DMCA, DRM & Piracy

Although SOPA was ignominiously defeated in 2012, the content industry never really gave up on the basic idea of breaking the Internet in order to combat content piracy. The industry now claims that a major cause of piracy is search engines returning results that direct users to pirated content. To combat this, they would like to regulate search engine results to prevent them from linking to sites that contain pirated music and movies.

This idea is problematic on many levels. First, there is very little evidence that content piracy is a serious concern in objective economic terms. Most content pirates would not, but for the availability of pirated content, empty their wallets to incentivize the creation of more movies and music. As Ian Robinson and I explain in our recent paper, industry estimates of the jobs created by intellectual property are absurd. Second, there are serious free speech implications associated with regulating search engine results. Search engines perform an information distribution role similar to that of newspapers, and they have an editorial voice. They deserve protection from censorship as long as they are not hosting the pirated material themselves. Third, as anyone who knows anything about the Internet knows, nobody uses the major search engines to look for pirated content. The serious pirates go straight to sites that specialize in piracy. Fourth, this is all part of a desperate attempt by the content industry to avoid modernizing and offering more of their content online through convenient packages such as Netflix.

As if these were not sufficient reason to reject the idea of “SOPA for Search Engines,” Google has now announced that they will be directing users to legitimate digital content if it is available on Netflix, Amazon, Google Play, Spotify, or other online services. The content industry now has no excuse—if they make their music and movies available in convenient form, users will see links to legitimate content even if they search for pirated versions.

star-trek-search-results

Google also says they will be using DMCA takedown notices as an input into search rankings and autocomplete suggestions, demoting sites and terms that are associated with piracy. This is above and beyond what Google needs to do, and in fact raises some concerns about fraudulent DMCA takedown notices that could chill free expression—such as when CBS issued a takedown of John McCain’s campaign ad on YouTube even though it was likely legal under fair use. Google will have to carefully monitor the DMCA takedown process for abuse. But in any case, these moves by Google should once and for all put the nail in the coffin of the idea that we should compromise the integrity of search results through government regulation for the sake of fighting a piracy problem that is not that serious in the first place.

Earlier this week NTIA petitioned the FCC to adopt a rule requiring wireless carriers to unlock the cell phones of customers and former customers who request it, and today the New York Times editorialized in support. While such a rule would solve the immediate problem of cell phone unlocking, it would be a band-aid solution that avoids dealing with the real problem: the DMCA’s anti-circumvention provisions.

As I’ve explained before, the cell phone unlocking issue is just one symptom of a greater problem, namely that it is illegal for you or any third party you contract to unlock content that you own. This affects not just phones, but also e-readers, music and video players, and even garage door openers and printer cartridges in the view of some. So I have to disagree with CDT when it says, “Perhaps the best feature of the NTIA’s approach is that it skips the absurd debate over copyright and DMCA exemptions and treats phone unlocking as what it is – a telecom issue.”

Cell phone unlocking, despite what the name might lead you to think, is not a telecom issue; it’s a DMCA issue. You can see this if you think about all the restrictions that remain in place even if the FCC were to adopt the NTIA’s proposed rule. For example, the rule forces carriers to unlock your phone at your request, but it would still be illegal for you to unlock your own phone, or to have a third party (such as a competing carrier that wants your business) unlock your phone.

Bottom line: It’s really strange to solve a problem created by Section 1201 of the DMCA by turning to the FCC to force carriers to give up their rights under the DMCA. Indeed, it removes a contractual possibility from the market because under the rule a carrier could no longer contract with a consumer to keep the phone unlocked for the duration of the contract. That’s an option that should be available to carriers and consumers. Any fix to this DMCA-created problem must leave the freedom to contract alone. The better way to address cell phone unlocking is to have the FCC stay out of what is an issue that Congress needs to address. Rep. Lofgren’s Unlocking Technology Act, for example, does just that.

It’s been over five years since Congress passed major legislation addressing copyright protection, but this hasn’t stopped copyright owners from achieving real progress in securing their expressive works. In cooperation with private-sector stakeholders, rights holders have made several deals aimed at combating copyright infringement and channeling consumer demand for original content toward legitimate outlets. These voluntary agreements will be the subject of a hearing this afternoon (9/18) before the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property and the Internet. This panel marks the latest in a series of hearings the committee launched earlier this year to review the Copyright Act, much of which dates back to 1976 or earlier.

