Supreme Court Declines to Hear Oracle v. Google Case Over Java Copyrights

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This morning the Supreme Court issued an order indicating that it was declining to hear an appeal of the copyright case between Oracle and Google.  The appeal concerned the copyrightability of “application programming interfaces” (APIs).  Oracle launched the suit against Google shortly after acquiring Sun, which held copyrights and patents on the Java computer language, in 2010.  It claimed that Android infringed Java copyrights because Android replicated elements of the Java API in the Android API.  (Oracle’s suit also advanced patent claims, which came up remarkably short.)

The trial court sided with Google, but the U.S. Court of Appeals for the Federal Circuit disagreed, in a May 2014 ruling discussed previously here, here, and here.  Google appealed to the Supreme Court, arguing that the appellate court had incorrectly held that the system and methods of the Java API could be protected under U.S. copyright law.  The U.S. Copyright Act withholds protection from any idea, procedure, process, system, or method of operation. Processes, systems, and methods are usually the domain of patent law, not copyright; courts have long noted the lack of copyright protection for interface specifications encourages interoperability across software environments.

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The Public Costs of Private Distribution Strategies: Content Release Windows as Negative Externalities

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In a Bloomberg Businessweek interview last month, Megaupload founder Kim Dotcom talked extensively about copyright and business models.  Dotcom, who has been criminally charged in the United States in relation to copyright infringement, was asked by the interviewer if he “believed in copyright.”  Dotcom replied that he did, but argued that he did not believe in “copyright extremism” – a term he used to describe extended delays in content distribution, which often result in content reaching foreign markets months after it is released in the United States.

According to Dotcom, the solution to such “extremism” is a worldwide studio-run streaming platform rather than, as the Washington Post’s Brian Fung described it, “letting Netflix play the middleman.”  Essentially, “extremism” is another way of saying that piracy is more a business model problem than a policy problem.  Expensive and controversial copyright enforcement would be more efficiently supplanted with different business practices.

But this raises an obvious question: if there is a better way of doing things, why aren’t things done that way?  The answer is that different stakeholders bear the costs of different solutions.  Moving to worldwide online distribution entails risks borne mostly by industry stakeholders, who would be abandoning a time-honored content distribution strategy referred to as “windowing” or “release windows.”  On the other hand, the risks of the current windowing model are known, and the costs of this model fall at least in part on taxpayers.

Example of Release Windows

(click to enlarge)

What Are Content Release Windows?

The traditional approach to distribution of film and some other content involves selective release through different and often exclusive channels, in different markets, for different times.  This means content may only be available through a particular channel for a period of time.  This period is dictated by the license, and it may occasionally be mandated by law.  As a result, the availability of a given piece of digital content often appears to consumers to change arbitrarily.

The most sacrosanct window has always been that of initial theatrical exhibition.  This is the time frame during which newly released films are exhibited in traditional movie theaters.  Over time, the length and nature of this window has changed, and it has generally become shorter.  As data from the theater owners’ trade association shows, the theatrical exhibition window has contracted over the last decade, but it still stands at roughly 120 days in the United States, and can be far longer in other markets.

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Royalties Ruling Reflects Anti-Innovation Bias

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As the national press noted two weeks ago, Judge Louis Stanton in the Southern District of New York sided with BMI in a dispute with Pandora over royalty rates for public performance of musical compositions administered by BMI.  That ruling was finally unsealed yesterday, and it reflects another example of copyright law penalizing new technology.

The upshot of yesterday’s decision [PDF here] is this: while radio broadcasters everywhere pay 1.7% of their gross revenues in public performance royalties for musical compositions, Pandora should pay 2.5% of its gross revenue to BMI.

As I have noted in previous posts, Internet radio broadly gets a bad deal in the copyright regulatory framework.  The fact is that the current copyright system tends to discriminate against newer forms of technology, and in favor of existing technologies.  This isn’t a recipe for promoting progress.

