Podcasters Hope to Raise SHIELD Against Patent Trolls

Ahead of the standard introduction to his February 28, 2013 episode of his WTF Podcast, standup comic Marc Maron decided to shine a light on patent trolls, or “non-practicing entities” ("NPEs") as they are otherwise called. These organizations have been characterized as shell companies that procure broad patent portfolios, do not produce content, and sue inventors for patent infringement if the invention allegedly incorporates a patent held in the portfolio. Winning in court is not even the endgame for the troll here, because the defendant may be someone who can ill afford to continue in drawn-out litigation, and therefore the inventor may opt to settle.

Protracted patent litigation is well-trodden ground for the likes of Apple and Samsung. Apple has been criticized for wielding broad patents against competitors like Android with respect to touchscreen smartphone interfaces. On a different scale, this is occurring in the arena of podcasting. A February 7, 2012, patent issued for Personal Audio LLC that it is being put forth as essentially preempting podcasters in the medium, many of whom are small operations out a garage speaking to their audiences in weekly installments on all matters of, well, anything at all. Personal Audio has actually taken on Apple in the past and won $8 million in a suit for infringement of downloadable playlists.

Personal Audio’s patent is said to be the precursor to podcasting, as it set forth a “system for disseminating media content representing episodes in a serialized sequence.” Some of the podcasters Personal Audio has reached out to and invited to apply for a license include Maron, Adam Corolla, and Stuff You Should Know. Personal Audio has been criticized for having “not sold a product since 1998.”

The SHIELD Act, an acronym for Saving High-Tech Innovators from Egregious Legal Disputes, was initially introduced in 2011 by Rep. Peter DeFazio (D-OR) and Rep. Jason Chaffetz (R-UT) and intended to create a loser-pays rule by which the loser of the patent infringement or validity suit would be made to pay the costs of the opponents’ fees for the proceedings. The idea is to deter would-be litigants from filing frivolous suits regarding computer hardware and software patents, specifically, “where the court finds the claimant did not have a reasonable likelihood of succeeding.” The software portion is defined as covering “(A) any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent; or (B) any computer system that is programmed to perform a process described in subparagraph (A).” The revised bill intends to expand its scope to all patents to protect not just technology companies, but retailers, manufacturers, podcasters, and municipalities from being subjected to predatory litigation, as expressed in a press release from Rep. Chaffetz’s site.

It would seem like an oddly unjust policy to allow for a patent to cover a medium in its entirety; in the case of podcasts, an application of electronic audio files in a serialized form disseminated online. Legislative efforts like the SHIELD Act could help prevent patent litigation undertaken in bad faith.

For many podcasters, monetizing the podcast is an issue. While the format may be inexpensive, with the producers of the content often using nothing more than their microphones and a computer for interviews, it is not generally lucrative in a direct way. It seems that much of the value derived from the podcast for the broadcaster/podcaster is the goodwill it generates with the audience. It can also be an effective means of self-promotion; for example, a comic promoting his upcoming appearances and shows. Another mechanism for income is the utilization of ads for things like stamps.com or audible.com. This is all to say that podcasters may make for an odd target for this type of litigation, even if some podcast authors are more well-known and have somewhat deeper pockets. Is it because some in this demographic earn just enough to yield a promising settlement but not enough to pursue all-out “sport of kings” patent litigation?

There is also a question as to whether there should be a distinction made between original content available exclusively in the podcast format from, for example, a radio show on NPR that is broadcast live on terrestrial radio and via livestreaming online, and then packaged for downloads later as a podcast. Should podcasters now have to consider the high price of patent litigation just a cost of doing business?

As suggested in some comments on related articles like Techcrunch.com’s The Death of the Non-Practicing Entity?, additional measures could be taken to close potential loopholes, and to craft legislation to address not only NPEs, but NPEs that purport to be practicing entities. Arguments against the SHIELD Act suggest that it might stifle startup companies that have legitimate patent claims from litigating those claims, because the costs would be too burdensome if unsuccessful. Addressing the categories of companies that occupy the grey areas between practicing entities and NPEs might address that concern in some measure. What still remains is the larger issue of fairness and incentives created by the current standards used by the US Patent and Trademark Office in patent examinations and whether they are truly effective in promoting innovation, which was the original intent of patent protection in the United States Constitution.

