fo the copyrighted work. 17 U.S.C. 107.
Second, while the work was technically unpublished under the Copyright Act’s definition of “publication,” a fact that usually cuts against fair use, the court held that because the contents of the recording were transmitted during the conference call, “the publication status of the work favors fair use.” Third, although Bloomberg copied the entire recording (again, a factor that typically weighes against fair use), it didn’t help Swatch in this context. The court held that “copying the entirety of a work is sometimes necessary to make a fair use,” and that was the case here.
Fourth, the Second Circuit held that the fact that there is no commercial market for the resale of financial earnings calls favored fair use.
Swatch v. Bloomberg is a significant case in the evolution of fair use case law, which has been quite active as of late (see, for example, Google Books, Cariou v. Prince).
It’s worth pointing out that the Second Circuit dodged an unusual copyright issue on this appeal. One of the fundamental precepts of copyright law is that the work for which copyright is claimed must be “fixed in a tangible medium of expression,” such as a book, film or a digital storage device. In this case Swatch’s audio was recorded simultaneously with its transmission, satisfying the all-important “fixation” requirement. However, Bloomberg received the transmission simultaneously with Swatch’s receipt and fixation of the call, and therefore fixation had not taken place at the instant Bloomberg made its recording. Accordingly, Bloomberg argued, no copyright-protected work existed at the moment Bloomberg recorded the transmission.
This issue was addressed in the lower court opinion, decided in April 2011. Swatch’s response, which the federal district court accepted, relied on Section 101 of the Copyright Act, part of which states that “a work consisting of sounds, images, or both, that are being transmitted, is ‘fixed’ for purposes of this title if a fixation of the work is being made simultaneously with its transmission.” The district court applied this section of the statute, and held that copyright law creates a legal fiction that the simultaneous fixation occurs before the transmission. This ruling allows the unauthorized recording of sounds that are transmitted live and recorded simultaneously to be the subject of a copyright infringement claim.
Bloomberg sought to challenge this interpretation of the copyright statute on appeal, but the Second Circuit refused to address the issue based on a procedural defect in Bloomberg’s appeal. This leaves the lower court decision on a rare and obscure issue of copyright law intact.
The Swatch Group Mgt. Services Ltd. v. Bloomberg, L.P. (2nd Cir. Jan.27, 2014)
It’s difficult to believe that so many judges and lawyers could disagree over what would appear, at first blush, to be a straightforward issue of copyright law. Can a company legally copy over-the-air TV broadcasts and transmit them to subscribers over the Internet, as long as it stores and transmits a separate copy for each customer?
Two companies have adopted this technology,, Aereo and FilmOn X (fka “BarryDriller.com”). Two federal courts have held that this does 
not violate the copyright rights of broadcasters (New York’s Second Circuit and a Massachusetts district court), and three courts have held it does (the California, D.C. and Utah district courts). Thus far, all of the rulings have arisen in the context of preliminary injunction motions, and until the Utah court’s ruling on February 19, 2014, Aereo had survived two challenges (New York and Massachusetts). FilmOn X had suffered the two losses (California and D.C.). Before the Utah decision, the Supreme Court had accepted review of the New York case, an unusual development given the fact that none of these cases involved a final judgment on the merits.
The Utah decision may prove to have tipped the balance, in more ways than one. Not only is the count now 3-2 in favor of the broadcasters in judging the legality of the “individual copies” technology, but Utah Federal District Court Judge Dale Kimball — a 17 year judicial veteran and former law professor — may have finally cut through the massive volume of verbiage surrounding this issue.
The section of the Copyright Act at issue, the “Transmit Clause,” states:
To perform or display a work “publicly” means—
to transmit or otherwise communicate a performance or display of the work … by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.
When confronted with the same issue that had been presented to four federal district courts and the Second Circuit, and which will be decided by the Supreme Court this term, Judge Kimball made short work of the local broadcaster’s motion for a preliminary injunction:
The plain language of the 1976 Copyright Act support Plaintiffs’ position. The definitions in the Act contain sweepingly broad language and the Transmit Clause easily encompasses Aereo’s process of transmitting copyright-protected material to its paying customers. Aereo uses “any device or process” to transmit a performance or display of Plaintiff’s copyrighted programs to Aereo’s paid subscribers, all of whom are members of the public, who receive it in the same place or separate places and at the same time or separate times.
