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April 25, 2012
Lee Gesmer Gesmer Updegrove LLP Boston, Massachusetts
Copyright Gesmer Updegrove LLP 2012
Digital Millennium Copyright Act (DMCA) Copyright First Sale Doctrine Keyword Advertising/Trademark Computer Fraud and Abuse Act (CFAA)
Digital Millennium Copyright Act
- UMG Recordings, Inc. v. Shelter Capital Partners LLC, 667 F.3d 1022 (9th Cir. 2011) - Viacom Int'l, Inc. v. Youtube, Inc., 2012 U.S. App. LEXIS 6909 (2d Cir. N.Y. Apr. 5, 2012)
17 USC § 512 Safe Harbors
§ 512 immunizes Internet intermediaries for user
supplied infringing content but service provider • Must: comply mechanics: agent, notice/take down, repeat infringer policy • Must: provide storage at direction of a user • Must not: Have actual knowledge or facts/ circumstances • Must not: Derive financial benefit + right/ ability to control
By Reason of Storage at Direction of User
“A service provider shall not be liable . . . by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider . . .” § 512(c)
“By Reason of” Storage - Veoh
“language and structure of the statute . . . [and] legislative intent clarify that § 512(c) encompasses the access-facilitating processes that automatically occur when a user uploads a video to Veoh” “web hosts, like Veoh, . . . store user-submitted materials in order to make those materials accessible to other Internet users. . . . if the web host only stored information for a single user, it would be more aptly described as an online back-up service”
“By Reason of” Storage - Youtube
Agrees with Veoh regarding scope of storage safe harbor –“transcoding,” “playback” and “related videos” (automated algorithm) fall within safe harbor Third-party syndication – Youtube licensed videos to Verizon. “Manual selection of copyrighted material for licensing to a third party” => Remanded to determine whether clips-in-suit were licensed
[the service provider is not liable if it] . . . does not have actual knowledge that the material . . . is infringing; . . . in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent” (Red Flag)
Veoh - Actual Know./Facts-Circumst.
• Actual knowledge/facts and circumstances both
require specific knowledge of infringing conduct, not generalized knowledge
Email from Disney CEO to Veoh investor inadequate because the copyright holder did not comply with notice requirements - deficient notice "shall not be considered under paragraph (1)(A) in determining whether a service provider has actual knowledge or is aware of facts or circumstances from which infringing activity is apparent"
Youtube - Actual Know./Facts-Circumst.
“the actual knowledge provision turns on whether the provider actually or “subjectively” knew of specific infringement, while the red flag provision turns on whether the provider was subjectively aware of facts that would have made the specific infringement ‘objectively’ obvious to a reasonable person” => “Upon a review of the record, we are persuaded that the plaintiffs may have raised a material issue of fact regarding YouTube’s knowledge or awareness of specific instances of infringement”
Youtube - Willful Blindness Doctrine
“Safe harbor not conditioned on service provider monitoring its service or affirmatively seeking facts indicating infringing activity” . . . [DMCA] is incompatible with a broad common law duty to monitor or otherwise seek out infringing activity based on general awareness . . . . . . [therefore] willful blindness cannot be defined as an affirmative duty to monitor. . . . [But the statute does not] abrogate the doctrine. . . . the willful blindness doctrine may be applied, in appropriate circumstances, to demonstrate knowledge or awareness of specific instances of infringement”
“Financial Benefit ... Ability to Control”
Service provider is eligible for the §512(c) safe harbor only if it "does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity" 17 U.S.C. § 512(c)(1) (B)
=> Financial Benefit + Control ≠ Safe Harbor
Veoh - “Financial Benefit/Control”
“Service provider must be aware of specific infringing material to have the ability to control that infringing activity . . . Only then would its failure to exercise its ability to control deny it a safe harbor . . . "right and ability to control" . . . requires control over specific infringing activity the provider knows about . . . Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge . . .”
Youtube - “Financial Benefit/Control”
“importing a specific knowledge requirement into [control/benefit] renders the control provision duplicative of [the actual knowledge provision]. Any service provider that has item-specific knowledge of infringing activity and thereby obtains financial benefit would already be excluded from the [control/benefit] safe harbor . . . for having specific knowledge of infringing material and failing to effect expeditious removal.”
