April 18, 2014

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The Decline of DVD-by-Mail, or Further Thoughts on the Digital Death of Copyright’s First Sale Doctrine

Netflix reported a second-quarter profit last week as customer demand continues to drive a transition in the company’s primary delivery model from DVD-by-mail to Internet streaming. According to The New York Times, “[t]he company’s net losses among DVD-by-mail subscriptions outpaced its gains in net streaming subscriptions in the United States, reflecting the continued challenge of converting from a physical disc business to one predominately online.” The company, of which I am a longtime subscriber and fan, has famously struggled with the business implications of this transition since it began offering streaming service in 2007. (Remember the Qwickster debacle?) Those business implications derive in some interesting ways from copyright law.

The DVD-by-mail model, on which Netflix built its success, was enabled by the first sale doctrine, which cuts off a copyright owner’s distribution right with respect to a particular copy of a copyrighted work when that copy is first sold. Because of the first sale doctrine, Netflix was not required to get permission from movie studios to set up its business. In the early days, Netflix simply bought DVDs—lots of them—from whatever retailers were selling them and then rented those DVDs to its customers. If the movie studios didn’t like that, well, too bad.
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Opening Government: On the Limits of FOIA and the Metaphor of Transparency

At a recent symposium (“Piracy and the Politics of Policing: Legislating and Enforcing Copyright Law”) sponsored by the Cardozo Arts and Entertainment Law Journal, I was invited to respond to an excellent paper by David Levine on secrecy, national security, and the denial of public access to documents from the Anti-Counterfeiting Trade Agreement (ACTA) negotiation process. Dave argues in his paper for an amendment to the federal Freedom of Information Act (FOIA) that would create a qualified public right to “foreign relations” national security information. Had such an amendment been in place at the time of the ACTA negotiations, the Office of the United States Trade Representative would not have been able to invoke FOIA’s national security exemption—a dubious invocation, at best—to deny public requests for documents that were made under FOIA by public interest groups like Public Knowledge.

Responding to Dave’s article got me thinking about the use of “transparency” as a metaphor for openness in government, the use of FOIA as a mechanism for ensuring such openness, and the ways in which proponents of greater public involvement in policy-making (among whom I count myself) may disserve the cause by focusing too single-mindedly on access to information and the right to know, both of which are operationalized through FOIA. In my response to Dave’s article, a relatively short piece that I’ve posted to SSRN, I try to articulate the limits of FOIA as a mechanism for open government:
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Contract hacking and community organizing

I discussed community discontent with copyright terms of some scholarly publishers, and I proposed an economic analysis. Now let’s consider two other approaches.

Contract hacking

I have published quite a few scholarly papers, and with each one I am invited to sign a copyright form. This is a contract between author and publisher, which which I hand over certain rights and the give me $0 (plus they publish my paper). These contracts (and my signature) is in dead-tree form, on real paper (though in recent years it follows the print/sign/fax or print/sign/scan/e-mail model).

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Modest Proposals for Academic Authors

In the scuffles over copyright policies on scholarly articles, what is the academic author to do? First, inform yourself. Find and read the copyright policy of the journals (or refereed conferences) to which you submit the articles describing research results. Find out the subscription price (dead-tree-edition or online) that the publisher charges individuals and institutions, and compare with the norms in your fields and others. Decide for yourself whether your publisher is unduly limiting the spread of ideas, or charging such prices that the effect is the same.

Remember what Thomas Jefferson wrote in 1813:

That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.

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Copyright in Scholarly Publishing, 2012 Edition

I’ve heard a lot recently about copyright policies of scholarly journals. Over 9000 researchers signed a pledge to boycott Elsevier, on three grounds: (1) high prices for journal subscriptions, (2) bundling practices for institutional subscriptions; (3) lobbying regarding SOPA, PIPA, and the Research Works Act.

Meanwhile, other organizations such as the ACM (scholarly/professional society for computer science and the computing industry) and IEEE (scholarly/professional society for electrical engineering and computing) once were leaders in open-access; they had relatively low journal prices and relatively liberal policies permitting authors to display preprints on the authors’ web pages. Now the ACM’s and IEEE’s policies have not changed, but they are no longer at the forefront: while ACM and IEEE require an assignment of copyright and leave the author with a few rights, organizations such as Usenix (another professional society in computing) take only a nonexclusive license to reprint a scholarly article.

