by Shana Dines

In a previous article, we explained the Digital Millennium Copyright Act's "notice and takedown" and "safe harbor" provisions that were meant to insulate certain internet services from copyright infringement committed by their users. 

Viacom sued YouTube in early 2007, alleging that at least 150,000 clips on YouTube included content owned by Viacom that had been viewed at least 1.5 billion times, in total.  Viacom further condemned YouTube for profiting from a "massive copyright infringement."

Veoh, another online video site that offers a combination of licensed studio content and user-generated content, has also come under fire for hosting user-generated videos containing copyright infringements.  While Universal Music Group (UMG) has a case against Veoh still pending, Veoh recently won another case against them based on the safe harbor provision.

Io, a producer of adult entertainment videos, sued Veoh for hosting videos with clips from ten of Io's copyrighted films that had been uploaded by users without permission.  Io never filed take down notices, however, and Veoh first learned of this infringement with the filing of the lawsuit.

In opposing motions for summary judgment by both parties, Veoh ultimately came out victorious.

Judge Howard Lloyd, of the US District Court for the Northern District of California, ruled that Veoh had fulfilled the requirements necessary to be eligible for safe harbor protection and was thus not liable for copyright infringement.

Of the three prerequisites a service provider must complete in order to qualify for safe harbor, the case turned on the first, that a service provider had and reasonably implemented a policy of terminating repeat infringers. 

Veoh claimed they fulfilled this by requiring users to register and agree to their Terms of Use and Acceptable Use Policy before uploading videos. 

The Terms of Use require all users to comply with copyright laws.  The Acceptable Use Policy states that, "Veoh reserves the right to terminate the service account of anyone it learns is using the Veoh Services in violation of copyright law." 

There is an additional message that pops up every time a user uploads a video reminding users to not upload copyrighted material.  At the time of the case, Veoh had terminated over 1,000 users for repeat copyright violations. 

Nonetheless, Io claimed Veoh's policy was not reasonably implemented because it failed to detect repeat infringers using pseudonyms and fake email addresses to obtain new accounts.  Io contended that this policy is not enough to qualify for the DMCA safe harbor provisions, but the Court disagreed. 

Citing a decision from the Ninth Circuit (which includes California and is binding on this court), Judge Lloyd held that observing the DMCA requires reasonable, not perfect, policies of terminating repeat infringers.  Further, just because a terminated user is able to make a new account "does not give rise to a genuine issue of material fact as to the reasonableness of Veoh's implementation." 

Following this decision, Veoh has renewed their request for "safe harbor" immunity in their pending lawsuit by UMG. This case is in the US District Court for the Southern District of California, meaning that Judge Lloyd's reasoning is persuasive, but not binding. 

This decision is also expected to influence Viacom's lawsuit against YouTube, which is in a New York federal court and is also not bound by the Veoh decision.  However, Viacom have already issued statements saying they will not back down, calling YouTube a "business built on infringement."

by Shana Dines

In a previous article about the lawsuit against Jammie Thomas, we discussed the arguments on either side of the "make available" theory of copyright infringement.  Just this week, Judge Davis granted the pending motion for a new trial.  The jury award of $222,000 in the Thomas case was considered the pride of the Recording Industry Association of America (RIAA). 

While this decision strikes a definitive blow to the RIAA's campaign to sue illegal file-traders for copyright infringement, there are still plenty of other cases pending on similar issues.  In another case that seemed to be leaning towards the defendants, the RIAA ultimately achieved a small victory earlier this month. 

The latest victims are the Howells, a husband and wife from Phoenix, AZ who decided to proceed in court without an attorney.  They had been faring relatively well for the past year, successfully blocking two summary judgments, however, the decision was ultimately ill-conceived. 

The Howells are now faced with a fine of $40,850 for destroying evidence that was critical to the case against them. 

The case of Atlantic Records versus Pamela and Jeffrey Howell seemed to be leaning in favor of the defendants just months ago.  In April, Judge Neil V. Wake of the United States District Court for the District of Arizona denied a summary judgment for Atlantic Records. 

Like Ms. Thomas' case, the RIAA's cause of action here depended on the acceptance of the make available theory of copyright infringement.  The RIAA uses the tech-company MediaSentry to track KaZaA file-sharing activity.  MediaSentry was able to identify the Howells as the owners of a user account that had at least 54 copyrighted songs in a shared folder. 

In his deposition, Mr. Howell claimed that he did use KaZaA to share files, but that he had not placed the music files into the shared folder and had not authorized the sharing of those song files.  He maintained that, through some technical glitch, the KaZaA program was granting public access to files on his computer without his consent.

At the time of this motion, Judge Wake did not believe that Atlantic Records had established unlawful distribution of their copyrighted song files.  The fact that the songs were made available to the public in a shared folder was not the same as showing actual distribution.  Judge Wake said, "Unless a copy of the work changes hands in one of the designated ways, a 'distribution' under §106(3) has not taken place."

Judge Wake further held,

" The court is not unsympathetic to the difficulty that Internet file-sharing systems pose to owners of registered copyrights. Even so, it is not the position of this court to respond to new technological innovations by expanding the protections received by copyright holders beyond those found in the Copyright Act."

Despite the court's earlier favorable treatment of the Howells, in August the court determined that Jeffrey Howell had destroyed evidence by performing a KaZaA uninstall, a hard drive reformat, and a broader system wipe on his computer.  Judge Wake declared that this "brazen destruction of evidence" was done in bad faith despite repeated warnings against such actions.

He issued sanctions against Mr. Howell as a default judgment in the amount of $40,500 for the minimum statutory damages that Atlantic Records is entitled to, plus $350 for their filing fees.  The court also issued a permanent injunction against Mr. Howell to keep him from ever downloading or distributing Atlantic's copyrighted material without permission again.  Mrs. Howell was dismissed without prejudice, meaning a suit could later be re-opened against her.

The change in Judge Wake's attitude toward the Howells shifted dramatically from the start of this case to the unforgiving conclusion.  What started as a promising step against the RIAA's "make available" theory ended in a harsh lesson to future defendants against self-representation.

by Shana Dines

The economy is in a recession.  Gas prices are up.  Mortgages are foreclosing.  But digital music sales are on the rise, with iTunes reportedly selling over 5 billion songs, to date. 

Not surprisingly, politicians have begun viewing the billion-dollar industry as a potential revenue generator for the government through taxation. 

Many states, including California, have tax laws that unintentionally protect digital downloads from taxing because of language written well before the internet was even envisioned.  However, a growing number of states have started (or will soon start) taxing digital music downloads, either through reinterpretation of existing tax laws or by passing new laws.

Currently, there are 17 states that have recently enacted taxes on digital downloads.  Nebraska passed a tax in April that will go into effect in October.  The Nebraska tax is being levied on "the retail sale of digital audio works, digital audiovisual works, digital codes, and digital books delivered electronically." 

It also clarifies "retail sale" to include the transfer of permanent right of use, rights of use that terminates on some condition, and right of use that is conditioned upon continued payments.  This is meant to ensure the tax can be applied to most of the digital music retailers, despite their different DRM and payment plans. 

