Letter from AmeriKat II: Good Day Sunshine (patents)

Google's $900 million bid for Nortel's patents

Last Monday Google announced a bid to buy almost 6000 patents and patent applications from Nortel, the bankrupt Canadian telecoms equipment manufacturer, for $900 million. The patents include patents for wireless, internet and social platform technologies. The bid comes as part of Google's strategy to shield itself from patent litigation. The thinking is that if you buy enough patents that cover a wide and diverse range of technologies and industries, you may have a patent in your legal arsenal that may have otherwise been used against you. Google currently possess a comparatively weak patent portfolio in comparison to their market share and expansion into mobile operating systems, especially in relation to android-related technology. Readers may recall that Oracle sued Google last fall for patent infringement of its Java patents by Google's open-source android operating system. (District Judge Alsup, who is presiding over the case, last week received a tutorial in Java. Also, for a fun trade secret case involving HP and Oracle see this recent news here)

Although it was reported that other tech companies were expected to make bids for Nortel's patents, there may be few that can beat Google's incredibly high bid. On Monday, Google's general counsel and Senior VP Kent Walker(picture, left) wrote on Google's blog that

"... one of a company’s best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services. Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories.

So after a lot of thought, we’ve decided to bid for Nortel’s patent portfolio in the company’s bankruptcy auction. Today, Nortel selected our bid as the “stalking-horse bid," which is the starting point against which others will bid prior to the auction. If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate. In the absence of meaningful reform, we believe it's the best long-term solution for Google, our users and our partners."

The planned sale of Nortel's patent portfolio must first beapproved by judges overseeing Nortel's bankruptcy cases in the US and in Canada. As reported by Bloomberg, anyone planning to beat Google's offer has to beat it by at least $25 million more than Google's initial offer, or at last count, $5 million more than the last offer. Anyone have $905 million to spare? The AmeriKat wonders what the return on investment is on purchasing a patent portfolio which with patents and/or applications that will have only about 20 or so years of life in them? Will Google ever make back theri $905 million on savings to legal fees or from patent damages? Or does that even matter as long as Google is sending a message to would-be plaintiffs that their patent portfolio is now robust, so sue at your peril? What do readers think?

US and UK unite for some more sweet patent harmony

David Kappos's UK harmonization tour last week not only yielded a Monday morning breakfast at UCL, but progress on the UK and US's joint action plan to combat the problem of patent backlogs and their effects. The joint announcement was made by Kappos and Baroness Wilcox, (compare the IP experience) Kappos stated that:

“The joint action plan highlights that while 21st century patent challenges are global in scope, so too are their solutions. Work sharing is a powerful tool that equips examiners to extract value from our skilled colleagues in other patent offices. By reducing redundant workloads and chipping away at the backlog, we can collaborate to unleash millions of jobs lying in wait and breathe life into our economies.”

The action plan is designed to allow an examiner in one office the ability to reuse work already done by an examiner in the other office on a corresponding applications, as much as possible to avoid duplication of work.

Kappos was also interviewed by The American Lawyer recently regarding the recent patent reforms (read interview here) and the America Invents Act (see recent AmeriKat posts here). When asked whether he thought it was that the House would pass a similar bill, Kappos replied:

I am off-the-charts optimistic.

The AmeriKat loves the enthusiasm.

Letter from AmeriKat I: Good Day Sunshine (TMs and ©)

The AmeriKat has been watching the English public embrace the change of the season this week. On Friday she slinked outside for her midday patrol and perched on a bench in Gray's Inn, with the new Vogue in paw. (picture, left - the AmeriKat taking a much needed lunchtime Kat nap) Like spring flowers, once the temperature rises above a certain level the English bloom onto any stretch of grass available to them. A sea of students, solicitors, lawyers and miscellaneous office workers were scattered about in the sections of Gray's Inn grass that was unspoilt by any appearance of shade. Once modest workwear suits, worn by males and females alike, were stripped of any sweaters, cufflinks and buttons to expose as much square footage of skin as possible, laughter was echoing off the Inn's buildings, people were chatting with their neighbors, and a general feeling of calm settled throughout. The AmeriKat even spied some IP barristers from 11 South Square joining in on the emergence of spring. There is something about warmer weather in England that makes the general public a little less guarded than normal, in both physical appearance and mentality, which can only ever be welcome.

Louboutin sees red with Yves Saint Laurent

Someone who has seemed to let their guard down, in least where trade mark infringement claims are concerned, is Yves Saint Laurent who last Thursday was sued in Manhattan federal court by the one and only Christian Louboutin. Louboutin is famous for his footwear recognizable by the casual observer by its trade mark red sole. The story goes that one of Louboutin's customers was wearing an amazing red nail polish on her nails which Louboutin adored. She had the coveted nail color in her bag, took it out and Louboutin painted his first sole with the red nail polish. The violent red-lacquered sole would later become his signature maker's mark and would be granted a US trade mark in 2008 (picture, right - Louboutin's famous heel).

Louboutin is now alleging that since January Yves Saint Laurent America, a subsidiary of the Gucci Group, is selling their shoes with the same red sole in store throughout Manhattan. Louboutin's complaint argues that Yves Saint Laurent's use of the red sole is "likely to cause and is causing confusion, mistake and deception among the relevant purchasing public." Louboutin is claiming for $1 million in damages and an injunction to stop Yves Saint Laurent (picture, left) from manufacturing the shoes. Interestingly, Louboutin apprenticed with Yves Saint Laurent in the late 1980s before setting up his own brand.