Copyright consensus may sound like an oxymoron, especially in the wake of last year’s bruising legislative battle over SOPA and PIPA. But in reality, there’s no shortage of common ground when it comes to copyright protection. Despite all the controversy that surrounds the issue, copyright isn’t so much a “conflict of visions”, to borrow from Thomas Sowell, but a conflict of tactics, as I argued earlier this year on Cato Unbound.

Indeed, with some notable exceptions, most scholars, business leaders, and policymakers accept that government has a legitimate and important role in securing to inventors and creators the fruits of their labors“. Unsurprisingly, the devil is in the details, where genuinely tough questions arise regarding the government’s proper role in policing the Internet for copyright violations. Should the law hold online intermediaries accountable for their users’ infringing acts? What remedies should the law afford rights holders whose works are unlawfully distributed all over the Internet, often by profit-generating foreign actors?

Continue reading →

Sean Flaim

Sean Flaim, an attorney focusing on antitrust, intellectual property, cyberlaw, and privacy, discusses his new paper “Copyright Conspiracy: How the New Copyright Alert System May Violate the Sherman Act,” recently published in the New York University Journal of Intellectual Property and Entertainment Law.

Flaim describes content owners early attempts to enforce copyright through lawsuit as a “public relations nightmare” that humanized piracy and created outrage over large fines imposed on casual downloaders. According to Flaim, the Copyright Alert System is a more nuanced approach by the content industry to crack down on copyright infringement online, which arose in response to a government failure to update copyright law to reflect the nature of modern information exchange.

Flaim explains the six stages of the Copyright Alert System in action, noting his own suspicions about the program’s states intent as a education tool for repeat violators of copyright law online. In addition to antitrust concerns, Flaim worries that appropriate cost-benefit analysis has not been applied to this private regulation system, and, ultimately, that private companies are being granted a government-like power to punish individuals for breaking the law.

Download

Related Links

In the past couple weeks, three bills addressing the legality of cell phone unlocking have been introduced in the Senate:

  • Sens. Leahy, Grassley, Franken, and Hatch’s “Unlocking Consumer Choice and Wireless Competition Act” (S.517)
  • Sen. Ron Wyden’s “Wireless Device Independence Act” (S.467)
  • Sen. Amy Klobuchar’s “Wireless Consumer Choice Act” (S.481)

This essay will explain how these bills would affect users’ ability to lawfully unlock their cell phones.

Background

If you buy a new cell phone from a U.S. wireless carrier and sign a multi-year service contract, chances are your phone is “locked” to your carrier. This means if you want to switch carriers, you’ll first need to unlock your phone. Your original carrier may well be happy to lend you a helping hand—but, if not, unlocking your phone may violate federal law.4s-unlock

The last few months have seen an explosion of public outcry over this issue, with a recent White House “We the People” petition calling for the legalization of cell phone unlocking garnering over 114,000 signatures—and a favorable response from the Obama administration. The controversy was sparked in October 2012, when a governmental ruling (PDF) announced that unlocking cell phones purchased after January 26, 2013 would violate a 1998 federal law known as the Digital Millennium Copyright Act (the “DMCA”).

Under this law’s “anti-circumvention” provisions (17 U.S.C. §§ 1201-05), it is generally illegal to “circumvent a technological measure” that protects a copyrighted work. Violators are subject to civil penalties and, in serious cases, criminal prosecution.

However, the law includes an escape valve: it empowers the Librarian of Congress, in consultation with the Register of Copyrights, to periodically determine if any users’ “ability to make noninfringing uses . . . of a particular class of copyrighted works” is adversely affected by the DMCA’s prohibition of tools that circumvent access controls. Based on these determinations, the Librarian may promulgate rules exempting categories of circumvention tools from the DMCA’s ban.

One such exemption, originally granted in 2006 and renewed in 2010, permits users to unlock their cell phones without their carrier’s permission. (You may be wondering why phone unlocking is considered an access control circumvention—it’s because unlocking requires the circumvention of limits on user access to a mobile phone’s bootloader or operating system, both of which are usually copyrighted.)

