Monday, December 20, 2004

LAW: Bittorrent and Secondary Copyright Infringement

This is not just a rant. I have a substantive point to make about the nature of secondary copyright liability. It just so happens that I get to rant for awhile to set up the facts.

The most popular Bittorrent directory on the world wide web is closing down for good less than a week after the MPAA announced that it had the latest P2P filesharing technology in its sights. A few days ago, the MPAA sued more than 100 operators of Bittorrent tracking websites.

I'm not surprised. I don't really think the site operators would have won an infringement case anyway.

Although it's one of the latest technologies, Bittorrent relies on tracking websites to host lists of files that users can download in order to retrieve large files from a large number of sources simultaneously, thus dramatically reducing the time it takes to grab a file. Essentially, users load a Bittorrent program on their computers and provide information on how other Bittorrent users can download files that they have made available. As users download parts of files, Bittorrent makes those file fragments available for others to share so that it isn't necessary to serve an entire copy of a large file on a single computer. Unlike traditional P2P networks, Bittorrents don't require full copies of a file, which permits a level of distributed file hosting never before seen.

Of course, one of its most popular uses has been copyright infringement, specifically of movies. You can get one much faster than you can with a conventional P2P network, where download speed increases only as full copies of files become available.

However, Bittorrent relies on tracking files to work. And the most efficient way to disseminate tracking files is on websites. I think this brings sites like suprnova.org, which hosted lists of Bittorrent tracking files, squarely within the Napster decision. Site operators stored tracking files that visitors downloaded in order to enable them to commit acts of copyright infringement. In this way, the Bittorrent files are a lot like Napster's central servers. The site operators knew that users were relying on the site to facilitate copyright infringement and got traffic because of it.

According to Wired News, MPAA representatives expressed no desire to go after Bram Cohen, the creator of Bittorrent. And as of today, the Bittorrent website is still up and you can still download the software from a number of places, including sourceforge.

Despite the argument that site operators might not know what is going on inside the computer, I think that reality demonstrates that a lot of Bittorrent tracking websites know exactly what their users are doing. Here is some text from one website that hasn't come down yet:

Why choose ******** and BitTorrent?

1. Users move to ******** Bittorrents instead of Kazaa every day

2. Bittorrents are spyware free.

3. Bittorrents are adware free.

4. Bittorrents files are verified and rated, no dummy files or corrupted files!

5. As seen in CNET News: ******** BitTorrents is taking over Kazaa as the prefered P2P networks.

6. Extremely easy to use, and counting on full tech support.

The site's toolbar further supports my point. It advertises movies, games, tv shows, anime, music, apps, and comics. This particular site charges a fee for registration, so I couldn't access any tracker lists. As a side note, anyone who uses a credit card to pay for access to a site that may promote copyright infringement is asking to get sued by the MPAA. Watch National Treasure and see what I mean. I suppose it's possible that the site serves only public domain works and freeware or shareware software. But I'm skeptical about anything claiming to be "taking over Kazaa."

Anyway, I think that most of the Bittorrent tracker sites are a pretty clear case of secondary copyright infringement, which occurs when you don't do any illegal copying yourself, but you do certain things that enable others to do it more easily. According to Chilling Effects:

Vicarious liability, a form of indirect copyright infringement, is found where an operator has (1) the right and ability to control users and (2) a direct financial benefit from allowing their acts of piracy. User agreements or Acceptable Use Policies may be evidence of an operator's authority over users. The financial benefit may include a subscription fee, advertising revenues, or even a bartered exchange for other copyrighted [material]. Under the doctrine of vicarious liability, you may be found liable even if you do not have specific knowledge of infringing acts occurring on your site.

and:

The other form of indirect infringement, contributory infringement, requires (1) knowledge of the infringing activity and (2) a material contribution -- actual assistance or inducement -- to the alleged piracy. Posting access codes from authorized copies of software, serial numbers, or other tools to assist in accessing such software may subject you to liability. Providing a forum for uploading and downloading any copyrighted file or cracker utility may also be contributory infringement. Even though you may not actually make software directly available on your site, providing assistance (or supporting a forum in which others may provide assistance) in locating unauthorized copies of software, links to download sites, server space, or support for sites that do the above may contributorily infringe. To succeed on a contributory infringement claim, the copyright owner must show that the webmaster or service provider actually knew or should have known of the infringing activity.

