Google and the Global Takedown

by Lee Gesmer on July 21, 2017

“One country shouldn’t be able to decide what information people in other countries can access online”    

 David Price, senior product counsel at Google

A risk long anticipated by Internet law observers is that the courts might become more aggressive in regulating online behavior, not just in their own nation, but worldwide. Google, more than any company, has had a target on its back for this kind of case.

The obvious example would be a court in one nation ordering Google to takedown (“de-index”) search results for users worldwide. This is exactly what happened in the Canadian Supreme Court’s decision in Google Inc. v. Equustek Solutions Inc. (June 28, 2017). This case represents the first time the highest court in a country has ordered a search engine to de-index worldwide in the context of a purely commercial two-party dispute. And, as we shall see below, this is a crucial issue for Google – one that it will not concede without a fight.

The facts of the Canadian case are straightforward. Equustek, a Canadian company, sued its former distributor, Datalink, on various grounds, including trade secret misappropriation. Datalink moved its offices and web host outside of Canada, but continued to sell its product online. A court order directed at Datalink was ineffective, so Equustek turned to Google, demanding that it remove links to Datalink from Google’s search engine. Google was prepared to comply in Canada, but Equuestek insisted that Google de-link Datalink worldwide.

After a series of lower-court decisions granted Equustek’s demand for worldwide de-indexing of Datalink sites Google appealed the case to the Supreme Court of Canada.

The Supreme Court upheld the lower Canadian court. It rejected Google’s argument that the Canadian courts did not have the legal authority to issue a worldwide takedown injunction. Noting that Datalink would not be commercially viable without Google’s search results, the court found that Google was “facilitating Datalink’s breach … by enabling it to continue carrying on business through the Internet.” Since the Internet has “no borders,” only a worldwide injunction would be effective to protect the Canadian company.

Google argued that a worldwide takedown order could run afoul of laws in other jurisdictions, but the court held that Google could seek modification of the order should that prove to be the case: “we are dealing with the Internet after all, and the balance of convenience test has to take full account of its inevitable extraterritorial reach when injunctive relief is being sought against an entity like Google.”

While Google has no further appeals in Canada, it’s seeking a partial reprieve in the United States. On July 24, 2017, a month following the decision in Canada, Google filed suit against Equustek (the plaintiff in the Canadian case), asking a California federal district court to:

Declare that the Canadian Order is unenforceable in the United States as inconsistent with the First Amendment, the Communications Decency Act, and the public policy surrounding enforceability of foreign judgments pursuant to international comity.

Google opened its complaint as follows:

Google brings this action to prevent enforcement in the United States of a Canadian order that prohibits Google from publishing within the United States search result information about the contents of the internet. As part of a Canadian lawsuit brought by Canadian plaintiffs against Canadian defendants, a Canadian trial court enjoined Google (a non-party based in California) from including in its search results links to dozens of the Canadian defendants’ websites—not just on Google’s site for Canada, but worldwide, including within the United States. As a result, Google, alone among search engines and other providers of interactive computer services, is compelled to censor the information it provides to its users around the globe about the existence of the Canadian defendants’ websites.

How Google’s U.S. case will proceed raises some interesting and potentially important issues, including the following:

  • Google’s complaint is based on three legal grounds: that the Canadian ruling violates the First Amendment, the Communications Decency Act* and U.S. public policy. Each of these contentions is likely to implicate complex legal arguments. The last issue raises difficult issues of international comity – in this case the willingness of a U.S. court to override a court decision from another jurisdiction affecting a U.S. corporation.

    *The Communications Decency Act states that: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). Likely, under this U.S. statute Google could not be forced to de-index search engine links to Datalink’s web pages.

  • Even if the U.S. court does override the Canadian case in the U.S. and Google restores links to Datalink’s web pages in the U.S., Google would still be in violation of the injunction in Canada. Will Google petition the Canadian courts to modify the Canadian order to permit re-indexing in the U.S., and how would a Canadian court respond to such a petition?
  • At a practical level, who will defend this suit, which could easily go to the Ninth Circuit, and perhaps the Supreme Court? Equustek, not the Canadian government, is the defendant, and it may not even have the financial resources to defend this case in the U.S. If it doesn’t, who will?
  • Again, as a practical matter, what if Datalink (the original bad actor) goes out of business or removes the offending pages while the case is pending? Will the U.S. case be moot, leaving the Canadian decision standing as a potentially important precedent?

While the presence or absence of links to Datalink is of no financial significance to Google, Google v. Equustek represents an existential threat to the Internet that Google takes seriously – the Balkanization of the Internet. Countries with different views of permissible online speech could lead to an Internet where what you see in one country (such as the U.S.) may be different from what you see in another (such as Canada).

The risk that worldwide takedowns will be the future of the Internet is very real, and Google appears to be committed to preventing, or at the least minimizing, this outcome by challenging it, as it did in Canada. If it can’t achieve that, as it could not do in Canada, it will accept Balkanization as a second choice, as it is now seeking to do through its U.S. suit.

For readers who may be interested in the legal theories Google is advancing in the U.S. suit, I recommend the Electronic Frontier Foundation’s amicus brief in the Canadian case, which is available here.

Update: Google has filed a motion for a preliminary injunction prohibiting enforcement of the delisting order in the U.S. Link here

Mavrix v. LiveJournal: The Incredible Shrinking DMCA

While many performing artists and record companies complain that the Digital Millennium Copyright Act (the “DMCA”) puts them to the unfair burden of sending endless takedown notices, and argue that the law should require notice and “stay down,” supporters of Internet intermediaries and websites argue that court decisions have unreasonably narrowed the DMCA safe harbor.

A recent decision by the influential Ninth Circuit Court of Appeals (which includes California) adds to the concerns of the latter group.

LiveJournal, the defendant in this case, displayed  on its website 20 photographs owned by Mavrix. Mavrix responded, not by sending DMCA “takedown” notices, as you might expect, but by filing suit for copyright infringement. LiveJournal responded that it was protected by the DMCA. However, to successfully invoke the DMCA’s safe harbor  LiveJournal had to satisfy all of the legal requirements of the DMCA.

A key requirement is that infringing content have been posted “at the direction of the user.” In other words, the DMCA is designed to make websites immune from copyright infringement based on postings by users; it doesn’t protect a site from content posted or uploaded by the site itself – that is, by the site’s employees.  The photos at issue were submitted by users and posted at their direction and therefore, LiveJournal argued, it satisfied this DMCA requirement.

