Category: Uncategorized

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Greetings from CPIP Executive Director Sean O’Connor

The fall semester is now in full swing at Antonin Scalia Law School, and the CPIP team has been busy this past month with our various programs and events. On September 12-13, we hosted the third meeting of the 2019-2020 Thomas Edison Innovation Fellowship, where the Edison Fellows presented rough drafts of their papers and received valuable feedback. Then, on September 20-21, we co-hosted the 31st Annual Intellectual Property Section Seminar with the IP Section of the Virginia State Bar, which provided practitioners with an in-depth look at recent and upcoming developments in IP law. Finally, we’ve been getting ready for our Seventh Annual Fall Conference, which will take place at Scalia Law this Friday, October 4.

I am thrilled to announce that Erika Lietzan of Mizzou Law has joined CPIP as its new Director of Life Sciences. Prof. Lietzan is a leading expert in the fields of food and drug regulation, intellectual property, and administrative law, and her primary research focus lies at the intersection of IP law and FDA regulation of medical products. We’re very excited to have her join us as a core member of the CPIP team. In addition, I am especially proud of the work of CPIP Director of Copyright Research and Policy Sandra Aistars, who conducted an entertainment law education session and pop-up clinic for filmmakers with the students in her Arts & Entertainment Advocacy Clinic during the DC Shorts Film Festival on September 20.

We at CPIP send you our regards and best wishes for the coming month, and we hope to see you at our Fall Conference this Friday!

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Join Us for CPIP’s Seventh Annual Fall Conference on Friday, October 4!

Online registration closes on Tuesday, October 1, 2019, at noon ET. Onsite registration will be available at the conference. 5 hours Virginia CLE, including 1.5 hours Ethics, available.

On Friday, October 4, 2019, CPIP will host its Seventh Annual Fall Conference at Antonin Scalia Law School in Arlington, Virginia. The theme of this year’s conference is The IP Bridge: Connecting the Lab & Studio, and the event will feature keynote addresses by Professor Robert Merges, UC Berkeley, and Maria Pallante, President & CEO of AAP and former Register of Copyrights.

This unique conference will highlight how IP rights facilitate the creative and innovative processes and preserve the vibrant ecosystems that deliver innovative products and creative works to consumers. In addition to exploring how IP helps to improve and enrich the lives of creators, inventors, and the public, this conference will also discuss how various efforts to impose price controls in the creative and innovation industries threaten established markets and the creation of innovative products and artistic works.

Please click here to register. We look forward to seeing you this Friday!

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Spotlight on Scholarship

Erika Lietzan & Kristina Acri, Distorted Drug Patents, ___ Wash. L. Rev. ___ (forthcoming)

In this forthcoming paper supported by a CPIP Leonardo da Vinci Fellowship Research Grant that will be published in the Washington Law Review, CPIP Director of Life Sciences Erika Lietzan and Professor Kristina Acri of Colorado College investigate whether the patent system provides adequate incentives for innovation in the pharmaceutical industry. Using a large dataset spanning 34 years, they find that longer clinical programs result in shorter effective patent life, even accounting for patent term restoration, which adds to the growing body of literature suggesting that the patent system may be systematically distorting drug research incentives.

Jonathan M. Barnett, Stealth Commoditization: The Misuse of Smartphone Antitrust, CPI Antitrust Chronicle (Sept. 2019)

In this article that was published by Competition Policy International, CPIP Senior Scholar Jonathan Barnett explores how antitrust regulators have implemented policies and taken actions that seek to limit the enforcement and licensing of standard-essential patents in the smartphone industry. Prof. Barnett explains how the real-world evidence does not support the patent holdup theory that underlies these antitrust decisions, and he notes that they in fact promote private interests of downstream producers at the expense of the public interest that the antitrust laws are intended to foster.

Ryan T. Holte & Ted M. Sichelman, Cycles of Obviousness, 105 Iowa L. Rev. ___ (2019)

In this paper that will be published by the Iowa Law Review, CPIP Senior Scholar Ted Sichelman and Judge Ryan Holte of the U.S. Court of Federal Claims conduct the first comprehensive empirical study of district court and Federal Circuit decisions both before and after the Supreme Court’s KSR v. Teleflex opinion. They explain how this recent shift in nonobviousness doctrine is part of an ongoing trend of courts raising and lowering the obviousness threshold based on the prevailing attitudes of judges as to the role of patents in promoting innovation.

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Activities, News, & Events

CPIP Senior Scholar Mark Schultz will join the faculty at the University of Akron School of Law in January 2020 as the Goodyear Tire & Rubber Company Chair in Intellectual Property Law and Director of the Center for Intellectual Property Law & Technology. Prof. Schultz’s research focuses on the law and economics of the global intellectual property system, and as Goodyear Chair, he will serve an important role in advancing critical thinking on IP law within the academic, business, and industry fields. At the IP Center, Prof. Schultz succeeds Judge Ryan Holte, who stepped down from his position to become a judge of the U.S. Court of Federal Claims.

CPIP Senior Scholar Kristen Osenga spoke at the Patent Masters Symposium, which was held in Arlington, Virginia, on September 10-11. Prof. Osenga joined the session entitled Balance, Transparency & Reasonableness: Converging Approaches to SEP Licenses and FRAND Royalties, where she presented her upcoming paper, IEEE IPR Policy Amendments: Strategic Behavior and Feedback Loops, that examines the problems with the IEEE’s 2015 amendments to its IPR policy. In the paper, Prof. Osenga examines the events leading to the amended IPR policy, including the theoretical problems of patent holdup and royalty stacking that supposedly justified it, and then she considers how the aftermath of the policy favors implementers over contributors.

By Matthew Barblan & Kevin Madigan

One of the oddities of US copyright law is that sound recordings—the way that our favorite songs are captured on media so that we can listen to them over and over again—were not protected under federal law until the early 1970s. Unfortunately, when the federal Copyright Act was finally amended in 1971 to incorporate sound recordings, copyright protection for sound recordings was not applied retroactively. As a result, artists who recorded music before February 15, 1972 (the effective date of the 1971 Sound Recording Amendment) have been unable to use federal copyright law to safeguard their valuable creative contributions to American music.