After recapping the legislative history of the Transmit Clause, Judge Kimball stated:
Aereo’s retransmission of Plaintiffs’ copyrighted programs is indistinguishable from a cable company and falls squarely within the language of the Transmit Clause. It is undisputed that Plaintiffs license its programming to cable and satellite television companies and through services such as Hulu and iTunes. These companies and services are providing paying customers with retransmissions of copyrighted works. Similarly, Aereo uses “any device or process” to transmit a performance or display of Plaintiff’s copyrighted programs to Aereo’s paid subscribers, all of whom are members of the public.
Judge Kimball was not impressed with the reasoning of the Second Circuit in the Cablevision case (Cartoon Network v. CSC Holdings), the 2008 case that created the copyright “loophole” on which Aereo and FilmOn X have built their businesses:
To reach its conclusion that the recorded copies for later playback did not require an additional license as a separate public performance, the Second Circuit proceeded to spin the language of the Transmit Clause, the legislative history, and prior case law into a complicated web. The court focused on discerning who is “capable of receiving” the performance to determine whether a performance is transmitted to the public. However, such a focus is not supported by the language of the statute. The clause states clearly that it applies to any performance made available to the public. Paying subscribers would certainly fall within the ambit of “a substantial number of persons outside of a normal circle of a family and its social acquaintances” and within a general understanding of the term “public.”
However, the Cablevision court appears to discount the simple use of the phrase “to the public” because it concludes that the final clause within the Transmit Clause – “whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times”– was intended by Congress to distinguish between public and private transmissions. This court disagrees. The entire clause “whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times” appears to actually be Congress’ attempt to broaden scope of the clause, not an effort to distinguish public and private transmissions or otherwise limit the clause’s reach. The term “whether” does not imply that the ensuing clause encompasses a limitation. Rather, the introduction of the clause with the word “whether” implies an intent to explain the broad sweep of the clause and the many different ways it could apply to members of the public. Reading this final clause expansively is consistent with Congress’ intent to have the entire Transmit Clause apply to all technologies developed in the future.
Judge Kimball challenged an interpretation of the law that lies at the very heart of the Cablevision decision:
The Cablevision court’s analysis also appears to have changed the wording of the Transmit Clause from reading “members of the public capable of receiving the performance” to “members of the public capable of receiving the transmission.” Therefore, instead of examining whether the transmitter is transmitting a performance of the work to the public, the Cablevision court examined who is capable of receiving a particular transmission. This court agrees with Plaintiffs that the language of the Transmit Clause does not support such a focus.
Judge Kimball concluded that:
Based on the plain language of the 1976 Copyright Act and the clear intent of Congress, this court concludes that Aereo is engaging in copyright infringement of Plaintiffs’ programs. Despite its attempt to design a device or process outside the scope of the 1976 Copyright Act, Aereo’s device or process transmits Plaintiffs’ copyrighted programs to the public.
Based on this analysis the court enjoined Aereo from providing its service in the six states in the Tenth Circuit (Colorado, Kansas, New 
Mexico, Oklahoma, Utah and Wyoming). He declined to stay the injunction pending the Supreme Court’s review of the issue, ordering that the preliminary injunction go into force at once.
This case, and the fact that it is Aereo’s first courtroom loss, just adds to the drama over the upcoming Supreme Court hearing and decision on this issue. Will the Supreme Court perceive the issue to be a simple as Judge Kimball, or will it, to use Judge Kimball’s phrase, “spin the language” of the Transmit Clause to come out the same way as the Second Circuit ?
And, while this line of cases may be of academic interest to copyright lawyers, it is of immense practical interest to untold numbers of consumers who may want to use the Aereo/FilmOn X services to help them “cut the cord” of the expensive cable services. For this reason, pressure on the Supreme Court from consumer rights advocates in favor of Aereo’s technology is likely to be intense. The extent to which this will influence the Supreme Court may never be known, but few will deny that it will be a factor.
A couple of weeks ago I returned to the offices of the URBusiness Network to discuss the Digital Millennium Copyright Act (DMCA). This was my second trip to the URBusiness Network, an online radio network with a wide range of business shows.
The subject of the first show, recorded last October, was web site liability for third party postings under the Communications Decency Act (CDA). However, the CDA does not protect web sites for user postings that violate copyright law, so copyright liability and the DMCA were the topics of the current show.
Once again it was a pleasure to be interviewed by Ruck Brutti, who was joined on this occasion by co-host Nathan Roman.
