“Information wants to be free” is a standard rejoinder to criticism of online entertainment piracy. Such a sentiment may motivate some copyright thieves, but profit, not ideology, drives the proprietors of “cyberlockers” whose business is trafficking pirated entertainment content. A recent study by the Digital Citizens Alliance (DCA)—”Behind the Cyberlocker Door“— has laid bare that reality. These websites generate profit margins that lawful businesses can only dream of, and they do so on the backs of countless workers in the music, movie, and television industries.
DCA analyzed data from the 15 top direct download cyberlockers and 15 top streaming cyberlockers. It found that 78% of the files on the direct download sites, and 84% on the streaming sites, were infringing content such as music, movies, and TV shows. Total annual revenue for the 30 businesses was $96.2 million, which averages out to $3.2 million a site. The average profit ratio of the direct download sites was 63.4%, with one site enjoying 88.5%. For the streaming cyberlockers, the average ratio was 87.6%, with the highest coming in at 96.3%.
Much like people who run the illicit cyberlockers, some of those who unlawfully access and share copyright-protected content may claim to be advancing an extreme public commons ideology or “sticking it to Big Entertainment,” but the volume of such piracy reflects a baser motivation. Pirated content consumers’ catchphrase shouldn’t be “information wants to be free;” it should be “we want free information.” Continue reading →
Nearly two years ago, in a Legal Pulse post and a WLF Legal Opinion Letter, we discussed the strong judicial response to the copyright litigation scheme pursued by a company called Righthaven LLC. Righthaven was created at the behest of newspaper-owning media company Stephens Media as a vehicle to sue bloggers and other online information outlets which had reprinted articles originally published in Stephens’ newspapers. Thankfully rather than pay the copyright troll’s “toll,” several bloggers refused and Righthaven sued them.
Federal District Judge Philip Pro dismissed Righthaven’s suit for two reasons. First, because the agreement between Stephens Media and Righthaven assigned only the right to sue potential copyright infringers, Righthaven did not have the exclusive rights needed to possess standing to sue. Second, the bloggers’ reprinting of articles constituted fair use under federal law. Several days after this ruling, Judge Pro ruled that Righthaven had to pay $34,000 in attorneys’ fees. In a separate but related case, a federal judge sanctioned Righthaven $5,000 for failing to disclose its financial ties to Stephens Media.
Apparently not embracing the modified maxim “it’s time to quit while you’re behind,” Righthaven decided to spend more money on legal fees and appealed its loss to the U.S. Court of Appeals for the Ninth Circuit.
In an appropriately terse opinion yesterday, the Ninth Circuit panel unanimously affirmed Judge Pro on the issue of standing. Circuit Judge Clifton initiated his opinion with a reference to an Abraham Lincoln story about a lawyer who tried to “establish that a calf had five legs by calling its leg a tail.” As Lincoln observed, “calling a tail a leg does not make it so.” Similarly, just because Righthaven called itself a copyright owner does not mean it in fact is.
The court essentially went on to restate the very clear legal standards relied upon by District Judge Pro. Regretfully for bloggers and other online information providers, the court vacated the portion of Judge Pro’s ruling that the reprinting activity constituted fair use, since the case could be dismissed on procedural grounds.
A Nevada federal court recently found Righthaven LLC responsible for $34,000 in attorneys’ fees. This onerous judgment couldn’t have fallen on a more deserving group – Righthaven is a copyright troll notorious for suing bloggers and forum posters who have excerpted from or copied articles from other sites to share with their friends or the general public.
In bringing these suits, Righthaven exploits a loophole in the Digital Millennium Copyright Act (DMCA), which states that for user-generated sites to have a “safe harbor” they must fill out a form and pay $100 to register a DMCA “takedown agent” with the U.S. Copyright Office. Righthaven targets those websites whose proprietors have not done that. The first notice accused infringers receive is a complaint threatening damages of up to $150,000 and confiscation of their website’s domain name. The violations that trigger this are often trivial, such as posts or comments generated by site visitors. Many of Righthaven’s targets are owners of small, low-trafficked blogs who do not possess the financial resources to challenge Righthaven in court. This “shoot first ask questions later” approach routinely compels defendants to quickly settle. Since 2010, Righthaven has filed over 300 suits, and although none have yet succeeded, about 100 have ended in settlement.”
But the worm has turned. In Righthaven v. Hoehn Judge Philip M. Pro ruled that Righthaven had no standing to bring the case and that even if they did, Hoehn’s use of the text in question constituted fair use. Then, only days ago, the Judge ruled that Righthaven should pay $34,000 for Hoehn’s attorneys’ fees.