Next week, the House Judiciary Committee will mark up a legislative package that includes the CLASSICS Act (“CLASSICS” stands for Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society). The CLASSICS Act creates a digital public performance right for pre-1972 sound recordings, and in doing so addresses an inequity that has persisted for decades. By giving legacy artists the ability to protect and license the use of their sound recordings in modern distribution platforms, the CLASSICS Act represents an important first step in recognizing the hard-earned property rights of countless American artists who recorded their music before 1972.

With the markup of the CLASSICS Act fast approaching, it’s fitting to look back on the peculiar history of US copyright in sound recordings and trace the events that lead to the current inequitable state of affairs. This essay first examines how sound recordings have been treated by US copyright law over time, discussing the erstwhile promise and eventual shortcomings of enforcing digital public performance rights at the state level. The article then analyzes the CLASSICS Act and discusses how the bill represents important progress in fairly compensating and securing property rights to the myriad legacy artists whose recorded music continues to influence and inspire us in the twenty-first century.

A Longstanding Struggle for Recording Artists

Sound recordings have played a vital role in the development of American art since the late 19^th century when luminaries such as Alexander Graham Bell and Thomas Edison revolutionized the fixation of sound. In addition to chronicling the rich evolution of musical genres from jazz to rock ‘n’ roll, sound recordings of folklore, radio broadcasts, speeches, and other spoken words make up an invaluable account of the American experience. But despite attempts by some of the first record companies in the early twentieth-century to secure federal copyright protection for sound recordings, the Copyright Act of 1909 only secured copyright protection to owners of the musical compositions that are the subjects of sound recordings, but not to sound recordings themselves.

The US Copyright Office’s 2011 report on pre-1972 sound recordings explains that, without federal copyright protection, administration of the infringement of sound recordings was left to the states through a patchwork of unfair competition laws and common law copyright. In the 25 years between 1925 and 1951, over 30 bills were introduced in Congress that would have extended some form of federal copyright protection to sound recordings, but as the Copyright Office report notes, none passed due to opposition “based on technical deficiencies and concerns about their constitutionality (both as to whether sound recordings were creative, and whether they were writings).”

It wasn’t until 1971—after years of review and an important study on sound recordings by former Register of Copyrights Barbara Ringer—that Congress passed the Sound Recording Amendment, which finally secured federal copyright protection for sound recordings. A key reason Congress acted in 1971 was the failure of state statutes and common law to adequately protect sound recordings in the face of an alarming rise in audio tape piracy. Copyright owners had become increasingly frustrated with having to rely on a hodgepodge of state unfair competition laws to protect their property rights against infringers, finding that even if they were successful, remedies were often limited. Additionally, the very validity of state law protection of sound recordings had been challenged in high profile cases by defendants who argued that any state law provision was preempted by federal law, despite the fact that no federal law existed to protect copyright in sound recordings.

The Sound Recording Amendment to the Copyright Act took effect on February 15, 1972, but it only secured copyright protection for sound recordings fixed on or after that date, and it omitted certain rights guaranteed to other works of authorship. The 1976 Copyright Act ultimately included sound recordings as protectable subject matter, but it too failed to secure copyright protection in pre-1972 sound recordings, and it also failed to provide sound recordings with the full scope of exclusive rights secured to other types of creative works. According to the Copyright Office’s 2011 report, it’s unclear why Congress didn’t address the issue of pre-1972 sound recordings a long time ago, but the report suggests that it was a mistake of not fully understanding the consequences of leaving these works (and artists) behind. Whatever the reason, for over 45 years since passing the 1971 Sound Recording Amendment, Congress has left pre-1972 sound recordings under the aegis of state law.

A Failure at the State Level

Left behind by the federal copyright revisions, pre-1972 sound recording owners and recording artists have long faced a web of inconsistent state criminal and civil laws. Making matters worse, many states simply do not have adequate statutes or common law causes of action to address the growing varieties of infringement that we see today, and it is often impossible to predict how courts will apply broad common law principles or unfair competition statutes to infringement claims.

The vague and varying nature of states’ protection of pre-1972 sound recordings has frustrated recording artists and copyright owners for many years, but the most vexing issue today involves digital public performances of these works. The Copyright Act was amended in 1995 to provide copyright protection for the public performance of sound recordings “by means of a digital audio transmission,” but like other federal copyright protections for sound recordings, pre-1972 sound recordings were not included. The struggles of the 1960’s-era rock band The Turtles in their high profile attempts to use state law to protect their sound recordings against digital public performance infringement provide an emblematic example of why state law is largely inadequate to protect the creative contributions of pre-1972 recording artists.

In 2013, Turtles members Flo & Eddie filed a class action suit against Sirius XM in California for infringement of millions of pre-1972 sound recordings, arguing the satellite broadcaster played the songs without permission and without paying royalties to the artists. After bringing suit in California, Flo & Eddie filed similar class action claims against satellite radio services in New York and Florida, setting up a showdown that would—for better or worse—bring additional clarity to the landscape of state law protection of sound recordings in the digital streaming age.

Despite early optimism and a conditional settlement agreement with Sirius, in 2016, the New York Court of Appeals (the highest court in the state) dealt a blow to Flo & Eddie when it ruled that New York state law did not protect public performances of pre-1972 sound recordings. Critics of the ruling pointed out that the opinion contains many logical flaws and that the court ruled in favor of Sirius mainly because of concerns over the potential disruption that a ruling in favor of Flo & Eddie would cause. In 2017, the Florida Supreme Court echoed the New York opinion, holding that Florida law doesn’t recognize public performance rights for recordings made before 1972. The Florida Supreme Court made no mystery of a chief reason for their finding, admitting that to find otherwise “would have an immediate impact on consumers beyond Florida’s borders and would affect numerous stakeholders who are not parties to this suit.”

The main remaining battleground for Flo & Eddie is the California Supreme Court, which has yet to rule on the issue, but regardless of the California outcome for Flo & Eddie, the New York and Florida cases have exposed the failure of state law to protect the creative property of legacy recording artists.

