The DMCA’s Unworkable Loophole

After completing yesterday’s post, I got to thinking about how our digital lives would be different if the legal changes to the interpretation of the DMCA suggested (mandated?) by the Second Circuit came to pass.

Remember, here’s the DMCA’s safe harbor protections in a nutshell. I (YouTube, Grooveshark, et al) allow users to upload music and other protected content to my website (even if I know it infringes another’s copyrights). I pretend I don’t know about it. People flock to my site because you can listen to music for Free!!! So many people come to my site, that I start to make big bucks off add revenue. Even though I know it’s probably illegal, you, the copyright owner, can’t sue me. Instead, you have to write me a letter and tell me you don’t like what I’m doing. After I get this letter, I take down the music. You still can’t sue me because I took down the music. Tomorrow, someone else is going to put the same music right back up on my site again and I’ll allow it until you write me another letter. Then I’ll take it down and we can continue with this process.

I question whether companies like Grooveshark would be able to hide behind the DMCA’s protection any longer if the Second Circuit’s interpretive approach were applied. If courts no longer required the copyright holder to have to notify the website operator before DMCA protection could be removed, what would happen? If operators couldn’t hide behind a game of willful blindness, what would happen? Make no mistake, these websites know full well they have infringing material on their sites, but the DMCA nonetheless protects them until someone literally tells them in a “takedown notice” what they already know. It’s pretty ridiculous hoop to jump through and it allows the copyright infringer to essentially break the law until someone tells them to stop, even though they know they’re breaking the law. I hope we are moving towards something more workable.

Jeff Price over at Tunecore Blog wrote an excellent piece on the evil that is Grooveshark, and if you support artists but still support Grooveshark and similar platforms, I implore you to read the article. They steal music. They get rich doing it. Simple as that.

Read it here: Grooveshark: Trolling the Sea of Artists to Make a Buck

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Safe Harbor to Harbor a Little Less Safety?

About a week ago the Second Circuit issued a decision in YouTube v Viacom that has copyright lawyers all up in arms, which may not be all that difficult a feat in itself. The decision overturned a grant of summary judgement on behalf of YouTube in a copyright infringement case that spans all the way back to 2007. (Yes, this is how slowly IP law moves). I must first say that there are some excellent postings and rumination on this case. One of my favs is the Copyhype blog which goes in to far more detail than I.

Why should you care about this? Well, it’s pretty important if you’re a website operator who posts user generated content, or allows users to post their own content a la YouTube. In the late 90’s, Congress created the Digital Millennium Copyright Act (DMCA), which among other things granted these sorts of website operators a “safe harbor” wherein could avoid liability in the event a user posted content that infringed the copyrights of another, a situation certain to happen. The DMCA says that as long as the website operator follows a few simple statutory rules and does not have knowledge of the infringement, then they can’t be held liable for the infringement. It’s this last component — knowledge — that is key to the court’s determination.

In the original case, the District Court held that knowledge could not be merely “general awareness that there is infringement”. Instead, the court held that the level of knowledge needed to remove the DMCA’s protections would have to rise to a  level “actual or constructive knowledge of specific and identifiable infringements.” Recognizably, this is a pretty high threshold and is realistically only met via notice to a website owner from a copyright holder since the operator itself has no duty to police or monitor its content. As long as they don’t know that specific content is infringing, then they’re all clear (as far as notice goes, remembering, however, that there are other requisites to the DMCA safe harbor).

The YouTube case is interesting because, while YouTube did not have this sort of specific notice from a copyright holder prior to its notification from Viacom and other plaintiffs, emails were introduced at trial showing that employees suspected that certain videos were infringing, and most importantly, that these emails referred to specific and particular videos and clips. Viacom argued that this sort of internal email amounted to knowledge since the emails clearly indicated an awareness, not only of the specific video’s presence but also of the fact that the videos were infringing. Consequently, Viacom argues, YouTube had actual knowledge of the infringement and should not be granted DMCA safe harbor. Though the District Court didn’t buy this interpretation, the Second Circuit did, stating that this sort of internal communication may rise to the requisite level of knowledge if the evidence shows, and so reversed the District Court’s grant of summary judgement on the particular issue.

Do you see the big deal now? Internal emails identifying specific acts of infringement may now possibly remove DMCA safe harbor protection, whereas before they would not have. The DMCA has always clearly stated that there is no active duty on the part of the website operator to monitor the legality of the content posted. However, depending on how this case progresses, there could now be a duty to preemptively take down known infringing material even before the copyright holder notifies the operator. Actually, this probably stays more true to the intent of the law.

Lastly, the Second Circuit noted the concept of “willful blindness” which has long been accepted in the common law to be a type of knowledge. Though the concept is generally adopted in copyright law, its application to the DMCA had not yet been considered (i.e., whether acts constituting willful blindness indicate actual knowledge) Again, whether YouTube’s actions amounted to this are unknown at this point. The important thing to note is that the Circuit court has stated that willful blindness may play a part in the determination of a website provider’s knowledge. In itself, this is a new development.