It seems pretty clear to me that a site, particular one that charges a registration fee, that enables users to download Bittorrent trackers that allow them to illegally download copyrighted works would be, like the original Napster, both a vicarious and contributory infringer.

Notice the term "inducement." It appears in the contributory infringement analysis. It also appears in the Induce Act, which media meat puppet Orrin Hatch proposed in order to give corporate content owners yet another weapon. The act would hold liable for copyright infringement anyone who:

intentionally aids, abets, induces, or procures, [copyright infringement] and intent may be shown by acts from which a reasonable person would find intent to induce infringement based upon all relevant information about such acts then reasonably available to the actor, including whether the activity relies on infringement for its commercial viability.

Notice that the cause of action under the act, creatively dubbed "inducement," is substantially broader than "inducement" as a type of contributory copyright infringement: knowingly and actually assisting infringement. It could also catch a lot of "dual use" technologies that are used to infringe copyrights, but are market for other legitimate purposes.

The iPod, anyone?

Anyway, the Induce Act died in Congress, the victim of disagreement between technology companies and content owners. The tech sector wants to be able to make things like DVR's, iPods, and CD burners without having to fight the entertainment industry over "inducing" copyright infringement. Big media would like very much to rule the world and control innovation absolutely. I suppose the setbacks that the Induce Act has suffered were inevitable.

However, inducement is back, this time before the Supreme Court in MGM v. Grokster. I think that the big issues before the Court will be inducement and the "substantial noninfringng uses" test from the Sony Betamax case, which states:

Accordingly, the sale of copying equipment, like the sale of other articles of
commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.

The question is thus whether the Betamax is capable of commercially significant noninfringing uses. In order to resolve that question, we need not explore all the different potential uses of the machine and determine whether or not they would constitute infringement. Rather, we need only consider whether on the basis of the facts as found by the District Court a significant number of them would be noninfringing.

As for substantial noninfringing uses, the issue is what "capable of substantial noninfringing uses" means. Does the business model mean anything? How much can a defendant really stretch potentiality of a substantial noninfringing use before anything can escape liability under this exception?

This is a test that targets a technology itself. Is the product or service capable of substantial noninfringing uses? If so, it escapes liability and a device-killing injunction. If not, it goes away.

Well, almost anything is. Even Napster would be capable of such uses. After all, it could have purchased licenses. But that didn't save it. Why?

Some people think Napster was wrongly decided. Personally, I don't. While I think P2P is a valuable technology with a lot of potential, Napster was using it for illegal purposes. Furthermore, its value as a service depended almost entirely on those illegal uses.

Realistically, that has to matter. "Substantial noninfringing uses" can't become an excuse raised by people who are clearly and presently profiting from infringement. The doctrine is supposed to protect innovators, not thieves.

So where should a court draw the line? How remote can a potentially substantial noninfringing use be before it's no defense to a party that's merely raising the possibility as an excuse to continue encouraging acts of copyright infringement?

I have had some unique opportunities to discuss the issue with attorneys from both sides from the issue and I think I've come up with the beginning of a test that I could support.

If a technology has a present, commercially significant noninfringing use, then its developer is not liable for secondary copyright infringement. That's the easy part.

If the technology does not have such a use, but is capable of commercially significant noninfringing uses, then its developer will not be liable for secondary infringement unless it derives most, if not all, of its present value from acts of infringement.