The CLASSICS Act

On July 19, 2017, Representatives Jerry Nadler (D-NY) and Darrell Issa (R-Calif.) introduced the Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society (CLASSICS) Act, and the bill is now scheduled to be marked up as part of a larger legislative package in the House Judiciary Committee during the week of April 9. According to Representatives Nadler and Issa, the bill aims to resolve “uncertainty over the copyright protections afforded to sound recordings made before 1972 by bringing these recordings into the federal copyright system and ensuring that digital transmissions of both pre- and post-1972 recordings are treated uniformly.” On February 8, 2018, a companion bill was introduced in the Senate, led by Senators Chris Coons (D-Del.) and John Kennedy (R-Louis.). At its core, the CLASSICS Act would take an important step to recognize and protect the creative labors of artists who recorded their songs before 1972, bringing them closer to being on equal footing with artists who recorded their songs after 1972.

The CLASSICS Act would amend Title 17 of the United States Code, adding a Chapter 14 titled “Unauthorized Digital Performance of Pre-1972 Sound Recordings.” Under the proposed language, “[a]nyone who, . . . without the consent of the rights owner, performs publicly, by means of a digital audio transmission, a sound recording fixed on or after January 1, 1923, and before February 15, 1972, shall be subject to the remedies provided in sections 502 through 505 [of the Copyright Act] to the same extent as an infringer of copyright.” In other words, copyright owners of pre-1972 sound recordings would finally be able to stop digital platforms from publicly performing their songs without permission or compensation. This would remedy the current injustice that allows digital platforms to profit from publicly performing hundreds of thousands of pre-1972 sound recordings without paying a penny back to the myriad artists who put their hearts and souls into creating those sounds.

To be clear, the CLASSICS Act does not create a true free market for the digital public performance of pre-1972 sound recordings. Like post-1972 sound recordings, pre-1972 sound recordings would still be subject to the statutory licensing provisions in Section 114 of the Copyright Act. Nonetheless, the leap from no payment at all to payment under the Section 114 statutory licensing provisions is a significant increase for legacy recording artists, and it at least puts them on the same playing field (with respect to digital public performance) as owners of post-1972 sound recordings. Furthermore, not every digital public performance of a sound recording qualifies for the Section 114 statutory license, and in those instances the CLASSICS Act would allow owners of pre-1972 sound recordings to benefit from the same free market that owners of post-1972 sound recordings enjoy.

In addition to creating a cause of action for unauthorized digital public performance of pre-1972 sound recordings, the CLASSICS Act would also preempt “any claim of common law copyright or equivalent right under the laws of any State arising from any digital audio transmission” of a pre-1972 sound recording. The proposed statutory language also ensures that the limitations on remedies available to copyright owners for fair use, uses by libraries, archives, and educational institutions would apply to unauthorized uses of a pre-1972 sound recording. And the proposed statutory language would subject the newly-created cause of action to Section 512 of the Copyright Act and would apply the same statute of limitations applicable to other actions under the Copyright Act.

While the CLASSICS Act would not provide pre-1972 sound recordings with all the same federal protections that apply to post-1972 sound recordings pursuant to Section 106 of the Copyright Act, by creating a federal cause of action for unauthorized digital public performance of pre-1972 sound recordings, the proposed bill would go a long way towards remedying the current unfair treatment of the creative contributions of legacy recording artists.

Conclusion

For too long, Congress and the states have neglected the property rights of recording artists responsible for some of the most celebrated sound recordings in the canon of American music. As digital streaming services flourish in part through the digital public performance of pre-1972 sound recordings, thousands of legacy artists are left uncompensated and unappreciated. The CLASSICS Act represents a significant first step towards recognizing and rewarding the hard work and achievements of these important musicians.

Matthew Barblan is Executive Director of the Center for the Protection of Intellectual Property and Assistant Professor of Law at Antonin Scalia Law School, George Mason University

Kevin Madigan is Assistant Director, Development & Research, at the Center for the Protection of Intellectual Property 

 

Cross-posted from the Mister Copyright blog.

Next week, the Copyright Alternative in Small Claims Enforcement (CASE) Act is scheduled for markup before the House Judiciary Committee, promising long-overdue support for small creators and copyright owners in their fight against overwhelming infringement in the digital age. While the bill has bipartisan support and the backing of a wide array of individual creators, artist organizations, and the creative industries, some detractors are now raising questions of constitutionality in an attempt to interfere with the bill’s passage. But the constitutional argument is merely a meritless rhetorical refrain put forward to mask a steadfast resistance by certain companies to any effort to impose accountability for online infringement.

A product of years of advocacy on behalf of the creative community and a thorough report by the Copyright Office, The CASE Act would create a Copyright Claims Board (CCB) within the Copyright Office to hear claims brought by individual creators and copyright owners. It would provide a venue to address rampant copyright infringement online, empowering a class of creators who have limited means and few opportunities to protect their intellectual property. The idea of a routinely ignored group of artists and copyright owners finally having a venue to protect their rights has infringers and those who enable infringement spooked, and they’re struggling to defeat the CASE Act in any way they can.

A testament to the CASE Act’s sound provisions is the fact that its critics are left grasping for challengeable issues. One of their tactics has been to contest the constitutionality of an administrative Article I court that would render decisions affecting intellectual property rights. It’s actually somewhat of a crafty approach to impeding the bills advancement, if only because of the inevitable reaction that comes any time the word “unconstitutional” is uttered. But regardless of the strategic game being played, anyone willing to pay attention will see that the creation of a Copyright Claims Board is clearly constitutional and that arguments to the contrary are hollow.

Some critics claim that the establishment of an alternative dispute forum within an executive agency would violate Article III of the Constitution, arguing that because the cases involve private property rights, they must be heard by an Article III tribunal. It’s an unconvincing argument that ignores hundreds of years of Supreme Court analysis which confirms Congress’s right to create special tribunals that adjudicate a variety of disputes outside the federal court system. As my colleague, Sandra Aistars, explains in her detailed article on copyright small claims, examples of these non Article III courts or administrative agencies include Tax Courts, the Court of Federal Claims, the Social Security Appeals Council, and the Commodities Futures Trading Commission.

But what makes the constitutionality argument utterly groundless is the fact that participation in the small claims court would be voluntary. The Supreme Court has clearly held that a litigant’s right to an Article III decision-maker is violated only when the defendant is involuntarily forced to litigate before a non-Article III court. In Wellness International v. Sharif, the Supreme Court stated that “the court has never … h[e]ld that a litigant who has the right to an Article III court may not waive that right through his consent.”

