Judge Dismisses E-Book DRM Antitrust Case December 12, 2013Posted by Bill Rosenblatt in DRM, Law, Publishing.
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Last week a federal judge in New York dismissed a lawsuit that a group of independent booksellers brought earlier this year against Amazon.com and the (then) Big Six trade publishers. The suit alleged that the publishers were conspiring with Amazon to use Amazon’s DRM to shut the indie booksellers out of the majority of the e-book market. The three bookstores sought class action status on behalf of all indie booksellers.
In most cases, independent booksellers can’t sell e-books that can be read on Amazon’s Kindle e-readers; instead they have a program through the Independent Booksellers Association that enables consumers to buy e-books from the stores’ websites via the Kobo e-book platform, which has apps for all major devices (PCs, iOS, Android, etc.) as well as Kobo eReaders.
Let’s get the full disclosure out of the way: I worked with the plaintiffs in this case as an expert witness. (Which is why I didn’t write about this case when it was brought several months ago.) I did so because, like others, I read the complaint and found that it reflected various misconceptions about DRM and its place in the e-book market; I thought that perhaps I could help educate the booksellers.
The booksellers asked the court to enjoin (force) Amazon to drop its proprietary DRM, and to enjoin the Big Six to allow independent bookstores to sell their e-books using an interoperable DRM that would presumably work with Kindles as well as iOS and Android devices, PCs, Macs, BlackBerrys, etc. (The term that the complaint used for the opposite of “interoperable DRM” was “inoperable DRM,” much to the amusement of some anti-DRM folks.)
There were two fundamental problems with the complaint. One was that it presupposed the existence of an idealized interoperable DRM that would work with any “interoperable or open architecture device,” and that “Amazon could easily, and without significant cost or disruption, eliminate its device specific restrictive  DRM and instead utilize an available interoperable system.”
There is no such thing, nor is one likely to come into being. I worked with the International Digital Publishing Form (IDPF), the trade association for e-books, to design a “lightweight” content protection scheme that would be attractive to a large number of retailers through low cost of adoption, but that project is far from fruition, and in any case, no one associated with it is under any illusion that all retailers will adopt the scheme. The only DRM that is guaranteed to work with all devices and all retailers forever is no DRM at all.
The closest thing there is to an “interoperable” DRM nowadays is Adobe Content Server (ACS) — which isn’t all that close. Adobe had intended ACS to become an interoperable standard, much like PDF is. Unlike Amazon’s Mobipocket DRM and Apple’s FairPlay DRM for iBooks, ACS can be licensed and used by makers of e-reader devices and apps. Several e-book platforms do use it. But the only retailer of any size in the United States market that does so is Barnes & Noble, which has modified it and combined it with another DRM that it had acquired years ago. Kobo has its own DRM and uses ACS only for interoperability with other environments.
More relevantly, I have heard it said that Amazon experimented with ACS before launching the Kindle with the Mobipocket DRM that it acquired back in 2005. But in any case, ACS’s presence in the US e-book market is on the wane, and Adobe has stopped actively working on the product.
The second misconception in the booksellers’ complaint was the implication that the major publishers had an interest in limiting their opportunities to sell e-books through indie bookstores. The reality is just the opposite: publishers, from the (now) Big Five on down, would like nothing more than to be able to sell e-books through every possible retailer onto every possible device. The complaint alleges that publishers “confirmed, affirmed, and/or condoned AMAZON’s use of restrictive DRMs” and thereby conspired to restrain trade in the e-book market.
Publishers have been wary of Amazon’s dominant market position for years, but they have tolerated its proprietary technology ecosystem — at least in part because many of them understand that technology-based media markets always settle down to steady states involving two or three different platforms, protocols, formats, etc. DRM helps vendors create walls around their ecosystems, but it is far from the only technology that does so.
As I’ve said before, the ideal of an “MP3 for e-books” is highly unlikely and is largely a mirage in any case. Copyright owners have a constant struggle to create and preserve level playing fields for retailers in the digital age, one that the more savvy among them recognize that they can’t win as much as they would like.
Judge Jed Rakoff picked up on this second point in his opinion dismissing the case. He said, “… nothing about [the] fact [that publishers made agreements with Amazon requiring DRM] suggests that the Publishers also required Amazon to use device-restrictive DRM limiting the devices on which the Publishers’ e-books can be display, or to place restrictions on Kindle devices and apps such that they could only display e-books enabled with Amazon’s proprietary DRM. Indeed, unlike DRM requirements, which clearly serve the Publishers’ economic interests by preventing copyright violations, these latter types of restrictions run counter to the Publishers’ interests …” (emphasis in original).
Indie bookstores are great things; it’s a shame that Amazon’s Kindle ecosystem doesn’t play nicely with them. But at the end of the day — as Judge Rakoff also pointed out — Amazon competes with independent booksellers, and “no business has a duty to aid competitors,” even under antitrust law.
In fact, Amazon has repeatedly shown that it will “cooperate” with competitors only as a means of cutting into their markets. Its extension of the Kindle platform to public library e-lending last year is best seen as part of its attempt to invade libraries’ territory. More recently, Amazon has attempted to get indie booksellers interested in selling Kindle devices in their stores, a move that has elicited frosty reactions from the bookstores.
