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Innovation Internet Patent Law Patentability Requirements Software Patent Uncategorized

Federal Circuit Again Finds Computer-Implemented Invention Patent Eligible

dictionary entry for the word "innovate"In Tuesday’s McRO v. Bandai decision, the Federal Circuit has once again reversed a district court’s determination that a computer-implemented invention (aka “software patent”) was not patent eligible under Section 101 of the Patent Act. This continues the Federal Circuit’s recent trend of clarifying the Supreme Court’s two-step patent-eligibility test under Mayo and Alice. The first step asks whether the invention is “directed to” a patent-ineligible concept, such as an abstract idea. If so, the second step then asks whether there is an “inventive concept” that transforms the concept into a patent-eligible invention. While the Supreme Court gave little guidance on what “directed to” and “inventive concept” mean in practice, the Federal Circuit’s recent decisions have made the Mayo-Alice test far less abstract—rather ironic, given that the test itself assesses abstractness.

This past May, the Federal Circuit held in Enfish that, in the software context, the “directed to” inquiry looks at whether “the plain focus of the claims is on an improvement to computer functionality itself.” Since the database claims at issue focused on specific improvements to computer capabilities, they were not “directed to” a patent-ineligible concept under Section 101. Two months later in Bascom, the Federal Circuit stated that an “inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.” And even though each software claim, related to filtering content on the internet, was “known in the art” when taken individually, the Federal Circuit held that the claims, in combination, were patent eligible because they transformed “the abstract idea of filtering content into a particular, practical application of that abstract idea.”

Adding to this recent line of cases upholding the patent-eligibility of computer-implemented inventions, the Federal Circuit’s new opinion in McRO v. Bandai sheds even more light on the Section 101 analysis under the Mayo-Alice test. The invention at issue involved automated lip-syncing for computer-generated animation, which the district court held was drafted too broadly to be patent eligible. The Federal Circuit reversed, noting that courts “must look to the claims as an ordered combination,” even under the first step of the Mayo-Alice test. The Court of Appeals thus found that the proper analytical centerpiece was “whether the claims in these patents focus on a specific means or method that improves the relevant technology.” Since the invention constituted a “combined order of specific rules that renders information into a specific format that is then used and applied to create desired results,” the Federal Circuit held it patent eligible under Section 101.

Several commentators have praised the Federal Circuit’s decision. Bob Sachs, who specializes in patentable subject matter as a partner at Fenwick & West, points out that the Federal Circuit, for the first time, has used preemption to find that the invention was not “directed to” patent-ineligible subject matter. The Federal Circuit here looked at preemption as part of the first step of the Mayo-Alice test, finding it relevant to whether the invention was “directed to” a patent-ineligible concept in the first place. As Sachs explains, the Federal Circuit “confirms Enfish’s holding that the improvement provided by the specific claim limitations can be considered” under the first step of the Mayo-Alice test. Moreover, Sachs notes that the “panel here makes clear that a demonstration of meaningful non-preemption is sufficient to establish that a claim is not ‘directed to’ an abstract idea, and thus eligible at step 1.”

Other observers, including Erich Andersen, VP and Deputy General Counsel at Microsoft, and Gene Quinn of IPWatchdog, have applauded the Federal Circuit for making the patent-eligibility analysis even more concrete in light of the Supreme Court’s rather abstract abstractness test in Mayo and Alice. If anything, the Federal Circuit here has not only built upon its prior precedents in Enfish and Bascom, it has tied them together by explaining that ordered combinations are relevant to both the first and second steps of the Mayo-Alice test. In the end, the patent eligibility of a computer-implemented invention appears far more settled than ever before–a great result for inventors of so-called “software patents.” The Federal Circuit’s decision is certainly a far cry from the supposed death-knell for “software patents” predicted by several commentators after the Supreme Court’s opinion in Alice.

Categories
Copyright Copyright Licensing Copyright Theory Infringement International Law Internet Legislation Uncategorized WIPO

European Union Draws a Line on Infringing Hyperlinks

Cross-posted from the Mister Copyright blog.

a gavel lying on a table in front of booksLast week, the European Court of Justice—the judicial authority of the European Union—issued an anticipated decision in the Sanoma hyperlinking case, declaring that commercial linking with knowledge of unauthorized content constitutes copyright infringement. The opinion comes after years of similar cases in Europe stirred debate over whether linking to pirated works was a ‘communication to the public’ and therefore infringing, and provides a sensible test that protects the works of authors and creators while ensuring the internet remains a bastion of free speech.

Sanoma involved the popular Dutch news and gossip site GeenStijl, which ran an article in 2011 that included links to an Australian website where copyrighted Playboy magazine photos were made available. The photos were published on the Australian website without the consent of Sanoma, Playboy’s editor and copyright owner of the photos at issues, but taken down after the site was notified of their infringing nature. Despite similar notifications, GeenStijl refused to remove the hyperlinks and actually provided links to another website hosting the unauthorized photos after the Australian website took them down.

Sanoma brought a copyright infringement claim against GS Media, which operates the GeenStijl website, and the Supreme Court of the Netherlands sought a preliminary ruling from the European Court of Justice on whether hyperlinks represent the communication of a work to the public. According to an earlier EU directive, any communication to the public of works protected by copyright must be authorized by the copyright owner. Due to the ubiquity of links and hyperlinks on the Internet, a ruling classifying them as communications to the public would have major ramifications for anyone linking to unauthorized content.

In its judgment, the European Court of Justice found that the concept of ‘communication to the public’ requires individual assessment and laid out the following three factors that must be considered when determining whether a link or hyperlink qualifies.

1) The deliberate nature of the intervention – According to the Court, “the user makes an act of communication when it intervenes, in full knowledge of the consequences of its actions, in order to give access to a protected work to its customers.”
2) The concept of the ‘public’ covers an indeterminate number of potential viewers and implies a large number of people.
3) The profit-making nature of a communication to the public – The Court explains that when hyperlinks are posted for profit, “it may be expected that the person who posted such a link should carry out the checks necessary to ensure that the work concerned is not illegally published.”

Applying these criteria to Sanoma, the Court found that because GS Media runs a commercial website that makes money from advertising, it is undisputed that they posted the hyperlinks for profit, and that it is also undisputed that Sanoma had not authorized the publication of the photos. It also found that because they were notified by Sanoma and continued to repost links after the original source website took down the content, GS Media was aware of the infringing nature of the photos and “cannot, therefore, rebut the presumption that it posted those links in full knowledge of the illegal nature of that publication.” The Court concluded that by posting the links, GS Media therefor effected a ‘communication to the public.’