Tennessee passed a statute with similar content in June, which will take effect in January of next year.  Some of the large states that tax downloads are Texas, New Jersey, and Washington, as well as the District of Columbia. 

The struggle over digital download taxes in California has been one of the most contentious and hard-fought.  With a deficit of $8 million, the state should take all the tax increases it can get. 

A bill proposed by Democratic Assemblyman Charles Calderon was defeated back in April.  The bill would have taxed the download of all types of digital property and would have drawn in approximately $114 million in tax revenue, according to California Board of Equalization.  Calderon is expected to pursue this bill further in the next legislative session.

In a state where physical retail sales, including CDs and DVDs are taxed so heavily, it seems logical that the digital equivalent be subject to similar taxation.  The bill was supported by agencies representing various state and public employees, like teachers and firemen. 

However, the bill's opponents, including many internet-based companies and the Motion Picture Association of America, criticized the proposal on numerous different grounds.  The vice president of the MPAA, Vans Stevenson, foresees a tax on digital downloads as encouraging consumers to return to their bad habits of illegally downloading copyrighted material.  NetChoice's executive director, Steve DelBianco, criticizes it as taxation of the "greenest way to buy music, movies, and software," something which should be encouraged.

Further, one member of the California Board of Equalization, Michelle Steel, warns that California retailers would be at a competitive disadvantage to out-of-state companies because of nexus.  The legal concept of "nexus," which was reinforced by the U.S. Supreme Court in 1992, requires that a state may only tax a company that has a physical business presence within the state's borders.  Therefore, a state tax on digital downloads would apply to California-based companies like Apple and Rhapsody, but not Amazon, whose warehouse is in Seattle.  This incentive for businesses to leave California would end up reducing tax revenues in the form of corporate taxes. 

From a procedural perspective, Calderon's bill was also criticized for trying to circumvent normal initiatives for new taxes.  The bill had the California Board of Equalization setting the new tax policy, which only requires a simple majority, as opposed to standard legislation on new taxes, which needs two-thirds voter approval.  Del Bianco of NetChoice is critical of this practice, saying that if legislatures want to increase taxes, they "have to do it in the daylight" where it is subject to public debate and not behind closed doors.

In the interest of better serving our loyal readers, the M.E.L.O.N. Blog Team is excited to introduce the New M.E.L.O.N. Podcast!

Tony Berman, Esq. is here to answer all of your questions about multimedia and entertainment law.

Today's podcast answers a question from Will in Los Angeles.  Will asked why he should bother copyrighting his original songs and artwork.  Tony will also explain what someone should do if they find out their copyright is being infringed, how to go about registering a copyright, and what damages one can expect to recover if his copyright is infringed.

If you have a question you'd like Tony to answer on the M.E.L.O.N. podcast, please send it to melon@beat-law.com

Resources mentioned in the podcast:

U.S. Copyright Office, Library of Congress

Request Paper Copies of Form PA for a song and Form SR for a sound recording
or
Use Electronic Fillable Form CO (Adobe Acrobat Reader needed)

by Tony Berman

researched & edited by Shana Dines

While I was in Las Vegas the past couple of days, I checked out the listings of entertainment at the casinos.  There were obvious “tribute” shows such as “The Rat Pack is Back,” “Barbra and Frank: The Concert That Never Was,” and “Four Lads From Liverpool.”

Then there were some performers that made me wonder - “The Platters,” “Cornell Gunter's Coasters,” and “The Marvelettes.” 

I thought, “Didn’t Cornell Gunter die in the '90s in Las Vegas after being shot?” Who were these Coasters then?

And what about these Marvelettes?  I knew that for many years, none of the original members were able to tour under the name "The Marvelettes" in the United States due to a decision by Motown Records to sell their name to a promoter who had much younger girls on both coasts appearing as "The Marvelettes." 

"Did original Marvelette Gladys Horton regain control of the name?" I wondered.

And how many of the original Platters would be at this gig?  Certainly not Zola Taylor, who I knew had died last year.

Impersonators and tribute bands have long been a popular, inexpensive alternative to seeing the real musical groups, especially those who have passed away.  However, when a group falsely claims to include an original member and bills themselves as the real thing, they cross the line and become impostors.

In the past few years, legislation called the Truth in Music Act has made it unlawful in certain states, including California, for any person to advertise or perform using a false, deceptive, or misleading affiliation with a recording group.  To be legal, a performing group must be authorized by the owner of the band name's trademark or include at least one member of the original recording group who has a legal right to use the name.  Tributes and reviews are still legal, but original members of famous old vocal groups now have some legal redress against impostors. 

To date, 18 states have passed Truth in Music bills and 12 more have begun the process of enacting similar laws.  The Vocal Group Hall of Fame Foundation, which recognizes and commemorates vocal groups of all genres, is the main force behind urging states to pass this legislation. 

The Truth in Music Committee is chaired by Jon Bauman (Bowzer from Sha Na Na) and has members from '50s R&B groups The Drifters ("This Magic Moment," "Under the Boardwalk"), The Platters ("Only You"), and The Coasters ("Yakety Yak"). 

Truth in Music is intended to protect the original musicians of these and other groups, including the Marvelettes ("Please Mr. Postman"), by preserving their rights and musical legacy.  Most groups of this genre were renowned as a whole, while the individual members are less recognizable today (with the exception of Diana Ross of the Supremes). 

In fact, as many as 15 different men have sung on various Drifters albums, as the members of the group changed often under the management of George Treadwell.  Treadwell owned the trademark to the band name and made each member sign contracts relinquishing rights to the name. 

In addition to preserving the rights of the performers, the bill also was intended to protect consumers from paying higher prices to see impostors, thinking they are the originals, as opposed to cheaper tribute bands' admission. 

So far, every state to propose the Truth in Music bill has passed it with little opposition. 

At the Nevada Senate hearings last year, Bauman, Mary Wilson of the Supremes, and Sonny Turner of the Platters each broke into song while giving testimony in support of the bill.  Nevada was a huge accomplishment for the Truth in Music movement, as it is a ground zero for entertainment of this kind.

The Bandwidth Music | Technology Conference is taking place August 14 & 15 at the University Club in Nob Hill. 

BEAT-Law's Tony Berman will be leading the discussion about digital legal issues @ 1 pm in the Library.

Other featured speakers include Susan Bonds and Alex Lieu, President/CEO and Chief Creative Officer of 42 Entertainment, Jonathan Poneman, co-founder of Sub Pop Records, and Alexandra Patsavas, founder of Chop Shop Music. 

From their website:

Bandwidth features conversations with movers and shakers, as well as a chance to interact with others in an intimate environment - the right people in the right space in numbers that make it easy to connect.

Topics focus on marketing, fan behavior, trends and future forecasts, and an examination of the ways people discover, purchase, interact with, and are exposed to music.

Hope to see you there!

by Shana Dines

In our previous article, Copyright: Registration Pt. 2, we mentioned the case of the Recording Industry Association of America (RIAA) suing Jammie Thomas for 24 counts of copyright infringement through the web-based P2P trading network, KaZaA.  In October 2007, the jury awarded the five record label plaintiffs (including Capitol and Sony/BMG) statutory damages of $222,000, which is less than 10% of what they were legally entitled to. 