The rest of Judge Rakoff’s opinion dealt with the booksellers’ failure to meet legal criteria under antitrust law. Independent booksellers might possibly have a case to bring against Amazon for boxing them out of the market as reading goes digital, but Book House of Stuyvesant Plaza et al v. Amazon.com et al wasn’t it.
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We have added another panel session to the Copyright and Technology London 2013 conference, which will take place next Thursday (17 October). The most important recent copyright litigation in the UK at the moment is the case of Ministry of Sound v. Spotify, in which the record label is objecting to Spotify making playlists available that mimic the compilation albums for which the label is best known. The case has broad implications for the limits of copyrightability in the digital age, at least under UK law.
Here is the panel description:
The Limits of Copyright in the Digital Age
The litigation that Ministry of Sound recently started against Spotify will test whether playlists on compilation albums have copyright protection. It will be played out in the context of the debate about to what extent we as a society are prepared to pay for curation. The same issue faces news-disseminating organisations over their headlines and sports reporters over game highlights. Does our society value the editorial/quality control/validation role that they play? This panel will explore the boundaries of what is – and should be – protected by copyright in the digital age and suggest what directions legal decisions in the future may take.
Although the case was only filed a month ago, we have been able to pull together an excellent group of authorities on both the legal and content aspects of the matter, thanks to the tireless efforts of Serena Tierney of Bircham Dyson Bell, the panel chair and herself an authority on copyright in the digital age. Panelists will include:
- Jeff Smith, Head of Music at BBC Radio 2 and 6; former Director of Music Programming at Napster
- Mo McRoberts, Head of the BBC Genome Project at the BBC Archive
- Lindsay Lane, Barrister at 8 New Square Intellectual Property and co-author of the standard copyright treatise Laddie, Prescott and Vitoria on The Modern Law of Copyright and Designs
- Andrew Orlowski, Executive Editor of The Register, who has covered this case.
This means that we will have a packed day of exciting sessions from all around the world of copyright. Places are still left, so register today!
Eight top Internet advertising networks will participate in a scheme for reducing ads that they place on pirate sites — websites that exist primarily to attract traffic by offering infringing content as well as counterfeit goods. The Best Practice Guidelines for Ad Networks to Address Piracy and Counterfeiting document, announced on July 15th, specifies a process modeled on the US copyright law’s notice-and-takedown regime, a/k/a DMCA 512: a copyright owner can send an ad network detailed information about websites on which it placed ads and that feature pirated material; then the ad network can decide to remove its ads from the site.
Although this scheme may result in some ads being pulled from obvious pirate sites, it has several major shortcomings. First of all, because this is a voluntary scheme, ad networks don’t risk legal liability for failing to comply with takedown notices, as they do under the DMCA.
So how will compliance be enforced? Consider this: the companies that have signed on to these guidelines are 24/7 Media, Adtegrity, AOL, Condé Nast, Google, Microsoft, SpotXchange, and Yahoo!. These companies have agreed to have the Interactive Advertising Bureau (IAB, the trade association for internet advertising) monitor them for compliance. The largest six of these eight companies have seats on the IAB board. In other words, this is rather like foxes agreeing to be monitored by the American Fox Association for compliance with henhouse guarding guidelines.
Secondly, the ad networks that are actually causing the most trouble aren’t involved. None of the ad networks listed as the top ten worst offenders in the latest (June) edition of the USC Annenberg Innovation Lab’s Advertising Transparency Report have signed on to the guidelines. Two of the eight that did sign on, Google and Yahoo!, were on the top 10 list when the Ad Transparency Report first came out in January but have come off since.
Another factoid: of the current worst offenders, only one (ZEDO) is a member of IAB at all. Ad network operators on that list with names like “Sumotorrent” are surely not going to be observing these guidelines.
This extralegal agreement between the ad networks and the major content industries follows a well-trodden Washington path: government threatens to regulate industries in order to curb bad behavior; the industry to be regulated responds with a set of “voluntary best practices”; these are just barely serious enough to get government to back off and the instigators of the regulation to at least admit that it’s better than nothing.
We’ve seen this game played before many times, such as when organizations that look out for children’s interests pushed for ways to filter Internet porn and obscenities, or countless attempts to fend off substantive online privacy laws (an area in which the IAB has been heavily involved).
The Best Practices for Ad Networks were announced by Victoria Espinel, President Obama’s intellectual property enforcement czar. That the document was actually written by the IAB is evident from its ample supply of equivocations and accountability dodges. While it’s tempting to go through it line by line and point all of these out (I’d rather see Chris Castle do this; he’s great at picking these things apart), I’d rather focus on the missed opportunity here: instead of modeling this scheme on DMCA 512, the ad networks should have agreed to link the scheme to that law. (The scheme does have a couple of minor links to the DMCA itself, but they are almost beside the point.)
