An example of this problem arose from concerns recently expressed by Representative Robert Goodlatte, who has strongly supported both artists and technologists. Representative Goodlatte is one of the many legislators within the "reasoned center" of debate about copyrights and the Internet: He and many others seem to want real solutions that preserve both the generative power of the Internet and the generative power of copyright protection--without forcing copyright owners to sue consumers knowingly or deliberately used as "human shields" to protect the piracy-driven "business models" of miscreants like the distributors of the Morpheus file-sharing program.

Consequently, during a recent hearing on Internet piracy of sports programming, I was surprised to hear that Representative Goodlatte had asked Justin.tv, an online service provider ("OSP"), whether it should continue to honor takedown notices from copyright owners given that Google had told the government of New Zealand that a third-party study had "reported" that 37% of the DMCA "takedown notices" that Google receives state invalid copyright claims.

The problem here was not that Representative Goodlatte believed Google's claim that a third-party study had reported that 37% of the DMCA notices that Google receives are invalid--after all, Google itself had made that claim when addressing the government of New Zealand. Rather, the problem was that Google's claim was dead wrong--and then the Internet echo-chamber enabled a string of serious errors to mislead not only the New Zealand government, but also journalists and a thoughtful U.S. legislator on the other side of the world. In short, Internet titans must be very careful to prevent their non-A-team employees and agents from exaggerating, even when they address only the government of beautiful islands half a world away.

Here is the relevant claim from Google's comments to New Zealand, which were filed by a Google employee in Belgium, another in Australia, and a New Zealand lawyer:

A recent study undertaken in the United States reported on findings from takedown notices issued to Google under the Digital Millennium Copyright Act 1998 (US), concluding that... over one third (37%) of notices were not valid copyright claims. See J Urban & L Quilter, Efficient Process or "Chilling Effects"? Takedown Notices Under Section 512 of the Digital Millennium Copyright Act (summary).

This will be the first of two posts on the claim that the Chilling Effects study "reports" that 37% of the DMCA notices received by Google "were not valid copyright claims." This post will explain why neither the Chilling Effects study nor its summary actually "reports" any such finding. My next post will explain why the Chilling Effects study--even were its findings correctly summarized and reported--would still be inane "junk science" that can only mislead.

No "study" or "summary" has "reported" that 37% of the DMCA notices received by Google fail to state "valid copyright claims."
Google's New Zealand comments are just wrong: They claim that the Chilling Effects study "undertaken in the United States reported... that over one third (37%) of [DMCA takedown] notices [sent to Google] were not valid copyright claims." But the Chilling Effects study never "reported" that 37% of DMCA takedown notices sent to Google "were not valid copyright claims." Indeed, the statistic "37%" appears nowhere within the published Chilling Effects study.

So where did the 37% statistic come from? The Google comments cite the 37% figure not to the Chilling Effects study itself, but to a summary of the study. In itself, that is a problem: Summaries of studies are often unreliable. This one, for example, contradicts the study itself on the issue central to Google's comments. Compare J Urban & L Quilter, Efficient Process or "Chilling Effects"? Takedown Notices Under Section 512 of the Digital Millennium Copyright Act, http://mylaw.usc.edu/documents/512Rep-ExecSum_out.pdf (this summary reports that 37% of notices received by Google targeted foreign websites or postings) with Chilling Effects at 676 (the study reports that 34% of notices received by Google targeted foreign websites or postings). Nor was this problem of flagrant conflict isolated.

Moreover, not only does the Urban/Quilter summary repeatedly contradict the actual study, it also repeatedly spouts blatant nonsense. Here is an example:

[W]hile there was some conflicting caselaw on Section 512(c) (hosted material situations), merely providing hypertext links through a search engine seems unlikely under current law to result in secondary liability for search OSPs in the first place, regardless of the 512(d) putative "safe harbor."

Consequently, no competent scholar would blithely assert--in a summary--that different results would necessarily follow were the databases of file hashes and IP addresses discussed in cases like Napster, Aimster, and Grokster replaced by databases of "hypertext links" to URLs created through actual copying of infringed works. And if U.S. academes did believe something so absurd, then Australia's Cooper decision should have alerted Australian Google employees to their errors.

In short, the Urban/Quilter "summary" of the Chilling Effects study distorts law and the study itself so badly that even foreign lawyers only dimly aware of the basics of U.S. law probably should have realized that this summary was unreliable. Worse yet, not even the authors of this summary dared to "report" that 37% of DMCA takedown notices sent to Google "were not valid copyright claims."

To the contrary: the see-no-Napster, hear-no-Aimster, speak-no-Grokster authors of this "summary" merely noted that they had found two "interesting patterns that do not, by themselves, indicate concern...." One of these "patterns" was that 37% "of the [DMCA takedown] notices sent to Google targeted sites apparently outside of the United States."

Note the key detail: Professors Urban and Quilter themselves had no "concern" that 37% "of the [DMCA takedown] notices sent to Google" were invalid merely because they "targeted sites apparently outside of the United States." Consequently, Google erred when it told New Zealand that a "recent study undertaken in the United States reported... that over one third (37%) of [DMCA takedown] notices [sent to Google] were not valid copyright claims." That was never true: Neither the Chilling Effects study nor its summary had "reported" such a claim.

Indeed, to make that 37%-apparently-foreign statistic quantify the percent of "invalid" DMCA notices received by Google, two foreign Google employees and a foreign lawyer would have had to have silently adopted an interpretation of U.S. law so unsupportable--and dangerous to OSPs--that the authors of the Chilling Effects study and summary had wisely avoided it. In effect, the authors of the Google comments appear to have presumed that if an infringing user of a U.S.-based hosting or information-location service resided outside the United States, then--even if the user had infringed the copyright laws of his or her own country and caused a U.S. service provider to engage in potentially infringing copying and distribution in the United States--no takedown remedy is legally available even to U.S. copyright owners harmed by such acts.