You can listen to the new show here.
[This is part 2 of a 2-part post. To read part 1, click here]
[Update: Viacom v. Youtube was settled before the Second Circuit rendered its decision on the appeal discussed in this post]
After the events described in part 1, Kevin Kickstarter, founder of YouPostVid, meets with his lawyer, Mr. Jagger, to discuss whether YouPostVid needs to change its approach to managing copyrighted videos posted by users of the site. In preparation for this meeting Kevin has read the decisions in Viacom v. YouTube, and Mr. Jagger* has familiarized himself with YouPostVid’s compliance practices under the DMCA.
*[Note] Mr. Jagger’s name is a play on the infamous lawyer in Great Expectations, by Charles Dickens.
Kevin Kickstarter: Mr. Jagger, what I don’t understand is this – we comply with valid DMCA takedown notices. We take down thousands of video clips a month in response to takedown notices.
However, the DMCA also says that we can lose our immunity if we have “actual knowledge” of infringement, or if we are “aware of facts or circumstances from which infringing activity is apparent” — what you call “red flag” knowledge — or if we engage in “willful blindness,” a concept I don’t understand at all. At the same time the DMCA says that we have no obligation to monitor for infringement. How can I run a business based on this confusing set of rules?
And, as if this were not enough, I see that in the first appeal in the YouTube case the Second Circuit said that we could lose immunity if we have induced infringement. And, I read some of the briefs filed in the second appeal, and I see that Viacom is arguing that web sites don’t have to take any actions to “induce infringement” – this can be found based on the owner’s intent or state of mind. I’m totally confused. It seems that in terms of protecting YouPostVid the DMCA has more holes than swiss cheese.
Mr. Jagger: You’re right, Kevin – this is a confusing statute, and if Viacom gets its way in this appeal, the DMCA’s protection of Internet service providers will be narrowed. You need to play it safe in anticipation of an adverse ruling in this case. OK?
Kevin: Yes, I understand. But this is an intolerable situation for my company, and I hope the Second Circuit is able to clarify the law, and soon. We need to know what the rules are. I can’t believe that the online industry doesn’t have clear rules for web site liability based on user generated content 15 years after this law was passed.
Lets get going – I have a hard stop at 3:00 today.
Mr. Jagger: OK. Let me begin by reminding you that there are a lot of ways that you can lose DMCA protection that are easy to avoid. We know that your company has registered an agent to receive takedown notices, and that you have a repeat infringer policy, both of which are essential under the DMCA. You’ve also told me that you have told your employees that they may not upload videos to YouPostVid, since the DMCA only protects uploads by third parties. More than one video sharing site has been caught doing this and denied DMCA protection for employee uploads. You monitor for pornography and hate speech, but you don’t monitor for copyright infringement by means of employee monitoring or automated blocking software, and the law is clear, you have no obligation to do so, although whether you should use blocking software is something we’ll touch on at some point today.
These are all areas of the DMCA that are relatively clear. However, there are additional ways to lose the DMCA’s “safe harbor” protection that are at issue in the Viacom case and other cases pending in the federal courts in New York, and that are not so clear. I want to talk about those.
Kevin: OK, but make it quick – I don’t have much time today. I have a business to run.
Induced Infringement
Mr. Jagger: Understood. Lets start with what I think, in your company, is the easiest issue, “induced infringement.” You know that Viacom has argued, based on the Supreme Court’s 1995 Grokster decision, that it is illegal to distribute a device (including software, and by implication a web site), “with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement.” There is no question that this is true – a service provider that “fosters” or encourages infringement risks copyright liability for acts of infringement by third parties who use its software, and cannot rely on the DMCA as a defense.
However, I think Viacom is overreaching on this issue – it argues that the service provider’s state of mind or “secret intent” is a factor in determining whether there has been inducement. In effect, it is arguing that YouTube should lose immunity under the DMCA safe harbor based on a “thought tort.” This argument seems particularly weak where, as in YouTube’s case and in your company, the service has substantial non-infringing uses.
I think that the Second Circuit will hold that an Internet service provider must engage in purposeful expression or conduct — affirmative steps — to induce infringement, and you have never done that.
But, better safe than sorry. I’m going to suggest that you hedge your bets – no emails like the ones you showed me in which you tell employees that popular, copyrighted videos are good for business. In fact, I recommend you stop emails discussing the pros and cons of various clips altogether – they have been YouTube’s worst enemy, and they can be your worst enemy.
