Improving Copyright’s Public Image September 3, 2014Posted by Bill Rosenblatt in Law, United States.
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The Copyright Society of the USA established the Donald C. Brace Memorial Lecture over 40 years ago as an opportunity to invite a distinguished member of the copyright legal community to create a talk to be given and published in the Society’s journal. The list of annual Brace Lecture givers is a Who’s Who of the American copyright community.
Last year’s lecture, which made it into the latest issue of the Journal of the Copyright Society, is well worth a read. It was given by Peter Menell, a professor at Berkeley Law School who co-directs the Berkeley Center for Law and Technology. It’s called This American Copyright Life: Reflections on Re-Equilibrating Copyright for the Internet Age. Since giving the lecture at Fordham Law School in NYC, Menell has been touring it (it has music and visual components) around various law schools and conferences.
Two things about Menell’s talk/paper caught my attention. First was this sentence, early on in the paper, regarding his love for both copyright and technology during the outbreak of the Copyright Wars in the 2000s: “I was passionately in the middle, perhaps the loneliest place of all.” Second was his focus on the public reputation of copyright and how it needs to be rehabilitated.
Menell’s basic thesis is that no one thought much about copyright when the limitations on copying media products were physical rather than legal; but when the digital age came along, the reason why you might not have made copies of your music recordings was because it was possibly against the law rather than because it took time and effort. He says: “‘My Generation’ did not see copyright as an oppressive regime. We thrived in ignorant bliss well below copyright’s enforcement radar and
were inspired by content industry products. The situation could not be more different for adolescents, teenagers, college students, and netizens today. Many perceive copyright to be an overbearing constraint on creativity, freedom, and access to creative works.” (The latter category apparently includes Menell’s own kids.) In other words, copyright law has appeared in the public consciousness as a limiter of people’s behavior instead of as the force that enables creative works to be made.
Here’s a figure from his paper that captures the decline in copyright’s public approval:
The icons in the figure refer respectively to the 1984 Universal v. Sony “Betamax” Supreme Court decision, the 2001 Ninth Circuit Napster decision, and the defeat of the Stop Online Piracy Act in 2012 from Silicon Valley-amplified public pressure.
Compare this with a slide from a guest lecture I gave at Rutgers Law School last year:
Menell provides a number of personal reflections about his engagement with technology and copyright over the years, including a story about how he and a friend created a slide show for their high school graduation ceremony with spliced-up music selections keyed to slide changes via a sync track on a reel-to-reel tape recorder. This combination of hack and mashup ought to establish Menell’s techie cred. In fact, the “live” version of the paper is itself a mashup of audio and video items.
He takes the reader through the history of the dramatic shift in public attitudes towards copyright after the advent of Napster. My favorite part of this is a fascinating vignette of copyleft icon Fred von Lohmann, then of the Electronic Frontier Foundation (EFF), stating on a conference panel in 2002 that many users of peer-to-peer file-sharing networks were probably infringing copyrights and that the most appropriate legal strategy for the media industry ought to be to sue them, instead of suing the operators of P2P networks as the RIAA had done with Napster. Menell’s reaction, including his own incredulity at the time that “EFF did not use its considerable bully pulpit within the post-Napster generations to encourage ethical behavior as digital content channels emerged,” is just as fascinating.
(Of course, the RIAA did begin doing just that — suing individuals — the very next year. Five years after that, the EFF posted an article that said “suing music fans is no answer to the P2P dilemma.” Fred von Lohmann was still there.)
He also provides examples of the general online public’s current attitudes towards copyright, which has gone long past “Big Media is evil”; he says that “the post-Napster generations possess the incredible human capacity for rationalizing their self-interest” by their implications that individual content creators should not get paid because they are “lazy” or “old-fashioned” or even “spoiled” — even while he admits that the sixteen-year-old Peter Menell might have fallen prey to the same sad rationalizations.
In the rest of the paper, Menell lays out a number of suggestions for how copyright law could change in order to make it more palatable to the public. These include what for me is the biggest breath of fresh air in the article: some of the only serious suggestions I’ve ever seen from copyright academics about using technology as an enabler of copyright rather than as its natural enemy. He touts the value of creating searchable databases of rights holder information and giving copyright owners the opportunity to deposit fingerprints of their content when they register their copyrights, in order to help prove and trace ownership. He also mentions encryption and DRM as means of controlling infringement that have succeeded in the video, software, and game industries, but he does not claim that they are or should be part of the legal system.
Menell also makes several suggestions about how to tweak the law itself to make it a better fit to the digital age. One of these is to establish different tiers of liability for individuals and corporations. He says that the threat of massively inflated statutory damages for copyright infringement has failed to act as a deterrent and that courts have paid little attention to the upper limits of damages anyway. Instead he calls for a realignment of enforcement efficiency, penalties, and incentives for individuals: “Copyright law should address garden variety file-sharing not through costly and complex federal court proceedings but instead through streamlined, higher detection probability, low-fine means — more in the nature of parking tickets, with inducements and nudges to steer consumers into better (e.g., subscription) parking plans.”
Another topic in Menell’s paper that brought a smile to my face was his call for “Operationalizing Fair Use” by such means as establishing “bright-line ‘fair use harbors’ to provide assurance in particular settings.” (I’ve occasionally said similar things and gotten nothing but funny looks from lawyers on all sides of the issue.)
One suggestion he makes along these lines is to establish a compulsory license, with relatively fixed royalties, for music used in remixes and mashups. That is, anyone who wants to use more than a tiny sample of music in a remix or mashup should pay a fee established by law (as opposed to by record labels or music publishers) that gets distributed to the appropriate rights holders. The idea is that such a scheme would strike a pragmatic and reasonable balance between rampant uncompensated use of content in remixes and unworkable (not to mention creativity-impeding) attempts to lock everything down. The U.S. Copyright Office would be tasked with figuring out suitable schemes for dividing up revenue from these licenses.