However, when it comes to the DMCA, the devil is in the details, and the outcome in any case depends on how the courts interpret those details. In the case of LiveJournal photos are submitted by users, but they are posted only after they are reviewed and approved by volunteer moderators. For this reason, Mavrix argued, the photographs were not “posted at the direction of the user,” rather they were posted by moderators who selected them from user submissions. Further, Mavrix argued that the moderators were “agents” of LiveJournal, and therefore their actions were legally attributed to LiveJournal. In other words, as “agents” of LiveJournal their actions were the same as if they were employees.

The district court rejected Mavrix’s arguments and ruled for LiveJournal, but the Ninth Circuit reversed, holding that Mavrix had a point – the moderators might very well be “agents” of LiveJournal, in which case LiveJournal would have failed this requirement of the DMCA and be liable for copyright infringement. In reaching this conclusion the court emphasized that the critical inquiry is not who submitted content, but who posted the content. The court rejected LiveJournal’s position that the words “at the direction of the user” include all user submissions, even when they are reviewed and selected by agents or employees of the service provider.

In the case of LiveJournal, because moderators screened and posted user submissions the issue is whether the moderators are “agents” of LiveJournal whose actions should be attributed to LiveJournal. In effect, the court equated agents with employees.

To make matters worse for websites hoping to use volunteer moderators, the legal “test” to determine whether moderators are agents gets into the arcane subject of agency law, a topic that rightly triggers the limbic system of any lawyer who suffered through agency law in law school. In this case the question is whether the level of control LiveJournal exercised over its volunteer moderators created an agency relationship based on “actual” or “apparent” authority. Trust me when I say that these are complex issues that no website owner would want to have to parse out while running its business, much less have to present and argue to a jury.

This ruling was a blow to LiveJournal, but the Ninth Circuit had more bad news to deliver. Even if LiveJournal was able to establish that the moderators were not agents of LiveJournal, Mavrix might be able to show that LiveJournal had “actual” or “red flag” knowledge that the postings were infringements. While the Ninth Circuit stated that “red flag” knowledge requires that the infringement be “immediately apparent to a non-expert,” the court ruled that the fact that some of the photos contained watermarks could have created red flag knowledge. Whether they did will be up to a jury to decide. If a jury decides that LiveJournal had the requisite knowledge with respect to one or more photos, LiveJournal will lose DMCA protection for those photos.

However, after this ruling the Ninth Circuit was still not done with LiveJournal.  The DMCA requires that LiveJournal not have received a financial benefit from infringements that it had the right and ability to control. The court held that this benefit “need not be a substantial or a large proportion” of the website’s revenue, and added to the confusion around DMCA law by suggesting that such a benefit could be established based on the volume of infringing material on the site, even if this material did not belong to Mavrix and was not the subject of the current litigation.

What lessons can website operators draw from this case?

First, this is a very bad decision for any social media website that would like to moderate content, whether through the use of volunteers or by employees.

Any business based on LiveJournal’s business model – volunteer moderators who review user submissions and decide whether or not to post them – is at serious risk of losing DMCA protection. The degree of planning, administration and ongoing legal supervision necessary to be confident that moderators are not agents would be daunting.

It’s worth noting that this decision will be difficult to evade – the fact that a site may not be in one of the states included in the Ninth Circuit is not likely to  provide protection. A site incorporated and operating outside the Ninth Circuit can be sued in the Ninth Circuit if it has minimum contacts there, and this is often easily established in the case of popular websites. The Mavrix case is so favorable for copyright owners seeking to challenge a DMCA safe harbor defense that it is likely to motivate forum shopping in the Ninth Circuit.

Second, the  irony of this case is obvious – Mavrix creates an incentive to engage in no moderation or curation and post “all comers.” If there is no moderator (whether an agent or employee) to view a warning watermark, there can be no knowledge of infringement. Unregulated postings of user generated content is likely to result in more copyright infringement, not less.

Third, to add to the confusion over how the DMCA should be applied to websites that host user-generated content screened by moderators, the Court of Appeals for the Tenth Circuit issued a decision in 2016 that appears to come to the opposite conclusion regarding the use of moderators. BWP Media USA Inc. v. Clarity Digital Group., LLC. This case may give LiveJournal a chance to persuade the Supreme Court to accept an appeal of the Mavrix case (based on a “circuit split”) – assuming, that is, that LiveJournal has the stomach, and the budget, to prolong this case further, rather than settle.

Lastly, it’s important to view this decision in the context of the DMCA as a whole. Any service provider hosting user-generated content has to pass through a punishing legal gauntlet before reaching the DMCA’s safe harbor:

(i) content must be stored at the direction of a user;

(ii) the provider must implement a policy to terminate repeat infringers, communicate it to users and reasonably enforce it;

(iii) the provider must designate an agent to be notified of take down notices, register the agent online by the end of 2017 and post the contact info for the agent online on the site;

(iv) the provider must respond expeditiously to take down notices;

(v) the provider may not have actual or red flag knowledge of infringement, nor may it be willfully blind to infringements;

(vi) the provider may not have the right and ability to control infringing content; and

(vii) the provider may not have a direct financial interest in the infringing content.

This is a challenging list of requirements and, as illustrated by the Mavrix case, each requirement is complex, subject to challenge by a copyright owner and subject varying interpretations by different courts. If the service provider fails on even one point it loses its DMCA safe harbor protection.

After the Ninth Circuit’s decision in Mavrix the chances that a service provider will be able to successfully navigate this gauntlet are significantly reduced, at least in the Ninth Circuit.

Mavrix Photographs, LLC v. LiveJournal, Inc. (9th Cir. April 7, 2017)

Failure to Put Infringing and Infringed Work in Evidence Dooms Copyright Case

I was surprised when I read the Ninth Circuit’s recent decision in Antonick v. Electronic Arts, Inc. (9th Cir. Nov. 22, 2016). In that case the plaintiff alleged copyright infringement against EA* based on copying of computer source code for the John Madden Football game, but failed to introduce the source code into evidence, choosing instead to rely solely on expert testimony to prove copying.

*[footnote] Technically speaking, this was a breach of contract case. However, the contract between Antonick and EA stated that Antonick would receive royalties on the sale of any “derivative work”, as that term is defined under U.S. copyright law. As a result, the parties and the courts applied copyright law to determine whether EA had breached its royalty agreement with Antonick.