Kevin: OK, I understand, I’ll do that. I hope you’re right. We have never encouraged or “fostered” copyright infringement in any way. Should I destroy the emails you’re referring to?
Mr. Jagger: No, I think it’s too late for that. The publisher we met with had its lawyer send me a letter demanding that we preserve internal communications, and you have to comply with that. Sorry.
Kevin: Darn ….
Actual or “Red Flag” Knowledge
The next two ways to lose protection involve what the law calls actual knowledge and “red flag” knowledge. As you noted, the law doesn’t actually use the term “red flag,” it uses the expression “facts and circumstances,” but “red flag” is a common shorthand. And, it’s difficult to separate these two concepts, so I’m going to discuss them together.
What a lot of people don’t appreciate is that since the Second Circuit’s first ruling in Viacom v. YouTube in April 2012 DMCA protection has actually narrowed. Courts in New York applying the Second Circuit decision have held that a website can lose DMCA protection if it becomes aware of a specific infringement, or if it is aware of facts that would make it “obvious to a reasonable person” that a specific clip is infringing. Rather than go into the legal theory I’m going to tell you what this means as a practical matter.
Kevin: Whoa, Mr. Jagger, hold on a minute, hold up, please. I don’t get it. This makes no sense.
We have no obligation to look for copyrighted clips, but if we’re told about one, or one of my employees becomes aware of one, we need to take it down? This makes no sense. I understand that we need to investigate these “good samaritan” emails identifying infringing clips, but I don’t get the second piece of this. If an employee becomes aware of a specific clip I need to decide whether it would be “objectively obvious to a reasonable person” that the clip is infringing? If that’s the case I’m going to have to tell my employees not to browse the site. Is that what the law requires? You’ve got to be kidding me!
Mr. Jagger: I agree with you, Kevin, but I do not make the laws, would that I did. I am reminded of the comment by Mr. Bumble in Oliver Twist, “If the law supposes that the law is a ass – a idiot.”
Kevin: Mr. Jagger you are always quoting Dickens, or some other long-dead writer, most of whom I have never heard of. Stop your literary peregrinations, and get to the point, please! I haven’t had a migraine in years, but I feel one coming on now ….
Mr. Jagger: Sadly, I often hear this from my clients. I am sorry.
Kevin: Proceed, sir, please. Get this over with. This is worse than a root canal procedure.
Mr. Jagger: Very well. Yes, the safest legal course of action is to tell your employees to limit their viewing of uploads to your site.
Kevin: But our employees organize clips by subject, and move popular clips to the home page and various topic pages. They have to look at the clips to do that. Are you suggesting we stop this? That we can’t even look at video uploads on our own site? That what we’ve done in the past could lead to liability?
Mr. Jagger: I am afraid so. If you don’t you will need to train your staff to recognize copyrighted works under the “objectively obvious” test, and you will need to take down clips that satisfy that test, at least until the law is further clarified.
Kevin: You want me to provide legal training to my staff? Half of these people are high school students, interns, engineers . . . They aren’t lawyers; I can’t possibly ask them to apply this test.
Besides, this is not as simple as you — or these courts — appear to assume What if the clip uses copyrighted material but it falls under fair use? What if the clip is just a bunch of kids lip dubbing a song? Is that illegal or fair use? What if its a home-made video that uses only 20 or 30 seconds of a copyrighted song – is that infringement or fair use? How about an amateur music lesson of a copyrighted song? What if its a creative video mashup? You expect me to tell my employees that they need to make these kinds of distinctions? They are not lawyers, and frankly I’m not convinced that even lawyers could sort infringing from fair use clips, given the confusing court decisions on fair use!
Mr. Jagger: You can, and you must, or you must tell them not to view clips on the site, unless you are willing to risk a lawsuit. Or, of course, you can license Audible Magic. I can give you guidelines on how to apply the “objectively obvious” test or identify fair use, and when they are in doubt you can send a link to the clips to me, and I’ll advise you.
Kevin: I bet you will ….
Mr. Jagger: So, shall we continue? I’m afraid I have more bad news …..
Kevin: Before you do that Mr. Jagger, let me just point out how ridiculous this has become. I know enough about copyright law to know that not only are network and cable shows and Justin Bieber songs and music videos copyrighted, but the fact is that almost every video clip on my site is protected by copyright law. If someone creates a cat video, or a baby video, isn’t that automatically protected by copyright law? Isn’t the Charlie Bit My Finger video copyrighted? How am I supposed to apply this “red flag” standard when almost every video on my site is copyrighted? Even Audible Magic won’t block those videos. You’re telling me that I, the founder and owner of this company, can’t look at my the video clips on the site without applying the “red flag” test to every clip I view?