It goes without saying that establishing any scheme of that type will involve years and years of lobbying and haggling to determine the rates. Even then, several factions aren’t likely to be interested in this idea in principle. Although musical artists surely would like to be compensated for the use of their material in remixes, many artists are not (or are no longer) in favor of more compulsory licenses and would rather see proper compensation develop in the free market. And the copyleft crowd tends to view all remixes and mashups as fair use, and therefore not subject to royalties at all.
In general, Menell’s paper calls for changes to copyright law that are designed to improve its public image by making it seem more fair to both consumers and content creators. Changing behavioral norms in the online world is perhaps better done in narrowly targeted ways than broadly, but the paper ought to be a springboard for many more such ideas in the future.
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President Obama recently signed into law a bill that allows people to “jailbreak” or “root” their mobile phones in order to switch wireless carriers. The Unlocking Consumer Choice and Wireless Competition Act was that rarest of rarities these days: a bipartisan bill that passed both houses of Congress by unanimous consent. Copyleft advocates such as Public Knowledge see this as an important step towards weakening the part of the Digital Millennium Copyright Act that outlaws hacks to DRM systems, known as DMCA 1201.
For those of you who might be scratching your heads wondering what jailbreaking your iPhone or rooting your Android device has to do with DRM hacking, here is some background. Last year, the U.S. Copyright Office declined to renew a temporary exception to DMCA 1201 that would make it legal to unlock mobile phones. A petition to the president to reverse the decision garnered over 100,000 signatures, but as he has no power to do this, I predicted that nothing would happen. I was wrong; Congress did take up the issue, with the resulting legislation breezing through Congress last month.
Around the time of the Copyright Office’s ruling last year, Zoe Lofgren, a Democrat who represents a chunk of Silicon Valley in Congress, introduced a bill called the Unlocking Technology Act that would go considerably further in weakening DMCA 1201. This legislation would sidestep the triennial rulemaking process in which the Copyright Office considers temporary exceptions to the law; it would create permanent exceptions to DMCA 1201 for any hack to a DRM scheme, as long as the primary purpose of the hack is not an infringement of copyright. The ostensible aim of this bill is to allow people to break their devices’ DRMs for such purposes as enabling read-aloud features in e-book readers, as well as to unlock their mobile phones.
DMCA 1201 was purposefully crafted so as to disallow any hacks to DRMs even if the resulting uses of content are noninfringing. There were two rationales for this. Most basically, if you could hack a DRM, then you would be able to get unencrypted content, which you could use for any reason, including emailing it to your million best friends (which would have been a consideration in the 1990s when the law was created, as Torrent trackers and cyberlockers weren’t around yet).
But more specifically, if it’s OK to hack DRMs for noninfringing purposes, then potentially sticky questions about whether a resulting use of content qualifies as fair use must be judged the old-fashioned way: through the legal system, not through technology. And if you are trying to enforce copyrights, once you fall through what I have called the trap door into the legal system, you lose: enforcement through the traditional legal system is massively less effective and efficient than enforcement through technology. The media industry doesn’t want judgments about fair use from hacked DRMs to be left up to consumers; it wants to reserve the benefit of the doubt for itself.
The tech industry, on the other hand, wants to allow fair uses of content obtained from hacked DRMs in order to make its products and services more useful to consumers. And there’s no question that the Unlocking Technology Act has aspects that would be beneficial to consumers. But there is a deeper principle at work here that renders the costs and benefits less clear.
The primary motivation for DMCA 1201 in the first place was to erect a legal backstop for DRM technology that wasn’t very effective — such as the CSS scheme for DVDs, which was the subject of several DMCA 1201 litigations in the previous decades. The media industry wanted to avoid an “arms race” against hackers. The telecommunications industry — which was on the opposite side of the negotiating table when these issues were debated in the early 1990s — was fine with this: telcos understood that with a legal backstop against hacks in place, they would have less responsibility to implement more expensive and complex DRM systems that were actually strong; furthermore, the law placed accountability for hacks squarely on hackers, and not on the service providers (such as telcos) that implemented the DRMs in the first place. In all, if there had to be a law against DRM hacking, DMCA 1201 was not a bad deal for today’s service providers and app developers.
The problem with the Unlocking Technology Act is in the interpretation of phrases in it like “primarily designed or produced for the purpose of facilitating noninfringing uses of [copyrighted] works.” Most DRM hacks that I’m familiar with are “marketed” with language like “Exercise your fair use rights to your content” and disclaimers — nudge, nudge, wink, wink — that the hack should not be used for copyright infringement. Hacks that developers sell for money are subject to the law against products and services that “induce” infringement, thanks to the Supreme Court’s 2005 Grokster decision, so commercial hackers have been on notice for years about avoiding promotional language that encourages infringement. (And of course none of these laws apply outside of the United States.)
So, if a law like the Unlocking Technology Act passes, then copyright owners could face challenges in getting courts to find that DRM hacks were not “primarily designed or produced for the purpose of facilitating noninfringing uses[.]” The question of liability would seem to shift from the supplier of the hack to the user. In other words, this law would render DMCA 1201 essentially toothless — which is what copyleft interests have wanted all along.
