Major Record Company Brings Copyright Action Against Upstart Company Selling Used Digital Music

Photo titled "I love my music!" by Shiv Shankar Menon Palat

Last month, EMI, a top record company, alleged that ReDigi, an upstart company that sells used digital music, creates unauthorized copies of its songs through the operation of its business. EMI brought a copyright complaint against ReDigi, asking the United States District Court for a preliminary injunction to force ReDigi to shut down its business pending the court proceedings.

While the judge denied EMI’s request for the preliminary injunction, the resolution of the case will likely answer many of the questions facing the digital age. Some of the issues raised by the case include the meaning of “copy” for copyright purposes and whether transmitting copies of digital material count as a public performance. One of the biggest issues brought up with this case are what property rights does a purchaser of digital music through a source like ITunes really have?

Back before digital music existed through purchasing sites such as ITunes, people bought music the old-fashioned way—by going to the music store and purchasing a record, tape, or CD. Once someone purchased the music album, that particular copy was their album. The person could not duplicate the album and sell copies, but he or she could use it for a year and sell it to another individual or to a music store specializing in used music albums under the First Sale Doctrine.

ReDigi claims it does the same thing with digital music, since it scans the seller’s hard-drive and deletes the music file once the transaction of sale is complete. This act makes it impossible for the song initially purchased from ITunes and sold to ReDigi to be duplicated or transferred. Is this not the same thing as selling your physical album for some cash? Something the court may have to determine is whether ReDigi has really taken away the rights of the digital music holder when it deletes the song from their hard-drive, or if in this advanced technological age the seller could in actuality retain access; posing problems for companies like EMI.

Carrier IQ – Has someone violated the Electronic Communications Privacy Act?

Photo Titled "Completely Taped" by Byung Kyu Park available on Flickr

141 Million handsets have a software program deployed on them which purports to only collect network diagnostic information for mobile phone service carriers. However, this software program is secretly running because is not easy for an average mobile phone user to see the program running on their phone because it does not appear as a “running application” on the applications list. Nor is there a clear disclosure of what data is being collected by the application, or a way to easily opt out of the application running on the mobile device. Nor is there any easy way to stop it from running on the Android phones. On November 28, 2011 Trevor Eckhart uploaded a seventeen minute video (shown above) exposing the extent of the data being captured by Carrier IQ, an application that mobile phone providers and/or carriers install on mobile phones. The video shows an Android developer searching his phone for privacy policy disclosures, and not finding any privacy disclosures related to the Carrier IQ program, he proceeds to show the type of data that is logged by Carrier IQ onto the phone’s debug log. For example, each time he presses a key that key press is logged, even when he enters information into a web page over his own local WiFi connection and the session is protected with SSL (which is an encrypted means of communicating between a client and host and forms the backbone of all secure communication over the Internet; as a standard and all data transferred within an SSL connection should be encrypted and protected after the SSL handshake). As of January 25, 2012, Eckhart’s video received over 1.9 Million views on YouTube.

In response, Carrier IQ sent Eckhart a letter threatening legal action unless he retracted his research, characterizing his analysis and posting of privacy policies as a breach of copyright which could expose him to an excess of $150,000 in damages. In response, Eckhart reached out to the E.F.F., who agreed to represent him; Carrier IQ has since backed off from its legal action and apologized for the cease and desist letter. The question remains now – has Carrier IQ, or the mobile phone manufacturers, or the mobile service carriers violated the E.C.P.A. by secretly running a software program on the mobile phones?

The Electronic Communications Privacy Act (E.C.P.A., 18 U.S.C.A. § 2510) was enacted to expand the scope of the Wiretap Act (which was focused on the interception of voice communication) to protect data transferred by computers. Title I of the Act protects messages that are in transit, and Title II of the Act protects messages that are in storage on a device. Within the E.C.P.A., it is unlawful for a person to distribute “any electronic, mechanical, or other device, knowing or having reason to know that the design of such device renders it primarily useful for the purpose of the surreptitious interception of wire, oral, or electronic communications” (18 U.S.C.A. § 2512(1)(a)). However carriers do have an exception, where under the normal course of their business in maintaining their communication systems, they can use devices to intercept wire communications.

Senator Al Franken, who chairs the Senate Judiciary Subcommittee on Privacy, Technology and the Law, has requested more information regarding what data is being collected and where the data is being sent. Depending on the type of data that is actually collected and sent to the carriers, they may be able to claim that they were operating within their normal course of business in maintaining the stability of the wireless networks. A criminal or civil case under the E.C.P.A. may not be a guaranteed success in a court of law. However, the public surprise of the extent of data being captured, and the lack of notice and control that users are able to exercise over how much activity is being tracked has already made the carriers and Carrier IQ losers in the court of public opinion.

"If the Price is too Good to be True, it Probably is” - ICE Director John Morton

Photo by: mollyali's 

A coordinated government effort to crackdown on websites selling counterfeit goods is in full force, most recently seizing 150 websites on Cyber Monday 2011. The rationale for the seizures is based on the idea that these websites steal creative ideas, cost our economy jobs and revenue, and can threaten the health and safety of American consumers by selling inferior goods in the market. Opponents argue the seizures are unconstitutional because the government does not afford the site owners adequate due process protection prior to seizing the sites.

Operation in our Sites is the effort of DOJ and DHS/ICE to halt intellectual property crimes at the national level. ICE is leading the charge, and derives its authority from the seizure and forfeiture laws of 18 U.S.C § 981 and 2323. As Margaret A. Esquenet and Justin A. Hendrix explain, (http://www.ecommercetimes.com/story/72344.html) “Under Section 2323, property used to a commit federal crime, such as criminal trademark or copyright infringement, is subject to forfeiture to the U.S. government. Under Section 981, the government can apply to a federal court for a warrant to seize that property. To obtain the warrant, the government must show there is probable cause that the website violates federal criminal law. The owner of the domain name may challenge the seizure warrant in the district court that issued it. During a later forfeiture proceeding, the owner also may challenge the basis for forfeiture.”

To carry out the Operation, ICE agents make undercover purchases of various products covered by trademark, including professional sports jerseys, golf equipment, DVD sets, footwear, handbags, and sunglasses. Once the goods arrive and the trademark holders confirm that the purchased products are counterfeit, seizure orders are obtained. The intent of ICE is to protect the economy and consumers, and ensure that revenue is flowing to the rightful parties instead of to those who steal intellectual property. The objective is a good one, and the websites are property used to commit a federal crime, so the seizures and the process by which they are carried out are legitimate under federal statute.

ICE may need to revisit the effectiveness of some their procedures to reach that end, though. In February 2011, the department rightfully seized 10 sites before the Super Bowl that were accused of offering illegal streaming video of sporting events, and before Valentine’s Day, it seized 18 sites selling counterfeit luxury goods. But somehow along with those, it shut down 84,000 other legitimate sites and posted a notice that the reason was for “advertisement, distribution, transportation, receipt, and possession of child pornography.” Not good. The error may have had to do with linking sites, but the owners of the legitimate sites deserve a more robust due process procedure so as to avoid future errors.

