Friday’s Endnotes – 08/03/12

By , August 03, 2012.

Google and Facebook’s new tactic in the tech wars — It’s a pretty shady tactic.

Copyright and the Little Guy Part 2 – Copyright and Competition Redux — A great follow up from the Cynical Musician on why, contrary to some assertions, copyright is in fact more important to individuals and SME’s than large corporations.

Amazon decides it actually does need licenses for music — Kudos to Amazon for securing licenses that will allow some pretty cool (and legal) features for its cloud storage services. According to Ars Technica, “Amazon’s new scan-and-match service copies customer’s iTunes and Windows Media Player music libraries and matches songs to those in Amazon’s own library of 20 million songs, populating your cloud player so you can listen anywhere. ‘All matched songs–even music purchased from iTunes or ripped from CDs–are instantly made available in Cloud Player and are upgraded for free to high-quality 256 Kbps audio,’ an Amazon press release wrote.”

Craigslist’s Big Bluff — The popular online classifieds site changed its TOS to require users to grant an exclusive license in their postings to the site, in part to assist in recent efforts to combat third-party sites from using its listings. GigaOM speaks to IP prof Richard Gold, who doesn’t believe the move stands on solid legal ground.

Flava Works v. Gunter — The Seventh Circuit vacates a preliminary injunction against social bookmarking site myVidster. I’ll have a longer writeup on this decision next week, but for now, any thoughts?

4 Comments

  1. Mark

    I really enjoy the original reporting over at Ars, they generally have a level head when it comes to these issues. Sadly, the comments section has generally been overtaken by piracy apologists… I’ve tried reasoning with them before to no avail. Seems to the audience that the tech sphere can do no wrong.

  2. D.H.

    Flava Works v. Gunter — The Seventh Circuit vacates a preliminary injunction against social bookmarking site myVidster. I’ll have a longer writeup on this decision next week, but for now, any thoughts?

    1. Preliminary Injunctions

    I think that other than the importation of the eBay preliminary injunction standard into copyright cases in the 7th Circuit, the opinion is dicta. The district court tried to use the old standard if the plaintiff can show a likelihood of success on the merits, then irreparable harm may be presumed. The Supreme Court in eBay said there is no such presumption in trademark cases for permanent injunctions. That analysis, I think, clearly applies to preliminary injunctions in copyright cases too, so I think Judge Posner is correct on that score. Since the district court failed to consider irreparable harm or to properly balance equitable considerations, that alone was reversible error sufficient to vacate the injunction. The rest of Posner’s musings are therefore not necessary to the holding and are thus dicta.

    The Second Circuit’s explanation of the preliminary injunction standard is significantly more helpful than Judge Posner’s:

    This Court’s pre-eBay standard for when preliminary injunctions may issue in copyright cases is inconsistent with the principles of equity set forth in eBay. The Supreme Court’s decision in Winter tells us that, at minimum, we must consider whether “irreparable injury is likely in the absence of an injunction,” we must “ ‘balance the competing claims of injury,’ ” and we must “ ‘pay particular regard for the public consequences in employing the extraordinary remedy of injunction.’ ”8. 129 S.Ct. at 375-77 (quoting Amoco, 480 U.S. at 542, 107 S.Ct. 1396; Weinberger, 456 U.S. at 312, 102 S.Ct. 1798). Therefore, in light of Winter and eBay, we hold that a district court must undertake the following inquiry in determining whether to grant a plaintiff’s motion for a preliminary injunction in a copyright case. First, as in most other kinds of cases in our Circuit, a court may issue a preliminary injunction in a copyright case only if the plaintiff has demonstrated “either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the [plaintiff]’ s favor.” NXIVM Corp., 364 F.3d at 476; see also, e.g., Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 116 (2d Cir.2009). Second, the *80 court may issue the injunction only if the plaintiff has demonstrated “that he is likely to suffer irreparable injury in the absence of an injunction.” Winter, 129 S.Ct. at 374. The court must not adopt a “categorical” or “general” rule or presume that the plaintiff will suffer irreparable harm (unless such a “departure from the long tradition of equity practice” was intended by Congress). eBay, 547 U.S. at 391, 393-94, 126 S.Ct. 1837. Instead, the court must actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the “remedies available at law, such as monetary damages, are inadequate to compensate for that injury.” eBay, 547 U.S. at 391, 126 S.Ct. 1837; see also Winter, 129 S.Ct. at 375 (quoting 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2948.1 (2d ed.1995), for the proposition that an applicant for a preliminary injunction “must demonstrate that in the absence of a preliminary injunction, ‘the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered’ ”). Third, a court must consider the balance of hardships between the plaintiff and defendant and issue the injunction only if the balance of hardships tips in the plaintiff’s favor. Winter, 129 S.Ct. at 374; eBay, 547 U.S. at 391, 126 S.Ct. 1837. Finally, the court must ensure that the “public interest would not be disserved” by the issuance of a preliminary injunction. eBay, 547 U.S. at 391, 126 S.Ct. 1837; accord Winter, 129 S.Ct. at 374.