The AmeriKat is curious, as any Kat should be, to know what evidence of actual confusion (as stated by the complaint to be occurring) Louboutin has. Unlike in the UK, under section 1114 of the Lanham Act US trade mark owners have to prove that the defendant's use of their mark confused consumers. In the Second Circuit, which includes New York, the factors for the test for confusion is that as laid down in the Polaroid Corp v Polarad Elecs. Corp (1961) case. The AmeriKat sets out these factors below with some comments in the IPKat's signature comment red:

1. The strength of the mark, i.e. the red soles - It is somewhat undeniable that Louboutin's red soles have indeed become well-recognized as a trade mark for his shoes in the market.
2. The degree of similarity between the two marks - Identical - in so far as they are both red outersoles
3. The proximity of the products and services - Identical - they are both shoes, being sold in the same stores, probably right next to or near each other
4. The likelihood that the senior user will "bridge the gap" into the junior user's product service line - if there even is a 'gap' it is very likely because they are competitors
5. Evidence of actual confusion between the marks - Always hard to come by, but perhaps Louboutin has some faithful customers who will be able to attest to some initial interest confusion?
6. Whether the Yves Saint Laurent adopted the mark in good faith
7. The quality of the Yves Saint Laurent's products - the AmeriKat would love to see Louboutin allege that YSL's products are of a lesser quality, but the fact that they are not and are side-by-side competitors actually makes it more difficult for YSL to squirm out of this one because there is more chance of there being actual, likely or initial-interest confusion.
8. The sophistication of the parties customers -If someone is in the market for $400-$4,000 shoes, one would think you would pay particular attention in knowing what shoe and from whom you were buying, however again, initial interest confusion may be the savior in this confusion battle.

Confusion, as any trade mark lawyer knows in the US and the UK, is notoriously difficult to prove. However, in the US and now thanks to Arnold J in the UK, initial interest confusion is probably the saving grace for Louboutin. Given that the price points of parties' products are so high and the sophistication of the intended consumers is so developed, any confusion present regarding the origin of the shoes on behalf of the consumer is likely to be remedied prior to purchase. What do readers think? Is this an easy fight for Louboutin or does Yves Saint Laurent have it in the (Neiman Marcus) bag?

Need for Congress to address issues with Google Books lawsuit, Pallante says

The AmeriKat has been quiet about the Google Books Settlement, which some may find unusual considering how much she followed and wrote about the litigation (see previous reports here). In fact she even predicted when District Judge Denny Chin (picture, left) was going to issue his damning judgment (just ask @garethdickson). There is little she wishes to say right now about Judge Chin's judgment other than, in her opinion, it was the correct determination given that the revised settlement seemed even worse than the first and again did not adequately address the issue of orphan works, and Google could have saved itself a lot of bother had it been an "opt-in" class than an "opt-out" (albeit probably not as profitable). However, the issue spotlighted how important the issue of digitization of works is in copyright, be it literary or artistic.

Maria Pallante (picture, right), acting Register of Copyrights, feels the same. Last week she told an event hosted by the US Chamber of Commerce that lawmakers need to address the issue of whether the digitization of literary works should be a benefit for the public or become a profit-making endeavour. As reported by the Dow Jones Newswire, Pallante stated that

"The first issue is really, is mass digitization a national goal that Congress feels legislation is warranted for, and if so, for what beneficiaries."

She also stated that

"It isn't that universal libraries aren't important, but there's a difference between universal libraries and universal bookstores."

With orphan works are back where we started, says the AmeriKat, why can't the US government just once and for all pass a bill like the Shawn Bentley Bill? It would allow for digitization of orphan works, but if and when the owner came forward a reasonable royalty would be payable under statute provided the user undertook a reasonable search. Does it need to be more complicated than this? Of course, the problem encountered is that once that copy is digitized the person who digitized it can arguably exclude other digitized copies of the same book being made - thus some of the arguments against Google in the Google Books case. As long as it is clear that the mere digitization of a literary or artistic orphan work does not mean that the digitizer can exclude others from making their own digitized versions of the work, then such problems should not be encountered. But then again, how can this be done but by legislation?

More in Part II.

Letter from AmeriKat: It's Super Bowl Sunday!!!

This week marks the 100th AmeriKat post (although there have been several non-AmeriKat posts from this feline). There would be no more apt a day to publish her 100th Letter than on SUPER BOWL SUNDAY! FOOTBALL!!!!!!!! Readers will have to excuse the AmeriKat for her sudden burst of feline frenzy, but she does love a good American football game. This year it is the Pittsburgh Steelers and Green Bay Packers who are at loggerheads -- the AmeriKat is rooting for the Steelers, although this may change following half-time. For those who have been engrossed by the rugby this weekend on this side of the Atlantic, take a moment and enjoy the beauty that is American football, not just the sport but its impact on IP. Last year the Supreme Court ruled on an issue regarding NFL team trade marks and competition law issues in the American Needle case (AmeriKat reports here). Ahh ... the NFL, bringing together two American pastimes - Sunday night football and litigation. You can't really say that about rugby, can you?

The AmeriKat will be gone next weekend as she will be finishing off (or writing) a book chapter on the Viacom v YouTube litigation, but will be back the following week with news of Microsoft's Supreme Court filing in the i4i case.

Google's "Bing Sting" takes a punt at Microsoft, but is it really copying?

Another epic battle between two massive teams has also been launched when last week Google accused Microsoft and their Bing search engine of copying their search results. Google's engineers had created 100 "synthetic" search queries such as "hiybbprqag" to which predetermined real search results that had nothing to do with the original query would then appear. After a few weeks of implementing this 'sting', these same search results were also displayed on Bing. Google's Amit Singhai published a detailed blog post about the ins and outs of Google's sting and said that their experiment confirmed their suspicion that something strange was happening with Bing. Google suggests that individuals who are using some combination of Internet Explorer 8 - which can send data to Microsoft via its Suggested Sites feature and/or the Bing Toolbar which can do the same, are inadvertently sending data to Bing about what keywords they search for on Google and what results Google in turn displays. A sort of "search engine espionage" if you will. Singhai stated that

"At Google we strongly believe in innovation and are proud of our search quality. We’ve invested thousands of person-years into developing our search algorithms because we want our users to get the right answer every time they search, and that’s not easy. We look forward to competing with genuinely new search algorithms out there—algorithms built on core innovation, and not on recycled search results from a competitor. So to all the users out there looking for the most authentic, relevant search results, we encourage you to come directly to Google. And to those who have asked what we want out of all this, the answer is simple: we'd like for this practice to stop."

