SarahFeingold2012If you’re in the market for some original Aboriginal dot paintings, or an even more esoteric item, like a bed for your pet rat that’s shaped like a slice of cake, you’re in luck: It’s likely that Etsy, the giant, 24/7 online version of the weekend crafts market will have something on offer that will appeal to you.

Etsy, if you hadn’t heard, is one of the world’s fastest-growing ecommerce platforms that has successfully managed to tap into the latent market for easily-accessible, hand-crafted and vintage goods. Since its founding in Brooklyn in 2005 by Robert Kalin, Chris Maguire, Haim Schoppik and Jared Tarbell, it’s mushroomed into a global, 500-person company with more than 40 million members, more than a million shops selling more than $1.35 billion worth of goods in 2013. Etsy charges 20 cents for each item published on the platform for up to four months and a 3.5 percent fee on the sale of each item. Its current CEO is Chad Dickerson, the company’s former chief technology officer. Its investors include Accel Partners, Hubert Burda, Index Ventures, and Union Square Ventures.

Sarah Feingold, a jeweler and metalsmith who also happens to be a lawyer, is a member of Etsy’s core team who’s been through almost the whole journey. Feingold is from a family of artists and first became interested in copyright law when she wanted to find out more about how to protect her creations. That led to a professional interest, law school at Syracuse University, authoring an e-book for artists on copyright basics and what they should be doing to protect their works, and then eventually a job as an attorney at Etsy. Like a lot of startups, Etsy didn’t have an in-house lawyer in 2007. Feingold saw an opportunity, knocked on the company’s doors and managed to convince Kalin that she was the person that they didn’t know they were looking for. Today, Feingold is part of a team of four. She’s an in-house counsel who focuses on intellectual property issues, and works alongside Hissan Bajwa, another in-house counsel. Althea Erickson is the company’s public policy director, and Jordan Breslow is the firm’s general counsel.

Etsy has grown into an important avenue of sustaining livelihoods for creative people. At the same time, the open nature of the Internet, and the rise of entities in Asia that can quickly copy and mass manufacture designs by artisans have made copyright a burning issue of importance for many in the community. It’s not hard to find online discussions between various Etsy sellers debating the limits of fair use, or others sharing their experiences of receiving cease and desist letters.

However, like any other online platform that hosts third-party content, Etsy is subject to the Digital Millennium Copyright Act (DMCA). The company acts as an impartial conduit that does not get involved in the merits of the hundreds of infringement claims and counterclaims that flow into Etsy’s offices.

As the company’s chief in-house IP counsel, Feingold handles the DMCA takedown requests, and counter-notices, among other things. Her advice to sellers is to educate themselves as much as possible about copyright policy so that they understand both their own rights, and also understand the complexities of the factors at play when courts judge what is and isn’t fair use.

Below in an edited Q&A, Feingold discusses the DMCA and fair use.

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There’s been much press coverage of the travails of the AmLaw 100 — America’s largest law firms. Clients are aggressively pushing back against ever-increasing hourly rates and significant inefficiencies. Storied firms have been foldingmerging and laying off staff and even attorneys at unprecedented levels. Electronic discovery specialists and legal outsourcing are compressing margins for the litigation work that historically fueled big firm profits. Non-traditional legal providers are hardly faring better. Clearspire, a much-heralded pioneer of the virtual law firm concept, closed shop in June.

Yet at the same time — and perhaps as a consequence — the market for legal startups is booming. VentureBeat commented that the profession’s ongoing transition is “fueling innovation throughout the entire industry.” In 2009, just 15 legal services startups were listed on AngelList. There are now more than 400 startups and almost 1,000 investors. A whopping $458 million was invested into legal startups last year, a remarkable increase from the $66 million that went into the space in 2012. Legal entrepreneurs are focused on two different objectives: helping lawyers do their work better, faster and cheaper, and making the law more accessible, sometimes eliminating the need for lawyers altogether.

Law

It is the second, consumer-facing portion of this trend that portends a fundamental change in the legal market. By giving both individual and corporate consumers the resources to do it yourself, today’s crop of disruptive legal startups is laying the groundwork for an era in which software tools, social sharing and document comparison-assembly programs are positioned to replace attorneys’ stock in trade, namely reuse of contracts and other legal “forms.”

A century ago the bar protected itself with arcane Latin phrases and obscure judicial reporters. Two decades ago, it used the expense of private legal research databases like LexisNexis, an information barrier that is increasingly archaic in today’s era of Web-enabled courts and Google Scholar. With the present challenge to the largest traditional domain of legal practice — creation, revision and execution of legally binding documents — technology is breaking down walls that made have legal U.S. services unaffordable, and thus essentially unavailable, to many except the wealthy those at the opposite end of the economic spectrum who qualify for free and pro bono legal services.