But late last year (2012), when the phone unlocking exemption came up for its triennial review, the landscape had evolved regarding a crucial legal question: do cell phone owners own a copy of the operating system software installed on their phone, or are they merely licensees of the software?

Continue reading →

James Grimmelmann

New York University law professor James Grimmelmann eulogizes Aaron Swartz, the open information and internet activist who recently committed suicide in the face of a computer trespass prosecution.

Grimmelmann describes Swartz’s journey from “wunderkind prodigy who came out of nowhere when he was 14″ to “classic activist-organizer,” paying special attention to the ideas that motivated his work. According to Grimmelmann, Swartz was primarily interested in power being held by the wrong people and how to overcome it through community organizing. Swartz was dedicated to his personal theory of change and believed that people who know how to use computers have a duty to undermine the closed-access system from within.

It was this ardent belief that led Swartz to surreptitiously download academic articles from JSTOR. Grimmelmann closely analyzes the case, providing a balanced view of both the prosecution’s and Swartz’s view of the issue. Grimmelmann additionally suggests possible policy reforms brought to light by Schwartz’s case.

Download

Related Links

Imagine a service that livestreams major broadcast television channels over the Internet for $4.99 a month — no cable or satellite subscription required. For an extra 99 cents a month, the service offers DVR functionality, making it possible to record, rewind, and pause live broadcast television on any broadband-equipped PC.

If this service sounds too good to be true, that’s because it is. But for a time, it was the business model of ivi. Cheaper than a cable/satellite/fiber subscription and more reliable than an over-the-air antenna, ivi earned positive reviews when it launched in September 2010.

Soon thereafter, however, a group of broadcast networks, affiliates, and content owners sued ivi in federal court for copyright infringement. The court agreed with the broadcasters and ordered ivi to cease operations pending the resolution of the lawsuit.

ivi appealed this ruling to the 2nd Circuit, which affirmed the trial court’s preliminary injunction earlier this month in an opinion (PDF) by Judge Denny Chin. The appeals court held as follows:

  • The rights holders would likely prevail on their claim that ivi infringed on their performance rights, as ivi publicly performed their copyrighted programs without permission;
  • ivi is not a “cable system” eligible for the Copyright Act’s compulsory license for broadcast retransmissions, as ivi distributes video over the Internet, rather than its own facilities;
  • Allowing ivi to continue operating would likely cause irreparable harm to the rights holders, as ivi’s unauthorized distribution of copyrighted programs diminishes the works’ market value, and ivi would likely be unable to pay damages if it loses the lawsuit;
  • ivi cannot be “legally harmed by the fact that it cannot continue streaming plaintiffs’ programming,” thus tipping the balance of hardships in plaintiffs’ favor;
  • While the broad distribution of creative works advances the public interest, the works streamed by ivi are already widely accessible to the public.

As much as I enjoy a good statutory construction dispute, to me, the most interesting question here is whether ivi caused “irreparable harm” to rights holders.

Writing on Techdirt, Mike Masnick is skeptical of the 2nd Circuit’s holding, criticizing its “purely faith-based claims … that a service like ivi creates irreparable harm to the TV networks.” He argues that even though ivi “disrupt[s] the ‘traditional’ way that [the broadcast television] industry’s business model works … that doesn’t necessarily mean that it’s automatically diminishing the value of the original.” Citing the VCR and DVR, two technologies that disrupted traditional methods of monetizing content, Mike concludes that “[t]here’s no reason to think” ivi wouldn’t “help [content owners'] business by increasing the value of shows by making them more easily watchable by people.”

Continue reading →

Christopher Sprigman, professor of law at the University of Virginia discusses his upcoming book the Knockoff Economy: How Imitation sparks Innovation co authored with Kal Raustiala. The book is an accessible look at how industries that do not have heavily enforced copyright law, such as the fashion and culinary industries, are still thriving and innovative. Sprigman explains how copyright was not able to be litigated heavily in these cases and what the results could teach us about what other industries that do have extensive copyright enforcement, such as the music and movie industries, could look like without it.