Operation in our Sites is certainly a complicated technological effort without introducing administrative hurdles. But there is likely little harm (expense notwithstanding) in an email notice to domain name owners that their site is subject of investigation and will be shut down in 48 hours without further action on their part.

Carrier IQ, the Electronic Communications Privacy Act, and the Digital Millennium Copyright Act

Image titled Android Virus by Charliesalima

In the same week that Facebook settled its dispute with the Federal Trade Commission (“FTC”) over allegedly deceiving consumers about its privacy practices, an Android developer, Trevor Eckhart, discovered that Android phones run software that logs keystrokes and hides its presence on the phone. The discovery of Carrier IQ (CIQ) software embedded in the Android (and over the following days, other smartphones) raises legal questions that might expose both smartphone vendors and customers to liability.

The Electronic Communications Privacy Act, 18 U.S.C. 2510 et. seq. (2006)(ECPA) expanded the Federal Wiretap Act to prohibit interception of electronic communications through any “system affecting interstate or foreign commerce” without the consent of at least one of the parties to the communication. The Digital Millennium Copyright Act prohibits circumvention of effective measures designed to prevent unauthorized access to copyrighted material. 17 U.S.C.A. 1201 (2006).

Much of the analysis of Carrier IQ misunderstands the ECPA, so some discussion of what the ECPA does and does not cover is in order. The ECPA has been interpreted to allow keystroke logging which intercepted signals sent between the keyboard and the computer, because until an email or other message is actually sent, the computer is not “a system affecting interstate or foreign commerce.” U.S. v. Ropp, 347 F. Supp. 2d 831(C.D. Cal. 2004). The bulk of CIQ’s spying does not violate the ECPA. As Eckhart noted in his criticism of CIQ, when he dialed a phone number, the software logged the number before he made the call. Some states may have privacy laws prohibiting CIQ’s conduct, and certain consumers may have other claims (e.g. copyright infringement if any of their emails or texts contained material they owned a copyright to), but the ECPA does not prohibit keylogging.

Other portions of CIQ’s data collection may violate the ECPA. CIQ apparently also intercepts incoming text messages and emails. Incoming messages satisfy the “affecting interstate or foreign commerce” standard. Whether the manufacturers or carriers who installed CIQ violated the ECPA would then depend on whether they had valid contracts which allowed them to intercept their customers’ messages, a factual question specific to each carrier. Carriers’ recent panicked statements to the media indicate that most do not, as carriers have generally claimed either that they do not collect the data Carrier IQ collects, or that they only collect some less offensive subset of it. Carriers have put themselves in a precarious position by making such assertions, which smartphone manufacturers claim are false. The claim that a carrier does not collect data is only believable if the carrier does not include a data collection provision in its contracts, or includes the provision in a manner designed to keep consumers from recognizing or understanding it. Carriers who try to avoid bad publicity now may find themselves estopped from asserting a contract defense to ECPA claims in a later lawsuit.

A lawsuit may be the only option consumers have. Self-help is available to copyright owners in many scenarios, but is denied to people who want to protect their privacy from their wireless carrier. CIQ cannot be turned off through normal means, at least on the phone Eckhart tested. It can be defeated by hacking the phone. However, because CIQ is protected by digital rights management (DRM) software, consumer attempts to turn CIQ off may violate the DMCA.

In 2010, the Librarian of Congress used its powers under the DMCA to create an exemption for “jailbreaking” smartphone handsets. However, the exemption only applies when the jailbreaking is for purposes of interoperability, offering consumers no hope for protecting their privacy.

The DRM technology in use does not need to be strong to make circumventing it illegal. In spite of the word “effective” in the statute, courts have held that the DMCA also prohibits circumvention of ineffective measures designed to protect copyrighted material, because effective measures don’t need legal restrictions on circumvention and the word “effective” would be mere surplusage if it didn’t also cover ineffective measures. See Universal City Studios v. Reimerdes, 111 F. Supp. 273 F.3d 429 (2d Cir. 2001). The DMCA applies even when no copyright is violated, and it carries criminal penalties.

The DMCA leaves customers of carriers who use CIQ no other option but to accept violations of their privacy, find a carrier which does not use CIQ, or sue. Given the number of misleading press releases put out by carriers in the last few days and the frequent use of adhesion contracts that lock customers in to long periods of service, option 2 may not be so easy. While the case for ECPA violations is not as strong as some have asserted, it is still viable, and may be consumers’ only hope.

SOPA: The New Way to Stop the Feed

Photo by: donkeyhotey 

Introduced in October, the Stop Internet Piracy Act ("SOPA") is the House of Representatives attempt to place greater restrictions on websites hosting copyright infringing material. In the Congressional hearing that have thus far been held, representatives of Hollywood and the Recording Industry Association of America ("RIAA") have strongly supported this bill, as it would attempt to stem the flow of copyright infringing material, especially from websites from foreign states. This controversial bill has come under fire from internet providers, including Google, Verizon, Comcast, and AT&T, specifically focused on section 102 of the proposed bill, the site blocking provision.

Section 102 of SOPA provides the courts with the power to require an internet service provider ("ISP") to block a website that is found to contain infringing material. The location of the website is not relevant to this section, as the provider can be ordered to take measures to "prevent prevent access by its subscribers located within the United States to the foreign infringing site."

Some ISP's, specifically those running smaller servers, have already stated that such a blocking requirement is simply not technically feasible with their current network infrastructure. They would have to completely redesign their system in order to be able to screen access to a list of potentially thousands of sites, placing an immense financial burden on these smaller providers.

In addition to this worry, ISP are concerned at the vagueness of the requirements and responsibility that will be assigned to providers for complying with a blocking order. Proponents of the legislation state the SOPA does not have any specific technology requirements, or methodology for listing and blocking the infringing sites, so that it can be flexible. The problem is that such flexibility means that the court will be required to determine whether an ISP is complying with the spirit of the law, as there is no letter of the law to follow.

Regardless of whether such blocking should be required, potential costs from both possible legislation and network redesign will make the implementation of this legislation difficult to say the least.

Private Crackdown on Copyright Infringement

Photo courtesy of Richard Ericksson

Hollywood and the music industry announced a new policy in July aimed at cracking down on copyright infringement by Internet users. The agreement, which also involved Internet service providers (ISPs) such as AT&T, Cablevision, Comcast, Time Warner, and Verizon, requires the ISPs to punish their customers who are suspected of violating copyrights. An Internet-service customer who downloads movies or music from peer-to-peer networks may be subjected to “mitigation measures.”

The mitigation measures are graduated—first, an email alert is sent to the suspected infringer stating that the user may have misused their Internet account for online content theft. If a second suspected offense is committed, the user may receive an email “educating” him/her about the legalities of online file sharing. If several more suspected violations are committed, the user’s ISP may temporarily reduce the user’s Internet speed, or redirect the user to a landing page. At this point the user would either need to contact his/her ISP or respond to some educational information regarding copyrights.