Thomas filed an appeal 11 days after the jury verdict was entered on the grounds of excessive damages.  Finally, 7 months later, Judge Michael Davis filed an order stating that he was considering granting a new trial not based on excessive damages, but based on a possible "manifest error of law."  The hearing over this matter was held yesterday, August 4, 2008.  Although a decision will not be entered for another month, many commentators are expecting Judge Davis to declare it a mistrial.

If Thomas' case does get retried, the RIAA plans to use evidence of songs actually being downloaded from her shared KaZaA folder by their hired investigators.  RIAA investigators have been downloading songs from various users in hopes of securing evidence for future lawsuits.

However, Thomas' defense attorney has pointed out that the Copyright Act only makes unauthorized distribution of copyrighted material illegal.  If the investigators are hired by the RIAA and downloading the songs with permission, he claims it is not technically an unauthorized distribution and, therefore, not illegal.

"Manifest Error of Law"?

In Judge Davis's original order, he stated that he was contemplating granting a new trial based on a possible error in Jury Instruction No. 15.  Based on suggestions by the plaintiffs' counsel, the instruction stated that the act of making copyrighted material available for electronic distribution, regardless of whether actual distribution has been shown, constitutes an infringement. 

The judge's main concern was that this instruction may be contrary to precedent from the Eighth Circuit Court of Appeals, which is binding in this case.  A copyright case from 1993, National Car Rental System, Inc. v. Computer Associates Int'l, Inc. held that infringement of the distribution right "requires an actual dissemination of either copies or phonorecords."

This is further supported by a recent, closely related case by the RIAA against Jeffery Howell, where the court denied a motion for summary judgment by the plaintiffs citing the same precedent, as well as numerous other copyright cases.  The judge there held, "Unless a copy of the work changes hands in one of the designated ways, a distribution under [the Copyright Act] has not taken place." 

Another victory over the RIAA by another defendant Joan Cassin came just after these decisions. 

Cassin's attorney had been updating the judge in this case every time a decision was passed in related cases, most recently sending copies of the Howell and Thomas decisions.  After his last letter, dated May 15, 2008, the RIAA reportedly "quietly dropped" the suit against Cassin, which had been going on for over 2 years. 

While the RIAA gave no explanation for this action, Cassin's attorney believed it was related to the contention that to constitute infringement, the copyrighted material must have been actually disseminated, and not merely made available.

Judge Davis requested amicus briefs from interested parties, which are persuasive arguments for or against a particular motion.  Amicus briefs are typically submitted by non-profits, professional organizations, or lobbyists. 

On June 20, Judge Davis received numerous briefs, including one from the Motion Picture Association of America (MPAA) opposing a new trial.  Another brief, supporting a new trial, came jointly from the Electronic Frontier Foundation (EFF), Public Knowledge, United States Internet Industry Association, and Computer & Communications Industry Association.

Argument Against a New Trial

The crux of the MPAA's argument is that the U.S. is a party to various international copyright treaties that include the right to make a work available as one of the exclusive rights of copyright holders.  Therefore, domestic policy should not conflict with international obligations. 

The MPAA also argues that legislative history has assured the international community that the U.S. Copyright Act encompasses the right to make copyrighted material available in its protected rights of copyright holders. 

The MPAA's brief included a criticism of the court for taking a single sentence out of context of the National Car Rental case, in which the facts bear little resemblance to the present case.  The court there held that infringement of the distribution right "requires an actual dissemination of either copies or phonorecords."

The brief then cites various other cases that rejected National Car Rental's reasoning, including Hotaling v. Church of Jesus Christ of Latter-Day Saints, the most commonly cited case to support the "make available" theory of copyright infringement.

Argument For a New Trial

Arguing against the "make available" theory, the EFF makes a more strict interpretation of the language of the Copyright Act, as well as a consideration of the public policy of the future of copyright law. 

The EFF's brief explains that the exact language of the exclusive rights of copyright holders includes the right to "distribute copies … by sale or other transfer of ownership, or by rental, lease, or lending."  This line from the Copyright Act, 17 U.S.C. § 106(3), has been expanded to equate actual distribution with making a copyrighted work available for distribution. 

The brief argues that if Congress had intended to include potential distribution, they would have done so explicitly.  Because they did not, potential distribution should not count as infringement.

The EFF's brief cites National Car Rental and other related cases that hold actual dissemination is required for copyright infringement.  The brief also criticizes the reasoning of certain courts that publication and distribution are synonymous terms in the Copyright Act, such as in the recently decided Elektra Entertainment v. Barker. 

Considering the far-reaching effects of the "make available" theory, the brief argues that the line between public performance rights and distribution rights could be blurred for digital radio broadcasters.  Additionally, it could transform secondary liability of search engines into direct infringement for showing users where copyrighted material is located, but not actually accessing it.

Check back with MELON for future updates on the many copyright infringement lawsuits filed by the RIAA.

by Shana Dines

The Internet Corporation for Assigned Names and Numbers (ICANN) announced their unanimous decision to allow new generic top-level domains (gTLDs) last month. 

Generic top-level domains are the series of letters at the right end of a website address.  The most commonly used gTLDs are .com, and .org, while some restricted TLDs include .gov and .edu.  There are also country code TLDs, like .il for Israel and .au for Australia. 

This program, set to take effect in early 2009, could potentially add limitless new gTLDs to the realm of IP addresses.

The news comes to a mixture of reactions, ranging from fear to excitement to apathy.

Some are predicting bidding wars to ensure over highly sought after words.  This could have the ripple effect of bringing on a second dot-com boom and subsequent crash.  Companies could potentially have to contend with cyber-squatters and domain speculators over domains that have a clear connection to their brand names.

Others think this will have little or no impact on normal internet users.  Back in 2000, ICANN introduced seven new TLDs, including .biz, .info, and .museum, that resulted in almost no effect on day to day internet use. 

ICANN is developing an application process that will require all proposed gTLDs to pass through an evaluation, safeguarding for issues like potential trademark infringement or offensiveness.  For example, if someone tried to register .disney without the consent of the corporation, a red flag should be raised. 

In 2007, ICANN refused to allow .xxx as a TLD that would be restricted to adult-content (read: porn) websites.  Those in favor of the TLD thought it would be an easy way to protect children from such websites by relegating them to a separate section of the Internet.  First proposed in 2001, ICANN ultimately rejected it so as not to appear to approve of pornography websites. 

It is yet unclear whether .xxx or similar TLDs will be approved in the new scheme.

However, don't expect to see gTLDs coming from just anywhere. 

The projected cost of registering a new gTLD will be from $100,000 to $500,000.  In addition, the purchasing party will have to prove to ICANN that they have the ability to manage the TLD or can reach a deal with a company who will.

Managing a TLD entails maintaining a registration service for second-level domains within the TLD (like typepad.com).  Domain name registrars are subject to approval by ICANN and are overseen by the TLD Registry.  There are over 500 domain name registration services for .com websites.

Still, many are expecting a gold-rush style bidding frenzy to snatch up new gTLDs.