This was an enormous risk, and it doomed Mr. Antonick’s case. The Ninth Circuit panel held:

Antonick’s claims rest on the contention that the source code of the Sega Madden games infringed on the source code for Apple II Madden. But, none of the source code was in evidence. The jury therefore could not compare the works to determine substantial similarity.

Expert testimony alone was not sufficient, the court ruled. However, even if expert testimony had been sufficient, Antonick’s case failed: the expert testimony presented by Antonick related to how the games appeared to users (the user interface), not the source code. Antonick’s case was based on similarities between the source code of the products, not the user interface.

Maybe there was a good reason that Antonick’s lawyers didn’t introduce the source code into evidence. Perhaps the original source code (which is decades old) was no longer available, and Antonick was trying to skirt this issue; if so this isn’t apparent from the opinion. I hope, for Antonick’s sake, that his lawyers didn’t think they could prove copying of source code by focusing on the user interface of the programs, since similarities in interfaces don’t necessarily mean the source code that generates them are the same or similar.

Trial lawyers know that one goal at trial is to introduce as much evidence into the record as possible, to avoid just this kind of outcome.  As long as evidence is in the record, a party can point to it to support its case even if (as likely was the case here), the evidence is computer source code incomprehensible to the jury. A document may be incomprehensible to the jury, but as long as it is in evidence, the courts will adopt the fiction that that the jury considered it in reaching its verdict.

In this case Antonick prevailed in a jury trial, but the judge set the verdict aside post-trial, based on his failure to introduce the two works. Antonick appealed, but lost on appeal.

Antonick went the last mile to try to save his case on appeal, retaining famed copyright lawyer and treatise author David Nimmer (“Nimmer on Copyright”) to argue his case. This was unsuccessful.

Here is the video of oral argument before the 3-judge 9th Circuit panel. Nimmer’s argument begins at :20 in the video, and his rebuttal testimony begins at 1:10.

The district court’s opinion, which discusses the plaintiff’s failure to introduce the works at issue into evidence in more detail, is available here.

The U.S. Copyright Office has issued a new rule that has important implications for any website that allows “user generated content” (UGC).  This includes (for example), videos (think Youtube), user reviews (think Amazon or Tripadvisor), and any site that allows user comments.

In order to avoid possible claims of copyright infringement based on UGC, website owners rely on the Digital Millennium Copyright Act (the “DMCA”). However, the DMCA imposes strict requirements on website owners, and failure to comply with even one of these requirements will result in the loss of protection.

One requirement is that the website register an agent with the Copyright Office. The contact information contained in the registration allows copyright owners to request a “take down” of the copyright owner’s content.

The Copyright Office is revamping its agent registration system, and as part of this process it is requiring website owners to re-register their DMCA agents by the end of 2017, and re-register every three years thereafter. Gesmer Updegrove LLP’s Client Advisory on this new rule is embedded in this post, below.  You can also click here to go directly to the pdf file on the firm’s website.

Redigi - Did Ossenmacher Know He Was Risking Personal Liability?

In August, MediaPost reported that Redigi and one of its founders, John Ossenmacher, had filed bankruptcy:

“ReDigi recently stipulated to pay Capitol $3.5 million in damages, but also appealed the underlying copyright infringement finding to the 2nd Circuit Court of Appeals. This week, the company said in an appellate filing that it had declared bankruptcy in U.S. District Court for the Southern District of Florida. ReDigi co-founder John Ossenmacher also declared bankruptcy in the same court.” (link)

Very likely, this ends the appeal to the Second Circuit.

I’ve written about this case several times, and in April 2013 I observed:

In addition, Capitol may seek leave of court to add as defendants the individual owners and employees of Redigi that exercised control over or benefited from the infringement.  While Redigi could oppose such as motion as coming too late in the case, a decision would be at the discretion of the judge. As Capitol Records showed in its copyright suit against MP3tunes and Michael Robertson, Capitol is not above suing not only corporate infringers but their founders and owners. (See: The Record Labels Want My Minivan).* The philosophy of the record companies in many copyright cases may best be described as, “never kick a man when he’s down, unless that’s the only way to keep him there.” Capitol may be preparing to put on its steel toe boots in this case. (link)

In fact, this is what transpired. In September 2013 Capital Records amended its complaint to include Redigi founders John Ossenmacher and Larry Rudolph as defendants.

I also noted that –

According to the court decision Redigi consulted legal counsel before launching Redigi and engaging the recording industry in a test case.

A test case can be a great idea, but I can’t help but wonder whether the lawyers Redigi consulted warned Messrs. Ossenmacher and Rudolph that they risked personal liability. Business people are told that a corporation or LLC protects them from personal liability, but there are many exceptions to this rule, and one of these is copyright infringement. To quote a New York federal court on this issue:

It is well established that all persons and corporations who participate in, exercise control over or benefit from an infringement are jointly and severally liable as copyright infringers.  . . .  An individual, including a corporate officer, who has the ability to supervise infringing activity and has a financial interest in that activity, or who personally participates in that activity is personally liable for infringement.

Arista Records LLC v. Lime Grp. LLC, 784 F. Supp. 2d 398, 437 (S.D.N.Y. 2011).

Sadly, I have met many lawyers, including “IP lawyers,” who were unaware of this fact. I hope Mr. Ossenmacher’s lawyers were not in this group, and that he knew the personal risk he undertook when founding Redigi.

Melania Trump's Speech – Plagiarism or Copyright Infringement?

The press calls Melania Trump’s use of Michelle Obama’s 2008 nomination speech “plagiarism,” but is it also copyright infringement?  Could the authors or assignees of Michelle’s speech sue Melania and others for copyright infringement?

It’s hard to imagine this would ever happen for political and practical reasons (one of which I discuss below). But it’s interesting (fun?) to think about whether a copyright infringement suit against Melania would have legs. In that spirit, consider the following.

Ownership. It’s likely that Michelle’s 2008 speech was written by several people, each of whom could be considered a co-author. The Forward reports that the speech was first written by Sarah Hurwitz, but it’s not clear if she was an independent contractor, an employee of the Obama campaign or working for someone else. This could raise ownership issues under the work-for-hire provision of the copyright statute.