This is disturbing enough, but emails obtained through the Freedom of Information Act and provided to Wired.com, reveal something even more troubling. The U.S. copyright czar, as well as other top-ranking Obama administration officials, were involved in the closed-door negotiations leading to this agreement. This is troubling because despite the fact that the U.S. government has an extensive copyright statute to protect copyright holders, it is also pushing its enforcement policy through private action that is not subject to judicial review.

Further, consumer advocacy groups were hardly consulted during these negotiations and were not given the opportunity to provide any sort of substantive input. Some people may not be troubled by such actions taken by government officials, or some may feel indifferent. But the question that must be asked is what is the proper role of government? Here it seems that the federal government is pushing policies through private contracts between ISPs and their customers. Such contracts are much more likely to be enforced than a federal statute that says the same thing. Not to mention that Congress itself is being bypassed through such a process, eliminating the need for Congress’ approval of a de facto legislative act.

Today Congress Giveth, Tomorrow They Taketh Away

Post oral argument and in feverous anticipation of the Supreme Court's opinion, I offer this belated summary of the procedural history of Golan v. Holder, 609 F. 3d 1076 (10th Cir. 2010). The Court's forthcoming opinion will have major implications regarding Congress' constitutional power and the predictability of copyright licensors and licensees worldwide.

Golan, et al., v. Holder is a challenge to the constitutionality of Section 514 of the Uruguay Round Agreements Act of 1989. Section 514 implements Article 18 of the Berne Convention of 1994, which would square copyright law in the United States with copyright law in over one hundred other countries. Much of this case is somewhat familiar territory because the Supreme Court heard a challenge to copyright extensions specifically in Eldred v. Ashcroft, 537 U.S. 186 (2003). In Eldred, the Court found that the “limited Times” language in the Constitution did not preclude Congress from extending copyright terms. Golan is distinguishable from Eldred because the legislation in question, Section 514, is retroactive, not an extension. The plaintiffs in Golan case range from conductors of symphonies, record labels, to motion picture production companies that use public domain works without a license. Well known works by Igor Stravinsky and H.G. Wells are just a couple examples of works that would be affected by Section 514. The plaintiffs’ key argument is that they relied on these works remaining in the public domain and Congress has never granted a retroactive copyright since the first Copyright Act of 1790. The defendants are copyright owners that would like to control the use of potentially lucrative works no longer covered by copyright. The amicus briefs for both petitioner and respondent are compelling because they are not simply public domain advocates versus copyright holders and licensors who are hoping to make a buck.

The first time around, a Colorado district court granted summary judgment to the plaintiffs. On appeal, the court remanded the case back down to the district court with instructions to determine whether Section 514 was content-based or content-neutral. This determination would inform how Section 514 would be analyzed. A content-neutral determination would deserve intermediate scrutiny and content-based would bring on the strict-scrutiny lens. The court found Section 514 to be content-neutral and again granted summary judgment for the plaintiffs holding Section 514 unconstitutional.

The Tenth Circuit Court of Appeals reversed the district court’s judgment and remanded the case with instructions to grant the government’s motion of summary judgment. The Tenth Circuit, using intermediate scrutiny, determined that Section 514 addresses an important government interest and a real harm. The court also determined that Section 514 would cure these harms. These determinations justified Congress’ intention. The court of appeals also determined that the plaintiffs’ speech and reliance on the works remaining in the public domain was not restricted therefore the First Amendment was not violated by Section 514.

This case brings the clash of author and public into the legal spotlight once again. One major negative consequence of this retroactive reinstatement of copyrights is the possibility that a work without a business minded copyright holder will be protected but underexposed or underutilized by the public. A possible positive outcome is that authors or the transferees will now aggressively market these newly protected works because monetary value will suddenly be at stake. The biggest drawback is that one of the major goals of the Copyright Act of 1976 was increased predictability for authors and copyright holders alike. But predictability is not what either party is getting. What if one of your most profitable business models was to capitalize off of copyrighted works that had fallen into the public domain? Without a contingency plan your business might be ruined.

For a discussion of the legal issues stemming from Golan v. Holder, see “Supreme Court Preview – Golan v. Holder: Can Congress Remove Works from the Public Domain?” by Anna Shapell

Supreme Court Preview – Golan v. Holder: Can Congress Remove Works from the Public Domain?

On Wednesday, October 5th, the Supreme Court heard arguments for Golan v. Holder, to decide whether Article I, § 8, cl. 8 of the Constitution prohibits Congress from taking works out of the public domain. This clause, known as the Progress Clause, exists to “promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Essentially, the Court’s task is to decide whether Congress can restore copyright protection for works whose copyright protection has already expired. For the purposes of Golan, analyzing the phrase “for limited times” will be particularly important to the Court as they discuss whether that limited time status is revocable by Congress for certain works—specifically foreign works.

U.S. copyright laws have always been formulated to accord with the time limitation mandated by the Progress Clause. Originally, or at least commencing with the 1909 Act, copyrighted works, so long as they complied with the requirements of notice and registration, were granted with a twenty-eight year period of copyrightability, which was renewable for a subsequent term of equal duration. This Act was then superseded by the Copyright Act of 1976. Regarding the term of protection under the 1976 Act, works created prior to 1976 received an extension amounting to fifty plus the life of the author. Subsequently, the Berne Convention was held, and in 1988, a two-part implementation took place. First, signatories to the Act are required to recognize the works of authors from other signatory countries, and second, all works (with an exception) shall have copyright protection for at least fifty years after the author’s death. It was not until 1998 and the enactment of the Copyright Term Extension Act (CTEA), more affectionately dubbed the “Sonny Bono Bonus Act,” that copyright duration as it exists today was implemented. The Act extended the duration of a copyright to the life of the author plus seventy years. Additionally, it stipulated that any works created in or after 1923 were, as they were still under copyright protection in 1998, were granted additional protection until 2019 or later. As a matter of course, since works created prior to January 1, 1978 (the triggering date for the 1976 Act) would naturally lapse into the public domain, the 1998 Act included that such works were to remain protected until 2047. Often the 1998 Act is called the Mickey Mouse Extension Act, because it was largely believed that the extension was granted in order to postpone the date at which copyright protection for Mickey Mouse would enter the public domain. And it is here that the issues in Golan arose.

Golan is irrevocably tied to another Supreme Court case of note, Eldred v. Ashcroft, decided in 2003. In Eldred, the plaintiff operated a website that displayed what new works entering the public domain were every year. The 1998 Act effectively put Eldred out of business, however, since per the Act, the next time any works will enter the public domain is 2019; Eldred would have to go on hiatus for quite some time before his website could finally be updated. Ultimately, the Court upheld the constitutionality of the CTEA. Represented by copyright advocate and champion Lawrence Lessig, Eldred made several arguments essentially claiming that this extension was just one of many the public could expect in order to prevent certain works from ever lapsing into the public domain. Lessig argued that the extension violated the limited nature of the Progress Clause, and invariably became unlimited. The solicitor general, arguing on behalf of the attorney general, countered by explaining that the very act of setting a time limit—seventy years plus the life of the author—was inherently limited because it set a hard date at which a copyrighted work would no longer be protected. The Court agreed with this argument, and others, and upheld the constitutionality of the Act 7-2. The ultimate impact of Eldred was to uphold the notion that Congress, empowered through the Progress Clause, is the appropriate body for setting the relevant limit.