I am aware of no legal support for such a conclusion. No U.S. court has held that the takedown remedies of the DMCA are unavailable to copyright owners when U.S. online service providers host or copy-and-index infringing content or websites that originated outside the U.S. Indeed, one U.S. court just rejected such sophistry.

Nor would wise U.S. OSPs advocate such interpretations of U.S. law. Congress clearly intended the DMCA's hosting and information-location "safe harbors" to be available only when operators of hosting or search services implement takedown procedures. Consequently, if takedown notices aimed at foreign users or websites cannot state "valid copyright claims," then the DMCA's safe-harbor provisions must be inapplicable to transnational posting or indexing by U.S. OSPs. That result seems disadvantageous to U.S. OSPs generally, and to Google in particular.

Even a correct report of the findings of the junk-science Chilling Effects study would be useless to thoughtful legislators and governments.
In conclusion, the Google comments to New Zealand were not only dead wrong, they were also hyper-technical at best, and self-destructive at worst. Nevertheless, the usual cheerleaders-for-piracy will surely claim that these were mere technical errors because the Chilling Effects study itself would support claims that 31% of DMCA notices are "substantively flawed." See Chilling Effects at 667.

Don't bother, piracy cheerleaders. Even had Google correctly reported its results, the entire Chilling Effects study would still be useless junk science. This study proves only that to find 31% of DMCA takedown notices "substantively flawed," you must (1) study the most concededly biased and unrepresentative set of DMCA notices available; (2) use analytic methods so absurd that they can deem even a notice targeting inarguably infringing acts "substantively flawed"; and (3) present the resulting findings in a way that concededly maximizes their potential to mislead. Such blatant manipulations make the Chilling Effects "study" useless to anyone who wants to understand the actual efficacy of the DMCA take-down process.

I will discuss the junk-science Chilling Effects "study" in more detail in my next post on this topic. When I do so, I will be making openly a point that I have often implied: The "scholarship" of the copyright-hating Free Culture Movement has become so absurdly biased against creators and copyright enforcement that refuting it is often even less challenging than shooting fish in a barrel. After all, fish in a barrel do not exacerbate their predicament by obliviously pinning "Shoot-Me" signs upon their own scaly backsides.

And when I am done making this point as to the Urban/Quilter Chilling Effects "study," I will make it again as to the newly published Samuelson/Wheatland article, Statutory Damages in Copyright Law: A Remedy in Need of Reform, 51 Wm. and Mary L. Rev. 463 (Nov. 2009), which still denies realities as basic as inflation. And then I will make it again as to the new Oberholzer-Gee/Strumpf "study," File-Sharing and Copyright, which denies realities as basic as these: (1) since 2002, technological change has made, and will continue to make, downloaded files better substitutes for purchased optical disks or legal downloads, (2) legalizing unauthorized file-sharing would encourage more people to engage more often in this now-illegal activity.

Happy New Year to all--Tom.

This story by Washington Post reporters Ellen Nakashima and Paul Kane has exposed the latest in a long line of file-sharing disasters stretching back to 2001. In short, a highly confidential report detailing the activities of the House Committee on Standards of Official Conduct, (often called the "Ethics Committee") was broadcast over a peer-to-peer file-sharing network. The disclosed report summarized confidential ongoing or potential investigations relating to at 33 Members of Congress and some Congressional staff.

This latest disastrous disclosure occurred because a diligent--but unlucky--committee staffer did work at home on a computer that was running the sort of peer-to-peer file-sharing program used almost exclusively to pirate popular music, movies and software. But--no doubt inadvertently--someone had mis-configured the program, and as a result, thousands of personal files, (like the Ethics Committee report), were inadvertently shared with strangers. The Post reports that the staffer in question has been fired.

A Member of the Ethics Committee, responding to the report of the breach, "said the breach was an isolated incident."

No, it wasn't. There was nothing "isolated" about this incident of inadvertent sharing--as demonstrated by the five Congressional hearings on inadvertent file-sharing and countless other media reports. (Links to the hearings are here, here, here, here and here; and a much longer listing of incidents can be found here). Indeed, were someone to fund the necessary research, I confidently predict that this sort of file-sharing-related breach of confidential data would be found to be affecting the constituents of every single Representative and Senator in Congress--every one. There is nothing "isolated" about inadvertent sharing. That is why, in New York alone about 150,000 tax returns were being "shared" with identity thieves.

Nor are such disasters really accidents. To the contrary, they occur regularly because piracy-adapted file-sharing networks don't work well unless many users share popular files--almost all of which, the Supreme Court noted in Grokster, are infringing. Consequently, once content distributors and their public-interest allies finally succeeded in demanding copyright enforcement against consumers using these programs, consumers using these programs tried to stop sharing files--as groups like EFF had advised.

For the distributors of these programs, this was Bad. So--as computer scientists had long predicted--distributors of these programs began to incorporate into their programs certain "features" that were long known to dupe unsophisticated users into sharing many thousands of personal files, including their entire collections of music and movies. Pretty soon, even the theoretically tech-savvy EFF became incapable of telling users of its own client's file-sharing program how to stop sharing files.

In short, from the perspective of distributors of piracy-adapted file-sharing programs, inadvertent file-sharing looks like a very deliberate strategy to increase the amount of content on the network. Voluntary self-regulation by these distributors has now failed miserably--twice.

