Law Professor: Megaupload Prosecution A 'Depressing Display Of Abuse Of Government Authority'

from the tell-me-about-it dept

We've written plenty about the problems with the government's case against Megaupload, but it's still interesting to see law professor Eric Goldman's rather brutal assessment of the government's case, suggesting that it's clearly a case of abuse by the government:

The resulting prosecution is a depressing display of abuse of government authority. It’s hard to comprehensively catalog all of the lawless aspects of the US government’s prosecution of Megaupload, so I’ll just focus on two:

1) Trying to hold Megaupload criminally liable for its users' actions. Criminal copyright infringement requires willful infringement, a very rigorous scienter level. I discuss the implications of this high scienter requirement in more detail in my decade-old article on warez trading. Megaupload’s business choices may not have been ideal, but Megaupload has a number of strong potential defenses for its users' activities, including 512(c), lack of volitional conduct and more. Whether it actually qualified for these is irrelevant; Megaupload’s subjective belief in these defenses should destroy the willfulness requirement. Thus, the government is simply making up the law to try to hold Megaupload accountable for its users' uploading/downloading.

2) Taking Megaupload offline. Megaupload's website is analogous to a printing press that constantly published new content. Under our Constitution, the government can’t simply shut down a printing press, but that's basically what our government did when it turned Megaupload off and seized all of the assets. Not surprisingly, shutting down a printing press suppresses countless legitimate content publications by legitimate users of Megaupload. Surprisingly (shockingly, even), the government apparently doesn't care about this “collateral,” entirely foreseeable and deeply unconstitutional effect. The government's further insistence that all user data, even legitimate data, should be destroyed is even more shocking. Destroying the evidence not only screws over the legitimate users, but it may make it impossible for Megaupload to mount a proper defense. It's depressing our government isn't above such cheap tricks in its zeal to win.

The government has also been shockingly cavalier about the collateral consequences of its prosecution on the marketplace. Legitimate web hosts, and their investors, are quaking in their boots that they will be next. It doesn’t help that the content industry is circulating a “kill chart” of its next desired targets.

The more we hear and see about the government's case against Megaupload, it really appears that the government was relying almost entirely on the fact that Megaupload looked bad. It's hard to deny that there were plenty of things that Kim (in particular) did that makes him appear pretty obnoxious. But being a crass showoff doesn't automatically make you a criminal. Even worse, the government's action in the case to date seem to be doing everything possible to undermine their own case as they try to railroad Megaupload. I'll admit, when I heard about the shutdown, I (perhaps naively) assumed that the government had a pretty solid case. To take down a whole site, they must have the goods. In fact, in talking to another law professor in the hours after the indictment was made public, I was cautioned that there simply must be more to the case, because what was in the indictment just didn't seem complete. Perhaps there's something hidden in the back pocket of the DOJ, but so far it seems like (former anti-piracy exec) US Attorney Neil MacBride ran an effort against Megaupload that was more focused on how it looked to his former colleagues than what the law actually says.

Filed Under: abuse, eric goldman, kim dotcom
Companies: megaupload

Ridiculous Statutory Damages Rules Mean Judge Regretfully Awards $3.6 Million For Circumvention Of DRM

from the totally-out-of-touch-with-reality dept

Eric Goldman points us to yet another example of ridiculous statutory damages rules around copyright creating awards in court cases that have no connection to any real harm. And, this time, it involves the violation of the highly questionable (and controversial) anti-circumvention clause of the DMCA. The case involves an online game, MapleStory, and some people who set up an alternate server, UMaple, allowing users to play the game with the official game client, but without logging into the official MapleStory servers. This kind of thing happens all the time.

In this case, the people behind UMaple apparently ignored the lawsuit, leading to a default judgment. However, even there, it appears that MapleStory went too far, and the judge is clearly annoyed with them at times. Even though judges often side entirely with winners in default judgments, in this case, the judge repeatedly expresses skepticism about arguments made for determining "damages" to be awarded. Thus on most of the claims, the judge seems to look for ways to avoid giving MapleStory much, if any, money. For example, in determining profits made by UMaple, the judge repeatedly knocks MapleStory for failing to show what profits were specific to UMaple's infringement, telling it that it can't just assume all money made by UMaple belongs to MapleStory. So the judge dumps a request for $68,764.23 in profits made by UMaple down to just $398.98.