In the procedure set forth by the CASE Act, those accused of infringement would be notified of a claim against them and have the ability to “opt out” of the process. The voluntary nature of the process adheres to Supreme Court precedent and is entirely consistent with Article III of the Constitution.

Critics of the CASE Act have also pushed for the small claims process to be “opt in,” rather than “opt out,” meaning that unless a defendant actively agrees to participate, the case cannot go forward. Essentially, a defendant could ignore any notice of a claim against them without consequence, drastically weakening the small claims process the CASE Act seeks to promote. It’s a brazen proposal, and it’s one that elevates a culture of casual misappropriation and disregard for small creators above a culture that promotes respect for the property rights of others.

The groups challenging the CASE Act represent tech companies that rely on the content and creative works of others to thrive, and the fight for the CASE Act has become a battle between these dominant entities and exploited creators. As these tech companies have consolidated wealth and power in ways few thought possible, they’ve garnered considerable influence in Washington, and they are working to shut down the first opportunity individuals and small businesses in the arts have to enjoy the fruits of their constitutionally guaranteed property right.

The tide is turning in the way we interact with technology and the internet and what we as a society expect from the companies that control our digital existence. Business models that enable companies to profit off intellectual property theft must be challenged. It’s not particularly surprising that these new global titans would resist efforts like the CASE Act that plan to inject accountability into cyber space, but let’s not be fooled by empty arguments aimed at distracting us from moving towards a greater respect for creators in the digital age.

Cross-posted from the Mister Copyright blog.

Late last month, a preliminary injunction was issued in favor of Netflix, Amazon, and six major studios in their case against the manufacturers of the set-top streaming device TickBox TV. The order comes as use of piracy-enabling streaming devices is on the rise, and it represents an initial victory in the fight against stream-based infringement. But while the order is a step in the right direction aimed at ending TickBox’s brazen inducement of copyright infringement, it’s important to understand that the injunction will not disrupt distribution of the TickBox devices and that the ultimate effect on streaming piracy is unclear.

Rise of Illegal Streaming Devices

TickBox TV is a device sold by a Georgia-based company that, in many ways, is similar to the popular name-brand set-top devices such as the Roku, Amazon Fire Stick, or Apple TV. It’s an internet connected box that is easily hooked up to a television or computer monitor via USB cable, and, like other streaming devices, acts as a media platform that allows users to download software and apps which then deliver content to the device. But unlike its counterparts which support apps featuring licensed content, TickBox was sold with pre-loaded applications dedicated to delivering infringing content. Furthermore, in case there were any questions about the device’s capabilities, TickBox’s website and promotional materials encouraged piracy and offered step-by-step instructions on downloading the latest illicit “add-ons.”

Add-ons are applications developed by third parties, the most popular of which deliver vast catalogues of high-quality, ready-to-stream television shows, movies, and live TV. The offerings are largely made of up of pirated material, making the add-ons’ delivery a direct infringement of the copyright owners’ right of public performance and distribution. Manufacturers of devices like TickBox often point the finger at the add-on developers as the true bad actors, claiming they have no control over the applications users choose to download after purchasing the device.

While streaming devices preprogrammed with illicit add-ons are now gaining popularity in the US, authorities in the United Kingdom have been dealing with a boom of “Kodi box“ sales over the last few years. A recent report from the UK’s Intellectual Property Office notes that 19% of adults watch pirated material through set-top box streaming devices—nearly three times as many as estimated in the US. Urged into action by broadcasters such as the BBC and Skye—as well as the English Premier League—recent efforts by English authorities to curb the distribution of Kodi boxes have involved prosecuting those offering preprogrammed boxes for sale on eBay, with stiff penalties aimed at deterring similar conduct.

Who’s Liable?

With clear liability for direct infringement falling on add-on developers, some question why copyright owners just don’t go directly to the source of content. Unfortunately, the streaming piracy model is organized in a way that makes going after the source of the content extremely difficult. The add-ons are often based in foreign countries and are in a state of continuous transformation. Once an add-on gets popular enough to draw the attention of rights holders or law enforcement, it will shut down, only to be immediately replaced by another service offering the same content. There are countless websites that provide rankings of the best add-ons—or those that offer the most pirated content—and the lists are constantly changing and being updated.

If this situation sounds familiar, it’s because the exact same whack-a-mole conundrum has for years frustrated copyright owners trying to confront illegal downloading and torrent sites—only now, it’s all about the stream. The people behind the most prevalent and successful piracy websites and add-ons aren’t stupid. They know how to survive in the gray areas of the law and reinvent themselves when the heat is on. When websites such as the Pirate Bay or Kickass Downloads were finally facing real consequences in the form of seized domains, they quickly shifted the same infringing content to a new domain—a process known as mirroring. The add-ons are taking a page from this play book, and there’s always another application ready to go that is the same as the one before in everything but name.

Inducing Infringement

So then why go after TickBox? TickBox and similar devices such as preprogrammed Kodi boxes and the now-targeted DragonBox provide a gateway to the add-ons’ pirated material. They represent a technology that can be used for noninfringing purposes—just like a VCR or torrent website—but whose business model is based primarily on facilitating infringement.

Suppliers of these kinds of technologies are usually able to skirt liability by turning a blind eye to the illegal activity of their users, so long as their devices can be show to have substantial non-infringing uses. But TickBox made the fatal mistake of blatantly encouraging and inducing infringement. As the complaint details, TickBox’s advertisement of its ability to connect customers with illicit add-ons that store and stream unauthorized content, along with promoting itself as a way to access content available from legitimate distributors “ABSOLUTELY FREE,” constitutes active inducement of copyright infringement. Additional language in TickBox’s promotional materials included the following:

You can see almost every movie and TV series ever made. You can even access movies and shows that are still on Demand and episodes of TV that were just aired. You will never pay to watch any of them.

While TickBox may not be liable for the direct copyright infringement committed by the add-ons, their behavior shows clear (1) knowledge of and (2) material contribution to infringement. The record is replete with instances of flagrant and intentional inducement of infringement, providing evidence that TickBox was fully aware that people were using their boxes to watch unauthorized content. Their material contribution was simply the provision of physical devices that can facilitate and enable infringement.

The combination of these two elements represents clear liability for contributory copyright infringement. Indeed, in granting the injunction, the court relied on landmark cases involving websites facilitating illegal downloading and found that “TickBox may be held contributorily liable under Grokster and Fung because it has served as the intermediary between third parties who directly infringe upon Plaintiffs’ public performance rights and its customers, who become a necessary component of the infringement.”