Fortunately, Members of Congress have introduced H.R. 1319, the Informed P2P Users Act. It would serve the useful purpose of reminding the Federal Trade Commission that it is, in fact, a federal law enforcement agency charged to protect consumers from bad actors--like the ones that it has been "working with" since 2004 to no effect.

Some will try to blame this latest episode on the hapless staffer who disclosed sensitive government data. But that misses the point. Granted, sensitive data--governmental or personal--should never be stored on any computer running a file-sharing program. But here is the problem: every home computer that I own or have owned has housed sensitive personal data. Consequently, if file-sharing programs cannot be safely used on computers housing sensitive data, then they cannot be safely used by ordinary consumers. That is the point.

Both Ben Sheffner and Chris Castle have interesting posts on the summary-judgment ruling in UMG Recordings, Inc. v. Veoh Networks, Inc. Greg Sandoval of CNET also has interesting reports on Veoh here and here. Veoh is a potentially interesting decision because Veoh is not the same sort of extremely blatant wrongdoer that so many Internet savants nevertheless defended in Grokster.

My own views on Veoh focus on a potential problem that could foreclose most debate about its questionable interpretations of Section 512. Nevertheless, I agree with Ben Sheffner that Veoh tells us nothing about the merits of the Viacom/YouTube litigation: the only people likely to know whether Veoh has any real implications are probably outside counsel subject to a protective order. Nor does Veoh seem to have pushed the bounds of the § 512(c) safe-harbor as far as YouTube may have in its pre-Google formative years.

But in any case, Veoh does provide an important reminder about why it can sometimes be important to analyze a court's accounts of the law and the facts when assessing judicial opinions. Until the facts are characterized correctly, an interpretation or application of the law is a meaningless advisory opinion.

This is true even though--for journalists and wonks--the interesting part of a judicial decision is usually its interpretation of the law. Cases almost always have materially differing facts, so the court's interpretation of the law is usually the most broadly relevant aspect of the decision. But before turning to Veoh's interpretation of the law, a critical question must first be answered: Did the opinion granting summary judgment correctly identify the "undisputed" facts before applying the law to them?

I put the term "undisputed" in quotations because it characterizes a more complex reality. Summary judgment is a critical component of the federal judicial process. Nevertheless, federal courts cannot grant summary-judgment when doing so would usurp the fact-finding role of the jury. Summary judgment would become an unconstitutional usurpation of power were it just a way for judges to rule in favor of the party they would have voted for, had they been federal jurors, rather than federal judges.

To avoid encroaching on the jury's fact-finding powers, judges grant summary only when all material facts in a case are "undisputed" and the application of the law to those facts dictates a decision for a party on some or all claims or defenses in a case. But the few cases in which there really are no disputes about any facts material to any case, claim or defense cannot explain the prevalence of summary judgment.

Nevertheless, courts can grant summary judgment even in cases in which conflicting or ambiguous evidence creates actual disputes about what the facts are or what inferences should be drawn from them. Such disputes can be made immaterial if all reasonable disputes about what the facts are, and all reasonable disputes about what inferences should be drawn from them are resolved in favor of the non-moving party. Consequently, as Judge Martz put it in Veoh, "[I]n ruling on a motion for summary judgment, the nonmoving party's evidence 'is to be believed, and all justifiable inferences are to be drawn in [that party's] favor." Judges granting summary judgment must thus be reversed on reconsideration or appeal if they fail to correctly describe the set of facts that must be deemed "undisputed" when deciding a summary-judgment motion.

Policy analysts can usually skip the step of cross-checking an opinion's account of the "undisputed" facts of the case. Ordinarily, that task will be extremely difficult: it will mean carefully reviewing a novel-length set of briefs supporting cross-motions for summary judgment and conflicting Proposed Statements of Facts and Conclusions of Law. It may even be impossible: a confidentiality order may ensure that only counsel to parties to the case, the court, and the appellate court(s) will be able to cross-check a summary-judgment ruling's account of the "undisputed" facts of the case.

But in the opinion granting summary judgment on the Veoh defendant's eligibility for the DMCA's "hosting-site" safe harbor, a serious problem with the Court's interpretation of the "undisputed" facts seems evident in the opinion itself. This rarely happens, but when it does, it can not only signal reversible error, but also other defects in the characterization of other facts lurking beneath the surface.

A summary of the relevant legal issues can clarify the problem with Veoh's account of the "undisputed" facts. The question before the court in Veoh was whether Veoh was entitled to the liability-limitations granted by the DMCA's § 512(c) "safe harbor" for sites that host third-party content. While § 512(c) can protect hosting sites that comply with certain basic requirements, (like responding to take-down notices from copyright owners), it was not meant to let hosting sites sit in a "safe harbor" while copyright owners play an extended game of takedown-notice-whack-a-mole with their infringing users that either undermines the vitality of their federal rights or forces them to sue individual Internet users--again.

To foreclose such results, Congress added two limitations to the hosting safe harbor. The "culpability limitation" in § 512(c)(1)(A) (sometimes called the "red-flag" test), denies a "harbor" to hosting sites that "have actual knowledge that the material or an activity [on their site] is infringing" or lack such knowledge, but become "aware of facts or circumstances from which infringing activity is apparent." The "control limitation" in § 512(c)(1)(B) denies a "harbor" to any hosting site that "receive[s] a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity...."

A critical question in Veoh was thus whether Veoh had triggered the culpability or control limitations on the hosting safe harbor. Any facts or inferences relevant to culpability or control were thus highly material and--if disputed--would have had to have been given the reasonable interpretation most favorable to UMG. On its face, the Veoh opinion seems to fail to apply this familiar standard when interpreting the "undisputed" facts relevant to the most powerful evidence discussed in the opinion.