But... then we get to the anti-circumvention stuff. Here, the ridiculous statutory rates set a minimum of $200 per infringement. Multiply that by 17,938 users of UMaple... and you get $3.6 million. MapleStory, of course, asked for the statutory maximum of $44,845,000, which the court refuses to grant. In fact, the judge chides MapleStory for its request for the maximum -- even to the point of noting that the arguments by MapleStory make it "question very seriously whether Plaintiff intended to actively mislead the Court or whether these oversights were merely the result of poor legal research."

The court then notes that the minimum statutory amount -- the $3.6 million -- is already "a significant windfall to Plaintiff far in excess of any amount necessary to deter future infringing conduct," and also that the "award here likely bears little plausible relationship to Plaintiff’s actual damages." In fact, it sounds like the court would very much like to decrease the amount, but notes that "nevertheless, the court is powerless to deviate from the DMCA's statutory minimum."

As Goldman says, this is "guffaw-inducing", because the minimum award seems to have no bearing on the actual seriousness of the infringement. As he points out:

this case does provide an excellent example of the ridiculousness of anti-circumvention statutory damages. $3.4M can't be the right damages award in this case, and it's so guffaw-inducing that it further erodes the legitimacy of our copyright rules.

Indeed. And yet no one seems interested in exploring just how disconnected statutory damages are from reality.

Filed Under: anti-circumvention, damages, dmca, eric goldman, maplestory, umaple

Viacom Didn't Actually 'Win' Against YouTube, But The Appeals Court Ruling Is Still Dangerous

from the a-mixed-bag dept

We already covered the 2nd Circuit's ruling in the appeal of the Viacom/YouTube case, but I wanted to follow up after seeing much of the coverage. There have been a number of reports that outright declare this a "victory" for Viacom, which is a very generous reading of the ruling. To be sure, the appeals court reinstates the case that had been effectively shut down by the district court -- but it did so in a manner that rejected every single one of Viacom's interpretations of the law. The biggest concern in this lawsuit was that Viacom would be able to use it to effectively reinterpret the DMCA the way it wanted the law to act, rather than the way the law was actually written (and which the case law has supported for years). The court clearly rejected that attempt by Viacom.

But, of course, it wasn't a complete vindication for YouTube. Reviving the lawsuit is clearly a partial step backwards for YouTube, but it's entirely possible that they could still prevail in the district court on the specific points that were sent back for trial. And, in the details of why the appeals court revived the case are some significant problems, many of which are outlined in a thorough post by Eric Goldman. I don't agree that the ruling is quite as significant as Goldman does, but he does make some good points about problems with the setup of the DMCA's safe harbor and (equally troubling) the way the court ruled on a few key points that make little sense.

On the setup of the DMCA, Goldman notes that the real issue here is that the DMCA safe harbors have a bunch of different confusingly worded parts -- and to keep the safe harbors, you need to hit on every point, which is kind of ridiculous when you think about it:

Most importantly, this opinion exposes a structural deficiency of the 512(c) safe harbor. The statute's simply too long and detailed, and if a defendant fails to satisfy each and every element, the safe harbor is lost completely. This is reminiscent of military strategy and information security: the defense has to work equally well across its entire border, while the adversary can concentrate its attack and only has to succeed on one point of attack to win. The same is true with a 512(c) defense. So, it doesn't matter that YouTube won most of the points of contention; if any single point of contention fails, YouTube's 512(c) defense fails. As I've insisted before, this provides a good lesson for drafters of safe harbors and immunities--to work effectively, the safe harbors/immunities must be pithy and categorical, or else they create too many potential points of failure.

This is a really good point, and suggests that if the DMCA is to be fixed, the safe harbor provisions should be clearer that missing a single checkbox doesn't mean you automatically lose all safe harbors.

The second concern is how the court interpreted parts of the DMCA where it's been sent back to the lower court. As Goldman notes, the 2nd Circuit's decision to totally punt on "right and ability to control" is going to create a huge mess for a while, in which we can expect copyright holders to flood the 2nd Circuit with cases focusing on that point -- since the appeals court simply rejects the standards put forth by YouTube (which used an interpretation already accepted in the 9th Circuit) and Viacom (which used an interpretation that only made sense in the minds of Viacom execs) but fails to come up with its own standard. Meaning no one knows what the standard is... and that means that copyright holders have a chance to get the court to redefine it in their favor:

So the court agrees with no one. Given that it rejected everyone else's definitions, we might expect the court to carefully lay out what it thinks the phrase means. Sadly, no. The opinion doesn't provide an express definition of what qualifies as the "right and ability to control," instead sending that issue back to the district court to figure out both the standard and whether YouTube met it. The clearest clue the court provides about the standard is it "involve[s] a service provider exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity." I have no idea what that means, other than that it's open season for plaintiff fiestas.