Youtube - “Financial Benefit/Control”
Perfect 10 v. Cybernet Ventures, 213 F. Supp. 2d 1146 (C.D. Cal. 2002) - service provider instituted a monitoring program by which user websites received detailed instructions regarding issues of layout, appearance, and content, and also forbade certain types of content and refused access to users who failed to comply with its instructions => “exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity”
Youtube - “Financial Benefit/Control”
“the ‘right and ability to control’ infringing activity under § 512(c)(1)(B) requires something more than the ability to remove or block access to materials posted on a service provider’s website . . . The remaining—and more difficult—question is how to define the ‘something more’ that is required . . . we think it prudent to remand to the District Court to consider in the first instance whether the plaintiffs have adduced sufficient evidence to allow a reasonable jury to conclude that YouTube had the right and ability to control the infringing activity and received a financial benefit directly attributable to that activity”
Attempt to graft Grokster onto DMCA
Metro-Goldwyn-Mayer Studios Inc. v. Grokster (U.S. 2005) “... one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative stops taken to foster infringement, is liable for the resulting acts of infringement by third parties”
Viacom: YouTube is a “Video Grokster”
- “[W]e need views, [but] I’m a little concerned with the recent [S]upreme [C]ourt ruling on copyrighted material” - “[S]ave your meal money for some lawsuits!” - “concentrate all of our efforts in building up our numbers as aggressively as we can through whatever tactics, however evil” - “our dirty little secret . . . is that we actually just want to sell out quickly”
Both courts reject application of Grokster
Veoh - “In light of the DMCA's language, structure, purpose and legislative history, we are compelled to reject UMG's argument that the district court should have employed Napster's vicarious liability standard . . .” Youtube - “a finding of safe harbor application necessarily protects a defendant from all affirmative claims for monetary relief”
Veoh - Investor Liability (secondary liab.)
“The Investor Defendants argue that it would be illogical to impose greater liability on them than on Veoh itself. Although we agree that this would create an anomalous result, we assume without deciding that the suit against the Investor Defendants can properly proceed even though Veoh is protected from monetary liability by the DMCA” “. . . were we to hold that Veoh was protected, but its investors were not, investors might hesitate to provide the necessary funding to companies like Veoh, and Congress' purpose in passing the DMCA would be undermined”
Veoh: Prevailing Def. Denied Atty Fees
FRCP 68 – “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made” Copyright statute - court "may . . . award a reasonable attorney's fee to the prevailing party as part of the costs" 17 U.S.C. § 505
Capitol Records v. Redigi – First Sale Doctrine and Digital Recordings
“Sell your old songs legally – The world’s first used digital music marketplace - Buy used music insanely cheap” “Store, Stream, Buy and Sell Pre-Owned Digital Music”
Redigi (2) ....
Step One: file is “space shifted” to “music locker,” verified, fingerprinted, owner’s local copy deleted Step Two: Owner designates file “for sale” purchased file is retitled to the new owner Step Three: The new owner can leave the file on Redigi or download
Redigi (3) ....
Capitol’s Argument - first sale doctrine limited to owner of a “particular copy” (a “material object”) in which a copyrighted work is “fixed,” to “dispose of the possession of that copy” - Digital transmissions do not involve the physical transfer of a material object - Digital resale requires reproduction of the original file and creation of a new copy => Ergo, first sale does not apply
First Sale Doctrine
“. . . the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord” 17 US.C. §109(a) •Copy owner’s rights, as opposed to copyright owner’s rights
Vernor v. Autodesk (9th Cir. 2010)
Garage sale purchaser of software bound by license prohibiting resale? “First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user’s ability to transfer the software. Finally, we consider whether the copyright owner imposes notable use restrictions”
F.B.T. Prods., LLC v. Aftermath Records (9th Cir. Cal. 2010)
“where a copyright owner transfers a copy of copyrighted material, retains title, limits the uses to which the material may be put, and is compensated periodically based on the transferee’s exploitation of the material, the transaction is a license”
MDY v. Blizzard (9th Cir. 2010)
EULA for WoW restricted use of “BOT” that played through game levels Yes, but: •Yes - WoW players are licensees •But - the anti-BOT restriction was a covenant rather than a copyright enforceable condition
UMG Recordings, Inc. v. Augusto (9th Cir. 2011)
Unsolicited promo CDs - license or transfer? No agreement in place “Resale or transfer of possession is not allowed ...” Unordered merchandise statute
Key Word Advertising/Trademark
Rosetta Stone v. Google, Inc. (4th Cir. 2012)
Intent: < 2004 - Google did not allow the use of trademarks as keyword search triggers for unauthorized advertisers or in the body or title of the text of an advertisement > 2004 – Loosened restrictions, but continued to prevent advertisers from using trademarks in ad text or ad titles unless authorized; recognized increase in risk. >2009 – Permitted use of trademark terms in ad text even if advertiser doesn’t own the mark or have explicit approval from the trademark owner to use it (resellers, components, compatible parts, info/reviews)
Rosetta Stone (2) .... “Viewing the evidence and all reasonable inferences in a light most favorable to Rosetta Stone . . . a reasonable trier of fact could find that Google intended to cause confusion in that it acted with the knowledge that confusion was very likely to result from its use of the marks”
Rosetta Stone (3) ....