Returning to Golan, the result of Eldred initially doomed Golan; the U.S. District Court for the District of Colorado dismissed the primary issue of whether the 1998 Act violated the limited time element of the Progress Clause. That case, originally under the name Golan v. Ashcroft in accordance with the fact that John Ashcroft was the attorney general at the time of suit, morphed into Golan v. Holder, as Attorney General Eric Holder was attorney general in 2009 when the suit was brought again. Under this new title, a new Act was brought under scrutiny: the 1994 Uruguay Rounds Agreement Act (URAA). This Act relies heavily on the restoration provisions of the Berne Convention. Under the 1988 Act, foreign works still copyrighted in their source country but that were not in the United States were restored to copyright protection in the U.S. But, in a twist, the United States refused to sign on to this particular aspect of the Berne Convention, and the criticism it faced as a result of this denouncement was remedied by the passing of the URAA. The relevant provision of the URAA restored copyright protection to foreign works that were previously not copyrighted in the United States. It is this provision of the URAA— in addition to the restoration provisions of the CTEA—with which Golan took issue.

As Eldred did for the CTEA, Golan challenges that the URAA violates the limitedness of copyright law by restoring certain foreign works to copyright protection. This argument was not persuasive at the district court level, nor at the in the Appeals Court for the Tenth Circuit. The Supreme Court then granted certiorari on March 7, 2011 for review in its upcoming term.

While oral arguments have been made, the outcome of this case in the Supreme Court could mean many things for the right of the public to copy works that have entered the public domain by virtue of the lapse of their copyright protection. Some argue that withdrawing certain works from the public domain will stifle creativity and discourage the production of new works. Preserving Congress’s right to restore copyright protection to works of its choosing opens up the possibility for doing so for unlimited works. Perhaps if Congress deems it necessary in the future, it will restore copyright protection to works it decides are worthy of continued protection. Advocates argue that the concept of a free and open public commons, one in which artists are free to draw on other works for inspiration, is threatened by a shrinking public domain. It is believed that focusing the Court’s attention on the integrity of the public domain, indeed, the public domain which allows U.S. artists and authors to use the foreign works at issue as a foundation for their own work, is at risk.

Conversely, the government could potentially argue that this practice of restoring copyright protection to certain works is a prerogative Congress has exercised before. The natural byproduct of passing new copyright laws extended copyright protection to works that would have lapsed by for the extension. For example, works created prior to 1978 were gifted with additional years of protection; those who sought to rely on the lapsing of the copyright for those works into the public domain were, at that time, disappointed, but the constitutionality of the 1978 was ultimately upheld. The same could be said for the extensions granted under Berne and the CETA, and therefore, the government could argue, for the sake of consistency, the Court should hold that the extensions under the URAA are similarly constitutional.

This case could finally settle the right of Congress to exclusively control the setting of the limits for copyrighted works. So long as there is a limit, it is the privilege of Congress to set that limit within reason. And in light of the rapidity of technological advancements and the impact that invariably has on the creation of new types of works, not allowing Congress to exclusively control the setting of limits certainly emphasizes a clear bottom line: those who believe the creative commons should be inherently public are hereby being disabused of that notion. In other words, copyright protection persists for the purpose of protecting the rights of artists and authors to continue to create without the threat of copying, which is the basic purpose of the Progress Clause. It will be interesting to see which side prevails, and whether the Court opts to sanctify the superiority of Congress in this matter, or instead upholds the accessibility of knowledge and ideas.

For an analysis of the procedural history of Golan v. Holder, see “Today Congress Giveth, Tomorrow They Taketh Away” by Charles Glyman.

Big Tobacco v. Australia: The Battle over Branding

Image by Economicz

As of January 2012, all cigarettes in Australia will be sold in packs of uniform olive green. The color was carefully chosen after a government survey found it to be the most distasteful to Australian smokers. The brand names will be printed in black standardized font. The new legislation will also designate seventy-five percent of the front and ninety percent of the back of the pack to warning labels.

The new packaging is the next step in Australia’s push to reduce smoking rates. Last year, the government raised tobacco taxes by twenty-five percent, bringing the cost of a pack of twenty cigarettes to between sixteen and twenty Australian dollars per pack ($16.75 – 21.00). These are some of the highest prices in the world. Australia has already banned public displays of tobacco products in retail stores, forcing storeowners to keep the products hidden behind counters. Smoking-related diseases kill 15,000 Australians per year and cost the country 31.5 billion Australian dollars in healthcare and lost productivity. Cigarettes are the leading preventable cause of death in the country. Australian officials say they are confident this ban of tobacco trademarks can be justified by its public health argument.

Tobacco companies vow not to give up without a fight. They have invested substantial capital in establishing and protecting their trademarks and feel that the plain packaging requirement will deprive them of their intellectual property without compensation. Philip Morris Asia, based in Hong Kong, has already initiated legal action against the Australian government, claiming the new legislation would violate a twenty-year-old bilateral investment treaty between Australia and Hong Kong. Under bilateral investment treaties, countries pledge to protect the investments made by foreign companies within their borders. On June 27, 2011, Philip Morris Asia filed a notice of claim, starting a mandatory three-month negotiation period. Other companies will likely follow suit.

Stripped of their brand recognition, tobacco companies are concerned for lost revenue. The value of a trademark is not in its possession, but its use. Trademarks create a shortcut in the consumer’s mind between the product and the quality. While Australia represents only a modest fraction of global tobacco sales, companies fear a domino effect. Countries like Canada, New Zealand, and the United Kingdom are watching this situation closely and considering similar measures. Tobacco companies also fear that plain packaging, which is much easier to imitate, will lead to an increase in counterfeit tobacco. This could lead to a greater supply of cheaper tobacco products on the market. Many companies have threatened to lower their prices in order to remain competitive, thus incentivize smoking.

Philip Morris will likely make two main arguments against the Australia’s public health claim First, it will point to the fact that there is no evidence that removing trademarks from packaging will reduce the number of existing smokers. Even if a person may mistake one brand for another, there is nothing to show that their smoking patterns would change. However, proponents of the new packaging argue removing all trademarks will breakdown the smoking-is-cool image the cigarette companies have been working for decades to create.

Secondly, Philip Morris will likely argue that the cigarette industry is being singled out. The Australian government allows for trademark-laden packaging for other unhealthy but legal products, such as alcohol and junk food. When this issue has been raised in interviews, Australian health minister, Nikola Roxon has responded that while alcohol and junk food, if consumed in moderation, produce few health concerns, there is no safe level of tobacco intake.

Outside of the courtroom, the tobacco companies have launched a counter attack. Philip Morris and other companies have joined together to create an advertizing campaign depicting the Australian government as an overbearing parental figure. The ads feature a stern looking woman with a tagline that reads, “Do you like living in a nanny-state?” Philip Morris has also created a website that warns that plain packaging will lead to counterfeit cigarettes manufactured in squalid conditions by organized crime leaders.