The Court goes on to detail its desire to maintain a fair balance between the interest of copyright owners and authors and the protection of the interests and fundamental rights of Internet users, “in particular their freedom of expression and of information, as well as the general interest.” After providing the criteria for assessing whether a link qualifies as a communication to the public, the opinion emphasizes the important role hyperlinks play in the exchange and free flow of information over the internet, and clarifies that linking—even to unauthorized content—is not a communication to the public if there is no profit motive or knowledge of the infringing nature of the linked-to works. Even so, it’s important to note that not-for-profit hyperlinking may still be considered a communication to the public if the person posting the link knew or should have reasonably known that the content was posted without authorization.

Perhaps most surprising about the Court’s decree is the relative approval by both copyright owners and supporters of the rights of those posting links. While it speaks to the reasonable approach the Court has taken in determining what qualifies as a communication to the public, it may also represent a hesitation to condemn or praise the order due to a significant ambiguity. It’s not entirely clear who carries the evidentiary burden of proving whether an individual knew or should have reasonably known certain content was posted on the Internet without authorization. If copyright owners and authors are forced to prove a user knew or should have known content was unauthorized every time they attempt to remove links that can appear online incessantly, it could render the new directives ineffectual in protecting creative works.

Regardless of the uncertainly surrounding this burden of proof, the current test seems to strike a balance that holds commercial websites more accountable, while allowing for some flexibility for the general public. With debates over the effectiveness of notice and takedown intensifying in the United States, the EU’s decision on communications to the public should be recognized as workable approach to dealing with infringing hyperlinks. As the United States Copyright Office admits in its 2016 study on the making available right, jurisprudence in the US regarding offering access to content hosted elsewhere on the Internet through hyperlinking is less developed as some foreign jurisdictions. But the study acknowledges the progress made in the EU, and emphasizes the need to include ‘offers of access’ in the crucial making available right.

Despite semantic differences, the EU and the US are both moving towards systems that will impose greater accountability for posting links to unauthorized works. The EU’s directive makes clear that commercial hyperlinking to unauthorized content is indeed a communication to the public and therefor copyright infringement, while ensuring that the free flow of information through general public linking will not be threatened and the Internet will remain unbroken. It’s an approach that represents the greater goals of copyright law around the world, and other jurisdictions should follow the lead of the EU when crafting copyright policies that address the intricacies of the Internet.

Categories
Copyright Patent Law Trade Secrets Trademarks Uncategorized

Scalia Law Alums Help Arts & Entertainment Advocacy Clinic Draft Influential Amicus Brief

jennifer-atkins
Jennifer Atkins of Cloudigy Law

Last spring, the Arts & Entertainment Advocacy Clinic at Scalia Law School filed an amicus brief on behalf of intellectual property law scholars in the Fox News v. TVEyes copyright infringement case. Assisting the students on the project was practicing IP attorney and Scalia Law alum Jennifer Atkins, who volunteered her time—and the time of her firm, Cloudigy Law—to work closely with the Clinic to craft a professional and influential brief.

Cloudigy Law is a boutique intellectual property law firm located in Tysons Corner, Virginia, that was founded by Antigone Peyton, another Scalia Law alum. Expanding the firm’s reach into all areas of IP law, Antigone recruited other Scalia Law alums including Clyde Findley and Jennifer Atkins to build a “cloud-based” intellectual property and technology firm that stresses client communication and offers an innovative service model that big law firms can’t match. Cloudigy’s attorneys stay on top of current developments in IP law through their Decoding IP blog, which includes podcast discussions of the issues important to their clients.

As a result of its unique approach and dedication to the client, Cloudigy has grown to eleven attorneys and technologists who offer high quality strategic advice to help identify and protect IP and realize its value. The firm uses sophisticated enterprise collaboration technology to effectively share knowledge and deadlines within its litigation team and with its clients. Cloudigy values the relationships it has built with smaller clients, and it has adapted and responded to changes in the legal services market to suit their needs.

Jennifer got involved with the Arts & Entertainment Advocacy Clinic through her Scalia Law alumni connections, partnering with Clinic Director and CPIP Senior Scholar Sandra Aistars and meeting with students to discuss project strategy. Because of her background as an appellate clerk for the Honorable E. Grady Jolly at the United States Court of Appeals for the Fifth Circuit and her extensive appellate practice experience as a partner with Kirkland & Ellis, Jennifer was a perfect match for the Clinic—according to Professor Aistars, Jennifer was an “ideal and impressive partner.”

Emphasizing the role of an amicus brief in litigation, Jennifer encouraged the students to assume perspectives different than those of the parties and to utilize effective writing techniques to produce an outstanding brief that would be useful to the court. As the students worked through drafts, Jennifer made valuable suggestions that helped them get at the underlying policy issues and flesh out a persuasive argument. Working alongside a seasoned professional through the amicus brief process was a truly invaluable experience for the Clinic students and something that they’ll draw on as they begin their legal careers. Jennifer also expressed her appreciation for the opportunity to guide the students through the process, saying it was a “great way for us to give back to our law school.”

As the Arts & Entertainment Advocacy Clinic begins another semester of work, connections with Scalia Law alums and IP professionals* will continue to provide the students with unique opportunities and to foster the mutually beneficial relationships that represent Scalia Law’s esteemed IP law program.

*Lawyers and IP professionals who would like the Clinic to weigh in on a pro-artist copyright case or who would like to explore other volunteer opportunities with the Arts & Entertainment Advocacy Clinic may contact Sandra Aistars at saistars@gmu.edu.

Categories
Copyright Copyright Licensing Copyright Theory Infringement Intellectual Property Theory Internet Reasonable Royalty Uncategorized

Despite What You Hear, Notice and Takedown is Failing Creators and Copyright Owners

cameraIn a recent op-ed in the LA Times, Professors Chris Sprigman and Mark Lemley praise the notice and takedown provisions of the Digital Millennium Copyright Act (DMCA) as “a bit of copyright law worth saving.” They argue that Section 512 of the DMCA continues to serve its purpose of balancing the rights of copyright owners and creators with those of Internet service providers (ISPs), while leaving both sides only “slightly disappointed.” Satisfying these two groups is indeed a difficult charge, but it’s simply disingenuous to suggest that creators and copyright owners are satisfied with a system so clearly in need of an overhaul.