From a pragmatic perspective, this law could lead non-dominant retailers of digital content to build DRM hacks into their software for “interoperability” purposes, to help them compete with the market leaders. It’s particularly easy to see why Google should want this, as it has zillions of users but has struggled to get traction for its Google Play content retail operations. Under this law, Google could add an “Import from iTunes” option for video and “Import from Kindle/Nook/iBooks” options for e-books. (And once one retailer did this, all of the others would follow.) As long as those “import” options re-encrypted content in the native DRM, there shouldn’t be much of an issue with “fair use.” (There would be plenty of issues about users violating retailers’ license agreements, but that would be a separate matter.)
This in turn could cause retailers that use DRM to help lock consumers into their services to implement stronger, more complex, and more expensive DRM. They would have to use techniques that help thwart hacks over time, such as reverse engineering prevention, code diversity and renewability, and sophisticated key hiding techniques such as whitebox encryption. Some will argue that making lock-in more of a hassle will cause technology companies to stop trying. This argument is misguided: first, lock-in is fundamental to theories of markets in the networked digital economy and isn’t likely to go away over costs of DRM implementation; second, DRM is far from the only way to achieve lock-in.
The other question is whether Hollywood studios and other copyright owners will demand stronger DRM from service providers that have little motivation to implement it. The problem, as usual, is that copyright owners demand the technology (as a condition of licensing their content) but don’t pay for it. If there’s no effective legal backstop to weak DRM, then negotiations between copyright owners and technology companies may get tougher. However, this may not be an issue particularly where Hollywood is concerned, since studios tend to rely more heavily on terms in license agreements (such as robustness rules) than on DMCA 1201 to enforce the strength of DRM implementations.
Regardless, the passage of the mobile phone unlocking legislation has led to increased interest in the Unlocking Technology Act, such as the recent panel that Public Knowledge and other like-minded organizations put on in Washington. Rep. Lofgren has succeeded in getting several more members of Congress to co-sponsor her bill. The trouble is, all but one of them are Democrats (in a Republican-controlled House of Representatives not exactly known for cooperation with the other side of the aisle); and the Democratically-controlled Senate has not introduced parallel legislation. This means that the fate of the Unlocking Technology Act is likely to be similar to that of past attempts to do much the same thing: the Digital Media Consumers’ Rights Act of 2003 and the Freedom and Innovation Revitalizing United States Entrepreneurship (FAIR USE) Act of 2007. That is, it’s likely to go nowhere.
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Registration for Copyright and Technology London 2014 is now live. An earlybird discount is in place through August 8. Space is limited and we came close to filling the rooms last time, so please register today!
I am particularly excited about our two keynote speakers — two of the most important copyright policy officials in the European Union and United States respectively. Maria Martin-Prat will discuss efforts to harmonize aspects of copyright law throughout the 28 EU Member States, while Shira Perlmutter will provide an update on the long process that the US has started to revise its copyright law.
We have made one change to the Law and Policy track in the afternoon: we’ve added a panel called The Cloudy Future of Private Copying. This panel will deal with controversies in the already complex and often confusing world of laws in Europe that allow consumers to make copies of lawfully-obtained content for personal use.
The right of private copying throughout Europe was established in the European Union Copyright Directive of 2001, but the EU Member States’ implementations of private copying vary widely — as do the levies that makers of consumer electronics and blank media have to pay to copyright collecting societies in many countries on the presumption that consumers will make private copies of copyrighted material. Private copying was originally intended to apply to such straightforward scenarios as photocopying of text materials or taping vinyl albums onto cassette. But nowadays, cloud storage services, cyberlockers, and “cloud sync” services for music files — some of which allow streaming from the cloud or access to content by users other than those who uploaded the content — are coming into view regarding private copying.
The result is a growing amount of controversy among collecting societies, consumer electronics makers, retailers, and others; meanwhile the European Commission is seeking ways to harmonize the laws across Member States amid rapid technological change. Our panel will discuss these issues and consider whether there’s a rational way forward.
We have slots open for a chair and speakers on this panel; I will accept proposals through July 31. Please email your proposal(s) with the following information:
- Speaker’s name and full contact information
- Chair or speaker request?
- Description of speaker’s experience or point of view on the panel subject
- Brief narrative bio of speaker
- Contact info of representative, if different from speaker*
Finally, back over here across the Atlantic, I’ll note an interesting new development in the Aereo case that hasn’t gotten much press since the Supreme Court decision in the case a couple of weeks ago. Aereo had claimed that it had “bet the farm” on a court ruling that its service was legal and that “there is no Plan B,” implying that it didn’t have the money to pay for licenses with television networks. Various commentators have noted that Aereo wasn’t going to have much leverage in any such negotiations anyway.
As a result of the decision, Aereo has changed tactics. In the Supreme Court’s ruling, Justice Breyer stated that Aereo resembled a cable TV provider and therefore could not offer access to television networks’ content without a license. Now, in a filing with the New York district court that first heard the case, Aereo is claiming that it should be entitled to the statutory license for cable TV operators under section 111 of the copyright law, with royalty rates that are spelled out in 17 U.S.C § 111(d)(1).
In essence, Aereo is attempting to rely on the court for its negotiating leverage, and it has apparently decided that it can become a profitable business even if it has to pay the fees under that statutory license. Has Barry Diller — or another investor — stepped in with the promise of more cash to keep the company afloat? Regardless, in pursuing this tactic, Aereo is simply following the well-worn path of working litigation into a negotiation for a license to intellectual property.
*Please note that personal confirmation from speakers themselves is required before we will put them on the program.
Supreme Court’s Aereo Decision Clouds the Future July 3, 2014Posted by Bill Rosenblatt in Law, United States, Video.