Microsoft denied copying Google and has instead accused them of conducting "spy-novelesque stunts". Vice President of Bing, Harry Shum, stated that

"We do not copy Google's search results. We use multiple signals and approaches in ranking search results. Opt-in programs like the toolbar help us with click stream data, one of many input signals we and other search engines use to help rank sites."

Click stream data basically tracks or maps how users are searching and using the web. So if you use the Bing toolbar or Internet Explorer to search something on Google then it can see the URL for that query and the resulting search results. It can also see when you search something on Amazon, or when you check out the latest YouTube clip or browse shoes on Nieman Marcus (picture, left - the AmeriKat asleep in one such shoe). There is no specific Google signal, just a general search signal for the whole gambit of websites. Some of these search signals are very weak (tails) and some are very strong (heads). Head signals are generic terms such as "movies" or "shoes" - terms that millions of people search every day and will thus be 'strong'. Tail searches are your more obscure searches, such as the nonsensical queries used in the sting operation. Because these tail searches are searched less frequently a search stream will thus have less data to go on and thus the results may appear to be that Bing is "copying"' Google's results, but really there is less data to go on and the data that is out there is from only a few sources including Google (if the AmeriKat is understanding this correctly!). According to Danny Sullivan, both Google and Bing agree that this replication of search results can occur in instances of weak signals.

According to Sullivan, Google's test proves that the surfstream is a weak signal because even where Google was providing the sole signal or sole data for the nonsensical terms, Bing used this signal (data) only about 9% of the time. So are Google's claims of being copied legitimate? Shum says that Bing is not copying Google, they are only watching how users search and use the web. Much, says the AmeriKat, like what Google does with Google Chrome and their own search and browse settings. Although she knows this is not an equitable issue, the maxim "one who comes into equity must come with clean hands" is chiming around the AmeriKat's head right now ...

So is this just a PR battle being waged by Google? Is there any copying taking place at law? Further, what protection does Google have in the search results? If algorithms are being copied (of which there does not appear to any evidence of direct taking), perhaps copyright infringement is taking place or, if there is some patent at work, is there patent infringement? In so far as results are displayed, is there another possible copyright claim in the layout or table of search results? The AmeriKat has to admit that the inner workings of search engines are a mystery to her, so identifying the intellectual property rights is also a stab in the dark. What do readers think?

If anything, the AmeriKat is sure that Viacom and their amici (which include Microsoft) in Viacom v YouTube are loving hearing Google whine about being copied and saying choice things such as

“I’ve got no problem with a competitor developing an innovative algorithm. But copying is not innovation, in my book."

The Amerikat would like to thank Dave Sant of the BBC for spurring her interest in this story.

US Officials score a touchdown in fight against online counterfeits

Last week, with the assistance of Immigration and Customs Enforcement (ICE), the US Attorney's Office of the Southern District of New York seized 10 websites that allegedly streamed live sporting and and pay-per-view events online - mere days before the big SUPER BOWL GAME! The Super Bowl game attracts about 100 million viewers a year and in recent years many viewers have been tuning in online, either legally or illegally. The websites that have apparently assisted in the illegal viewing of sports games that were subject to the seizure under Title 18 of the United States Code included channelsurfing.nehq-streams.com, firstrow.net, ilemi.com and rojadirecta.org. What makes the seizure of rojadirecta.org particularly controversial is because this Spanish site was held to be operating legally by a Spanish court last May. (picture, top left - the notice now displaying on the seized websites)

These websites were alleged to illegally provide links to sites that would show or stream professional sports organizations' content, including games from the NFL and the NBA (National Basketball Association). For anyone who has ever watched an NFL or Premier League game, you will know that the sports organizations will usually own the copyright in film and sound recording of the game/match, the trade marks of some of the teams' logos and/or uniform, the music, layout, etc. Thus, unauthorized streaming or use of this content is a violation of their copyright. With more and more fans turning to their laptops to watch their favorite game, sports organizations are now facing the age-old battle with sites that illegally provide this content.

US Attorney, Preet Bharara (photo, right) stated

“The illegal streaming of professional sporting events over the Internet deals a financial body blow to the leagues and broadcasters, who are forced to pass their losses off to fans by raising prices for tickets and pay-per-view events. With the Super Bowl just days away, the seizures of these infringing websites reaffirm our commitment to working with our law enforcement partners to protect copyrighted material and put the people who steal it out of business.”

But the efficacy of such seizures is under question and anyone who battles counterfeit websites online know what that is: as soon as one domain goes away, another one will soon swoop up in its place. However, ICE Director John Morton remains undeterred

“This swift action by our Homeland Security Investigations New York special agents and analysts sends a clear message to website operators who mistakenly believe it’s worth the risk to take copyrighted programming and portray it as their own. We will continue to aggressively investigate this type of crime with our law enforcement partners."

But how effective is this? Although it may not completely get rid of these types of sites, it does shove the domains back down in the Alexa ratings which means they are more difficult to find. The more difficult a site is to find, fewer users access it, which in turn results in any advertising revenue on the site drying up. It may not be perfect, but it has the desired effect of essentially making the commercial viability of counterfeit websites less attractive to their operators.