    Salinger v. Colting, 607 F.3d 68, 79-80 (2d Cir. 2010).

    Since Judge Posner was importing the test into the 7th Circuit, he could have taken the time to spell it out like the 2d Circuit did in Salinger.

    2. Contributory Infringement

    The district court’s formulation of the contributory infringement test derived from Gershwin, 443 F.2d at 1162, looked fine to me:

    To establish contributory copyright infringement, plaintiff must show: (1) a third party directly infringed its work; (2) the defendant knew of the infringement; and (3) the defendant materially contributed to the infringement.

    Flava Works, Inc. v. Gunter, 2011 WL 3205399 at *7 (N.D. Ill. July 27, 2011).

    The district court held that the first element, third-party direct infringement, was a no-brainer—myVidster users, without authorization, were copying and distributing plaintiff’s copyrighted works. The district court found that the knowledge element was also satisfied here (coincidentally quoting Judge Posner’s opinion in In Re Aimster, 334 F.3d at 650) because by ignoring DMCA takedown notices, myVidster had constructive knowledge of the infringement complained of therein. As to material contribution, the district court found that by providing the site, the backup service, the download feature, the encouragement of sharing, and the lack of repeat infringer policy, myVidster had contributed materially to the infringement. Adding it all up, the district court found a likelihood of success on the merits for plaintiff.

    Judge Posner had some silly nitpicking about the Gershwin standard for contributory infringement, though I do like the conciseness of his version:

    Brevity is the soul of wit and tediousness its limbs and outward flourishes. We therefore prefer the succinct definition of contributory infringement in Matthew Bender & Co. v. West Publishing Co., 158 F.3d 693, 706 (2d Cir. 1998): “personal conduct that encourages or assists the infringement.” See also Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1172 (9th Cir. 2007).

    That formulation does seem to omit the knowledge element, though, which is perplexing. Is there strict liability for contributory infringement? That’s news to me. And if his test tacitly assumes knowledge, then I’m not sure that test is any better. Why not stick to Gershwin and leave well enough alone?

    Judge Posner’s application of his test is equally perplexing: Having deleted the knowledge requirement from the test, he then ignores the import of myVidster having ignored takedown notices. The recipient of a well-formed takedown notice is deemed to have knowledge that the complained of link is infringing. Failure to remove the link means liability for whatever infringement the link causes.

    Judge Posner states:

    Congress addressed this problem in the Digital Millennium Copyright Act of 1998, Pub. L. 105-304, 112 Stat. 2860. The Act provides a safe harbor to Internet service providers. It states that a provider isn’t liable for copyright infringement by “referring or linking users to an online location containing infringing material” if it meets certain conditions—it doesn’t know the material is infringing, it isn’t aware of facts that would make the infringement apparent, upon learning such facts it acts expeditiously to remove or disable access to the infringing material, it doesn’t receive a financial benefit directly attributable to the infringing activity, 17 U.S.C. § 512(d), and it terminates repeat infringers. § 512(i)(1)(A). myVidster received “takedown” notices from Flava designed to activate the duty of an Internet service provider to ban repeat infringers from its website, and Flava contends that myVidster failed to comply with the notices. But this is irrelevant unless myVidster is contributing to infringement; a noninfringer doesn’t need a safe harbor. As the record stands (a vital qualification, given that the appeal is from the grant of a preliminary injunction and may therefore be incomplete), myVidster is not an infringer, at least in the form of copying or distributing copies of copyrighted work. The infringers are the uploaders of copyrighted work. There is no evidence that myVidster is encouraging them, which would make it a contributory infringer.