Actual Confusion: • 5 depositions, confusion as to sponsorship (vs source) sufficient • Rosetta – over 250 complaints • Google admissions - the only effective trademark policy is to allow trademark usage for keywords but not allow trademark usage in ad text - title or body • Google’s internal studies probative as to actual confusion
Rosetta Stone (4) ....
Sophistication of Consuming Public: “internal Google study reflect[s] that even welleducated, seasoned Internet consumers are confused by the nature of Google's sponsored links and are sometimes even unaware that sponsored links are, in actuality, advertisements”
Rosetta Stone (5) ....
Functionality Defense: Reversed district court’s holding that Google’s use of keywords was functional Contributory Infringement: Remanded – question of fact as to whether Google continued to supply services to known infringers
Network Automation v. Advanced Systems Concepts (9th Cir. 2011)
Trademark owner lawsuit against keyword advertiser (compare Rosetta Stone, suing search engine) Network Auto’s ads did not use plaintiff’s trademark Buying keyword ads constitutes a use in commerce (accord: Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009) (selling keywords is use in commerce)
Network Automation (2) ...
Most relevant factors to likelihood of confusion: (1) strength of the mark; (2) evidence of actual confusion; (3) type of goods/ degree of care likely to be exercised by the purchaser; and (4) labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page
Network Automation (3) ...
Demise of “Initial Interest Confusion”? • “Internet users on the whole exercise a low degree of care.” Brookfield Commc’ns v. West Coast Entm’t Corp.,174 F.3d 1036 (9th Cir. 1999) • “the owner of the mark must demonstrate likely confusion, not mere diversion” . . . [“initial interest” limited to] “misleading and deceptive.” Network Automation, 2011
Network Automation (4) ...
Similar marketing channels: “it would be the rare commercial retailer that did not advertise online, and the shared use of a ubiquitous marketing channel does not shed much light on the likelihood of consumer confusion” => Preliminary injunction vacated
Louis Vuitton v. Akanoc (9th Cir. 2011)
Web host liability/counterfeiting retailers - $32M damages at trial
-"providing direct infringers with server space" qualifies as a material contribution for contributory copyright infringement. De facto notice/takedown for trademarks? See also Tiffany (NJ) Inc. v. eBay Inc., 600 F. 3d 93 (2nd Cir. 2010)
Computer Fraud and Abuse Act (CFAA)
18 U.S.C. § 1030(a)(4): (a) Whoever— (4) knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value . . . shall be punished . . . .
CFAA - U.S. v. Nosal (9th Cir. 2011) (panel)
Company policy "restricted the use and disclosure of all such information, except for legitimate [company] business” "an employee 'exceeds authorized access' ...when he ...violates the employer's computer access restrictions -including use restrictions”
CFAA - U.S. v. Nosal (9th Cir. 2012) (en banc)
“we hold that the phrase ‘exceeds authorized access’ in the CFAA does not extend to violations of use restrictions” (Majority, Judge Alex Kosinski) “This case has nothing to do with playing sudoku, checking email, fibbing on dating sites, or any of the other activities that the majority rightly values. It has everything to do with stealing an employer’s valuable information to set up a competing business with the purloined data, siphoned away from the victim, knowing such access and use were prohibited in the defendants’ employment contracts” (Silverman, dissenting)
CFAA - U.S. v. Tolliver (3rd Cir. 2011)
Upheld CFAA conviction of former bank teller who provided confidential account information to "check runners" who cashed fraudulent checks against the accounts of bank customers No reference to bank policies, but "there was sufficient evidence" that "Tolliver exceeded her authorized access" because "she did not have a business purpose" to access the customers' accounts
CFAA - U.S. v. Teague (8th Cir. 2011)
8th Cir. upheld CFAA conviction where employee viewed Obama student loan data, but did not remove/use it Compare: U.S. v. Czubinski (1st Cir. 1997) (“merely” viewing data insufficient - there must be a "showing of some additional end -to which the unauthorized access is a means”)
CFAA - Pulte Homes v. Laborers' Intern’l Union (6th Cir. 2011)
Labor union "bombarded" employer’s computer systems with emails and voicemails disrupting communications with its customers/ vendors Liable for "knowingly caus[ing] the transmission of a program, information, code, or command, and as a result of such conduct, intentionally caus[ing] damage without authorization, to a protected computer"
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