Mr. Jagger: You are 100% correct, Kevin. Very likely, all of those videos are protected by copyright law. It’s difficult to reconcile the “notice and takedown” parts of the law with the “actual knowledge”/”facts or circumstances” sections. I think that this is the key issue the Second Circuit will have to deal with in the Viacom/YouTube appeal, and in an appeal in a case involving Vimeo, presenting this precise issue. In that case the court held that Vimeo had to weigh the type of music (professional v. amateur), how well-known the artist is, and other factors that could be used to distinguish amateur material from professional material. The court seems to assume that amateur material has been posted with the consent of the owner, but professional material has not. The court held that a “recognizable song,” played essentially in its entirety and in unedited form triggers the red flag, and the website owner must either take it down, or investigate to confirm it is not a copyright violation. And songs that are lip synced or mashups are no exception.
Unfortunately, the court ignores the fact that what is immediately “recognizable” to one person may not be recognizable in the least to another, so for now the best rule of thumb is, “if in doubt, take it down.” You cannot be liable for taking down a clip (the DMCA expressly states this), but you can be liable if you make the wrong decision and leave it up.
I know we are past your 3:00 stop time, but I should also mention that the Second Circuit in Viacom stated that a web site could be liable for “willful blindness” where the site owner is “aware of a high probability of the fact of infringement and consciously avoids confirming this fact.” However, it’s not clear how this is different from “red flag” knowledge, so I suggest we leave it be until the courts provide more guidance.
Kevin: Thanks Mr. Jagger, are we done.
Mr. Jagger: I do have one more issue I need to warn you about. One federal district court in New York has held, in the MP3Tunes case, that the DMCA safe harbor applies to sound recordings — in other words music — recorded before February 15, 1972. However, more recently a different court in the same district, in the Vimeo case, held that the DMCA does not apply to pre-1972 sound recordings. The judge in the Vimeo case has authorized the parties to ask the Second Circuit to decide this issue while the Vimeo case is still pending — an “interlocutory” appeal — but there’s no guarantee the Second Circuit will exercise its discretion and hear this issue at this point in the case. This is obviously a question of great importance, but at the moment the law is not clear.
Kevin: Wait a minute – if we don’t take down pre-1972 sound recordings we risk liability, but if we review our clips to try to find pre-1972 recordings, we have to evaluate every clip we review to determine if it is an infringing copy? This is a catch-22 that we just can’t win.
Mr. Jagger: I agree ….
Kevin: Mr. Jagger, let me ask you a question – what do you see as the big picture here? Where are the courts trying to guide companies like mine with this ridiculous line of cases.
Mr. Jagger: I will tell you my theory, Kevin. Under the language of the DMCA the courts cannot force web sites like yours to use filtering software like Audible Magic, or ContentID, a system developed by Google. However, they can use the law to make it so difficult to avoid liability that, as a practical matter, that will be the only option. I think that, in the not too distant future, we may see an Internet in which almost every significant site that allows a significant number of uploads will either have some form of licensing agreement with content owners, or will use filtering software to block most copyrighted works. Other than renegade sites that can’t be reached by the courts, the early days of sites like YouTube, Vimeo, Veoh and MP3Tunes will become as much a distant memory as 5 1/4 inch floppy disks.
Kevin: I need to go. I think I can sell my company for a decent profit before the forces of darkness you describe put me out of business.
Mr. Jagger: Good luck, Kevin . . ..
On Friday the U.S. Supreme Court granted review in American Broadcasting Companies, Inc. v. Aereo, Inc.
I wrote a 4-part post on this case in the Spring of 2013. Part I of the series begins here. The series begins as follows:
Aereo is a company that has developed a system that captures over-the-air television (broadcast TV) and retransmits it to subscribers over the Internet. Subscribers are able to watch broadcast TV on their computers, tablets and smart phones. Even better, Aereo acts as a remote digital video recorder (a remote DVR) so subscribers can record programs and stream them at another time. Aereo launched in New York City in early 2012, but it has announced that it is expanding to 21 other cities in 2013.
Is this a problem for broadcasters? You bet it is. . . . . continue reading
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