Legal Analysis
Judge Allows Bogus Jones Day Trademark Claims to Go Forward
Legal Analysis by Corynne McSherryIn a decision that could have significant negative consequences for online speech and commerce, Judge John Darrah of the Northern District of Illinois has refused to dismiss some of the most preposterous trademark claims we've ever seen (and that's saying something).
The defendant in the case, BlockShopper.com, provides information about recent real estate transactions, including publicly available information about buyers and sellers. After BlockShopper published articles referring to two Jones Day attorneys who had recently bought homes (with links to their bios on the Jones Day firm website), the law firm sued BlockShopper, alleging that using the term "Jones Day" to refer to the firm in a headline and linking to the Jones Day website could lead to confusion over the sponsorship of the site. With amicus support from EFF, Public Citizen, Public Knowledge and the Citizen Media Law Project, BlockShopper.com argued that the uses were fully protected by fair use and the First Amendment, and that no Internet user would imagine that Jones Day was affiliated with or sponsored BlockShopper based solely on a link or a reference to the firm in a headline.
This case was a perfect candidate for early dismissal. It is based on the erroneous belief that trademark owners can prevent others from using their marks, accurately, in the ordinary course of communication, to refer to the owners themselves. Trademark law has never given a mark owner veto power over all uses of its mark, and for good reason. Online and off, trademarks—words, symbols, colors, etc—are also essential components of everyday language, used by companies, consumers and citizens to share information. If Jones Day were correct, no news site or blog could use marks to identify markholders, or links to point to further information about the markholders, without risking a lawsuit. But that is not the law, and Jones Day should know it.
We're disappointed that a respected law firm like Jones Day started this outrageous litigation, but we're even more disappointed that the court didn't take this opportunity to nip it in the bud. The court said that it could not end the case at this stage because it is required to take Jones Day's allegations as true. That's not precisely so; on an early motion like BlockShopper's, a court is required to accept facts as true, but not (implausible) legal conclusions. That's because deciding the facts is up to a jury. But interpreting the law is exactly what the judge is supposed to do, and it's disheartening to see the court let this case go any further.
At any rate, by allowing the case to go forward, the court has made BlockShopper's defense much more expensive, even if BlockShopper is confident (as it should be) that it will win in the end. Thus, the court has sent a signal to news sites and blogs everywhere: no matter what the Lanham Act says, if you link to a trademark owner's site, or use a mark in a headline or post, you'd better have a pretty decent legal budget.
Google Book Search Settlement: A Reader's Guide
Legal Analysis by Fred von Lohmann
As we reported earlier this week, Google has settled the lawsuit brought in 2005 by authors and book publishers regarding its massive book scanning and indexing project. Although the settlement must still be approved by the court and is unlikely to go into effect until sometime late in 2009, commentary has already been flooding the blogosphere. Generally, opinions are split between excitement for users ("better access to zillions of out-of-print books") and suspicion of Google ("one library to rule them all, and in the darkness bind them").
We are still digesting the ~300-page proposed settlement agreement (for those seeking a good overview, the 39-page notice to class members is a good place to start).
So far, two things are plain.
First, this agreement is likely to change forever the way that we find and browse for books, particularly out-of-print books. Google has already scanned more than 7 million books, and plans to scan millions more. This agreement will allow Google to get close to its original goal of including all of those books into Google's search results (publishers got some concessions, however, for in-print books). In addition to search, scanned public domain books will be available for free PDF download (as they are today). But the agreement goes beyond Google's Book Search by permitting access, as well. Unless authors specifically opt out, books that are out-of-print but still copyrighted will be available for "preview" (a few pages) for free, and for full access for a fee. In-print books will be available for access only if rightsholders affirmatively opt in. The upshot: Google users will have an unprecedented ability to search (for free) and access (for a fee) books that formerly lived only in university libraries.
Second, this outcome is plainly second-best from the point of view of those who believe Google would have won the fair use question at the heart of the case. A legal ruling that scanning books to provide indexing and search is a fair use would have benefited the public by setting a precedent on which everyone could rely, thus limiting publishers' control over the activities of future book scanners. In contrast, only Google gets to rely on this settlement agreement, and the agreement embodies many concessions that a fair user shouldn't have to make.
