Friday, March 15, 2013

DMCA conference: 512 litigation

Panel 4: 512 Litigation

Moderator: Annemarie Bridy, University of Idaho College of Law

Jeffrey Mausner, former outside counsel for Perfect 10

Here as concerned citizen. DMCA safe harbor was supposed to lead to cooperation between copyright owners and OSPs to remove infringing content from the internet. Unfortunately, the safe harbor has been interpreted by courts in ways that favor infringers and greatly disadvantage copyright owners. This has allowed OSPs to fail to cooperate and make billions from infringement instead of copyright owners. Even though Google knows or should know that it’s providing massive quantities of infringing images via Google image search and infringing songs/movies via search and YouTube and making billions, courts by and large haven’t held Google liable. Courts have allowed Google to allow anonymous infringers to post billions of dollars of obviously copyrighted works on Google’s servers and make money from infringing.

Google etc. are greatly damaging our country’s IP using a misguided interpretation of the safe harbor. Google’s business model is making money off of others’ IP, owning virtually none of the IP it makes available to users.  That’s why users love Google: massive provision of free content belonging to others. Supporting this is short sighted and will lead to less over time. Google’s power is unprecedented compared to railroads/robber barons. Google has unlimited money and can reach anyone with a computer to control/influence them—SOPA/PIPA. 

Lamar Smith said of Google’s opposition: sought to obstruct the committee’s consideration of bipartisan litigation—no surprise given settlement of case involving helping rogue websites distribute pharmaceuticals—$500 million settlement.  Not rogue employees.  Google’s efforts to appear to control unlawful ads were window dressing, continuing to allow Google to earn revenues even as it professed to take action against the sites. Given Google’s record, its objection to authorizing a court to order a search engine not to direct consumers to foreign rogue websites is more easily understood.

Perfect 10 v. Amazon: 9th Circuit said that there was no dispute that Google “substantially assists” websites to distribute infringing copies to a worldwide market, and assists users to access the content.  Google knows or should know that infringing material is available on a massive scale, but continues to provide users with these, but it’s the safe harbor that allows this.  Facilitates infringement by helping users to locate infringing materials; supporting infringing sites by directing traffic to them.

Google provides vastly more links to infringing websites—more to the Pirate Bay—than it does to legitimate websites—see  Also facilitates infringement by putting Google ads next to infringing materials, which means it not only profits from the infringement, but helps infringing websites stay afloat as continued sources of infringement.  Got socked for it with pharma, but not yet for copyright.

Google also assists infringement via Blogger, providing near complete immunity to anonymous infringers displaying Google ads.  When copyright owners try to get infringing materials removed, Google uses the DMCA to make it difficult or effectively impossible to do so rather than by using image recognition or other technology Google has.  Allows infringement to appear over and over in different locations. Google allows this because it makes money. 

If you search “I do not own” on Google, you get 1.6 billion results: admits doesn’t own the content.  (Ed. note: Hey, that’s a lot of noninfringing fan fiction (warning: first link I got goes to TVTropes and has terrible legal analysis to boot!))

Google claimed Perfect 10 had to describe its images using text, not a copy of the image sent with a takedown notice. Pictures speak a thousand words, but Google requires words to create a greater burden on copyright owners. Antitrust issues as well.

Andrew Bridges, Fenwick & West LLP (on the other side of Perfect 10 v. Google)

Will let the cases speak for themselves; Mausner has shown how SOPA ought to have been named the Stop Google Act. 

When I defend cases, I don’t put the safe harbor front & center. I litigate a lot of direct and secondary liability cases where I stay focused on the underlying standards for direct, contributory, and vicarious infringement, knowing that the safe harbor can be a shortcut on remedies. It’s not clear that much is safe about the safe harbor, in actual litigation. What one sees in cases is uncertainty about whether 512 is a safe harbor or a reworking of the substantive liability standard. The safe harbor is relevant only if a defendant has been adjudicated an infringer. The safe harbor is so complicated that it costs more to litigate—more parts to the elements—than the substantive secondary liability. Mushiness is a real practical problem.

Moreover, it’s no safe harbor against criminal prosecution. 