At this time, Philip Morris Asia is the only company to begin legal action, although they cannot officially file suit until the law goes into effect in January. When that happens and if Philip Morris is successful, other tobacco companies are likely to follow. Besides suing under bilateral investment treaties, the tobacco companies may also try to persuade their governments to bring suit against Australia under the WTO for violations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The countries most likey to do this would be the world’s leading tobacco producers. Indonesia, the Dominican Republic, Mexico, and the Philippines have already raised concerns. Regardless of how the tobacco companies choose to fight the anti-trademark legislation, Australia should prepare for a shoot-out that would make the Marlboro Man proud.

Facebook’s Open Graph API - Be Afraid or Be Very Afraid?

Illustration by Hank Grebe

Mark Zuckerberg unveiled the next generation of Facebook’s Open Graph API at the F8 conference in San Francisco on Thursday, September 22nd. The updated protocol allows third party applications to more easily utilize Facebook users’ data. The goal is to encourage users to share increasingly dynamic content more frequently. A simple example of the API in action is the inclusion of a Like button on a webpage – when a visitor clicks the Like button that information is recorded in that user’s Facebook feed.

The new version of Open Graph “allows apps to model user activities based on actions and objects.” Eventually, the old-fashioned (ha!) Like button will be supplemented with a number of other verb choices. Thus, you can receive news by emulating what your friends are reading on Yahoo! News, be exposed to new music by examining what your friends are listening to on Spotify, or challenge yourself by running the same route as your friend that uses a Nike Running application.

As happens pretty much any time Facebook changes their site in a way that implicates privacy concerns, a backlash is building. Critics’ primary concern: the availability of data to application developers for more than 24 hours, strikes me as fairly harmless considering that many applications previously circumvented this restriction anyway. Other concerns focus on the fact that Facebook has a variety of new partners that automatically fall under the ‘Instant Personalization’ category and automatically ‘personalize the experience’ for you. In other words, new users have to opt out of in order to avoid sharing information that they might not otherwise want to share by using these applications. However, all of the Open Graph features can be easily disabled.

So are there any laws in the United States that will govern Facebook’s conduct when they roll out new functionality with respect to these privacy concerns? Well, not really; not any comprehensive ones, at least. The United States has taken a very pointed approach to regulating privacy issues, addressing privacy only certain specific instances such as HIPAA (Health Information), Gramm-Leach-Bliley (Financial Information), or FERPA (Educational Records). This is to be contrasted with the European (most notably French) approach to privacy regulation where privacy is implicit in the constitution. Social networking sights such as Facebook and Google have found themselves more frequently arguing privacy issues in European states. So while we are largely at the mercy of the social networking industry giants, we can take some comfort stateside in the fact that many of these concerns are mitigated by the market forces imposed on the companies because they do not want to alienate the user base.

One last point that all these Facebook shenanigans got me thinking about – are the developers of these applications adequately protecting their copyrights? Facebook encourages independent third-party development of integrated applications. For that matter, what about users that are, in addition to just going around Liking things, generating a wide variety of copyrightable material in the form of photos, blog posts, and music? If they’re not – they will be, as new tools are popping up to facilitate this protection. The website Myows provides free tools to manage your copyrightable works and to build a case for infringement. In their own words, “Myows offers a professional one-stop copyright management solution from registration through to issuing take-down notices.” Very cool. The website DepotCode is an alternate site that provides similar tools for managing and proving copyrights in source code.

The Fair Market Value of Pirate Booty

Photo titled: "Look at that Booty" by Theodore Scott, on Flickr

What is the cost of a song? To the average consumer the amount might be equal to the sum needed to purchase a song on iTunes, which is roughly $.99 to $1.19 per song. For movies, that price can range between $4.99 and $29.99. It could be argued that this is the value that both the public and entertainment industries find to be a fair price for the privilege to listen or watch another’s work. Under §504, a copyright infringer can be liable for damages up to $30,000 per infringed work with a statutory minimum of $750 per work. The disparately between the market price for copyrighted material and statutory damages begs the question of whether the statutory damages as set out in 17 U.S.C. §504 accurately reflect those actual harms felt by media industries.

Those damages would seem to make sense in certain scenarios. The competition a software distributor would face as a result of a piece of code being copied and placed in the market can have large monetary repercussions for the holder of the copyright. The same could be said of the unauthorized use of a work in an advertisement or motion picture. In both circumstances the unauthorized use deprives the creator of potential revenue that could very well be in the range of $750 to $30,000 and as Harvard Law Professor Charles Nessons states these are likely the types of damages envisioned through the proscribed statutory damages.

When the infringer is an individual obtaining a copy for personal use, the statutory minimums make less sense. Even the statutory minimum of $750 for a pirated song seems excessive, leading critics to argue high statutory damages levied on small infringers do not accurately reflect actual loss and approach the realm of unconstitutional. District Judge Gertner had a similar contention when she reduced an award against Joel Tenenbaum from $675,000 to $67,500 upon her characterization of the use as menial.

The recording and motion picture associations counter that the industry has suffered innumerable damage as a result of software sharing services such as Limewire, and the Pirate Bay. The Recording Industry Association of America alleges annual losses of approximately $12.5 billion, with 71,060 in lost U.S. jobs. The Motion Picture Association of America states that protecting intellectual property from copyright infringement is necessary to protect the 2.4 million individuals employed in the motion picture industry. These losses came contemporaneously with the shift in the entertainment industry from tangible means of delivery to digital methods through the internet.

Is it then that the entertainment industry is relying on copyright law to maintain the status quo in a rapidly changing market? More importantly should purported losses from this changing economic landscape be placed on the shoulders of those individuals such as Joel Tenenbaum who violate copyright through pirating 30 songs for personal use? Although it is undeniable that Tenenbaum was guilty of copyright infringement, it is disputable whether the damages levied adequately reflect Tenenbaum’s contribution to the losses the entertainment industry purports to suffer.

This creates quite the predicament; there is a need to have a means of protecting intellectual property, as there is a livelihood devalued through rampant copyright abuse. However, at the same time, there is an industry desperately trying to hold onto its former profits through using federal copyright law as means to restrict how the market operates. Certain record companies have discovered alternative ways to obtain profits while at the same time allowing for free public access to copyrighted works. Social music networks such as Imeen, allow free streaming of music funded by advertisements. In a similar fashion, cable television networks such as FX and USA offer their shows free online accompanied with advertisements. Another method being used by Universal is “Comes with music” phones, which allows free access and downloads of music that are transferable from phone to phone. Universal gets money not from advertisement or music sales but through a percentage of phone sales.

The digital age has ushered in a new dawn of experiencing media. The internet allows for willful copyright infringers to sidestep the arm of American courts through relocating domain names and servers, whilst saturating the web with misappropriated material. There is the occasional large damage award levied on those most responsible for industry losses such as Limewire and the Pirate Bay, but these suits do little to deter infringement. The same could be said of the occasional hefty judgment against single individuals. While considerable damage awards receive sensational media attention, decreased record sales show that these disproportionate awards do little to restore the entertainment industries profit. This is not to say that the law should be altered simply because there is a losing battle. Rather, when the circumstances facing an industry have dramatically changed, the law must evolve to account for these changing circumstances.