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Appellate Court Rejects Attempted Copyright ‘Immigration’ Claim in Garcia v. Google

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Today a federal appeals court in California rejected an effort to use copyright to suppress the distribution of a controversial film online, echoing sentiments I previously expressed in two posts on what I called “IP immigration” [1] [2].  Others have discussed the case at length today [1] [2] [3] [4].  In short, the Ninth Circuit court of appeals rejected a copyright infringement claim by the plaintiff Cindy Garcia, who had been deceived into appearing in a short film titled “Innocence of Muslims,” which made insulting and inflammatory statements about Islam.  When the film was posted to YouTube and translated into Arabic, it resulted in threats to the plaintiff Garcia.

The court’s opinion today recognized that the plaintiff could not and did not have a copyright in her five-second, otherwise-unfixed performance.  As the court put it, the activities surrounding Garcia’s unwitting participation in the film may leave her “with a legitimate and serious beef, though not one that can be vindicated under the rubric of copyright.”  (A separate opinion released today observed that compelling YouTube to take down the video based on threats was a prior restraint of speech prohibited by the First Amendment.)

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Why U.S. Trade Promotion Authority Should Promote Balanced Copyright

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As a fight over the trade promotion authority (TPA) bill “engulfs the capitol,” debate has arisen over whether Congress should identify obtaining balanced copyright language as a U.S. trade priority. Both the Internet Association and the Computer & Communications Industry Association (where I work) criticized the bill’s failure to acknowledge the importance of promoting balanced copyright among U.S. trading partners, since the absence of these protections limits growth opportunities abroad. The Consumer Electronics Association, while applauding the legislation, expressed a similar view, observing that “[f]uture trade agreements should include not only include strong intellectual property protection and enforcement, but also robust and flexible limitation provisions.”

In response to the concerns voiced by the Internet sector, Geoffrey Manne appears to disagree, writing for Truth on the Market that “mandated ‘fair use’ language has no place in trade promotion authority.” (It is important to recognize that these statements do not call on Congress to “mandate fair use” in TPA. The question is whether Congress should direct the U.S. Trade Representative to promote balanced copyright in foreign markets that U.S. Internet companies are entering.)

This issue is important because of the high stakes. Manne is right in saying that trade promotion authority is important, but this glosses over how controversial it can be. As former Deputy USTR Miriam Sapiro wrote at Brookings this week, “the stakes as well as the hurdles for getting trade promotion authority from Congress are high. Critics of trade agreements have been well organized and mobilized.” Trade needs every friend it can get right now, which is why it would be a grave mistake to throw Internet concerns under the bus. This is particularly the case given that the Obama Administration’s last trade effort, ACTA, foundered several years ago due to the perception that the agreement was anti-Internet.

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Giganews Wins $5.6M Against Perfect 10 Over Copyright Misadventure

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Yesterday Austin-based Usenet provider Giganews was awarded more than $5.6 million in attorney’s fees and costs by a federal court in California, relating to its lengthy battle to exonerate itself of spurious infringement allegations from serial copyright litigant Perfect 10.  The court awarded fees in order to “discourage serial litigants from bringing unmeritorious suits and then unnecessarily driving up litigation costs in order to drive a settlement.”  (A statement by Giganews and link to the order are here.)

Represented by “high stakes” IP litigator Andrew Bridges of Fenwick & West, Giganews has been slugging it out with adult content purveyor Perfect 10 since 2011.

Perfect 10 is likely no stranger to copyright nerds; its litigation campaigns against a who’s-who of Internet properties in the previous decade yielded few victories for the company, but did lead to important precedents on intermediary liability and fair use, including search engines’ use of thumbnails.  (Some of these cases comprise the so-called Perfect 10 “trilogy”; including Perfect 10 v. Google, Inc., Perfect 10 v. Amazon.com, Perfect 10 v. VISA, Perfect 10 v. CCBill LLC.)MORE »

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Research Shows Impact of Legal and Regulatory Ambiguity on Investment

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An expert panel convened on Capitol Hill this morning, discussing new research on the detrimental effect that regulatory uncertainty has on Internet investment (as well as additional copyright law and policy challenges, which we live tweeted on @DisCo_Project).