    But I think that misses the point: myVidster may not be encouraging the uploaders of the copyright works, but it is nonetheless responsible for whatever infringement occurs via a link it has failed to remove once a DMCA takedown notice has been issued complaining of that link. The DMCA notice imparts knowledge, and the myVidster website no doubt materially contributes to the infringement by collecting the infringing links. The fact that the uploaders, and not the users, are the direct infringers is irrelevant. What matters is that myVidster knowingly provided infringing links.

    That Judge Posner ignores the knowledge element comes through in this paragraph:

    It might seem that the mention in the Digital Millennium Copyright Act of “referring or linking users to an online location containing infringing material” expands the concept of contributory infringement to any reference to, or linkage in the sense of facilitating access to, copyrighted material. But this is implausible, and anyway is not argued by Flava. Taken literally it would make the publication, online or otherwise, of any contact information concerning a copyrighted work a form of contributory infringement. A more plausible interpretation is that Congress wanted to make the safe harbor as capacious as possible—however broadly contributory infringement might be understood, the Internet service provider would be able to avoid liability.

    But this interpretation doesn’t expand the concept of contributory liability to any link to infringing material. There has to be knowledge as well. That’s the whole point of the DMCA takedown notice: the notice is deemed to impart knowledge. Absent the notice, and absent other knowledge, there is no liability. I think Judge Posner really screwed this part up, and his deleting the knowledge requirement from the test for contributory infringement is just wrong doctrinally.

    3. Tertiary Infringement

    I’m glad Judge Posner says explicitly that there’s no such thing as a tertiary infringer, as Google, Facebook, Professor Goldman, and others often allude to. You’re either an infringer, a contributory infringer (which includes inducement), a vicarious infringer, or a noninfringer. Period.

    ***

    I’ve got other thoughts too, but duty calls (and sorry too about any typos or grammatical errors, I don’t have time to proofread right now). 🙂

    • D.H.

      “The Supreme Court in eBay said there is no such presumption in trademark cases for permanent injunctions.”

      Should have said patent cases, not trademark cases.

  3. D.H.

    I’m looking at the opinion again, and a few things jump out at me…

    Judge Posner says:

    Flava contends that by providing a connection to websites that contain illegal copies of its copyrighted videos, myVidster is encouraging its subscribers to circumvent Flava’s pay wall, thus reducing Flava’s income. No doubt. But unless those visitors copy the videos they are viewing on the infringers’ websites, myVidster isn’t increasing the amount of infringement. See Perfect 10, Inc. v. Visa Int’l Service Ass’n, 494 F.3d 788, 797 (9th Cir. 2007). An employee of Flava who embezzled corporate funds would be doing the same thing—reducing Flava’s income—but would not be infringing Flava’s copyrights by doing so. myVidster displays names and addresses (that’s what the thumbnails are, in effect) of videos hosted elsewhere on the Internet that may or may not be copyrighted. Someone who uses one of those addresses to bypass Flava’s pay wall and watch a copyrighted video for free is no more a copyright infringer than if he had snuck into a movie theater and watched a copyrighted movie without buying a ticket. The facilitator of conduct that doesn’t infringe copyright is not a contributory infringer.

    This doesn’t seem right to me since it’s not analogous to sneaking into a movie theater without paying. The movie theater has a legitimate copy of the film and is showing it legally to paying customers. The person sneaking into the theater doesn’t cause an illegal performance to occur like someone who clicks on an infringing link does. I don’t think this analogy to meatspace makes much sense.

    Say someone uploads an infringing video to the internet. A user then embeds that video on the myVidster website. And then someone else clicks on that link and watches a stream of that video. Who’s liable for what? I think the uploader is directly liable for violating the reproduction right by uploading a copy to the internet. Judge Posner, I think, would agree. But where I think Judge Posner gets it wrong is in saying that the party embedding the video has done no wrong. That party is a contributory infringer since it materially contributes to and has knowledge of the infringement (the entire purpose of providing the embed is to facilitate infringement). And if myVidster had knowledge that the embed was infringing and failed to remove it, it would also be a contributory infringer. The party that clicks on the embed to watch the video is not free from liability either, which is (strangely) what Judge Posner claims. I think that party is a direct infringer (though I’m by no means convinced of it), as is the party that serves the video (I am convinced of this one).