But the settlement has one distinct advantage over a litigation victory: it's much, much faster. A complete victory for Google in this case was probably years away. More importantly, a victory would only have given the green light for scanning in order to index and provide snippets in search results; it would not have provided clear answers for all the other activities addressed in the settlement, such as providing display access for out-of-print books, allowing nondisplay research on the corpus, and providing access for libraries. Litigating all of those fair use questions could easily have taken a decade or more. As University of Michigan head librarian Paul Courant points out, those are years that we would never get back. (University of Virginia's Prof. Siva Vaidhyanathan offers a differing view: "These claims are not convincing when one considers just how great an alternative system could be, if everyone would just mount a long-term, global campaign for it rather than settle for the quick fix.").
Conclusions beyond those two are harder to draw. Many devils are buried in the details of the 300-pages of legalese, and much will turn on how the agreement is implemented. Here are the 6 "big picture" concerns that I'm keeping in mind as I review those details:
Fair Use: How will this agreement impact future fair use cases involving book scanning? Others (like the Open Content Alliance) are scanning books, and they may not have Google's ability (or budget) to strike a deal with the world's publishers. UCLA Law's Prof. Neal Netanel has a few preliminary thoughts along this line at the Balkinization blog.
Innovation: It seems likely that the "nondisplay uses" of Google's scanned corpus of text will end up being far more important than anything else in the agreement. Imagine the kinds of things that data mining all the world's books might let Google's engineers build: automated translation, optical character recognition, voice recognition algorithms. And those are just the things we can think of today. Under the agreement, Google has unrestricted, royalty-free access to this corpus. The agreement gives libraries their own copy of the corpus, and allows them to make it available to "certified" researchers for "nonconsumptive" research, but will that be enough?
Competition: In the words of Prof. Michael Madison, "Has Google backed away from an interesting and socially constructive fair use fight in order to secure market power for itself?" Does this deal give Google an unfair head start against any second-comers to book scanning? The agreement creates an independent, nonprofit Book Rights Registry to dole out Google's royalties, and the parties clearly hope that the Registry will be able to license others on similar terms. But the Registry is empowered to cut a deal with Google on behalf of all rightsholders by virtue of the class action; in order to offer similar blanket licenses to others, it would have to independently acquire rights from each and every copyright owner individually. How long will that take? What about the Registry itself? It hopes to be a monopoly that fixes prices for the entire market of copyright owners -- precisely the kind of thing that landed ASCAP and BMI, which dole out blanket licenses for music, in antitrust trouble decades ago.
Access: This agreement promises unprecedented access to copyrighted books. But by settling for this amount of access, has Google made it effectively impossible to get more and better access? The agreement allows you to "purchase" digital access for out-of-print books, but does not include the right to download the book (unlike public domain books). So you can read the book, but only on Google's terms. Libraries get more access, but for an undisclosed price (OK, one computer for free) and still with a variety of restrictions. In the words of Harvard's head librarian, "As we understand it, the settlement contains too many potential limitations on access to and use of the books by members of the higher education community and by patrons of public libraries."
Public Domain: Early reports are that public domain materials are not regulated by the agreement. Moreover, Google has negotiated a "safe harbor" that protects it from liability for mistakes in evaluating the copyright status of a book. That should result in more willingness to forge ahead with the free PDF posting of books published between 1923-1963, where a public domain determination turns on checking government records to see whether the copyright had been renewed. But will Google impose restrictions on these "safe harbor" public domain works? Will the libraries that receive a digital copy of their own public domain holdings impose restrictions on those copies?
Privacy: The agreement apparently envisions a world where Google keeps all of the electronic books that you "purchase" on an "electronic shelf" for you. In other words, in order to read the books you've paid for, you have to log into Google. Google is also likely to keep track of which books you browse (at least if you're logged in). This is a huge change in the privacy we traditionally enjoy in libraries and bookstores, where nobody writes down "Fred von Lohmann entered the store at 19:42:08 and spent 2.2 minutes on page 28 of 0-486-66980-7, 3.1 minutes on page 29, and 2.8 minutes on page 30." If Google becomes the default place to search, browse, and buy books, it will be able to keep unprecedented track of what you read, how you read it, and collate that with all the other information it has about you. Does the agreement contain ironclad protections for user privacy?
