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OpenMarket: Intellectual Property

  • Why the Supreme Court's Aereo Decision Protects Creators without Endangering the Cloud

    June 26, 2014 10:41 AM

    This post was coauthored by Geoffrey Manne and Ben Sperry of the International Center for Law and Economics. It originally appeared at Truth on the Market.


    Yesterday, the Supreme Court released its much-awaited decision in ABC v. Aereo. The Court reversed the Second Circuit, holding that Aereo directly infringed the copyrights of broadcast television program owners by publicly performing their works without permission. Justice Breyer, who wrote the opinion for the Court, was joined by five other Justices, including Chief Justice Roberts, Justice Kennedy, and the liberal-leaning bloc. Interestingly, Justice Scalia dissented on textualist grounds, joined by his conservative-leaning colleagues Justice Thomas and Justice Alito.


    As this split illustrates, debates about intellectual property often don’t break down along partisan or ideological lines, and the division between the majority and the dissent in Aereo focused entirely on how to interpret the copyright statute, not on the underlying philosophical merits of property rights or policy judgments regarding the costs and benefits of stronger or weaker IP.


    The majority, relying on both the legislative history and the text of the Copyright Act of 1976, emphasized that the Act sought to foreclose the workaround by cable companies of broadcasters’ copyrights that the Supreme Court had previously sanctioned in a duo of cases—and that Aereo’s conduct was functionally almost identical to the unauthorized retransmissions by cable companies prior to the 1976 Act.


    Justice Scalia dissented on two grounds: first, that the majority based its reading of the statute on legislative history, a practice he opposes as a means of divining a statute’s meaning; and second, that the majority relied on a vague and inapt comparison between Aereo’s allegedly infringing conduct and cable companies’ pre-1976 retransmissions of broadcast network programming.


    We argue here, building on our amicus brief and our previous blog post on Aereo, that, regardless of which test applies, Aereo infringes on television program owners’ exclusive right under the Copyright Act to publicly perform their works. Moreover, we argue that the Court’s test in Aereo is far less ambiguous than its critics assert, and that it does not endanger cloud computing services like so many contend.


  • Senate Leaders Kill Patent Reform, Once again Thwarting Democracy to Protect Special Interests

    May 27, 2014 7:28 AM

    Hundreds of moderate and conservative bills have passed the House of Representatives, often overwhelmingly, only to die in the Senate without even being voted on there. Senate Majority Leader Harry Reid (D-Nev.) doesn't want these bills to pass, because they contain provisions opposed by left-leaning special interest groups, like the trial lawyers. Letting them come to a vote would enable many of these bills to pass, given popular support for them.


    Reid just did it again with patent reform, which passed the House, only to die in the Senate. Thanks to Reid, the trial lawyers and "patent trolls won in Congress," laments a tech policy expert at Ars Technica. Without Reid's approval, Senate Judiciary Committee Chairman Pat Leahy (D-Vt.) won't even hold a vote on the bill, knowing it would likely pass the committee if he did. Nor will he consider a compromise replacement designed to attract Democratic support hammered out by Senators Schumer (D-N.Y.) and Cornyn (R-Texas), which added sweeteners to the bill to attract Democrat-leaning constituencies like universities.


    Even the liberal New York Times editorial board, which has not endorsed a Republican for president since Dwight Eisenhower, supports the bill. But trial lawyers, a powerful special interest group who are a major force in the Democratic party, opposed the patent reform bill. Many House bills that supporters say would create jobs have never been allowed to come to a vote in the Senate.


    Ironically, news of the death of patent reform came at the same time that President Obama, speaking at a partisan fundraiser, claimed that "the problem” in Washington, and the reason for legislative gridlock, "is not that the Democrats are overly ideological — because the truth of the matter is, is that the Democrats in Congress have consistently been willing to compromise and reach out to the other side."


  • The Premises of Net Neutrality

    May 19, 2014 4:12 PM

    In the electric power industry, if you run an extension cord across the street to serve another, you go to jail. The local utility has a protected monopoly. We’ve put most of that "public utility" vision behind us in communications. Wired and wireless and satellite options abound for Internet service; we'll likely see blimps and communications drones, and who knows what else.


    Yet special interests still want the Federal Communications Commission (FCC) to regulate the content flows and grid infrastructure, the prices and services of the Internet via something called net neutrality. They actually are quite open about wanting government regulated monopoly power.


    The Internet as a utility, like the power company. They want speed limits.


    We're nearly a decade into a series of disruptive efforts to inflict "net neutrality" on the Internet; Neutrality is the idea that we won't have access to content where and when and as fast as we want it without government and special interests controlling the wires.


    Neutrality proponents want to inflict a "Mother-May-I" method of operation on the Internet; they want planning boards and regulatory affirmation of content carriage arrangements and of infrastructure deals.


    It's not a bright new idea, and not even one rooted in a plausible belief in natural monopoly, or one informed by angelic visions of "common carriage. Regulation like net neutrality devolves into cronyism. It was also rooted in cronyism.