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Back in March, I blogged about a slate of competition accusations that had been leveled at the Android mobile operating system.  Although I am not going to rehash my initial arguments here, I wanted to point readers to a recent paper by Dr. Torsten Körber, which analyzes the same claims and comes to similar conclusions (including noting that both the US FTC and Korean antitrust regulators examined the Android ecosystem as part of their antitrust reviews of Google’s practices and found no cause for concern).

Given that this is a blog, and not an academic journal, I’m not going to analyze Körber’s entire paper (although I recommend it to anyone interested in a deep dive on these issues), but instead point out a few interesting takeaways from it on the nature of competition in the mobile ecosystem.  Specifically, I will focus on how the mobile market is different than the PC market, as much of the current high-tech antitrust thinking and analysis is influenced by prior landmark antitrust cases, not least of which being the Microsoft cases.

1) The mobile market turns over much faster than the PC market

In the mobile world, turnover of devices is much faster.  Although it varies by country and manufacturer, it is very common for consumers to replace their smartphones every year, or every other year.  Compare this to the PC world, where — as Körber points out — Windows XP still has nearly a 30 percent share, and it was released in 2001!

So, what does this mean for antitrust/competition analysis?  It means that market power is more difficult to come by and market share is more ethereal than in the PC market, as consumers are continually faced with inflection points where they reevaluate their choice of handset and mobile OS.  Whereas if the average consumer replaces his or her computer once or twice a decade, then market power is more permanent and market share changes are much slower.  This partially explains the ephemeral nature of the leading smartphone and mobile OS makers over the decade, which is illustrated by this quote from comScore market research highlighted in the paper:

“In 2005, the market was dominated by Palm, Symbian and BlackBerry. However, by the following year all three had ceded control to Microsoft as the new market share leader. 2008‐2010 saw BlackBerry stage a comeback to assume the #1 position before eventually giving way to the upstart Android platform in 2011”.

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Jonathan’s post continues DisCo’s ongoing coverage of the Aereo case.  Last week, Prof. Michael Carrier wrote a post for DisCo on the possible effect of Aereo on investment.  Previously, DisCo writer Matt Schruers guest-posted on SCOTUSblog about how Aereo creates uncertainty for the cloud.

One of the great attractions (or frustrations) of copyright law is that it is based on metaphysical distinctions. The most obvious of these is the idea/expression dichotomy. The Second Circuit in Computer Associates v. Altai observed that “drawing the line between idea and expression is a tricky business.” Judge Learned Hand, one of the leading copyright jurists, stated that “nobody has ever been able to fix that boundary, and nobody ever can.” He also noted “no principle can be stated as to when the imitator has gone beyond copying the ‘idea’ and has borrowed its expression. Decisions must therefore inevitably be ad hoc.”

Other similarly metaphysical (and ad hoc) distinctions in copyright law are whether the idea and the expression have “merged,” whether two works are “substantially similar,” and whether a use is fair. And after the Supreme Court’s decision in American Broadcasting Cos. v. Aereo, we can add the identification of who is the volitional actor to this list of abstract, ad hoc determinations.

One of the conceptual flaws of the Second Circuit’s decision in Aereo was that the Second Circuit never decided definitely who was the “volitional actor,” i.e., who was doing the transmitting, Aereo or the subscriber. The Second Circuit focused just on the fact that a particular copy was being transmitted to only one subscriber, ignoring the question of who was transmitting it to the subscriber. As a result, the parties talked past one another in the briefing before the Supreme Court, with the broadcasters assuming that Aereo was the volitional actor, while Aereo assumed that the subscriber was the volitional actor. Several of the amicus briefs, including the one I filed on behalf of the Center for Democracy and Technology, and those filed by CCIA and law professors David Post and James Grimmelmann, stated that the starting point of any copyright analysis was identifying who was the volitional actor—who was the party that would be treated as the direct infringer, as opposed to a secondary infringer.

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The Supreme Court recently held that Aereo, a service allowing subscribers to watch broadcast TV on Internet-connected devices, infringed copyright law by publicly performing protected works. Although the Court promised that its ruling was “limited,” that may not be the case. To shed light on Aereo’s impact, this post highlights my research into copyright law and innovation, which foreshadows harms to innovators, reduced venture capital, and increased litigation from heightened ambiguity.