Download

Unshackling a market from obsolete, protectionist regulations can be a very challenging undertaking, especially when the lifeblood of a regulated industry is at stake. The latest push for regulatory reform to encounter the murky waters of modernization is the “Next Generation Television Marketplace Act.” The ambitious and comprehensive bill, introduced by Rep. Steve Scalise and Sen. Jim DeMint in their respective chambers of Congress, aims to free up the broadcast television market. The federal government’s hands have been all over this market since its inception, overseen primarily by the FCC, pursuant to the Communications Act.

The Next Generation Television Marketplace Act (“DeMint/Scalise”) is a bold and laudable bill that would, on the whole, substantially free up America’s television marketplace. But one aspect of the bill—its abolition of the retransmission consent regime—has sparked a vigorous debate among free marketers. This essay will explain what this debate is all about and why policymakers should think twice before getting rid of retransmission consent.

Toward a Free Market in Television

The DeMint/Scalise bill takes an axe to many of the myriad rules that stand in the way of a free market in television programming. As Co-Liberator Adam Thierer recently explained on these pages, the bill’s many provisions would among other things get rid of the compulsory licensing provisions in the Copyright Act that empower government to set the rates cable and satellite (“pay-TV”) providers must pay to retransmit distant broadcast signals. It would eliminate the “network non-duplication” rule, which generally bars pay-TV providers from carrying out-of-market signals that offer the same programs as local broadcasters. The bill would also end the “must-carry” rule that forces pay-TV providers to retransmit certain local broadcast signals without receiving any compensation.

These are just a few of the many provisions of the DeMint/Scalise bill that would substantially reform the Communications and Copyright Acts to foster a free video marketplace and bring television regulation into the 21st century. (For a more in-depth assessment of the positive aspects of the DeMint/Scalise proposal, see Adam’s informative Forbes.com essay, Toward a True Free Market in Television Programming; Randy May’s superb Free State Foundation Perspectives essay, Broadcast Retransmission Negotiations and Free Markets;” and Bruce Owen’s FSF essay, The FCC and the Unfree Market for TV Program Rights.)

Continue reading →

In the ongoing debate over SOPA, PIPA, and rogue websites legislation, most commentators have focused on what Congress should and shouldn’t do to combat these sites. Less attention, however, has been paid to the underlying assumption that these rogue websites represent a public policy problem. While no one has defended websites that defraud consumers by deceptively selling them fake pharmaceuticals and other counterfeit goods, many consumers who frequent “rogue websites” do so for the express purpose of downloading copyright infringing content.

As Julian Sanchez explains over on Cato-at-Liberty, how the latter category of rogue websites (including The Pirate Bay and, until last week, MegaUpload) affects the U.S. economy and social welfare is hotly contested in the economic literature:

[I]t’s become an indisputable premise in Washington that there’s an enormous piracy problem, that it’s having a devastating impact on U.S. content industries, and that some kind of aggressive new legislation is needed tout suite to stanch the bleeding. Despite the fact that the [GAO] recently concluded that it is “difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the economy as a whole,” our legislative class has somehow determined that . . . this is an urgent priority. Obviously, there’s quite a lot of copyrighted material circulating on the Internet without authorization, and other things equal, one would like to see less of it. But does the best available evidence show that this is inflicting such catastrophic economic harm—that it is depressing so much output, and destroying so many jobs—that Congress has no option but to Do Something immediately? Bearing the GAO’s warning in mind, the data we do have doesn’t remotely seem to justify the DEFCON One rhetoric that now appears to be obligatory on the Hill. The International Intellectual Property Alliance . . . actually paints a picture of industries that, far from being “killed” by piracy, are already weathering a harsh economic climate better than most, and have far outperformed the overall U.S. economy through the current recession.

Julian makes several great points, and his essay is well worth reading in its entirety.

Nevertheless, in my view, rogue websites dedicated to the infringement of U.S. copyrights pose a public policy problem that merits not only serious congressional attention, but also prompt (albeit prudent) legislative action. While I’m relieved that the flawed SOPA and PIPA bills seem unlikely to pass in their current forms, I also think it would be unwise for Congress to dither on rogue sites legislation for years in search of “credible data” about how such sites impact our economy.

Continue reading →