IP Scholars conference, fourth parallel session

Indirect Infringement Issues

Barak Orbach, Indirect Liability for Copyright Infringement in Multisided Markets. A multisided market is a business environment in which a market intermediary connects different group. Judges inaccurately characterize indirect infringers because they don’t deal with the structure of these markets. Dance hall operators are intermediaries connecting performers with audiences; video recorders involve TV networks connecting audiences, content owners, advertisers; file sharing application connect users and advertisers; flea markets connects buyers and sellers.

Important to distinguish between multisided markets and the classic supply chain of supplier to manufacturer to consumers, which doesn’t involve creation of direct connections between members of each group. Multisided markets create indirect network externalities based on the number of members of the other group: the value of credit cards to consumers is based on the number of places that accept it, not on the number of fellow credit card holders; vice versa on the value of credit cards to merchants.

Marketplace platforms connect buyers and sellers, as with a flea market, dance hall, or eBay. The problem is parties who engage in infringing transactions. Advertising platforms connect audiences and advertisers, and in most cases content owners: TV networks, newspapers, file sharing services, instant messaging. The problems are that a third party enables some connecting parties to circumvent the platform, or that the platform hosts infringing transactions.

Some harms come from piggybackers, for example by interfering with the audience’s payment (in attention) to advertisers, who pay content owners. Piggybacking may interfere with content transmission/storage (time-shifting) or enable conversion of perishable content to durable content (messing up the pricing system of content) or delete advertising.

Other harms come from freeloading platforms, which accommodate infringing transactions to enhance their own attractiveness and increase sales. Advertising platforms may enable content exchange without the presence of content owners at all. Some such platforms may be good – like email and IM services.

The taxonomy could allow courts to make inferences about intent, knowledge, facilitation, control, and financial interest, which helps us assess contributory and vicarious liability. It also shows that the controversial cases arise mostly in multisided markets of advertising platforms. Finally, it helps us to see that there is choice and flexibility in technological design.

Question: How would this lead to different results in cases? Answer: If Sony were decided today, commercial-skipping should be found infringing. The plaintiffs would have to be the platforms, not the content owners, and the focus should be on advertising avoidance and not content storage, which itself is not a bad thing.

What happens when there’s no business plan? Answer: All the bad applications planned to get revenue from advertisers. (Is this true? Freenet and Gnutella, etc.) In the case of anarchy, we may need different rules, but this analysis is helpful when you’re dealing with multisided markets.

Question: About Sony -- librarying is important; Texaco looked at the existence of archiving to find that Texaco researchers weren’t engaging in fair use. Answer: He doesn’t think it affects the economic analysis.

Molly Van Houweling, Safe Harbors. How do we deal with the combination of uncertainty, lack of legal sophistication, over-claiming, and risk aversion that characterizes copyright? Usually with insurance, but for some reason that doesn’t seem to work very well with copyright. Instead, we get constrained behavior. That can be worse than the behavior that might be allowed by rigid rules, even if they were generally pro-copyright owner. Her proposal: safe harbors that are more generous than what scaredy-cats are doing but are within the realm of the standard, so you could always go beyond the harbor and rely on the standard. It will entice scaredy-cats out of their little box, but also push some people who relied on the standard into the larger-but-not-as-large-as-the-law-allows box. Is the tradeoff worth it?

Van Howeling proposes horse trading: we could trade an attribution requirement for a limitation on damages, or bigger safe harbors for clearer pro-copyright owner rules.

Question: What about uncertainty from copyright holder’s point of view? Should we give them more certainty to justify production, such as “no fair use of works that sell over 50,000 units”? Answer: Possibly. She thinks the public choice problems are more serious on the users’ side than the owners’ side, though.

Sometimes there’s technical incompetence in crafting safe harbors, as with mandating the use of a particular technology like Macrovision. Perhaps some of this should be done by agencies that can change over time.

Question: What about change over time? Fair use is evolutionary, which has advantages when circumstances change. Answer: A hybrid solution should keep the possibility of evolution open, unlike the Classroom Guidelines where no one ever presses the limits of educational fair use.

Charles Adams, Applying General Tort Law to the Indirect Infringement of Patents, Copyrights and Trademarks.

Tort law could answer unsettled questions in IP law, such as what happens when the direct infringer has potential defenses. (The answer would then be there’s no indirect liability.) Interestingly, though the common law recognizes respondeat superior, there’s no general vicarious liability for the acts of independent contractors, whereas copyright recognizes such liability.