I was surprised when inducement came up in our discussion. Parts of the committee wanted to suggest to the Court that one who induced another to infringe a copyright by affirmatively persuading or encouraging the infringement was liable or if the developer is not pursuing the development of value based on substantial noninfringing uses in good faith.

I think this is a hard standard to prove, but I think it strikes the right balance. the Bram Cohens of the world, who create useful and innovative technologies, get to continue working while the Suprnovas of the world get injunctions. Some may criticize this standard as being overprotective of the developer. Maybe so, but courts have traditionally erred on the side of innovation and should continue to do so.

It's important to remember that the Suprnovas and Napsters out there are not actually committing any copyright infringement of their own. Their users are. And regardless of where courts draw the "substantial noninfringing use" line, copyright owners will always be able to pursue actual infringers, identify them, and seek recovery that way.

Besides, there are other ways to impose secondary copyright liability by targeting acts instead of technology. This is where this whole "inducement" theory comes in. The idea is that you don't need to create any technology to be a secondary infringer if you actively enocurage and enable others to commit direct infringement.

If the goal is to prevent infringement, I think that requiring copyright owners to pursue the actors rather than the technology that they use (which, as in the case of Bittorrent, they may not even have created), seems to be a reasonable tradeoff for being able to go after people for "inducement" whether as an element of contributory infringement or a separate and independent claim, like Orrin Hatch wants to make it.

I think it's important for any kind of liability based on "inducement" to be limited to contributory infringement and to actual bad actors. This is why I talked about Bittorrent so extensively.

In the case of Grokster and other traditional P2P networks, there are three sides: the software devleoper, the content owner, and the users. In the Bittorrent context, there are four: the software developer, the copyright owners, the users, and the web site operators who host lists of tracking files. In situations like this, it's absolutely critical to separate the bad acts from the technology itself.

This is why I side with those who think "inducement" liability, whether based on contributory infringement or some other cause of action that Congress will have to hammer out, must be limited to the bad acts, while leaving the technology behind the acts behind.

The distribution of Bittorrent doesn't infringe on copyrights. The maintenance of tracker websites does. I would like to see a definition of secondary liability based on affirmative acts of persuasion that intentionally encourage users to infringe copyrights. Furthermore, such acts should form the fundamental basis of the business. This way, you get the Suprnovas, but you don't get the Bittorrents. This preserves the technology and pursues the bad uses.

Essentially, I think "inducement" should be limited to cases where the business model is what's doing the infringing. This protects dual use technologies, but not the people who profit from encouraging others to use them for infringement. I think that a defendant could be held liable under an inducement theory if the copyright owner is able to prove that they performed affirmative acts intended to promote acts of direct copyright infringement. Further, the distribution of a technology that is capable of substantial noninfringing uses should not be a factor under this kind of analysis. The acts of encouraging infringement (providing the Bittorrent tracking files in a convenient, centralized place so that people can directly infringe copyrights by illegally downloading movies) are wrong. The distribution of the technology (Bittorrent itself) isn't.

So what we have here are two ways to get at secondary liability. One attacks a technology itself. The other attacks bad acts using an otherwise neutral technology that happens to be capable of infringing copyrights on a large scale. Are they perfect? No. I'm a human being so are the men and women who contributed significantly to the development of my position on the issue. But then again, I don't think it's reasonable to expect perfection either. Every industry has to deal with some degree of loss. Why should the entertainment industry be any different?

Sunday, December 19, 2004

NEWS - Music is More Important than Food and Medicine

Wired news reports that the recording industry, which is currently suing Australian company Sharman Networks, the makers of the Kazaa file-sharing program, for a bunch of things related to its general existence (but manly focusing on copyright infringement), may have a new target: the Red Cross.

Yes, that's right. The Red Cross.

It's not that the Red Cross is secretly hosting billions of illegally-downloaded music on its servers. One of the world's most prominent charitable organizations may get in trouble because Sharman Networks is giving it money.