My research uncovered the relationship between copyright and innovation in the music industry through interviews of 31 high-ranking officials from technology companies, the recording industry, and venture capital firms. I traced the effect of litigation including Napster, the first case to punish a peer-to-peer (P2P) service, and one in which the court required filters that were 100% effective in blocking copyrighted works.

I learned that Napster had a significant effect on innovation and investment in the music industry. Venture capitalists and entrepreneurs were “scared away” from the area, which was “too risky.” And the decision led to a venture capital “wasteland,” “graveyard,” and “lost decade,” with “a pall over companies getting funded.”

Relatedly, innovators who tried to comply with the law were blocked by the copyright holders. One innovator introduced a service that he believed was “completely legal to the letter and to the spirit” of the law, but still “got hit across the head with a hammer.” Another, who offered a service that was “able to block close to 100%” of the files the record labels requested, lamented that he was “getting set up by the RIAA [Recording Industry Association of America]” with an “ultimatum” that “you cannot have any of our material being downloaded on our website—100%.” And a third, offering a service that had investors with “deep entertainment interests” and was “first of kind” in implementing compliance procedures, witnessed its offer of a “blank check” rejected by the labels, which “just wanted us dead.”

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(cross-posted from the CCIA blog)

Achieving a modern copyright regime that is apt for a digitally connected continent requires a strategic vision. The leak of the European Commission’s White Paper on copyright policy which appeared this week has a strategic vision – unfortunately, one which seems to see copyright as an instrument of industrial policy designed “to ensure a balanced distribution of value among market players”. It is conceptually wrong to pick winners and losers in the marketplace via copyright rules. While copyright rules were not designed to do this, the Commission’s White Paper seems to suggest that this is a legitimate vision based on the ‘perception’ of some claiming that they are not getting a fair share from the online economy.

At the same time statements on the “sustainability of value chains that are based on copyright works” raise questions on what the Commission envisions to legislate for. Copyright rules should neither try to protect existing business models nor try to prevent new market developments and innovations – even if they are very disruptive for some players. In fact, the White Paper implies that all value online comes from professionally produced content industries. It fails to provide evidence on the new, pro-active role of consumers and new creators who are part of a dynamic, rapidly evolving landscape for creative content. Contrary to certain statements, this landscape is increasingly driven by digital technology enabling the creative sector to thrive. In addition, traditional content industries like books, music, audiovisual and video games have grown over the past years, largely driven by digital distribution chains and formats.

A strategic vision should include a proper balance in the copyright framework. Creativity must be incentivized and rewarded without, however, undermining legitimate interests of users and the broader development of a thriving digital economy in Europe. Establishing balance in copyright is not only for the purpose of addressing market failures. Making sure that copyright does not collide with fundamental rights and leaving enough breathing space for Europe’s digital innovators are examples of two other compelling reasons for balance in copyright.

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Yesterday, it was reported that Community, which had been canceled by NBC in May, was just picked up for a sixth season (at least) by Yahoo.

The creation and distribution of original programming by new entrants is a growing phenomenon.  Traditional over-the-air broadcast television is no longer the sole source of episodic programming.  As DisCo has previously noted, shows like House of Cards and Alpha House have risen to fame on web-based services like Netflix and Amazon, entirely in the absence of network backing.  Just as record labels are no longer the sole gatekeepers to music production, it is increasingly clear that television networks are no longer the gatekeeper to serialized video content.

Increased competition and disintermediation in the market for video content is unmistakably a good thing for consumers, who have more options for entertainment than ever before, and for creators and entrepreneurs, who can produce programming without needing permission or funding from existing gatekeepers.  This allows for more risk-taking and creative choices, without having to worry about what incumbents find desirable.

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120921_KTQgala_HeadShot_11Life Itself,” Kartemquin Films’ highly-acclaimed documentary about the late movie critic Roger Ebert, debuts in theaters this July 4 weekend, and it’ll contain clips from Ingmar Bergman’s movie “The Silence,” Martin Scorsese’s “Who’s That Knocking At My Door,” and Russ Meyer’s “Beyond the Valley of the Dolls.”

Thanks in part to an ongoing campaign undertaken by Kartemquin Films’ Co-Founder and one of “Life Itself”’s Executive Producers Gordon Quinn, the documentarians didn’t have to license all of the clips.

“Life Itself,” and several other documentaries, such as “The Trials of Muhammad Ali,” would not have been possible without the filmmakers being able to rely on the legal concept of fair use, because licensing footage and archival materials would have been prohibitively expensive, Quinn said in a recent interview.