It has taken years of discussion and debate for ICANN to reach this decision.  Their goal with relaxing the regulation of gTLDs is "to preserve the security, stability, and global interoperability of the Internet," according to the ICANN website. 

Back in the 1980s when the internet was first being developed, the domain-name system (DNS) was set-up as an easy way to organize and search for website addresses.  There is speculation as to how this change will affect users searching new TLDs by directories; however popular search engines should remain comprehensive and useful.

by Shana Dines

Back in February, we reported on the progress of the Performance Rights Act (H.R.4789, S.2500) in a three-part series of articles.  Part 1 provided the background of the bill, Part 2 explained the changes it would make to existing law, and Part 3 discussed the arguments for and against the bill.

On June 11, 2008, hearings on the Performance Rights Act were held in the House Judiciary Committee's Subcommittee on the Courts, the Internet, and Intellectual Property and on June 26, the subcommittee voted on and passed the bill.  Next is consideration by the full Judiciary Committee and, if approved, the bill will move on to the House of Representatives.

However, before the Performance Rights Act was proposed on Dec. 18, 2007, a Concurrent Resolution Supporting the Local Radio Freedom Act had been introduced in the House of Representatives on Oct. 31, 2007 that, if passed, would nullify the P.R.A.'s intended changes.

While H. Con. Res. 244 has not proceeded past the first stage of the legislative process, it has been slowly gaining support and is now co-sponsored by 221 House members, with Rep. Green (D-TX) at the forefront. 

Over a year and a half later, on May 12, 2008, Senate followed suit and introduced S. Con. Res. 82, with identical language and the support of twelve Senators, which is lead by Sen. Lincoln (D-AR). 

The Local Radio Freedom Act has bipartisan support in both Houses and has greatly surpassed the Performance Rights Act's support.

The Local Radio Freedom Act gives a bottom line declaration "That Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over the air, or on any business for such public performance of sound recordings."

The Local Radio Freedom Act is primarily supported by the National Association of Broadcasters (NAB) and the Free Radio Alliance.  In rallying for this bill, NAB has distributed a new study by Stanford economics professor Dr. James Dertouzos to both Houses of Congress. 

Dr. Dertouzos' study, called "Radio Airplay and the Record Industry: An Economic Analysis," shows a direct correlation between radio airplay and record sales.  The report is being used as evidence of the main argument in favor of the Local Radio Freedom Act, that radio has always been a source of free advertising for recording artists.

The study used data from Arbitron for local radio ratings information, Nielsen BDS and Mediaguide for music volume information, Nielsen SoundScan for music sales data, and BIA Financial Network for radio financial data. 

Dr. Dertouzos asked the question, "Does radio airplay provide the music industry with free promotional or advertising value?"

He compared sales of albums and digital tracks with variations in music exposures and determined that greater exposure had a positive and statistically significant impact on retail music sales.  Dr. Dertouzos concluded that his study clearly demonstrates that radio airplay increases music sales.

If the Local Radio Freedom Act is passed, the inequality between terrestrial and internet radio will remain intact.  Internet radio stations have been required to pay royalties not only the songwriters, like terrestrial radio stations do, but also to the performers since the passage of the Digital Public Performance Right in Sound Recordings Act of 1995. 

Some are hoping that Congress goes a step further and extends the limitation on royalties to internet radio, as well.

Check back with MELON as more developments unfold.

by Howie Cockrill

In late April of this year, I wrote a three-part “Spotlight” article on Live Nation, exploring in depth the massive steps being taken by the concert impresario to secure its primacy not just in the live events market, but also in pretty much every ancillary market you can imagine.

One strategy Live Nation used in this business blitz was to identify major-player executives in both its core markets and its areas of expansion, and to bring them into the Live Nation fold.

Michael Cohl was one of these major-player executives.

Brought on in May, 2006, when Live Nation bought a controlling stake in Cohl’s Canadian-based Concert Productions International (“CPI”), Cohl was promoted to Chairman of the Board of Live nation in February of 2008 – just 5 months ago.  He also headed the new Live Nation Artists division an is the largest single shareholder

Since coming aboard at Live Nation, the 60 year old Cohl has arguably been the prophet and the punching bag for the ever controversial 360 Deal, signing $120 and $150 million deals with Madonna and Jay-Z respectively.

And according to the Wall Street Journal , Cohl had as many as 15 more such deals waiting in the wings, including Shakira.

Cohl cemented himself in the upper echelon of promoters when, in 1989, he beat out rival Bill Graham for the concert, sponsorship, merchandising, radio, television and film rights to the Rolling Stones’ “Steel Wheels” tour.

At Live Nation, Cohl wanted to pursue exactly this type of one-stop-shop rights catalog for major performers, and with Korn, Madonna, Jay-Z, U2 and the Jonas Brothers climbing on board – he was accomplishing just that in his short stint with Live Nation.

But the tide at Live Nation seems to have turned against Cohl’s aggressive business strategy, in the form of Live Nation CEO Michael Rapino.

Rapino has urged a more cautious pace in offering 360 Deals to artists for a number of reasons, not least of which being the overall sluggish economy and the topsy-turvy music industry.

Additionally, since Live Nation signed the $120 million deal with Madonna in October, 2007, Live Nation’s stock has plunged a whopping 44%.

The bottom-line consequences of Chairman Cohl’s strategy has created increasing friction between him and CEO Rapino, reportedly resulting in a full-scale feud between the two.

Whether it was a feud or fundamental disagreement, the result was the same.

On June 20th, Michael Cohl “transitioned to a consultant role” with Live Nation. And it was because the two could not come to an agreement over the pace of Cohl’s 360 Deal strategy.

The setting for all of this drama is of course the 21^st century music industry, which is undergoing a face-lift to put it mildly.

With CD sales down 10 to 20% each year from the previous year, significant ROI pressure is being put on live events and associated merchandise.

However, as Ethan Smith in the Wall Street Journal notes:

The combination of businesses is risky, however, in part because profit margins in concert promotion are perilously thin, and a bad tour could undercut the overall value of a package deal.

So where do things stand for Live Nation and Mr. Cohl now?

In a Live Nation press release, Rapino made reference to Cohl’s “vision and guidance” and his “immeasurable” contributions to the formation of Live Nation Artists.

He also thanked Cohl for “agreeing to stay with the company as a consultant.”

Of course, what other choices does Cohl have in this situation?

Cohl’s employment agreement prohibits competition with Live Nation.

According to the WSJ, the non-compete term is 8 years. TicketNews says 10 years.

While some non-compete agreements may be unenforceable, employers typically find alternative ways to prevent a former employee from becoming a competitor – often by enforcing strict “confidentiality” provisions governing intellectual property, client lists, and financial information.

Presumably Cohl was in a position to receive all of this kind of information he needed, which would be very valuable in a business competitive environment.

Not that there won’t be some zeros on Cohl’s W-9 form.

According to TicketNews, Cohl will receive a lump sum payout of $4.5 million for 4 years of consulting.

Nevertheless, Rapino asserted in the press release that Live Nation is still committed to the 360 Deals it already has, while at the same time taking a “disciplined financial approach.”

