Intellectual Property

Nearly six months before this week’s reveal of iPhone 6 and the Apple Watch, the Wall Street Journal reported that Apple was in talks with Comcast Corp. about “teaming up for a streaming-television service that would use an Apple set-top box and get special treatment on Comcast’s cables to ensure it bypasses congestion on the Web.” For content, the product reportedly would not only offer users access to on-demand movies, TV programs and other apps, including games, but also live Comcast cable programming. This raises a serious question whether such an arrangement would represent a procompetitive development or instead further delay a languishing 20-year federal effort to create a commercially viable retail market for cable set-top boxes (“STBs”).

There are three sets of obstacles potentially standing in the way of this initiative. First are business issues associated with customer control. As commentary noted at the time:

Back in February it seemed both Comcast and DirecTV were reluctant to allow Apple to develop a system where customers logged in using their Apple credentials instead of their pay-TV accounts. The fundamental question of who gets to have the primary relationship with the customer has played prominently in Apple’s negotiations with magazine and newspaper publishers in the past, so it makes sense that the issue would pop up again in a different medium. Given that Comcast has been investing in its own advanced set-top boxes, the cable giant is probably not ready to cede too much ground too quickly.

The second set of issues relates to whether Apple, or any content provider, should be permitted to pay for routing of its IPTV traffic as a managed service, receiving priority handling for the packets involved, from ISPs. That is a subset of the network neutrality debate, commonly referred to as “paid prioritization,” that continues to rage before the FCC and Congress. MORE »

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Tuesday’s decision in Fox News Network v. TVEyes suggests an interesting and illuminating similarity between the concept of transformative use under the fair use doctrine and the hearsay rule. TVEyes monitors and records all content broadcast by over 1,400 television and radio stations on a 24/7 basis, and transforms the content into a searchable database for its subscribers. Employing search terms, subscribers can determine when, where, and how those search terms have been used, and obtain transcripts and video clips of the portions of the shows that used the search term.

Fox News Network sued for copyright infringement. TVEyes asserted an affirmative defense of fair use. Judge Alvin Hellerstein, a federal district court judge in New York, granted summary judgment in favor of TVEyes. In finding for TVEyes, Judge Hellerstein relied on recent fair use decisions in the Second Circuit, including Authors Guild v. HathiTrust, Swatch v. Bloomberg, and Authors Guild v. Google.

Of particular interest was Judge Hellerstein’s finding that TVEyes’ use was transformative. He observed that TVEyes’ search engine and its display of result clips “serves a new and different function from the original work and is not a substitute for it.” In making this finding, he was guided by Second Circuit precedent that databases that convert copyrighted works into a research tool to further learning are transformative. He noted that “TVEyes’ message, ‘this is what they said’—is a very different message from Fox News’—‘this is what you should know or believe.’”

Distinguishing between documenting what someone said and repeating the statement for the purpose of conveying the statement’s message bears a striking similarity to the hearsay rule. Under the Federal Rules of Evidence (FRE), hearsay is an out of court statement offered in evidence to prove the truth of the matter asserted. As a general matter, hearsay is not admissible. The theory behind the hearsay rule is that human assertions are often unreliable, and it would be unfair for out-of-court statements to be admitted as evidence.

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Intellectual property is facing an “immigration” challenge, but has no immigration policy.  That is, there is an increasing trend of plaintiffs discovering IP to achieve non-IP ends.  The absence of any IP doctrine that can deal with this — aside from amorphous and often inapplicable doctrines of misuse — means that parties can invoke (or are counseled to invoke) the statutory monopolies of intellectual property to achieve objectives that have, at best, a tenuous relation to “promot[ing]… Progress.”

As commentators discussed the recent leak of celebrity nude pictures — at least some of which have been alleged to be “selfies” — copyright comes up frequently.  Generally, the suggestion is that the victims should invoke the copyright in their photos and send Digital Millennium Copyright Act takedown claims (under Section 512) to the sites hosting the files.

This is not the first example of such suggestions: “Revenge porn” victims also want compromising pictures taken down from websites.  Actress Cindy Lee Garcia, unwittingly deceived into appearing in anti-Islam film, receives death threats and wants the film purged from the Internet.  Other examples of non-IP use of IP abound.  For example: deposed Panamanian dictator Manuel Noriega resents being featured as a villain in a historical fiction video game.  A state legislator wants superhero-costumed street performers exiled from New York city streets.  In each of these cases, intellectual property is the proposed solution to unwanted activity that most objective viewers would not characterize as principally involving IP.

What is happening is that plaintiffs are migrating into IP territory.  Why?  In a word: remedies.  When testifying before Congress on this subject in July, I briefly noted that IP remedies are so attractive that they attract plaintiffs from other areas of the law.  Rather than forum-shop, potential plaintiffs jurisprudence-shop.  Claimants come to IP seeking redress for concerns that they cannot vindicate elsewhere.  In the physical world, immigration is usually an indication that the destination is more attractive.  In fact, a large amount of migration occurs in search of better conditions, or opportunities, and the anecdotal evidence suggests that this “remedy immigration” is no different.

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Last week’s acquisition of Twitch by Amazon for $1.1 billion drew public attention to organized video game competitions, referred to as e-sports. Twitch streams these e-sports events live over the Internet to millions of viewers. But as reported in a front page story in the New York Times, these competitions often take place in the presence of thousands of spectators. The article described a competition involving the video game Dota 2 occurring this past July in Seattle’s basketball arena before 11,000 fans. The popularity of these live events is not limited to the United States. In March, over 70,000 people attended a four-day tournament in Poland, and 50,000 attendees are expected at a soccer stadium in Seoul to view the League of Legends championship.