Thanks to the Google Transparency Report and the USC Annenberg Innovation Lab, we have learned that DMCA takedown notices provide an excellent proxy metric of the most infringing websites. The Google Transparency Report shows the number of DMCA takedown notices that Google received per month for sites in its search results. The sites that exceed a certain threshold — say, 10,000 takedown notices per month — are all obvious pirate sites, while even the biggest mainstream consumer websites fall well below that threshold.
The Best Practices for Ad Networks could have made use of these statistics by tying ad takedowns to DMCA takedown notices received by the sites in question via the Google Transparency Report — instead of requiring copyright owners to generate an entirely new set of detailed notices under a voluntary regime with a Grand Canyon’s worth of wiggle room. In other words, the “best practice” could have been very simple: do not place ads on sites that generate more than X DMCA takedown notices per month. This would accomplish the mutually reinforcing goals of reducing ad revenue for pirate sites and reducing their access to the content itself.
Even better would have been to establish a repository of DMCA takedown notices independent of the ones that Google collects for its search results. Anyone who sends a site a takedown notice could simply send a copy to the keeper of this repository, which could be a neutral third party agreed to by the content industries and the IAB, or the U.S. Copyright Office. I have suggested adopting a standard format for takedown notices, which would facilitate this process.
(Such a repository could be supported by fees from copyright owners who submit large numbers of takedown notices, so that individuals and small copyright owners wouldn’t have to pay, and as a deterrent of abuse. The fees would be much smaller than those charged by the piracy monitoring services that big media companies hire, which could submit the notices to the repository and bundle the fees into their own.)
The IAB generated the Best Practices for Ad Networks under pressure from Big Media lobbying groups as well as the White House. But neither of these entities put money in ad networks’ pockets; advertisers do. The result would undoubtedly have been stronger if actual advertisers had added their voices to the process, though none appear to have done so.
Musician David Lowery, a longtime fighter against ad-sponsored piracy, has identified a few large advertisers that have taken steps to mitigate their involvement with pirate sites, such as here (Starbucks, Costco, Walmart), here (Coca-Cola, Pepsi), and here (Levi’s), but these are few compared with the many brands that keep advertising on them. Lowery and others do their best to shame consumer brands into awareness over this issue, but the amount of real change will depend on how much that shame translates into real involvement. As always, it’s best to follow the money.
Public Knowledge Weighs In on Digital First Sale July 14, 2013Posted by Bill Rosenblatt in Law, United States.
The Internet advocacy group Public Knowledge (PK) recently published Copies, Rights, & Copyrights: Really Owning Your Digital Stuff, a think-piece on first sale for the digital age, authored by Sherwin Siy, PK’s VP of Legal Affairs. PK’s position on digital first sale, characteristically, is that users should have the same types of rights to resell, lend, and give away their digital content as they do physical items such as books and CDs. The law in the United States is at best ambiguous on this point, but as digital content consumption goes mainstream, the need for clarity increases.
This whitepaper, which mixes the scholarly with the pragmatic, should be fun for copyright law geeks to read and pick over. It’s PK’s contribution to what will undoubtedly be years of dialog and argument over what to do about first sale for digital content. It mines the history of first sale-related court decisions for precedents that justify the extrapolation of first sale rights to the digital age.
The doctrine of first sale, section 109 of the Copyright Act, says that once you buy (or otherwise lawfully obtain) a copy of a copyrighted work, it’s yours to do with as you please. As Siy explains, the law evolved through litigation to cover things like the right to repair and publicly display one’s legitimately obtained works without permission from the publisher. In examining how first sale ought to apply in the digital age, Siy considers not just obvious use cases such as reselling or lending downloaded music files or e-books, but also less straightforward scenarios like the right to “lend” access to a database through an Internet login, or to lend a DVD rented from Netflix (which is contrary to Netflix’s terms and conditions).
One mystifying aspect of this document is that despite the June 27 publication date, it is completely silent about the recent summary judgment against the MP3 resale startup ReDigi, which happened in a New York federal court three months previous. This is tantamount to writing a piece on domestic terrorism without mentioning the Boston Marathon bombings. One can’t help but wonder whether the omission was intentional, given that PK can’t have liked the way that case went, or if Siy is saving his ammunition for an amicus brief to be filed in ReDigi’s appeal.
At the heart of Siy’s analysis is the notion of copies made as “essential steps” in the normal usage of a copyrighted work. If you rebind a book and put a new cover on it, for example, the law says that the result is a “derivative work” — a specific type of copy in legal terms — of the original book. But one court decision said that you have the right to do this because of the essentiality of the derivative work to the functioning of the original.
Analogously, various copies of software or digital content that are made in the RAM of a PC or other devices can be argued to be made as essential steps in the use of the software or content. Few people notice or care about such RAM copies. They aren’t given much consideration in copyright law, and end-user license agreements (EULAs) usually don’t explicitly give users permission to make them. In legal terms, they are de minimis copies.
ReDigi’s software — at least the version of it for which the court found ReDigi liable — made a copy of a music file as part of the process of making it available for resale. It deleted the original copy in the process of making the new one, and it took steps to ensure that the user didn’t try to keep additional copies after the file was resold; but still, it made a new copy. And the judge in the ReDigi case specifically ruled that the new copy was infringing. In other words, the ReDigi opinion implied that the copy made for resale purposes was not essential to the normal use of digital music files.
