Copyright Unbalanced: From Incentive to Excess (7 page)

9
.    Victoria Espinel, Aneesh Chopra, and Howard Schmidt, “Combating Online Piracy While Protecting an Open and Innovative Internet” (Official White House Response to two petitions concerning SOPA and the E-Parasite Act), accessed October 12, 2012,
https://wwws.whitehouse.gov/petition-tool/response/combating-online-piracy-while-protecting-open-and-innovative-internet
.

10
.  Keep in mind, when contemplating what a SOPA-enabled world might look like, that the United States is of course not the only country that can take these steps: France, and Brazil, and Thailand, and many other countries, could try to remedy
their
rightsholders’ injuries (as measured by their local laws) by deleting domains, canceling credit card accounts, and the like.

11
.  See SOPA § 103(b). This obligation is waived only if the owner of the domain name in question submits a “counter-notification” to the ISP, bank, credit card company, search engine, or Internet ad network, in the form prescribed by section 103(b)(5)(A) of the statute. That provision, in turn, requires the counter-notifier—the owner or operator of the website in question—to declare (a) that he or she “consents to the jurisdiction of the courts of the United States,” and (b) that he or she “has a good faith belief that [the site] does not meet the criteria of an ‘Internet site dedicated to theft of U.S. property.’” (As to how he or she would figure that out, see note 3—keeping in mind that the counter-notifier is quite likely to have a limited command of English.)

Maybe it’s just me, but this has an Orwellian, nightmarish cast to it—all these account suspensions and counter-suspensions, domain deletion orders, notifications and counter-notifications, flowing through the network in possibly enormous numbers. Although it is impossible to know how many sites would have been subject to SOPA seizure orders or notifications, the number would likely have been immense. Internet scale is unprecedented—as my colleague James Grimmelmann put it, “The Internet is sublimely large; in comparison to it, all other human activity is small.” James Grimmelmann, “The Internet Is a Semicommons,”
Fordham Law Review
78, no. 6 (2010): 2803. The “notice-and-takedown” procedure implemented in US copyright law by the 1998 Digital Millennium Copyright Act, on which SOPA was purportedly modeled (see note 14), can perhaps give us some idea of the potential scale and scope of SOPA notification. While it is impossible to accurately ascertain the total number of DMCA takedown notices that have been issued since enactment of the DMCA, Google Inc. estimated that during 2010 it disabled access to approximately 3 million URLs pursuant to DMCA takedown notices. See Google Comments to the Department of Commerce, “Inquiry on Copyright Policy, Creativity, and Innovation in the Internet Economy,” Docket No. 100910448-0448-01, accessed October 12, 2012,
http://www.ntia.doc.gov/comments/100910448-0448-01/comment.cfm?e=6BDC88CD-BD11-4506-9196-220C54FBBB87
. See also Viacom Int’l Inc. v. YouTube, Inc., 718 F. Supp. 2d 514, 524 (S.D.N.Y. 2010)—noting that a single website (YouTube) received more than 100,000 takedown notices from a single copyright holder (Viacom Inc.) on February 2, 2007.

12
.  SOPA’s notification-and-counter-notification scheme was, as those of you who are familiar with US copyright law might have already surmised, modeled on the “notice and takedown” copyright enforcement scheme enacted in 1998 in section 512 of the Digital Millennium Copyright Act, 17 U.S.C. § 512(c). For those of you unfamiliar with notice-and-takedown, it works more or less as follows. Under the DMCA, once a copyright holder notifies a website operator that his or her copyright-protected work “resides on a system or network controlled by or operated by or for” the website operator, the operator must “respond expeditiously” to “remove, or disable access to, the material that is claimed to be infringing,” unless there is counter-notification from the party responsible for the allegedly infringing posting; if the website operator does so, it obtains a “safe harbor” from any liability for the infringement.