NYPD & Microsoft join together to create a high tech crime fighting dashboard

It sounds like something out of a futuristic science fiction movie, but the New York Police Department’s Domain Awareness System is far from a fantasy. This system, nicknamed the “dashboard”, connects the cities over 3,000 public and private cameras onto one central network. This system has allowed the police department to respond to crime more quickly, more effectively, and also more efficiently.

The way that the system works is best illustrated by a hypothetical scenario. Hypothetically, a call comes in for a bomb in lower Manhattan. An alert would contact the officers and they would be able to focus their cameras on the threatened area. The cameras could scan for heightened levels of radiation as well as suspicious behavior. This type of response creates a safer working environment for the officers as it provides them with crucial information prior to entering the field. As the Fox News article states, it enables officers to know what they are getting into. According to the Fox News article, it is the city’s hope to connect this system to a laptop in every police cruiser. This would allow for real time updates and more effective crime management.

Right now the Domain awareness system is getting most of its use in the counterterrorism unit. Jessica Tisch, who is the director of planning and policy for the counterterrorism unit, was quoted referring to the system, saying “it works incredibly well”. According to the Fox News article the system was used during the “deadly shooting outside of the Empire State building this past August”. With so many calls coming in, it originally looked like there were multiple shooters. However, after the system pulled cameras within 500 feet of the area and mapped the data, police were able to determine that there was a single shooter.

Besides being able to detect bombs, other uses of the Domain awareness system include access to the entire departments arrest records and emergency calls. Also, in addition to the 3,000 connected security cameras, there are also license plate readers and portable radiation detectors being used.

One of the interesting twists of this story involves Microsoft. In 2009, the NYPD approached Microsoft with the idea of developing this type of technology. According to Richard Daddario, the NYPD’s deputy commissioner for counterterrorism, “usually you purchase software that you try to work with, but we wanted this to be something that really worked well for us, so we set about creating it with them”. It was estimated that the development of this software would cost between $30 and $40 million. The city also looks to potentially benefit financially from this system. A potential marketing deal between the NYPD and Microsoft would pay the city tens of millions of dollars according to the article.

While this system will undoubtedly create a more effective and efficient police force, many citizens are rightfully concerned about the privacy implications that come with a surveillance system of this magnitude. This system provides immense power to a small group of individuals. Being able to track an individual, without a warrant or scan an individual’s license plate without cause could raise Constitutional issues not only in privacy but also invalid search and seizure. The courts will have to take a serious look at this system. While it does increase our safety as citizens and provide the NYPD with a tool leading to more effective policing, its unregulated use could prove quite invasive.

A Look At the Internet Radio Fairness Act… and the Royal Mess That is the Copyright Royalties System That It Attempts to Address

On September 21, 2012 Rep. Jason Chaffetz (R-UT) introduced the Internet Radio Fairness Act of 2012 which would alter 17 U.S.C. §801, the statute which establishes the Copyright Royalty Board composed of Copyright Royalty Judges. Under the statute, the Librarian of Congress, as head of a freestanding entity, appoints this panel of judges who set default royalty rates and terms for webcasting digitally recorded music. While the Act enjoys five cosponsors, its senate counterpart has none thus far.

The Act proposes to make the appointment of Copyright Royalty Judges the province of the President with the advice and consent of the Senate, rather than that of the Librarian of Congress as is currently the case. The D.C. Circuit in 2011 held that the since the Librarian is restricted in the ability to remove Copyright Royalty Judges, Congress’s vesting appointment in the Librarian as head of a Department rather than the President makes limiting language of §802(i) unconstitutional as a violation of the Appointments Clause.

The Act would put the burden of proof on the party requesting a royalty to show that such royalty is reasonable. It would change the way rate proceedings are conducted by, for instance, removing the precedential effect of past royalty proceedings. Currently, rates for noninteractive broadcasting are based on interactive broadcasting rates. Much of these are based on extrapolations by expert witnesses testifying about which rates should be adjusted, using regression analysis to remove the effect of interactivity of broadcasting on precedent deals in the interactive market to guide rates to be set in non-interactive broadcasting—as in webcasting services like Pandora. Proponents argue this is problematic as a highly subjective and speculative analysis. Someone will be paying a rate based on fundamentally different market conditions from their own because of the inherent difficulty in trying to project what the non-interactive market actually is (See broadcastlawblog).

