Challenging the balance

Once again the District Court of Hamburg shows a strange idea of "keeping the balance" between rightholders and ISPs. Ignoring the statutory safe harbour privileges by introducing a duty to monitor third parties websites (known for providing links to infringing content) the Hamburg Court ruled in favor of the GEMA (which collects fees for artists) in a law suit brought up against a host provider (summary judgement). The defendant hosted third parties' content and is obligated according to the decision of the court not only to take down infringing content after receiving notice by copyright owners but also to monitor by itself on own duty websites, newsgroups and other sources known for providing access to infringing content stored inter alia at its own servers. This decision raises significant ISP's risk of being liable for copyright infringement and introduces a incredible broad obligation to monitor infringing actions by searching the whole internet. (LG Hamburg, 308 O 458/10 03/02/11)

Article Sharing Time

Something I came across in my research for a paper I'm writing on gene patents. Odd.

From the abstract:

Content owners claim they are doomed, because in the digital environment, they can't compete with free. But they've made such claims before. This short essay traces the history of content owner claims that new technologies will destroy their business over the last two centuries. None have come to pass. It is likely the sky isn't falling this time either. I suggest some ways content may continue to thrive in the digital environment.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1656485

(Click the link "One-Click Download")

New model, and new issue

Apple iTunes may open new age of music distribution. However, new model always arises new issue. Last September, the Ninth Circuit made its decision regarding the dispute of loyalty between performers and record labels (F.B.T. v. Aftermath Records). The Ninth Circuit decided that songs downloaded from Apple’s iTunes store are licensed, not sold.

F.B.T. signed Eminem in 1995, and transferred Eminem’s exclusive recording services to Aftermath. Under the agreement between F.B.T. and Aftermath, the “Records Sold” provision provides that F.B.T. is entitled to receive between 12% and 20% of the adjusted retail price. In addition, F.B.T. is entitled to receive 50% of Aftermath’s net receipts on masters licensed to others for their manufacture and sale of records or for any other uses.

In a 2006 audit, F.B.T. found that "Aftermath had been applying the Records Sold provision to calculate the royalties due to F.B.T. for sales of Eminem’s
recordings in the form of permanent downloads and mastertones." F.B.T. brought a lawsuit in the district court, and the jury's decision is in favor of Aftermath. F.B.T appeal and the Ninth Circuit reversed.

It is necessary to review all agreements and make essential amendments while adopting new business model. This case indicates that Apple may raise prices of iTunes song, if the labels have to pay more to performers.

US Copyright Holders to World: "We [Dis]Like [In]Consistent Laws"

It might be a stretch but, as with any reasonable actor, the content industry both supports and opposes consistency in the application of copyright across countries.

W.r.t. adding mandatory exceptions to WIPO copyright treaty (e.g., compulsory licensing to content providers for the blind):

The uniform approach within this global framework has been to set minimum standards of copyright protection, subject to certain exceptions or limitations which are permissible, but not mandatory. ... The draft treaty would turn this long-standing principle on its head, demanding that signatories limit copyright protection to an extent not even permissible under the existing treaties... Link.

Yet when it comes to well established legal principles in the US that: (1) do not fall within the realm of a treaty; (2) have created new markets and technologies; and (3) are being considered in other countries which would produce a more "uniform approach"...

In the US, laws and court cases provide Americans with the freedom to "format shift" their music from CDs to a computer to an iPod, and the freedom to "time shift" video has allowed digital video recorders to flourish. But when other countries try to encode similar copyright exceptions into law, the US government frowns on the practice, saying it "sends the wrong message." Link.

The "Disney Vault" and Other Ridiculous Content Control

Old school content owners and distributors need to wake up. Here’s my consumer perspective on why alarms should be going off. First, I'll recap how my content-consumption mindset has changed over time. Then I'll try to synthesize what I think it means. Once upon a time I had a naïve mindset.

Back in 1997/1998, I thought that everything was fair game. If I didn't own it, I could download it. Sure I purchased stuff, but that was limited to computer upgrades paying for a DSL connection with the profits from my summer job at an ISP (<ping + >fps = >frags!). As far as content, I didn’t think twice about how or where I got it. Not much changed in the next 8 years. College was file sharing paradise. Enter the real world where I found a risk-averse mindset.

Things changed after I realized:
(1) a ton of people were being sued;
(2) I no longer had a ‘perceived immunity’ as a college student; and
(3) I generally found better things to do than consume content.

The problem is I went back to college (OK, law school, college part deux). Now that I’m back I realize:
(1) people are still being sued;
(2) I definitely lack any ‘perceived immunity’ as a law student; and
(3) I generally try to find anything to distract me from my homework.
And that is what has led me to my modern mindset.

If I can’t find a cheap and easy way to access content, I either won’t bother, will lose interest, or will forget about it. For example, I’ll see a movie trailer that I think looks decent, but not the kind of movie I’ll spend $13.00 to see in a theatre (reserved for visually stunning pictures, no comedies or dramas). Months will pass; the DVD will release. I’ll never notice.