Setting aside work-for-hire, if several people participated in writing the speech (Hurwitz, Michelle, Barack?), assuming that each of these people meets the stringent requirements for co-authorship under U.S copyright law (independently copyrightable contribution and intent) and hasn’t assigned ownership to someone else, each co-author has independent standing to sue Melania for copyright infringement.

It’s not inconceivable that Sarah Hurwitz (or her then-employer) is the sole owner of the copyright in Michelle’s 2008 speech, and Michelle, Barack and the Obama campaign would have no control over a copyright infringement suit.

The bottom line is that ownership of Michelle’s speech is a complicated issue.

Fixed in Tangible Form. Michelle’s speech was recorded in video and audio, satisfying the fixation requirement.

Originality. The originality threshold for copyright protection is very low, and Michelle’s speech easily meets the minimum level of creativity to satisfy it.

Access. Given the wide dissemination of Michelle’s 2008 speech access can be presumed. In fact, based on news reports describing how Melania’s speech was written, access would likely be admitted.

Substantial Similarity. Melania might argue that the sentences she copied from Michelle were a small part of Michelle’s speech, as well as a small part of her speech, and that this de minimis level of copying does not rise to the level of copyright infringement. However, a copier cannot escape infringement based on how little of a work she copied. Even a quantitatively small amount of copying can be infringement if it copies a qualitatively important part of the original work. Michelle’s case would also rest on the tongue-twisting copyright doctrine of fragmented literal similarity, since Melania did not engage in wholesale copying, but copied fragments of Michelle’s speech. Although it may be borderline, Michelle’s claim of substantial similarity appears viable and would likely be decided by a jury after trial (rather than be resolved by a judge on a motion to dismiss or summary judgment).

Fair Use. In addition to arguing no infringement based on lack of substantial similarity and de minimis copying Melania could claim fair use – a defense asserted in virtually every contemporary copyright case. She would argue fair use based on her use of fragments of Michelle’s speech in a political, non-profit context. And, like every copyright defendant today, she would argue that her use was “transformative,” although it’s difficult to see a transformative use in this case.  Nevertheless, a fair use defense has the potential to be effective, and could result in a finding of no infringement.

Scènes à faire. Melania could argue that the common phrases copied from Michelle are indispensable, or standard, in a political speech of this type, and therefore unprotected under the copyright law doctrine known as scènes à faire. Again, this defense could be effective.

No Intent. Copyright infringement is a “strict liability” violation – neither knowledge nor intent is necessary, and the absence of both is not a defense.

Idea-Expression, Merger. There are a few other “tag-along” defenses that are raised in almost every copyright case, and which Melania could assert. For example, she could argue that the sentences copied were unprotected “ideas,” or that there are so few ways to express the ideas that Michelle’s expression is unprotectable under the “merger doctrine.” However, these defenses appear weak given the material copied.

Defendants Other Than Melania. The speech was broadcast by television stations, web sites, newspapers and magazines. All of these publishers are potential defendants, but most of them would have a strong fair use defense, since they used the speech in connection with news reporting.

However, Melania’s co-authors (Merideth McIver, for example), are also potential defendants, and they stand in a position similar to Melania, whose fair use defense is weaker than that of news organizations. Note that Melania need not have participated in writing the speech to be liable, since she infringed by reading the speech in public.

Registration and Damages. It’s unlikely that Michelle’s speech was registered before Melania copied it – a quick search of Copyright Office registration records shows that both Barack and Michelle Obama have registered books, but Michelle’s 2008 speech does not appear in the registration records. Michelle would need to register the speech as a condition to bringing suit, which is easily done. However, failure to register before the infringement occurred would prevent her from recovering statutory damages (which might have been up to $150,000) or attorney’s fees (take a wild guess, now triple it). Without pre-infringement registration Michelle would be limited to recovering “actual” damages (her lost profits or a reasonable license fee), or Melania’s illegal profits attributable to the infringement, and each of these could prove difficult to establish. Of course, Michelle could also seek an injunction, but  the absence of any financial incentive is likely to discourage Michelle (or her co-authors) from bringing suit. But, the statute of limitations for a copyright infringement suit is three years, so they have plenty of time to think about it.

Conclusion. A copyright infringement suit against Melania faces significant obstacles based on ownership, fair use and proof of damages, and I don’t expect that we will ever see this case brought. But, it’s fun for a copyright lawyer to think about.

Kevin Kickstarter Visits His Attorney for an Update on the DMCA Following Capitol Records v. Vimeo

The fictional Kevin Kickstarter last met with his lawyer, Mr. Jaggers, in January 2014. Still pondering Mr. Jaggers advice (following the then-recent Second Circuit’s decision in Viacom v. Youtube), he recently heard of the Second Circuit’s new DMCA ruling in Capitol Records v. Vimeo, and he set up an appointment with Mr. Jaggers to get an update on the law.

Before listening in on this fictional conversation, a brief recap: YouPostVid is a small “you post, we host” music video website. Kevin Kickstarter is its sole owner. YouPostVid is struggling to meet the confusing  requirements necessary to receive safe harbor protection for copyright infringement under the Digital Millennium Copyright Act (the DMCA).  (See the earlier transcript to be updated on how the DMCA can protect web hosts, aka “service providers”, from copyright liability for works uploaded by users).

Two years ago Mr. Jaggers advised Kevin on how to stay on the safe side of the DMCA. But Kevin was frustrated by the confusing law, to the point where he even considered selling his business.  However, demonstrating true grit he has soldiered on and now, more than two years later, he’s back, ready to discuss the latest developments with his lawyer. We are privileged to listen in ….

*      *      *

Kevin Kickstarter: Wassup Mr. Jaggers? I almost didn’t want to see you today for fear of the latest. It has sure been hard playing it safe with the law, as you suggested last time.

Mr. Jaggers: Hello Kevin. I am pleased to tell you that for once, your worries are not to be realized. The Court of Appeals for the Second Circuit, based in New York and arguably the most influential copyright court in the country, has made some progress in clarifying the scope of the DMCA in a case called Capitol Records, LLC v. Vimeo, LLC. The decision was written by Judge Pierre Leval, who authored the Google Books decision last year, and who may be the single most influential living judge on matters of copyright law.

The decision leaves many remaining uncertainties under this law, but it gives companies like yours more protection from claims of copyright infringement based on uploads by your customers. And coming from Judge Leval in the Second Circuit, it carries a lot of weight.