In other words, Live Nation is slowing its roll on 360 Deals.

Meanwhile, Cohl does not seem to be disavowing or undercutting his work at Live Nation Artists; in fact, his statements in the press release could belie a feeling that he’s always been right.

I am extremely proud of what we have accomplished thus far at Live Nation Artists. We have built a division whose current strategy we believe is set to unlock great value for our shareholders and our artists.

Whether or not Cohl will repurchase his formerly owned CPI from Live Nation (which he sold to in 2007 for $123 million in Live Nation stock and $10 million in cash) is still in question.

However, as of July 18^th the value of his stock was down 7.6% to $94 million. On July 20^th, the day his departure was announced, Live Nation stock dropped another 9%.

Hopefully Cohl will still be able to get free tickets to any show he wants, or at least take advantage of Live Nation’s new “Skip the Line” promotion. 

The debate between Cohl and Rapino largely brings up issues about the implementation of 360 Deals - namely the pace.

Is Rapino's circumspection a throwback to the established industry's indecision and missteps over the past 2 decades?  Is Cohl then the bold cowboy innovator - buying rights first and crunching numbers later?

Or perhaps Rapino's decision is an example of measured, belt-tightening business judgment - the kind that the industry will need in the coming years. 

More likely is that Rapino's caution and Cohl's daring are endemic of the larger issues nagging the music industry in the digital 21st century.

As usual, the question is clearer than the answer: whether now is the time to spend money on new artist deals in order to make money, or whether now is the time to slow down, reevaluate and focus on existing deals.   

by Tony Berman

Researched & edited by Shana Dines

Since the U.S. District Court for the Southern District of New York decided against Yoko Ono Lennon earlier this month in a well-publicized copyright infringement case, many filmmakers are further confused about where the lines are drawn around the concept of “Fair Use”. 

Ono Lennon was denied an injunction against the makers of the documentary film "Expelled," about Intelligent Design theory, for using a 15-second excerpt from Lennon's renowned song "Imagine" without her permission. 

However, the majority of the public commentary on this case is giving a false impression of what the Fair Use Doctrine truly entails.

The most quoted line from the case is from Judge Stein who wrote, "[t]he fair use of a work for the purposes of criticism and commentary is not an infringement of copyright."  This is a simple overview of the Fair Use Doctrine, but does not even begin to address what is required for a finding of Fair Use.

As noted in several earlier postings on MELON, the Fair Use Doctrine provides an exception to the Copyright Act and allows a work to be used, but only in certain circumstances.  There is no absolute answer to what is or is not considered a fair use of copyrighted material.  A judge must always make the determination by considering the four factors described in the fair use statute, 17 U.S.C. §107. 

The factors to be considered are:

1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.  The court will also consider the ultimate goal of fair use, which is to promote the progress of science and useful arts.

1. Purpose and Character
The first factor a judge looks at is the purpose and character of the use of the copyrighted work.  The main determination here is not whether the main point for the use was to profit, but whether the user of the copyrighted material stands to profit from the use. 

However, in the realm of documentary films, in particular, the ultimate commercial goals of the filmmakers does not weigh very heavily against fair use when they can prove the film is meant to contribute to the broader pubic interest by stimulating debate on a current issue. 

Further, if the party who is using the copyrighted material can make a showing that the use is transformative, rather than exploitative, then fair use is favored.  Transformative use means that something new has been added to the purpose or character of the original work by altering its expression, meaning, or message. 

Here, the court determined that, even though the filmmakers did not alter the music or lyrics of "Imagine," they changed the purpose of the song by pairing it with visuals that contract the song's message, thus changing its meaning in the context of the film. 

Although the documentary film has an ultimately commercial purpose, the transformative use of the excerpt from "Imagine" weighs more heavily in favor of fair use. 

2. Nature of the Work
The second factor of the fair use doctrine is the nature of the copyrighted work.  The law favors more protection for creative fictional works than factual or informational material.  Whether the work is published is also considered, particularly limiting fair use of unpublished works.  In Ono Lennon's case, the judge found that the widespread publication of the song outweighs that it is a creative work.

3. Amount and Substantiality
The third factor is the amount and substantiality of the portion used in relation to the copyrighted work as a whole.  The more of the copyrighted work that is used, the less favorable is a finding of fair use.  Both quantitative and qualitative components are considered in this analysis.  Here, the court first recognized that the excerpt used was only 15-seconds, as compared to the 3-minute total running time of "Imagine." 

Quantitative measurements can be outweighed if the portion of the copyrighted used is the "heart" of the work.  In this case, a musicology expert was brought in to explain that the 15-second excerpt of "Imagine" is representative of the whole song, and therefore the "heart" of it, because it included vocal and piano phrases that are repeated throughout the song. 

However, in his opinion, the judge cited a well-known case about 2 Live Crew's use of a portion of Roy Orbison's song "Oh, Pretty Woman," where the court found fair use.  Despite the repetitive use of the chorus, or "heart" of the song, the court determined that the use was fair because the new song was a parody. 

Judge Stein related this reasoning to the present case, saying use that is fair for parody must also be fair for commentary and criticism.

4. Effect on Potential Market
The fourth and final factor of the fair use doctrine is the effect of the use upon the potential market for or value of the copyrighted work.  This factor is based on the concern of whether the secondary use usurps the market of the original work, not whether it destroys the market of the original work or its potential derivatives. 

This means the court is less likely to find fair use if the same people who would purchase the original work are going to purchase the secondary work instead.  However, the court is less favorable to a claim that the secondary use will indirectly harm, but not directly encroach upon the original work's market. 

Although Ono Lennon claimed the unauthorized use of "Imagine" would harm the marketplace for licensing the song, she was not able to offer any concrete evidence to prove her contention.  The judge decided that without evidence, the factor weighed weakly against fair use.

There is no absolute formula for what will or will not constitute fair use.

There is no type of use that will always be considered fair.

In any case regarding the fair use of a copyrighted work, the judge will analyze and weigh each of these four factors depending on the individual circumstances.   

Here, Judge Stein decided that the transformative use of the song outweighed the commercial purpose of the film.  The widespread publication of the song outweighs that it is a creative work.  The filmmakers' purpose of making a commentary on a current political issue outweighs the amount and substantiality of the excerpt. 

Further, Ono Lennon was unable to produce evidence that the use will usurp the market for licensing the song.  All of these factors combined to lead the judge to determine that the use of an excerpt of the song "Imagine" in the documentary film "Expelled" is fair use and not an illegal copyright infringement.

by Howie Cockrill

In Part 1 of this article I explained what the First Sale Doctrine is, how the it was first applied in the U.S. and how it became part of federal copyright law.

In Part 2 I began looking at Universal Music Group v. Augusto, the most recent application of the First Sale Doctrine in federal courts.

Part 3 focuses on Augusto's particular arguments, and what the court thought of each. 

Here's a quick review.  Augusto had 3 main arguments: 

• Argument 1:  Invalid License (the license language on the promo CDs is invalid)
• Argument 2:  Gift (UMG transferred ownership of the promo CDs to insiders by giving a gift)
• Argument 3:  Abandonment (UMG abandoned ownership of the promo CDs because UMG never intended to get them back)

ARGUMENT 1:  INVALID LICENSE

UMG’s position was: 

• that it retained ownership of the promo CDs after providing them to industry insiders, and
• that the license language on the promo CDs created a license between UMG and the industry insiders receiving them.