UMG showed that Veoh had paid search engines to display sponsored links that would direct to Veoh users who had searched for specific works owned by UMG, (like the video for artist 50 Cent's Grammy-nominated song "Candy Shop")--works that were not legally available on Veoh's site, but may have been made available there illegally by Veoh users. Here is the unanimous Supreme Court in Grokster, explaining why evidence like this might be dispositive of an intent-based inducement claim--and thus highly relevant to the knowledge-based or control-based limitations on the § 512(c) safe harbor:

Evidence of "active steps taken to encourage direct infringement,"... such as advertising an infringing use... show an affirmative intent that the product be used to infringe....

UMG next points out that Veoh paid search engines to have a link to its website appear in search results when users used certain search terms, including the names of specific UMG-controlled music videos. Veoh, however, presented rebuttal evidence that the five artists referred to in the search terms UMG identified are Sony BMG artists whose videos Veoh streams with SonyBMG's consent.

At the hearing, UMG stressed that one of the keywords that Veoh purchased was "50 cent candy shop music video," and asserted that UMG controls the copyright to that video. UMG does not, however, dispute the evidence that SonyBMG controls the rights to at least some of 50 Cent's works, and UMG acknowledges that SonyBMG hosts two 50 Cent videos.

UMG misconstrues the deposition testimony of Veoh's former head of marketing Jennifer Betka, by stating that she admitted that Veoh would only buy such terms if it knew that the infringing videos were present on its site. In fact, Betka stated she was speaking in general terms, was not "close to" the purchasing of the search terms by Veoh, and was very unfamiliar with this level of detail against Veoh's search engine media habits...." Furthermore, the keywords were associated with links to the authorized SonyBMG videos.

On its face, the court's analysis of these facts--and the inferences that can be reasonably drawn from them-- seems to violate basic rules of summary judgment. Simply put, the Court seems to resolve disputed facts and inferences in favor of the moving party.

No matter how they are interpreted, these facts seem to put Veoh in a bad light. Veoh seems to have been playing bait-and-switch. But the critical question is: bait and switch to what? Two sets of inferences seem plausible:

• The pro-Veoh inferences that could be reasonably drawn would be those proposed by the Court: Veoh was paying to lure to its site consumers who might realize that they had been duped, and then stay and do business with the site that tricked them.

• The pro-UMG inferences that could be reasonably drawn would be these: Veoh was paying to lure to its site consumers who would think that the sponsored link was misdirected (or the video moved), search Veoh, find an unauthorized "50 cent candy shop music video" and forget about the initial "misdirected link."

On summary judgment, I don't see how a court could adopt the pro-Veoh inferences that would direct any chicanery toward consumers, rather than UMG. By contrast, were the UMG-favoring inferences presumed, then this and similar episodes would seem highly relevant to intent-based inducement liability, the culpability-based harbor limitation, and the control-based harbor limitation. (You can certainly control whether you direct to your site persons looking for content that you may have, but not legally.) Consequently, this seems like a pretty serious, blatant and dispositive error--particularly since failure to apply the relevant summary-judgment standards to the facts of the case is an error of law reviewable de novo on appeal.

As for the legal analysis in Veoh, I think that the factual problem just discussed severely undermines its credibility. Moreover, Ben and Chris have noted many of the problems with it. I would thus note only one more point--not a problem, but a it's-kind-of-silverish lining for those concerned about the long-term implications of a decision like Veoh.

It would be very problematic--and contrary to Congressional intent--were § 512(c) interpreted to harbor hosting sites that insist on re-running the early YouTube's takedown-only experiment to re-confirm that it still generates massive infringing use that must later be remediated by other means. And while it is not clear to me from the Veoh opinion whether Veoh could fairly be said to present such a case, such concerns are quite valid and they are heightened by some of the dicta in Veoh.

Fortunately, any permissible interpretation of the culpability limitation on the § 512(c) harbor should grow more powerful over time. This is a critical point that the anti-copyright crowd tends to forget: no criminal would ever be convinced unless judges and juries were both empowered and able to infer unspoken culpability from facts and circumstances.

For example, the law presumes that people intend the obvious consequences of their own actions. If so, then neither § 512(c) nor § 512(d) can long "harbor" an endless procession of hosting sites or file-sharing-program distributors that insist on re-running (with minor variations) the early-YouTube or Napster/Aimster/Grokster experiments. Legal rules could be questionable if they required people to make detailed predictions about the distant future. But not if they required people to learn from the past. Consequently, the day should come, if it has not already, when yet another attempt to re-run Napster or Morpheus should--in itself--suffice to waive the red flag, drain the harbor, and support inducement liability under Grokster.

So in the long run--and regardless of whether it is sustained or overturned--the Veoh decision's most important contribution may be to memorialize that takedown-plus-hash-based-filtering is an ineffective strategy that should never again be pursued by hosting sites dedicated to building businesses based upon lawful, non-infringing uses of their services. Let that be a lesson to those who follow.

After the ruling, the Thomas Plaintiffs did just what they should have: They filed a motion to certify the Court's making-available-right ruling for an interlocutory appeal. Thomas is an ideal case for an interlocutory appeal: the recent self-reversal in Thomas would require the parties to re-try the entire case because the Court used internally inconsistent reasoning to adopt a minority position on a pure question of law that admittedly causes the United States to violate nine international agreements. Stronger grounds for an interlocutory appeal are scarcely conceivable.

