Intellectual Property

Class Certification Denial in Premier League v. YouTube Is Further Evidence that IP Isn’t Property

by Matt Schruers on May 16, 2013

District Court Judge Louis Stanton denied certification of the plaintiff class yesterday in the Premier League’s copyright infringement case against YouTube.  The plaintiffs’ counsel had requested that the court include “every person and entity in the world who own infringed copyrighted works,” who have or will register them with Copyright Office as required, uploaded to YouTube.

Characterizing the case as “a Frankenstein monster posing as a class action,” Judge Stanton refused to allow this unwieldy definition to go forward.  At present, this means the case cannot proceed as a class action.

Interestingly, the order points out that copyright claims are, generally speaking, poorly suited for resolution by class.  “Each claim presents particular factual issues of copyright ownership, infringement, fair use, and damages, among others.”  This is not to say that no copyright dispute can be disposed by class action.  Indeed, a few unique examples exist, like Tasini and Muchnick, but these are the exceptions that demonstrate the rule.  Generally speaking, intellectual property is simply less conducive to class disposition since it less frequently satisfies the Federal Rules requirements such as commonality and typicality.

How can this be?  Class actions are frequently used to resolve property damage disputes.  Examples including ground contamination and polybutylene piping come to mind.

But real property ownership is easily proven, because we mandate recordation of land ownership.  By contrast, copyright registration is optional (and non-existent in most countries), and most IP transactions are not publicly recorded.  Real property defenses are generally narrower, because there are fewer countervailing policy considerations regarding restricting access to property than there are to regulating access to information.  IP, after all, is a utilitarian apparatus, designed to improve social welfare.  The notion of real property, on the other hand, is not subject to the sort of cost-benefit analysis implicit in the constitutional imperative to “promote progress.”  Damage to a real property interest is more easily determined, due to the rivalrous nature of real property usage.  Registered copyright owners, Judge Stanton points out, don’t have to worry about proving damages: they have statutory damages, which “is designed to give litigation value to each individual case.”  Real property owners have no such luxury.

Ultimately, real property is more amenable to class certification because of how it behaves.  Intellectual property doesn’t behave like real property; it behaves like regulation.

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Aereo Launches in Boston, with 21 Other Cities Planned, as Litigation Continues

by Ali Sternburg on May 15, 2013

Aereo, the television streaming service that recently won in the Second Circuit, is no longer confined to New York.  Today, Aereo launched in Boston, and 21 other cities are planned for 2013, including Atlanta launching as Aereo’s third city on June 17.

In addition to increasing its markets, Aereo has also increased its lawsuits.  Previously, Aereo had been sued by broadcasters, who argued that when individuals watch shows in their homes they are unauthorized ‘public performances’ that infringe copyright.  The Second Circuit agreed that Aereo’s conduct was legal under the 2008 Cablevision case.  Last week, Aereo brought suit against broadcasters, by filing a declaratory judgment against CBS and some of its affiliates.  A declaratory judgment is a suit brought with the intent that the court clarify the ambiguity around the potential impact of a law or legal obligation on the plaintiff.  Here, Aereo has requested that the court confirm that its technology does not infringe CBS’s copyrights or violate the Copyright Act, and requests costs, attorneys’ fees, and any other relief the court deems just and proper.  The complaint cites May 1 comments from CBS President and CEO Leslie Moonves that “we’ll sue,” and April 23 tweets from CBS Corporation Communications Exec Dana McClintock, which are embedded below:

These remarks from CBS demonstrate what Aereo investor Barry Diller recently explained; broadcasting is a challenging business for competitors: “No incumbent wants anyone in. That is an unbreakable rule.”  But Aereo’s decisions to continue to enter new markets, and to bring this declaratory judgment, show that they are up to the challenge.

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Group-Playback Apps Let You Choose Your Own Copyright Adventure

by Rob Pegoraro on May 10, 2013

The play button is getting yet another upgrade from the Internet: the ability to function in sync across multiple devices. Instead of only being able to listen to a song on your own computers, a few apps can cue up that tune on other gadgets–in effect, turning them into Internet-connected speakers.

Is that legal? You’ve heard this before in copyright debates: It depends!

The best-known implementation of the concept is Samsung’s free Group Play app, which comes preinstalled on its Galaxy S 4 but also works on other recent Samsung phones and tablets.