In its white paper, PK, proposes short term fixes to the copyright law. It also discusses longer term implications of first sale in an age where the concepts of copies of and access to content are increasingly muddy. The short term fix focuses on adding language to the law that make “essential step” copies — including those made for transfer of ownership — presumptively legal. Siy suggests that if publishers want to limit this at all, they can do so by putting terms into EULAs.
In addition, Siy proposes codifying distribution of files for transfer of ownership as part of the normal use of digital content:
“…the law could allow the lawful owners of lawful copies to make reproductions of the works necessary to the transfer of ownership of a copy to one other party, provided that the other party be the only one in possession of a copy at the end of the transfer, and that no more than one of the parties has the use of the work at one time.”
In other words, it should be legal to do this as long as the original copy disappears. Siy adds:
“Skeptics of this approach might note that the copyright holder would have to rely upon the goodwill of the transferring parties not to make more permanent reproductions in the course of the transfer and just keep the copy they claim to have sold to someone else. This is true. However, it is not a significant change from the state of play now. Photocopiers continue to operate without licenses from copyright holders despite the fact that they may be used for infringing reproductions.”
Here’s where his analysis starts to lose credibility. First, the U.S. Copyright Office investigated this very issue in a 2001 report on digital first sale. It decided that while it’s possible to build a mechanism to delete the original when making a copy — a “forward and delete” scheme similar to ReDigi’s — it would be neither prudent to trust people to do this nor practical to mandate such a mechanism. Given that the Copyright Office is the advisor to Congress on copyright law, this report is tantamount to Congress’s last word on the subject. (The Copyright Office hasn’t been asked to revise the report since 2001.) Siy doesn’t mention this.
Secondly, there are two things wrong with Siy’s photocopying analogy. First, while publishers don’t bother trying to seek licenses for photocopying from individuals, they do seek licenses from institutions via the Copyright Clearance Center that are based on an institution’s size, industry, and other factors; the vast majority of the Fortune 500, for example, pays fees for such licenses. Second, and most fundamentally, a photocopy is not the same as the original, whereas a bit-for-bit copy of a digital file is. This difference has to be relevant, as it was to Judge Sullivan in his ReDigi opinion. I’d argue that the exactness of digital copies has to be at the heart of any debate on the future of first sale in the digital age, yet Siy doesn’t touch this issue.
After his suggested short-term solutions, Siy surveys the emerging landscape of content distribution models that focus more on access than on copies, and he wonders — quite appropriately — whether copies are still the most appropriate measure of the usage of copyrighted works. Looking creatively at the present and future of content business models, he says:
“As technology advances, we can see the relationship diminishing between the structure of the Copyright Act and the reality of how authors and audiences alike value and use copyrighted works. … increasingly, consumption of copyrighted works comes not through the distribution of fixed copies, or even the distribution of digital ones. People listen to music via subscriptions to Spotify, pay for online access to the New York Times and Wall Street Journal, and ‘rent’ (actually, pay for streaming access to) digital movies from Amazon. Access, not copies, seems to be more the question. We own copies now; we don’t necessarily own access. Should we be able to trade access … ? This is actually more than just a fix for the first sale doctrine; it’s a realignment of how we think of copyright and what the value of the thing is.”
Yet at the end of the day, Siy decides that focusing on copies is still the most sensible approach to laws intended to balance the interests of content creators and the public. The alternative would be to enable content distributors to grant or deny rights on every conceivable type of content access, including, for example, the ability to flip back and forth or search through text. He says that this could lead to a future that is “at best tedious and at worst dystopian,” and uses that as a rationale to conclude that maybe focusing on copies isn’t so bad after all.
Another landmark case in the world of digital first sale, which Siy does mention, is Vernor v. Autodesk. In my discussion of that case, I suggested that specifying such fine-grained limitations in a EULA amounts to “verbal DRM,” which in a way is worse than technological DRM because of its potential for ambiguity and thus legal risk to users. Commercial content distributors need to make their services easy to understand and use, because the alternative is irrelevance, not to mention piracy. Just as importantly, digital content and software developers should know that byzantine usage restrictions in EULAs without technological measures to back them up are virtually impossible to enforce; users will merely ignore and/or complain about them.
Therefore I’m not so concerned about Sherwin Siy’s “tedious” and “dystopian” future, and I continue to wonder whether there’s a better way forward than looking at copies.
Copyright and Accessibility June 19, 2013Posted by Bill Rosenblatt in Events, Law, Publishing, Standards, Uncategorized.
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Last week I received an education in the world of publishing for print-disabled people, including the blind and dyslexic. I was in Copenhagen to speak at Future Publishing and Accessibility, a conference produced by Nota, an organization within the Danish Ministry of Culture that provides materials for the print-disabled, and the DAISY Consortium, the promoter of global standards for talking books. The conference brought together speakers from the accessibility and mainstream publishing fields.