Federal Circuit Reins In Business Method Patents
Legal Analysis by Corynne McSherryThe Court of Appeals for the Federal Circuit yesterday issued a decision that imposes firm limits on business method patents. The ruling effectively overturns a key part of the court’s decision in State Street Bank and Trust v. Signature Financial Group, which opened the door to an explosion of patents on "methods" of doing business so long as the methods involved use of a computer and produced a "useful, concrete, and tangible result."
Bilski applied for a patent on a method of managing the risk of bad weather through commodities trading. Upholding the Patent Office’s rejection of Bilski’s application, the Federal Circuit held (in line with Supreme Court precedent) that processes can be patented only if they are implemented by a machine or transformed something into a new or different thing. The court found that Bilski’s method was not patentable because “transformations or manipulations of…business risks, or other such abstractions cannot meet the test because they are not physical objects or substances….” The court affirmed that business methods are still patentable, but explicitly rejected State Street’s “useful, concrete, and tangible result” test, which many believed had cleared the way for improper patents on fundamental principles and everyday activities that had no connection to technological innovation:
[W]hile looking for "a useful, concrete and tangible result" may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible under § 101. And it was certainly never intended to supplant the Supreme Court's test. Therefore, we also conclude that the "useful, concrete and tangible result" inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.
EFF submitted an amicus brief (in conjunction with The Samuelson Law, Technology & Public Policy Clinic at UC Berkeley Law, Public Knowledge, and Consumers Union) supporting the rejection of Bilski's patent application.
Hollywood Menaces DVD Rental Kiosks
Legal Analysis by Fred von Lohmann
Hollywood's distaste for disruptive innovation isn't limited to software products like RealDVD. Now it is targeting DVD rental kiosks, like the Redbox kiosk pictured here.
The idea couldn't be simpler, or the innovation more pro-consumer: Redbox makes DVD rental kiosks that rent authentic, Hollywood DVDs. It's just like Blockbuster, only without the trappings of the store, which means kiosk vendors can do it cheaper, quicker, and in more places. Simple $1 per night DVD rentals. Brilliant.
Hollywood apparently doesn't see it that way. According to a lawsuit filed by Redbox, the Universal Studios family of companies have demanded that Redbox sign a "revenue sharing agreement" that would require Redbox to:
- wait 45 days after a DVD's release date before renting it;
- pay a royalty of 40% of gross rental revenues;
- promise that prices never dip below $0.99 per night; and
- destroy all previously rented DVDs rather than offering them for purchase for $7, as Redbox currently does.
What if Redbox refuses? Universal Studios allegedly threatened to cut off the distributors (Ingram and VPD) who sell Universal DVDs to Redbox. I'm guessing this threat is meant to get Redbox cut off by its distributors -- obviously, Ingram and VPD aren't going to be thrilled to lose all of their other customers over the Redbox account.
This is a breathtaking attack on the first sale doctrine, which makes it crystal clear that once you've bought a DVD, you can rent and resell it at any price and on any terms you like. Universal Studios apparently would prefer a world where millions of DVDs are shredded and put in landfills to one where consumers can rent a DVD for $1. (Although this is an improvement over its former corporate sibling, Universal Music Group, which believes that throwing promo CDs away is illegal.)
Hat tip to Paul Sweeting at ContentAgenda, who brought this story to light.
CC licensed photo by Eddie Does Japan
YouTube Responds to McCain Campaign's Letter
Legal Analysis by Michael KwunYesterday, we wrote about the McCain-Palin campaign's letter to YouTube, highlighting how DMCA takedown notices can make online speech disappear from the Internet, even when the claims of infringement plainly lack any merit.
Today, we bring you YouTube's response. YouTube's response points out, much like we did yesterday, that the McCain-Palin campaign's proposed solution (human review of DMCA takedown notices targeting videos posted by political candidates and campaigns) favors speech from one particular class of users. YouTube says that it "tri[es] to be careful not to favor one category of content on [its] site over others, and to treat all of [its] users fairly, regardless of whether they are an individual, a large corporation, or a candidate for public office."
At the end of the day, we agree with YouTube that "[t]he real problem here is individuals and entities that abuse the DMCA takedown process." And we commend YouTube for taking action in some cases where it has identified false takedown notices.
Nonetheless, although YouTube may not be the source of the problem, that doesn't mean it can't do more to be part of the solution. YouTube notes that it can't always be certain whether a video qualifies as fair use, and that it can't know whether the poster has a license to the content. That's all true.