Here’s a simple cause and effect table I think sums it up:

Big content decides to...	So I...
Limit the streaming of a television series to the three most recent episodes	Won't bother.
Allow access to five random episodes from season 3	Won’t bother.
Not offer a movie in a streaming format	Find something else.
Charge 30 bucks for a single season on DVD that I will watch one time	Find something else.
License one out of ten seasons to a streaming service	Lose interest.
Force me to go to their site rather than a site with aggregated content	Become annoyed.
Periodically change what episodes are available	Won't bother.

Conclusion
There’s simply too much good stuff out there to get stuck waiting. More restrictions on content result in shrinking audiences and the continuation of piracy. If my anecdotal story is at all representative, as old school content owners and distributors continue to resist change, they will begin to see that easy access to alternative quality content erodes their bottom line.

Another YouTube's DMCA case raising fair user concern

As the DMCA requires content owners to make certain showing of infringement to ISPs for the ISP to remove the alleged infringing material from its network, the problem arises as there is no guarantee that the alleged infringing material is an actual infringement. Rather, the DMCA only requires that the copyright holder has a “good faith belief” that the use of material has no legal ground. Therefore, most notices to takedown lack precision and are “commonly faulty.”

Before the California District court landed it decision in Lenz v. Universal Music,[1] content owners only have to determine whether their rights are violated. However, after Lenz content owners have a responsibility to consider whether the alleged infringing material is a fair use before issuing a takedown notice. This case involves online service provider YouTube.com and its user Lenz, who sued a record label (Universal) after her video posted on YouTube.com was removed due to the takedown notice claiming copyright violation in the song “Let’s Go Crazy” own by Universal. After YouTube had received a DMCA takedown notice, it removed the material on the following day and sent Lenz an email informing that the video had been removed and warning that repeated copyright infringement incidents could result in removal of her account and contents. Lenz field a counter-notice claiming that the material was wrongfully removed and remanding that it be reposted. Six weeks later YouTube reposted the video.

Subsequently, the lawsuit was brought against Universal claiming that the DMCA requires the copyright owner to consider fair use doctrine. Universal counterclaimed that there is no requirement that copyright owners has to determine whether the material is fair use before sending a takedown notice. However, the court did not buy this argument and ruled for Lenz that a copyright holder is required to consider whether there is fair use involve before formulating a good faith belief because a content owner must “make an initial review of the potentially infringing material prior to sending a takedown notice.” The court further held that sending takedown notice without proper consideration of the fair use doctrine deems acting in bad faith which is may be held liable for misrepresentation under §512(f) of the DMCA.

[1] Lenz v. Universal Music Corp., 572 F. Supp. 2d 1150 (N.D. Cal. 2008).

Questions about Digital First Sale and Future Business Model

Some people have predicted that “superdistribution” will be the most common business model sooner or later. Since the digital first sale doctrine has not been approved by the Congress, to avoid of being bound by the traditional first sale doctrine, it is understandable that the digital documents publisher and copyright owners seek the new business model to protect their exclusive right. For example, the e-book publisher, Amazon Kindle, it disclaims the application of first sale doctrine and adopts the e-book licensing models with TPMs of access controls, which means under that business, customers cannot actually owns the digital copies. In other word, the first sale doctrine cannot restrict the copyright owners’ exclusive right to distribute; meanwhile, consumers could violate Copyright Act if they make the further transfer of the copies. Moreover, anybody who breaks the TPMs or circumvents the TPMs could violate the DMCA section 1201. More explicitly, it is “licensing”, not “sold”.

As to the iTunes Music Store, it had created 10 billion dollars market in the past seven years. Apple has adopted the “win-win” business model to provide the DRM-free digital music files and to encourage consumers pay less, and download more. The average price of one song is 0.99 dollars or less. According to Electronic Frontier Foundation (EEF), if most of sixty million Americans who have been downloading music from legal Internet service platform pay $5 monthly downloading music, the market value will grow an additional 3 billion market value in revenue annually. The enormous market value expressly illustrates that the music downloading business has increased drastically. However, as Steve Jobs said, piracy is the big enemy to music industries. Illegal digital files sharing and reproduction by digital dissemination has threatened the copyrighted owners.

Under the current circumstance, there are two issues should be considered in order to discuss the possibility of acceptance of “digital first sale doctrine” in the copyright legal system. Firstly, finding a possible way to reduce and command the piracy activities, which is the most challenging undertaking for the digital transmission industries management. If one downloads a song legally and then share with someone else without deleting original copy or without permission of the copyright owner, it constitutes a piracy, and it cannot apply to first sale doctrine.

Secondly, whether the secondary market is still necessary under the licensing business model of digital transmission transaction should also be considered. The legislative purpose of first sale doctrine is to restrict copyright owners right to distribute after initial authorized sale, and further to activate the secondary market of second hand copies and to create another access for the public to approach the copyrighted documents. If the digital dissemination transaction changes to licensing business model, there may be no room for discussion of digital first sale doctrine. Under the licensing business model, consumers do not own the title of that particular copy. They may not transfer the title of that particular copy or dispose, donate the particular copy to third party. The only right that consumers gain is using the copyrighted item under the licensing agreements. The secondary market could not be created since the consumers are merely the licensee, but not the owners, of the digital copyrighted products. In that case, digital first sale doctrine may be insignificant to the digital transactions world. Specifically, the Nine Circuit actually has blocked the secondary market of software transactions by barring the users resell the software in Vernor v. Autodesk case, whether the software is fixed on the tangible form.