It’s pretty straightforward to set up: Open the app and tap “Create group” on your device, choose a song and then a second phone within WiFi range can have the same tune streaming in sync–with its left and right channels sent separately to each device for a proper stereo effect.

The default setting requires you to set a numeric passcode for the group, with up to nine other devices allowed, but you can assign a single-digit passcode or make the group open. You can also share pictures and documents or play games this way.

Last weekend, I saw a similar concept at the Day of Fosterly startup conference: a Web app called Speaker Blast, which lets you upload a song to a server and then have it play through multiple Web browsers at a preset time.

Two tests of this app (still in private beta) did not work quite as smoothly. The desktop, laptop and iPad evidently did not have the exact same time, resulting in playback a tic out of phase–as if I were hearing “Radio Free Europe” played not by R.E.M., but by a cover band needing more rehearsal.

A third app, Seedio, offers similar group-playback features on iOS, but I haven’t tried that yet.

All of these products intersect with a core concept of copyright law: the restriction on the “public performance” of a copyrighted work without a proper license.

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MPAA, Spacey: Availability, Access, and Affordability Fight Piracy

by Ali Sternburg on May 8, 2013

The @MPAA Twitter account live-tweeted last night’s interview with Kevin Spacey, and they tweeted this quote from him:

This statement is consistent with what Netflix Chief Content Officer Ted Sarandos recently said: “The best way to combat piracy isn’t legislatively or criminally but by giving good options.”  This may not be a coincidence, because Spacey stars in Netflix’s House of Cards.  All thirteen episodes of the first season of House of Cards were released on Netflix all at once, rather than the traditional distribution model, and as Netflix CEO Reed Hastings said, this ended up “reinforcing our brand attribute of giving consumers complete control over how and when they enjoy their entertainment.”

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Quote of the Day: Judge Sanctions Porn Troll Principals in Star Trek-reference Filled Opinion

by Matt Schruers on May 6, 2013

Plaintiffs have outmaneuvered the legal system.  They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn.  So now, copyright laws originally designed to compensate starving artists, allow starving attorneys in this electronic-media era to plunder the citizenry.

– U.S. District Court Judge Otis D. Wright II, introducing a Star Trek reference-filled order, sanctioning the principals of the “Prenda Law” organization in relation to alleged fraud, identity theft, and copyright trolling. (Extensive coverage of the Prenda Law group is available via law blog Popehat and Techdirt.)

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Netflix Exec: To Combat ‘Piracy,’ Give Good Options

by Ali Sternburg on May 3, 2013

Lobbyists for copyright owners like to stress the problem of ‘piracy,’ proposing bills like the ill-fated Stop Online Piracy Act (SOPA), even when research continues to demonstrate that ‘piracy’ doesn’t always hurt, and in fact sometimes helps, content sales.  Often ‘piracy’ occurs when consumers’ expectations are not being met, because of technological constraints, or markets not yet existing.  If consumers can’t purchase the content lawfully, they may instead access it however they can.  (Exhibit A:  HBO’s ‘Game of Thrones.’)

However, content owners don’t always mind.  HBO programming president Michael Lombardo spoke out recently about this ‘piracy’ of Game of Thrones, saying it’s a compliment and doesn’t hurt DVD sales.  Lady Gaga’s manager Troy Carter has said ‘piracy’ is going away, thanks to technological innovation.

And just this week, a Netflix exec, in charge of Netflix’s new original content programming, echoed these sentiments.  According to Gizmodo, Netflix’s Chief Content Officer Ted Sarandos “claims the modern trend for easily streaming legal content is impacting on the more hardcore Bittorrent scene, with pirate traffic dropping in countries when Netflix switches on its servers.”

Sarandos explained that this is because “people are mostly honest,” adding that:

The best way to combat piracy isn’t legislatively or criminally but by giving good options. One of the side effects of growth of content is an expectation to have access to it. You can’t use the internet as a marketing vehicle and then not as a delivery vehicle.