13
.  In an amicus brief submitted to the Court of Appeals for the Second Circuit in the recently concluded
Viacom v. YouTube
appeal (available online at
http://www.scribd.com/doc/109867487
), I wrote (with coauthor Annemarie Bridy, and on behalf of 43 signatory law professors):

Over the last decade, the scheme that Congress implemented in the DMCA … has been resoundingly, and perhaps even remarkably, successful at forging an equitable balance among [copyright holders and users]. Website operators and other providers of innovative online services have a clear and straightforward set of ground rules to follow, allowing them to conform their operations to the law and, thereby, to avoid the specter of potentially crushing liability. At the same time, copyright holders, through the notice-and-takedown process spelled out in 17 U.S.C. § 512(c), have simple and cost-effective means to curtail large numbers of unauthorized and infringing uses of their protected expression.

The benefits that Internet users—i.e., the public—have reaped from this compromise have been profound. The DMCA has fueled extraordinary and unprecedented growth in innovative Internet services based entirely on user expression. This explosion of
participatory
(often referred to as “user-generated content,” or “Web 2.0”) online services and applications has, in turn, fueled the growth and evolution of the Internet itself as a truly global communications platform, one that has become, as the daily news headlines continue to remind us, a powerful tool for grassroots democratic movements around the world. Thousands of Internet businesses, many of which are now household names across the globe—e.g., Facebook, Twitter, YouTube, Blogger, Craigslist, MySpace, Tumblr, Flickr, and many, many others—have emerged over the past decade sharing one common characteristic: they provide virtually no content of their own (copyrightable or otherwise), but rely instead entirely on their users to make the sites valuable, engaging, and attractive for other users. Internet users have responded in truly breathtaking numbers. It is difficult, if not impossible, to imagine this development in the absence of strong DMCA safe harbors.

At the same time, the DMCA safe harbors provide copyright holders with a direct, efficient, and effective remedy against infringing conduct on the massive scale made possible by participatory media platforms. Through the notice-and-takedown procedures set forth in § 512(c), hundreds of thousands, or perhaps millions, of infringing works have been quickly removed from circulation over the Internet through a process that avoids costly and time-consuming adjudication while simultaneously providing due consideration of the interests of all parties involved.

14
.  I’m not aware of any SOPA supporter who argues that SOPA actually
does
provide foreign website operators with a meaningful opportunity to be heard, before a neutral magistrate, in an adversarial proceeding and in a forum that can lawfully assert jurisdiction over them or their property, before depriving them of their ability to communicate with millions of Internet users in the United States.

15
.  United States v. Verdugo-Urquidez, 494 U.S. 259, 271 (1990).

Timothy B. Lee

I
N 1984, THE
Supreme Court narrowly rejected Hollywood’s argument that Sony should be held liable for copyright infringements by users of its Betamax VCR. Writing for the majority, Justice John Paul Stevens acknowledged that copyright holders have a “legitimate demand for effective—not merely symbolic—protection of the statutory monopoly” provided by copyright law.
¹
But he concluded that the creator of a general-purpose technology with “substantial non-infringing uses” was not liable if some of its customers used the technology to infringe copyright. Many people regard the
Sony
decision as the legal foundation of the modern consumer electronics industry.

Two decades later, the high court reached the opposite conclusion about the peer-to-peer file-sharing service Grokster. A unanimous court ruled that the firm was liable because it had deliberately “induced” infringement by its users.
²
Still, some justices were concerned that an overly broad ruling could discourage future innovation. During oral arguments, Justice Stephen Breyer worried that ruling against Grokster would set a precedent that, if it had been in place five years earlier, would have made it hard for an attorney to “recommend to the iPod inventor that he could go ahead” and invent the iPod.

This trade-off between the harms of infringement and the harms to innovation from overzealous enforcement have been central to the copyright debate for decades. In
Sony
,
Grokster
, and other cases, the courts have tried to fashion a body of law that strikes a balance between these dangers.

Two related trends in copyright enforcement threaten to upend this balance. First, the federal government has begun to criminally prosecute online intermediaries who allegedly facilitate the infringing activities of users. That’s a change from the traditional approach, exemplified by the
Sony
and
Grokster
cases, in which major content companies brought
civil
lawsuits against technology firms.

Second, using civil forfeiture powers granted by the 2008 PRO-IP Act, the federal government has begun seizing the domain names, servers, and other assets of online intermediaries. These seizures typically occur before the owners are convicted of any crime, and in some cases property is seized without its owners ever being charged.