Augusto’s 1st argument was that UMG’s distribution of the promo CDs qualified as a gift or a sale, not a license, and accordingly that UMG did not retain ownership of the CDs.

Thus, the court had to decide:

• whether UMG retained ownership and simply gave insiders permission for personal use of the CDs, or
• whether UMG actually transferred ownership via a gift or a sale.

The court said that one strong indicator of whether a transaction is a sale/gift or a license is whether the owner intends to later regain possession of the work.

If the owner intends to regain possession, that’s an indication that the transaction was a license. 

If the owner does not intend to regain possession, that indicates a sale or gift.

Here, the court determined that UMG never intended to regain possession of the promo CDs. 

Further, the court found that the licensing language on the CD itself did not require the industry insider to ever return the CD. 

The court also noted that UMG does not keep any records regarding who it has given promo CDs – so even if it did want to regain possession, it couldn’t.

Another strong indicator in distinguishing a sale/gift from a license is “recurring benefit.”

A license tends to provide the licensor with a recurring benefit from the licensee’s continued possession or use of the licensed work.

As applied here, UMG was not guaranteed any benefit, recurring or otherwise, from providing insiders with promo CDs. 

Insiders are not required to promote the CD.  In fact – because of the “for personal use only” language on the promo CD, insiders would technically be barred from professional uses of the CD. 

According to the court, the only benefit UMG could have received from the “license” was to restrain further transfer of the promo CDs, and this notion was struck down 100 years ago in Bobbs-Merrill.

In fact, music industry insiders appeared to be receiving all of the benefits of ownership – including perpetual possession and freedom from obligations to UMG.

Thus, the court ruled

1. that UMG transferred ownership in the promo CDs to the music industry insiders,
2. that the “license” language on the promo CDs was invalid and
3. that Augusto was protected by the First Sale Doctrine.

Augusto won on Argument 1, and therefore was not liable for copyright infringement.

ARGUMENT 2:  GIFT

The court didn’t stop there though, and went on to rule on Augusto’s claims that the transfer of ownership was in the form of a gift, not a sale. 

The Postal Reorganization Act Section 3009 prohibits mailing unordered merchandise without the prior express request or consent of the recipient. 

If someone does mail unordered merchandise, under federal law the recipient can treat it as a gift. 

Accordingly, the recipient has the right to “retain, use, discard or dispose of it” however he or she wants, according to 39 USC Sect. 3009(b). 

Obviously, the purpose of this law is to prevent someone from mailing you something without your permission, and then demanding payment for it.

UMG argued that Section 3009 didn’t apply to them because that law only applies to merchandise sent to “consumers” and for which payment was later requested.   

UMG also argued that Section 3009 did not override agreements between the mailer and the recipient, say in the form of licensing language on a promo CD.

The court disagreed, stating that:

• music industry insiders are also “consumers,” and
• the actual language of Section 3009 does not require that the sender later demand payment. 

And regardless, an insider receiving a promo CD with “license” language is put in the same subjective position as a recipient from whom a sender demanded payment – they either have to return the CD, or keep it and face some affirmative obligation to the sender. 

Lastly, the court rejected UMG’s argument that by keeping the promo CDs, the insiders were agreeing to the license and that Section 3009 did not invalidate that license.

Thus, because UMG sent “unordered merchandise” in the form of promo CDs to music industry insiders without their prior consent – the promo CDs were deemed “gifts” to those insiders under federal law. 

Because the CDs are gifts, UMG has transferred ownership in them and can no longer control what happens to them. 

Insiders are allowed to dispose of them as they wish, including selling them at used record stores or online, or giving them to someone who does so.

Augusto thus won on Argument 2 as well.

ARGUMENT 3:  ABANDONMENT

Finally, Augusto argued that, under California law, UMG had abandoned its rights in the promo CDs.

To do so, he had to prove that:

• UMG did not possess the promo CDs, and
• UMG intended to abandon the promo CDs.

Of course UMG was not in possession, so the only issue was intent to abandon.

The court noted that to prove intent to abandon, there must be more than “mere passivity.”  There must be some clear act or series of acts indicating an intent to give up ownership.

Here, UMG simply did not try to regain possession – it never affirmatively disavowed its rights in the promo CDs. 

Thus, Augusto lost on Argument 3. 

Nevertheless, either one of his other 2 successful argument would have been sufficient to seal his defense. 

The result:  Troy Augusto’s sale of promotional CDs on eBay was protected by the First Sale Doctrine. 

As for Augusto’s counter-claim that UMG filed a bad faith notice with eBay to suspend Augusto’s account, the court found for UMG, stating that UMG filed the notice with a good faith belief that Augusto’s actions were infringing.

by Howie Cockrill

In Part 1 of this article, I explained the First Sale Doctrine, and we saw how it was first applied in the U.S. and then became part of federal copyright legislation.

The First Sale Doctrine has been in the news lately due to a recent California federal district court ruling. 

So in Part 2, I'll explore a 2008 application of the First Sale Doctrine in Universal Music Group v. Augusto.

Here's what happened:

UMG v. AUGUSTO

Universal, like most record labels, puts out promotional CDs in advance of the general commercial release of their albums.

Promo CDs can function like mini-albums, featuring a few tracks all from one artist, or they can function like samplers, featuring tracks from multiple artists on the label.

The point is, labels give these promo CDs away to "industry insiders" - radio stations, managers, booking agents, film music supervisors, magazines, newspapers, blogs, attorneys, and anyone else who can help build a buzz for the recording artist, the album and the label. 

Quick side note:  Because the promos are given away instead of sold, artists do not see royalties on them. 

If you'€™ve ever been to a used record store, you€™'ve probably seen these promo CDs mixed in the stacks.

On their covers, they usually say something along the lines of:

This CD is the property of the record company and is licensed to the intended recipient for personal use only. 

Acceptance of this CD shall constitute an agreement to comply with the terms of the license.

Resale or transfer of possession is not allowed and may be punishable under federal and state laws.

Of course, the practice of promo CDs being bought and sold in used record stores has been going on for years. 

And a substantial number of those industry insiders who have received promo CDs from labels have also either sold these CDs to used record stores, or given them to someone who has. 

No one has really paid much attention to this practice, or at least copyright owners have turned a blind eye, as it used to be limited only to brick and mortar stores.

But as with so many other mildly contentious issues, internet commerce has turned up the volume of the debate. 

Take Troy Augusto for example. 

He bought lots of promo CDs from not just used record stores, but also from online auctions.  He then turned around and sold them on eBay as "rarities."€

Universal Music Group (UMG) sent Augusto a cease & desist letter, stating that Augusto'€™s sales on eBay violated UMG'€™s copyrights.  UMG also notified eBay, which in turn suspended Augusto'€™s account.

eBay later reinstated Augusto'€™s account, and Augusto went back to selling promo CDs. 