A Limited Injunction

While some are cheering the injunction as a blow to TickBox that will deter similar device manufacturers, it’s important to understand what activity the order doesn’t enjoin. It seems that after TickBox was named in the complaint, some of the obvious language of inducement was re-phrased or removed from its website and promotional materials, and pre-loaded links to illicit add-ons were no longer included in newly manufactured devices.

As it stands, the injunction merely compels TickBox to maintain the “status quo”—meaning maintaining the post-lawsuit modifications to the device’s interface, which “seemingly no longer contains links to the themes or add-ons that Plaintiffs have specifically flagged as problematic.” Plaintiffs have requested that TickBox implement a software update to already-distributed boxes that would disable or remove add-ons that facilitate infringement, but TickBox pushed back on this idea, and the injunction only advises that the parties “attempt to reach an agreement” that would address the issue.

There’s nothing stopping TickBox or any other device manufactures from distributing similar devices with the same ability to facilitate infringement through add-ons; the only thing they can’t do is advertise its infringing capabilities. And at this point, the word is out on TickBox and how it can be used to access masses of unauthorized content. There are countless websites that users can visit to get step-by-step guidance on downloading add-ons and using TickBox for the same illegal uses the lawsuit was brought to prevent. So while the injunction is a good start, just what effect it will have on stream-based piracy remains to be seen.

Cross-posted from the Mister Copyright blog.

Over the past few weeks, widespread criticism has emerged over a superfluous and seemingly partisan effort to override existing copyright law. The target of concern is the American Law Institute’s (ALI) Restatement of the Law, Copyright project which—despite its stated mission to clarify copyright law—has been revealed as an influenced venture that could futher muddle already complex areas of IP law. And with disapproval ranging from the Restatement committee’s own Advisers to the Acting Register of Copyrights, the project’s future is suddenly in doubt.

Founded almost one hundred years ago, the ALI is an independent organization whose mission is to produce “scholarly work to clarify, modernize, and improve the law.” It brings together lawyers, judges, and academics to issue Restatements, the focus of which is to advance uniformity in fundamental state common law principles. But the current copyright project diverges from these traditional endeavors by attempting to tackle a settled body of positive federal law, causing concern that the goal is to create an alternative description of the law already established by the Copyright Act.

Copyright Office Concern

As reported in a Billboard article earlier this month, on January 16^th Acting Register of Copyrights Karyn Temple Claggett sent a letter to the ALI voicing significant concern over the confusion that the Restatement project is in danger of injecting into copyright law. Calling out the committee for attempting to promote a “pseudo-version of the Copyright Act,” Temple Claggett ultimately urges the ALI to reconsider the project entirely. For the head of the Copyright Office to reach out to the ALI and question the necessity of the project is particularly noteworthy, and it reflects a pervasive worry among those in the copyright community that the Restatement will present a conflicting and potentially biased interpretation of established law.

But this recent inquiry by the Acting Register is just the latest expression of skepticism coming from the Copyright Office. In 2015, while the project was still in its infancy, former General Counsel and Associate Register of Copyrights Jacqueline Charlesworth questioned the nature of project in a similar letter to the ALI, noting that the early drafts of the restatement would be more accurately characterized as a “rewriting of the law.” The letter identified areas in which early drafts of the project highlight select judicial decisions or favor particular interpretations of law—treating them as well-established rules—and asked whether this approach could legitimately be called a “restatement.” But despite these concerns, the project went forward, and questions over its designation soon spread to fear throughout the creative community regarding the substance of the drafts and what influence they might have on copyright jurisprudence.

A Question of Leadership  

It’s not difficult to understand the creative community’s unease when taking a closer look at two of the projects leaders. The Restatement was originally the idea of Pamela Samuelson, a Professor of Law at UC Berkeley who is well known in the copyright academy as someone who has routinely advocated for a narrower scope of copyright protection. And while her knowledge and expertise in the field is unquestionable, her ability to take an objective approach to a project meant to influence important copyright law decisions is suspect.

While Professor Samuelson’s academic record reveals that she may not be the most suitable candidate to spearhead a restatement of copyright law, the project’s Reporters—those responsible for drafting the restatement—are led by Professor Chris Sprigman, whose work in academia and as a practicing attorney should undeniably disqualify him from this highly influential role. As music industry attorney Dina Lapolt points out in a recent article denouncing the project, Professor Sprigman has been a persistent supporter of the big tech companies who stand to benefit from a neutering of copyright law. Specifically, Professor Sprigman’s recent representation of Spotify in which he argued streaming services are not required to pay mechanical rights should raise serious conflict of interest questions.

That the ALI would agree to an unprecedented interpretation of established federal law and entrust the process to unmistakably partial proponents of weakened copyright has resulted in a justifiable suspicion not just from the Copyright Office and creative community, but from some of the distinguished judges, scholars, and copyright experts working on the project. In a letter sent earlier this month to ALI Director Richard Revesz and fellow ALI members, a group of Advisors and Liaisons to the Restatement committee presented a litany of problems with the current draft, including an extensive list of errors and omissions in its black letter text, unclear explanations and misleading examples, and a pervasive lack of balance. The Advisors urged the ALI to, at a minimum, reject the current draft, or, as Register Temple Claggett advised, consider reframing the scope and nature project entirely.

What’s Next?

Last week, following the barrage of criticisms and letters, the ALI posted this vague message to its copyright restatement webpage:

After discussion of the project at the 2018 January Council meeting, the Director agreed to designate a group to consider whether this project should use a format that differs from the typical Restatement format.

Though the ALI hasn’t offered more details about this “group” or what different form the project may take, the presumption is that it will become something less authoritative. It’s unclear if the work done over the last few years can be salvaged, but if there is to be an effort to move forward, a change in leadership is essential. With the project suddenly the subject of so much condemnation, perhaps it’s in the ALI’s best interest to abandon the effort entirely, rather than produce a treatise whose tainted track record may render it valueless.

Cross-posted from the Mister Copyright blog.

