The unintended consequences of well-meaning regulation is a theme we discuss frequently here on DisCo. (Note: This is different than cynical, anticompetitive regulations that are pushed under the guise of well-intentioned “consumer protection”, which is another recurring DisCo topic.)
In that vein, I filed comments on behalf of CCIA discussing the potential impact of new proposed regulations by the Department of Transportation aimed at requiring airlines to disclose the full cost of travel up front (instead of playing hide the ball with a litany of added fees).
The aim of this rulemaking is noble and economically sound. Econ 101 tells us that competition works best when certain conditions are present. One of those conditions is that “perfect information” is available to consumers and producers. The principle is that markets work best when everyone involved knows the full price up front and can assess their options before purchasing. (Obviously, “perfect” is an ideal on one side of a continuum.) In fact, this is an area where all sides of the political spectrum should agree — at least in theory. Narrow rules that increase pricing (and quality of service) transparency would help the free market work better, and decrease the need for regulation, as consumers would be better able to discipline market participants with their consumption decisions. In English that translates to: if airlines are screwing consumers on price or quality, and consumers know that up front, they can purchase a ticket on another airline, making that airline less likely to screw customers. Hence, the “disciplinary power” of a well functioning market. (Now, it is an entirely different debate as to whether the airline market is competitive enough given the recent wave of airline consolidation and the market’s unique structure, but that is an argument beyond the scope of this post. No matter how competitive that market is right now, it is difficult to argue with the contention that better pricing information up front will make it work better.)
However, while “open data” is a good thing, regulations that go further than requiring a standardized output of raw data, governing how data is displayed by third parties, would be unwise. As the growth of the Internet economy has illustrated, the packaging and display of information to consumers is an important sector of economic activity where new participants and innovation currently abound. Locking in a particular type of display or presentation would slow growth and harm competition in the metasearch market.
If you haven’t had your daily fill of irony yet, let me tell you about the Euro-skeptic, free marketeer news organization appealing to European regulators to guarantee “fair returns” in the wake of Internet-driven disruption.
On Wednesday, News Corp released a letter from its CEO Robert Thomson to the EU competition commissioner Joaquín Almunia, criticizing Google and championing regulators to act against the search provider, following similar demands by the news publisher’s European peers. Unfortunately, Thomson’s letter received about as much fact-checking as a News Corp tabloid. (Jeff Jarvis has already annotated the letter’s “staggering” “willful blindness to irony” on the News Genius platform).
News Corp publications have championed tech disruption before, but apparently those principles go out the window when News Corp is the one being disrupted. In fact, News Corp’s own Wall Street Journal previously complained that Google had become its competitors’ “piñata,” who were demanding “a regulatory veto” notwithstanding the fact that they “haven’t demonstrated any economic harm” stemming from the search provider. Yet this week, News Corp itself jumps into the piñata party, waving the European banner. MORE »
Wednesday’s hearing in the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet on section 1201 of the Digital Millennium Copyright Act was simultaneously disturbing and encouraging. (A complete summary of the hearing can be found here.) It was disturbing because it revealed the conflation by some witnesses and subcommittee members of the effect of technological protection measures (“TPMs”) with the effect of section 1201’s ban on the circumvention of TPMs. It was encouraging because many subcommittee members recognized that section 1201’s prohibitions may be too broad and the rulemaking process for additional exemptions too rigorous.
A Little Bit of History
In September 1995, the Clinton Administration’s Working Group on Intellectual Property (chaired by Bruce Lehman, then Commissioner of the Patent and Trademark Office), issued a White Paper that proposed a prohibition on the production and distribution of devices that circumvent anti-copying technology. The policy rationale for the prohibition was a series of assumptions. The Working Group first assumed that the availability of legal copyrighted content would be a critical driver of the development of electronic commerce on the “National Information Infrastructure,” as the Working Group described the Internet. The Working Group next assumed that the ease of infringement that digital networks made possible would encourage widespread disregard of the copyright laws. The Working Group assumed that this threat of infringement would inhibit copyright right owners from making their content available in legal online markets. The Working Group further assumed that TPMs could prevent this infringement. The Working Group, however, recognized that TPMs could be circumvented. Accordingly, the Working Group supported legal remedies against the circumvention of TPMs. But the Working Group concluded that prohibition of the act of circumvention would be insufficient if the technologies that enabled the circumvention remained available. Thus, the Working Group also supported legal remedies against the manufacture and sale of circumvention tools. Without such remedies against circumvention tools, the legal prohibition on circumvention would be ineffective, which would render the TPMs ineffective, which would lead to widespread infringement, which would prevent the development of legitimate online markets for copyrighted works, which would inhibit the development of electronic commerce generally.
Putting aside the economic assumption of the importance of legitimate online content markets to the development of electronic commerce, this concatenation of assumptions contains a fundamental logical flaw. If people would disregard a legal prohibition on reproduction and dissemination of copyrighted works, why would they respect a legal prohibition on circumvention of TPMs or the manufacture and distribution of circumvention tools? In particular, why would they respect a legal prohibition on circumvention when they could readily access the circumvention tools—typically software—using the Internet? The Working Group on Intellectual Property should have recognized that in the digital environment, a circumvention law would be no more and no less effective than the copyright law itself.
Last week I wrote about a phenomenon I referred to as ‘IP immigration,’ in which plaintiffs with non-IP injuries bring lawsuits making IP-based claims, usually due to the potency of IP remedies compared to what they can claim using more conventional claims. Given the recent Celebgate debacle, in which compromising photos from celebrities’ iCloud accounts leaked onto the Internet, it is timely to think about whether IP ‘immigration’ is a desirable trend.
As I mentioned before, this phenomenon is not limited to copyright, but it seems to occur most frequently in copyright. That makes sense; copyright does occasionally play what might look like a privacy-related function in relation to unpublished works. Cases like Salinger v. Random House, which involved a biographer’s use of author J.D. Salinger’s unpublished letters, and the Supreme Court’s decision in Harper & Row v. Nation Enterprises, which involved a magazine reporting lengthy quotes from former President Gerald Ford’s memoirs using a leaked manuscript, show that copyright interests can be used control the act of first publication. Still, many ‘immigration’ cases don’t involve unpublished works at all.
In that vein, consider legislation introduced in the 1990s which proposed granting the United States a copyright in the American Flag. (e.g., here and here). The stated purpose was to prevent anyone from burning or otherwise desecrating flags, a subject of great interest in the early 1990s following court decisions holding that the First Amendment protected such acts. By assigning a copyright to the government and extending a public license for anyone to sell, distribute, manufacture, and, under certain circumstances, display the flag, the legislation would have permitted the sale and display of flags, but empowered the U.S. Government to still bring criminal charges against flag burners to prevent mutilation of a flag. (I’m indebted to Prof. Mark Lemley for pointing out these proposals.) Confronted with the nearly insurmountable barrier of the First Amendment, these (ultimately unsuccessful) bills would have attempted a work-around by ‘immigrating’ to one of the few established First Amendment exceptions: copyright. MORE »
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 »
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.
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.
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.
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.
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.