    Early telecommunications and power networks were highly competitive, with duplicative infrastructure. The powerful didn't like the competition. The cronies got a franchise and guaranteed profit, everybody else got shut out, and the effects still linger.


  • Is the FTC Already Capable of Regulating Patent Demand Letters?

    November 15, 2013 4:31 PM

    The answer is no, except under special circumstances. The question itself arises from comments by Julie P. Samuels of the Electronic Frontier Foundation at last week’s panel held by the Senate Committee on Commerce, Science and Transportation over demand letters from patent assertion entities (PAEs), commonly known as patent trolls. Samuels proposed new legislation to expand the Federal Trade Commission’s (FTC) Section 5 authority, which allows the FTC to regulate “unfair or deceptive acts” by businesses.


    PAEs are companies which buy patent rights from other companies and then sell licensing rights for those patents to other third party companies to produce products using said patents. Patent demand letters are letters sent by PAEs to companies which are accused of violating the patents held by a PAE in question.

  • Wikileaks' Latest -- Draft IP Chapter in Major Trade Agreement

    November 13, 2013 6:34 PM

    Wikileaks has made another big splash yesterday -- not about spying, but about a multinational trade agreement currently being negotiated. Wikileaks published a draft chapter on intellectual property that is part of the Trans-Pacific Partnership  Agreement (TPP), now being negotiated with 12 countries -- Japan, Mexico, Canada, Australia, Malaysia, Chile, Singapore, Peru, Vietnam, New Zealand, and Brunei Darussalam.


    The 95-page chapter, as a negotiating document, includes proposed provisions and language on a broad range of intellectual property issues, including copyrights, trademarks, patents, pharmaceuticals, and the Internet. The chapter also includes enforcement mechanisms for violations of the agreement. Individual countries’ initials next to the provisions or words in brackets show which countries support or oppose the particular language.


    It’s a difficult document to parse, as many of the provisions reference other agreements and treaties, particularly the Agreement on Trade Related Aspects of Intellectual Property Rights, commonly known as TRIPS, which is administered by the World Trade Organization.


    Intellectual property rights are likely to continue to be a difficult issue for the 12 countries to negotiate, as some countries are at the leading edge of technological developments, while others are hardly players.  However, some of the developing countries are pushing for intellectual property rights in plant varieties -- likely to be a contentious issue as well.


  • We Must Take a More Active Role in Challenging the FCC

    September 19, 2013 10:35 AM

    On September 9, 2013 I entered the E. Barrett Prettyman Court house, which houses the federal Court of Appeals for the District of Colombia Circuit. It was 8:30am and in one and a half hours, oral arguments in Verizon v. FCC were slated to begin.


    I assumed that arriving an hour before the doors would open would be time enough to get a seat for the case. However, I encountered a line of over a hundred people already waiting to enter the courtroom, and by the time I entered the court room, space was limited to standing room only.


    As oral arguments proceeded, the panel asked a litany of questions about the question whether the FCC’s Open Internet Order treats broadband providers as common carriers. The arguments seemed rather esoteric, focusing on specific sections within the Order and the Telecommunications Act of 1996.


    This was natural for a courtroom, and yet, it was rather strange to not hear questions about the FCC’s attempt at assigning itself ancillary authority over the Internet. What has seemed absent from much of the discussion about net neutrality is a serious opposition from the public to regulators self-implementing authority to manage the Internet.


    In 2010, the FCC explored redefining broadband Internet from information technology to telecommunications technology in order to establish control over the industry. Content distributors, of course, supported the motion, but a majority of respondents were against the expansion. The FCC ceased exploration soon after.


  • Vitter Amendment To Ban Drug Patent Settlements Would Raise Pharmaceutical Prices

    March 22, 2013 8:47 PM

    With time running out for the Senate to act on a continuing budget resolution, members are trying to find some magic pot of money that would mask the fact that our government spends far more than it raises in revenue. Tonight, it looks like Sen. David Vitter has resurrected an old proposal to ban what are known as reverse payment patent settlements -- agreements in which brand name drug manufacturers pay generic firms not to challenge patents on the innovators’ drugs.


    Critics, including the Obama administration and the Federal Trade Commission, call these settlements “pay-for-delay,” and argue that successful patent challenges would get generics to market sooner. In turn, they claim, that could save federal health programs billions of dollars every year, which is why the proposal is so popular with both Democratic and Republican members of Congress. A CBO analysis scored a ban proposed in 2011 as saving federal health programs $2.68 billion over 10 years.


    The problem is, any alleged savings from a ban on these patent settlements is illusory because reverse payment settlements actually have the effect of getting generic drugs on the market sooner, thereby lowering drug costs, not raising them.


  • Science And Technology Policy And The Democratic Convention

    September 4, 2012 10:06 AM

    Now it's the Democrats' turn to gather for their convention in Charlotte and one element of the platform in common with basic Republican philosophy is the case for government funding of basic science.