Unfortunately, on December 23, 2008, the Court in Thomas denied the motion to certify an interlocutory appeal--for an absurd reason. According to the Court, there can be no substantial disagreement that it was bound to deny that a making-available right exists by the "binding precedent" established in the second of three alternative holdings in the contract-interpretation case National Car Rental.

So I found it funny when a Wired magazine blog tried to put a partisan spin on one of my recent papers. This paper criticized the vacatur of the jury verdict in Capitol Records, Inc. v. Thomas. Wired tried to spin this paper as "Republican think-tank attacks Democratic judge." I can see why this spin might have fooled a harried editor, but it is laughable.

For example, a federal judge has reportedly held that Boston University (BU) is such an incompetent internet-access provider that it cannot disclose the identities of allegedly infringing users of its network. In London-Sire Records, Inc. v. Does 1-4, Judge Gertner's recent order granted BU's "Motion to Quash" because "[BU] has adequately demonstrated that it is not able to identify the alleged infringers with a reasonable degree of technical certainty."

Overall, I thought Prof. Lessig made a good case regarding the benefits of "remix culture" and why copyright law should leave breathing room for the various derivative works of amateur creators. On the other hand, Lessig still too often blurs remix culture with "ripoff culture" (i.e., those who aren't out to create anything new but instead just take something without paying a penny for it).

To solve that latter problem, Lessig again endorses a proposal that William Fisher, Electronic Frontier Foundation, and others have made for collective licensing of all online music, but he fails to drill down into the devilish details. He says, for example, that "by authorizing a simple blanket licensing procedure, whereby users could, for a low fee, buy the right to freely file-share" we could "decriminalize file sharing." (p. 271)

I respect the fact that Lessig is at least acknowledging a problem exists and proposing a solution to it, but the collective licensing approach will be anything but "simple" in practice. As I have pointed out here before, collective licensing proposals and efforts almost always become compulsory in practice. They inevitably involve government mandates to determine (1) who pays in, (2) how much they pay in, as well as (3) how much gets paid out and, (4) who gets the money.

Nonsense: I stand by my paper because Mr. Masnick and "others" failed to quibble successfully even about details wholly tangential to its main argument. As Mr. Masnick's post indicates, his quibbles claimed that I had unfairly portrayed Lessig as a "communist sympathizer." But my paper said:

To be clear, I do not think that Lessig, Fisher, or other Free-Culture-Movement academics and interest groups are literally 'communists' or 'socialists....' But they do still display the flaws that made communists and socialists dangerous to themselves and others: Inherent distrust of and contempt for the utility of bilateral private exchange conjoined with boundless, unshakeable faith in the potential wisdom, foresight, and benevolence of vast and coercive governmental power.

Mr. Masnick claimed that my paper challenging the logic of the recent ruling in Thomas was an "attack on the judge in the Jammie Thomas trial."  That was wrong: the Thomas opinion was unreasoned and unreasonable, but its author tried hard to correctly adjudicate the case--he even solicited amicus briefs.  But he was betrayed: the Defendant and her amici just regurgitated anti-copyright arguments with little regard for their merits or capacity to co-exist within a reasoned judicial decision.  As in Grokster, such tactics succeeded--at the district court.

Nevertheless, I did appreciate Mr. Masnick's comments on my paper--if only because they clarified why we usually disagree about copyrights.  Mr. Masnick claimed that, PFF "has called itself a 'free market' think tank [though] it appears to be anything but free market when it comes to intellectual property issues.  For years, it's been a huge supporter of strengthening government granted monopolies [sic]...."

I do favor granting artists enforceable exclusive rights, (a.k.a. "property rights"), in their works--even if Masnicks call those rights "government granted monopolies."  I do so because market competition between producers of a socially valuable resource can occur only when producers possess governments-granted, practically enforceable property rights in the resources that they produce.  This is a point missed by a few IPR opponents: We can only use market mechanisms to facilitate the production of expressive works if producers of those works have enforceable exclusive rights in the copies of the works that they produce.  No exclusive rights means no market competition to encourage and allocate the production of expression.  To quote Professor Carol Rose:

[P]roperty mobilizes self-interested humans to labour as nothing else does..... That is, property "internalizes the externalities of labour, concentrating its fruits on the labourer himself."  As Richard Posner has... remarked, "All of this has been well known for hundreds of years."

Apparently, Judge Posner was unaware of the alternative reality called "Techdirt." 

It also seems absurd to give up so easily on a system of exclusive private rights that has been stunningly successful at encouraging the production of a vast array of expressive works. Indeed, I have always suspected that the most important--yet underanalyzed--question in copyright law is this: Why, in the latter two-thirds of the 20th Century, did the U.S. transform itself from a net importer of expressive works into the world's leading creator and exporter of expressive works?

This really was a remarkable change. In 1840, one of our first and best friends in Europe, Alexis de Tocqueville, titled an entire chapter of Democracy in America as follows: The Example of the Americas does not Prove that a Democratic People can have no Aptitude and no Taste for Science, Literature or Art. A century later, in 1940, the U.S. situation had begun to become radically different.

When you start trying to figure out why, it becomes obvious that untangling the potential influences will be no small task. Certainly, industrialization and increased rule of law play a huge role, and it certainly could not have hurt that the U.S. did not play host to two World Wars. Nevertheless, it remains difficult to believe that these factors alone explain the shift. Moreover, if you look at what the U.S. was doing differently from most other nations, two potential factors of interest emerge.