BitTorrent Pirates, Copyright Troll Lawsuits, and the Forthcoming Congressional Response

Imagine by: Cyberspace Law and Policy Centre, University of New South Wales

BitTorrent has become the tool of choice for Internet users sharing digital media. BitTorrent is a peer-to-peer file sharing protocol under which users can access the files shared on others’ computers. The genius of the technology as compared to pre-existing P2P technologies is that it allows users to “swarm” connections, i.e., upload and download pieces of large files from multiple sources at once. The BitTorrent protocol was first released in 2001 and use of the tool has increased steadily over the last decade – with over one hundred million active users of the technology and more arriving daily. This army of users is, wittingly or unwittingly, often guilty of violating the rights of copyright holders.

Needless to say, most media industries that rely on traditional distribution mechanisms are in no way “cool” with this latest wave of file-sharing technology and its tendency to enable copyright infringement. In an attempt to recoup some of the losses that they are incurring from pirates, several companies have enlisted the help of lawyers to churn out massive John Doe lawsuits. In the face of a threatening cease and desist letter (that notes the possibility of $150,000 in damages per download) the suspected infringer is urged to settle. The superficial nature of these lawsuits has earned the firms that engage in this practice the not-so-endearing term “copyright troll”. Corynne McSherry, intellectual property director at the Electronic Frontier Foundation described the practice as “a dragnet approach to litigation.”

One prominent Washington D.C. law firm calling itself the U.S. Copyright Group sued 25,000 users for downloading the movie “The Hurt Locker” in April of 2011. Jeffrey Weaver, head of the U.S. Copyright Group described the approach of his group: “We’re creating a revenue stream and monetizing the equivalent of an alternative distribution channel.” Yikes. Many of The Hurt Locker suits were dropped because of a lack of personal jurisdiction. Another massive lawsuit campaign took place over infringement on The Expendables (do you remember this incredible cinematic achievement?). 70% of the profits from these settlement shakedowns go to the lawyers, with only 30% returning to the rights holders. So at least the lawyers are happy.

More of these lawsuits are coming down the pike (for a weekly update, see http://story.albuquerqueexpress.com/index.php/ct/9/cid/63e88d54af0cf473/id/46388238/). The best way for BitTorrent users to avoid getting sued is not to download or share any copyrighted material- i.e., only share/download files 1) that are in the public domain, 2) for which you have permission to share, or 3) that are made available under pro-sharing licenses. The Electronic Frontier Foundation provides advice on what to do in the event that a cease and desist letter is received.

Meanwhile, Congress is spinning its wheels once again to create new legislation providing additional enforcement mechanisms for the rights holders. Senator Leahy’s proposed Protect IP Act is the latest attempt; many are critical of the bill’s tendency to inhibit technological innovation.

The digital piracy problem has, to this point, been unsolvable. The media establishment and Congress’s responses over the last decade feels a lot like a rearranging deck chairs. Traditional business models that create revenue streams based upon their pseudo-property rights are opposed to the very concept of the Internet as a tool for the open exchange of information. Whether the tool in question is Napster, YouTube, Google Books, BitTorrent, or some unforeseen, yet-to-be-invented piece of technology, we can be sure the opposition from IP rights holders will continue.

A Fashion Fiasco

Photo By: ChristopherMacsurak

Hollywood actresses spend thousands of dollars on couture dresses for the Academy Awards. The designers who craft these exquisite gowns spend hours of time and bundles of money to adorn such fashion-forward actresses. Yet in minutes of stepping on the red carpet, individuals are sketching these designs with plans to recreate a cheaper version of the couture for the mass-market. With the rapid use of technology, designs from runway shows in Paris and Milan are being recreated overnight and are shown in stores, such as Forever 21, in the United States within weeks. The quick snap of a camera and the instant upload to a computer can turn a couture design into a cheap knock-off.

Currently, trade dress law and policy does not cover the design of a dress but rather covers only the look and feel of the article. In the basis for a Supreme Court case, Samara designed and manufactured children’s clothing. Wal-Mart sold knock-offs or copies of these designs and generated approximately $1.5 million in gross profits. In Wal-Mart v. Samara, 529 U.S. 205 (2000), the Supreme Court held that clothing is product design and therefore secondary meaning is needed.

Similarly, copyright law doesn’t cover the overall design of a dress but it does cover a pattern. Specifically, copyright law covers the lace pattern of a wedding dress but does not extend to the wedding dress as a whole. Over the past four years, Representatives have introduced design piracy legislation into Congress only to have it die in committee hearings before reaching a vote.

Along with maintaining creativity, designers must endure the push and pull nature between copyright and trade dress law while searching for available protections for their designs. With the scarce options of intellectual property remedies for designers, design pirates are monetarily capitalizing on a designer’s creation and are usurping their creative marrow.

The question left for designers is whether the fate of their protective remedies is left with Congress or with the courts. Moreover, if either of those routes fail, then will designers be left with parsing the intellectual property principles of copyright and trade dress to protect specific aspects of their design?

Appropriation Art on Trial: What Cariou v. Prince Means for Artistic Borrowing

On March 21, 2011, the District Court for the Southern District of New York issued its opinion in the copyright infringement case of Cariou v. Prince. Cariou, a professional photographer, published a book, Yes, Rasta, in 2000, which contained photographs of Rastafarians and Jamaican landscape photos taken over the course of six years (Cariou is the sole copyright holder of the photos contained within the book). Around 2007 or 2008, Richard Prince, a well-known appropriation artist, exhibited several collage pieces, including one entitled “Canal Zone,” which consisted of approximately thirty-five torn-up photographs from Yes, Rasta pasted onto a wooden board. The finished piece appeared in magazines, and ultimately was exhibited at Gagosian Gallery, a prominent New York City art gallery. Prince also completed other similar collages, all using, to a significant degree, Cariou’s photographs from Yes, Rasta.

The court ruled in favor of Cariou, a photographer who claimed that Prince’s appropriation of Cariou’s photos was infringing and not fair use. Prince fired back with predictable, yet varied defenses. He challenged the validity of Cariou’s copyright, stating that the photographs were compilations of facts, and therefore not deserving of copyright protection. On that count, unfortunately for Prince, it is well-established in copyright law that photographs, by virtue of the creative choices, lighting, poses, etc…, meet the requisite originality standards, and are therefore protectable.

After dispensing with this defense, the court next addressed Prince’s claims of fair use in his appropriation. Prince relied heavily on the rich tradition in art of appropriating images of the past and re-incorporating them for modern use as a mode of commentary, both on the current eras, and on past ones. By definition, appropriation artists “borrow images from popular culture, advertising, the mass media, other artists and elsewhere, and incorporate them into new works of art.” Prince claimed that his use of Cariou’s photographs was fair because his “purpose in using Cariou's Rastafarian portraits was the same as Cariou's original purpose in taking them: a desire to communicate to the viewer core truths about Rastafarians and their culture.” More specifically, “Prince's intent in creating the Canal Zone paintings was to pay homage or tribute to other painters, including Picasso, Cezanne, Warhol, and de Kooning…” The court relied on Prince’s statements of intent, and ultimately ruled that Prince’s appropriation was not fair because the copying/appropriation was not intended to comment or criticize Cariou’s work. In other words, “Canal Zone” needed to transform, per the first prong of the fair use analysis laid out in § 107 of the U.S. Copyright Act of 1976, Cariou’s work, and not, as Prince did, merely comment on the role of appropriation in the more generalized context of art historical tradition.