Before the conference, I had been wondering what the attitude of the accessibility community would be towards copyright. Would they view it as a restrictive construct that limits the spread of accessible information, allowing it to remain in the hands of publishers that put profit first?
As it turns out, the answer is no. The accessibility community, generally speaking, has a balanced view of copyright that reflects the growing importance of the print disabled to publishers as a business matter.
Digital publishing technology might be a convenience for normally sighted people, but for the print disabled, it’s a huge revelation. The same e-publishing standards that promote ease of production, distribution, and interoperability for mainstream consumers make it possible to automate and thus drastically lower the cost and time to produce content in Braille, large print, or spoken-word formats.
Once you understand this, it makes perfect sense that the IDPF (promoter of the EPUB standards for e-books) and DAISY Consortium share several key members. It was also pointed out at the conference that the print disabled constitute an audience that expands the market for publishers by roughly 10%. All this adds up to a market for accessible content that’s just too big to ignore.
As a result, the interests of the publishing industry and the accessibility community are aligning. Accessibility experts respect copyright because it helps preserve incentives for publishers to convert their products into versions for the print disabled. Although more and more accessibility conversion processes can be automated, manual effort is still necessary — particularly for complex works such as textbooks and scientific materials.
Publishers, for their part, view making content accessible to the print disabled as part of the value that they can add to content — value that still can’t exist without financial support and investment.
One example is Elsevier, the world’s largest scientific publisher. Elsevier has undertaken a broad, ambitious program to optimize its ability to produce versions of its titles for the print disabled. One speaker from the accessibility community called the program “the gold standard” for digital publishing. Not bad for a company that some in the academic community refer to as the Evil Empire.
This is not by any means to suggest that publishers and the accessibility community coexist in perfect harmony. There is still a long way to go to reach the state articulated at the conference by George Kerscher, who is both Secretary General of DAISY and President of IDPF: to make all materials available to the print disabled at the same time, and for the same price, as mainstream content.
The Future Publishing and Accessibility conference was timed to take place just before negotiations begin over a proposed WIPO treaty that would facilitate the production of accessible materials and distribution of them across borders. The negotiations are taking place this and next week in Marrakech, Morocco. This proposed treaty is already laden with concerns from the copyright industries that its provisions will create opportunities for abuse, and reciprocal concerns from the open Internet camp that the treaty will be overburdened with restrictions designed to limit such abuse. But as I found out in Denmark last week, there is enough practical common ground to hope that accessibility of content for the print disabled will continue to improve.
Capitol Records Prevails in ReDigi Case April 1, 2013Posted by Bill Rosenblatt in Law, Music, United States.
A federal court in New York City handed down summary judgment against ReDigi over the weekend in its legal fight with Capitol Records. In his ruling , Judge Richard Sullivan found the digital resale service liable for primary and secondary copyright infringement. He rejected ReDigi’s arguments that its service, which enables users to resell music tracks purchased on iTunes, is legal under the doctrines of fair use and first sale.
The decision is a surprising blow to the Boston-based startup, especially given that Judge Sullivan refused Capitol’s request for a preliminary injuction early on in the case.
The central holding in Judge Sullivan’s opinion was that in order to resell a digital file, a user has to make another copy of it — even if the original copy disappears, and even if two copies never coexist simultaneously. He based this holding on a literal interpretation of the phrase “copies are material objects” from Section 101 of the Copyright Act.
Once Judge Sullivan established that the ReDigi system causes another copy to be made as part of the resale process, the rest of his opinion flowed from there:
- The user didn’t have a right to make that new copy, therefore it’s infringement — specifically of Capitol’s reproduction and distribution rights under copyright law.
- ReDigi knowingly aided and abetted, and benefited from, users’ acts of infringement, therefore it’s secondary as well as primary infringement.
- The user resold the new copy, not the original one, therefore it’s not protected under first sale (which says that a consumer can do whatever she wants with a copy of a copyrighted work that she lawfully obtains).
- The “new” copies made in the ReDigi process don’t qualify as fair use: they are identical to the originals and thus aren’t “transformative”; they are made for commercial purposes; they undercut the originals and thus diminish the market for them.
In sum, as Judge Sullivan put it bluntly, “ReDigi, by virtue of its design, is incapable of compliance with the law.” At the same time, he was quick to point out that his was a narrow ruling based on a literal interpretation of the law, saying that “this is a court of law and not a congressional subcommittee or technology blog[.]” He investigated Congress’s intent regarding digital first sale and found that it hadn’t advanced since the U.S. Copyright Office — the copyright advisors to Congress — had counseled against allowing digital resale back in 2001.
I’ve always assumed that any district court decision in this case would be minimally relevant, as it would be appealed. ReDigi has already stated that it will appeal. And the opinion does contain patches of daylight through which an appeal could possibly be launched.
Most important is the opinion’s focus on the making of a “new copy” during the resale process. It’s hard to see how this gibes with the many “new copies” of digital files made during normal content distribution processes, including streaming as well as downloads.