However, not everyone is happy about the seizures. A critic of these types of seizures and of an anti-piracy legislation that will probably be reintroduced this term,Senator Ron Wyden (D-Oregon, left) wrote to Attorney General Eric Holder and Morton expressing his concern. He called for greater transparency about the criteria on why these domain seizures were being allowed to proceed. He noted particular concern in that the 10 websites that were seized last week providing links to infringing content, not providing infringing content themselves, and an apparent lack of due process. Senator Wyden stated that

"These seizures represent a major shift in the way the U.S. government combats copyright infringement in the digital environment...I grow concerned when the methods used may not be effective and could stifle constitutionally protected speech, job-creating innovation and give license to foreign regimes to censor the internet."

Steven Tepp of the US Chamber of Commerce (a private lobbying institution) previously stated in an e-mail to the AmeriKat that the anti-priacy legislation Combating Online Infringement and Counterfeits Act (COICA), that has Senator Wyden concerned does provide for due process in that the legislation does require the Department of Justice to "simultaneously give notice to the accused domain so that they have an opportunity to come to court to defend themselves" and allows a party served with an order the opportunity to modify or vacate the order. To read the text of this bill click here.

At the same time the website seizures were taking place Deputy Director of the ICE Kumar Kibble announced another successful sting, which was cleverly dubbed in time for Super Bowl Sunday as "Operation Interception". The Operation saw $3.56 million in fake NFL merchandise seized. The Operation will continue throughout the weekend.

Now that the Digital Economy Bill's website blocking clause is being reviewed by the UK Government, what do IPKat' readers think about introducing similar enforcement procedures in the UK as those undertaken by the US ICE?

Many thanks to Oliver Weingarten of the Premier League for alerting the IPKat to the ICE seizure-story.

Letter from AmeriKat II: Viacom v YouTube - The Viacom Appeal

Willfull Blindness cannot save you now

Viacom argues that, even if Section 512(c) excludes from liability those that do no not have URL-specific knowledge of infringement, the district court erred by finding for YouTube where the evidence showed that it was willfully blind to the massive scale of copyright infringement on the site. It was held In re Aimster Copyright Litigation (2003), cited in Arista Records v Doe 3 (2010) and recently in Tiffany v eBay that “willful blindness is knowledge in copyright law…as it is in the law generally.” Willful blindess occurs where a person engages in “deliberate avoidance” amounting to knowledge where “the circumstances were such to alert [the person] to a high probability” of the relevant fact, but the defendant “consciously avoided learning” that fact. A potential finding of willful blindness can be defeated where a defendant “continually taking steps to further refine its anti-fraud measures”, as was the case of eBay in Tiffany v eBay. Viacom argues that YouTube actually did the opposite of eBay in taking “affirmative steps to shut down any mechanism that might have provided the URL-specific knowledge YouTube claims is indispensable” for a finding of liability by removing the ability for community users to flag suspected infringing videos and only “selectively” implementing fingerprint technology. (picture, top left - YouTube's business policy? - "See no evil, hear no evil, speak no evil")

The Section 512(1)(B) Problem: YouTube Profiteering from Infringement

Section 512(c)(1)(B) requires that a defendant who benefits from a safe harbour protection must “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.” Judge Stanton held that YouTube lacked the “right and ability to control” the activity because they did not have “item-specific” knowledge of the activity, but did not rule on whether or not they received a financial benefit. Viacom again argues that the touchstone of “item-specific” knowledge is not a pre-requisite for being able to control an activity. This is because, says Viacom, YouTube has the “ability” to control third-party infringement by implementing Audible Magic filtering.

Further, like with the district court’s interpretation holding Section 512(c)(1)(A)(ii) virtually meaningless, their interpretation of Section 512(c)(1)(B) is rendered likewise. This is because, if “right and ability to control” requires an ISP to have “item-specific knowledge”, this appears to be the same knowledge required for and ISP to fall foul of Section 512(c)(1)(A)(i) and (ii). Section 512(B), on this construction, essentially duplicates Section 512(c)(1)(A) as any service provider who has item specific knowledge of users’ acts of infringement automatically falls foul of Section 512(c)(1)(A) and thus never gets to Section 512(B).

Viacom argues that Congressional intent of Section 512(c)(1)(B) was to track the common law rule that a defendant may be found vicariously liable for copyright infringement where the defendant

“derive[s] a direct financial benefit from the infringement and ha[s] the right and ability to supervise the infringing activity.” (Ellison v Robertson (2004); Matthew Bender v W. Publishing Co. (1998))

This interpretation, says Viacom, is confirmed by Congress in the HR Rep NO 105-551(I) at 25-26, by the courts in Perfect10 and by academics in Nimmer on Copyright (section 12B.04[A][2] at 12B-38). Because vicarious liability turns on financial benefit and control, even in the absence of actual knowledge of infringement (Shapiro (1966); Grokster (2005)), YouTube’s activities clearly fall within the scope of Section 512(c)(1)(B). This is because, Viacom argues, YouTube has the right to control activities on the site by reserving editorial control in and the right to remove content and terminate accounts. It also has the ability to control the site by way of community flagging of suspected infringing videos, by way of its search feature and index and by implementation of fingerprint filtering technologies. YouTube also obtained a direct financial benefit attributable to the infringement because the infringing material acted as a “draw” or “major lure” for an ever-increasing YouTube audience. Such popularity resulted in YouTube being bought by Google for $1.65 billion only about 18 months after it was founded. This financial element is also seen by the placement of ads next to videos up until 2007.

No storage, no harbour!