The new research quantifies the impact of Internet regulations, including intermediary liability limitations, by showing their effect on early-stage investment.  A new report by Fifth Era and Engine finds that legal uncertainties for digital content intermediaries discourage early-stage investment around the world, reinforcing findings from a 2011 report that found early-stage investors in the United States were considerably less likely to invest in new online services exposed to legal risks.

In a similar vein, another 2011 paper found that changes in copyright policy changes could spur demonstrable investment in new online services.  Comparing investment in online services in the U.S. and Europe in the wake of the 2008 Cablevision case — a federal appellate court ruling widely heralded as giving additional legal certainty to online platforms — researchers found that U.S. investment increased considerably.  In contrast, a follow-up study by the same authors explored the impact of judicial decisions in Europe that increased legal exposure for online platforms, and found decreased investment when applying the same methods.

The Fifth Era report reinforces this conclusion, providing further evidence that additional risk and uncertainty in the online environment decreases investment.  This conclusion is not entirely surprising — but the authors’ specific findings provide impressive data on how severely risk can stifle early-stage investment.

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Transparency at the Intersection of Music Licensing and Antitrust

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At a hearing on Capitol Hill tomorrow, a Senate subcommittee will hear different perspectives on the degree to which competing music publishers should be permitted to coordinate licensing activities through performing rights organizations (“PROs”), such as ASCAP.  Music publishers have expressed a desire for fewer antitrust constraints on their coordinated behavior, while users and distributors of music will call for greater transparency in the music marketplace.

The hearing occurs during an ongoing Justice Department review of the consent decrees that govern PROs.[FN1] Music publishers and PROs are presently subject to oversight to the extent that PROs coordinate behavior among publishers who ostensibly should compete with one another.  Competitor coordination usually violates antitrust law, but because collective licensing also helps reduce the high transaction costs in music licensing, exceptions have been made for PROs.  A PRO can offer a single performance rights license to a user or distributor for all the works controlled by multiple publishers – one-stop shopping for a huge number of works.  But because one entity is nevertheless coordinating business transactions for a large group of companies that should be competing, antitrust oversight remains necessary.

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How One Mississippi Case Could Determine Whether State Officials Can Regulate Internet Content

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Far from Washington or any other place associated with Internet policy-making, a federal district court in Jackson, Mississippi is considering a case that could dramatically alter the regulation of Internet speech.  The case pits Google against the Mississippi Attorney General, Jim Hood, over the question of whether Hood can launch a sweeping investigation of Google after the search provider declined to block websites at Hood’s discretion, absent any court order.

Some background:  Among the leaks that resulted from the 2014 hack of Sony Pictures was the revelation of so-called “Project Goliath,” a secret initiative of major film studios and the MPAA.  The project involved enlisting State Attorneys General (AGs) like Hood in taking up one of Hollywood’s “key issues and asks” since the spectacular 2012 failure of the Stop Online Piracy Act (SOPA): extra-judicial site blocking.  As an article by The Verge makes clear, the funding of high-priced private law firms to ghost-write legal demands from AG Hood to Google was a major element of “Goliath.”  (It’s like Uber, but for State AGs.)MORE »

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On Weaponized Uncertainty, Transparency, and Bringing Music Licensing in From the Cold

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We’re taking part in Copyright Week, a series of actions and discussions supporting key principles that should guide copyright policy. Every day this week, various groups are taking on different elements of the law, and addressing what’s at stake, and what we need to do to make sure that copyright promotes creativity and innovation.

Last week at the Future of Music Coalition blog, Casey Rae discussed how transparency is so crucial in the music marketplace. ([1], [2])

As Casey points out, marketplace transparency is a necessary (but not sufficient) condition to ensure artists get a fair and competitive deal.

Digital services have similar needs.  Just as artists need accurate and reliable information to know they are receiving a square deal, music delivery services need accurate and reliable information to know what they can play, and what they’ll have to pay, and to whom.  Most (but not all) participants benefit from a more transparent marketplace.

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