Ali Sternburg

A decades-old statute is being taken advantage of by opportunist litigants to extract statutory damages or settlements from companies.  Sound familiar?

While this could easily describe the phenomenon of copyright trolls or even patent trolls, I’m referring to the Telephone Consumer Protection Act of 1991 (TCPA).  Like copyright and patent statutes, the TCPA also serves a noble purpose: penalizing misleading and abusive telemarketing practices.  Unfortunately, like copyright, the TCPA grants plaintiffs large statutory damages per violation.  The availability of these awards, which require no proof of any actual harm, has incentivized class action litigants to seek out opportunities to allege technical violations of the statute.  In many cases, these claims don’t even address telemarketing activities at all, let alone abusive practices, but a class action can impose such substantial legal costs that opportunistic claims can coerce settlements where the costs of reaching a judge who can throw out abusive claims is high.  As we’ve seen in the copyright context, statutory damages deter investment in new technology; the same thing happens to TCPA defendants, stifling innovation and development in tools for communication.

Some companies are starting to fight back against TCPA misuse.  Several companies whose businesses clearly don’t constitute telemarketing have petitioned the FCC over the last few months in the TCPA docket regarding overbroad interpretations of the TCPA, including TextMe, an app for free messaging and calling; Stage Stores, a clothing retail company; and Santander Consumer USA, an automotive finance company.  Additionally, some of these cases do make it to trial; Twitter and Path joined an amicus brief in August supporting Yahoo in the Third Circuit Dominguez v. Yahoo case.

Guidance from the FCC, courts, or Congress could help relieve the uncertainty over the reach of this 1991 telemarketing statute, and prevent it from being read so broadly as to deprive consumers of innovative new products and services for communicating in the 21st century.

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Despite inexplicable opposition from certain outliers, it’s becoming widely accepted that the Internet enables and democratizes creativity and its dissemination more than ever before.

Earlier this week, Taylor Swift released her new single, Shake It Off, complete with a music video, and announced the release date for her forthcoming pop album, 1989.  She did so in front of an audience, webcast live online.  In Ms. Swift’s own words, “they’re telling me we’re making history because this is the first ever worldwide live stream for ABC and Yahoo to get together and I’m so excited I can’t even!”  (It’s not clear whether she meant that it’s the first ever worldwide live stream for an album date announcement/single release party, or the first ever worldwide live stream for these companies together, or what, but her enthusiasm was contagious, and her fans didn’t seem to care.)  In the view of Claire Suddath, a writer for Businessweek, however, Taylor Swift followed all the rules and everything about this was completely expected.

This was contrasted with Beyoncé’s now-legendary promotion-free drop of her “visual album” Beyoncé on Instagram at midnight in December (which she later followed up with an equally unexpected promotion-free remix of ***Flawless, released over social media at midnight a few weeks ago).  “Weird Al” Yankovic did something similar this summer too, although he pointed out that he did it with his last album, before Bey, and that she was in fact ‘doing a Weird Al.’  While none of these examples involved displacing intermediaries and selling to fans directly like Louis C.K., Weird Al did notably take advantage of different video sites for each daily exclusive video release.

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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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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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Today CCIA launched ConsumerTVChoice.net, a new site to promote competition and choice in the TV set-top box marketplace, and to encourage consumer advocacy around this issue.

While CCIA has supported Congress’s renewal of STELA, which expires at the end of the year, CCIA has denounced attempts by some lawmakers to add anticompetitive provisions into STELA that would undermine the FCC’s statutory consumer protection mandates regarding open standards for electronic boxes that can access both your cable programming and online video.

This issue is consistent with CCIA’s mission at its founding more than 40 years ago – to raise awareness when incumbent companies try to snuff out competition and innovation.  From fighting for the ability of third party developers to write independent software for IBM mainframes, to championing the right of consumers to plug non-AT&T devices into their wall jacks, battles CCIA has supported have been critical to the thriving tech industry we have today.  The mainframe battle paved the way for the entire software industry and rise of Silicon Valley.  The third party device issue resolution resulted in innovations like the first cordless phones, answering machines, fax machines, computer modems and game consoles.