Currently, Sirius XM Satellite Radio pays about 8% of its revenue in sound recording royalties under the 801(b) standard while Pandora Internet Radio pays about 50% of its revenue in such royalties under the willing buyer/willing seller standard.

Are the uses that satellite radio makes of artists’ and producers’ copyrighted content so different from the uses used by internet radio services like Pandora as to justify such a large discrepancy in the royalties each one is to pay? SoundExchange is a non-profit tasked with collecting and distributing royalties on behalf of recording artists and master rights owners, that is, owners of recorded works. Its president is among the chorus against the Pandora-backed Act for its potential to reduce record label and musicians’ royalties. Analysts have said the bill seeks to create parity in royalties among internet, satellite, and cable TV services as a share of revenue instead of a flat rate per recording, currently at $.0011 per performance (each play of a song) per listener for an internet radio service.

Proponents of the bill argue that it would establish a fairer approach by using the 801(b) approach for all of these platforms. In theory this would close the gap between internet radio and satellite radio. It would also not allow standard AM/FM radio to pay much lower royalties than internet and satellite counterparts.

Opponents of the bill side with the willing buyer/willing seller approach. Among them is Congressman Jerry Nadler (D-NY) who has circulated a discussion draft of the Interim FIRST Act, touted as a promoting fair compensation for artists. MusicFIRST, a coalition of organizations representing musicians, performers, and producers, whose founding members include the Recording Industry Association of America (RIAA), criticizes Pandora’s lobbying against fair pay for playing authors’ works and seeking to raise profits since going public in mid-2011 when it was valued at over $3 billion at $16 per share. It is currently at $9.44 a share and has made $103 million in the second quarter of its fiscal 2013. Pandora’s opponents have suggested that it could generate more revenue with more ads on its site rather than trimming royalties on content it streams. Recording artists and musicians endorsing MusicFirst range from Jay-Z to Bonnie Raitt to Tom Waits. Which serves to better level the playing field here? Are these platforms even similarly situated? What is actually equitable here?

Proponents of the willing buyer/willing seller approach argue its approach makes an attempt to mirror the marketplace itself, while the 801(b) standard allows Copyright Royalty Judges the discretion to set rates that minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. It is unclear which approach ultimately provides a more equitable balance of the royalties to authors and master rights owners and revenues generated by companies using their content. The Internet Radio Fairness Act does appear to take a subtler approach to updating the current royalty system, which its proponents argue will promote greater innovation and growth in the industry by extending 801(b)’s benefits to all non-interactive broadcasters rather than a select few. The outcome will likely be more based on whose lobbying efforts prove stronger on Capitol Hill.

Music to My Ears? - Setting a Precedent for Federal Copyright Infringement

In one of the largest amounts ever awarded in an illegal file sharing proceeding, an Illinois judge has ordered defendant Kywan Fisher to pay $1.5 million to adult entertainment company Flava Works for illegally copying and sharing 10 movies on the file-sharing website BitTorrent. This case highlights a trend in the courts' increasing disapprobation for copyright infringement, and hints at the potential for an increase in the severity of punishments imposed for such crimes. In a world in which illegally downloading a film or audio file is as easy as clicking a button, users may want to think twice before they bypass copyrights or skimp on paying full price for their digital entertainment.

When Napster gained mass popularity in 1999 for allowing users to share files effortlessly and seemingly without consequences, it soon boasted over 25 million users. However, in 2001, only two years after its inception, Napster lost a copyright infringement suit and was subsequently forced to revoke the free access to mp3s that it once afforded its members. Despite indications that the legal system and record companies were attuned to the growing trend of file sharing, other sites such as AudioGalaxy, Morpheus, Kazaa and Limewire sprung up in Napster’s wake, bolstering the trend and creating even more fans of file sharing.

Predictably, however, users of these copycat sites soon saw themselves faced with lawsuits citing illegal downloading and copyright infringement. While no case has been as monumental or landmark in its consequences as Fisher, courts have, since the inception of file-sharing websites, taken seriously and not looked favorably on the activity. In 2010, defendant Joel Tenenbaum, a doctoral student in physics at Boston University, was convicted and slapped with a fine of over $67,000 for downloading and distributing 30 copyrighted songs using file-sharing software. Also in 2010, the case against Jamie Thomas-Rasset went to trial, resulting in a damages award of $2,250 per song, totaling an amount of $675,000.