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The Supreme Court has rendered various decisions that serve as rules of the road for the treatment of copyrighted works amid technological innovation. Universal v. Sony (1984) established the legality of “time shifting” video for personal viewing as well as the “substantial noninfringing uses” standard for new technologies that involve digital media. MGM v. Grokster (2005) took the concept of “inducing infringement” from patent law and applied it to copyright, so that services that directly and explicitly benefit from users’ infringement could be held liable. UMG v. Veoh (2011) taught that network service operators have no duty to proactively police their services for users’ infringements. These rulings are reasonably clear signposts that technologists can follow when contemplating new products and services.
Unfortunately, Justice Stephen Breyer’s ruling last week in ABC v. Aereo won’t be joining that list. He ruled against Aereo in a 6-3 majority that united the Court’s liberals and moderates. Justice Antonin Scalia’s forceful dissent described the problems that this decision will create for services in the future.
Several weeks ago, at the Copyright Clearance Center’s OnCopyright conference in NYC, Rick Cotton — former General Counsel of NBC Universal — predicted that the Supreme Court would come down against Aereo in a narrow decision that would avoid impact on other technologies. He got it right in terms of what Justice Breyer may have hoped to accomplish, but not in terms of what’s likely to happen in the future.
Instead of establishing principles that future technology designers can rely on, the Court simply took a law that was enacted almost 40 years ago to apply to an old technology, determined that Aereo resembles that old technology, and concluded that therefore the law should apply to it. The old technology in question is Community Access Television (CATV) — transmissions of broadcast television over cable to reach households that couldn’t receive the broadcasts over the air.
Justice Breyer observed that Congress made changes in the copyright law, with the Copyright Act of 1976, in order to stop CATV providers from being able to “free ride” on broadcast TV signals; he found that that Aereo was similarly free-riding and therefore ought to be subject to the same law.
Just in terms of functionality, the decision makes little sense: CATV was created to enable broadcast television to reach new audiences, while Aereo (nominally, at least) enabled an existing audience for broadcast TV to watch it on other devices and in other locations. In that respect, Aereo is more like the “cloud sync” services for music like DoubleTwist and MP3Tunes that popped up in the late 2000s, which automatically copied users’ MP3 music files and playlists across all of their devices. More on that analogy later.
More broadly, the Court’s decision is unlikely to be helpful in guiding future technologies; all it offers is a “does it look like cable TV?” test based on fact-specific interpretations of the public performance right in copyright law. Justice Breyer claimed that his opinion should not necessarily have implications for cloud computing and other new technologies, but that doesn’t make it so.
As Justice Scalia remarked in his dissent, “The Court vows that its ruling will not affect cloud-storage providers and cable television systems … , but it cannot deliver on that promise given the imprecision of its result-driven rule.” Justice Scalia felt that Aereo exploited a loophole in the copyright law but that it should be up to Congress instead of the Supreme Court to close it.
In fact, Justice Scalia agreed with the Court’s opinion that Aereo probably violates copyright law. But he stated that the decision the Court was called upon to make — regarding Aereo’s direct infringement liability and whether the TV networks’ request for a preliminary injunction should be upheld — wasn’t an appropriate vehicle for determining Aereo’s copyright liability, and that the Court should have left well enough alone. Instead, Justice Scalia offered that Aereo should be more properly held accountable based on secondary liability — just as the Court did in Grokster — and that a lower court could well reach such a finding later in the case after the preliminary injunction issue had been settled.
Secondary liability means that a service doesn’t infringe copyrights itself but somehow enables end users to do so. Of course there have been many cases where copyright owners have sued tech companies on the basis of secondary liability and forced them to go out of business (e.g., Napster, LimeWire), but there have been many others where lawsuits (or threats of lawsuits) have resulted in mutually beneficial license agreements between copyright owners and the technology companies.
And that brings us back to “cloud sync” services for music. DoubleTwist was built by Jon Lech Johansen, who had become notorious for hacking the encryption system for DVDs in the late 1990s. MP3Tunes was developed by Michael Robertson, who was equally notorious for his original MP3.com service. Cloud sync services enabled users to make copies of their music files without permission and didn’t share revenue (e.g., from advertising or premium subscriptions) with copyright owners. DoubleTwist, MP3Tunes, and a handful of similar services became moderately popular. In addition to their functionality, what MP3Tunes and DoubleTwist had in common was that they were developed by people who had first built blatantly illegal technology and then sought ways to push the legal envelope more gently.
Later on, Amazon, Apple, and Google followed the same latter path. They built cloud sync capabilities into their music services (thereby rendering small third-party services like DoubleTwist largely irrelevant). Amazon and Google launched their cloud sync capabilities without taking any licenses from record companies; record companies complained; confidential discussions ensued; and now everyone’s happy, including the consumers who use these handy services. (Apple took a license for its iTunes Match feature at the outset.)
The question for Aereo is whether it’s able to have such discussions with TV networks; the answer is clearly no. The company never entertained the possibility that it would have to (“there is no Plan B“), and its principal investor, video mogul Barry Diller, isn’t going to pump more money into the company to pay for licenses.
Of course, TV networks are cheering the result of the Supreme Court’s decision in Aereo. But it doesn’t help them in the long run if the rules of the road for future technologies are made cloudier instead of clearer. And Aereo would eventually have been doomed anyway if Justice Scalia had a majority.
Copyright Alert System Releases First Year Results June 10, 2014Posted by Bill Rosenblatt in Europe, Fingerprinting, Law, United States, Watermarking.
The Center for Copyright Information (CCI) released a report last month summarizing the first calendar year of activity of the Copyright Alert System (CAS), the United States’ voluntary graduated response scheme for involving ISPs in flagging their subscribers’ alleged copyright infringement. The report contains data from CAS activity as well as results of a study that CCI commissioned on consumer attitudes in the US towards copyright and file sharing.