Kevin: Sounds good, dude, tell me more.

Mr. Jaggers: Quite. So do you remember how I explained that YouPostVid had the burden of proving it has complied with certain DMCA safe harbor legal requirements in order to avoid liability for copyright infringement based on user uploads? Well this is still the case. So first up, to qualify a video must be uploaded by a user outside your company. Therefore, be sure to continue to instruct your employees not to upload videos that infringe copyright, a mistake the owners of Grooveshark made, to their regret. And, of course, you have registered a contact agent with the Copyright Office and identified that person on your website for receipt of notices of infringement. Plus, you have a repeat infringer policy.

Kevin: OK, I’m with you so far. I’ve done all that stuff. What was the next requirement under this crazy law?

Mr. Jaggers: Well this is the tricky part we discussed last time. An internet service provider with “actual” knowledge” or “red flag” knowledge must remove or take down the offending material expeditiously.

Kevin: Ugh, the red flag stuff. This gives me a headache. I don’t know how you lawyers do it, Mr. Jaggers. Remind me of what “actual” knowledge and “red flag” knowledge mean.

Mr. Jaggers: Yes, it is confusing, as it requires application of a mixed subjective/objective legal standard – I’m not sure how a jury would ever understand this enough to apply it in a trial. This remains the most perplexing aspect of the DMCA.

According to the Second Circuit in Vimeo, “actual” knowledge means that you actually, “subjectively” know of a specific infringement. If you do, you need to remove the item from your site. An example of this might be if Capital Records writes to you, informs you that they are the owner of a specific video, that its publication on your site is unauthorized, and demands that you take it down. Even though they have not sent you a formal DMCA “takedown notice” that complies with the DMCA “to the letter,” you should take the video down as soon as possible, or to quote the DMCA, “expeditiously.”

“Red flag” knowledge, on the other hand, means that you are subjectively aware of facts that would have made the specific infringement objectively obvious to a reasonable person.

Kevin: Mr. Jaggers, this is the same legal mumbo jumbo as last time. “Red flag,” “objective,” “subjective”! Who can understand this stuff? Normal people don’t even talk like that. But Mr. Jaggers, were there formal takedown notices from Capitol Records in this case – you know, a formal notice identifying the URL and containing the stuff the DMCA requires in a takedown notice?

Mr. Jaggers: No Kevin, there were no takedown notices in this case.

Kevin: Why not?

Mr. Jaggers: I think the large copyright owners, in this case Capital Records, want to expand the scope of the DMCA, and avoid having to serve formal notices – formal notices are too burdensome, and one of their goals is to persuade the courts to shift responsibility for locating and removing infringements to web sites like yours. However, that strategy failed in this case.

Kevin: OK, I think I get it. So, to return to “red flag” knowledge, the last time we met you said if my employees view any clip where the existence of copyright protection would be “objectively obvious to a reasonable person”, then it’s a red flag, and needs to be taken down. You even told me that my own employees couldn’t view videos on the site unless they were trained in this “objectively obvious” standard. This, despite the fact that most of them are part-time high school kids and college students! As a result I’ve told my employees to try to avoid viewing videos – do I still have to do that?

Mr. Jaggers: Kevin, in 2013 the district court in the Vimeo case held that Vimeo had to determine the type of music, that is, professional v. amateur. The court assumed that any “professional” material was posted without the consent of the copyright owner. The court held that a “recognizable song,” played essentially in its entirety and in unedited form triggered the red flag, and a website owner like Vimeo was required to either take it down, or investigate to confirm it was not a copyright violation. The last time we met I advised you based on the law as described in that case.

The good news is that the Second Circuit disagreed with the district court. The Second Circuit held that the fact that an uploaded video contains recognizable, or even famous, copyrighted music and was viewed, even in its entirety, by an employee of a service provider is insufficient, without more, to establish red flag knowledge.

The judges also held that when applying the “red flag” test, the hypothetical “reasonable person” to whom infringement must be obvious is an ordinary person – not someone with specialized knowledge or expertise concerning music or the laws of copyright. In other words, your employees no longer need to be trained in how to sort out the nuanced details of fair use and copyright law. If copyright infringement isn’t obvious to a reasonable person, then the standard is satisfied in your favor.

Kevin: Well, OK, but what does “obvious to a reasonable person” mean? How am I supposed to apply that rule in my company. Remember, I have around 15 kids – well, ok, young adults – working for me. How do I apply this standard to them? Frankly, I wouldn’t call many of “reasonable,” if you get my drift …

Mr. Jaggers: Well, the problem for you, and other web sites that rely on user generated content, is that even there remains a great deal of gray area in this law. Courts have a tendency to decide the narrow issue before them, and usually don’t address hypothetical situations. In the case of the DMCA, that has meant that our understanding of the law has crept forward at a glacial pace.

In this case the Second Circuit didn’t provide any examples of when an infringement would be obvious to a reasonable person, leaving that for the lower courts to work out on a case-by-case basis. But, they did provide an example that shows how difficult it will be for a copyright owner to prove red flag knowledge under this standard. As I mentioned, it’s not enough to establish red flag knowledge to show, without more, that an employee viewed a full length video containing a recognizable song by a well-known artist containing a copyright notice. The video could have been authorized or be fair use – how is the employee to know? Any way you look at it, it’s now much more difficult for a copyright owner to prove red flag knowledge.

Kevin: That’s good as far as it goes, Mr. Jaggers, but it doesn’t go very far. And, what does “without more” mean?

Mr. Jaggers: We don’t know yet, Kevin, the Second Circuit didn’t explain what additional facts would push this into “red flag” territory. Again, the bad news is that this will have to be worked out by the trial courts. But let me give you an example. Assume that you’ve received a valid, formal takedown notice for a specific video, and you’ve told an employee to take the video off your site. If that employee sees the same video re-uploaded shortly afterwards, that would probably trigger a red flag. The employee should take that video down. Anything short of that I can’t say at this point – we’ll have to see what the courts do in follow-up cases. But, if you come across a situation where you are in doubt, you should do one of two things – take the clip down, to be safe. Or, call me to discuss it, and I’ll advise you.

And, to answer your earlier question as to how to apply the  “reasonable person” standard, that’s the kind of instruction that is often left in the hands of juries.