Cariou is certainly not the first time appropriation has come under legal attack. Jeff Koons is an artist known not only for his art, but the legal trouble it gets him into, and he was party to two prominent infringement cases dealing with appropriation art, Rogers v. Koons and Blanch v. Koons. In Rogers, Koons made a painting of a photograph of a man and a woman holding several puppies, and Koons called his piece “String of Puppies.” The court found that Koons, in borrowing heavily from the source material, accomplished nothing more than a change of medium, and did not adequately comment on the original photograph. In Blanch, however, the court decided that Koons’ incorporation of a pre-existing photograph into a collage piece was sufficiently transformative because the recontextualization of the original photograph “gave the painting an “entirely different purpose and meaning…” These results, legally disparate, do not provide a sound foundation for determining an issue like the one that came up in Cariou.

Cariou has the potential to be a tie-breaker of sorts given the divergent outcomes of both Koons cases. It is a clear-cut case of un-licensed infringement, and while the court declined to rule, as Prince sought, to rule that appropriation is inherently transformative, it did limit “the scope of fair use in appropriation art to work that comments on the original works…” What many find most striking, though, is the judicial emphasis the court placed on Prince’s professed intent in creating “Canal Zone.” Artistic intent is anything but concrete, and just because the artists sees a piece one way does not mean that others, i.e., the audience will view it in the same way. Further, judges are expressly prohibited from basing opinions on their presumptions of artistic merit in Bleistein v. Donaldson Lithographing Co., when Justice Oliver Wendell Holmes wrote that “[i]t would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.” This isn’t to say that the court in Cariou was passing artistic judgment on “Canal Zone,” but it does seem like the court should have relied on something more than just artistic intent, perhaps, the opinion of the average audience.

The good thing is, appropriation art is not totally dead, in the eyes of the Southern District of New York, at least. It does send a strong message to appropriation artists, however, warning them to ensure that their pieces, consisting either totally or in part of borrowed copyrighted material, fulfill the courts’ interpretations of transformativeness.

Costco v. Omega and the Evolution of the First Sale Doctrine

(Photo by: B. Tse)

The First Sale Doctrine, without many people being aware of it, is one of the most prevalent and applicable sections of U.S. copyright law. The First Sale Doctrine, found in 17 U.S.C. § 109(a) of the 1976 U.S. Copyright Act, provides that “[t]he 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.”

The application of the First Sale Doctrine affects our daily lives in fundamental ways, yet most people benefit from the doctrine without actually knowing what it is. For example, anyone engaged in buying or selling books on Amazon, or anyone attempting to find a new home for a vintage sports jersey on eBay, or anyone marketing a painting on Etsy can with relatively few constraints. Typically, the book, jersey or painting is sold, and while the host site may take a small commission, the seller reaps the monetary windfall. But, it should be known that without the First Sale Doctrine, a percentage of the sale of personal property, provided it is a copyrighted work, would have to go to the copyright owner. Still, most of us simply assume that we can discard personal property in any manner we see fit, yet without the First Sale Doctrine, our concept of personal property would drastically change. The ability to control, get rid of, or determine the fate of the objects you own seems fundamental, yet, without the First Sale Doctrine, controlling personal property would be subject to several limitations.

While it is easy to see how the First Sale Doctrine operates to protect buyers and sellers in the secondary market, the U.S. Supreme Court is currently hearing oral arguments by the Costco Corporation and the Omega watch-making company to determine whether the First Sale Doctrine applies to situations where goods manufactured internationally are sold on the gray market in the U.S. In Costco, Omega manufactured watches in Switzerland, and then sold them to Latin American dealers. The watches then were sold, through back channels, to the Costco corporation, who sold the watches below retail price, thus undercutting the price at which Omega typically sold their watches in the U.S.

The most relevant case law is Quality King Distribs., Inc. v. L’Anza Research Int’l, 523 U.S. 135 (1998), where the Court held that if works manufactured in the U.S. are exported internationally and are then imported back to the U.S., the buyer/importer is permitted to distribute the works at will, and the copyright holder’s rights (i.e., L’Anza’s) are not infringed. Despite this more recent development, however, the inception of the First Sale Doctrine is found in the 1908 case of Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), where the court held that copyright owners may not limit the sale or distribution of their works after their initial sale.

Costco adds more complications to the issue presented, mostly because it deals with works manufactured abroad. It will be determined, when the Court issues their opinion, whether the same rule of law will apply as was applied in Quality King. The current need is for a First Sale Doctrine that effectively governs the prevalence of the international manufacturing, import and export markets. The Court may either expand on Bobbs-Merrill — a case whose outcome predates our current global economy — or find that the Bobbs-Merrill Rule (while keeping Quality King in mind) is still applicable. In Quality King, the Court seemingly promoted a free market economy and a looser interpretation of the First Sale Doctrine. Yet, at the same time, it also approved of a system whereby U.S. companies are undercut in U.S. sales. Now, whether that promotes U.S. manufacturing and discourages international sales in the first place remains to be seen in Costco.

Perhaps the Court, in Quality King, was attempting to encourage U.S. companies to manufacture and sell their goods within the U.S. to benefit the American market. But, in the case of internationally manufactured goods, will the court find in favor of Costco and the argument that the American market is made stronger when goods are made more cheaply and readily available? This is why Quality King is somewhat perplexing; if the Court wanted to encourage U.S. manufacturing to compete with the European market and instead sell their goods in the U.S. in order to prevent gray market sales, why did they make it harder for L’Anza, an American company to make their goods available to a ready global market? Surely, allowing L’Anza to have more control over subsequent sales of their goods would have made them a stronger and more financially stable company, and it might follow that encouraging international sales could result in a surge of productivity by L’Anza and other similar companies.

The reasoning is by no means linear, and the effects of Quality King are neither straightforward nor fully realized. Therefore the Court’s consideration of the economic and legal ramifications of either extending or denying application of the First Sale Doctrine to grey market sales in the U.S. of internationally manufactured goods has the potential to shore up the limits of the doctrine itself. At present, the doctrine is pretty elastic; the statute itself is not specific, and seemingly embraces a policy of “you buy it, you own it.” The Court has the opportunity in Costco to place constraints on this aspect of the First Sale Doctrine, and it remains to be seen how the Court believes the doctrine should function in an undeniably global economy.

Jailbreaking Smartphones: A Recognized Fair Use

(Photo by: Thanushyon)

Jailbreaking a smart-phone allows individuals to run unapproved applications. Apple pushed for a ruling that jailbreaking was illegal under the Digital Millennium Copyright Act. However, in a ruling on July 26th, 2010, the Library of Congress affirmed the legality of the practice by approving a fair use exception, thereby allowing jailbreaking to continue legally, at least for now.