As the Copyright Office embarks on its review of the DMCA, supporters and critics of the nearly twenty-year-old doctrine are weighing in on its effectiveness in addressing online infringement. Sprigman and Lemley claim that the “process has worked well for years,” and that the result of shifting more enforcement burden to ISPs “could be a broken Internet.” But for those creators and copyright owners who have their works resurface online just minutes after they are taken down, the Internet is already “broken.” The fact that piracy continues to intensify, despite incredible efforts to have infringing content taken down, shows that notice and takedown is largely ineffective.

As CPIP Senior Scholar Sean O’Connor testified before Congress, the notice and takedown system is not working for any of its intended beneficiaries. The constant game of whack-a-mole renders the system essentially futile for copyright owners and creators, and it creates significant burdens for ISPs that want to comply—especially small to mid-level companies that can’t afford compliance staff. Worse still, by shielding service providers from liability, the DMCA creates perverse incentives where there’s little downside to ignoring infringing content. In fact, reviewing content could lead to an ISP having knowledge of infringement and losing its safe harbor.

Now that the Copyright Office’s review is underway, it’s somewhat strange to see some supporters claim that all is well. But has anything actually changed since the Office announced its study?  Of course not. The whack-a-mole problem remains, and the knowledge standards are still interpreted broadly to disproportionately favor ISPs. When one side says the system is working and the other side says it’s broken, the truth is that the system is not working well for everyone. Sprigman and Lemley can claim that the DMCA is “worth saving” only by downplaying the true plight of creators and copyright owners.

A concrete example of this struggle comes from the comments filed by Universal Music Group (UMG) as part of the Copyright Office’s study. UMG describes the painstaking efforts devoted to protect just one artist’s creative work. In October of 2014, UMG and Big Machine Records launched a joint offensive to protect Taylor Swift’s “1989.” A staff of UMG employees dedicated 100% of their time and resources to manually search for infringements on YouTube, SoundCloud, and Tumblr, and through March of 2016, they had sent over 66,000 DMCA takedown notices. Despite their considerable efforts, over 500,000 links to the album were identified, and “1989” was illegally downloaded nearly 1.4 million times from torrent sites.

Of course, this type of effort would be impossible to replicate for any works other than those that attract such massive attention. For most artists, the burden of monitoring the Internet and sending takedown notices would fall entirely on their shoulders, with no guarantee of putting a stop to the theft of their works. Sprigman and Lemley ignore these problems, instead claiming that since copyright owners sent “more than 500 million takedown requests just to Google last year,” we know that the “system is a powerful tool against pirated content.” That would be great, if true, but the reality is that those notices barely made a dent.

Sprigman and Lemley claim that the “genius of the DMCA” is that it “enables entertainment companies to turn piracy into legitimate revenue.” They give the example of “YouTube’s Content ID system,” which “gives copyright owners the opportunity to ‘claim’ their work and share in any advertising revenue rather than pull it off the site.” From the perspective of creators and copyright owners, the only “genius” of this system is that YouTube can legally present them with an unfair choice—suffer infringement and get nothing or monetize and get next to nothing.

While Sprigman and Lemley praise the “more than $1 billion” paid out by YouTube, the real question is how much more copyright owners and creators would have been paid in a properly functioning market. YouTube is consistently teeming with infringing videos—one recent report revealed that over 180 million infringing videos had been removed in 2014 alone. And the artists that YouTube’s largess supposedly benefits are loudly complaining about their exploitation. If Content ID is so great, why are so many creators and copyright owners upset with the arrangement? The monetization Google offers to copyright owners and artists is less than half of the royalties paid out by streaming services like Pandora, an amount that artists have denounced as already inequitable.

In her excellent piece on the fictions of the Content ID system, Grammy-winning artist Maria Schneider exposes Content ID as a way for Google to cash in by actually legitimizing and perpetuating piracy. She explains that a majority of creators that opt for monetization realize miserable percentages of ad revenue, and the continued illegal uploading of their music and content drives billions of users to YouTube’s platform. YouTube has turned the weakness of the DMCA into a system that exploits artists while offering embarrassingly lower royalty rates than what would be negotiated in a free market.

The current situation is untenable, and if change means “breaking” the Internet, then we should pull out the pickaxes and get to work. A system of notice and staydown, rather than just takedown, would help alleviate the constant and seemingly ineffectual vigilance required by the current system. By removing all copies of a protected work and blocking inevitable re-postings, ISPs would honor the original purpose of the DMCA while actually doing their part to earn the protection of the safe harbor provisions. Only by ensuring that targeted works do not resurface will ISPs respect the rights of those without whose content they would cease to exist.

How anyone can honestly say that the current notice and takedown system is working for copyright owners and creators is mystifying given the constant calls for reform from creators and the numerous critical comments filed with the Copyright Office. The incredible magnitude of takedown notices sent and the seemingly unstoppable reappearance of infringing works online are a clear signal that the system is completely failing those it was meant to protect. Creators and copyright owners deserve a better chance at protecting the fruits of their labors, and the DMCA needs to be changed so that it truly is a system “worth saving.”

Categories
Copyright Internet Uncategorized

CloudFlare’s Desperate New Strategy to Protect Pirate Sites

a gavel lying on a table in front of booksSan Francisco-based CloudFlare has earned a somewhat dubious reputation in the online world. Website owners can set up CloudFlare in just a few minutes, gaining the performance, security, and privacy benefits the service provides. Traffic routed through CloudFlare’s global content delivery network is cached for faster delivery times and protected from numerous online threats. Pirate sites have flocked to the service because it hides their true identities from copyright owners by default. And it probably doesn’t hurt that CloudFlare CEO Matthew Prince thinks that “censoring the Internet” is “creepy,” even “under a court order.”

Prince practices what he preaches, and CloudFlare has been all-too-ready to lend a helping hand to even the most notorious pirates. When The Pirate Bay rose from the ashes in early 2015, CloudFlare provided the site with services that helped manage its massive server loads. CloudFlare’s encryption technology even made it easy for users in the UK to circumvent the High Court’s ban ordering ISPs to block the pirate site. Amazingly, The Pirate Bay is now back in the United States, using its original thepiratebay.org Virginia-based domain and benefiting from CloudFlare’s robust services to make its criminal enterprise run smoothly worldwide.

Of course, the only reason CloudFlare can get away with supporting the world’s most-visited torrent site is because the DMCA is such a mess. Courts have set the bar so high that CloudFlare wouldn’t likely be found to have red flag knowledge of the massive amounts of infringement it certainly knows its service enables for globally-infamous criminal infringers like The Pirate Bay. Rather than taking the high road and refusing to work with obvious pirate sites, CloudFlare lawyers up when pushed and denies the supportive role that its service provides.