The growing popularity of in-person e-sports competitions is just the latest demonstration of the unique quality of shared entertainment experiences, which immunizes them from the competitive impact of both legitimate and infringing content. The sense of community and excitement created by people engaged in a common activity in a public space cannot be duplicated by a lawful or unlawful stream. Although e-sport fans can view the competitions via Twitch for free, there are willing to pay large sums to watch the competitions in person with a community of other fans.

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The term “copyright troll” typically is associated with Rightshaven or adult entertainment companies that rely on the threat of embarrassment to pressure alleged infringers into quick settlements. Indeed, a third of the federal courts’ copyright caseload involves pornography. For its part, the term “willful infringer” conjures up images of Kim Dotcom or other operators of “notorious markets” for infringing products.

But as two recent circuit court decisions indicate, not all copyright trolls are pornographers, and not all willful infringers are Internet piracy kingpins.

Klinger v. Conan Doyle Estate

Judge Posner of the U.S. Court of Appeals for the Seventh Circuit has written a strong opinion attacking the overly aggressive assertion of copyrights. Leslie Klinger assembled an anthology of stories written after the death of Sir Arthur Conan Doyle, creator of Sherlock Holmes, that feature Sherlock Holmes and other characters from the series. Although most of the Sherlock Holmes stories were written before 1923, and were in the public domain, the Doyle estate argued that the Holmes character continued to develop in the few stories Doyle wrote between 1923 and his death in 1930, and that the estate was entitled to license fees from authors that used the “fuller” Holmes character. Klinger refused to pay the license fee, and instead sought a declaratory judgment of non-infringement. After Klinger prevailed in the district court, the Doyle estate appealed. In June 2014, Judge Posner writing for the Seventh Circuit rejected this theory on the grounds that it would in effect allow the extension of the copyright term.

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With its Sept. 1 issue, Bloomberg Businessweek’s cover story again puts online video platforms in the media spotlight with favorable coverage, proclaiming YouTube to be “Hollywood’s new hit factory.”  This is a decidedly different take from Variety’s own ‘YouTube issue” last month, which suggested that “traditional” film and television sectors may be rendered irrelevant by the continued success of online video.  (DisCo mentioned Variety’s “YouTube issue” previously, noting how an odd anti-Internet op-ed was sandwiched between highly favorable coverage of social media video services.)

Businessweek shows that the disintermediation story doesn’t necessarily apply to all content producers.  As DisCo recently noted elsewhere, established incumbents are not invariably disintermediated by new technology, and the Businessweek cover story bears this out with stories of major online video acquisitions by established Hollywood incumbents. MORE »

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Monday’s announcement that Amazon would acquire Twitch for $1.1 billion was preceded several weeks ago by the gaming platform’s announcement that it would mute the audio streams of archived videos, due to unlicensed music. Among other gaming activities, Twitch allows users to watch both live and archived streams of other people playing video games. (According to Amazon’s press release, in July 2014, “more than 55 million unique visitors viewed more than 15 billion minutes of content on Twitch produced by more than 1 million broadcasters, including individual gamers, pro players, publishers, developers, media outlets, conventions and stadium-filling esports organizations.”) Twitch’s decision to use Audible Magic to identify and mute unauthorized in-game and ambient music in the streams of archived material was cited as evidence that Twitch was putting its copyright house in order prior to acquisition by a larger Internet company. The decision also was criticized as an example of what was wrong with our copyright system.

The Twitch muting policy applies to archives of both full streams and highlights clips. The policy raises interesting fair use questions particularly in the highlights context.The muting of music in the highlights resembles the Fourth Circuit’s troubling 2010 decision in Bouchat v. Baltimore Ravens. For the past 17 years, Frederick Bouchat has been enmeshed in litigation with the Ravens and the National Football League over the “Flying B” logo, which the Ravens used for their first three seasons. Prior to the Ravens’ first season in 1996, Bouchat had submitted a drawing of a logo to the chairman of the Maryland Stadium Authority, and a jury found that the Ravens had infringed the copyright in the drawing. A separate jury, however, awarded Bouchat no damages. After the infringement finding, the Ravens changed their logo, adopting the current “Raven Profile” logo. Of course, the Ravens could not remove the infringing logo from the historical record: it still persists in archival footage and photographs.

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While reading Variety’s eye-opening article explaining how successful young performers are reaching a new generation through Internet platforms, you might have come across producer Kurt Sutter’s (potentially NSFW) open letter savaging Google about piracy allegations.  Sutter, who produces the FX drama “Sons of Anarchy,” announces the search company is “in the process of systematically destroying our artistic future.”

The attack is uncomfortably wedged between Variety’s impressive coverage of the rise of the Internet content creators, and stars on Google’s YouTube in particular.  In fact, Variety published a survey this morning which concluded that YouTube stars are more popular than “mainstream” celebrities among teens.  Hollywood, however, has no idea who these new stars are — a disconnect likely to widen as more young Americans cut the cord and trade the remote for the smartphone.  Amidst other coverage, one article concludes, “[Internet video brands] AwesomenessTV and Vice could very well be the next mega-brands; they demand our attention now”.

It’s difficult to square Sutter’s dire predictions that we will look back with regret on “the magical days when creatives flourished” when the several preceding articles highlight creativity flourishing on the Internet.  Situated as it is inside what might be called Variety’s Disintermediation Issue, Sutter’s f-bomb fusillade says nothing so loudly as ‘get off my lawn.’

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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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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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