    The Democrats are much more ambitious, however, in calls for the funding of "investment" beyond basic science. The word "investment," in fact, appears 40 times in the just-released 2012 Democratic National Platform.


    Indeed most agree with the notion that such a basic science policy is "unimpeachable," as Fareed Zakaria's, "How Government Funding of Science Rewards U.S. Taxpayers," put it in the The Washington Post.


    But needless problems arise when an institution with the power to tax and compel gets overly involved in the very production of knowledge itself.


    Problems include seducing industry with funds, inviting cronyism, and federal “steering” when Washington has no business doing so.


    The alternative "Platform" is creating a tax and regulatory environment favorable for all, not the favored few, to engage in scientific knowledge and wealth creation, potentially on scales far beyond those of today.


    Today, we see examples of artificially created conflicts rooted in governmental science and tech policy:


    • Over the fundamental merit of basic vs. applied research (a false split in many ways).

    • Over relative impacts of private vs. public funding on discovery, knowledge creation and well-being.

    • Over the alleged objectivity of government vs. “industry” science, and the improper disdain for industry science in the marketplace of ideas that public funding abets.

    • Over the right to not fund research programs with which one disagrees or is indifferent toward.

  • Google, Antitrust Antagonism, Patent Trolling, and Joseph Schumpeter

    July 5, 2012 3:05 PM

    Google has been in the news lately for all the right reasons, but also some wrong ones. The FTC is investigating its use of patents held by Motorola Mobility, recently acquired in a deal thought by many to be as much about intellectual property as hardware expertise. The European Union has also fined Google on antitrust grounds, claiming that it unfairly leverages its dominance of online search to serve its promote its own content.


    This is not the first time the technology, advertising, and media giant has faced pressure from regulators. Google has fingers in lots of pies. Its name is synonymous with the dominant search engine that made its reputation, and with search itself. It arguably boasts the most popular and capable email platform, Gmail, integrated with a constellation of cloud services and social networks including Docs, Play, YouTube, Maps, Picasa, and Drive. Indeed, the same integration that draws competitors' ire and regulators' scrutiny is a crucial element of the firm's UVP. It has turned Android into a mobile operating system that rivals and in some cases surpasses Apple's iOS. And its Chrome web browser recently overtook Internet Explorer as the most popular in the world, commanding almost a third of global market share barely four years after its release. The question is, does Google constitute a monopoly?


  • Going to Jail for Linking? What Sen. Amy Klobuchar's S. 978 Could Mean for You

    June 30, 2011 9:56 AM

    Earlier this month, the U.S. Senate Judiciary Committee unanimously approved S. 978, a bill that would expand the scope of felony criminal copyright infringement under federal law. While the legislation enjoys broad congressional support, a number of bloggers have slammed the bill on the grounds that it would allegedly impose criminal liability on lots of innocent U.S. Internet users.


    In this essay, I’ll answer a few "Frequently Asked Questions" about the legislation -- and explain why you should care.


    Here are some links to get you up to speed:


    • Text of S. 978 as reported by the Senate Judiciary Committee on June 16

    • TechDirt’s latest commentary on S. 978

    • Electronic Frontier Foundation’s analysis of S. 978


    If I embed on my website a YouTube video that turns out to be infringing and ten people watch it, in what circumstances could I be charged with a felony under S. 978?


    Mike Masnick at TechDirt recently posed this question. To begin, federal law defines “public performance” in two ways:


    1. performing or displaying the protected material in a place open to the public or  in which it can be viewed by a “substantial number of persons” (not a small family or friends setting); or

    2. to transmit or communicate to such a place by using “any device or process,” regardless of whether the people viewing the material are in different locations and viewing it at different times, or in the same location viewing it at the same time

    Streaming appears to fall under the second prong, as a recent White House Intellectual Property White Paper argued. This also comports with a 2010 case from the Second Circuit, in which the court observed that “[a] stream… like a television or radio broadcast, is a performance because there is a playing of the song that is perceived simultaneously.”  Thus, each stream of a copyrighted video could well constitute a public performance for the purposes of 18 USC 2319(b). As Masnick points out, under S. 978, you may be open to criminal liability in such a situation.


    However, that only answers part of the question.  Embedding a video is linking to content which is potentially hosted elsewhere, so the act of embedding would not likely be direct infringement through reproduction or distribution of that protected content, though this is far from certain.  If you post copyrighted works and host them yourself for streaming, you could be charged provided you meet the other statutory criteria.


    Terry Hart of Copyhype has a more nuanced view, arguing that even if the law would technically make criminals out of individuals who post infringing videos online, the chances of prosecution would be slim, especially given the limited resources of federal prosecutors and other considerations. Hart further notes that the higher standard of proof in criminal cases compared to civil infringement cases will serve as a check on rampant prosecutions.  But this sounds an awful lot like, “just because they can doesn’t mean they will.” Hart’s arguments, therefore, are unlikely to alleviate the concerns raised by skeptics of S. 978.



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