These trends threaten to transform copyright law, making the legal precedents the courts have developed in recent decades practically irrelevant. When an entrepreneur faces a civil lawsuit, the worst that can happen is that his firm will be forced into bankruptcy. In contrast, a criminal case can mean jail time for a firm’s executives.

The complexity and novelty of online copyright cases means that the law is often unsettled. So executives facing criminal penalties have a strong incentive to accept a plea bargain even if they believe they have acted lawfully. But while that may be rational for an individual defendant, it deprives the courts of an opportunity to establish a precedent that could make the law more predictable in the future.

Even more troubling, the threat of criminal prosecutions could cause online service providers to give a wide berth to business models that could be construed as piracy-promoting, even if they could bring significant consumer benefits. After all, the first VCRs, the first MP3 players, and YouTube all faced civil lawsuits from major copyright holders when they were introduced. If the creator of the next great media technology has to worry about
criminal
prosecution, it will make Justice Breyer’s concerns in
Grokster
look quaint by comparison.

In this chapter, I will briefly review copyright enforcement efforts brought against online intermediaries during the first decade of the 21st century. Then I’ll take a detailed look at some copyright enforcement efforts undertaken since the passage of the PRO-IP Act in 2008. The former were civil lawsuits brought by private rightsholders. In contrast, the latter are undertaken by the federal government and make use of criminal prosecutions and asset forfeiture—powers not available to plaintiffs in civil lawsuits. After examining these case studies, I will argue that the criminalization of copyright infringement has gone too far.

For most of the 20th century, copyright infringement involved duplicating physical media such as books, cassette tapes, or DVDs. The significant economies of scale to physical content distribution resulted in two distinct types of piracy: large-scale commercial piracy and casual amateur sharing. Because the latter had only a modest effect on the market for copyrighted works, antipiracy efforts focused primarily on the former.

The Internet radically reduced the cost of making and distributing unauthorized copies of copyrighted works, erasing the previously clear line between commercial piracy and amateur sharing. Suddenly, millions of ordinary people had the ability to distribute copyrighted works to strangers around the world with minimal effort and at negligible cost.

It would have been logistically impossible to sue or prosecute every direct infringer, so major content companies began targeting intermediaries—online services that help users to find and share information with each other. In December 1999, major record labels sued Napster, an early “peer to peer” file-sharing site.
³
Napster provided users with the ability to offer files for others to download and a search engine to help users find music they wanted. But Napster employees did not actively review or approve files made available on the Napster network. Napster argued that this fact shielded it from liability for its users’ infringing activities. But the company lost its court battle and was forced to shut down the service in 2001.
⁴

In the decade since Napster’s demise, a variety of other intermediaries have sprung up to take its place. And many of them have faced their own lawsuits from major content companies. We’ve already mentioned the
Grokster
fight, which went all the way to the Supreme Court in 2005. Grokster had a more decentralized architecture than Napster; information about which files users were sharing never passed through Grokster’s servers. Grokster argued that this architectural decision shielded it from liability. But the high court found Grokster liable because it had actively encouraged (“induced”) the use of its service for illicit purposes.
⁵
Hollywood’s victory over Grokster forced several other peer-to-peer services, including Morpheus,
⁶
eDonkey,
⁷
and Kazaa,
⁸
to shut down as well.

Content industries’ impressive winning streak against commercial peer-to-peer companies caused many users to shift to open file-sharing protocols that were not under the control of any specific company. One of these, the BitTorrent protocol, is now the leading peer-to-peer platform.

BitTorrent is an efficient system for distributing digital content, but it lacks a built-in mechanism for searching or browsing available files. A variety of BitTorrent search engines and directories arose to meet this need, and content companies began suing those as well. For example, the Motion Picture Association of America sued a BitTorrent search engine called ISOHunt in 2006,
⁹
leading to an injunction against the site.
¹⁰

At the same time they were suing intermediaries, some content companies were also suing individual users.
¹¹
The fear of such lawsuits has spurred the emergence of an alternate file-sharing model. It consists of two distinct types of intermediaries: link sites and locker sites. Locker sites offer the capacity to make files available to the public, but they typically preserve plausible deniability by omitting any way to browse or search the files available on the site. Link sites provide this missing functionality, offering organized directories of content available for download from various locker sites.