We saw this last year in the Grooveshark case. After the original Grooveshark site was found liable for willful infringement and agreed to shut down, copycat sites sprung up at different top-level domains such as grooveshark.io and grooveshark.pw. The plaintiffs obtained a temporary restraining order against the copycats, which registrars Namecheap and Dynadot promptly complied with by disabling some of the domains. But when the plaintiffs asked CloudFlare to stop providing services to some of the other copycats, they were met with firm resistance. The plaintiffs had to turn to the court for an order clarifying that the injunction against the copycat sites prevented CloudFlare from providing them services.

With the backing of the Electronic Frontier Foundation, CloudFlare put up a big fight. It denied that it was in “active concert or participation” with the copycats, which under Rule 65 would have made it bound by their existing injunction. CloudFlare argued that its services were merely passive and that the domains would still remain accessible even if its services were cut off. The district court rejected CloudFlare’s self-serving arguments, noting that it was in fact aiding and abetting the copycat sites by operating their authoritative domain name servers and optimizing their traffic worldwide. Since CloudFlare had actual notice of the injunction and was in “active concert or participation” with the enjoined copycats, it was also bound by their injunction under Rule 65.

Hit with what must have been the eye-opening reality that, under penalty of contempt, it couldn’t knowingly help its enjoined customer engage in the very wrong the court had ordered it to stop committing, one might think that CloudFlare would have become more respectful of court orders involving its customers. However, as recent developments in the MP3Skull case show, CloudFlare has decided to again take the low road in shirking its responsibility to the court. And its argument here as to why it’s beyond the court’s reach is even more desperate than before.

In April of 2015, several record label plaintiffs sued MP3Skull for copyright infringement, easily obtaining a default judgment when the defendants failed to respond to the suit. Earlier this year, the plaintiffs were granted a permanent injunction, which the defendants quickly flouted by setting up shop under several different top-level domains. Naturally, the common denominator of these multiple MP3Skull sites was that they used CloudFlare. The plaintiffs’ lawyers sent a copy of the injunction against the pirate sites to CloudFlare, asking it to honor the injunction and stop supplying services to the enjoined domains. But, as with Grooveshark, CloudFlare again refused to comply.

The record label plaintiffs have now gone back to the district court, filing a motion requesting clarification that CloudFlare is bound by the injunction against the MP3Skull sites. They argue that the “law is clear that CloudFlare’s continued provision of services to Defendants, with full knowledge of this Court’s Order, renders CloudFlare ‘in active concert or participation’ with Defendants,” and they point to the opinion in the Grooveshark case in support. According to the plaintiffs, the only issue is whether CloudFlare is aiding and abetting the enjoined defendants by providing them services.

CloudFlare opposes the motion, though it noticeably doesn’t deny that it’s in “active concert or participation” with the enjoined defendants. Instead, CloudFlare argues that, since this is a copyright case, any injunction against it must comply with the DMCA:

Section 512(j) prescribes specific standards and procedures for injunctions against service providers like CloudFlare in copyright cases. It places strict limits on injunctions against eligible service providers. 17 U.S.C. § 512(j)(1). It specifies criteria that courts “shall consider” when evaluating a request for injunctive relief against a service provider. 17 U.S.C. § 512(j)(2). And it requires that a service provider have notice and an opportunity to appear, before a party may bind it with an injunction. 17 U.S.C. § 512(j)(3). Plaintiffs ignored those requirements entirely.

The gist of CloudFlare’s argument is that Section 512(j) controls injunctions against service providers like itself, notwithstanding the fact that Rule 65 binds those in “active concert or participation” with an enjoined party. In other words, CloudFlare says that the DMCA gives service providers unique immunity from having to obey court-issued injunctions under the Federal Rules—a remarkable claim requiring remarkable proof. And the case law cited to back up this claim? None. Zip. Nada. CloudFlare fails to produce one single cite showing that any injunctive-relief statute, whether copyright or otherwise, has ever been deemed to preempt the longstanding rule that it’s contempt of court to aid and abet an enjoined defendant. The desperation is palpable.

The reason the DMCA doesn’t apply to CloudFlare is obvious. Section 512(j) states that it “shall apply in the case of any application for an injunction under section 502 against a service provider” that qualifies for the safe harbors. CloudFlare goes on for pages about how it’s a service provider that would qualify for the safe harbor defense if given the chance, but all of this misses the point: CloudFlare is not being enjoined. The only service provider being enjoined is MP3Skull—and that injunction was issued under Section 502 without the limitations set forth in Section 512(j) because MP3Skull didn’t even bother to show up and attempt to claim the safe harbors. But the plaintiffs have not sought an injunction against CloudFlare, which they could only do by naming CloudFlare as a party to the suit.

Since CloudFlare itself isn’t being enjoined under Section 502, Section 512(j) provides it no limitations. The issue is simply whether, under the Federal Rules, CloudFlare is bound by the injunction that has already been issued against the MP3Skull sites. Perhaps not wanting to get bench-slapped again on the aiding and abetting question under Rule 65, CloudFlare is taking an even lower road with this desperate new argument that it’s magically immune to court orders against its customers under the Federal Rules. The district court has yet to rule on the plaintiffs’ motion, but my guess is that it will make short work in reminding CloudFlare of the court’s true power to hold aiders and abettors in contempt.

Categories
Copyright Innovation International Law Uncategorized

The European Union Extends Copyright in Design—and Critics Balk (Yet Again)

dictionary entry for the word "innovate"The European Union recently decided to support the productive labors of designers by extending legal protections of their works in all areas of copyright, design, and patent law. Just as past legislation in the United States extending copyright terms was attacked with histrionic allegations that this was merely rent-seeking behavior by politically powerful corporations, the EU’s extension of protections for designs have come under similar attack. In the US, the specter of Disney trying to keep “the Mouse” alive has become a stale trope trotted out in opposition to any sensible copyright protections. Thus, it is not a surprise that the same trope is being used to attack the EU’s new law. In both cases, the attack misses its target because it is rooted in a false assumption about why property rights are secured to innovators and creators.

First, a word about the change in European Union law. This law is important both in making creators’ rights more effective throughout the EU and in bringing those rights closer in harmony with EU intellectual property (IP) law as a whole. As of July 28, 2016, the Copyright, Designs and Patents Act extends the copyright for a designer’s work from 25 years to 70 years. (A six-month grace period in the UK has been granted to allow retailers to clear their stock of works that might be in question under the new Act.)