But just because YouTube can't always identify sham takedown notices doesn't mean it can't sometimes know the answer. Using a short excerpt from a news broadcast and commenting on it in a political commercial is clearly fair use. And there are many other examples of clear fair uses, as well.
We'd love to see YouTube take further action, so that takedown notices directed at clearly non-infringing videos can't be used to silence speech. As we said yesterday, stay tuned for more on this topic from us soon.
McCain Campaign Feels DMCA Sting
Legal Analysis by Fred von LohmannYesterday, the McCain-Palin campaign sent a letter to YouTube describing the troubles it has been having with bogus DMCA takedowns targeting its videos:
[O]verreaching copyright claims have resulted in the removal of non-infringing campaign videos from YouTube, thus silencing political speech. Numerous times during the course of the campaign, our advertisements or web videos have been the subject of DMCA takedown notices regarding uses that are clearly privileged under the fair use doctrine. The uses at issue have been the inclusion of fewer than ten seconds of footage from news broadcasts in campaign ads or videos, as a basis for commentary on the issues presented in the news reports, or on the reports themselves. These are paradigmatic examples of fair use...
It's heartening to see a presidential campaign recognize the importance of fair use and "remix culture" (the Obama-Biden campaign has also been the victim of frivolous takedowns from big media companies, so this is a bipartisan problem). EFF, the ACLU, Harvard's Citizen's Media Law Project, and Stanford's Fair Use Project have been making the same point for several years now. EFF has also been providing direct legal assistance to victims of DMCA abuse.
Unfortunately, the solution proposed by the McCain campaign addresses only the tip of the iceberg:
[W]e believe that it would consume few resources--and provide enormous benefit--for YouTube to commit to a full legal review of all takedown notices on videos posted from accounts controlled by (at least) political candidates and campaigns.
The obvious problem with this solution? It assumes that YouTube should prioritize the campaigns' fair use rights, rather than those of the rest of us. That seems precisely backwards, since the most exciting new possibilities on YouTube are for amateur political expression by the voters themselves. After all, the campaigns have no trouble getting the same ads out on television and radio, options not available to most YouTubers.
Let's start by identifying the real villains here: the major news media outlets. They are the ones censoring these political ads, based on the use of a few seconds of their footage. The networks need to back off and give fair use a wide berth. So let's start by shaming the bad guys here. In addition, lawsuits might help. Under the DMCA, both the campaigns themselves and YouTube have standing to sue those who send clearly bogus takedown notices. (EFF has represented video creators in a number of these cases, including against Viacom.)
There are other possible solutions, as well. Stay tuned for our specific ideas on what YouTube can do to protect fair use while staying within the bounds of its DMCA safe harbor protection (hint: as the McCain-Palin letter points out, you don't need a safe harbor if the video isn't infringing, something that human review by YouTube should be able to determine).
UPDATE: The McCain-Palin campaign has identified the news outlets behind the YouTube removals: CBS, Fox News, and the Christian Broadcasting Network. We noted above that NBC has targeted an Obama-Biden video for removal. That's four news entities that should know better.
Why Hollywood Hates RealDVD
Legal Analysis by Fred von LohmannWhy does Hollywood hate RealDVD so much? Here's a hint: it has nothing to do with piracy and everything to do with controlling innovation.
Earlier this week, a district court in San Francisco extended the temporary restraining order (TRO) blocking RealNetworks' distribution of its RealDVD software, at least until a full-dress preliminary injunction hearing can be held sometime in late November. Although reporters have done a good job reporting on the hearing, they have not answered a more basic question: why does Hollywood care so much about RealDVD in the first place?
It's not about piracy. After all, those who want to copy DVDs have plenty of free, widely available, easy-to-use software to choose from (e.g., Handbrake, DVD Shrink, Mac The Ripper). And those who want to skip the tedium of DVD ripping altogether can easily download movies from unauthorized sources like The Pirate Bay. In short, Hollywood can't possibly believe that the $30, DRM-hobbled RealDVD software represents a piracy threat in an environment rife with easier options.
So why unleash all the expensive lawyers to kill RealDVD? Answer: to send a message about what happens to those who innovate without permission in a post-DMCA world.
As we've said for years, DRM systems like the Content Scramble System (CSS) used on DVDs are not principally about preventing piracy. Rather, DRM is the legal "hook" that forces technology companies to enter into license agreements before they build products that can play movies (Hollywood lawyers candidly admit this "hook IP" strategy). Those license agreements, in turn, define what the devices can and can't do, thereby protecting Hollywood business models from disruptive innovation.