There are two alerts at each level, for a total of six, but the three categories make it easier to compare the CAS with “three strikes” graduated response regimes in other countries. As I discussed recently, the CAS’s “mitigation” penalties are very minor compared to punitive measures in other systems such as those in France and South Korea.
The CCI’s report indicates that during the first ten months of operation, it sent out 1.3 million alerts. Of these, 72% were “educational,” 20% were “acknowledgement,” and 8% were “mitigation.” The CAS includes a process for users to submit mitigation alerts they receive to an independent review process. Only 265 review requests were sent, and among these, 47 (18%) resulted in the alert being overturned. Most of these 47 were overturned because the review process found that the user’s account was used by someone else without the user’s authorization. In no case did the review process turn up a false positive, i.e. a file that the user shared that was actually not unauthorized use of copyrighted material.
It’s particularly instructive to compare these results to France’s HADOPI system. This is possible thanks to the detailed research reports that HADOPI routinely issues. Two of these were presented at our Copyright and Technology London conferences and are available on SlideShare (2012 report here; 2013 report here). Here is a comparison of the percent of alerts issued by each system at each of the three levels:
|Alert Level||HADOPI 2012||HADOPI 2013||CAS 2013|
Of course these comparisons are not precise; but it is hard not to draw an inference from them that threats of harsher punitive measures succeed in deterring file-sharing. In the French system — in which users can face fines of up to €1500 and one year suspensions of their Internet service — only 0.03% of those who received notices kept receiving them up to the third level, and only a tiny handful of users actually received penalties. In the US system — where penalties are much lighter and not widely advertised — almost 8% of users who received alerts went all the way to the “mitigation” levels. (Of that 8%, 3% went to the sixth and final level.)
Furthermore, while the HADOPI results are consistent from 2012 to 2013, they reflect a slight upward shift in the number of users who receive second-level notices, while the percent of third-level notices — those that could involve fines or suspensions — remained constant. This reinforces the conclusion that actual punitive measures serve as deterrents. At the same time, the 2013 results also showed that while the HADOPI system did reduce P2P file sharing by about one-third during roughly the second year of the system’s operation, P2P usage stabilized and even rose slightly in the two years after that. This suggests that HADOPI has succeeded in deterring certain types of P2P file-sharers but that hardcore pirates remain undeterred — a reasonable conclusion.
It will be interesting to see if the CCI takes this type of data from other graduated response systems worldwide — including those with no punitive measures at all, such as the UK’s planned Vcap system — into account and uses it to adjust its level of punitive responses in the Copyright Alert System.
This is the second of three installments on interesting developments from last week’s IDPF Digital Book conference in NYC.
Another interesting panel at the conference was on public libraries. I’ve written several times (here’s one example) about the difficulties that public libraries are having in licensing e-books from major trade publishers, given that publishers are not legally obligated to license their e-books for library lending on the same terms as for printed books — or at all. The major trade publishers have established different licensing models with various restrictions, such as limited durations (measured in years or number of loans), lack of access to frontlist (current) titles, and/or prices that range up to several times those charged to consumers.
The panel presented some research findings that included some hard data about how libraries drive book sales — data that libraries badly need in order to bolster their case that publishers should license material to them on reasonable terms.
As we learned from Rebecca Miller from Library Journal, public libraries in the US currently spend only 9% of their acquisition budgets on e-books — which amounts to about $100 Million, or less than 3% of overall trade e-book revenue in the United States. Surely that percentage will increase, making e-book acquisition more and more important for the future of public libraries. And as e-books take up a larger portion of libraries’ acquisition budgets, the fact that libraries have little control over licensing terms will become a bigger and bigger problem for them.
The library community has issued a lot of rhetoric — including during that panel– about how important libraries are for book discovery. But publishers are ultimately only swayed by measurable revenue from sales of books that were driven by visits to or loans from libraries. They also want to know to what extent people don’t buy e-books because they can “borrow” them from libraries.
In that light, the library panel had one relevant statistic to offer, courtesy of a study done by my colleague Steve Paxhia for the Book Industry Study Group. The study found that 22% of library patrons ended up buying a book that they borrowed from the library at least once during the past year.
That’s quite a high number. Here’s how it works out to revenue for publishers: Given Pew Internet and American Life statistics about library usage (48% of the population visited libraries last year), and only counting people aged 18 years and up, it means that people bought about 25 million books last year after having borrowed them from libraries. Given that e-books made up 30% of book sales in unit volume last year and figuring an average retail price of $10, that’s $75 million in e-book sales directly attributable to library lending. The correct figure is probably higher, given that many library patrons discover books in ways other than borrowing them (e.g. browsing through them at the library) — though it may also be lower given that some people buy books in order to own physical objects (and thus the percentage of e-books purchased as a result of exposure in libraries may be lower than the corresponding percentage of print books).
So, in rough numbers, it’s safe to say that for the $100 Million that libraries spend on e-books per year, they deliver a similar amount again in sales through discovery. It’s just too bad that the study did not also measure how many people refrained from buying e-books because they could get them from public libraries. This would be an uncomfortable number to measure, but it would help lead to the truth about how public libraries help publishers sell books.
Update: Steve Paxhia found that his 22% number was of library lends leading to purchases during a period of six months, not a year. And the survey respondents may have purchased books after borrowing them more than once during that period. His data also shows that half of respondents indicated that they purchased other works from a given author after having borrowed one from the library. So, using the same rough formula as above, the amount of purchases attributable to library usage is more likely to be north of $150 million. Yet we still have no indication of the number of times someone did not purchase a book — particularly an e-book — because it was available through a public library system.