A final requirement of Section 512(c)’s safe harbour is that the infringement is “by reason of the storage at the direction of a user” of the material. This includes service space for a user’s website, chatroom, or other forum where material is posted by users, which on the face of it may include a YouTube-type service. However, Viacom argues that its claims of infringement do not have anything to do with “storage” with or without the direction of a user: YouTube, in transcoding user-uploaded material into a standard format for display, distribution and performance of the content from its site, does not just facilitate storage but facilitates broadcasting. Viacom argues that a user’s decision to upload a video on to YouTube is not a direction to YouTube to then make copies of the video in different formats, to index and feature the material, or to licence the material to third parties to make viewing of the video easier on hand-held devices (such as the case with Verizon wireless). Viacom argues that YouTube takes those actions independently and for its own benefit and profit.

However, the AmeriKat cannot help but find fault with this argument because, if YouTube users just wanted their videos to be stored they would not be uploading them onto YouTube. YouTube users upload their videos on the site for the very reason that YouTube transforms the video into the particular viewable format. Surely their “direction” is implicit from the mere fact they are using YouTube to upload their video.

What’s Next

Almost 55 pages later, the bulk of Viacom’s substantive arguments end and its arguments for their motions for summary judgment on these issues begin—all in all 13,880 words or 15,000 more than this post.

A large swarm of amici curiae including Microsoft, The Washington Post, Newspaper Association of America, The Associated Press, and a group of economic professors also aligned with Viacom – a summary of their briefs can be found here. Microsoft’s brief in particular focused on YouTube’s “intentional efforts to build – and expand – its business based on a model that invited users to upload copyright infringing content to its site” and stating that this type of activity was not intended by Congress to benefit from the DMCA’s safe harbour provisions.

The AmeriKat is cautious about Viacom’s chances of success in their appeal and motion for summary judgment. Although she sees some logic in their arguments, especially in relation to redundancy of Section 512(c)(1)(A)(ii) with the heightened standard of knowledge, the US courts have in recent history been interpreting IP statutes in a way which benefits a Google, YouTube and eBay-type business model and she does not think that this case will be all that different. What do readers think? Will the Appeals Court save Viacom?

As far as the AmeriKat is aware, we have yet to receive a response from YouTube’s camp, be it press release or court filing. The AmeriKat has not been able to find any evidence of a peep or meow from YouTube, but if any reader knows of any, please let her know.

Letter from AmeriKat I: Viacom v YouTube - The Viacom Appeal

The past three Sundays the Amerikat has found herself engaged in many battles. First she was battling London Heathrow's snow incompetency, which delayed her flight home by four days. Then she was left battling a furiously stubborn cold, and then finally she was battling her over-stuffed suitcase in preparation for her trip to Singapore for the Global Foum on IP (more about this later this week). Having flown around the world in four days, she is now battling a bizarre jetlag cocktail. (picture, left - the AmeriKat with more legroom than she has experienced in weeks) However, the AmeriKat has pulled herself together this week with a report on a different battle: this time Viacom's opening brief filing in the Viacom v YouTube litigation, filed last month. For previous IPKat reports on the battle click here.


Viacom v YouTube: Viacom's appeal arguments

Following YouTube's summary judgment success in the Viacom litigation last year it was no surprise that Viacom, supported by several amici curiae, would appeal Judge Stanton’s June summary judgment (here and reported here). Sure enough, on 3 December 2010, Viacom filed its opening brief with the US Court of Appeals for the Second Circuit and requested summary judgment on the issues. Readers will recall that this case focuses on Viacom’s copyright-protected content being uploaded onto YouTube by third-party users and YouTube, once notified, not doing enough to remove the infringing content or in preventing the uploading of infringing material.

Judge Stanton held that YouTube was able to benefit from the Safe Harbor provisions in the Digital Millennium Copyright Act because it did not have actual or constructive knowledge of every specific YouTube URL containing infringing material on the site. Mere knowledge that there is, or is likely to be, infringing material on the site was not enough to be considered actual or constructive knowledge under Sections 512(c)(1)(A)(i) and (ii) respectively. To hold so would, Judge Stanton held, fly in the face of the DMCA's text, specifically Section 512(m)(1), as well as the Perfect 10 case—both of which indicate that the burden of identifying infringement must rest with the copyright owner, not on YouTube.

The Contentious Section

To refresh your memories, the section at issue is Section 512(c)(1) which provides that a service provider:

“shall not be liable for monetary relief or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system if the provider:

(A) (i) – does not have actual knowledge that the material or activity using the material on the system or network is infringing; or

(ii) – in the absence of such knowledge is not aware of facts or circumstances from which infringing activity is apparent (the "red flag test"); or

(iii) – upon obtaining knowledge or awareness expeditiously removes it; AND

(B) – does not receive a financial benefit directly attributable to the infringing activity; AND

(C) – upon notification of claimed infringement it responds expeditiously to remove the material”

Viacom Sets the Scene

In its opening brief, Viacom calls Judge Stanton’s interpretation of Section 512(c) "absurd, disquieting and disruptive" and states that the effect of this interpretation would be that even the most

"piratical businesses held to account in Metro-Goldwyn-Mayer Studios v Grokster (2005) could be immune with just minor tweaks to their business models.”

Viacom also argue that the text of DMCA does the opposite to what Judge Stanton held, in that the DMCA actually "compels" internet service providers who are aware of pervasive copyright infringement, participate and profit from it, to be found liable for copyright infringement under the DMCA.

Viacom's opening brief first sets out the legislative history of the DMCA. The US Congress (picture, left) when drafting the DMCA, sought to achieve a balance between protecting copyright owners from mass online infringement and providing security to internet service providers who served as the "backbone" of the internet. In drafting Section 512, Congress aimed to strike this balance by creating a safe harbor for "innocent service providers" which disappears the moment that they lose their innocence (ALS Scan v RemarQ Communities (2001)). This disappearance of the safe harbor occurs when the ISP obtains actual or constructive knowledge (the "red flag test") of infringing activities and then does not act expeditiously to remove or disable access to the material. Congress also wove into the DMCA safe harbour, principles of vicarious infringement in order to exclude its shield in instances where ISPs receive financial benefit attributable to the infringement.