This arrangement reverses the previous innovation status quo. Where non-DRM'd content (e.g., books, broadcast TV, the CD) is concerned, innovators do not have to ask permission before building new products that can copy and play copyrighted works (e.g., the photocopier, the VCR, the iPod). But where DRM'd content like DVDs are concerned, Hollywood intended the DMCA's anti-circumvention provisions to slam the door on that kind of disruptive innovation. After the DMCA, technology vendors would have to ask permission, sign licenses, and make concessions, if they were going to build things to play DRM'd Hollywood movies.
So it's not that Hollywood implacably hates personal use format-shifting and space-shifting -- rather, Hollywood wants to make sure those new features happen on Hollywood's terms ("pay us again"), on Hollywood's timetable ("later"), and only after valuable concessions have been wrung from technology companies ("watermark detection, compliance & robustness requirements, down-rezzing").
That's why RealDVD is such a threat. By reading the existing CSS license carefully, Real (and Kaleidescape before it) found a way to create a new product category without first getting permission from (and paying obeisance to) the Hollywood studios. Real's defection represents a threat to several schemes that Hollywood has been working on for throttling DVD innovation over the next several years. For example:
- Managed Copy: Hollywood has been negotiating for years with technology companies over "Managed Copy," a mechanism that will allow limited copying of DVD and Bluray discs onto PCs and portable devices. "Managed Copy" has been promised for years, yet has not materialized, thanks to power struggles inside the organizations that run the relevant DRM licenses (DVD-CCA for DVDs, AACS-LA for Bluray). In the course of these negotiations, Hollywood has managed to wrest several important concessions from technology vendors (including requiring that computers do watermark detection to spot pirated copies when reading data from Bluray discs, and imposing DRM on resulting copies). If those technology companies can build things like RealDVD and Kaleidescape under the terms of the existing contract, then the prospect of more negotiations and concessions for Managed Copy suddenly seems much less appealing.
- Digital Copy: Hollywood has begun selling DVDs that come with a second disc that permits the making of a copy on a PC. The catch? You have to pay extra for the right to make this personal use copy -- in other words, Hollywood is stealing your fair use rights and selling them back to you piecemeal.
- Internet Download Services: you already bought it on DVD, but now Hollywood wants you to buy it a second time from iTunes, Amazon, or MovieLink if you want to watch the same movie on a PC or iPod.
So that's the real story here. It's not about piracy. It's about Real defecting from the DRM licensing cartel, building what consumers want now instead of negotiating endlessly for a spot in Hollywood's next Five Year Plan for the DVD format.
Why MPAA Should Lose Against RealDVD
Legal Analysis by Fred von LohmannEarlier this week, the motion picture industry sued RealNetworks over its RealDVD software. The MPAA companies also asked for an immediate temporary restraining order (TRO) to block Real from distributing the product, which allows consumers to copy their DVDs onto their personal computers for later playback.
There are many obvious reasons why this is a short-sighted and futile gesture by the studios (as Jon Healey of the L.A. Times points out), but let's focus just on the fatal flaws in their legal theory. (We've posted the key legal documents, including TRO briefs, for those who want to read them and form their own opinions.)
In order to obtain a TRO or preliminary injunction, the studios have to demonstrate both (1) a likelihood of prevailing on the merits of the case and (2) irreparable harm if they don't get an immediate order blocking distribution of RealDVD. They fail on both counts.
Irreparable Harm ... Not
Let's take "irreparable harm" first. The studios claim that if consumers get the power to copy DVDs (gasp!), it will be a catastrophe for Hollywood's DVD, VOD, and digital download businesses. I'm not sure what alternate version of reality the MPAA is living in, but consumers have been able to copy DVDs for a long time, thanks to free, widely available DVD rippers like Handbrake, DVD Shrink, and MacTheRipper. And, as we pointed out back in 2006 in a filing with the Copyright Office, this isn't a fringe activity only for hacker super-users. DVD rippers are in wide circulation and have been routinely reviewed in the mainstream press (like the Fort Worth Star-Telegram, PC World and MacWorld, not to mention Lifehacker). In fact, most of us were wondering how RealDVD was going to compete with Handbrake, particularly since RealDVD costs more ($30 v. free) and does less (Windows only v. multi-platform, DRM restrictions v. no restrictions).