In other words, if ReDigi is making “new copies” without authorization, then so are countless other technologies. Some such copies might be covered under fair use or the DMCA safe harbors. Other “new copies” are considered “incidental” (not requiring permission from the copyright holder); the judge didn’t explain why copies made by the ReDigi system don’t qualify as incidental. ReDigi did make a similar argument; the judge didn’t buy it because it didn’t involve the issues in this case, but a higher court, looking at the broader picture of digital first sale, might see things differently.
Judge Sullivan’s reliance on the Copyright Office’s 2001 report on digital first sale is also somewhat problematic. The Copyright Office believed that a “forward-and-delete” mechanism — not unlike what ReDigi has built — could actually support digital first sale. The Copyright Office simply concluded that such a mechanism would not be practical to implement. This does not comport with Judge Sullivan’s assertion that “forward-and-delete” requires a new copy to be made and thus cannot qualify as first sale in the first place.
Another notable feature of Judge Sullivan’s opinion is his assertion that “a ReDigi user owns the phonorecord that was created when she purchased and downloaded a song from iTunes to her hard disk.” The assertion that a user “owns” a digital download is itself controversial and not based on legal precedent. Judge Sullivan found no legal precedent for digital first sale, but somehow he did find a basis for asserting that digital downloads are “owned.”
Retailers of digital goods believe that they don’t actually sell them in the way that books, CDs, or DVDs are sold; instead they license them to users under terms that may resemble sale. The question of sale vs. licensing of copyrighted digital content is a gray area in the law, and it wasn’t up for examination here: Apple, for example, wasn’t a party to the case and remained silent throughout. But if Apple (or another digital content retailer) ever objects to its content being “resold” through a third-party service, it will have to deal with Judge Sullivan’s language; and once again, it may be harder for a higher court to ignore this aspect of digital resale when determining its legality.
It remains to be seen whether the above issues can be forged into a legal theory that can convince the Second Circuit appeals court to reverse Judge Sullivan’s ruling. Yet even if ReDigi throws in the towel and ceases operations, its very existence has called a lot of attention to the idea of digital resale. The mechanisms are in place today: beyond ReDigi, there’s at least one more startup (the NYC-based ReKiosk); and Amazon was recently granted a patent for resale of digital goods. Indie music labels and a few e-book publishers, at first, will most likely experiment with it.
This court ruling won’t eliminate digital resale; if let stand, it will simply restrict it to content that copyright owners have given permission to resell — permission that will probably include say over pricing, timing, and other factors. This will complicate the lives of resellers, but it will ensure that digital resale doesn’t harm copyright holders. In other words, ReDigi has let the digital resale genie out of the lamp. It’s bound to happen, one way or another.
Supreme Court Affirms First Sale in Kirtsaeng Case March 20, 2013Posted by Bill Rosenblatt in Law, Libraries, United States.
The copyleft was jubilant, and Big Media disgruntled, at the Supreme Court’s opinion on Tuesday in Kirtsaeng v. Wiley, a case about the first sale doctrine in US copyright law. First sale, known as “exhaustion” outside of the US, states that the publisher of a copyrighted work has no say or control in distribution of it after the first sale. The law says that if you have obtained a copy of a work legally, you can sell it, lend it, give it away, use it to line a birdcage, or anything else, without consent of the original publisher.
The Kirtsaeng case existed firmly in the realm of physical products. It concerned a tension in the law between first sale (section 109) and another provision (section 602) that makes it illegal to import copyrighted works from outside the US into the country without permission.
Supap Kirtsaeng, a Thai citizen living in the US, got his friends and family to buy textbooks published in his native land at prices that were much lower than those charged here. They sent him the books; he resold them here and pocketed the difference. The books were published by a subsidiary of John Wiley & Sons and were virtually identical to titles published by Wiley in the US. (Disclosure: Wiley is the publisher of one of my books.)
Wiley sued, claiming that Kirtsaeng was infringing under section 602. Kirtsaeng claimed first sale rights to resell the books. Kirtsaeng lost in the lower courts, but the Supreme Court reversed. Now the case goes back to the Second Circuit in New York for a re-hearing consistent with Tuesday’s decision.
Many people are asking me what impact this decision may have on digital first sale, and more specifically, the fortunes of the digital resale startup ReDigi, which is fighting a lawsuit brought by Capitol Records. While I’m not in the business of reading Supreme Court tea leaves, I’d say there are two ways to look at it.
The narrower view is: not very much. Justice Stephen Breyer’s opinion was an exemplar of judicial restraint. It spent a lot of time analyzing key words in the first sale law (specifically that a copy had to be “lawfully made under this title” to qualify for first sale) and the factors specific to its geographic interpretation vis-a-vis section 602. It also focused on divining Congress’s intent in making the law in the first place and emphasized the law’s “impeccable common law pedigree” dating back over 100 years. It’s no wonder that the 6-3 majority crossed “party lines,” with conservative Justices Roberts, Thomas, and Alito joining liberals Breyer, Kagan, and Sotomayor.
The opinion also concerned itself with the decision’s impact on libraries and museums, saying that if the case went Wiley’s way, it would place undue burdens on them to get permission before they could lend or exhibit foreign-made works.