The Red Cross is the only named beneficiary of a Vanatu-based trust that Sharman funds. The Recording Industry wants "to stop [the Red Cross from] disposing of any funds [paid by the trust]."

Wow.

So this isn't just about stopping Sharman from distributing software widely used to infringe on copyrights.

It really is about wringing every last cent out of the world.

At least the industry is being honest about their belief that the bank accounts of label execs are more important than the work of one of the world's most well-known charities.

I'm not too familiar with Austrialian copyright law, but if this was the United States, the industry could, if it won a similar lawsuit, not only stop the distribution of Kazaa, but also recover damages.

The US Copyright Act allows copyright owners to recover statutory damages from infringers under some circumstances, meaning that the plaintiff doesn't have to prove how much money the acts of infringement cost it. This is how the RIAA extorts $5000 "settlements" out of teenagers' parents: that thousand songs isn't going to cost $1000 even though that's how much those songs would have cost over iTunes. More like $700,000. Illegally download $1000 worth of music and your parents lose your house. It doesn't matter how much what you took was worth because the Copyright Act says that the owner can collect X amount of money.

In this case, the industry wants to collect it from the Red Cross. Specifically, it's asked the charity to freeze the fund until the end of the Australian case against Sharman. According to a member of Australia’s Music Industrye Piracy Investigations, "would be incredibly disappointing if [the industry] had to sue them."

Incredibly disappointing?

Don't get me wrong. I don't believe in illegally downloading free music, but I'm appalled that the industry would stoop so low. This isn't even money that Sharman is using for its own benefit. Trust funds are set up for the benefit of a third party, in this case, the Red Cross. A trustee manages the money and makes sure that the income the fund earns is paid to th beneficiary. The settlor, in this case Sharman, doesn't usually get to use the money for its own benefit. This isn't a case of the industry trying to take back money that Sharman is applying to its own profit here. Taking this money isn't going to stop further acts of infringement.

All it's going to do is make sure that the Red Cross has less money to spend helping people so that industry stakeholders can rake in a few more dollars.

Unsurprising, but sad nonetheless.

Friday, December 17, 2004

LAW - P2P Spotlight

Seems that Peer to Peer file sharing (P2P) is "in" again. First, RIAA and MPAA got stymied when the Senate Judiciary Committee shelved the INDUCE Act. The bill, S. 2560, proposed amending the United States Copyright Act to create a new type of copyright infringement liability: inducement. Specifically, the bill provides that "whoever intentionally induces any [copyright] violation shall be liable as an infringer."

Wow.

Naturally, Senators Hatch and Leahy, champions of megacorporate media that they are, provided a definition of "intentionally induce," which is such a model of clarity. To "intentionally induce" copyright infringement is, according to the bill,
aiding, abetting, inducing, or procuring, copyright infringement. Furthermore, intent may be shown by acts from which a reasonable person would find intent to induce infringement based upon all relevant information about such acts then reasonably available to the actor, including whether the activity relies on infringement for its commercial viability.

Things have gotten bad in our public school system these days, but didn't they teach grammar back when these guys were in grade school?

I suppose one way to rake in massive amounts of money in damages is to create a cause of action that's so hard to define that it means whatever the entertainment industry says it means at the time.

The bill does, however, create an interesting list of potential products that "induce" copyright infringement. Incidentally, itt also creates a list of defendants with some deep pockets.

iPod (Apple): you can store digital music on it and possibly give it to other people.

iTunes (Apple): you can rip CD's and then burn them to new CD's. You can even share music over a local area network with other people.

Garage Band (Apple): you can make your own music. You can even sample and mix other people's music. Future DJ Danger Mouses of the world beware.

AOL Instant Messenger (AOL Time Warner): you can create cyber-pseudonyms, meet people, and trade files with them. You can even make a large number of your own files available for other people to download. Some of these might conceivably be copyrighted.