First,U.S. copyright law provided both criminal penalties and deterrent civil remedies, (i.e., statutory damages) throughout the period of interest. These were potentially significant differences. Most countries derive their legal systems from the Continental, (or civil-law) tradition, which, by default, tend to award contract-like damages for most civil wrongs. If you look at the copyright laws of many civil-law countries, it soon becomes obvious that absent criminal prosecution or an unusual patent-like situation in which an injunction could have highly punitive effects, infringement might often be an economically rational choice. In short, U.S. law may have been uniquely well suited to create a functional private market for expressive works based upon exclusive rights that were, as a practical matter, relatively enforceable.

Second, the U.S. differs from most other countries by relying heavily on indirect, rather than direct, government subsidies to encourage the growth of both market and non-market mechanisms for the production of expressive works.

In other words, the U.S. has no Ministry of Culture and tends to support expression not through direct government funding of the creation of particular works, but through indirect incentives to create--like tax-exemptions for universities, charitable organizations that support the arts, private foundations, and tax-incentives for creative activities like film production. Economist Tyler Cowen discusses these mechanisms in his books Good and Plenty and In Praise of Commercial Culture.

In short, the critical difference for the U.S. may be that we have tended to encourage the production of expression through mechanisms that more strongly tend to encourage creators to please private, rather than governmental, tastes--be they those of wealthy private patrons or private markets.

I have no doubt that we will need to continue to think carefully and critically about how to structure copyrights and infringement remedies in order to find some way to reconcile the proven creative potential of private rights in expressive works with the generative potential of the Internet and other interactive, digital communications networks. But I also have no doubt that skipping the hard part about critical thought and defaulting to the easy solution--more use of the inflexible, technology-specific compulsory licenses that made it needlessly difficult to get legal music onto the internet--is a bad idea.

"If the [iTunes music store] was forced to absorb any increase in the ... royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss -which is no alternative at all," Cue wrote. "Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably."

Kevin Allison over at the Financial Times' tech blog and Mike Masnick over at Techdirt identify compelling reasons why you shouldn't chuck your ipod just yet.

In the case of ERIPA, the usually sound impulse to avoid further federal spending is misplaced. Dynamic analysis of ERIPA's costs and benefits shows that ERIPA is better than "revenue neutral"--it is "revenue enhancing."

The Coalition Against Counterfeiting and Piracy made this point by commissioning the Tyson Report, a conservative economic analysis of the probable costs and benefits of IPR-enforcement reform.[2] The Tyson Report concluded that because counterfeiting and piracy annually drain about $225 billion from the U.S. economy, IPR-enforcement reforms that only slightly decreased counterfeiting and piracy over three years would increase U.S. output, earnings, and employment enough to increase federal tax revenues by $4.9 to $5.7 per dollar spent on reform, and generate another $1.25 billion in state and local tax revenues. For the American taxpayer, dollars spent on IPR-enforcement reform are investments that offer potential three-year returns of 490% to 570%, even when discounted to present value.

The entire paper can be found here.

Opponents of a making-available right have the following problem. Section 106 of the Copyright Act of 1976 grants copyright owners "the exclusive right to do and to authorize" several things, including a right "to distribute... copies of the work to the public...." Consequently, questions about a U.S. making-available right turn on the meaning of two critical statutory terms--"to authorize...," in Section 106, and "to distribute...," in Section 106(3).

Both of these terms must be construed to determine whether U.S. law provides a making-available right. Moreover, both terms were enacted together in the same section of the same statute. So any coherent interpretation of the distribution right must apply the same principles of statutory construction as to both sets of statutory terms.

Nor can there be much doubt about the basic principle of statutory construction that should be applied to both of these terms. Ordinarily, courts conclude that any undefined statutory term should be given its "ordinary" meaning absent compelling evidence--such as powerful legislative history or evidence of specialized meaning derived from past judicial decisions--clearly showing that Congress really meant intended for it to have a specialized, broad or narrow meaning. In short, courts generally hold that "ordinary meaning" controls absent powerful contrary evidence.

But to conclude that Section 106 of the Copyright Act fails to provide a making-available right, opponents must this sensible principle violate it twice--in opposing ways--while construing the two clauses that define the distribution right granted by the Copyright Act of 1976. The process that produces this result consists of two steps.

STEP ONE: Interpret the First Clause in the Distribution Right By Rejecting the "Ordinary Meaning" of Statutory Text at the First Whiff of Ambiguous Legislative History: For opponents of a making available right, problems begin with the statutory clause that defines the distribution right as a right "to do or to authorize...." If Defendant Thomas did use KaZaA to "share" infringing files over the FastTrack file-sharing network, then she authorized the distribution of copies of those files to the public--if "to authorize" is given its ordinary meaning of "to permit."

Consequently, opponents of a making-available right argue that "to authorize" must be interpreted more narrowly. They do by relying upon the approach to statutory construction that the First Circuit used to narrowly construe "to authorize" in Venegas-Hernandez v. Asociacion de Compositores Y Editores De Musica Latinoamericana, 424 F.3d 50 (1st Cir. 2005). The Venegas opinion is admirably candid: Three times it acknowledges that it denies "to authorize" its ordinary meaning. 424 F.3d at 57 ("Looking only at the statutory language, one might well think that authorization alone could well be infringement."); see also id.; id. at 58. Nevertheless, in Venegas, the First Circuit derived a narrowing construction of "to authorize" from the legislative history of the Copyright Act of 1976. Venegas noted that the committee reports accompanying the Act stated, "[U]se of the phrase 'to authorize' is intended to avoid any questions as to the liability of contributory infringers."