What Breyer did not do was spend much time discussing the business implications of the case. He said little about both the impact on publishers and Kirtsaeng’s right to carry on his resale business. Justice Ruth Bader Ginsburg’s dissenting opinion focused much more on those aspects.
That leads me to believe that if and when the Supreme Court revisits first sale, it will be more receptive to arguments from the library and museum communities than those about industry factions, which often suffuse high-profile copyright litigation. And libraries especially face difficulties without clear digital first sale rights. The Owners Rights Initiative, a lobbying organization set up specifically to deal with this case, turns out to have done the right thing by enlisting library organizations to be part of its “public face” rather than the likes of CCIA and eBay. (The list of organizations that submitted or signed on to amicus briefs in this case is a mile long.)
The other possible view of the Kirtsaeng decision is the bigger-picture one: that the Supreme Court is taking a broad view of first sale by refusing to weigh it down with exceptions like those in section 602, and therefore the Court may take the same broad view when it’s asked to opine on digital first sale — that is, when it’s asked to interpret another group of words in the copyright act: “‘Copies’ are material objects…”
(Props to Andrew Bridges of Fenwick & West for his insights.)
The DMCA and Presidential Politics, Part 2 March 4, 2013Posted by Bill Rosenblatt in Law, United States.
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A minor war of words broke out yesterday in the U.S. government over consumers’ rights to “jailbreak” (unlock) their mobile phones. The White House and the FCC both made public statements in which they politely condemned the U.S. Copyright Office’s decision not to renew the DMCA 1201 exception for jailbreaking and stood in favor of unlocking mobile phones for the purpose of switching wireless carriers.
This is what happens when a government process that’s supposed to be confined to relatively arcane business interests spills over into the public sphere. The question is, why are we even talking about this at all?
A little background for those who need it: the Digital Millennium Copyright Act of 1998 has two parts. The part that has gotten most of the attention over the past few years is the second part (Title II, section 512), which includes the “notice and takedown” regime that online services have to follow to avoid copyright liability for files that users upload. This part of the DMCA has been the subject of several recent high-profile litigations, such as Viacom v. Google, EMI v. MP3Tunes, and UMG v. Veoh.
The first part of the DMCA, section 1201, makes it illegal to crack DRMs. This law was originally used to go after DRM hackers such as those who distributed DVD ripping software, in cases such as Universal v. Reimerdes. But that was many years ago.
Since then, we’ve only heard about how this law has been distended out of shape by the likes of makers of garage door openers and laser printer toner cartridges. And soon after Apple ushered in the smartphone revolution with the introduction of the iPhone in 2007, the major wireless carriers appropriated it to cover mobile phone jailbreaking. Let’s be clear: these are all abuses of a law that’s dubious to begin with.
There is a provision in DMCA 1201 that requires the U.S. Copyright Office — the agency that advises Congress on the copyright law — to conduct a “rulemaking” every three years to consider whether any exemptions to the anti-hacking law should be made. Anyone may submit proposals for such exemptions, though the requirements are fairly rigid. The Office evaluates the proposed exemptions and may approve some of them, but the approved exemptions only last three years, until the next rulemaking. They must be proposed and approved again in order to last longer.
In 2009, the Copyright Office approved an exemption for mobile phone jailbreaking. In the subsequent 2012 rulemaking, the Office chose not to renew it; instead they listened to wireless industry lobbyists who persuaded them that consumer choice and competition were doing fine, and therefore that jailbreaking wasn’t necessary. The 2009 exemption expired at the end of January 2013.
An entrepreneur named Sina Khanifar decided to do something about this: he submitted a petition to the White House, through its We the People online petition system, which has a policy of responding to petitions that get over 100,000 signatures within 30 days. The petition did cross that threshold, and the White House did respond.
It would be nice to do something to curtail these abuses of the DMCA. Right now, the DMCA is only “useful” in that it keeps actual DRM hacks in the shadows and prevents things like a “Convert from Nook” option in your Kindle (or vice versa).
But does anyone seriously expect any results from the White House’s populist grandstanding on this issue? The executive branch has no power to implement changes in the DMCA, and it’s unlikely that the FCC (also part of the executive branch) has any relevant authority either. Only Congress can change the law, and the Copyright Office is Congress’s legal advisor. The Office’s own statement on the matter (released via email, not yet available on the Office’s website) basically said “The White House is right, this is a bigger public policy matter than the arcane issues we usually deal with in these rulemakings” — in other words, that they’ve simply done their job according to the law.
The connection between mobile phone jailbreaking and the original intent of DMCA 1201 is tenuous at best. Maybe Khanifar’s petition will spur Congress to act, but I’m not holding my breath.
Copyright Alert System Launches in U.S. February 25, 2013Posted by Bill Rosenblatt in Fingerprinting, Law, Music, Video.
With today’s launch of the Copyright Alert System (CAS) by the Center for Copyright Information, the United States joins the list of countries that have adopted a so-called graduated response system for educating Internet users about online copyright infringement and taking steps to punish repeat offenders. The CAS is finally launching after a few months’ delay, part of which was supposedly due to the effects of Sandy, the mega-storm that hit the northeast U.S. late last year. Other graduated response countries include France, New Zealand, and South Korea; the United Kingdom is currently struggling with its own implementation.