Sarandos is exactly right that ‘piracy’ is reduced with a market-based solution.  The more services that emerge to provide consumers with superior options for content delivery the better, as competition drives down prices and spurs innovation.  There are barriers to entry, such as steep copyright licensing fees that deter innovation and lawsuits from incumbents, but disruptive competitors continue to emerge.  Companies shouldn’t be on the opposite side from their customers, by suing them or making their behaviors illegal; instead, they should be aware of consumers’ habits and changing norms, and innovate to meet demand.

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Patent Fixes Pick up Steam in Congress

by Daniel O'Connor on May 2, 2013

(Cross post on Patent Progress)

What a difference a year makes in Congress.  Last year, Reps. DeFazio (D-OR) and Chaffetz (R-UT) introduced the Saving High-tech Innovators from Egregious Legal Disputes (SHIELD) Act.  The bill generated some attention in the press, but never made it onto the campaign year legislative agenda.

Then we hit a tipping point of sorts.  It has been widely known that troll litigation is unsavory and inefficient, but many ardent defenders of the current patent system argued that patent trolls were a sideshow.  In 2005, trolls accounted for 23% of patent litigation.  Then, in December of last year, Santa Clara Law’s Prof. Colleen Chien released the results of her study showing that trolls accounted for 61% of patent lawsuits in 2012, which marked the first year that trolls accounted for more than half of all patent litigation.  The rhetorical rubicon had been crossed, which helped put the gears of Washington, DC in motion.

In December, the FTC and DOJ held a joint workshop on patent trolls, which marked the first time that our nation’s antitrust regulators took serious steps to examine the competition problem posed by patent assertion entities.  (Last April, I asked the former Assistant Attorney General for Antitrust, Sharis Pozen, about the DOJ’s stance on patent trolls and she said the agency was still internally thinking about how to handle trolls and had no comment beyond that [@ 39:10]).

Then this February the SHIELD Act was amended and reintroduced.  As some commenters have pointed out, the SHIELD Act is a small, but important tweak to get at some of the problems with trolls, but it does not go far enough on its own.  And, at the time of its introduction, it seemed like the SHIELD Act was as far as Congress was willing to go to help update our misfiring patent system, after having failed to agree on comprehensive reform in the America Invents Act.

However, the patent troll problem escalated to the Presidential level, with the President giving a well thought out response to a question on patent trolls in a Google Hangout he held in mid-February where he condemned the practice of trolling and discussed the need for more patent “balance” generally.

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Barry Diller On Incumbent Broadcasters And Aereo Being Legal

by Ali Sternburg on April 30, 2013

Barry Diller, an investor in Aereo (for more on Aereo, see this DisCo post about their recent win), was interviewed yesterday by Bloomberg TV.  The Verge transcribed part of the interview, and an excerpt is below:

“I understand broadcasting,” Diller says. “No incumbent wants anyone in. That is an unbreakable rule.”

Aereo as it exists is legal, argues Diller; the real danger to its future is that the networks’ complaints will lead to a hostile intervention from Congress. “My attitude has been to jump into something that looks difficult and is against what people think will succeed and plant my little flag,” says Diller, adding that “sometimes it gets kicked.”

As The Verge notes, “Barry Diller is a media legend, a former Paramount CEO and USA Network mogul who helped launch the Fox television network.”  It is admirable that given his perspective and experience he is supporting an innovative service for delivering content to consumers, and is willing to depart from his former colleagues.  His quotes aptly demonstrate the conflicts DisCo often highlights between incumbents whose established revenue streams are being undercut by startups, who then seek government intervention to try to keep their market share (and, as Diller puts it, often ‘kicking’ the competitors in the process).  But given how popular the service has been in New York and its plans to expand (next stop: Boston), not to mention the crucial fact that the law is on their side, Aereo’s future looks bright.

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Why Harvey Weinstein’s Latest Anti-Internet Outburst is Wrong.

by Matt Schruers on April 26, 2013

On most days, another anti-Internet outburst from Harvey Weinstein wouldn’t qualify as news, but it’s a slow Friday afternoon.