UMG then filed a copyright infringement lawsuit against Augusto.  Augusto counter-sued UMG, stating that UMG had acted unlawfully when it got eBay to suspend Augusto's account for unsubstantiated copyright infringement.

UMG's Claim

To establish its initial burden of proof for copyright infringement, UMG had to prove 2 things:

1. It is the valid owner of copyrights in the sound recordings.
2. Augusto violated one of UMG's exclusive rights as the copyright owner.

It was easy for UMG to prove the 1st requirement, as it had registered its copyrights in the sound recordings at issue.  (related MELON article:  Copyright Registration 101) 

As for the 2nd requirement, Augusto himself agreed that he had sold the promo CDs through eBay in violation of UMG's exclusive right to sell those copies to the public.

Augusto's Defense

However, Augusto'€™s defense was that he was exempt from infringement because of the First Sale Doctrine.

For this defense to be successful, Augusto had to prove the following:

1. the promo CDs were made with UMG's permission
2. UMG transferred ownership of the promo CDs
3. Augusto was the lawful owner of the CDs
4. Augusto distributed the CDs but did not copy them

UMG agreed that the promo CDs were lawfully manufactured and that Augusto distributed the CDs but didn't copy them.

Thus, the primary issues of this case focused on whether UMG transferred ownership of the promo CDs and whether Augusto was the lawful owner.

As the court so aptly stated it,

The remaining two elements hinge on one question: 

Did UMG transfer title to the music industry insiders when it mailed them the promo CDs?

If the answer is yes, then UMG transferred ownership of the CDs and Augusto lawfully owned the CDs at the time he sold them, which permitted Augusto to sell the CDs under the first sale doctrine.

If the answer is no, then UMG retained title to, and ownership of, the CDs and Augusto was not the lawful owner of those CDs at the time he sold them, which excludes Augusto's actions from the protection of the first sale doctrine.

Augusto's defense was made of 3 parts:   

• Argument 1:  Invalid License (the license language on the promo CDs is invalid)
• Argument 2:  Gift (UMG transferred ownership of the promo CDs to insiders by giving a gift)
• Argument 3:  Abandonment (UMG abandoned ownership of the promo CDs because UMG never intended to get them back)

Check back for Part 3 of this article to see what the court thought about each of these arguments.  What a cliff hanger!

by Howie Cockrill

Last week, a federal district judge in California dismissed a copyright infringement suit brought by Universal Music Group against a man selling Universal’s “promo” CDs on eBay. 

This decision is not a minor blip on the music industry’s radar, and at the case’s heart was something called the “first sale doctrine.” 

So – what is the first sale doctrine, and why should you care?

Excellent questions – let’s see if I can answer them.

INTRO

The First Sale Doctrine simply states that once you legally own a copy of a copyrighted work, you can then turn around and sell, give or sometimes rent out your copy to someone else – without the permission of the copyright owner.   

Remember – copyright owners have 5 exclusive rights to their works.  They have the sole right to:  (DR DAP)

1. Distribute
2. Reproduce
3. Display publicly
4. Alter
5. Perform publicly

Focusing on the first right – copyright owners have the exclusive right to distribute copies of their works to the public by a sale or other ownership transfer, or by a license.

The First Sale Doctrine is thus a limit on the copyright owner’s exclusive distribution right – and the limit is in favor of the public.

Even though the copyright owner has the sole right to distribute copies of their work, this right only goes so far as the first “sale.” 

I put “sale” in quotes because, even though its called the First Sale Doctrine – it applies not just to sales, but to any transfer of ownership – for instance, gifts.

Once the owner has transferred ownership of a copy of their work, they no longer have exclusive distribution rights as to that copy.

Note that the First Sale Doctrine does not give you as a consumer permission to “do whatever you want” with the copy you lawfully received. 

The First Sale Doctrine does not authorize you to make and sell copies of your copy without the copyright owner's permission. 

Making unauthorized copies violates the copyright owner’s exclusive reproduction right, and selling unauthorized copies violates the copyright owner’s exclusive distribution right.

But you can certainly take your old CDs to the used music store and sell them.  And you can certainly go to the used music store and buy someone else’s old CDs. 

The point is – these transactions do not have to go through the original copyright holder, thanks to the First Sale Doctrine.

BOBS-MERRILL v. STRAUS

The First Sale Doctrine first showed up in the U.S. in 1908 in the Supreme Court’s opinion in Bobs-Merrill v. Straus.

In that case, Bobs-Merrill was a book publisher.  In one of their novels, they inserted language just below the copyright symbol that stated: 

The price of this book at retail is $1 net.  No dealer is licensed to sell it at a lower price, and a sale at a lower price will be treated as an infringement of the copyright.

The department store Macy’s bought books at wholesale and resold them at 89 cents each, including the Bobs-Merrill novel.   Bobs-Merrill then sued Macy’s for copyright infringement.

The Supreme Court ruled that copyright law protects an owner’s right to distribute and sell their works, but it does give the owner rights to limit redistribution and resale of the work.

This is not to say that an owner couldn’t get rights over redistribution and resale by way of a contract between themselves and a purchaser or a distributor.

17 U.S.C. 109

After Bobbs-Merrill, the First Sale Doctrine was eventually enacted as federal legislation as Section 109 of the Copyright Act of 1976.

Summed up, Section 109 states that:

A consumer who owns a lawfully made copy of a copyrighted work, or any person authorized by that consumer, is entitled to sell or otherwise dispose of his or her possession of that particular copy, without needing permission from the copyright owner.

EXCEPTIONS

As with everything in law, there are some major exceptions to the First Sale Doctrine – which, as you’ll remember, is itself an exception to the copyright owner’s distribution right.

All of the exceptions in Section 109 apply to either sound recordings, computer programs and video games. 

To keep things simple here, I’m going to focus on the sound recording exceptions.

For example, some older compositions that had fallen into the public domain were restored to copyright protection so that the U.S. could bring its copyright law in line with foreign countries, as required by certain intellectual property treaties.

For copies of these “restored works” that were made before the works were restored, the First Sale Doctrine only applies for 12 months after the works were restored. 

Thereafter, owners of these pre-restoration copies must get permission from the copyright owner of the restored work if they want to sell the copies.

Here’s another exception.  The First Sale Doctrine does not apply to the “rental, lease or lending” for profit of sound recordings.

In other words, a person or company can’t rent or loan out CDs, tapes, vinyl, hard drives or other media embodying sound recordings, without the express permission of the copyright owners – even if the person or company got the recording by buying it.

Ah – but exception to this exception:  Non-profits, like libraries, can rent, lease or lend records. 

Also – the First Sale Doctrine does not apply to anyone who came into possession of their copy of the recording by rental, lease or lending – in other words, anyone who came into possession without acquiring ownership.

Check back with MELON for Part 2 of this article - in which I take a look at a recent California federal district court's ruling on the First Sale Doctrine in Universal Music Group v. Augusto.

by Howie Cockrill

In Part 1 and Part 2 of this article, I outlined the 4 types of Service Providers qualifying for protection under the DMCA and explained the 3 types of copyright infringement - strict, contributory and vicarious liability.