Befitting its character, Righthaven audaciously tried to wriggle its way out of the payment by declaring that since it did not have standing in the case, the court did not have jurisdiction to compel Righthaven to pay the fees. Judge Pro disagreed and ordered that the fees be paid by September 14.
“They are very complicated, complex issues, requiring us to delve into them in the dog days of summer,” a lawyer for Google Inc. reportedly said to U.S. Judge Denny Chin in a hearing today on the status of settlement talks between Google and author and publisher plaintiffs.
It’s been four months since Judge Chin rejected the litigants’ first attempt to settle charges that Google violated copyrights in the process of scanning books for its digital library. As we opined in March, addressing all of Judge Chin’s concerns would be a monumental task. No doubt the parties’ gaggle of lawyers have been piling up billable hours seeking an approvable solution, but Judge Chin is frustrated by the lack of progress. He was quoted as saying, “I’m a little bit concerned. This is a six-year-old case.” He wants them to spend even more focused time in their air-conditioned offices and conference rooms.
So to cajole things forward, the judge set a September 15 deadline. If the case isn’t “resolved or close to resolved in principle” by then, Judge Chin will set “a relatively tight schedule for discovery.” Perhaps other than being forced to use the Bing search engine on their computers and smartphones, the last thing Google executives likely want to do is litigate this case. The plaintiffs similarly have numerous incentives to settle, but after so many authors and publishers objected to the original settlement, the plaintiffs’ lawyers may have changed their opinion on what is equitable since March.
After many months of pondering, Judge Denny Chin, previously of the U.S. District Court for the Southern District of New York and now of the U.S. Court of Appeals for the Second Circuit, decided that the proposed settlement involving Google’s Book Search (GBS) project was not “fair, adequate and reasonable.” Though there is much good in widespread digital access to the world’s books, Judge Chin wrote, he was very “troubled” (a word that shows up frequently in his 48-page ruling) by how this copyright lawsuit settlement would reach that goal.
Washington Legal Foundation (WLF) filed objections to the settlement in 2009. While we are disappointed that the judge disagreed with our objection – that the notice provided about the settlement to the absent class members was legally inadequate – we were honored that Judge Chin specifically cited WLF’s objection in his opinion as a reference to those who advocated the opposing point of view.
Judge Chin’s decision directly impacts thousands of book authors and publishers. But it is also important for a number of broader principles and strategies in the realm of class action litigation that could affect thousands more future plaintiffs and defendants. Here are some class action settlement “do’s and don’ts” drawn from the lawsuit, its settlement, and the judge’s opinion: Continue reading →
Alexander W. Koff is a partner in the Baltimore office of the law firm Whiteford, Taylor & Preston, LLP. He was recently appointed by the U.S. Secretary of Commerce to serve on the Maryland/D.C. District Export Council (DEC), which helps to support export related activities from that region.
The Legal Pulse: Last November, you authored a Guest Commentary for The Legal Pulse on IP and China. Any new developments?
Alexander Koff: There is some news about IP cases being settled by Western companies. Yesterday The Wall Street Journalreported that software makers Microsoft, Adobe, and Autodesk settled copyright infringement suits against a midsize Chinese steel structure engineering company. Good on its face. But the settlement was reportedly just shy of $US200,000 and split three ways. And although supposedly this does not include “undisclosed financial damages,” the use of pirated software is widely reported to be rampant.
On December 14, 2010, the U.S. Court of Appeals for the Ninth Circuit continued its clarification of copyright law as it relates to the use of software. In an interesting follow-up to September’s Vernor v. Autodesk, Inc. decision, the Court of Appeals decided in MDY Industries, LLC v. Blizzard Entertainment, Inc. that although gamers’ use of “bots” to manipulate game-play violated the users’ license in the software, the violation was not so tied to copyright as to destroy the user’s license and turn the RAM copies on his computer into infringements. As such, the bot’s creator could not be liable for contributory infringement. However, the bot’s use of mechanisms to evade detection and expulsion by the game did violate the anti-circumvention sections of the Copyright Act and constituted violation of the DMCA by the bot creator.
In Vernor, the same court faced the issue of whether copies of software are typically licensed or sold. There, Vernor bought used copies of software and tried to resell them on eBay. Like most software, the copies Vernor bought contained a license agreement stating that any purchaser was not actually buying a copy of the software, but was being given a nontransferable license to use the software within certain restrictions. So, in the most basic of terms, the court had to determine: when you go to a store, pay, and bring home some software, did you actually buy the copy of the software (which would enable you to resell it pursuant to the “first sale” exception in the Copyright Act), or did you just license it? The Vernor court held that you just licensed it, so you cannot then sell your used copies of software (or the nontransferable license) because that violates the copyright owner’s exclusive distribution right. Continue reading →