Note that nothing in that sentence states any intent to depart from or narrow the ordinary meaning of "to authorize"--it mere expresses intent for the phrase to encompass a class of cases. Consequently, to divine narrowing intent from this sentence, Venegas had to infer that when the committee expressed intent for "authorize" to include contributory infringers, it thus implied intent to exclude all other classes of cases otherwise within the plain meaning of "authorize." In other words, Venegas applied expressio unius est exclusio alterius--the legal doctrine asserting that words expressing intent to include can imply intent to exclude--to a sentence in a committee report.

There are many problems with the Venegas method of interpreting "to authorize," but for now, note only that Venegas--and thus the arguments of Defendant Thomas and her amici--rely upon sparse and ambiguous-at-best legislative history to deny "to authorize" its ordinary meaning: As Venegas notes,"the narrower interpretation appears from legislative history to be closer to congressional intent...." Id. And that brings us to....

STEP TWO: Interpret the Second Clause in the Distribution Right by Ignoring Legislative History Much Stronger Than the Ambiguous Sentence Relied Upon in Step One: To be clear, I do conclude that a KaZaA user sharing files can infringe a statutory prohibition centering on the ordinary meaning of the undefined term "distribute." See, e.g., United States v. Sewell, 513 F.3d 820, 822 (8th Cir. 2008) ("the use of KaZaA to share child pornography is sufficient to uphold a conviction for the knowing distribution of child pornography"). Nevertheless, to better highlight the particular problem at issue, I will just assume arguendo that, absent resort to legislative history or other extrinsic evidence, the "ordinary meaning" of the text of Section 106(3)--the clause that begins "to distribute..."--would not encompass a making-available right.

Even with this assumption, the making-available opponents still have a problem: Plentiful, unambiguous legislative history--including the same committee reports quoted in Venegas--shows that Congress did intend for the Section 106(3) distribution right to include a "right of publication." And "publication" was and is understood before 1976, in 1976, and today to encompass the act of making copies of a work available to the public. Indeed, in the 1985 case Harper & Row, the Supreme Court relied upon this legislative history to find that "publication" was "an important subsidiary right" subsumed within the distribution right. Consequently, even the Brief of [Ten] Copyright Law Professors (p. 13) is forced to acknowledge the strength of this legislative history: "[E]ven if the courts were correct in inferring an intent on the part of the Congress that enacted the 1976 Copyright Act to equate all publications with distributions for purposes of 106(3), such an intent cannot override the plain meaning of the statutory text, absent ambiguity or patent absurdity."

So how did the ten scholars who wrote the preceding sentence reconcile its teachings with the legislative-history based narrowing construction of "to authorize" needed to deny the existence of a making-available right? They didn't. The amicus brief of the ten "Copyright Law Professors" simply fails to acknowledge that the words "to authorize" appear in Section 106 of the Copyright Act.

Nor do the briefs of Defendant Thomas or her other supporting amici articulate some principle that reconciles their embrace of the sparse and ambiguous legislative history of "to authorize" with their contempt for the plentiful and clearer legislative history of "to distribute...." The net result is very odd: Briefs that rely, on one page, on methods of statutory construction that they then indict and condemn on the next.

In the short run, this defective logic may not prove fatal: No doubt some trial courts may overlook the clash between the interpretive techniques being urged upon them. Indeed, some (like Howell) have already done so.

But in the long run--as the making-available cases reach the appellate courts--this lack of a coherent approach to statutory construction becomes a glaring flaw in the arguments against a making-available right. Appellate courts use many principles to guide the interpretation of statutes. Schizophrenia is rarely one of them.

Personally, I hope that the U.K. opts for the graduated-response option. I realize that the usual "public-interest" groups say that disconnecting infringing users after repeated warnings is unfair, but, seriously, as compared to what? Forcing copyright owners to incur thousands of dollars filing John Doe lawsuits that must then be recovered from the families of teenagers and students unless copyright enforcement is to become a money-loosing proposition? Putting college students in jail? Those are the options available to deter illegal file-sharing under existing U.S. law. Are these options honestly less punitive or more enlightened than a graduated-response program? And by the way, libraries also provide access to knowledge, but if you don't follow their rules, they will throw you out and revoke your borrowing privileges. Is that unfair?

Granted, these "public interest" groups may really think that suing teenagers and imprisoning college students are good ways to enforce copyrights on the Internet. For example, in MGM Studios, Inc. v. Grokster, Ltd., the Internet Archive, Project Gutenberg, and many associations of university and law-school librarians argued that for-profit corporations that encourage or dupe teenagers or students into downloading infringing files should not be held liable for the intended consequences of the business models that gave those corporations "no product costs to acquire music" and "the ability to get all the music." Why? Because these guardians of the public interest argued that the teenagers and college students that these corporations induced could just be sued into ruin by copyright owners or imprisoned by the United States Department of Justice. So remember, university students, if your file sharing causes you to receive a prelitigation letter or subpoena from a copyright owner--or a visit from the FBI--do be sure to say "thanks" to the Internet Archive, Project Gutenberg, and your campus librarians: They all told the Supreme Court that bankrupting or imprisoning you should be the preferred means of enforcing copyrights on the Internet....

But for those inclined to think seriously about how copyrights should be enforced on the Internet, this new U.K. proposal ought to be viewed as a wake-up call, though it need not be a roadmap for what we should do here. It should, however, remind us that we have a serious problem, and that we need to think seriously about how that problem ought to be resolved.

History suggests that if we do think seriously about all of the interests involved--consumers, copyright owners, artists, and ISPs--then we probably can identify means short of compulsory licensing or levies that can reconcile those interests and significantly reduce piracy. Consider, for example, the balance that the Digital Millennium Copyright Act (the "DMCA") struck as to sites hosting user-generated content ("UGC").