According to David Woods, a British lawyer, the EU’s changes aligned its copyright laws with those governing literature and music, providing uniform legal protections for all products of creative labors. Further, as Mr. Woods properly points out, “[t]he intent of the change to the legislation is to stop ‘exact’ copies of existing industrially designed artistic works”—a measure that he predicts will result in the closure of websites producing bargain basement, mass-produced copies of furniture, “as after all, this was their business model.” In sum, the legislation is directly aimed at illegal internet operations whose deliberate “business model” is to steal the fruits of the labors of those working in the design industries.

This copyright legislation secures to creators their highly-valued furniture design and thwarts piracy. As in the protection of all property rights, this spurs creativity and sustains livelihoods of professional creators. This is an example of how securing property rights of all types is a key requirement in a growing innovation economy and flourishing society.

Who could object to this? Surprisingly, some ersatz advocates for property rights, such as some libertarian academics like Alex Tabarrok. Tabarrok recently attacked the new EU design law with the tread-worn criticism that one hears from ideologically committed IP skeptics: “The point” of the revamped EU regulations, he declares, is “not to spur creativity but to protect the rents of a handful of people whose past designs turned out to have lasting value.” (One can hear the echoes of the rhetorically appealing, but false, claim that Disney was solely responsible for capturing Congress in keeping Mickey Mouse under legal wraps.)

In the abstract and without regard to recognizing how property rights function in the free market, Tabarrok’s criticism might seem plausible. But there’s a key mistake in it. The fallacy over which Tabarrok stumbles is assuming that the sole purpose of copyright is only to spur the creation of new works—no more, no less. According to Tabarrok, copyright is merely a carrot dangled in front of creators, who like Pavlov’s dog are supposed to be sparked into creative activity. Certainly, this is a function of IP rights, as it is with all property rights—promising to secure the fruits of productive labors, whether in a farm, books, or inventions, spurs people to create more of these valued assets.

But, like all property rights, copyright is not merely an incentive to create. All property rights serve the central function of securing to their owners the free use and disposition of the property, which is what leads to contracts and other exchanges in the free market that enhance everyone’s lives. Thus, copyright is vital to sustaining creators’ rights in reaping the rewards of their creative and valuable labors—when the works are disseminated in the market and purchased by consumers for their enjoyment and use.

Ironically, Tabarrok hints at this when he says, in what is meant to derogate copyright extension, that “the actual argument for copyright runs—We have lots of popular designs and we need to keep selling them at a high price.” Indeed, the argument for copyright as such could be restated in the same way: “we have lots of popular designs and we should be allowed to sell them at the price they command in the market,” irrespective of whether that price seems “high.”

Tabarrok looks to support his argument with the example of mid-century design classics, such as Charles Eames chairs and Arco lamps. These works have become familiar to the public through the sale of replicas sold by furniture retailers, such as Design Within Reach in the US and Swivel in the UK. Another classic example is the Barcelona chair, an exquisite and iconic work designed by Ludwig Mies van der Rohe. While the officially licensed version of the Barcelona chair sells at the Conran Shop in the UK for around £5,755, a replica can be found on websites such as Swivel for around £455.

The stark difference in price illustrates vividly why high-level furniture and “lifestyle” designers such as Sir Terence Conran, and fashion designers such as Stella McCartney, support the new EU law: their professional livelihood—their ability to benefit from specialization and division of labor, which Adam Smith taught us is the key to a flourishing free market—rests on their ability to profit from the fruits of their creative labors in a commercial economy. Their right to sell their designs at the prices they seek in the marketplace does not preclude the design and dissemination of new, original articles of design that are inspired by the inimitable works of the mid-century moderns referenced by Tabarrok. But their property rights should preclude the sale of pirated knock-offs, which bring nothing to the table in terms of originality, inspiration, or hard work and are simply cheap copies.

It is not surprising that Tabarrok and others of his ilk continue to resort to ill-founded and unsubstantiated attacks upon IP rights on the dubious grounds that at some point these rights do not directly encourage innovation. This is highly misleading, because the same can be said about all property rights. This rhetorical move also makes it seem like Tabarrok is on the “pro” side of creation and innovation, which is dissembling rhetoric at its best.

Tabarrok’s critique, however, rests on a misconceived view of the function of property rights as solely incentivizing creation. Patents and copyrights are property rights, and like all property rights, they do not merely incentivize creation and innovation. They serve the important function of enabling creators to earn a livelihood from their productive labors by securing to them the same rights of all property owners to control the conditions in which their property is sold in the marketplace. This reflects the longstanding economic principle that a growing free market and flourishing society requires securing to property owners the fruits of their labors – surely a central tenet of libertarianism!

Categories
Innovation Legislation Patent Law Patent Litigation Uncategorized

Law Professors & Economists Urge Caution on VENUE Act in Letter to Congress

Today, 28 law professors, economists, and political scientists from across the nation submitted a letter to Congress expressing serious concerns about the recent push for sweeping changes to patent litigation venue rules, such as those proposed in the VENUE Act. The letter is copied below, and it can be downloaded here: http://ssrn.com/abstract=2816062

Although proponents for the VENUE Act argue that the concentration of patent cases in a few federal district courts is bad for the patent system, this letter explains that the VENUE Act does not solve this problem. Studies show that similar restrictions on venue would only shift this concentration from the Eastern District of Texas to a couple other judicial districts – the District of Delaware and the Northern District of California. These two other districts are recognized as more friendly to defendants, such as the high-tech companies and retailers lobbying heavily for the VENUE Act. The letter also explains that Congress also should be wary of acting, because the rates and patterns in patent litigation are very fluid. For example, the percentage of patent lawsuits filed in the Eastern District of Texas relative to other districts is now declining substantially.

For these reasons, among others detailed in the letter, these academics conclude that Congress should adopt a wait-and-see approach on the VENUE Act. In the very least, until the patent-weakening effects of the America Invents Act’s new PTAB proceedings and recent Supreme Court decisions are better understood, Congress should be reluctant to enact legislation that will further weaken patent rights and potentially harm our innovation economy.

Read the letter below or download it here: http://ssrn.com/abstract=2816062

Letter to Congress from 28 Law Professors
& Economists Urging Caution on the VENUE Act

Dear Chairman Grassley, Ranking Member Leahy, Chairman Goodlatte, and Ranking Member Conyers:

As legal academics, economists, and political scientists who conduct research in patent law and policy, we write to express our concerns about the recent push for sweeping changes to patent litigation venue rules, such as those proposed in the VENUE Act.[1] These changes would vastly restrict where all patent owners could file suit—contrary to the general rule that a plaintiff in a civil lawsuit against a corporate defendant can select any court with jurisdictional ties to the defendant.[2]

Given the recent changes in the patent system under the America Invents Act of 2011 and judicial decisions that have effectively weakened patent rights,[3] we believe that Congress should adopt a cautious stance to enacting additional changes that further weaken patent rights, at least until the effects of these recent changes are better understood.