So if DVD copiers are already in the hands of millions of consumers, how does the introduction of RealDVD threaten "irreparable harm" to Hollywood? Answer: it doesn't.
Hollywood also argues that "Real's (false) prophesies of legality have the likely potential of altering consumer attitudes towards DVD-copying and, accordingly, consumer behavior." That's absurd. If the distribution of RealDVD does not threaten irreparable harm (because it's just one more DVD ripper), then Real's public statements about their legal position (all protected by the First Amendment) certainly can't tip the balance. After all, the MPAA's litigation, legislation, and public education efforts have already reached far more consumers than Real could ever hope to. Plus, there are those FBI warnings in every DVD, as the studios tout in the first line of their TRO brief: "Anyone who has ever watched a popular movie on a DVD knows from the opening frames that copying the content of the DVD is strictly prohibited."
[Aside for law nerds: The studios also make a half-hearted claim that they are entitled to a presumption of irreparable harm because that's the norm in intellectual property cases. That argument died two years ago, with the Supreme Court's 2006 ruling in eBay v. MercExchange rejecting those "presumptions." In fact, these same movie studios lost this same argument in front of the district court judge in MGM v. Grokster last year. See 518 F.Supp.2d 1197, 1212-14 (C.D. Cal. 2007).]
DMCA Violation ... Not
Nor are the studios likely to prevail on the merits of their DMCA claim. According to the studios, RealDVD "circumvents" the CSS encryption system that protects DVDs. The problem with that argument is that Real has a license from DVD-CCA to decrypt DVD movies, and the DVD-CCA v. Kaleidescape case tells us that the license does not prohibit making bit-for-bit digital copies of DVDs, so long as you keep them secure and play them in a software player that complies with the license requirements. This brings us to the heart of the studio's argument:
Although Real has authorization under the CSS license to use the decryption keys and licensed technology to play content on DVDs, Real does not have authority to use that technology to make a permanent, playable copy of DVD content. By using authorized technology for an unauthorized purpose, Real "avoid[s]," "bypass[es]" and "impair[s]" those very measures. In short, RealDVD circumvents CSS's access- and copy-control protections.
The trouble with this line of argument is that two courts have ruled that "using authorized technology for an unauthorized purpose" does not violate the DMCA. According to those courts, if someone gives you a password, and then you use it in an unauthorized way, there's no DMCA "circumvention." Here, the "password" would be the CSS keys to decrypt DVDs, which Real received as a DVD-CCA licensee. So using those keys for an "unauthorized purpose" is no DMCA violation. And, since the studios are seeking their TRO based solely on the DMCA, that should be the end of that.
[Aside for copyright nerds: if you believe the MPAA that the DVD-CCA license does not authorize "copying," but only "playback" of DVDs, then what about all the temporary RAM copies that are made by all licensed DVD players? The MPAA just got done arguing strenuously in the Cablevision case that all those RAM copies count as copies, no matter how short-lived. Have they changed their minds and embraced the Second Circuit's contrary ruling?]
The court should deny the TRO (and any subsequent preliminary injunction). Let the MPAA try to prove its case in court. In the meantime, let Real distribute RealDVD into the crowded market of PC-based DVD rippers and hard-drive based DVD jukeboxes. After all, Handbrake is more likely to kill off RealDVD than Hollywood is.
Court Protects Privacy of Satellite Receiver Owners
Legal Analysis by Fred von LohmannLast month, EFF filed an amicus brief in Echostar v. Freetech, where Echostar sought the identities of every consumer who purchased a Freetech "CoolSat" free-to-air (FTA) satellite receiver during the past five years. EFF argued that this demand, issued in discovery in a lawsuit between Echostar and Freetech, represented an unwarranted intrusion into the privacy of individual consumers. Today, the court agreed, issuing an order blocking Echostar's subpoenas.
The ruling potentially sets an important precedent, as it represents the first time a federal court has explicitly rejected a third-party subpoena on the basis of the privacy interests of nonparty consumers.
Echostar is the company behind the DISH satellite TV service. Freetech makes receivers for unencrypted, free-to-air satellite transmissions (there are many free, unencrypted satellite channels). In December 2007, Echostar sued Freetech, alleging that the Freetech CoolSat receiver was specifically designed for after-market modification to enable unauthorized reception of DISH programming. According to Echostar, Freetech "sold thousands of these FTA Receivers to consumer pirates for the sole purpose of circumventing [Echostar]'s Security System."