The brief legislative history segues into a somewhat damning historical account of YouTube's history entitled “YouTube Builds A Business Based on Infringement” which cites gems such as an email from YouTube founder Steve Chen who stated that removing the “obviously copyright infringing stuff” would reduce YouTube views “from 100,000 views a day down to about 20,000 views or maybe even lower”. From further internal YouTube emails, Viacom lifts other extracts which indicate that YouTube was aware of mass copyright infringement but chose to take a passive role in the self-monitoring of the site in order to benefit from the safe harbour legislation. Viacom also points to YouTube’s failure to implement software or digital fingerprint technology that would alert or prevent the upload of copyright material as being indicative of not only YouTube’s knowledge of the pervasiveness of infringement on the site, but as a conscious plan to evade liability by placing the burden of policing infringement squarely on the shoulders of a copyright owner in an effort to maintain their site traffic. In 2006, a “little exercise” conducted by Chen showed that over 70% of the “most viewed/most discussed/top favorites/top rated” videos on YouTube were copyright material. Viacom states that this method of business only grew after YouTube was bought by Google for $1.65 billion in late 2006.

The Section 512(1)(c)(A) issues: Surely YouTube knew what was going on!

Viacom contends that the district court erred in holding that YouTube could benefit from the safe harbour provisions, despite being “generally aware of” and indeed “welcome[ing]” of copyright-infringing material, because they lacked knowledge of the specific URL of each individual infringing video. Viacom argues that there is actual evidence that YouTube did have item-and-location specific information in respect of some of the works complained of and, for those that it didn’t, YouTube chose to actively to blind itself from assimilating specific information of infringement in order to benefit from the safe harbour, i.e. by not implementing infringement detecting software or a community flagging system for infringing videos. The internal email evidence also indicates that, for years, YouTube’s policy and practice was to take “no action”. Viacom argues that because YouTube, in the district court’s own words, “welcomed” “blatant” infringement, and turned a blind eye to such infringement it knew was occurring as evidenced by the internal emails, it cannot be said to not be “aware of facts or circumstances from which infringing activity is apparent” under Section 512(c)(1)(A)(ii). A defendant’s inaction while aware of widespread incidents of infringement, Viacom argues, should not be rewarded with a shield from liability.

That being said, the district court said that the facts above were not specific enough for YouTube not to benefit from the safe harbour provision. However, Viacom argue that the district court’s higher standard of knowledge for Section 512(c)(1)(A)(ii) is not supported by the statutory language. Breaking down the provision Viacom states that the exclusion of the safe harbour depends upon the defendant’s awareness of “facts or circumstances” that make the “infringing activity” “apparent”. This does not mean that these facts have to automatically point to an activity being absolutely and conclusively illegal (citing Jane Ginsburg’s 2008 article in 50 Ariz. L. Rev. 577). Further “facts and circumstances” suggests that Congress intended there to be a more holistic view of the origin, quality and quantity of information of infringement which a defendant may possess to fall within or foul of the provision. That is to say there is not just one type of specific information that is required for the inoperability of the safe harbor under Section 512(c)(1)(A)(ii) ( i.e., the requirement of specific URL addresses) but a combination of information sufficient to raise a “red flag” of warning to the service provider. Holding that there has to be specific identifiable knowledge on the part of the defendant to find an ISP liable renders the purpose of 512(c)(1)(A)(ii) void. If the same standard of knowledge is required for 512(c)(1)(A)(i) as for (ii), what purpose does (ii) serve?

Turning away form statutory interpretation, Viacom argues that the district court’s interpretation cannot be reconciled with Congress’s intent in enacting DMCA. A main purpose of the DMCA was to provide reasonable assurance to copyright owners that their copyright would be protected, given the increased risk and ease that their works can be infringed online. Although Viacom has a hint of recognition that the safe harbour provisions in the DMCA are appropriate for “innocent service" it argues that if the DMCA is to

“conform to the central purposes of the statute, [it] must exclude at least those that ‘welcome’, and even intend, their users’ infringement. To conclude otherwise would fatally undermine Congress’s intent to address 'massive piracy.' It would immunize even entities such as Grokster itself, which ‘distribute[d] a device with the object of promotion its use to infringe copyright’, yet designed its system to avoid item-or location-specific knowledge of those infringements.”

Viacom argues that YouTube has not proved that Congress intended the DMCA to be anything other than this original intent and indeed cites another Second Circuit district court decision as recognizing the DMCA’s purpose as being just that (Arista Record LLC v USENET.com, Inc (2009)). To hold otherwise would also place a substantial burden on copyright owners, who would have to continuously and constantly monitor the entire site for infringing videos.

Judge Stanton’s decision also relied on the district court’s interpretation of Perfect 10 v CCBill (2007) where the defendants provided services to websites with domain addresses such as “illegal.net” and “stolencelebritypics.com”. The claimant argued that these domain names gave notice to the defendants of ongoing infringement on these cites. The Ninth Circuit held that the website names alone were insufficient to create awareness of infringement as the names may just be a method of increasing traffic to the site, rather than being conclusively illegal. Viacom argues that

“even the crabbed (picture, above left) construction of red flag awareness in the Ninth Circuit’s analysis would not save YouTube, however, for, the service provide in CCBill was found to have no awareness that infringement was ongoing at all. Here, in contrast, YouTube was well aware that massive infringement as occurring, intended it to occur, and made no attempt to remedy it."

Gained in translation: Google comes to help the EPO

"No wonder it won't work", said Professor Prout,
"one of the French irregular verbs has broken loose"

Now here's something to ponder.  A media release, "European Patent Office and Google sign memorandum on translation of patents" (here), heralds the exciting prospect that the deadlock over European patent linguistic issues might eventually be broken by the adoption of machine translation solutions.  According to the media release, dated 30 November,

"The European Patent Office (EPO) and Google have ... signed a Memorandum of Understanding to improve access to patent translations in multiple languages.