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The Latest in Nationwide Internet User Identification – Part 2 (the All-New, So-Called Federal Co-Conspirator Theory)

Since Part 1 in this series a few months ago, Plaintiffs have continued to file “pure bill of discovery” suits in Florida state court. These proceedings typically involve “John Does” who are accused of copyright infringement via peer-to-peer networks. The Plaintiffs (copyright-holders or their delegates) have continued to name as defendants in those “pure discovery” proceedings not the entities from whom they seek discovery (i.e., the Internet service providers) but instead John Does, from whom no discovery is sought. After filing their suits, Plaintiffs promptly seek and obtain an ex parte order for expedited discovery of the John Does’ names from the ISPs, even though the ISPs are not then represented or present in the proceeding. Because the ISPs are not technically parties, the Plaintiffs can use these orders to issue subpoenas to ISPs from across the country regardless of whether the ISPs or their subscribers would be subject to the jurisdiction of a Florida state court.

The Plaintiffs’ lawyers certainly must know that this is not right. For one thing, they tend to withdraw their subpoenas whenever it appears a court is actually going to hear the reasons why their use of the proceeding is improper.

Recently, several ISPs stood firm and proceeded to a hearing on their motions for protective order in a couple of these proceedings. The Plaintiffs’ lawyers, in typical fashion, tried to withdraw their subpoenas and argued that the judges should not listen to the ISPs’ arguments. Not surprisingly, the Plaintiffs did not fare well in an adversarial proceeding.

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Join Us at Princeton Tomorrow for "Copyright Cat-and-Mouse: New Developments in Online Enforcement"

Tomorrow afternoon, the Center for Information Technology Policy is hosting an event that looks at the state of online copyright enforcement and the policy perspectives of the parties involved. We’ve got a great lineup, with folks from the content industry, internet service providers, web companies, academics, and the press.

Date: Tuesday, March 13, 2012
Time: 1:00 PM – 5:00 PM
Location: The Friend Center, Princeton University, Convocation Room

[Update: Video of the event is now available.]

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IEEE blows it on the Security & Privacy copyright agreement

Last June, I wrote about the decision at the business meeting of IEEE Security & Privacy to adopt the USENIX copyright policy, wherein authors grant a right for the conference to publish the paper and warrant that they actually wrote it, but otherwise the work in question is unquestionably the property of the authors. As I recall, there were only two dissenting votes in a room that was otherwise unanimously in favor of the motion.

Fast forward to the present. The IEEE Security & Privacy program committee, on which I served, has notified the authors of which papers have been accepted or rejected. Final camera-ready copies will be due soon, but we’ve got a twist. They’ve published the new license that authors will be expected to sign. Go read it.

The IEEE’s new “experimental delayed-open-access” licensing agreement for IEEE Security & Privacy goes very much against the vote last year of the S&P business meeting, bearing only a superficial resemblance to the USENIX policy we voted to adopt. While both policies give a period of exclusive distribution rights to the conference (12 months for USENIX, 18 months for IEEE), the devil is in the details.

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This Week in Copyright – SOPA, Golan, and Megaupload

It has been an exceptionally busy week for copyright policy. We heard from all three branches of the US Federal Government in one way or another, while the citizens of the Internet flexed their muscles in response.

The most covered story of the week was the battle over SOPA and PIPA — the twin proposed bills that aimed to cut down on online piracy of copyrighted works by giving the government significant new authority to block access to allegedly infringing web sites. Other authors on this blog have pointed out how the bills show inconsistency in the copyright industry’s position on regulating the internet, could threaten free speech in repressive regimes, and may ultimately be found by the courts to violate fundamental constitutional liberties. On Wednesday some of the most popular sites on the web “went dark” or otherwise heightened awareness of the issue, and the surge citizen pleas to Congress caused a surprising reversal of momentum in the House and Senate. [Update: Both PIPA and SOPA have now been shelved.]

Buried in the day’s developments was the Judicial branch’s copyright contribution. In a highly anticipated decision, the Supreme Court ruled on the case of Golan v. Holder. At issue was the question of whether or not Congress had the right to make a law that moved public domain works into copyright. Opponents of this law claimed that such a move violated not only the First Amendment, but also the purpose of the Copyright Clause — not to mention and age-old legal principles. The majority did not agree, and in a 6-2 vote it stated that individuals do not have any particular right that guarantees their use of the public domain, so they have no claim if Congress removes materials from it. Justices Breyer and Alito dissented, explaining that the ruling upset the delicate balance that the Founders had struck in affording limited monopoly rights to content creators. Nevertheless, the majority clearly demonstrated that the Judicial branch continues to trend toward greater expansion of copyright protection.

On Thursday, the Executive Branch weighed in. The Department of Justice announced that it had seized the domain name and servers of the popular file-sharing site Megaupload and had indicted several of the site’s operators. Although Megaupload claimed to be complying with US copyright law — in particular the notice-and-takedown provisions of the Digital Millennium Copyright Act — the feds claimed that the operators knew full well that the majority of the content on the site was infringing. Within minutes of the announcement, hacktivist group Anonymous had launched a denial-of-service attack on the Department of Justice web site, which remained unreachable for hours [Update: days].