Proponents of amending the venue rules have an initially plausible-sounding concern: the Eastern District of Texas handles a large percentage of patent infringement lawsuits and one judge within that district handles a disproportionate share of those cases. The reality is that the major proponents of changing the venue rules are primarily large high-tech companies and retailers with an online presence sued in the Eastern District of Texas that would rather litigate in a small number of more defendant-friendly jurisdictions.

Indeed, the arguments in favor of this unprecedented move to restrict venue do not stand up to scrutiny. Specifically:

  • Proponents for the VENUE Act argue that “[t]he staggering concentration of patent cases in just a few federal district courts is bad for the patent system.”[4] As an initial matter, data indicates that filings of patent lawsuits in the Eastern District of Texas have dropped substantially this year—suggesting a cautious approach until trends have stabilized.[5]
  • Contrary to claims by its proponents, legislative proposals like the VENUE Act would not spread lawsuits throughout the country. In fact, these same proponents have found that restricting venue in a manner similar to the VENUE Act would likely result in concentrating more than 50% of patent lawsuits in just two districts: the District of Delaware (where most publicly traded corporations are incorporated) and the Northern District of California (where many patent defendants are headquartered).[6] Instead of widely distributing patent cases across numerous districts in order to promote procedural “fairness,” the VENUE Act would primarily channel cases into only two districts, which happen to be districts where it is considered much more difficult to enforce patent rights.[7]
  • Proponents for the VENUE Act have argued that the Eastern District of Texas is reversed more often by the Federal Circuit than other jurisdictions, claiming that in 2015 the Federal Circuit affirmed only 39% of the Eastern District of Texas’s decisions but affirmed over 70% of decisions from the Northern District of California and District of Delaware.[8] These figures are misleading: they represent only one year of data, mix trials and summary judgment orders, and fail to take into account differences in technology types and appeals rates in each district. In fact, a more complete study over a longer time period by Price Waterhouse Coopers found that the Eastern District of Texas affirmance rate is only slightly below the national average for all districts.[9]
  • The Federal Circuit recently confirmed in In re TC Heartland (Fed. Cir. Apr. 29, 2016) that 28 U.S.C. § 1400(b) provides that a corporate defendant in a patent case—like corporate defendants in nearly all other types of cases—may be sued in any district in which personal jurisdiction lies. Constitutional due process requires a “substantial connection” between the defendant and forum.[10] Thus, contrary to its title and the claims of its proponents, the VENUE Act does not re-establish a “uniform” litigation system for patent rights by requiring substantial ties to the forum. Instead, the Act thwarts the well-established rule that plaintiffs can bring suit in any jurisdiction in which a corporate defendant has committed substantial violations of the law.[11]
  • The VENUE Act would raise costs for many patent owners by requiring them to litigate the same patent against multiple defendants in multiple jurisdictions, increasing patent litigation overall. In recent years, the America Invents Act’s prohibition on joinder of multiple defendants in a single lawsuit for violating the same patent has directly resulted in increased lawsuits and increased costs for patent owners.[12] Moreover, the VENUE Act would also result in potentially conflicting decisions in these multiple lawsuits, increasing uncertainty and administration costs in the patent system.
  • The VENUE Act encourages the manipulation of well-settled venue rules across all areas of law by the self-serving efforts of large corporate defendants who seek to insulate themselves from the consequences of violating the law. By enacting the VENUE Act, Congress would send a strong signal to corporate defendants that they can tilt the substantive playing field by simply shifting cases to defendant-friendly jurisdictions.

Innovators and their investors have long been vital to a flourishing innovation economy in the United States. Startups, venture capitalists, individual inventors, universities, and established companies often rely heavily on patents to recoup their extensive investments in both R&D and commercialization. We urge you to exercise caution before enacting further sweeping changes to our patent system that would primarily benefit large infringers to the detriment of these innovators and, ultimately, our innovation economy.

[1] Venue Equity and Non-Uniformity Elimination Act, S.2733, 114th Cong. (2016),
https://www.congress.gov/114/bills/s2733/BILLS-114s2733is.pdf.

[2] See 28 U.S.C. § 1391(c)(2). See generally Ferens v. John Deere Co., 494 U.S. 516, 527 (1990) (“a plaintiff . . . has the option of shopping for a forum with the most favorable law”).

[3] These include, among others: (1) administrative procedures for invalidating patents created by the America Invents Act, which have had extremely high invalidation rates, leading one former federal appellate judge to refer to these procedures as “death squads,” and (2) several decisions by the Supreme Court and the Federal Circuit that have drastically curtailed patent rights for many innovators. See Adam Mossoff, Weighing the Patent System: It Is Time to Confront the Bias against Patent Owners in Patent ‘Reform’ Legislation, WASHINGTON TIMES (March 24, 2016), http://www.washingtontimes.com/news/2016/mar/24/adam-mossoff-weighing-the-patent-system/.

[4] Colleen Chien & Michael Risch, A Patent Reform We Can All Agree On, WASH. POST (June 3, 2016), https://www.washingtonpost.com/news/in-theory/wp/2015/11/20/why-do-patent-lawyers-like-to-file-in-texas/.

[5] See Michael C. Smith, “Hot But No Longer Boiling“ – EDTX Patent Case Filings Down almost Half; New Case Allocation and Procedures (No More Letter Briefing for SJ motions), EDTexweblog.com (July 21, 2016), http://mcsmith.blogs.com/eastern_district_of_texas/2016/07/edtx-patent-case-filing-trends-new-case-allocation-andprocedures.html.

[6] Colleen Chien & Michael Risch, What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas?, PATENTLY-O (March 11, 2016), http://patentlyo.com/patent/2016/03/happen-patent-couldnt.html. This study also finds that 11% of cases would continue to be filed in the Eastern District of Texas, concentrating nearly two-thirds of all cases in three districts. See id. The authors of this study are presently expanding their investigation to an enlarged data set, which will also capture additional aspects of the VENUE Act. Neither the data nor their results are available yet. However, we have no reason to believe that the expanded data or analysis will produce results other than what has already been shown: a high concentration of patent cases in a small number of districts.

[7] See PricewaterhouseCoopers LLP, 2015 Patent Litigation Study (May 2015) (“PWC Study”), http://www.pwc.com/us/en/forensic-services/publications/assets/2015-pwc-patent-litigation-study.pdf.