Not surprisingly, many lawsuits involving illegal file sharing settle out of court, with defendants seeking to avoid costly litigation and potentially astronomical damages amounts. However, the amount of damages awarded in these types of cases has met with some controversy, with some judges deeming excessive amounts “unconstitutional,” overly “oppressive,” and greater than needed to serve the government’s legitimate interests in protecting copyright owners and preventing infringement. In an effort to assuage this controversy, Congress passed the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 which mandated that damages should not exceed $150,000 per infringement if the violation was committed willfully. In the case at hand, the judge utilized the maximum amount allowed under this statute, charging Fisher $150,000 for each of the 10 videos he copied and illegally shared.

In the thirteen years since Napster gained mass popularity, the Recording Industry Association of America (RIAA) and the U.S. Copyright Group have become increasingly zealous in their monitoring and suing individuals who utilize file-sharing sites. After initiating over 20,000 lawsuits against sharers of indie movies and other forms of digital media, the RIAA and U.S. Copyright Group, coupled with the hefty fines that usually accompany conviction, seem to have had a deterrent effect on internet users contemplating downloading an illegally shared file. Together with user’s ability to purchase individual tracks instead of entire albums on iTunes (often for as low as $.99 per song) and a similar opportunity to find songs on Napster for $.70-$.80 each, it appears as if the rate of illegal file sharing should soon be on the decrease.

The precedent set by Judge John Lee last week in Illinois that violators of federal copyright law could potentially find themselves paying millions of dollars for their transgression is a strong one that speaks loudly. In comparison to the minimal amount that it costs to acquire a legally distributed video or audio recording, the prospect of being fined such an astronomical amount will likely have a huge effect on those contemplating taking the easy way out and utilizing illegally shared files.

Self-driving cars now legal in California

On Tuesday, California Governor Edmund “Jerry” Brown signed a bill authorizing “self-driving cars” to be tested on public roads in California. Google co-founder Sergey Brin and state senator Alex Padilla were both present for the bill’s singing. The California bill, Senate Bill 1298, not only authorizes the cars to be tested on public streets but it also calls on the DMV to develop requirements and regulations to determine when the automated cars will be considered “road-ready”. Google is currently the primary developer of this technology, which they have already been testing in Nevada.

The Senate Bill lays out very specific guidelines for when and how the automated cars can be driven on the road. Currently, the bill only allows these cars to be driven on public roads “for testing purposes”. There is a section however that outlines the procedure for when these cars can eventually be used by the general public. Until that time, the cars can only be operated by company testers.

To be allowed on the road, the bill requires that a specially licensed operator is sitting in the driver’s seat, ready to take over the controls at a moment’s notice. This is for safety purposes because the technology is still quite new. Although according to Sergey Brin, the automated cars have successfully logged about 300,000 miles without the drivers needing to intervene. Further, there has only been one reported accident and it was while the car was being driven by one of the test drivers. This technology has a promising future that could eventually change the way we as a population travel.

While Google is the primary developer of this technology they currently do not have an interest in producing cars themselves. Their primary goal is to continue to develop and fine tune this technology so that it can then be sold to manufacturing companies. The system combines different technology to allow the car to successfully operate without assistance. The technology includes cameras and radar senses located around the car. The car also includes an advanced computer system that analyzes all of the data at split second speeds. This allows the car to properly respond to any number of situations that might occur while on the road.

The possibilities of this technology are seemingly endless, but there are also potential issues that may occur. Brin imagines a future where eventually there will be more automated cars on the road than human operated ones. He predicts that this technology will be of great use to those who are unable to drive, such as the elderly, individuals with certain disabilities, and even those who are too intoxicated. There is also an idea that eventually your automated car could drive you to work, drop you off, and then drive home to park itself safely in your driveway. This would likely be further down the road, however it is clear that the possibilities are endless.

Even with all of the possibilities that this technology could bring, there could still be potential issues with its widespread use. One of the issues that Google is dealing with now is how best to react to unpredictable pedestrians. Also, while the technology makes the car drive very carefully, many drivers will likely be hesitant to give over the controls to a computer. Google recognizes that their will likely be hesitance at first, but Brin is confident that individuals will “get over” this feeling.