Under the envisaged collaboration, the EPO will use Google's machine translation technology to translate patents into the languages of the 38 countries that it serves. In return, it will provide Google with access to its translated patents, enabling Google to optimise its machine translation technology. Google technology will be used to translate patents originating in Europe as well as patents originating in other regions of the world and enjoying protection in Europe.

The collaboration aims to offer faster and cheaper fit-for-purpose [this begs the question: "which purpose?" It seems to the IPKat that patents are read for more than one reason] translations of patents for companies, inventors and scientists in Europe. Today, anyone wishing to register a patent must do so in one of the EPO's official languages - English, French and German. They then need to arrange for translation of the patent - at their own cost - into the languages of all countries in which they wish the patent to apply. This complexity means that many European patents are not available in all national languages or legally binding in all the EPO's member states. Similarly, anyone searching for information in patents published in foreign languages finds it difficult to retrieve data relevant to their research projects.

"The European Patent Office is one of the largest providers of free information on state-of-the-art technology disclosed in patents from around the globe. The partnership with Google to create machine translation tools for patents will help inventors, engineers and R+D teams to retrieve relevant documents efficiently - in their own language - from our wealth of published patent information. This agreement with Google puts the EPO at the forefront of efforts to strengthen the patent system's international character and improve its quality for the benefit of the global economy," said EPO President Benoît Battistelli.[Merpel is always amused at the way in which matters pertaining to patent law are said to be beneficial to the global economy. One wonders how the global economy ever managed in the past, particularly since patents seem to be irrelevant to the economy in so many parts of the globe]

The collaboration also aims to facilitate the decision process of the EU states in their attempt to simplify the introduction of a single pan-European patent [Does this mean that it's going to be opposed?]. While the EPO provides a common entry point to obtain patents throughout Europe, patent owners must still validate and, where necessary, translate patents in each individual EU country. As a result, obtaining Europe-wide patent protection is significantly more expensive than in markets such as the US. A single EU patent could reduce costs and enhance legal certainty [Please can someone explain how a single EU patent is more legally certain than several national patents? The criteria of patentability and revocation aren't being changed, are they? ], giving businesses and innovators unified protection for their inventions.

For Google, the collaboration offers a major opportunity to improve its translation service. The EPO will offer access to around 1.5 million documents, and each year this number grows by more than 50 000 new patent grants [how does translating patent documents improve Google's translation service more than translating non-patent documents, wonders Merpel]. The partnership also covers Asian languages. Facilitating access to the rapidly increasing volumes of Japanese, Chinese and Korean technological information is one of the biggest challenges facing the global patent system.

"This collaboration is exciting for both Google and Europe. It will help to increase access to information for all Europeans, supporting the innovation process and allowing the European economy to strengthen its competitiveness," said Carlo d'Asaro Biondo, Google's Vice President of Sales for Southern and Eastern Europe, the Middle East and Africa. "It demonstrates how private companies can work with public institutions to find innovative solutions to difficult issues."

The IPKat welcomes anything and everything that will make patent documents more widely accessible. However, he notes that nothing is said about how Google, which is not known for its philanthropic contributions to the wellbeing of international institutions such as patent-granting authorities, is going to monetise this arrangement.  Are translated terms and the interrelationship of those terms with the names of companies and inventors going to be filtered into Adsense software and other means of targeting prospective consumers?

Merpel says, when are they going to invent a device that translates English-language patent documents into English too?

Cat language here
Languages that start with Cat here and here

Letter from AmeriKat - Hot News - too hot to handle?

The AmeriKat spent Saturday clearing away her belongings from bookshelves and tables in preparation of the painting that will take place in her flat next week. Readers may recall that in May, her flat was flooded after a neighbor's pipe burst turning her flat into Noah's Ark. Two months later and the painters are finally due to cover up the water-stained ceiling and resulting fissures in the walls. (picture, left, the AmeriKat taking a paw to painting) A fresh coat of paint can do wonders to a room - transforming a once dull and fading space, to a new and brightened environment. But despite attempts to freshen or fix some things in life, their inherent flaws will always show through no matter how many coats of paint you apply.

Hot News - So Hot Google can't touch it?

An industry and profession who have been inventing new ways to mask the cracks in their failing business model is the newspaper industry. A month ago the Federal Trade Commission published a "Discussion Draft" paper that against a backdrop of their importance to a democratic society, discussed the dire state of the newspaper industry, citing a loss of 45% of their advertising revenue since 2000. The paper proposed that additional intellectual property rights be employed to support claims from the traditional press against news aggregators. Readers may recall that last June Judge Posner also suggested that copyright law could be employed to rescue the newspaper industry (see previous AmeriKat post here).

News aggregators, for those unfamiliar with the term, aggregate links, headlines, and introductory sentences of newspaper articles in a one-stop style shop. The user clicks on their chosen link directing them to the original source material. For example, when you type in "Paul octopus World Cup" in Google News, it will aggregate or list all news articles that refer to those keywords. Some say that news aggregators infringe copyright, while others suggest that the doctrine of fair use rescues aggregators from a finding of copyright infringement. Although not a case strictly involving a news aggregator, a 9th Circuit federal court held that Google's use by way of the reproduction, distribution and display of thumbnail images and headings from copyright works was fair use in the Perfect 10 case. The four fair use factors were employed, but the court placed special reliance on the first factor, i.e., the purpose and character of the use, including whether the use is commercial or non-profit in nature. It seems odd that for the court to place so much reliance on this because surely, Google, as a commercial entity driven by ad revenue, could not rely solely on this factor. The court, however, said that the thumbnails were "highly transformative" because "a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool." Although arguably highly transformative, says the AmeriKat, surely the commercial nature of the use trumps the transformative nature? Unfortunately, besides the Perfect 10 case, there has yet be a case to have reached judgment of a US court that deals head-on with the issue of whether a news aggregator's use is infringing or falls within the ambit of fair use.