Kevin: I think I get it, Mr. Jaggers, and I can’t say I like it. Except at either extreme, this law remains unpredictable, and that means risks I can’t afford to take. And, it creates opportunities for the large copyright owners to make me spend money on defense, and that alone could force me out of business. The fact that the district court viewed the law one way, and that we tried to live under that legal regime for two years, only to have the Second Circuit provide a different rule of law, is incomprehensible to me. Don’t judges even know what the law is? If they can’t agree, how are we supposed to figure it out? What a crazy system.

Mr. Jaggers:  It’s a crazy system, but it may be better than any of the alternatives. Do you have any questions, Kevin?

Kevin: This all sounds like the law is moving in the right direction – for me, at least.  Before we break – what about the “willful blindness” doctrine? You said last time that it was hard to distinguish from the “red flag” rule.

Mr. Jaggers: That’s correct. “Red flag, “actual knowledge,” “willful blindness” – there are three separate doctrines at work in the DMCA, and it’s difficult to say where one ends and the other begins. In fact, the DMCA doesn’t even mention “willful blindness” – it seems to be a concept the Second Circuit grafted on to the statute.

Kevin: They can do that?

Mr. Jaggers: I’m afraid so. But, in a nutshell, a service provider is “willfully blind when it is aware of a high probability of an infringement and it consciously avoids confirming that fact.

Kevin: How is that any different from “red flag” knowledge?

Mr. Jaggers: Yes, it’s confusing. This willful blindness concept is still up in the air, I’m sorry to say. But, in the Vimeo case the Second Circuit discussed three situations where Capital Records argued Vimeo was willfully blind, and it rejected all of them. The first argument would be applicable to you Kevin, with regards to your community flagging system, which allows users to report videos that are pornographic or that contain hate speech. However, your system is not configured to allow users to flag possible copyright infringements. Vimeo similarly monitored its website, but in its case the monitoring was for infringement of visual copyrighted content as opposed to audio content. Remember that the DMCA has an explicit “no-duty-to-monitor” rule – there is no duty for service providers like you to monitor user content. This rule protected Vimeo – the court held that there was no reason that voluntarily monitoring a site for one type of infringement requires monitoring for a different type of infringement. In other words, even if you monitor for one thing, you’re not willfully blind if you don’t monitor for another. This means you don’t need to add flagging for possible copyright infringement.

Kevin: OK. What were the other two arguments relating to willful blindness?

Mr. Jaggers: The second is simple, and again you don’t need to worry. The Second Circuit held that “suspicion” of copyright infringement is not the same as knowing facts that make infringement obvious, nor does it trigger the “red flag.” In other words, if you or one of your employees is merely suspicious that a video is infringing, you are not obligated to investigate, and failure to do so does not mean you are “willfully blind.”

The third argument is slightly more complicated, and Vimeo skated very close to the line on this one. Believe it or not, Vimeo employees encouraged users to post videos containing infringing material. However, this was sporadic, and there was no evidence that this encouragement led to posting of any of the videos at issue in the suit.

Capitol Records argued that Vimeo’s generalized encouragement of copyright infringement should result in Vimeo being stripped of its DMCA protection altogether, but the Second Circuit rejected this argument.

I think Vimeo narrowly escaped disaster on this issue. It’s reasonable to think that you can’t encourage people to infringe, turn a “blind eye” to infringements and expect the courts to overlook your behavior. The only reason Vimeo won this argument is that the encouragement was minimal and sporadic, and it was not encouraged by company management.

Not only could encouragement rise to the level of “willful blindness,” but it could be viewed as inducement to infringe under the Supreme Court 2005 decision in Grokster. So, my advice is that you should instruct your employees about this in the strongest terms. They should not encourage infringement.

Kevin: OK. So, this last area is certainly more problematic for my business. It’s difficult for me to control my employees, or monitor what they are telling users. Maybe I’ll set up a system where all outgoing company emails get routed to one person, whose job it will be to review them to make sure my employees follow these rules.

But, not to change the subject, the thing that really confuses me is how all of this fits in to the law on sound recordings created prior to 1972. Last time you told me that I had to monitor my website for those because they were governed by some other laws, and DMCA protection didn’t apply. I’ve heard a lot about this pre-1972 sound recording issue, and Flo and Eddie’s lawsuits over their ‘60’s recordings, and I’m still confused by that. Did the court touch on that issue?

Mr. Jaggers: This is where I have saved the best until last. The Second Circuit held that Congress intended the DMCA to apply to all sound recordings, not just post-1972 recordings. The Second Circuit is the first federal appeals court to make this ruling so it is very important. While other courts could disagree, and the issue is not definitively resolved, I’m comfortable saying that you no longer have to treat pre-1972 recordings as a special case – you can treat them the same as everything else for purposes of the DMCA.

Kevin: Wow Mr. Jaggers! That will make life easier. But, I have to say this whole DMCA thing is crazy. The DMCA is still so unsettled that large companies like Capitol Records can still sue me and make me spend a fortune defending, right?

Mr. Jaggers: Yes, we can’t do much about that, I’m afraid. And, in fact, the Second Circuit did remand the Vimeo case so Capitol Records could conduct further discovery into some the “red flag” issues – presumably, this means they’ll be deposing Vimeo employees and questioning them about specific videos they viewed. This is a major problem, Kevin. I know that neither you nor any other startup can afford to defend a case like this if it drags on for years – the cost alone could put you out of business and scare off investors. I’m hopeful that the courts will short-circuit cases like this in the future, to save companies like yours the cost of defending. The Second Circuit hinted as much. We’ll see.

But keep your nose clean, Kevin, and you have a good chance of avoiding a case like this.

Kevin:  So, that’s a bummer. And this whole law seems so complicated and crazy! Do you think it will ever be changed, or do we have to live with this forever? In my weaker moments, I even feel sorry for the copyright owners, who have to play “whack a mole” sending takedown notices over and over again for the same music!

Mr. Jaggers: Yes Kevin, content owners are lobbying Congress to change the law, and it’s not just big companies like Universal, Sony and Warner that are complaining , and hundreds of artists have complained about how unfair the DMCA is to them. Of course, internet service providers like you are not happy with the complexities of the law, either. Everyone is dissatisfied and thinks the law should be changed to favor them. Whether anything gets done to correct these problems, and if so when, is anyone’s guess.