In the course of discovery, Echostar sent subpoenas to the distributors of CoolSat receivers, demanding that they hand over their customer lists, including the name, address, email address, and purchase details for every person to have purchased a CoolSat receiver over the past 5 years.
As EFF explained in its amicus brief, these subpoenas represent a serious intrusion into the privacy of legitimate purchasers of these FTA receivers. Not only would it be an intrusion to be contacted by Echostar about a device you purchased months or years ago, but other satellite TV companies have used customer lists to launch mass litigation campaigns against consumers. After DirecTV obtained similar customer lists in litigation in 2001, it sent more than 170,000 letters to individuals demanding "settlements" of $3,500.
In refusing to allow Echostar to obtain the CoolSat customer lists, the court specifically weighed Echostar's need for the information against the privacy interests of the customers whose information would be disclosed. The court expressed concern that "both those who purchase the FTA receivers for proper and improper purposes will be swept up in the process." The court went on to conclude that "the requests for customer lists, therefore, could lead to the perceived harassment of legitimate users and a concomitant chilling effect on the purchase and lawful use of Freetech's FTA receivers."
Kudos to the court for keeping the privacy interests of nonparties in mind as commercial litigants dispatch third-party subpoenas that would otherwise carelessly intrude into the lives of individual consumers.
Capitol v. Thomas: Judge Orders New Trial, Implores Congress to Lower Statutory Penalties for P2P
Legal Analysis by Corynne McSherryJoining the ranks of federal district judges in Arizona and Massachusetts, District of Minnesota Chief Judge Michael Davis today concluded [44-page PDF] that simply making a music file available in a shared file does not violate copyright law, and ordered a new trial in Capitol Records v. Jammie Thomas.
The case made headlines last year as the first peer-to-peer file-sharing case to go all the way to trial. In October 2007, a jury held Thomas liable and awarded $222,000 in damages to the record companies, based in whole or in part (it wasn't clear) on an instruction that merely making a file available violates a copyright owner's distribution right. Earlier this year, Chief Judge Davis said he was concerned that he might have made a mistake with that instruction and asked for more briefing on whether Thomas deserved a new trial. EFF, joined by Public Knowledge, the United States Internet Industry Association, and the Computer and Communications Industry Association filed an amicus brief urging the Court to reject the RIAA's making available theory.
One key holding:
The Court’s examination of the use of the term “distribution” in other provisions of the Copyright Act, as well as the evolution of liability for offers to sell in the analogous Patent Act, lead to the conclusion that the plain meaning of the term “distribution” does not including making available and, instead, requires actual dissemination.
. . .
If simply making a copyrighted work available to the public constituted a distribution, even if no member of the public ever accessed that work, copyright owners would be able to make an end run around the standards for assessing contributor copyright infringement.
In addition, Chief Judge Davis called on Congress to amend the Copyright Act:
The Court would be remiss if it did not take this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer-to-peer network cases such as the one currently before this Court. . . . While the Court does not discount Plaintiffs’ claim that, cumulatively, illegal downloading has far-reaching effects on their businesses, the damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs. Thomas allegedly infringed on the copyrights of 24 songs—the equivalent of approximately three CDs, costing less than $54, and yet the total damages awarded is $222,000—more than five hundred times the cost of buying 24 separate CDs and more than four thousand times the cost of three CDs. While the Copyright Act was intended to permit statutory damages that are larger than the simple cost of the infringed works in order to make infringing a far less attractive alternative than legitimately purchasing the songs, surely damages that are more than one hundred times the cost of the works would serve as a sufficient deterrent.
. . .
Unfortunately, by using Kazaa, Thomas acted like countless other Internet users. Her alleged acts were illegal, but common. Her status as a consumer who was not seeking to harm her competitors or make a profit does not excuse her behavior. But it does make the award of hundreds of thousands of dollars in damages unprecedented and oppressive.
EFF applauds Chief Judge Davis's thorough rejection of the RIAA's effort to rewrite copyright law and thereby avoid the trouble of actually proving any infringement has occurred. And we wholeheartedly endorse the court's call to amend the Copyright Act's oppressive damages provisions.