UGC sites have enormous potential to encourage creative expression, but it would be difficult to imagine how they could operate were they governed by the strict-liability that copyright law has traditionally imposed upon distributors of expressive works. But simply exempting UGC site operators from liability for infringing third-party uses of their sites would only encourage piracy and shift copyright enforcement onto individual Internet users.

As result, the DMCA created a so-called "safe harbor" that exempts UGC site-operators from liability for monetary damages if they take several measures to redress or deter infringing third-party uses of their sites. The most important is the so-called "notice-and-takedown" requirement. It prescribes an iterative process of dispute identification and resolution. First, a copyright owner must notify a site operator of allegedly infringing content. The site operator must then take down the content and notify the subscriber who posted it. The subscriber must then decide whether to send a counter-notice to the site operator. If the subscriber sends a counter-notice, then the operator must restore access to the disputed content unless or until the copyright owner files a lawsuit and secures a court order requiring it to be taken down.

This takedown process can benefit all three parties--copyright owner, site operator, and even the allegedly infringing user. The copyright owner gains a means to halt infringing conduct that is faster and cheaper than a lawsuit. The site operator gains unprecedented protections against most infringement liability. The allegedly infringing user receives a warning about any potential conflict, and gets to chose whether to avoid or confront it. This takedown process has resolved countless potential disputes and prevented many lawsuits.

But make no mistake: The DMCA notice-and-takedown regime is not ideal--not for copyright owners, UGC-site operators, or UGC-site users. Copyright owners find themselves playing takedown-notice whack-a-mole in which the same infringing content is repeatedly taken down and re-posted. UGC site operators incur enforcement and response costs, and operators receiving too many notices may fail to qualify for the safe harbor. For users, the notice-and-takedown process may alert them to potential conflicts and let them decide whether to avoid them, but it may not always show them how to correct problems so the content can be safely re-posted.

Fortunately, Congress expected that even the imperfect incentives to cooperate imposed by the takedown process would encourage interested parties to devise innovative solutions superior to any contemplated back in 1998. See 17 U.S.C. § 512(i)(1)(B). Congress appears to have been right. Many copyright owners and UGC-site operators have entered into licensing agreements. Both YouTube and the parties to the Copyright Principles for UGC Sites are preparing to deploy advanced filtering technologies. The parties to the Principles are also devising more interactive dispute-resolution procedures. Consequently, not even important, backward-looking disputes like the Viacom-Google litigation should obscure the progress being made by copyright owners, UGC-site operators, and UGC-site users.

To be sure, the DMCA did not anticipate the rise of file-sharing piracy that cannot be reasonably redressed at the application level. Nor could the balance that the DMCA struck as to UGC sites just be "cut and pasted" into the context of access providers. Nevertheless, the case of UGC sites show that when the law has encouraged cooperative approaches--even imperfect ones--cooperation has occurred, improvements have been made, and enforcement lawsuits against consumers have been almost entirely avoided.

Finally, some will argue that the U.K. proposal is unfair to internet-access providers. That argument has weaknesses and strengths. To be sure, many claim that piracy has helped access-providers by driving demand for broadband access. For example, in Free Culture, Professor Lawrence Lessig argues, "The appeal of file-sharing music was the crack cocaine of the Internet's growth. It drove demand for access to the Internet more powerfully than any other single application. It was the Internet's killer app.... It no doubt was the application that drove demand for bandwidth."

But while piracy may have been indirectly benefited some access providers, it has also imposed significant costs and inefficiencies. For example, from the perspective of efficient network management, most ISPs should cache popular downloads. But doing so is extremely risky. The DMCA's caching safe-harbor, (§512(b)), like its other provisions, envisioned a web-based Internet: Consequently, it does not seem to "harbor" the caching systems needed by file-sharing networks. Nevertheless, vague reports alleging the use of caching have surfaced ever since the 2004 study, Is P2P Dying or Just Hiding?

But in any case, a simple fact remains: Broadband Internet-access providers were not the ones who worked hard to ensure that file-sharing piracy would become a problem that could not be redressed at the application level. If those who did try to make that problem difficult to remediate now expect others to clean up their mess, then that is unjust.

Nothing makes this point more effectively than the written testimony provided recently to a congressional committee by Mr. Mark Gorton, "the founder and Chairman of LimeWire, LLC, the makers of the LimeWire file sharing program":

The regulatory framework that surrounds the Internet has not kept pace with technical advancements, and currently, no effective enforcement mechanisms exist to address illegal behavior on P2P networks.

Internet Service Providers, ISP's, are a unique point of control for every computer on the Internet. Universities frequently function as their own ISP's, and a handful of universities have implemented notice based warning systems that result in the disconnection of users engaged in illegal behavior who ignore multiple warnings. These universities have sharply reduced child pornography and copyright infringement on their campus networks.

Similar policies could be mandated for all ISP's in the United States. However, these policies are unpopular with the telecom and cable companies who would prefer not have an enforcement relationship with their paying customers. The telecom industry has objected vigorously to previous attempts to involve ISP's in the enforcement process and it continues to oppose policies that would allow for the establishment of moderate, yet effective enforcement mechanisms to combat illegal behavior on the Internet.

The only institution in the United States with the power to mandate the creation of an effective enforcement mechanism to police the Internet is the United States Congress.

I believe that careful thought would reveal viable solutions to the challenges of file-sharing piracy more creative and less prescriptive than those proposed by LimeWire. And if distributors of piracy-and-pornography-prone file-sharing programs now admit that they have knowingly created problems that can only be resolved by imposing significant costs on many third parties, including copyright owners, internet users, and internet-access providers, I would respectfully suggest that federal law-enforcement agencies should take such admissions into account. And send a message....