Capital Records, LLC v. Vimeo, LLC (2nd Cir. June 16, 2016)

My thanks to Alice Lomas, a UK law student who interned with my firm this summer, for her assistance with this post.

The Massachusetts Noncompetition Agreement Act - Eight Years and Trying

Laws are like sausages, it is better not to see them being made.  Otto von Bismarck

[Update: attempts to reform noncompete law in Massachusetts failed again in 2016, for the eighth consecutive year. Although bills passed both the House and Senate, an attempt at compromise legislation failed and the legislature adjourned on July 31, 2016 without passing a bill.]

You could go to sleep for years, Rip van Winkle-like, and not miss much when it comes to keeping up with Massachusetts noncompetition legislation. Bills have been filed every year since 2009 and failed to be enacted into law. These bills have displayed all kinds of restrictions on non-competes, ranging from an outright ban (California-style), to a minimum salary requirement.

However, it’s worth taking an occasional peak at what the drafters of this legislation are up to, and the proposed 2016 law is worth waking up for, particularly since it passed the Massachusetts House and is headed for the Senate and possible delivery to Governor Baker for signature by the end of July.

Unsuprisingly, watching the sausage factory (the legislature) at work is not a pretty sight. At the same time, it’s difficult to avert your eyes.

The bill, now H. 4434, contains a lot of what you might expect based on past bills: a 12 month restriction on non-competes (expanded to two years if the employee has breached her fiduciary duty to the employer or unlawfully taken, physically or electronically, property belonging to the employer), and requirements that noncompete agreements be in writing and be provided to employees in advance of the commencement of employment.

However, the proposed law also contains a controversial so-called “garden leave” requirement. The expression “garden leave” — which is common in Britain but infrequently used in the U.S. — describes the situation where an employee leaving a job is told to stay away from work for a certain period, while remaining on payroll. The idea is that a few weeks or months hanging out in the “garden” (or pub!) will prevent the employee from learning confidential information she might take to a new employer.

The proposed Massachusetts law requires that noncompete agreements include a “garden leave clause,” although what this describes is a variation on the British version. It would require an employer to pay an employee subject to a non-compete, post-termination, “at least 50 percent of the employee’s highest annualized base salary” during the two years before the termination. This amount would be paid pro-rata over the duration of the noncompete period (presumably no more than 12 months).

An earlier version of the bill made garden leave mandatory with no loopholes. If the bill had remained in this form it would have greatly complicated employers’ decisions on whether or not to impose noncompetes, since the cost to employers if they chose to enforce a noncompete would have gone from free (today) to six months’ salary.

However, at the last minute the bill was amended to allow employers and employees to agree on, as an alternative to garden leave, some “other mutually-agreed upon consideration.” Translation: employer to employee – “if you want this job you need to agree to a two week garden leave provision. Take it or leave it.” This loophole has been described elsewhere as a “giant, EMC-sized hole“.

Whether the garden leave provision remains in its now-weakened form in the Senate, or whether it will be restored to its original, noncompete-disincentivizing form, remains a key consideration as to whether this bill will have a major impact on noncompete law in Massachusetts.

A few other aspects of this legislation are also worth mentioning. First, and most importantly, a noncompete would not be enforceable against an employee terminated without cause or laid off. This would be a significant limitation on noncompetes in Massachusetts. Employees are often aghast to discover that a noncompete may be enforced against them even though they were terminated from their employment. The bill would leave noncompetes enforceable only against employees terminated with cause (a relatively infrequent occurrence) and employees who terminate their employment voluntarily.

Second, noncompetes would not be enforceable against non-exempt (overtime eligible) employees, students and employees 18 years or younger.

Third, if the employee has been a resident of Massachusetts or employed in Massachusetts for 30 days before termination of employment the employer won’t be able to avoid complying with the law by designating the controlling law to be that of another (more noncompete-friendly) state.

Whether this bill will be passed into law and, if so, what form it will take is is anyone’s guess. However, one thing it clear: only if the garden leave provision is restored without the current loophole will the culture of noncompetes in Massachusetts truly be transformed.

Early this month the White House issued a report titled, Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses. The conclusion of this 16 page report is as follows:

In some cases, non-compete agreements can play an important role in protecting businesses and promoting innovation. They can also encourage employers to invest in training for their employees. However, as detailed in this report, non-competes can impose substantial costs on workers, consumers, and the economy more generally. This report informs future discussions and potential recommendations for reform by providing an overview of the research on the prevalence of noncompetes, evidence of their effects, and examples of actions states are taking to limit the use and enforcement of unnecessary non-competes. There is more work to be done. The Administration will identify key areas where implementation and enforcement of non-competes may present issues, examine promising practices in states, and identify the best approaches for policy reform. Researchers must continue to assess and identify promising policy reforms and the potential impact of those reforms including unintended consequences. Ultimately, most of the power is in the hands of State legislators and policymakers in their ability to adopt institutional reforms that promote the use and enforcement of non-competes in instances that appropriately weigh their costs and benefits and in ways that provide workers appropriate levels of transparency about their rights.

Among many interesting points made are the following:

  • Almost 1/6 of of workers earning less than $40,000/year are bound by noncompetes.
  • An estimated 37% of employees subject to noncompetes are asked to sign noncompete agreements only after accepting a job offer.
  • There is a correlation between noncompetes and lower wages.
  • Many workers who sign noncompetes do not understand the legal implications of these agreements.

. . . and much more. Read the full report here.

The White House report comes on the heels of a March 2016 report by the U.S. Treasury titled Non-compete Contracts: Economic Effects and Policy Implications. The Treasury report makes many of the same points, concluding:

Though non-compete contracts can have important social benefits, principally related to the protection of trade secrets, a growing body of evidence suggests that they are frequently used in ways that are inimical to the interests of workers and the broader economy. Enhancing the transparency of non-competes, better aligning them with legitimate social purposes like protection of trade secrets, and instituting minimal worker protections can all help to ensure that non-compete contracts contribute to economic growth without unduly burdening workers.

Legislation regulating noncompetes has been filed with the Massachusetts legislature every year since 2008, and is likely to be filed again this year. Hopefully, the state lawmakers will take the findings of these reports into consideration and, at the very least, take steps that will curb some of the more egregious abuses associated with noncompete agreements.

Download the pdf file

A quick update on Capitol Records v. Redigi.

The SDNY federal court entered summary judgment against Redigi on liability in March 2013.