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The BBC has discovered documents that detail a so-called graduated response program for detecting illegal downloads done by customers of major UK ISPs and sending alert messages to them. The program is called the Voluntary Copyright Alert Programme (Vcap). It was negotiated between the UK’s four major ISPs (BT, Sky, Virgin Media, and TalkTalk) and trade associations for the music and film industries, and it is expected to launch sometime next year.
Vcap is a much watered-down version of measures defined in the Digital Economy Act of 2012, in that it calls only for repeated “educational” messages to be sent to ISP subscribers and for no punitive measures such as suspension or termination of their accounts.
In general, graduated response programs work like this: copyright owners engage network monitoring firms to monitor ISPs’ networks for infringing behavior. Monitoring firms use a range of technologies, including fingerprinting to automatically recognize content that users are downloading. If they find evidence of illegal behavior, they report it to a central authority, which passes the information to the relevant ISP, typically including the IP address of the user’s device. The ISP determines the identity of the targeted subscriber and takes some action, which depends on the details of the program.
In some cases (as in France and South Korea), the central authority is empowered to force the ISP to take punitive action; in other cases (as in the United States’ Copyright Alert System (CAS) as well as Vcap), ISPs take action voluntarily.
Assuming that Vcap launches on schedule, we could soon have data points about the effectiveness of various types of programs for monitoring ISP subscribers’ illegal downloading behaviors. The most important question to answer is whether truly punitive measures really make a difference in deterring online copyright infringement, or whether purely “educational” measures are enough to do the job. Currently there are graduated response programs in South Korea, New Zealand, Taiwan, and France that have punitive components, as well as one in Ireland (with Eircom, the country’s largest ISP) that is considered non-punitive.
Is America’s CAS punitive or educational? That’s a good question. CAS has been called a “six strikes” system (as opposed to other countries’ “three strikes”), because it defines six levels of alerts that ISPs must generate, although ISPs are intended to take “mitigation measures” against their subscribers starting at the fifth “strike.” What are these mitigation measures? It’s largely unclear. The CAS’s rules are ambiguous and leave quite a bit of wiggle room for each participating ISP to define its own actions.
Instead, you have to look at the policies of each of the five ISPs to find details about any punitive measures they may take — information that is often ambiguous or nonexistent. For example:
- AT&T: its online documentation contains no specifics at all about mitigation measures.
- Cablevision (Optimum Online): its policy is ambiguous, stating that it “may temporarily suspend your Internet access for a set period of time, or until you contact Optimum.” Other language in Cablevision’s policy suggests that the temporary suspension period is 24 hours.
- Comcast (Xfinity): Comcast’s written policy is also ambiguous, saying only that it will continue to post alert messages until the subscriber “resolve[s] the matter” and that it will never terminate an account.
- Time Warner Cable: also ambiguous but suggesting nothing on the order of suspension or termination, or bandwidth throttling. It states that “The range of actions may include redirection to a landing page for a period or until you contact Time Warner Cable.”
- Verizon: Verizon’s policy is the only one with much specificity. On the fifth alert, Verizon throttles the user’s Internet speed to 256kbps — equivalent to a bottom-of-the-line residential DSL connection in the US — for a period of two days after a 14-day advance warning. At the sixth alert, it throttles bandwidth for three days.
In other words, the so-called mitigation measures are not very punitive at all, not even at their worst — at least not compared to these penalties in other countries:
- France: up to ISP account suspension for up to one year and fines of up to €1500 (US $2000), although the fate of the HADOPI system in France is currently under legal review.
- New Zealand: account suspension of up to six months and fines of up to NZ $15,000 (US $13,000).
- South Korea: account suspension of up to six months.
- Taiwan: suspension or termination of accounts, although the fate of Taiwan’s graduated response program is also in doubt.
[Major hat tip to Thomas Dillon's graduatedresponse.org blog for much of this information.]
In contrast, Vcap will be restricted to sending out four alerts that must be “educational” and “promot[e] an increase in awareness” of copyright issues. Vcap is intended to run for three years, after which it will be re-evaluated — and if judged to be ineffective, possibly replaced with something that more closely resembles the original, stricter provisions in the Digital Economy Act. By 2018, the UK should also have plenty of data to draw on from other countries’ graduated response regimes about any relationship between punitive measures and reduced infringements.
MP3Tunes and the New DMCA Boundaries March 30, 2014Posted by Bill Rosenblatt in Law, Music, Services, United States.
With last week’s jury verdict of copyright liability against Michael Robertson of MP3Tunes, copyright owners are finally starting to get some clarity around the limits of DMCA 512. The law gives online service operators a “safe harbor” — a way to insulate themselves from copyright liability related to files that users post on their services by responding to takedown notices.
To qualify for the safe harbor, service providers have to have a policy for terminating the accounts of repeat infringers, and — more relevantly — cannot show “willful blindness” to users’ infringing actions. At the same time, the law does not obligate service providers to proactively police their networks for copyright infringement. The problem is that even when online services respond to takedown notices, the copyrighted works tend to be re-uploaded immediately.
The law was enacted in 1998, and copyright owners have brought a series of lawsuits against online services over the years to try to establish liability beyond the need to respond to one takedown notice at a time. Some of these lawsuits tried to revisit the intent of Congress in passing this law, to convince courts that Congress did not intend to require them to spend millions of dollars a year playing Whac-a-Mole games to get their content removed.
In cases such as Viacom v. YouTube and Universal Music Group v. Veoh that date back to 2007, the media industry failed to get courts to revisit the idea that service providers should act as their own copyright police. But over the past year, the industry has made progress along the “willful blindness” (a/k/a “looking the other way”) front.