Last week, the fifth round of the North American Free Trade Agreement (NAFTA) negotiations closed in Mexico City with tensions high and little progress made towards a modernized trade deal. While the most recent talks saw the U.S., Mexico, and Canada discussing (and disagreeing over) ways to resolve trade disputes and rules governing automobile tariffs, earlier meetings have focused on ways to update international intellectual property standards for the 21st century. And though it remains unclear how potential updates will take shape, it’s essential they give creators and copyright owners a fair shot at protecting their works, rather than reinforce an outdated system that promotes immunity for those who continually facilitate infringement.

Held in Ottawa in late September, the third round of NAFTA negotiations concentrated on intellectual property and used text from the Trans-Pacific Partnership (TPP) as a template for chapters on IP and digital trade—formerly called e-commerce. Following the talks, strong criticisms arose from the tech sector and their affiliate trade organizations, bemoaning what they considered a retreat from language confirming limitations on liability and exceptions to copyright that have allowed digital platforms and other internet intermediaries to avoid infringement accountability for years.

In a letter to United States Trade Representative (USTR) Robert Lighthizer, associations representing tech giants such as Google, Facebook, and Amazon, repeatedly call for NAFTA negotiators to commit to language from the twenty-year-old Digital Millennium Copyright Act (DMCA), which—according to the letter—would carry on the “balance” upon which their industry relies. Unfortunately, the letter fails to reveal that with every year that passes since the DMCA’s enactment, the scales tip further in favor of content users and intermediaries, leaving creators and copyright owners increasingly unable to control their works.

Critics of the recent NAFTA copyright discussions have accused the USTR of trying to advance proposals influenced by the “content industry,” which would make internet service providers (ISP) more responsible for removing infringing content and holding repeat infringers accountable. They’ve implied that the Trump administration has sided with Hollywood to promote a film industry agenda that’s tough on piracy, and they’ve claimed that it’s a policy that will come at the expense of free speech. But it’s a strange allegation to claim the current administration is somehow in cahoots with an industry it routinely derides, and it’s also one that has little to no corroborating evidence.

Reports have also surfaced that Canada, because it was not involved in early drafts of the sections on IP, is resisting using the TPP as a framework for the NAFTA updates. According to an article on the third round of negotiations, Canada prefers to use the original NAFTA IP language as a starting point for negotiations, augmenting it only with features of other agreements it has already signed onto. And while it may seem unreasonable to cling to an agreement written before an iPod existed, perhaps it shouldn’t be surprising that Canada would resist injecting more accountability into copyright law, as it has been notoriously weak on piracy and was recently recommended to be included in a USTR’s watch list of countries failing to implement international standards.

Before the IP talks in September, over twenty music industry organizations sent their own letter to the USTR regarding the NAFTA negotiations. In it, they stress that just as many tech companies have transformed from small startups to global titans over the past twenty years, the digital marketplace has changed drastically since earlier trade agreements. Respect for the contributions of the creative industries that was once the foundation of earlier IP policies has been replaced by the narrow agenda of a few powerful companies and interest groups that would prefer to keep the U.S. and its trade partners locked into antiquated guidelines. Instead of looking backward, the letter insists that NAFTA negotiators must look ahead to advance “an inclusive digital trade policy that capitalizes on the contributions of our creators to jobs, growth, and the U.S. competitive advantage in trade.”

To be sure, stakeholders in any sector involved in international trade want to see a NAFTA agreement that will benefit their individual companies and industry as a whole. But for those representing the interests of internet intermediaries who wish to shackle North America to regulations that have been become severely outdated in the age of lightning-fast technological advancement, the questions becomes: What will be the cost of unbalanced, continual benefits to these entities? Because for all the talk of maintaining balance between content creators and those whose business model relies upon the unfettered access and distribution of content, it’s clear that grasping at the obviously obsolete standards of the DMCA leaves creators and copyright owners in the lurch.

As renowned filmmaker Ron Maxwell recently described in an op-ed about the current NAFTA negotiations, now that the once intoxicating allure of Silicon Valley has started to wear off, it’s time to stop watering down our copyright policies so that a few can profit off the creations of many. Maxwell explains:

Silicon Valley is laser-focused on diluting the copyright language in the treaty and is arguing for broad and unchecked “safe harbors” — from copyright infringement as well as all other illegal activity perpetrated on their platforms. Why in the world do they deserve immunity from the same responsibilities everyone else must shoulder?

The reality is that the companies arguing for exceptions are no longer exceptional, and they should be subject to the same rules as any other entity that wishes to access, reproduce, or distribute copyrighted content. To allow otherwise would mean turning our back on the American cultural exports that have truly changed the world.

Cross-posted from the Mister Copyright blog.

This month, Congress introduced a bill that would establish a long-discussed small claims court for copyright disputes. The legislation comes after a House Judiciary Committee proposal based on a four-year review of the US Copyright system and a 2013 report by the Copyright Office that recommended “the creation of an alternative forum that will enable copyright owners to pursue small infringement matters and related claims arising under the Copyright Act.” The bill represents one of the key reforms intended to modernize the US copyright system, hoping to finally empower creators of limited means in the fight against the unauthorized use of their works.

Dubbed the Copyright Alternative in Small-Claims Enforcement (CASE) Act, the legislation was introduced to the House of Representatives by Congressmen Hakeem Jeffries (D-NY) and Tom Marino (R-PA), along with Representatives Doug Collins(R-GA), Judy Chu (D-CA), Ted Lieu (D-CA), and Lamar Smith (R-TX). The bill proposes the creation a Copyright Claims Board overseen by three Copyright Claims Officers, who would be appointed by the Librarian of Congress and serve a six-year term. Among other duties, these Officers would render determinations on the civil copyright claims brought before the Board, with damages capped at $30,000.

In 2011, a study by the American Intellectual Property Law Association (AIPLA) found the cost of litigating a copyright infringement lawsuit with less than $1 million at stake was roughly $350,000. This figure has surely grown over the past six years, and unfortunately, so too have instances of infringement. In addition to cost concerns, the time it takes for a copyright claim to be resolved has also deterred many copyright owners from pursuing lower-value claims. The Copyright Office small claims report noted that it takes nearly a year and a half for cases to go to trial in the districts that see the highest volume of copyright complaints.