The last two years have been spent preparing for trial on damages.

However, on Monday of this week, on the eve of trial, the parties reported the case settled.  Very likely, this settlement (which is confidential), was engineered to allow the decision on liability to be appealed to the Second Circuit. The way this works is that if the appeal is unsuccessful, the defendants will owe a certain amount of money (stipulated in the settlement agreement, which is confidential/non-public).  If Redigi wins on appeal, it will not owe that money (and, presumably, it will be able to resume offering its service, which appears to be inactive at present).  The settlement agreement likely provides for either outcome.

It has always been the expectation that Redigi wanted to get this case to the Second Circuit, so I believe this is likely to be the scenario that is in progress, particularly since there is no permanent injunction issued pursuant to the settlement.  However, without seeing the settlement agreement (or seeing a Notice of Appeal filed by Redigi), we can’t be 100% certain that the case will go to the Second Circuit.

Stay tuned ….

Several of the CopyrightX teaching fellows used the 1990s Lotus v. Borland copyright case in their classes last week. In an excellent Case Study, Professor Fisher and TF/Berkman Center intern Ben Sobel dissected the background and holdings in this complex case.

An interesting aspect of the case study was the use of documents that came to light during Elena Kagan’s Supreme Court nomination process. In 1995 now-Justice Kagan was Associate White House Counsel, and was involved in the administration’s debate of whether to support Lotus (which had prevailed before Massachusetts U.S. District Court Judge Robert Keeton), or Borland (which won before the First Circuit). Judge Keeton had held the Lotus 1-2-3 menu hierarchy copyrightable, and the First Circuit had reversed, holding it to be an uncopyrightable method of operation under 17 U.S.C. sec. 102(b).

Lotus appealed to the Supreme Court, which granted cert. The question the Solicitor General’s office faced in December 1995 was whether to support Borland or Lotus, and on what grounds. The policy issues were impacted by the fact that by 1995 Microsoft’s Excel spreadsheet program had an 80% market share, leaving Borland’s Quattro Pro and Lotus 1-2-3 in the dust.

Kagan’s files show the extent to which the administration was internally divided over this issue.

The DOJ Antitrust Division (headed by Joel Klein, who led the DOJ’s antitrust suit against Microsoft a few years later), supported Borland, and wanted to argue for affirmance. However, it disagreed with the First Circuit’s holding that the Lotus 1-2-3 commands were a method of operation, arguing instead that the First Circuit should be upheld on the ground that the commands were an uncopyrightable computer language. In fact, it appears that all of the agencies, even those that sided with Borland and wanted the First Circuit upheld, believed the First Circuit’s reasoning to have been flawed.

The Department of Commerce and the Copyright Office argued that the administration should take no position either way on the appeal, stating: ”

We all agree that the First Circuit’s reasoning was contrary to the copyright law, and that the Supreme Court should be apprised of the First Circuit’s legal errors. Professional organizations representing intellectual property experts, such as the American Intellectual Property Law Association, have already well-briefed the Supreme Court on these legal errors. . . .  Thus, the Supreme Court should be fully informed on all issues in the case, obviating the filing of
a government brief.

We vehemently oppose the filing of this or any amicus brief on behalf of Borland. The filing of such a brief would seriously jeopardize copyright protection for computer programs.

Commerce’s position ruled the day, and the government took no position on the case. The Supreme Court heard argument in early 1996 and tied 4-4 (Justice Stevens did not vote), affirming the First Circuit decision, but limiting it’s holding to that circuit. Since then no other circuit has adopted Lotus, and the First Circuit has not had occasion to revisit the case.

While the internal government memos and correspondence are fascinating, Kegan’s files also contain draft briefs that reflect the “computer language” argument that the DOJ was urging the SG to adopt. Here is the argument, asserting that the result is correct, but on different grounds than those relied on by the First Circuit:

Although the court of appeals’ reading did not lead it to an erroneous result in this case, we believe that, if left uncorrected, the court of appeals’ interpretation could effectively nullify Congress’ decision to treat computer programs as literary works eligible for protection under the Act. …

We agree with the court of appeals’ conclusion that the command hierarchy used by Lotus 1-2-3 is not subject to copyright protection. The command hierarchy is not, itself, a computer program; rather, it is a type of programming language, analogous to the rules of a game. It constitutes an abstract system of rules that defines permissible sequences of symbols, expressed as keystrokes or otherwise, and assigns meaning to those sequence. The hierarchy itself does not instruct the computer to carry out any function; it is the structure of a language that allows the user and Lotus 1-2-3 to communicate. As such, it facilitates, but is not itself, expression. Therefore, it cannot be afforded copyright protection by Section l02(a) which protects only original expression. …

The court of appeals misconstrued Section l02(b) by failing to interpret that provision in the context of the long-established idea/expression dichotomy that determines what is subject to copyright protection. The court appeared to interpret Section l02(b) as a bar to copyright protection for an expressive work of authorship if the work expresses a method operation. Thus, the court erred in that it interpreted “method of operation” as used in Section 102(b) to reach both idea and expression. But, as demonstrated above, Congress intended through Section l02(b) to exclude from copyright protection ideas and similarly abstract concepts such as methods and processes, but not to preclude copyright for the original expression in which such an idea is presented. …

To the extent the court of appeals’ analysis can be read to be inconsistent with’ the idea/expression dichotomy, it should be rejected. By failing to give effect to Congress’s intent to protect expression while leaving idea [sic] unprotected, it raised unjustified doubts about the copyright status of any work of authorship that could be characterized as “procedure, process, system, [or] method of operation.” …

So understood, the command hierarchy constitutes the structure of a language. The keystroke commands form the language’s vocabulary and the hierarchy defines its syntax and semantics. …
The command hierarchy is not a computer program because the hierarchy, i.e. the rules, do not instruct the computer to perform any operation or “bring about a certain result.” 17 U.S.C. 101. Rather, statements that users write in the language according to those rules i.e., macros — constitute such instructions. …

In sum, the rules that allow communication with a computer in the Lotus 1-2-3 language, like the rules that allow the playing of a particular game or the practice of a particular accounting system, are abstract ideas that may be expressed in copyrightable form, but are not themselves copyrightable expression under Section 102(a). This analysis preserves the public’s right freely to use the rules to create original expression and serves the fundamental policy considerations of the Copyright Act.