[8] Ryan Davis, EDTX Judges’ Love of Patent Trials Fuels High Reversal Rate, LAW360 (Mar. 8, 2016), http://www.law360.com/articles/767955/edtx-judges-love-of-patent-trials-fuels-high-reversal-rate.

[9] See PWC Study, supra note 7 (finding an average affirmance rate of 48% for all districts, compared to an affirmance rate of 42% for the Eastern District of Texas).

[10] See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985).

[11] See generally Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947) (“[T]he plaintiff’s choice of forum should rarely be disturbed.”).

[12] See Christopher A. Cotropia, Jay P. Kesan & David L. Schwartz, Unpacking Patent Assertion Entities (PAEs), 99 MINNESOTA LAW REVIEW 649 (2014), http://www.minnesotalawreview.org/wpcontent/uploads/2015/02/REVISEDSchwartzetal_MLR.pdf.

Categories
Innovation Inventors Patent Law Software Patent Uncategorized

CPIP Scholars File Amicus Brief in Trading Technologies v. CQG

a gavel lying on a table in front of booksEarlier this month, CPIP Senior Scholar Adam Mossoff penned an amicus brief in Trading Technologies v. CQG, currently on appeal to the Federal Circuit. The brief was joined by nine other IP scholars, including CPIP Senior Scholars Mark Schultz and Kristen Osenga.

The amici argue that Trading Technologies’ graphical user interface (GUI) constitutes patentable subject matter under Section 101 of the Patent Act. Noting the Supreme Court’s holding in Bilski v. Kappos that “Section 101 is a dynamic provision designed to encompass new and unforeseen inventions,” the amici urge the Federal Circuit not to interpret Section 101 so narrowly as to “impede the process of future innovation” by “creating unnecessary and innovation-killing ‘uncertainty as to the patentability of software.’”

The recognition that specific computer-implemented technologies are not “abstract” is wholly consistent with the Mayo-Alice test set forth by the Supreme Court in its recent Section 101 decisions, Mayo v. Prometheus Labs and Alice v. CLS Bank. Under the Mayo-Alice framework, Trading Technologies’ GUI is not merely an “abstract idea” incorporating conventional and automatic processes, but rather it exemplifies the technical innovation and “progress of . . . useful Arts” that the patent system is intended to promote.

The Summary of Argument section of the brief is copied below:

SUMMARY OF ARGUMENT

The trial court’s decision represents a proper application of 35 U.S.C. § 101. See Trading Technologies Int’l, Inc. v. CQG, Inc., No. 05-4811, 2015 WL 774655 (N.D. Ill. Feb. 24, 2015). Because the parties address the relevant innovation covered by Trading Technologies’ patents, as well as the application of the Supreme Court’s recent § 101 jurisprudence, amici offer an additional insight that supports the trial court’s decision: the invention of computer-mediated processes is exactly the kind of innovation that the patent system is designed to promote.

As the Supreme Court recognized in Bilski v. Kappos, 561 U.S. 593 (2010), “Section 101 is a dynamic provision designed to encompass new and unforeseen inventions.” Id. at 605 (internal quotations omitted). Thus, this Court should decline the invitation by Appellant to construe § 101 in a crabbed and antiquarian fashion that would limit patent eligibility only to “processes similar to those in the Industrial Age—for example, inventions grounded in a physical or tangible form.” Id. To do so would contravene the Bilski Court’s warning against limiting § 101 to only non-digital inventions, creating thereby unnecessary and innovation-killing “uncertainty as to the patentability of software,” such as Appellee’s graphical-user-interface invention.Id.

To read the full amicus brief, please click here.

Categories
Administrative Agency Commercialization Copyright Copyright Licensing Infringement Innovation Internet Legislation Supreme Court Uncategorized

Letter on FCC Set-Top Box Regulation Once Again Confuses the Issue

Washington, D.C. at nightLast week, a group of law professors wrote a letter to the acting Librarian of Congress in which they claim that the current FCC proposal to regulate cable video navigation systems does not deprive copyright owners of the exclusive rights guaranteed by the Copyright Act. The letter repeats arguments from response comments they  filed along with the Electronic Frontier Foundation (EFF), accusing the Copyright Office of misinterpreting the scope of copyright law and once again bringing up Sony v. Universal to insist that copyright owners are overstepping their bounds. Unfortunately, the IP professors’ recurring reliance on Sony is misplaced, as the 30-year-old case does not address the most significant and troubling copyright violations that will result from the FCC’s proposed rules.

In 1984, the Supreme Court in Sony held that recording television shows on a personal VCR was an act of “time-shifting” and therefor did not constitute copyright infringement. The court also ruled that contributory liability requires knowledge, and such knowledge will not be imputed to a defendant based solely on the characteristics or design of a distributed product if that product is “capable of substantial noninfringing uses.” But while this precedent remains good law today, it does not apply to the real concerns creators and copyright owners have with the FCC’s attempt to redistribute their works without authorization.

The FCC’s proposed rules would require pay-TV providers to send copyrighted, licensed TV programs to third parties, even if the transmission would violate the agreements that pay-TV providers carefully negotiated with copyright owners. A different group of IP scholars recently explained to the FCC that by forcing pay-TV providers to exceed the scope of their licenses, the proposed rules effectively create a zero-rate compulsory license and undermine the property rights of creators and copyright owners. The compulsory license would benefit third-party recipients of the TV programs who have no contractual relationship with either the copyright owners or pay-TV providers, depriving creators and copyright owners of the right to license their works on their own terms.

This unauthorized siphoning and redistribution of copyrighted works would occur well before the programming reaches the in-home navigational device, a fact that the authors of the recent letter to the Librarian of Congress either don’t understand, or choose to ignore. Creators and copyright owners are not attempting to “exert control over the market for video receivers,” as the letter suggests. The manufacture and distribution of innovative devices that allow consumers to access the programming to which they subscribe is something that copyright owners and creators embrace, and a thriving market for such devices already exists.

As more consumers resort to cord cutting, countless options have become available in terms of navigational devices and on-demand streaming services. Apple TV, Roku, Nexus Player and Amazon Fire Stick are just a few of the digital media players consumers can choose from, and more advanced devices are  always being released. But while the creative community supports the development of these devices, it is the circumvention of existing licenses and disregard for the rights of creators to control their works that has artists and copyright owners worried.

Sony has become a rallying cry for those arguing that copyright owners are attempting to control and stymie the development of new devices and technologies, but these critics neglect the substantial problems presented by the transmission of digital media that Sony couldn’t predict and does not address. In the era of the VCR, there was no Internet over which television was broadcast into the home. In 1984, once a VCR manufacturer sold a unit, they ceased to have any control over the use of the machine. Consumers could use VCRs to record television or play video cassettes as they pleased, and the manufacturer wouldn’t benefit from their activity either way.