Ruling yesterday in UMG v. Veoh—major victory for safe harbor, also for Hollywood, because Veoh was destroyed by years of intensive, costly litigation. That safe harbor wasn’t very safe.  Need something easier to use: if you pay 110% of your estimated taxes from last year, you’re safe.  That safe harbor is nothing like the DMCA. Safe harbor hasn’t solved the problem it was meant to solve. The way courts have treated it, wrestling with distinction between substantive standard and safe harbor, hasn’t been safe. Has encouraged business models that rely on third-party content, which is important. But consider how it started: Netcom. Not a safe harbor decision, but a substantive liability standard, adapted for DMCA ostensibly to make people feel more secure. But has it made anyone more secure? 

Was disappointed that there was no award of attorneys’ fees here in Veoh.  The ability of companies to be destroyed while litigating safe harbors should have resulted in a fee award. Also found it interesting that 3d party red flags are given more weight in defeating safe harbor than defective notices by the copyright owner. Often when 3d parties write in, they’re officious intermeddlers with little knowledge of the factual circumstances—who’s the author, owner, uploader, etc.? The copyright owner is in the best position to provide those facts, but if someone floats in out of the blue saying “you’re infringing,” that shouldn’t be given weight as red flag knowledge.  Expects to see copyright holders promoting officious intermeddling.  Make no mistake, the cases he’ve seen don’t involve neutral, modest litigation arguments but “let’s kill the company even if we don’t win” arguments because killing the company is as good as or better than winning a legal judgment.

Michael Robertson, (also founder of and mp3tunes)

Not an attorney, but has paid many. 

While the record companies were talking about how evil he was in court, suing him and driving his stock price down, they were also offering to buy his evil company.  Edgar Bronfman said that he sued because he feared that it would become too powerful.  While 512 is interesting, at the end of the day it’s all about money. Let’s ask if Google and YouTube have made the world better: the answer is yes.  Copyright is not about giving UMG more revenue; UMG has to compete against video games and movies. But is there more content today than yesterday? Absolutely.

The problems that exist are more with statutory damages—incentives to sue Veoh and drag it out and hope to get an award of billions. Still, the DMCA served a purpose; the US is a leader in search, aggregation and storage.

Bridy: Legislative history talks about allowing secondary liability doctrines to continue to evolve.  Has that happened?

Bridges: It still is developing, but language on safe harbor sounds so much like the vicarious liability standard that it led to arguments that there’d be no safe harbor for vicarious liability claims (just rejected by 9th Circuit). So standards are evolving, but the distractions of the DMCA cases have caused attention to be drawn away.   Also thinks that 9th Circuit has gone off the rails on the whole underlying principles of vicarious liability.  Vicarious liability exists across a range of law; 2d Circuit had a correct formulation, but Fonovisa subtly modified the language and divorced it from the underlying principle of respondeat superior and things like respondeat superior.  No one is now saying “is Napster’s relationship to its customers like respondeat superior,” and there’s been a lot of dicta about vicarious liability that is wrongheaded.  Partly there’s a lot of free-floating thoughts about contributory/vicarious and mushing them together, and a separate mushing together of secondary liability and safe harbors.  Better to analyze them distinctly.

Q: why is merging knowledge into vicarious liability a bad idea?

Bridges: you won’t find a court saying this, but this is how I think: types are vastly different. Contributory = wrongful conduct that leads to infringement. Vicarious = relationship-based liability; parent is responsible for child and employer for employee not because of supervision but the relationship itself is the basis of the liability, regardless of how well the employer is supervising the employee. Original department store case in 2d Circuit, Shapiro, Bernstein, involved employment-like relationship with department store.

Q: but the reason for that was a public policy shift: the person in that role has the ability to insure against losses, take steps to make people whole. The people benefiting financially should be the ones that are making sure that infringement isn’t taking place. (This would make more sense without statutory damages.)

Bridges: Where did that become copyright policy? Sony was very clear that copyright secondary liability came from general vicarious liability. FHA case, SCt said: In cases of federal statutory torts, courts may not impose vicarious liability broader than the traditional tort. We’re starting to put moralizing and Learned Hand type negligence theory where it shouldn’t be.  Original language: obvious and direct financial interest in the exploitation of the copyrighted work plus the right and ability to supervise.  I don’t have a direct financial interest in American Airlines, but I receive a financial benefit from AA because it takes me places where I take depositions and make money. 9th Circuit mushed contributory and vicarious liability and gave us a problem.