This division of labor has proven popular among those seeking to profit from illicit file-sharing because it gives each type of site a plausible legal defense. Locker sites compare themselves to the video-sharing site YouTube and the file-storage service DropBbox. Users sometimes use these mainstream products to share works in violation of copyright law, but the companies providing the services enjoy a robust “safe harbor” against liability under the 1998 Digital Millennium Copyright Act. Locker sites argue they are eligible for the same safe harbor.

For their part, link sites emphasize that they merely offer pointers to other sites’ content, and do not host files themselves. Indeed, courts in the United Kingdom and Spain have upheld the legality of some link sites.

Like Napster and Grokster before them, these intermediaries have faced lawsuits from major content companies. For example, the Motion Picture Association of America sued the locker site Hotfile for copyright infringement in February 2011.
¹²

All of the legal disputes we’ve discussed so far have one thing in common: they were civil lawsuits initiated by private firms. For more than a decade, companies like Napster, Grokster, YouTube, ISOHunt, and Hotfile have had to worry that lawsuits by major content companies could drive them into bankruptcy. But until recently, entrepreneurs building cutting-edge media technologies didn’t need to worry that prosecution by the federal government could lead to lengthy prison sentences for their executives. Nor did they have to worry that the federal government might seize their domain names, servers, and other property, effectively shutting them down before they’ve had their day in court.

Indeed, copyright infringement was no more than a misdemeanor offense until 1976. But lobbying by major content companies produced a series of bills—passed in 1976, 1982, 1992, and 1996—that beefed up criminal penalties for a wide variety of copyright violations. Many more infringements became eligible for criminal prosecution. The maximum fine increased from $1,000 in 1975 to $250,000 today. The maximum prison term rose from one year to five years.
¹³
In 1997, Congress passed the No Electronic Theft Act, which extended criminal penalties to noncommercial infringers.

Still, law enforcement agencies have better things to do than prosecute college kids for swapping movies on BitTorrent, so until recently the government exercised these powers relatively sparingly.

All that changed about five years ago when Hollywood and the major labels began seeking the active participation of the federal government in their campaign against online intermediaries. They secured the passage of the PRO-IP Act in 2008. It expanded the use of civil asset forfeiture in copyright cases, allowing the seizure of not only infringing copies themselves, but also “any property used, or intended to be used” to commit copyright infringement, as well as “any property constituting or derived from any proceeds obtained directly or indirectly as a result.”
¹⁴

Major content companies began using the phrase “rogue site” to describe locker and link sites. They argued that the “rogue site” problem required Congress to pass legislation like the Stop Online Piracy Act. They simultaneously pressed law enforcement officials to use powers they already had, including the forfeiture powers of the PRO-IP Act, to combat rogue sites.

As we saw in
chapter 3
, Congress rebuffed requests to enact SOPA. But the Obama administration was more receptive to calls for increased enforcement. In 2010, Immigration and Customs Enforcement began Operation In Our Sites, a project to use the government’s power of civil asset forfeiture to seize domains belonging to sites allegedly guilty of copyright or trademark infringement. Between June 2010 and November 2011, the government seized 350 domains.
¹⁵
As of November 2011, 116 of those domains had been forfeited to the government. The government has also brought criminal charges against the operators of some locker sites and link sites.

Next we will examine some of these government enforcement efforts in detail. To be clear, most of the sites the government has targeted so far really do seem to have profited from the infringing activities of their users. (As we’ll see, the seizure of dajaz1.com appears to have been a simple mistake.) If they were based in the United States, these sites would likely be vulnerable to a lawsuit under the
Grokster
inducement standard.

But it’s less clear whether the operators of sites based overseas have broken the law in their own countries. And there’s also doubt about whether their actions constitute criminal offenses under US law. More importantly, even apparently culpable defendants deserve to be treated as innocent until proven guilty. As we will see, the government’s new, more aggressive enforcement posture has imposed significant harm on many of its targets long before they have had their day in court.

Civil asset forfeiture law is based on the legal fiction that the targeted property—not its owner—is guilty of a crime. Judges often sign off on seizure orders without giving the owner of the target property the opportunity to rebut the government’s accusations.