It is also interesting to examine potential legal issues that will certainly arise with automated cars. Such as, who would be responsible in the event of an accident? Would it be the owner of the car, even though they were not driving? Would it be Google, who developed the technology? Or will the manufacturer who produced the car be liable? The widespread use of these automated vehicles will no doubt raise interesting legal questions. However, until the time that this technology is available to the public, it is exciting to look at how this technology could potentially change the future of transportation as we know it.

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.

Copyright Office Releases Discussion of “Mass Digitization”

Photo Titled "Kindle/Nook Hollow Book Holder" by Conduit_Press

Just this past month the Copyright Office released a forty page document entitled Legal Issues in Mass Digitization: A Preliminary Analysis and Discussion Document. The document is supplemented with multiple useful appendixes and comes in at just under one hundred pages total. What could possibly motivate the Copyright Office to go to such lengths? The answer is Google. More specifically, Google Books and a variety of organizations throughout the world that are attempting to compress as much printed or published material as possible into a digital medium. The problem is that the printed material, overwhelmingly books, is most likely under copyright with an owner who must grant permission for such copying. Hence copyrights.

The cases that led to this report and raised most of these concerns are Authors Guild v. Google Inc., 770 F. Supp. 2d 666 (S.D.N.Y. 2011), and the companion case American Society of Media Photographers, Inc. v. Google Inc., Civil No. 10-2977 (S.D.N.Y.). Google has been scanning books, many copyrighted, since 2004 and made full copies available to users of partner academic libraries and samples available to the general public via the internet. The report notes that the court was concerned “that exclusive rights afforded by copyright law should not be usurped as a matter of convenience, and that policy initiatives that redefine the relationship between copyright law and new technology are in the first instance the proper domain of Congress, not the courts." Google attempted to settle the matter at one point but he Department of Justice was concerned that Google’s behavior would continue and have negative long-term implications. Though settlements are expected, future litigation is almost inevitable.

The document goes on to describe how books are being mass digitized and who the interested parties are. Google is obviously one of these parties. A conglomerate made up of twelve well-known universities, Google, Microsoft and the Internet Archive created the HathiTrust Digital Library that contains three billion pages of scanned content. European governments have also partnered with private organizations to digitize as much cultural and scientific resources as possible. The Library of Congress, the Smithsonian Institution, and the National Archives all have detailed digital plans for the future as well. It is definitely worth noting that there is already a vast amount of literary work available online throughout the world. The EU, France, Germany, and China are all working on government funded projects to digitize books that are considered imperative to the preservation of history.

The fourth part of the report analyzes how copyright laws, specifically licensing, interact with book digitization initiatives. Under the Copyright Act a copyright owner possesses a “bundle of rights” that includes the right to exploit the digital rights of their work however they see fit. The Copyright Act also grants a limited exception to libraries and their ability to make copies of books. The report also notes “it is difficult to imagine an exception to copyright applying to the commercial partners of libraries.” The Fair Use exception is discussed but no concrete predictions for its application can be arrived at. Fair Use is employed as a defense once the court finds infringement, which analyzes the motives and individual circumstances of the infringer on a case-by-case basis. The last issue raised in the fourth part of the report is “orphan works.” The term orphan work is used to describe a copyrighted work without a locatable owner to obtain permission from. Congress has discussed a “safe harbor” for certain organizations that are using orphan works as long as the work is no longer used if the copyright owner reappears and objects to its use.

Licensing schemes are discussed in the last part of the report covering both direct licensing and collective licensing. Collective licensing would encompass voluntary (direct negotiation between licensee and licensor), extended (requiring some form of legislation to allow groups to bargain on behalf of licensee and licensor), and compulsory (basically forcing the copyright holder to license the use of the work) methods.

Many of the concerns brought up in this document are analogous to the concerns society and business had with the invention and rise in popularity of copiers/Xerox machines and videocassette recorders/VCRs. The use of digitized books by members of non-profit organizations like universities and public libraries does not seem to be the main problem here because the library will most likely be a good faith partner that can be negotiated or renegotiated with. The long-term concerns seem to be centered on what framework needs to be put in place to protect copyright owners from technology that isn’t “here” yet. If you told an author twenty years ago that their most lucrative royalties would come from tablets, Nooks, or Kindles they would try to have you committed. But, many if not most people’s lives now revolve around digital content. It would not be fair if that stick in copyright owner’s bundle of rights is compromised; it may ultimately prove to be the most valuable stick.