The CAS is a partnership between music and video content owners on the one hand and major ISPs on the other. The content owner representatives include not just the majors (RIAA and MPAA) but also the Independent Film and Television Alliance (IFTA) and American Association of Independent Music (A2IM). On the ISP side, membership includes the five largest providers: AT&T, Verizon, Time Warner Cable, Comcast, and Cablevision. Book and game publishers are not involved at this point.
The CAS is run by Jill Lesser, a tech policy veteran with deep experience on both the content and ISP sides. It has an advisory board whose principal function seems to be to curb abuses: it includes advocates for looser copyright laws (Gigi Sohn of Public Knowledge) and user privacy (Jules Polonetsky of the Future of Privacy Forum).
The CAS works similarly to other graduated response regimes: copyright owners employ infringement monitoring services, which can identify copyrighted works as users send them around the Internet using fingerprinting and other content recognition technologies. The monitoring services send notices to ISPs, which issue warning messages to users. The warnings get stronger with repeat infringements.
ISPs can opt to punish repeat alleged offenders by such means as throttling bandwidth and making users watch videos about copyright. (ISPs already have policies for terminating repeat infringers’ accounts, which they must have in order to maintain their eligibility for the DMCA safe harbor.)
Where the CAS differs from other graduated response systems is that it is not tied to law enforcement. The arrangement between content owners and ISPs is voluntary. ISPs will not terminate or suspend users’ Internet accounts, nor will they pass information about infringements on to copyright owners. Another difference is that the CAS is not being funded through taxes or levies on Internet service (although funding sources are confidential).
In other words, the CAS is a more purely educational approach than France’s HADOPI or other systems. Analysis of the CAS’s results will therefore be more useful in determining how successful education by itself can be in getting people to respect copyright. The hope is that education will do more than draconian statutory damages or blunt-instrument legislation.
Given how little effect those approaches have had, it may not be difficult to declare the Copyright Alert System a relative success in the years to come. As it is now, it seems like quite a reasonable system: it raises awareness about the importance of copyright by using advanced Internet technologies instead of relegating enforcement to outmoded nontechnical legal means; it is permeated with references to legal content sources; and it doesn’t cost users a thing.
Awareness Grows over Digital First Sale February 19, 2013Posted by Bill Rosenblatt in Business models, Law, Publishing.
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What would happen if the law were to definitively decide that users should get the same rights of ownership over digital downloads as they do with physical media products such as books, CDs, and DVDs? A growing crescendo of events over the last few weeks indicates a growing awareness of this fascinating topic.
Let’s start with late last month, when Amazon was granted a U.S. patent on a scheme for reselling digital objects. The patent describes a scheme for transferring “ownership” of digital content objects from one user to another, possibly with limits on the number of transfers, and handling the e-commerce behind each such transaction.
Digital resale is possible now. For example, the startup ReDigi is doing it for music downloads from iTunes and Amazon. The question is not whether it’s technically feasible to support digital resale with reasonable safeguards against abuse of the process (i.e., “reselling” your content while keeping your own copies). The question is whether doing so requires a license from content owners, or whether users have a legal right to resell their content without permission.
In the former case, any service (like ReDigi) that facilitates resale would have to pay royalties to copyright owners on every transaction. In the latter case, it need not pay anything. Since resold digital content is identical to “new” content, this would have highly disruptive implications for publishers and others in the value chain. The law is not clear on this point, but it may become clearer within the next couple of years through litigation, such as Capitol Records’ lawsuit against ReDigi, and the efforts of a lobbying group called the Owners’ Rights Initiative.
Amazon’s patent does not take a position on whether digital resale requires the copyright owner’s permission; it simply discloses a mechanism for doing digital resale. And of course just because Amazon has a patent does not mean it intends to implement such a system; Amazon was granted about 300 patents in 2012. Still, the issuance of the patent prompted Wired to run an article about digital first sale and its implications two weeks ago.
That brings us to last week, when the O’Reilly Tools of Change for Publishing (TOC) took place in NYC. TOC is the preeminent conference on technology and innovation in publishing. Just before the conference, the TOC folks held an invitation-only Executive Roundtable featuring John Ossenmacher, CEO of ReDigi. O’Reilly Media, a publisher of books and other information for IT professionals and a bellwether of technological innovation in publishing, confirmed that it is in talks with ReDigi to take the company into resale of e-books. The room was filled with traditional publishing executives who had a more skeptical view, though Ossenmacher survived the ordeal well.
The TOC organizers had asked me to give a talk on digital first sale at the conference; I did so later in the week (slides available on SlideShare). The room was packed with a broad mixture of editorial, business, and technology folks from the publishing industry. Publishers Weekly, the leading trade publication of the book publishing industry, decided that the topic was important enough to feature in an article summarizing my presentation. Most of the attendees were surprised at the highly disruptive implications for publishers, retailers, and libraries as well as users, though a few expressed the idea that digital resale is yet another inevitable type of change to legacy business models in the content industries.