These cases featured lots of arguments over what constitutes evidence of willful blindness or its close cousin, “red flag knowledge” of users’ infringements. Courts had a hard time navigating the blurry lines between the “willlful blindness” and “no need to self-police” principles in the law, especially when the lines must be redrawn for each online service’s feature set, marketing pitch, and so on.
But within the past couple of years, two appeals courts established some of the contours of willful blindness and related principles to give copyright owners some comfort. The New York-based (and typically media-industry-friendly) Second Circuit, in the YouTube case, found that certain types of evidence, such as company internal communications, could be evidence of willful blindness. And even the California-based (and typically tech-friendly) Ninth Circuit found similar evidence last year in a case against the BitTorrent site IsoHunt.
The Second Circuit’s opinion in YouTube served as the guiding precedent in the EMI v. MP3Tunes case — and in a rather curious way. Back in 2011, the district court judge in MP3Tunes handed down a summary judgment ruling that was favorable to Robertson in some but not all respects. But after the Second Circuit’s YouTube opinion, EMI asked the lower court judge to revisit the case, suggesting that the new YouTube precedent created issues of fact regarding willful blindness that a jury should decide. The judge was persuaded, the trial took place, and the jury decided for EMI. Robertson could now be on the hook for tens of millions of dollars in damages.
(Eleanor Lackman and Simon Pulman of the media-focused law firm Cowan DeBaets have an excellent summary of the legal backdrop of the MP3Tunes trial; they say that it is “very unusual” for a judge to go back on a summary judgment ruling like that.)
The MP3Tunes verdict gives media companies some long-sought leverage against online service operators, which keep claiming that their only responsibility is to respond to each takedown notice, one at a time. This is one — but only one — step of the many needed to clarify the rights of copyright owners and responsibilities of service providers to protect copyrights. And as far as we can tell now, it does not obligate service providers to implement any technologies or take any more proactive steps to reduce infringement. Yet it does now seem clear that if service providers want to look the other way, they at least have to keep quiet about it.
As for Robertson, he continues to think of new startup ideas that seem particularly calculated to goad copyright owners. The latest one, radiosearchengine.com, is an attempt to turn streaming radio into an interactive, on-demand music service a la Spotify. It lets users find and listen to Internet streams of radio stations that are currently playing specific songs (as well as artists, genres of music, etc.).
Radiosearchengine.com starts with a database of thousands of Internet radio stations, similar to TuneIn, iHeartRadio, Reciva, and various others. These streaming radio services (many of which are simulcasts of AM or FM signals) carry program content data, such as the title and artist of the song currently playing. Radiosearchengine.com retrieves this data from all of the stations in its database every few seconds, adds that information to the database, and makes it searchable by users. Robertston has even created an API so that other developers can access his database.
Of course, radiosearchengine.com can’t predict that a station will play a certain song in the future (stations aren’t allowed to report it in advance), so users are likely to click on station links and hear their chosen songs starting in the middle. But with the most popular songs — which are helpfully listed on the site’s left navbar — you can find many stations that are playing them, so you can presumably keep clicking until you find the song near its beginning.
This is something that TuneIn and others could have offered years ago if it didn’t seem so much like lawsuit bait. On the other hand, Robertson isn’t the first one to think of this: there’s been an app for that for at least three years.
Disney and Apple’s UV FUD March 26, 2014Posted by Bill Rosenblatt in Business models, Technologies, United States, Video.
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Last month Disney launched Disney Movies Anywhere, a service that lets users stream and download movies from Disney and associated studios on their Apple iOS devices. You can purchase movies on the site or from the App Store app and stream them to any iPhone, iPad, or iPod Touch. You can also get digital copies and streaming access with purchases of selected DVDs and Blu-ray discs. And you can connect your iTunes account to your Disney Movies Anywhere account so that you can gain similar streaming and download access to your existing Disney iTunes purchases.
A couple of things about Disney Movies Anywhere are worth discussing. First, this is yet more evidence of the strong bond between Disney and Apple, a relationship formed when Disney acquired Pixar from Steve Jobs, who became a Disney board member and the company’s largest shareholder.
More particularly, this service is a way for Apple to experiment with video streaming services without attaching its own brand name. Disney Movies Anywhere works with only iOS devices, and there’s little indication that it will add support for Android or other platforms. For whatever reason, Apple has shied away from streaming media services until quite recently (with iTunes Radio and the latest iteration of Apple TV).
More importantly, Disney Movies Anywhere is the first implementation of Disney’s KeyChest — a rights locker architecture that is similar to UltraViolet, the technology backed by the other five major Hollywood studios. The idea common to both KeyChest and UltraViolet is that when you purchase a movie, you’re actually purchasing the right to download or stream it from a variety of sources; the rights locker maintains a record of your purchase.
One of the main motivations behind UltraViolet was to prevent content distributors or consumer electronics makers from dominating the economics of the digital video supply chain in the way that Apple dominated music downloads (and Amazon may dominate e-books), and thus from being able to dictate terms to copyright owners. By making it possible for users to buy digital movies from one retailer and then download them in other formats from other retailers, the five studios hoped to create a level playing field among retailers as well as interoperability for users. UltraViolet has several retail partners, including Target, Walmart (VUDU), and Best Buy (CinemaNow).
The problem with these technology schemes is that it is very hard to make them into universal standards. Just about every software technology we use settles down to twos or threes. In operating systems, it’s all twos: Windows and Mac OS for desktops and laptops; Android and iOS for mobile devices; Unix/Linux and Windows for servers. Other markets are similar: in relational databases it’s Oracle/MySQL (Oracle Corp.), DB2 (IBM), and SQL Server (Microsoft); in music paid-download formats it’s MP4-AAC (Apple) and MP3 (Amazon); in e-books (in the US, at least) it’s Amazon, Barnes & Noble, and Apple iBooks. Antitrust law prevents a single technology from dominating too much; market complexity prevents more than a handful from becoming roughly equal competitors.