At a Washington event today, the Hollywood producer and Miramax co-founder reportedly complained about Google and YouTube, alleging that consumers can view full-length movies online for free, and demanding legislation to regulate online platforms.  Jason Horowitz, tweeting for the Washington Post, said:

This isn’t a surprise; it is par for the Weinstein course.  He previously received attention for his widely-reported but dubious prediction that the Obama Administration would flip-flop on the Stop Online Piracy Act (SOPA) in the post-election period.  Following that, Weinstein offered remarks similar to his outburst today in a wide-ranging interview, complaining that:

“the internet shortchanges writers, directors and producers in our industry. Their work–10 minute clips, 15 minute clips, whatever–gets shown all the time and they never get any money. The Director’s Guild doesn’t get any money, the Writer’s Guild. Journalists don’t benefit when their stories are taken, and given a link. It would be like me launching a newspaper–call it Link—where I can have the greatest journalists in the world working for me without paying them. It’s inconceivable….  If BMI and ASCAP can monitor the music business, we need a BMI and an ASCAP to monitor these businesses. This will be the one legislation for our industry that I’ll press. We need for writers, producers, studios, and journalists to be protected.”

Setting aside Weinstein’s peculiar hypothetical here, the fact that he lumps news into this narrative suggests that his problem is not copyright infringement at all — for which extensive and potent legal remedies exist.  The problem with news is that traditional media outlets are to some extent competing with individuals using blogs and Twitter, individuals who have decidedly different cost structures.   It’s competition, and there’s a lot of it.

How substantial is that competition?  YouTube generates hundreds of millions of dollars for the music industry alone; PSY’s popular “Gangnam Style” stood to yield $2 million in revenue as of last year.  Over 3000 partners use Content ID, including major broadcasters, studios and labels, who have claimed more than 200 million videos on the site.  (YouTube’s ContentID, it should be noted, is the industry gold standard for DMCA compliance.)   That is a significant amount of content, and revenue, and a non-trivial amount of that revenue is going to creators who are not Hollywood insiders.

This raises another subtext to this morning’s outburst: services like YouTube and Blogger provide tools to people who are upsetting the established content business model.  These platforms enable creative individuals whose motives are not pecuniary.  That is, a substantial number of Internet users write, blog, perform, and create video because they desire attention, reputation, an audience to influence.  The long tail has a soapbox.  It doesn’t just receive; it transmits, and that makes it competition, some of which isn’t necessarily looking for monetary compensation.

And because “the long tail” has a different cost structure, existing content producers are hard pressed to compete.  Competition is tough.  Getting Washington to regulate is easier.

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Months Later, Spotify is Back in the House

by Ali Sternburg on April 10, 2013

A few months ago, I wrote about the House of Representatives blocking Spotify under its longstanding P2P regulations, and the diverse backlash which ranged from the RIAA to Eric Cantor.  I suggested that the reason these overbroad regulations exist — which are intended for data protection, filesharing prevention, and virus preemption — is a series of unbalanced hearings from 2007 to 2009 that may have “caused technophobic Congressmen to panic, leading to a regulation that is now mindlessly enforced as a part of House IT policy.”  The rules appear to have been written and codified without adequately consulting people who understand the technology, and particularly what developments may emerge in the future.  Thus, there is an inherent bias against new, often disruptive, technologies, which are essentially blocked and disadvantaged by default.

Roll Call reported last night that Spotify is now accessible on the House network again.  According to a staffer, Spotify “modified some of their technology so the program no longer utilizes peer-to-peer technology.”  (Roll Call also noted that something similar had happened with Skype being blocked in 2011, but then reinstated after “member outcry and security modifications.”)

It’s good that Congress was responsive and listened to feedback.  Congress should continually monitor regulations and review existing and emerging technology, not just when a conflict arises, and also ensure that staffers who write legislation that impacts technology have access to the latest innovative products and services.

Plenty of institutions and businesses have inadequate internal IT policies, so this problem is not unique to Congress.  However, Congress is unique, for several reasons.  First of all, Congress is the entity that is responsible for shaping technology policy for the nation.  Thus, they should be more open minded and should avoid banning new technologies for unreasonable purposes.  Additionally, Congress does not face the same disciplinary mechanism that other organizations would face from competitors, who might lose market share as a consequence of not understanding technology.  That’s why it is critical to ‘bring in the nerds’ when the Internet and technology are involved — not just when making national legislation, but apparently for internal Congressional regulations as well.

UPDATE: House Majority Leader Eric Cantor (@GOPLeader), who had tweeted about the initial controversy, celebrated Spotify’s return:

Rep. Darrell Issa did, too:

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