Innovation Policy Post

Monday, June 28 was the day the U.S. Supreme Court was to decide the patent case of the century, Bilski v. Kappos, and bring clarity to the debacle of the 1998 State Street Bank decision. In State Street, the Court of Appeals for the Federal Circuit (which hears all patent appeals) had upended centuries of tradition that assumed that patents were for technology and a hundred years of judge-made law that explicitly excluded “methods of doing business.” That decision also appeared to abolish all limits on software patents, fueling a land rush in patenting that helped create the backlog of 1,200,000 applications the Patent and Trademark Office faces today.

State Street created an instant constituency for business method patents that wasn’t there before. Before State Street, everybody knew that business methods were not patentable. It was understood and accepted. It was rarely litigated.

Under State Street, Bilski would have gotten his patent for a risk-hedging scheme for energy costs – no questions asked. But it has become clear that business method patents – which might have seemed like a great idea in those go-go years – are deeply problematic. They are hard to evaluate for novelty and inventiveness, often sweepingly broad in scope, difficult to interpret, and very controversial. (Would we really want just one airline offering frequent flyer miles?) By abolishing the well-established and uncontroversial business method exclusion, State Street radically extended jurisdiction of the patent system to cover not only business practices such one-click ordering and tax avoidance strategies, but an apparently limitless range of human activities, such as athletic moves and playing with cats. Perhaps the largest professional land grab in modern history...

Today a federal judge in New York granted YouTube’s motion for summary judgment in the closely-watched Viacom v. YouTube copyright case.

Viacom sued YouTube for copyright infringement over the appearance of video clips on YouTube over which Viacom claimed the copyright. (It was later revealed that many of those clips were secretly uploaded by dozens of Viacom marketers.) YouTube argued that it was protected by the Digital Millennium Copyright Act’s safe harbors. Generally, those safe harbors, enacted in 1998, limit remedies against online services so long as they respond to “takedown requests” – that is, expeditiously disable access to allegedly infringing content when a copyright holder complains that particular content available on the service infringes its rights.

YouTube complied with thousands of Viacom takedown requests, but Viacom nevertheless argued the safe harbor shouldn’t apply to YouTube, since it had “generalized” knowledge of online infringement. The court rejected Viacom’s argument, pointing out that YouTube removes numerous clips at Viacom’s request, including 100,000 within one business day, consistent with the DMCA.

This decision shows that the DMCA safe harbors are working, and that Congress struck the proper balance, by providing robust protection for creators who think their copyrights are infringed, while still allowing platforms for expression to flourish online.

As today’s decision notes, it is nearly impossible for platforms that host user-created content to differentiate between authorized and unauthorized content, and infringing content and non-infringing content. People are sometimes surprised to learn that due to our lack of copyright ‘formalities’, there’s nowhere to look to determine with any certainty who has rights to what. Only rightsholders know that, and thus only rightsholders know what to take down. The DMCA’s Solomon-like compromise, therefore, was to assign to rightsholders the burden of coming forward with a specific complaint about infringement, and to assign to ISPs and online services the burden of responding to that complaint. Today’s decision reflects exactly that result.

One of CCIA’s smaller members, TurboHercules SAS, has received a lot of attention recently surrounding its antitrust dispute with IBM, especially because IBM has chosen to rattle its many patent sabers at this much smaller competitor by providing a list of 173 potentially infringed patents. What makes this story a little different from a classic patent shakedown is that TurboHercules is an open source company, and IBM is a champion of open source software. In early April of this year it was reported that IBM accused TurboHercules of “potentially” violating two of the patents in IBM’s “legally binding” Open Source Patent Pledge from 2005. In its pledge, IBM promised the world that it would not assert 500 selected patents (out of IBM’s portfolio of over 40,000) against open source projects. IBM then issued a series of conflicting statements regarding the two pledged patents (see here and here), including one that suggested that the pledge was limited to “qualified” companies that did not compete with IBM. Needless to say, this left many in the Open Source community scratching their heads. The story also highlighted many of the problems endemic to the current patent system.

A new copyright enforcement venture started making headlines earlier this year: the U.S. Copyright Group (USCG). Although the USCG name just recently started getting attention, it appears connected to the Leesburg, VA law firm Dunlap, Grubb & Weaver (DGW), which was established in 1999. The logos for USCG and DGW are the same and Thomas Dunlap, a named partner of DGW, filed several mass-defendant (PDF) complaints (PDF) on behalf of movie company plaintiffs as part of USCG. Further, the DGW name is prominently located on the top of settlement pages created for the litigations and can be found several times in the settlement (PDF) agreements (PDF) offered to alleged infringers in order to avoid litigation. Some blogs and The National Law Journal say that USCG is DGW, while DGW’s blog suggests it was simply “engaged” by USCG.