It would be a shame if this also became true for rights lockers for movies and TV shows. It does not help the studios if consumers get one flavor of “interoperability” for movies from all but one major studio and another flavor for movies from Disney. Disney surely remembers the less-than-stellar success of its last solo venture into digital movie distribution: MovieBeam, which launched around 2004 and lasted less than four years.
And that brings us back around to Apple. The only plausible explanation for this bifurcation is that Apple is really in charge here. UltraViolet is not just an “every studio but Disney” consortium; it is also an “every technology company but Apple” initiative. The list of technology companies participating in UltraViolet is huge, though Microsoft occupies a particularly important role as the source of the UltraViolet file format and the first commercial DRM to be approved for use with the system. In other words, the KeyChest/UltraViolet dichotomy is shaping up to look very much like Apple vs. the Microsoft-led Windows ecosystem, or Apple vs. the Google-led Android ecosystem.
Still, the market for digital video is still in relatively early days, and things could change quite a bit — especially if consumers are confused by the choices on offer. (Coincidentally, there’s a good overview of this confusion and its causes in today’s New York Times.) UltraViolet is enjoying only modest success so far — compared, say, to Netflix or iTunes — and the introduction of Disney Movies Anywhere is unlikely to help make rights lockers any clearer to consumers.
In that respect, the UltraViolet/KeyChest dichotomy also has a precedent in the digital music market. Back in 2001-2002, the (then) five major record labels lined up behind two different music distribution platforms: MusicNet and pressplay. MusicNet was backed by Warner Music Group, EMI, BMG, and RealNetworks, while pressplay was backed by Sony Music and Universal Music Group. MusicNet was a wholesale distribution platform that made deals with multiple retailers; pressplay was its own retailer. In other words, MusicNet was UltraViolet, while pressplay was Disney Movies Anywhere. Yet neither one was successful; both suffered from over-complexity (among other things). Apple launched the much easier to use iTunes Music Store in 2003, and few people remember MusicNet or pressplay anymore.*
In other words, there are still opportunities for new digital video models to emerge and disrupt the current market. And consumer confusion is a great way to hasten the disruption.
*The two music platforms did survive, in a way: MusicNet is now MediaNet, a wholesaler of digital music and other content with many retail partners; pressplay was sold to Roxio, rebranded as Napster (the legal version), and resold to Rhapsody, where it still exists under the Napster brand name outside of the US.
Viacom vs. YouTube: Not With a Bang, But a Whimper March 21, 2014Posted by Bill Rosenblatt in Law, United States.
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Earlier this week Viacom settled its long-running lawsuit against Google over video clips containing Viacom’s copyrighted material that users posted on YouTube. The lawsuit was filed seven years ago; Viacom sought well over a billion dollars in damages. The last major development in the case was in 2010, when a district court judge ruled in Google’s favor. The case had bounced around between the district and Second Circuit appeals courts. The parties agreed to settle the case just days before oral argument was to take place before the Second Circuit.
It’s surprising how little press coverage the settlement has attracted — even in the legal press — considering the strategic implications for Viacom and copyright owners in general.
The main reasons for the lack of press attention are that details of the settlement are being kept secret, and that by now the facts at issue in the case are firmly in the past. A few months after Viacom filed the lawsuit in March 2007, Google launched its Content ID program, which enables copyright owners to block user uploads of their content to YouTube — or monetize them through shared revenue from advertising. The lawsuit was concerned with video clips that users uploaded before Content ID was put into place.
Viacom’s determination to carry on with the litigation was clearly meant primarily to get the underlying law changed. Viacom has been a vocal opponent of the Digital Millennium Copyright Act (DMCA) in its current form. The law allows service providers like YouTube to respond to copyright owners’ requests to remove content (takedown notices) in order to avoid liability. It doesn’t require service providers to proactively police their services for copyright violations. As a result, a copyright owner has to issue a new takedown notice every time a clip of the same content appears on the network — which often happens immediately after each clip is taken down. As a result, companies like Viacom thus spend millions of dollars issuing takedown notices in a routine that has been likened to a game of Whac-a-Mole.
From that perspective, Google’s Content ID system goes beyond its obligations under the DMCA (Content ID has become a big revenue source for Google), so Google’s compliance with the current DMCA isn’t the issue. Countless other service providers don’t have technology like Content ID in place; moreover, since 2007 the courts have consistently — in other litigations such as Universal Music Group v. Veoh — interpreted the DMCA not to require that service providers act as their own copyright police. Viacom must still be interested in getting the law changed.
In this light, what’s most interesting is not that the settlement came just days before oral argument before the Third Circuit, but that it came just days after the House Judiciary Committee held hearings in Washington on the DMCA. These were done in the context of Congress’s decision to start on the long road to revamping the entire US copyright law.
My theory is that, while Viacom may have had various reasons to settle, the company has decided that it has a better shot at changing the law through Congress than through the courts. The journey to a new Copyright Act is likely to take years longer than the appeals process. But if Viacom were to get the lower court’s decision overturned in the Third Circuit, the result would be a precedent that wouldn’t apply nationwide; in particular, it wouldn’t necessarily apply in the tech-friendly Ninth Circuit. A fix to the actual law in Congress that’s favorable to copyright owners — if Congress delivers one — could have broader applicability, both geographically and to a wider variety of digital services. Viacom has waited six years; it can wait another ten or so.