In Part 3, I provide an explanation of the DMCA's Section 512 - more commonly referred to as the "notice and take down" or "safe harbor" provisions.

DMCA SECTION 512

An easy (yet over-simplified) way to think of the DMCA is that it consists of 2 main parts: 

1.    Section 512 – the “Notice and Takedown” provisions
2.    Section 1201 – the “Anti-Circumvention” provisions

In this article, I am focusing on Section 512.

Section 512, also referred to as the “Notice and Take Down” section of the DMCA, provides that certain qualifying Online Service Providers (OSPs) are not automatically strictly liable for copyright infringement initiated by their users.

Qualifying OSPs may be eligible for a “safe harbor,” which means they can be exempted from contributory liability if they follow certain procedures.

In practice, this means that to avoid liability – an OSP must abide by certain requirements to take down allegedly infringing material once it has received a notice from a copyright owner. 

So which OSPs qualify for the safe harbor? 

1. Conduits:  those that just provide connectivity (think ISPs)
2. Cachers:  those that temporarily cache web pages
3. Hosters:  those that allow their users to upload material
4. Linkers:  those that provide links (think search engines)

What is the “notice and takedown” procedure?

There are 3 prerequisites for OSPs to qualify for the safe harbor.  OSPs must:

1. have and implement a policy of terminating repeat infringers
2. accommodate and not interfere with widely-adopted, non-discriminatory technical measures used to protect copyrighted content.
3. designate an agent to receive notifications of claimed infringement, register the agent with the Copyright Office and list the agent’s contact information on the website.

If a qualifying OSP meets these prereqs – it may be protected from liability for its own infringing actions and those of its users.

When an OSP receives notice from a content owner of an alleged copyright infringement, the OSP must abide by the following procedure (as described on the EFF website).

1. Verify the Notice
2. Promptly take down the allegedly infringing material.
3. Notify the alleged infringer of the take down.
4. If counter notice is sent to OSP by alleged infringer – notify complaining copyright owner of counter notice
5. Restore allegedly infringing material unless the copyright owner files an infringement action.

VERIFY THE NOTICE

Notices of infringing material sent by content owners to OSPs must comply with DMCA notice requirements. 

Here are the DMCA requirements for proper notice:

1. signature (physical or electronic) of copyright owner or their authorized representative.
2. identification of the infringed work
3. identification of the allegedly infringing work
4. contact information for copyright owner or their representative
5. sworn statement that copyright owner or their representative has a good faith belief that the use of the infringed work was not authorized.
6. sworn statement that the information in the notice is accurate and, if the representative is signing, that the representative is authorized to do so by the copyright owner.

If a “take down” notice does not meet these requirements, it is not valid under the DMCA.

It should also be noted here that under Section 512, the complaining copyright owner can also have the OSP served with a subpoena for the alleged infringer’s identity and contact information, to the extent the OSP has that information.

In order for a court to grant such a subpoena, the OSP must present to the court a copy of the valid “take down” notice, a subpoena in proper form, and a declaration that the complaining copyright owner will use the subpoenaed information to protect their rights under the DMCA. 

The OSP may receive such a subpoena either at the same time as or after receiving the take down notice.

TAKE DOWN INFRINGING WORK

Once the Online Service Provider receives a valid “take down” notice, the OSP must take down the allegedly infringing work in order to qualify for the Section 512 safe harbor.

NOTIFY ALLEGED INFRINGER OF TAKE DOWN

After the infringing work has been taken down, the OSP must reasonably attempt to promptly notify the alleged infringer of the take down. 

The alleged infringer may believe that the take down was unjustified.  This could be for any number of reasons.

For instance, the alleged infringer may believe he or she had permission to use the work or that he or she is the owner of the work being infringed.  Alternatively, he or she may believe that their use qualifies as a “fair use.”

If this is the case, the alleged infringer may send a “counter notice” to the OSP. 

Here are the DMCA requirements for a valid counter notice:

1. signature (physical or electronic) of the alleged infringer.
2. identification of taken down work
3. identification of location of work before it was taken down
4. sworn statement that alleged infringer has a good faith belief that the work was taken down due to a mistake or misidentification
5. sworn statement that alleged infringer consents to jurisdiction in the federal court for the district where their address is.
6. alleged infringer’s contact information

NOTIFY COMPLAINING COPYRIGHT OWNER OF COUNTER NOTICE

If an OSP receives a counter notice from an alleged infringer, the OSP’s first step is to send notice to the complaining copyright owner, including a copy of the counter notice and a statement that the OSP will restore the allegedly infringing work to the OSP’s site in 10 to 14 business days.

RESTORE THE TAKEN DOWN WORK

If an OSP receives a counter notice, the OSP must restore the allegedly infringing work on the website no less than 10 and no more than 14 days later.

In that 10-14 day period, the complaining copyright owner may decide to file an infringement suit against the alleged infringer. 

If that happens, the complaining copyright owner will send a notice to the OSP that a lawsuit has been filed.  The OSP is then prohibited from restoring the alleged material on the website.

NON-QUALIFYING OSP’S

If the Online Service Provider does not qualify for the safe harbor, this does not mean that it will automatically be held liable.

It simply means that the “notice and takedown” provisions of Section 512 do not apply and that the court ruling on the issue will look to other court decisions in making its holding.

COMPLAINTS ABOUT THE DMCA “SAFE HARBOR” STATUTE

Many people complain that the DMCA Section 512 “safe harbor” provisions have been misused by copyright owners and their representatives.

Probably the most common complaint has to do with the 10-14 day period during which allegedly infringing material must stay taken down after an OSP’s receipt of a take down notice from a copyright owner.

On the internet – stories, memes, viral videos and myriad other content bubble to the surface and are gone again in the blink of an eye. 

Detractors of the “safe harbor” and how it is used in practice say that requiring material be removed from an OSP’s site simply because of a copyright owner’s “good faith belief” that the use of the material is unauthorized essentially amounts to short-term censorship. 

In addition to getting the material automatically taken down for 10-14 days, by using a subpoena the copyright owner can also get access to the alleged infringer’s identity and contact information from the OSP.

All of this without any substantive evidence of infringement and without filing an infringement suit.   

“SAFE HARBOR” AND VICARIOUS LIABILITY

The language in the DMCA Section 512 is fuzzy with regard to whether the safe harbor provisions protect OSP’s from vicarious liability.

The portion of 512 dealing with Hosters (the only one of the four categories who could be exposed to vicarious liability) states that Hosters will not be liable if:

1. they do not have knowledge of the infringement
2. they do not receive direct financial benefit from the infringement

This is something of a hybrid of contributory and vicarious liability, combining the “knowledge” requirement from contributory infringement and the “direct financial benefit” requirement from vicarious infringement. 

However, in application the trend appears to be that 512 protects qualifying OSP’s from contributory infringement but does not necessarily protect them from vicarious infringement.

OUTTRO

Anyone operating an internet site or service, as well as anyone posting content to such a service, should be not just aware of, but knowledgeable about, liability for online copyright infringement.

When infringement accusations start flying, the stakes can be high - and understanding your rights and your obligations ahead of time may help you prevent problems before they arise.