Broadband Internet (Verizon, SBC, Comcast, and many, many others): you can download large files very, very quickly.

The list goes on and on. The companies that create and market these technologies know that people will use them for copyright infringement. Broadband internet providers tout their systems' ability to let you download music and video in seconds. Manufacturers of digital music players encourage users to rip and burn music.

To "abet" means to encourage, incite, instigate, or assist another in the commission of a crime with knowledge of its wrongfulness. So is there anything that doesn't fall within the INDUCE Act's reach?

Perhaps it's no surprise that the INDUCE Act collapsed because negotiations between technology and content interests fell through.

Undaunted, however, the entertainment industry has soldiered on, bringing P2P before the other branches of the federal government. Seeking review of a decision that effectively legalized file sharing networks, the movie industry got the Supreme Court of the United States to review the Ninth Circuit's decision in MGM v. Grokster. They also managed to get the Federal Trade Commission to take notice, accusing P2P companies of engaging in unfair trade practices, including offloading copyright infringement liability on their users.

While the FTC can set down regulations designed to ensure that P2P networks don't deceive their users, the Supreme Court has the power to essentially destroy the technology, which would make big media and its flunkies in the Senate extremely happy.

The core of the issue is whether Grokster's P2P network is capable "substantial noninfringing uses." In defining the term in the context of a video tape recorder, the Supreme Court said:

Accordingly, the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses.

The question is thus whether the Betamax is capable of commercially significant noninfringing uses. In order to resolve that question, we need not explore all the different potential uses of the machine and determine whether or not they would constitute infringement. Rather, we need only consider whether on the basis of the facts as found by the District Court a significant number of them would be noninfringing.

Oddly enough, the Napster decision, where a federal appeals court determined that the granddaddy of all P2P networks was liable for copyright infringement, contains some important language too:

We depart from the reasoning of the district court that Napster failed to demonstrate that its system is capable of commercially significant noninfringing uses. The district court improperly confined the use analysis to current uses, ignoring the system's capabilities. Consequently, the district court placed undue weight on the proportion of current infringing use as compared to current and future noninfringing use.

So what does this mean?

It means that in  deciding whether a P2P network is "capabale of substantial noninfringing uses," it's important to consider not only how the technology is used now, but how it might be used in the future. It means that the fact that most P2P systems are used to swap files that include a large majority of illegally copied files doesn't necessarily condemn P2P any more than an isolated example of trade in noninfringing files exonerates it.

The Napster court had some other interesting things to say too. It noted that, in deciding whether a P2P network provider could be held liable for vicarious copyright infringement, which requires promoting infringement, being able to control it and not doing so, and profiting from it, the ability to control the service must be limited by the system's current architecture.

In other words: can you control infringement now? Not can you redesign the system so that it will let content providers control how people use their own personal property? Not can you make yourself the guardian of big media's intellectual property so that the entertainment industry doesn't need to police its own copyrights but instead can force the technology industry to do it for it?

It's tempting to say that Grokster and other systems like it could have stopped a lot of infringement by simply filtering. The Napster experience showed how well that worked. It was a miserable failure that led to the proliferation of bad spelling. But courts have always erred on the side of innovation. P2P or not, the RIAA and MPAA can still enforce their copyrights. They have done so successfully with an onslaught of litigation.

This is not a debate about whether or not the entertainment industry can enforce its copyrights. It's about whether the industry should have the right to force other people to do its dirty work.

Thursday, December 16, 2004

LAW - Did the Senate get a Clue?

Looks like big media may have suffered a setback. It seems like the Family Entertainment and Copyright Act of 2004 has left out some of the more outrageous provisions, like the PIRATE act, got left out. The sections of the act, which, for once, lacks a silly acronym criminialize the unauthorized recording of movies in a theater and increase the penalties for people who leak movies before their official release.

This is my first post in quite some time, and I haven't had an abundance of time. But hopefully, this will be the first of more regular posts in the future.