No doubt this case will continue to develop all sorts of interesting law. Rest assured, when something new develops, the entire copyright world will buzz.

Categories: Copyright & the DMCA

The Kardashian Consequence — Texas Anti-SLAPP Law & Endorsements

When this blog read over the news this week and saw that the Kardashians won a case after trashing a company they had an endorsement deal with, the first reaction was, “how?”  Then, come to find out that the same law that allowed the Kardashians to escape liability was just passed in Texas.  Oh happy day! To tie in the Texas Leg and the Kardashians?!  Only thing better than this would be some rain.

First, the news and a bit of setup.  Anytime the end of a legislative session occurs and a wave of laws suddenly rolls through, the media naturally fails to cover some things, but the blog was a little surprised it didn’t hear more about this.  Last week, Texas unanimously became the 27th state to adopt an Anti-SLAPP lawsuit law which will go into effect on September 1, 2011.  An odd name to be sure, SLAPP stands for Strategic Lawsuit Against Public Participation.  The purpose of the law is to “safeguard the constitutional rights of persons to … speak freely … and otherwise participate in government….”   The law is designed to encourage free speech by discouraging frivolous lawsuits that, via the threat of a costly and drawn out lawsuit, inhibit people from speaking out about matters of public concern.

But what is public concern?  Well, it’s rather broad and includes anything connected with health, safety, the government, public officials, and environmental, economic and community well-being — basically, it’s almost everything.  Under the anti-SLAPP law, a defendant who finds herself in a lawsuit regarding public concern speech makes a special motion to the judge to have full discovery suspended while the two sides briefly present why there should or shouldn’t be a full lawsuit.  The suspension of discovery is the real kicker here because the pretrial discovery process is easily the most drawn out process of a suit and typically the most expensive part; it’s also the time when the plaintiff gains access to the facts necessary to prove her case.  The anti-SLAPP law now requires the plaintiff prove her case with “clear and specific evidence” in order to prevent the entire action from being tossed out.  This increased burden is the purpose of the law.  By making sure the plaintiff’s got a dang good case before she files, the law hopes to weed out all those other lawsuits that lack merit.

However, there is an additional consequence to this new law — a Kardashian consequence (the author suggests that a “Kardashian Consequence” be adopted into the general lexicon as a word meaning “an unexpected situation which breeds an unearned consequence”.).

The setup is brief.  The Kardashian suit is in California, a state which adopted the anti-SLAPP law in 1992 and leads the country in dealing with suits related to the law.

The Kardashians were sued for breach of contract by Revenue Resource Group (RRG) seeking $75 million in damages.  RRG entered into a deal with the Kardashians to offer a branded prepaid debit card.  When the card began to receive a lot of public flak for having high fees, the Kardashians terminated their deal with RRG and began making disparaging public comments.  Not surprisingly, these comments were in opposition to the contract which required the Kardashians make positive and glowing comments only — in short, they were to constantly endorse the card.  RRG claimed the Kardashians’ comments essentially ruined their entire business, hence the $75 million in damages as opposed to the far less damage that would normally accompany a breach of contract claim.

The Kardashians quickly motioned that the suit be thrown out on anti-SLAPP grounds because they were exercising their free speech regarding a matter of public concern.  Judge Jeffrey Hamilton agreed.  “We do not have a mere breach of contract action here, seeking recovery from the Kardashians of the contract damages for their breach of same,” Hamilton wrote. “Instead, we have an attempt to also charge the defendants with loss of all other business unrelated to them, specifically tied to defendants’ exercise of free speech.”  The judge found that because RRG was losing money before the Kardashians made their comments, the overall damages to the company were not their fault.

To wrap it up — and kudos to you if you’re still reading — now that Texas has effectively the same anti-SLAPP law, this Kardashian opinion really speaks loudly, albeit narrowly.

Recognizably, it’s commonplace to engage in an endorsement deal with a celebrity/spokesperson, one which requires the spokesperson say nice things about the product and so forth.  This case speaks to that narrow area where a spokesperson breaks contract and speaks out against a product, and the damages that flow therefrom may or may not be related to the spokesperson’s speech.  If the company wants to bring suit for breach of contract, they can, no problem.  But if they want to recover any damages directly related to the spokesperson’s statements, this new anti-SLAPP law has placed an addtional hurdle in their way, and likely made recovery of those damages far more difficult.  Why? Well, now that same company would have to prove with “clear and specific evidence” that the spokesperson’s statements were what caused the damage, and do this before discovery or with only the limited discover the anti-SLAPP law permits.  Without the discovery, a successful case is significantly more difficult to establish.