The difference with the current navigation device manufacturers is that they will receive copyrighted TV programs to which they’ll have unbridled liberty to repackage and control before sending them to the in-home navigation device. The third-party device manufacturers will not only be able to tamper with the channel placement designed to protect viewer experience and brand value, they will also be able to insert their own advertising into the delivery of the content, reducing pay-tv ad revenue and the value of the license agreements that copyright owners negotiate with pay-TV providers. The FCC’s proposal isn’t really about navigational devices, it’s about the control of creative works and the building of services around TV programs that the FCC plans to distribute to third parties free of any obligation to the owners and creators of those programs.

The authors of the letter conflate two distinct issues, misleading influential decision makers that may not be as well versed in the intricacies of copyright law. By stubbornly comparing the copyright issues surrounding the FCC’s proposed rules to those considered by the Supreme Court in Sony, they craftily try to divert attention away from the real matter at hand: Not what consumers do with the creative works they access in the privacy of their own homes, but how those works are delivered to consumers’ homes in the first place.

It’s curious that after many rounds of back-and-forth comments discussing the FCC’s proposal, proponents of the rules still refuse to address this primary copyright concern that has been continuously raised by creators and copyright owners in corresponding comments, articles, and letters (see also here, here, here, and here). Perhaps the authors of the recent letter simply do not grasp the real implications of the FCC’s plan to seize and redistribute copyrighted content, but given their years of copyright law experience, that is unlikely. More probable is that they recognize the complications inherent in the proposal, but do not have a good answer to the questions raised by the proposal’s critics, so they choose instead to cloud the issue with a similar-sounding but separate issue. But if they truly want to make progress in the set-top box debate and clear the way for copyright compliant navigational devices, they’ll need to do more than fall back on the same, irrelevant arguments.

Categories
Copyright Infringement Internet Uncategorized

The Dangerous Combination of Content Theft and Malware

Cross-posted from the Mister Copyright blog.

circuit boardMalware, short for malicious software, has been used to infiltrate and contaminate computers since the early 1980s. But what began as relatively benign software designed to prank and annoy users has developed into a variety of hostile programs intended to hijack, steal, extort, and attack. Disguised software including computer viruses, worms, trojan horses, ransomware, spyware, adware, and other malicious programs have flooded the Internet, allowing online criminals to profit from illicit activity while inflicting enormous costs on businesses, governments and individual consumers.

Purveyors of malware target unsavory websites to embed and distribute their programs, often making deals with those in the business of disseminating stolen content. Content theft websites that appear online through legitimate hosting and content delivery systems are frequently riddled with devious malware that infect the computers of users looking to download or stream pirated music, movie and television shows.

Last week, the Digital Citizens Alliance (DCA) published a report detailing how US tech companies are allowing cyber criminals to use their services to perform a myriad of illegal exploits. Enabling Malware focuses on how stolen content is being used as bait to infect users’ computers and how domestic hosting and content delivery companies are permitting online criminals to profit from the spread of dangerous malware.

Employing the expertise of Internet security firm RiskIQ, the report found that 1 in 3 content theft websites expose users to infectious malware and that visitors are 28 times more likely to encounter malware on content theft sites than mainstream, legitimate websites. And although these nefarious websites are usually created and maintained by overseas operators, they rely on North America hosting companies to function.

It’s a tricky partnership because while the hosting companies are not breaking the law by allowing disreputable websites to make us of their services, they are facilitating criminal networks whose activities could have catastrophic consequences. The report likens these service companies to landlords who turn a blind eye to the illegal activity of a renter. The issue is the same one being examined by the Copyright Office in its DMCA 512 study: When does a service provider have the requisite knowledge of illicit activity to trigger a duty to address the problem?

But while Section 512 of the DMCA hopes to combat copyright infringement online, the introduction of malware to content theft sites has consequences more far-reaching and dire than the dissemination of stolen works. Once malware infiltrates a system and hackers are able to take over, the results can be disastrous. The report details a wide range of criminal activity that can result from malware infection including the theft of bank credentials and credit card information that is then subsequently sold online, locking computers and demanding ransoms to return access, and hijacking webcams to film users without consent. The report warns:

[T]hese companies are now contributing to a growing issue for Americans: the threat of computer infections, the rise of identity theft and loss of financial information. The U.S. Department of Justice reports that 16.2 million U.S. consumers have been victimized by identity theft, with financial losses totaling over $24.7 billion.

According to the study, one of the most notorious companies enabling the websites that spread malware is CloudFlare. Marketing itself as a global content protection and security service provider, CloudFlare actually conceals a website’s true hosting information, inserting their network information instead. This allows for notorious content theft websites to mask information related to their actual hosting companies, making it more difficult to identify those complicit in their illegal activity.

Employing CloudFlare’s services are websites like Putlockerr.io, which offers a wide array of pirated movies for download. But when a user attempts to watch a movie via Putlocker, they download more than pirated content. After a user clicks to watch a movie, they are redirected to a new site that prompts them to download a new video player in order to view the content. This download is in fact a mechanism to deliver the malware that will wreak havoc on their system.

One of the worst distributors of malware identified by RiskIQ was watchfreemoviesonline.top. According to the study, the websites malware exposure rate was 32 percent and baited users into downloading the infectious software by offering popular movies like Captain America: Civil War in advance of its theatrical release. Watchfreemoviesonline.top uses Hawk Host, a company offering services similar to CloudFlare, to hide information about their actual hosting affiliations.

The Digital Citizens Alliance contacted both CloudFlare and Hawk Host to inform them of the findings of the RiskIQ report, and received differing responses. After being presented with clear evidence of the shady and illegal activities of watchfreemoviesonline.top, Hawk Host acknowledged that the site violated their terms of service and told the DCA that the site would come down. Hawk Host also agreed to meet with DCA researches to further discuss the RiskIQ report.

Unfortunately, the DCA’s interaction with CloudFlare was not as encouraging. In response to an email informing the company of the findings of the RiskIQ report, CloudFlare responded with a vague comment disclaiming any responsibility for the content of their client websites.

In the past few years, there’s been progress among service companies’ accountability efforts, with many refusing to deal with criminal websites. Payment providers like PayPal and Visa have stopped permitting illicit websites to use their services, and online advertisers have vowed to stop dealing with infamous content theft sites. But in order to eradicate content theft sites and the malware they propagate, the companies that help veil their identities and enable criminal activity must be help accountable.