The establishment of the small claims system would give plaintiffs of limited means an opportunity to represent themselves or be represented pro bono by copyright attorneys and supervised law students. Not only will the Copyright Board provide copyright owners with a chance to recover damages that, to them, are not insignificant, it will give them a voice in the fight against infringement and hopefully deter acts of infringement that have become all to casual in the digital age.

The reality is that the majority of copyright owners are small businesses and individual creators who often lack the means to bring an infringement suit in federal court. According to a report by the Professional Photography Association, 70% of photographers have experienced unauthorized use of their work, but most instances of infringement are valued at less than $3,000. With relatively small sums of money and damages on the line, attorneys are reluctant to dedicate their time to representing individual artists and small businesses.

Speaking on the CASE Act at the Center for the Protection of Intellectual Property’s (CPIP) recent Fifth Annual Fall Conference, copyright expert Mike Klipper and CPIP Senior Scholar Sandra Aistars praised the House’s effort to implement a system that will benefit frustrated small creators. Klipper explained that the House Judiciary Committee heard creators and stakeholders loud and clear during its review tour in which it solicited suggestions on how the copyright system could better serve those it’s meant to incentivize and protect. Artists and small creators were tired of feeling powerless against rampant online infringement and asked for a venue that would allow them to challenge the theft of their works without breaking the bank.

While the Copyright Claims Board is a step towards empowering small creators, it’s important to point out that because the adjudicatory proceedings do not involve a jury trial, participation is voluntary for both parties. But, as Robert Levine points out in his review of the CASE Act, many defendants would likely still agree to the proceedings due to the high cost of defending themselves in federal court.

With the future of other legislative efforts to modernize the Copyright Office uncertain, it’s difficult to predict whether the CASE Act will become law. At the moment, the bill is supported by a bipartisan group of Representatives and doesn’t appear be strongly opposed by stakeholders who might find themselves named as defendants, which bodes well for its passage.

As Klipper explained in his commentary on the Copyright Claims Board, the time to act on copyright reform is now, as House Judiciary Committee Chairman—and champion of copyright reform—Bob Goodlatte’s term will come to an end in February of next year. Before that time, the establishment of a small claims system that will benefit both petitioners and respondents alike and provide a long-overdue service to the creative community will help to modernize the US copyright system.

Last month, the International Trade Administration (ITA)—an agency in the US Department of Commerce that measures and promotes the export of nonagricultural services and goods—released its 2017 Top Markets Report, Media and Entertainment Sector Snapshot. The report provides updates on the steady growth of the US media and entertainment (M&E) sector, which includes the core copyright industries: books, newspapers, periodicals, motion pictures, TV production, recorded music, radio and television broadcasting, video games, and software. In addition to emphasizing the solid growth and immense value added by copyright-intensive industries to the US economy, the update highlights the enduring barriers hindering the sector’s export potential, not the least of which is the continuing harmful effects of widespread piracy and copyright infringement.

The 2017 M&E report is an update to the more detailed 2016 report prepared by the ITA as a market assessment tool to help “unlock export and investment opportunities for U.S. businesses by combining indepth quantitative and qualitative analysis with ITA’s industry relationships.” Beginning with an overview of the global M&E market, the 2017 update references the 2016-2020 Entertainment & Media Outlook by PricewaterhouseCoopers, which measured global market revenues at $1.9 trillion in 2016 and predicts an expansion to nearly $2 trillion in 2017. One of the more notable movements in individual country market value came from China, which the report notes jumped into second place with a $190 billion share of the global total, followed by Japan ($157 billion), Germany ($97 billion) and the United Kingdom ($96 billion).

The United States remains firmly ahead of all other countries in market value, accounting for $712 billion—or one-third of the entire global market. Driving the US market is the unprecedented progress of the core copyright industries—or those industries “whose primary purpose is to create, produce, distribute, or exhibit copyright materials”—which grew at an aggregated annual rate of 4.8% between 2012 and 2015. The copyright industries’ growth was an astounding 127% more than the overall US economy, which grew at a rate of 2.1% over that time.

Additionally, the report describes copyright industries as significant contributors to US exports, outperforming other sectors such as chemicals, aerospace, agricultural products, and pharmaceuticals. The robust growth and output of the copyright sector reflects industries that are not only experiencing increased expansion in the digital market, but also a movement towards the convergence of media and entertainment companies that are now offering a multitude of services spanning many M&E sectors.

But despite this seemingly favorable outlook, the report warns that piracy and illegal file-sharing continue to harm the M&E sectors. Providing overviews of the top five export and licensing markets for the US digital and creative sectors—which include Brazil, China, India, Canada, and the UK—the report highlights the persistent piracy and lack of strong enforcement of copyright laws compromising international trade.

Particularly troublesome are the Indian and Brazilian markets, where growing classes of tech-savvy consumers are accustomed to high piracy rates and weak copyright enforcement. Detailing these barriers to entry, the report notes that “[c]opyright industries doing business in Brazil face significant Internet piracy, as do products in the entertainment sector, such as CDs; DVDs; and other media carrying pirated music, movies, TV programming and video games.” Facilitating this widespread infringement in Brazil and India are circumvention devices that allow access not only to movies and television shows, but also to video game consoles.

Unfortunately, infringement is also inhibiting trade with the United States’ North American neighbors. The report cautions that while Canada has a well-developed professional M&E sector that should make for efficient dealing with the US, “online infringement is high and enforcement weaker than expected.” On the bright side, recent Supreme and Federal Court rulings in Canada have shown a willingness to combat rampant infringement and enforce copyright law.

The update explains that “[d]igital trade has brought attention to widespread piracy and the importance of having solid copyright laws and enforcement actions.” It’s an important reminder that though creative industries are powering vibrant global ecosystems, sound IP laws and the willingness to enforce them are necessary to overcome the damaging effect infringement has on international markets.

 

Venture capital investment in the United States has declined steadily for years, as investors abandon an uncertain domestic climate for more reliable opportunities in foreign countries. In a report on the current state of the entrepreneurial ecosystem, the National Venture Capital Association emphasizes the extreme decline in the US share of global venture capital in the last twenty years, highlighting a drop from 83% of global share in 1996 to just 54% in 2015. At a time of decreasing investment, the US should be working to improve its innovation ecosystem, providing stable and effective property rights to inventors so that VCs can once again feel confident that investments in startups’ R&D—secured by patent rights—won’t just be stolen by established and better-financed infringers. Unfortunately, its doing just the opposite. Over the past decade, the US has continued to gut its patent system of the protections and incentives that attracted investment and made it the world leader in cutting-edge innovation in the first place.