While the law doesn’t take effect until September 1, 2011, it’s important to see how this new law influences the litigation process in areas other than traditional speech torts such as defamation or slander.  The Kardashian case cautions us that the anti-SLAPP law can also affect breach of contract claims.  Notably, the case is a California Superior Court case and in no way will influence the outcome of a Texas court on the same or similar issue.

However, any time we pass new laws, it’s wise to know what we’re getting ourselves into.  This recent case cautions us to only one (of many?) of the law’s Kardashian Consequences.

Keep. It. Simple.

“I shy away from [slotting] any artist with complications … Sometimes these are long-term projects, but usually I have to find something by 6 pm that day.”  These words were spoken by a music supervisor to Digital Music News this week.  Here’s why it’s true, why it matters, and why this problem must eventually change.

First off, as the music supervisor indicates, often the rights to a song must be secured very quickly and searching for four different rights holders, contacting them, and then coming to a deal is not something that can be accomplished at the needed pace.  Sometimes, even just the act of tracking down the rights holders can be prohibitively expensive because there is no single place where all rights can be cleared.  Typically, a licensee must go through the publishers (after of course, tracking down who that publisher is), who then must contact the artist or the artist’s representative if the license falls under a certain category, such as a synchronization license to place the song in television, film, commercials, etc.  This extra step, though it seems needless, helps the artist maximize the value of their creations via the creation of a knowledgeable gatekeeper.  It also allows the artist to create instead of having to constantly make business decisions.  Already, the music supervisor has used substantial time and eaten into their budget, and the negotiations have not yet begun.  There are so many steps to the process that aren’t important to go into here, but it is worth reiterating that these steps must be repeated for each rights holder for each song, and that can simply be too much.

So why should the artist care about this? Well, the easiest answer is that a song in which the rights are consolidated is a more valuable song and, consequently, more accessible. Case in point:  I struck up a conversation with a music supervisor at SXSW last year who worked for a sports broadcasting network and placed the songs during the broadcast of various games.  Believing that I had an artist who would fit her needs fairly well (don’t we all think that?), I asked her if she wouldn’t mind me sending her a song.  Her first question? “Do they own their own masters?” That was what mattered most.  She didn’t want to know about the song, about whether it was rock, country or rap, or whether the artist was well known or rapidly increasing their reputation.  No.  The gatekeeping issue for her was whether a prospective placement would require her to engage the artists, the publishers, the label, and who knows who else just to begin talking about doing business.  For her, there were simply far too many good songs out there that didn’t require a ton of hassle to mess with those songs that did.

Unfortunately, efforts to tackle this problem stall every time.  There should be a single place where a right can be cleared with a single signature, but there isn’t, yet.  I’m hopeful that eventually this will come to pass as artists realize that the complexity of the system is actually preventing them for acquiring opportunities.  On the contrary, some artists believe that the attendant friction that follows the split of a right drives up the value and final price of a song.

Perhaps the final message for the upcoming artist? Keep all your rights, or consider giving ’em all away to the label–I wouldn’t really advise that last one, but it’s consistent with the broader point that when all rights are concentrated in one place the artist is better served.  Either way, consider how many ways that bundle of rights that lies in each song is split.

Welcome to the …..

… well, I’m not quite sure where you’re at, or where I’m at for that matter.  What I am sure about is that the internet doesn’t have enough people typing their opinions for all to see.  There appears to be a vacuum of discussion on all things legal and so I hope to be the lone soul out there talking.

As far as I can tell so far, Intellectual Property has been a piecemeal effort over the last one hundred years, adding together new rights and new concepts of what is and should be protected by law.  Most importantly, the ever-expanding area of intellectual property, which shall forever be known here as “IP”, has probably not done enough to ensure that artists work’s are protected and that they get paid.  Perhaps IP has spawned a different approach.

The strict protections that exist throughout the Copyright Act, the Lanham Act (for Trademarks), and the Patent Act have done more–in my incredibly un-humble opinion–to prevent creativity and innovation than the founders ever would have imagined.  There are so many rights wrapped up in the use of any creation now that it has become difficult, if not entirely impossible for average people to create simple things.  If creation is the betterment of a prior idea, then how are we ever to create anything?  Want to use the preceding product in order to make a new and better one ?  Better pay the license fee.  Want to use a picture, chop it up, paint over it, and change it into something mostly new?  Better find the author, and, you guessed it, pay the license fee.  It seems that when lawyers write laws, it creates a situation wherein a lawyer must be consulted simply to avoid the violation of the law.  What a pitty ….

Here’s my thought.  Accessible blogs, and I certainly hope to fall in line here, can be at once informative, explanatory, and thought provoking.  To the point, the should be that way.  My comments here will focus on recent happenings in intellectual property and will frequently focus on those local Texas issues that affect the topic as well.

Beyond everything else, I seek feedback on how we can better the dialogue and grow a community of people who believe that IP can meet a better compromise when the folly of the day is examined more closely.  Thanks for stopping by.  How was that for talking a lot without saying much?

 

Categories: Uncategorized