USCG and DGW utilize an enforcement process employing the widely criticized shotgun methods of DigiProtect and ACS:Law: issuing thousands of pre-settlement letters to alleged copyright infringers. The letters purport to offer recipients the opportunity to avoid copyright infringement litigation for a fixed lump sum. For example, the Far Cry pre-settlement letter (found here in three parts) provides for a settlement payment of $1,500 before June 11, 2010, with the amount rising to $2,500 after that date. While the settlement pages for Far Cry and The Steam Experiment reflect a $1,500 settlement payment, the other three settlement pages created as of now all require a $2,500 payment. Recipients with the $1,500 option thus have a relatively short shot clock to decide whether to pay, or undertake the quite possibly more expensive alternative of retaining an attorney and defending the charges. This has prompted criticisms that even innocent recipients may pay to avoid the cost of litigation, as well as criticism that the joinder of so many arguably unrelated parties constitutes an abuse of process.

How do USCG and DGW identify potential defendants? USCG and certain “partners” monitor file-transfer services and log the IP address, date, time and other pertinent information whenever someone shares a file containing a client’s copyrighted material. DGW then files a single lawsuit in the D.C. District Court on behalf of a movie studio plaintiff naming John Does 1-XXXX for alleged infringing downloads of a given film. Attached to the complaint is a list of the allegedly infringing IP addresses. DGW says it has already filed “about 10 or 11” such complaints “on behalf of” USCG. Seven of those complaints have been filed this year, totaling 14,583 unnamed defendants.

1. A complaint against 749 unnamed defendants for the alleged illegal downloading of the film The Gray Man. Worldwide Film Entertainment, LLC v. Does 1-749, No. 1:10-cv-00038-HHK-DAR (D.D.C., filed Jan. 8, 2010).
   
   
2. A complaint (PDF) for the alleged illegal downloading of the film Uncross the Stars, originally against 83 unnamed defendants but subsequently amended to increase the unnamed defendants to 195. G2 Productions LLC v. Does 1-195, No. 1:10-cv-00041-CKK (D.D.C., filed Jan. 8, 2010).
   
   
3. A complaint (PDF) for the alleged illegal downloading of the film Far Cry, originally against 2,094 unnamed defendants but subsequently amended to increase the unnamed defendants to 4,577. Achte/Neunte Boll Kino Beteiligungs GMBH & CO KG v. Does 1-4,577, No. 1:10-cv-00453-RMC (D.D.C., filed Mar. 18, 2010).
   
   
4. A complaint (PDF) for the alleged illegal downloading of the film Call of the Wild 3-D, originally against 358 unnamed defendants but subsequently amended to increase the unnamed defendants to 1,062. Call of the Wild Movie, LLC v. Does 1-1,062, No. 1:10-cv-00455-RMU (D.D.C., filed Mar. 19, 2010)
   
   
5. A complaint against 2,000 unnamed defendants for the alleged illegal downloading of the film The Steam Experiment (also called The Chaos Experiment). West Bay One, Inc. v. Does 1- 2,000, No. 1:10-cv-00481-RMC (D.D.C., filed Mar. 23, 2010)
   
   
6. A complaint against 1,000 unnamed defendants for the alleged illegal downloading of Smile Pretty (aka Nasty). Maverick Entertainment Group, Inc. v. Does 1-1,000, No. 1:10-cv-00569-RJL (D.D.C., filed April 8, 2010)
   
   
7. A complaint against 5,000 unnamed defendants for the alleged illegal downloading of Oscar Best Picture winner The Hurt Locker. Voltage Pictures, LLC v. Does 1-5,000, No. 1:10-cv-00873-RMU (D.D.C., filed May 24, 2010).

Once the complaint is filed, DGW then asks the court to issue subpoenas requiring Internet access providers (IAPs) to turn over the names and addresses associated with the accounts having the allegedly infringing IP address. These subscribers are then contacted and given the choice of settling up front, or being added to the suit.

IAPs have responded to these subpoenas differently. Verizon notifies customers of subpoenas but has not yet sought to quash them. Comcast and Cablevision are both reportedly working with DWG to reach an agreement on how to handle this large number of subpoenas. However, Time Warner Cable (TWC) has moved to quash USCG’s subpoenas in the Far Cry, Call of the Wild 3-D, and The Steam Experiment cases. TWC’s motion argues that USCG should have filed individual cases against the John Does, as there appears to be no relation amongst them. Further, TWC cites the growing scope of the subpoenas and the hardship TWC will face in having to respond to all 809 information requests. USCG and DWG responded with what appears to be a veiled threat of going after TWC for contributory infringement. Three civil liberties groups, the Electronic Frontier Foundation (EFF), American Civil Liberties Union (ACLU), and Public Citizen, have chimed in with joint amicus briefs in support of TWC’s motion to quash in all three cases (all three PDFs). The amicus briefs argue that USCG and DWG’s tactics deprive letter recipients of a fair chance to defend themselves. Earlier this week, the Honorable Judge Rosemary Collyer ordered the plaintiff movie companies in the Far Cry and The Steam Experiment cases to show cause why she should not dismiss the case as to defendant Does 2-XXXX for “misjoinder under Federal Rule of Civil Procedure 20.”

Given the ease with which IP addresses can be misinterpreted or falsified (two years ago researchers successfully framed (PDF) a university’s network printer for copyright infringement), one question presented is whether a mere IP address is sufficient to allege infringement? Another question is whether hundreds of ostensibly unrelated defendants can be haled into court in a single litigation based merely on the commonality of the allegedly infringing work. D.C. federal courts will likely be required to answer both questions.