Opponents of SOPA and PIPA welcomed the opportunity to reflect on why these developments demonstrated the shortcomings of the proposed bills. Some of them noted that the DoJ’s actions were done without any additional authority from harmful new bills, while others observed that such approaches to enforcement are ultimately ineffective — they observed that it was only a matter of time until Megaupload returned, or the many other file-sharing sites filled their shoes. By Thursday night, all four GOP presidential candidates had come out against SOPA.

It is hard to consolidate all of these developments into a coherent story of where things are headed. However, a few things seem clear. First, the SOPA/PIPA backlash is shows us that the internet can help citizens to rally a truly remarkable effort that penetrates the beltway bubble. Second, internet freedom is a compelling and accessible counter-narrative to copyright maximalism and government policing. Third, the courts continue to favor an approach to copyright that emphasizes property rights of those who have already created works over the free speech rights of those who may rely on those works to create new works. Fourth, the enforcement arms of the government are interested in taking ever-more-extreme measures to take down those accused of infringement, and are committing more taxpayer resources to a problem that continues to grow despite their approach.

But perhaps most significantly, this week shows us that there is just plain turmoil in this area. Policymakers are struggling to find good answers, and sometimes their “solutions” provoke far more criticism than praise.

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"Stolen" LinkedIn Profiles and the Misappropriation of Ideas

The common law tort of “hot news” misappropriation has been dying a slow and justified death. Hot news misappropriation is the legal doctrine on which news outlets like the Associated Press have repeatedly relied over the years to try to prevent third-party dissemination of factual information gathered at the outlets’ expense. Last June, the Second Circuit Court of Appeals dealt a blow to the hot news doctrine when it held that financial firms engaged in producing research reports and recommendations concerning publicly traded securities could not prevent a third party website from publishing news of the recommendations soon after their initial release. The rationale for the court’s decision was that state law claims of hot news misappropriation can only very rarely survive federal preemption by the Copyright Act, which excludes facts from the scope of copyright protection. The rule that facts are not eligible for copyright (called the fact-expression dichotomy) is at the heart of the copyright system and serves the interests of democracy by promoting the unfettered dissemination of important news to the populace. Creative arrangements of facts can be protected under copyright law, but individual facts cannot.

Given the declining fortunes of the hot news doctrine, I was a little surprised to discover a recent case out of Pennsylvania called Eagle v. Morgan, in which the parties are fighting over ownership of a LinkedIn account containing the plaintiff’s profile and her professional connections. The defendant, Eagle’s former employer, asserted a state law counterclaim for misappropriation of ideas. Ideas, as it happens, are—like facts—excluded from the scope of federal copyright protection for a compelling policy reason: If we permit the monopolization of ideas themselves, we will stifle the communal intellectual progress that intellectual property laws exist to promote. Copyright law thus protects only the expression of ideas, not ideas themselves. (This principle is known as the idea-expression dichotomy.) Accordingly, section 102(b) of the Copyright Act denies copyright protection “to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied.” The statute really could not be clearer.

In its opinion denying Eagle’s motion for judgment on the pleadings, the trial court did not consider whether the state law tort of misappropriation of ideas is federally preempted by the Copyright Act, which seems to me to be a really important legal question. The court explained that a claim for misappropriation of an idea in Pennsylvania has two elements: “(1) the plaintiff had an idea that was novel and concrete and (2) the idea was misappropriated by the defendant.” To determine whether a misappropriation has occurred, the court further explained, Pennsylvania law requires consideration of three factors:

(1) the plaintiff “has made substantial investment of time, effort, and money into creating the thing misappropriated such that the court can characterize the ‘thing’ as a kind of property right,” (2) the defendant “has appropriated the ‘thing’ at little or no cost such that the court can characterize the defendant’s actions as ‘reaping where it has not sown,’” and (3) the defendant “has injured the plaintiff by the misappropriation.”

Setting aside the oddity of classifying digital information as a “thing,” the first of these factors collides head on with the Supreme Court’s clear repudiation in Feist Publications v. Rural Telephone Service of the “sweat of the brow” theory of intellectual property.

In Feist, the Court held that “sweat of the brow” as a justification for propertizing information “eschew[s] the most fundamental axiom of copyright law—that no one may copyright facts or ideas.” Given copyright law’s express prohibition on the propertization of ideas, there is a strong case to be made that state law claims for misappropriation of ideas are in direct conflict with both the letter and spirit of the federal copyright scheme. On that basis, they are akin to claims of hot news misappropriation, and they should likewise be treated as preempted.