While it’s impossible to fully predict what further innovations could result from consumers having more freedom to watch content on the device of their choice, it is clear that Big Cable is resisting change even while more efficient methods of accessing TV and other content are emerging.  The hope in launching this website is to help consumers understand that ability to choose is at risk in Congress right now so they can make their views known before it’s too late.  Consumers will be the losers if dominant businesses can legislate challengers out of the game.

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One might conclude Kevin Spacey has a finger on the pulse of the culture market: he bet heavily on the dark political series House of Cards when pundits scoffed at all-at-once Internet-only distribution [1, 2, 3] — now a smashing success.  Spacey will also soon feature as the arch-villain in the next installment of the best-selling Call of Duty video game (trailer), at a time when A-list actors are not often associated with gaming.  The Call of Duty franchise, however, is expected to generate at least $1B in revenue later this fall — an annual figure that the Hollywood box office can only dream of.

On top of his forward-thinking choices in roles, he has also spoken publicly about fighting piracy through alternative distribution models.  Spacey has previously said on at least two occasions, in May 2013 and in August 2013, that piracy can be reduced by giving the people what they want, when they want it, at a reasonable price.

This week, Spacey made a comment at the amusingly pirate-themed International Indian Film Academy awards about House of Cards being popular in India, adding that since Netflix doesn’t exist in India, they’re “stealing” it.  While reports differed on whether Spacey’s comment was serious or in jest (or, even, whether House of Cards is not available in India) the remark is consistent with his understanding that piracy is reduced when consumers have lawful convenient affordable options to watch what they want to watch.

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This morning, I attended the ABC v. Aereo oral argument at the Supreme Court that Matt previewed this morning.  (To be more specific, I got there last night at 7pm and camped out for more than 12 hours.)  Below are 8 of my takeaways from the argument, featuring quotes from the preliminary transcript:

  1. Unintended Consequences

The Court is obviously concerned about unintended consequences, including (and especially) for the cloud.  Justice Breyer in particular pressed this argument to the broadcasters’ lawyer, Paul Clement, who didn’t appear to effectively dissuade him.

JUSTICE BREYER: [A]re we somehow catching other things that really will change life and shouldn’t, such as the cloud?  And you said, well, as the government says, don’t worry, because that isn’t a public performance.  And then I read the definition and I don’t see how to get out of it.

  1. Deference to Cablevision

The Court was very willing to discuss Cablevision, a crucial Second Circuit case, but one that is not binding in the Supreme Court.  Justice Kennedy brought up a hypo about Cablevision being law to the broadcasters and the government.

JUSTICE KENNEDY: Just assume that CableVision is our precedent.  I know that it isn’t, but let’s just assume that it is.  How would you distinguish the CableVision from your case and how is it applicable here?  Assume that it’s binding precedent.  Just that’s a hypothetical.

  1. Interest in Sony, Fair Use

Despite not being an issue that people frequently talk about regarding Aereo (perhaps because it did not come up in Cablevision because it was waived), fair use, and particularly the precedent from Sony, came up a few times from Aereo’s lawyer, David Frederick.

MR. FREDERICK:  In Sony, this Court held that consumers have a fair use right to take local over-­the-­air broadcasts and make a copy of it.  All Aereo is doing is providing antennas and DVRs that enable consumers to do exactly what this Court in Sony recognized they can do. . . . MORE »

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DJ and mashup artist Girl Talk, who has “repeatedly stated that if he’s sued he believes he has a strong fair use defense,” released a new EP yesterday, along with a video for one of the songs, for which he cleared the samples, explaining “I think about each work separately and consider whether it qualifies for fair use or not. In this case, we needed the clearance.”  This exemplifies that copyright questions over works which use parts of existing works, such as music sampling, generally have to be analyzed on a case-by-case basis.

Exactly a year ago (total coincidence) I wrote a post entitled Can You Infringe Copyright In Six Seconds?, about then-new service Vine and potential copyright considerations for six second clips of content.  I discussed some key music sampling cases (Bridgeport and Newton v. Diamond), to see what we could draw from those precedents, but that law is far from settled, as there continues to be litigation over music sampling.  On the issue of how much of an existing work can be lawfully used in a new work, it’s clear that it’s still very much an open question.  I’ll explain some recent cases below.

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This post is part of the Disruptive Competition Policy Forum recap series.

Details below. MORE »

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This post is part of the Disruptive Competition Policy Forum recap series.

Details below. MORE »

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