Q: Robertson said statutory damages are the problem. What would happen if in 3d party liability cases the only damages recoverable were either actual harm or disgorgement?

Mauser: Even statutory damages don’t make up for the attorneys’ fees that have to be expended to win the case.  The problem isn’t big studio against little internet company; the real problem is mostly Google.  Google is bigger than the movie studios and record companies that developed all the content, losing all their money to Google.  There was going to be a §504 amendment to allow the court to use its discretion to award multiple statutory damages for compilations, but when you’re up against the big guys even statutory damages don’t provide enough to go through the litigation, and you might not get your attorneys’ fees even if you win.  Google is too big to sue.

Bridges: That hasn’t stopped Perfect 10 from suing lots of other people. Courts do award attorneys’ fees for plaintiffs, a lot more than for defendants.  I believe in statutory damages for statutory claims, not for nonstatutory claims like secondary liability.  Statutory damages should really be called fictitious damages—they’re completely divorced from real harm.  Media companies have never tried to prove actual damages; have dodged discovery when he’s tried.  Music company sued new media site one day after it signed a term sheet with another label; given the billions you owe us, it said, we’ll be satisfied with 60% of your company.  Perfect 10 has demanded $4 billion and claims to have lost $50 million over the course of its operations.  Limewire: sought more in statutory damages than the recording industry had made since Edison made a phonograph—annual US budget deficit. US claim against Megaupload: ½ a trillion dollars in damages.  The US should give up the tax business and go into copyright!

Statutory damages have perverted and corrupted the rest of copyright law; should put an absolute cap. SOPA/PIPA mantra was “piracy is a real problem and something must be done.”  If so, there should be no problem proving actual damages.

Robertson: Viacom and YouTube would settle tomorrow with no statutory damages; they’d figure something out.  Game theory: statutory damages means fight to the death.

Bridges: rule of law and copyright exceptionalism/celebrity exceptionalism. Look at patent: what if we did $150,000/claim infringed, plus Homeland Security arresting patent infringers, and life plus 70 as the term. Copyright has gone out of balance by accident.

Q: possibility of a plaintiff with a losing case driving defendant out of business.  Torts is heads I win, tails I break even. If there’s a probability of error, it pays to sue even the innocent and offer to settle.  What if the losing P owed the D damages of 1/6 the amount P had claimed?  Not fees, but damages for inflicting the risk of a false award on the D.

Bridges: some countries require bonds by P, but part of fees of court.

Robertson: he likes that idea.  Was CEO of firm that went bankrupt after paying attorneys’ fees. Big guys look at courts and say “I have more attorneys and money and I’ll wear you out.” I’ve been deposed 3 times in 7 ½ years over mp3tunes, and still going. This is a bigger problem than the DMCA.

Bridges: one thing making the DMCA a little irrelevant—major shift from civil to criminal. Perfect 10 sued Megaupload; Megaupload showed up to defend and settled.  Studios offloading litigation expense from plaintiff. Also, they killed Megaupload, which was all the victory they needed—won without a decision on the merits. In a civil case, a preliminary injunction would’ve been conditioned on a bond to protect Megaupload, but the government doesn’t have to post that bond. There’s a reason why it was the gov’t and not Hollywood who sued. I defended a case where the gov’t seized a domain name for secret reasons and secret time extensions—the gov’t killed a hip hop blog by seizing and never filing a forfeiture complaint. That’s where we are today. Megaupload claimed to comply with the DMCA; doesn’t know whether it did or not and we’ll probably never know.

Q: Talked to Judiciary staffer—if the carveout is consistent with Fonovisa, it gives nothing, so it has to be more like the NY standard, more equivalent to supervisory standard. Staffer said yes. But what about financial control? She said: we envisioned making money tied to the infringing material as opposed to the noninfringing material. Congress made a conscious decision to create a different standard for the internet, as it did with the CDA §230.  Mausner’s real complaint should be with Congress.

Robertson: Congressional Record has language on financial interest to the same effect.

Q: Congress didn’t make a conscious decision to do anything. Let the movie companies have the language they wanted, and ISPs in 512(m), and let them fight it out, as long as the campaign contributions kept coming.

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