The iPhone is a popular smart-phone manufactured by Apple; the iPhone held a 14.4% worldwide smart-phone market share in 2010. An iPhone user seeking to purchase additional software for their phone can purchase software at the App Store. Only software applications that are approved by Apple are available in the App Store. According to the Apple website, any application is subject to an approval process “in order to protect consumer privacy, safeguard children from inappropriate content, and avoid applications that degrade the core experience of the iPhone”.

To jailbreak a smartphone, the user replaces the firmware (the operating system software controlling basic phone function) with a modified version. The modified versions of the code remove any requirement that third party applications have completed the approval process. The modified versions are provided by the jailbreak community free of charge.

To jailbreak or not to jailbreak? That is the question that smart-phone owners have been asking themselves. The benefits of jailbreaking include the capability to utilize additional unapproved applications and customizations. It is also worth noting that a jailbroken iPhone can also access cracked Apple applications (one of the points that Apple is so concerned about). On the other hand, many users hesitate to jailbreak because this voids the warranty provided by Apple and a small potential exists that the phone will be damaged by the process. In 2009, about 2.3 million jailbroken iPhones existed (according to the New York Times).

Apple still claims that the practice of jailbreaking violates the Digital Millennium Copyright Act. The DMCA contains an anti-circumvention provision under §1201(a)(1) governing “the act of circumventing a technological protection measure put in place by a copyright owner to control access to a copyrighted work”. In other words, a copier cannot break into a locked room to copy a book. Apples point is that jailbreaking the phone requires a modification to the phone’s copyright protected Operating Software (OS). Furthermore, they state that recognizing a fair use exception will lead to an increase in pirated software (pirated software does not function on a non-jailbroken phone). Apple makes it exceedingly clear that jailbreaking an iPhone voids its warranty and stresses the potential damage to the device.

Here we have an all-too-typical situation: an industry giant attempting to hijack a body of law to serve a purpose that it was not intended to serve. Apple’s real interest in limiting access to third party applications is to ensure that these software revenue streams will remain open for them and exclusively under their controls (Apple takes a 30% cut from apps sold in their app store). They seek to inhibit legitimate competition in the market for iPhone software and ensure that their monopoly continues. Reverse engineering is a recognized fair use when done for purposes of fostering interoperability with independently created software and, thankfully, the Library of Congress promulgated the exception for jailbreaking using this rationale. So for now, Users that purchase smart-phone devices retain the freedom to customize their devices.

Slash Not Welcome in the Jungle: Axl Rose Sues Activision Over Use of Slash's Image in Guitar Hero III

Axl Rose is suing Activision for $20 million for allegedly breaking its promise not to include images of Slash, his former band mate in Guns N’ Roses, in Guitar Hero III. Mr. Rose claims that this promise was a condition of his granting Activision a license to use the song “Welcome to the Jungle” in Guitar Hero III. This promise was allegedly in the form of a written agreement in a series of emails. An animated version of Slash appears on the cover of the videogame. The suit claims fraud and breach of contract amongst other causes for relief.

It may be difficult to prove breach of contract due to the parol evidence rule. The parol evidence rule concerns what can be admitted as evidence when the court considers a contract. California’s parol evidence rule states that “[t]erms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement . . . .” Cal. Civ. Proc. Code § 1856(a) (2007).

A full parol evidence analysis is beyond the scope of this blog entry, and would require a copy of the contract, all relevant material, and the actual complaint; therefore this blog post will concentrate on just one limited aspect. If the court finds that the parties had a contract that was a “writing intended by the parties as a final expression of their agreement,” that will affect the admissibility of evidence of a prior agreement. If the email agreement to not use Slash’s image was made prior to the contract, that agreement will not be admissible as evidence to contradict the contract.

Prior agreements can, nevertheless, be admitted to show fraud. Under California law, the key language which defines fraudulent deceit is “[o]ne who willfully deceives another with intent to induce him to alter his position to his injury . . . .” Cal. Civ. Code § 1709 (2009). Deceit is defined as:

1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; 2. The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true; 3. The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or, 4. A promise, made without any intention of performing it.

Cal. Civ. Code § 1710 (2009). In order for Mr. Rose to succeed with a fraud claim, he will have to prove that Activision purposely deceived him with the intention of getting him to license “Welcome to the Jungle” to Activision. Fraud cases are often difficult to prove, as there is rarely a “smoking gun” to show the fraudulent intention, and instead, must often rely on the fact-finder to impute intent based on circumstantial evidence. Yet, the fraud claim may wind up being stronger than the breach of contract claim because the parol evidence rule can absolutely bar evidence from even being considered at trial.

Bring Out Bigger Cannons to Fight Online Pirates

In their continued frenzy to stop online piracy, the entertainment industry has supported a new bill in the Senate titled the “Combating Online Infringement and Counterfeits Act" (COICA). Patrick Leahy (D-Vt.) introduced the bill on the last day of the Senate session in the hope that it could be pushed through before Congress adjourned. Despite support from both sides of the aisle, lawmakers ran out of time, and shelved the act until after the Fall recess.

The proposed legislation would give the Department of Justice the power to file a civil suit against a website providing pirated material, and then file for a court order to require domain registries, ISPs, DNS providers, and others to block access to the site. The DOJ would also maintain a list of sites that it believes provide infringing content, but has yet to file suit against. Service providers are encouraged to also block these sites, and are given legal protection if they choose to do so. Critics have taken issue with the bill, claiming that it could lead to technical issues and the infringement of free speech rights.

A major problem with this legislation is its definition of which sites violate the law. It allows the DOJ to seek a court order for any Internet site that is “dedicated to infringing activities.” This includes a a site that is “primarily designed, has no demonstrable, commercially significant purpose or use other than, or is marketed by its operator” to distribute copyrighted or counterfeit materials. Combating Online Infringement and Counterfeits Act, §2324 (a)(2), 111th Cong. (2nd Sess. 2010).

A judge considering a court order blocking the site could either read the law broadly or narrowly, and either would have severe consequences. A broad reading would block sites that have both legal and illegal content. This could include sites like Rapidshare, or Megaupload, which allow users to share any type of file, copyrighted or otherwise. More alarmingly, the users of online forums regularly share copyrighted materials with other members. If a court order blocked this kind of site, it would raise a myriad of First Amendment issues, especially because the order would be issued without a chance for the accused site to defend itself.

On the other hand, a judge reading the statute narrowly would render the law ineffective. If a site only needs to have another purpose besides distributing copyrighted or counterfeit material, then this could easily be designed around. The owner of a website could change the format so that links to infringing works are presented in conjunction with a blog, a forum, or any other legitimate online activity. Furthermore, a high judicial standard for showing a violation would require the DOJ to present more evidence, thus slowing down the process. In addition to consuming valuable governmental resources, the sheer number of piracy sites would make the entire exercise futile.

Although piracy and counterfeit goods may be a problem in the United States, an ineffective bill that potentially violates the free speech rights is not the answer. An issue of this complexity requires careful thought and consideration, and cannot be fixed in a day, especially if that day is the last day before Congress adjourns.