The full document can be found here: OFFICE OF THE REGISTER OF COPYRIGHTS, LEGAL ISSUES IN MASS DIGITIZATION: A PRELIMINARY ANALYSIS AND DISCUSSION DOCUMENT, (2011), available at http://www.copyright.gov/docs/massdigitization/USCOMassDigitization_October2011.pdf

Cloud Computing: Terms of Service and Risks

Image Courtesy of Wikimedia Commons

Cloud computing is an increasingly used buzzword among IT departments, businesses, advertisers, and individuals. Without even knowing it, many of us use cloud computing daily. For example, the emails I receive, sent to various addresses, are all forwarded to GMail (www.gmail.com), where I’m allowed a free 7 gigabytes of storage – provided that I allow Google to search and read my email, determine what I’m most likely to buy, and serve up advertisements accordingly. Nearly all of my important documents are stored in DropBox (www.dropbox.com), a cloud computing storage drive. It’s installed on my work computer and laptop, and synchronizes with both. Documents are also accessible via the DropBox website. I can pay for more storage, or refer others to get more storage for free. Wherever I am, I have a copy of my important documents. I don’t have to worry about my hard drive crashing or spilling coffee on my laptop (well that’s still a worry but at least I can still access my materials if it happens).

What is cloud computing? There are many definitions, but generally it is a system where resources are accessed remotely from a dedicated internet-based service. In this respect, cloud computing is not a new concept; it’s core functionality has been around in one form or another since the early days of computing.

Originally, computing was prohibitively expensive and typically performed on large systems called mainframes. People would connect to, share time, and work on these systems via a ‘dumb’ terminal. As IBM, Microsoft, and Apple popularized the personal computer, the bulk of computing moved to individual machines with their own dedicated processing units. With the exponential growth of the Internet and increase in network speeds, we now see the proliferation of low (and high) cost ‘terminals’ that ultimately connect to a central resource for the bulk of computing power and storage needed. Cloud computing differs from mainframe computing in that the resources are typically spread across many datacenters and accessible from anywhere with an Internet connection. Cloud-based services can provide greater redundancy and reliability, while also offering elasticity – the ability to instantly scale as needed.

However, there are risks to moving to a cloud model. The most prominent risk is the possibility of data loss. For example, in April 2011 Amazon’s EC2 service crashed. Amazon quickly worked to restore all of their customer data, but their backups were insufficient and a small percentage of data was lost. The outage affected thousands of companies who had outsourced their web hosting and data storage needs to Amazon. The customers who lost data had little recourse; the Amazon EC2 terms of service, the terms that all users of the service must agree to, states that the customer is ultimately the one responsible for backing up his own data.

The terms of service agreements for cloud computing services, while rarely read or understood, highlight many of the risks involved, such as privacy. Data stored with a cloud vendor may physically reside on multiple servers. Any computer attached to a network is vulnerable to security intrusions. In their terms of service (TOS), companies typically do not guarantee against security intrusions. Generally, vague terms such as “Reasonable and Appropriate Measures” will describe the steps taken to secure your data. Having your files hosted and replicated across several data centers in different states and possibly different countries may also lead to some jurisdictional issues.

Another issue is ‘uptime,’ or the percentage of time that a cloud computing service is up and running. Cloud vendors should guarantee a minimum level of service, embodied in what are called Service Level Agreements (SLAs). This level is usually guaranteed to be in excess of 99.9%, with service credits or refunds offered if it dips below this level. However, there are few mechanisms available to monitor uptime for any service, and it is questionable whether the term covers service that is technically up and available, but the speed is frustratingly slow. Businesses that decide to migrate to cloud computing services should ensure that uptime is included in the agreement and determine means for enforcement.

While cloud computing typically offers redundancy, reliability and elasticity, people should be aware of the risks involved and plan on its use accordingly. Businesses should assess the potential reduction in costs by integrating cloud computing into their environments, and compare it with the loss of control inherent to using a cloud provider. However, for the general public, cloud computing storage and services are likely to be more reliable than the same services on a home PC – though having an extra backup couldn’t hurt.

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.