While these numbers are certainly cause for concern, they don’t surprise patent law experts such as former Director of the USPTO, David Kappos, who sees the shift in investments as a natural result of the continuing erosion of IP rights in the US. He warns that “[w]hen investment incentives are reduced, you can expect investment to move elsewhere.” And although a variety of factors are likely contributing to the shift of investments outside of the United States, continuing to weaken our patent system will only aggravate this worrisome trend as VCs increasingly look outside of the US for better returns on their investments. The National Venture Capital Association made this point succinctly in congressional testimony back in 2015:

[M]aking it more costly to enforce patents … will have the unintended consequence of diminishing—if not extinguishing—the only true incentive that thousands of innovators presently have to invest the necessary time, money and other resources needed to create a new company from scratch. Put differently, the patent-backed right to own and profit from innovative ideas has been a major driving force for the American economy for 200 years, and that right requires that valid patents be fully enforceable in court at reasonable expense and without undue risk to the patent owner or its investors.

Though the United States has long been regarded as the world leader in securing stable and effective property rights in cutting-edge innovation, over the past decade the US patent system has been transformed by new legislation and misguided Supreme Court decisions. The US tradition of excellence in protecting and encouraging the development of groundbreaking technology has been replaced by a growing sense of uncertainty that is driving money, jobs, and innovative activity overseas.

Patents and related IP rights play an important role in protecting inventors and companies in the innovative marketplace against copycats, and they’re are absolutely vital to R&D-intensive small businesses and VC-backed startups, who are especially vulnerable to having their hard work stolen by larger companies. But as patentable subject matter standards have narrowed in the US, and as the enforcement of IP rights has become a risky and expensive (often impossible) endeavor, investors’ willingness to bet on small R&D-intensive businesses is quickly evaporating.

This troubling dynamic is hitting the most innovative industries the hardest—things like personalized medicine or foundational high tech R&D. Recent Supreme Court decisions have distorted traditional interpretations of patentable subject matter standards and shut the door on game-changing—and potentially lifesaving—inventions. And while the United States backtracks on patentable technologies, foreign jurisdictions are moving forward and encouraging the next wave of innovative breakthroughs. As the Wall Street Journal recently highlighted, China is now embracing advances in biotechnology that the US is rejecting—a trend that may soon result in China leading the world in the development of lifesaving therapeutics and cancer treatment drugs.

With little confidence in the ability of American companies to commercialize and protect their intellectual property rights, investment in innovative research and development has also shifted outside of the United States. As detailed in the 2016 G20 Innovative Report, R&D and patenting activity in the US has slowed as support for R&D and innovation experiences exponential growth in China and other Asian countries. In a Fortune Magazine article titled The Death of American Research and Development, Chris Matthews cites an OECD study that further illustrates this dramatic difference in R&D investment.

An extended decline of American R&D investment in innovative industries would be catastrophic, as the value added to the US economy by IP-intensive industries cannot be overstated. A 2016 Department of Commerce report found that IP-intensive industries—identified as industries that rely most heavily on patents, trademarks, or copyrights—are directly and indirectly responsible for 45 million jobs—30% of the US workforce—and contributed $6.6 trillion to US GDP in 2014. Additionally, the study found that revenues specific to IP licensing—a practice often carelessly maligned as part of the patent “troll” narrative—totaled $115.2 billion in 2012, with 28 industries drawing revenues from licensing.

As Adam Mossoff and I detail in a recent paper, the US is abandoning its “gold standard” patent system at the exact same time that international competitors are embracing the value and importance of patents. We highlight a database of over 1700 patent applications recently rejected in the US but granted in China and the European Union, including applications for potentially lifesaving technologies and therapeutic methods that could usher in the next great advances in medical science. While it may be difficult to judge the long term impact of recently-rejected patent applications in the US, it’s clear that the patent system is no longer the pioneering institution that led the way in the digital and biotech revolutions of the 1980s and 90s. A study released earlier this year by the US Chamber of Commerce ranked the US patent system tenth in overall patent system strength, a significant drop from its former position as number one.

The World Intellectual Property Organization also reports that China is now the main driver of growth in patent applications, recently becoming the first jurisdiction to have over one million applications filed in a given year. And in addition to more filings, China is now granting more patents—many in the dynamic software and biotech industries the US is neglecting. Not surprisingly, stakeholders have recognized these trends, as venture capital investments in China reached a record high of $31 billion in 2016.

To be sure, a weak and uncertain patent protection landscape in the US is not solely to blame for the movement of venture capital to China and other foreign jurisdictions. As Venture Beat notes in a recent article, VCs are also drawn overseas by lower costs (including labor), faster product-to-market times, massive and eager consumer bases, and efficient manufacturing infrastructure. But as a group of venture capital and patent law specialists recently explained at the Advanced Patent Law Institute held at the USPTO, one of the main reason investments are being driven overseas is because an insecure US patent system no longer adequately incentivizes domestic investment. Citing a study by the Kauffman foundation, former Chief Judge of the Federal Circuit Paul Michel warned that because most new jobs come from small start-up companies dependent on technology, if incentives to invest in these job creators are lost, the patent system and economy are in serious danger.

At another recent event, Ami Patel Shah, managing director of Fortress Investment Group, detailed the stark realities facing startups in the wake of the Supreme Court’s patentable subject matter jurisprudence:

[A]s you educate them on the recent uncertainty and the drastic change in the [patentable subject matter] rules and what has happened with their patents, we were not able to provide them financing, nor was anyone else in the venture community giving them venture financing because then it became known that their product was unprotected, that anyone could copy it. So companies were put in bankruptcy or they had a fireside sale.

Across the globe, more and more countries are recognizing that the roots of a vibrant innovation economy lie in stable and effective intellectual property rights. And with countries like China able to offer all-around lower costs, faster production, and millions of eager consumers, it’s no surprise that investors will continue to eye “offshore invention” as a potentially lucrative investment opportunity. In light of this, the US should be working to make sure its patent system isn’t one of the reasons why money is streaming out of the country. If it doesn’t, the next wave of life-changing innovation—and all the economic benefits that come with it—will be realized elsewhere.