    I think of it like this: If two people are connected p2p and one uploads a file to the other who downloads it, both are direct infringers. The uploader has violated the distribution right, Section 106(3), and the downloader has violated the reproduction right, Section 106(1). The same simultaneous action (uploading/downloading) is in fact two separate, direct infringements by two separate parties. I think it’s the same with someone streaming an infringing video on the internet. The party serving the video and the party watching the video are both direct infringers of the public performance right, Section 106(4). I don’t buy that the party watching the stream hasn’t violated copyright law. The analogy to the person sneaking into the theater doesn’t work because there the film was being shown legally, and it was being shown regardless of the conduct of the person sneaking in. With streaming, by contrast, the video isn’t legal, and the person watching it, by their affirmative conduct, makes the stream occur—had they not initiated the video stream, they would not be able to watch it. The movie theater is going to show the movie whether the person sneaks in or not; the stream won’t happen unless the person makes it happen.

    Later in the opinion, Judge Posner acknowledges that myVidster could be a contributory infringer of the public performance right:

    That is an essential qualification. So far we’ve been discussing infringement just by copying, and we can’t stop there. For remember that the Copyright Act also makes it unlawful “to perform the copyrighted work publicly,” 17 U.S.C. § 106(4), defined, so far as relates to this case, as “to transmit or otherwise communicate a performance . . . of the work . . . to the public . . . whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.” § 101.

    ***

    But if the public performance is the transmission of the video when the visitor to myVidster’s website clicks on the video’s thumbnail (the second interpretation) and viewing begins, there is an argument that even though the video uploader is responsible for the transmitting and not myVidster, myVidster is assisting the transmission by providing the link between the uploader and the viewer, and is thus facilitating public performance. There is a remote analogy to the “swap meet” operated by the defendant in Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 262 (9th Cir. 1996). That was a flea market in which, as the defendant knew, pirated recordings of music copyrighted by the plaintiff were sold in such bulk that the subsequent performance by the buyers (when they played the recordings) may have satisfied the broad definition of public performance in the Copyright Act, although the opinion doesn’t say whether the infringement consisted of unauthorized distribution of copies or unauthorized public performance and probably meant the former. Under either interpretation the swap meet operator was providing “support services” without which “it would [have been] difficult for the infringing activity to take place in the massive quantities alleged.” Id. at 264.

    In contrast, Flava’s pirated videos are not sold, and there isn’t even admissible evidence that they’re actually being accessed via myVidster, rather than via other websites, and if they are not, myVidster is not contributing to their performance. Unlike the defendant in Fonovisa, myVidster is not providing a market for pirated works, because infringers who transmit copyrighted works to myVidster’s visitors are not selling them. That isn’t determinative, because copyrights can be infringed without a pecuniary motive. But it is relevant to whether myVidster’s bookmarking service is actually contributing significantly to the unauthorized performance of Flava’s copyrighted works by visitors to myVidster’s website. It’s not as if myVidster were pushing the uploading of Flava videos because it had a financial incentive to encourage performance of those works, as the swap meet did.

    The part I bolded is quite important: There was no evidence that anyone actually clicked on and watched any of plaintiff’s videos using myVidster. Therefore, there was no streaming for myVidster to be contributing to. Had the record shown that people were using myVidster to watch plaintiff’s videos, Posner appears to have been ready to call that contributory infringement—which it is. I disagree with Judge Posner though that myVidster doesn’t provide a market for pirated works. That’s exactly what it does, and it profits from it with ads surrounding the infringing streams. Just because myVidster isn’t incentivizing the uploaders of the infringing works (and I’m not sure how he determined that), it is nonetheless creating a place where such works are collected and presented for users to easily find and view. The benefit to users and to myVidster is obvious. The users don’t spend any money, but that’s the whole point—but for the infringing stream, they would have to spend money to see the same video. The users are making money for myVidster via the advertising on the site. Maybe market means something other than what I think it means, but to me, myVidster is in the business of creating a market for infringement.

    ***

    I’m still shaking my head at this opinion. It seems like Judge Posner has passed up an excellent opportunity to clarify the doctrine, but instead, he’s only mucked it up worse than it was before. Terry, I look forward to seeing what you come up with when you write about it. Hopefully you can make more sense of it than I can.