In 2004 and 2005, Quinn and a group of his peers, working alongside industry lawyers and academics, produced a 10-page guide entitled: “Documentary Filmmakers’ Statement of Best Practices in Fair Use.”

The project came about after an animated 2004 conversation between American University’s Professor of Communications Patricia Aufderheide and Quinn in Amsterdam as they were attending the International Documentary Festival. The professor told Quinn that documentarians didn’t have to live in a “clearance culture,” and that he and his colleagues ought to reset the expectations about fair use and licensing by creating industry standards, educating industry players and asserting their rights.

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Last week, the head U.S. trade negotiator, Ambassador Michael Froman, delivered a speech addressing the Trade in Services Agreement (TiSA).  What got my attention was the prominence that the Internet and Internet-centric commerce received in the speech.

Although this might seem like common sense given the immense role that the Internet plays in international commerce (particularly trade in services), the international trade regime has been slow to embrace this technological revolution.  As I have written before on this blog, Internet trade has traditionally received relatively short shrift from traditional trade negotiators.  However, at least in the U.S., that trend is changing.

[As an interesting aside, watch this presentation by J. Bradford Jensen to get a better understanding of the importance of trade in services to the U.S. and global economy.]

Before I chronicle the USTR’s evolution on Internet-enabled trade rhetoric and action, I want to throw out a few recent examples of why trade negotiators — in the U.S. and the rest of the world — should focus on facilitating a free and open Internet if they want to help consumers and global commerce.

At the risk of stating the obvious, I need to lay out the keystone fact up front for the purposes of my argument:  the Internet has an enormous positive effect on international commerce: particularly for small businesses.  The Boston Consulting Group estimates that the G-20’s Internet economy will be worth $4.2 trillion by 2016 and that more than one-fifth of the growth of modern economies from 2007-2012 is attributable to the Internet.  These effects are predicted to significantly increase as Internet penetration grows in the rest of the world.

For major U.S. Internet companies, international markets have become increasingly more important.  And the potential for international competition has become more robust.  In the latest installment of Mary Meeker’s routinely fabulous annual report on internet trends, she documents this phenomenon.  While nine out of the top ten “global Internet properties” are made in the U.S.A., 79% of their users come from outside the U.S.  Compare this to 2005, when Google’s total international revenue was 39% of its overall sales.  Now, 56% of Google’s revenue comes from overseas.  For Facebook, it is a similar story.  Currently, 86 % of Facebook’s users are international, while less than 50% of Facebook users were international as of 2008.

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The long-awaited Aereo opinion is out.  The Second Circuit was reversed 6-3, and it’s not encouraging for the cloud industry, as we feared.  (This appears to be 2(a) in Matt’s list of possible outcomes, more of a broad reversal than a narrow reversal.)

Matt has written several posts on how this case impacts the cloud industry ([1], [2]).  He explained that while the broadcasters may not intend to go after the cloud, any argument that attempts to just eliminate Aereo would also implicate cloud services.  And in fact, several members of the Supreme Court were concerned at oral argument (which I attended) with the effect of this decision on the cloud, although this was not sufficiently represented in the majority opinion.

The United States government had filed an amicus brief arguing that the Court could find Aereo unlawful while simultaneously not threatening the cloud, but as Matt explained, this is not possible.  (The majority, however, appears to have been persuaded by the U.S. government’s argument, as I explain below.)

Not only does this decision against Aereo potentially affect the cloud industry for legal reasons, but it is likely to deter investment in innovative new services.  The certainty provided by Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2008)) (popularly known as Cablevision) led to additional investment in U.S. cloud computing companies ranging from $728 million to $1.3 billion during the two years after the decision.  (Cablevision also happens to be the case that Aereo’s business model heavily relies upon.  As explained below, the majority does not cite the case, which is odd.)  Today’s decision may mean that the next Aereo is unable to secure funding from investors.  And that’s bad for everyone.

Some initial takeaways from the majority opinion:

First of all, the split was unique for copyright cases.  The majority opinion was written by Justice Breyer, who has often been on the side of limited copyright and increased innovation.  (See, e.g., his opinion in Kirtsaeng, and his dissents in Eldred and Golan.)

1. Breyer starts off by calling Aereo a “technologically complex service”

This is not a good start.  That is reminiscent of the ‘Rube Goldberg’ argument, but Aereo should not be faulted for designing a system that complies with the law.  The majority does not even cite the main precedent Aereo relies on, Cablevision, except for in a parenthetical.  This signifies that a results-oriented decision is to follow, rather than one that follows the law.  It also may implicate the broader cloud storage industry, if how the technology works does not matter to the Court.

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