If this story took place in the UK, that is where the story would end. However, in the US, the doctrine of "hot news" muddies the intellectual property waters. Copyright protects the expression of facts or ideas, not the facts or ideas themselves. However, the hot news doctrine in the US actually protects the facts of news. The 1918 Supreme Court case of International News Services v Associated Press originated this doctrine based on common law misappropriation principles in that breaking news was to be considered a "quasi property" right. Justice Pitney, in giving the majority decision, developed the doctrine of misappropriation in the news. According to his judgment a news organization has gathered news “at the cost of enterprise, organization, skill, labor and money” and therefore has a limited proprietary interest in it against a competitor.

Despite that the original federal common law that underlies the 1918 Supreme Court decision is no longer binding, several subsequent cases have reformulated the hot news doctrine. The result has meant that although federal copyright law does not recognize protection of "hot news", state law can protect "hot news". The Second Circuit Court of Appeals did not define the limits of the protection, but nevertheless restated the elements of the hot news doctrine in the NBA v Motorola case in 1998 as the following:

1. The claimant generates or collects information at cost or expense
2. The value of said information is highly time-sensitive
3. The defendant's use of the information free-rides off the claimant's efforts in collecting it
4. The defendant's use of the information is in direct competition with the claimant's use of it
5. The ability of other parties to free-ride off the claimant's efforts would reduce the incentive to produce it or the quality of the information would be threatened.

Now, with newspaper revenues dwindling and a reported loss of more than 40,000 jobs to the US newspaper industry in 2009, it is unsurprising that proponents of the hot news doctrine are demanding that the doctrine be enshrined in the Copyright Act. Proposals have included the encouragement of the development of state law doctrines, one one end, to the enshrinement of protection in the Copyright Act, at the other extreme. The reasoning for both proposals being that with the enshrinement of the protection in state and federal laws would result in the newspaper industry's content being protected and the industry thus be saved.

However, hasty measures and amendments to a centuries-old copyright system that itself was derived from the UK's Statute of Anne, makes the AmeriKat's fur bristle. At the extreme, by amending the Copyright Act one must necessarily be incredibly cautious in drafting a provision that protects news (something that will inevitably be in the public domain in a matter of minutes/days), but also allows for competition from competing news organizations. Without a perfectly drafted provision, costs of litigation and related disputes will rise. And its the very issue of costs, be it in production, overheads or libel litigation, that is thorn in the newspaper industry's paw. Surely, this is not the solution the industry could then possibly support?

Another suggestion in the report was that the fair use doctrine be narrowed so that "routine copying of original content done by a search engine in order to conduct a search (caching) is copyright infringement not protected by fair use." Other suggestions were that, at the very minimum, the way in which the fair use doctrine applies to aggregators should be clarified. But following such a suggestion through, if news aggregation did not benefit from the fair use defence and was thus copyright infringement, the way in which we search for news would radically change. The AmeriKat herself is a keen user of Google News. For example, searching for articles on this very topic resulted in a variety of sources from WSJ, New York Times, BBC, etc by way of the Google News tab - a news aggregator. A normal Google search of this topic resulted in a hodge-podge of topical, as well as irrelevant sources. Thus, a key question recognized by the FTC report was whether a limit on the fair use doctrine would necessarily restrict "the public's ability to find and access information on the web without comprehensive search engines".

The final suggestion in the IP section of the proposal was that of a more extensive licensing system, including statutory or compulsory licensing scheme, such as the ones that operate for phonorecords or jukeboxes (the Copyright Act is dating itself here), be employed. One of the FTC's workshop participants suggested that the federal copyright law be amended to create a "content licence fee" to be paid by every ISP on each customer account it provides. The copyright owners would then submit data of their site downloads and hits to the Copyright Office who would then be in charge of distributing the licence fees. (picture, left - the type of machine the Copyright Office may use to calculate license royalties) But a compulsory licence system in effect taxes access to information. Not only does a tax sits uneasily with the First Amendment, but its practical implications could be too complicated as to be practical.

Last week, Google, wrote a 20 page response to the FTC draft proposals. The AmeriKat is admittedly critical of Google in the field of copyright, however, she agrees with their response. Like Google, the AmeriKat is unsure how the cause of the failing business model of the traditional print media became the responsibility of copyright laws. Are news aggregators really to blame? The AmeriKat thinks not and neither does Google. As Google wrote:

"[T]he current challenges faced by the news industry are business problems, not legal problems, and can only be addressed effectively with business solutions"

Google then quotes the former editor of the now defunct Rocky Mountain News - John Temple (picture, below) - who stated last year:

"Being a great newspaper isn't enough in the Internet era. You have to know what business you're in. We thought we were in the newspaper business. . . If newspapers would spend more time trying to understand their customers instead of focused on their own internal issues...they're more likely to be successful. That's a hard switch for traditional manufacturing operations like newspapers to make"

The AmeriKat could not agree more. The FTC's and some traditional media outlets proposals are not proposals to save journalism, but are instead proposals to save the newspaper industry - an industry whose business model is entrenched in a different era. Copyright laws are not built and should not be manipulated to protect the very thing they were never meant to be protect, ie., facts, in a last-ditch attempt to save an outmoded business model. If anyone assumes that it is fierce proprietary protection, be it through pay-walls or copyright laws, that will inevitably save the newspaper industry, one need only point to the Times loss of 66% of its online readership following its disappearance behind the pay-wall. But if it is a business problem that is killing our traditional press, what is the Internet solution that will inevitably save it?