The fact that this will likely open up an opportunity for new lawsuits could be a pain for innovative companies who will face a new series of bogus legal attacks. Elsewhere, Goldman warns that the end result of this ruling will mean that startups that work with user generated comments are going to have to lawyer up at an earlier stage, and may have to take extra precautions which don't appear to be supported in law, just to avoid lawsuits.

In the end, the ruling is certainly not a "victory" for Viacom, but it does have significant problems. The district court could fix some of the problems by establishing that YouTube still gets safe harbors, even after the court's vague and directionless remand, but if that fails, perhaps this case and its differences from existing 9th Circuit case law would end up in the Supreme Court. That, of course, is risky, since the Supreme Court has been so consistently clueless when it comes to copyright cases.

Filed Under: dmca, eric goldman, safe harbors
Companies: viacom, youtube

Ridiculous: Court Says Mock Basketball Which Appears In Hyundia Commercial For 1 Second 'Dilutes' LV Trademark

from the are-they-insane? dept

A little over two years ago, we wrote about what we considered to be an absolutely insane lawsuit from Louis Vuitton, arguing that a mock basketball, which appeared in a Hyundai commercial for one second violated LV's trademark. You can see the commercial below:
If you missed it (entirely possible), at the 3 second mark, this image flashes briefly:


The point of the commercial is to get people to imagine what life would be like if "luxury" items were everyday items, and thus the mock basketball with symbols designed to suggest a luxury bag, like a Louis Vuitton bag. As we (and many, many trademark experts) suggested when the lawsuit was filed, the claims here are simply crazy. There is simply no harm whatsoever done to Louis Vuitton by this ad. Most people wouldn't even notice the markings and if they did, what possible "harm" would it do? The answer is none. There is no consumer confusion whatsoever. There are no LV basketballs that won't be sold because of this (in fact, the judge in this case notes that, after seeing this commercial, some people wanted one -- which would suggest a market opportunity, rather than litigation).

Of course, Louis Vuitton's complaint didn't rest on the bedrock of trademark law -- the likelihood of confusion -- but a more modern bastardization of trademark law called "dilution." The concept of dilution in trademark law is an affront to the purpose of trademark law, which is supposed to be about protecting consumers from confusion. That is, it's supposed to be about preventing someone from buying Bob's Cola, thinking that it's really Coca-Cola. But there's no such risk here. Dilution, however, flips the very concept of trademark law on its head and pretends (falsely) that trademark law is about protecting a company's trademarks from anyone doing anything at all with it that the company doesn't like.

Unfortunately, the courts don't always get things right -- which is why we get such ridiculous lawsuits in the first place -- and here, amazingly, the district court has sided with Louis Vuitton in its dilution argument, granting summary judgment on Hyundia's liability for dilution, while it rejected Hyundai's movement for summary judgment rejecting all of Louis Vuitton's claims. This is, in many ways, horrifying.

Eric Goldman's summary, linked above, highlights the many problems with the ruling -- while cautioning that the details suggest this type of ruling is limited. Still, as he notes:

And then we have an opinion like this--where the court finds trademark dilution without finding infringement (not resolved yet) and in a situation where EVERYONE can immediately tell there was zero harm to the brand owner. Rulings like this make trademark academics shudder in fear that trademark dilution will swallow up all of trademark law and confer rights-in-gross to trademark owners. While I don't share those fears for reasons I'll explain in a bit, unquestionably this is a bad ruling.

Goldman goes on to highlight some of the more specific problems with the ruling, but the key point is simply that there is no harm here. None. Absolutely none. Perhaps less than none, given the reports of interest in LV basketballs. When the law doesn't care about that, then the law is, unquestionably, broken. A ruling like this automatically lessens respect for trademark law, because it makes no sense at all. It makes a mockery of the judicial system by suggesting that lawsuits like this have any merit whatsoever.

Filed Under: basketball, commercial, dilution, eric goldman
Companies: hyundai, louis vuitton

Scribd Puts User Docs Behind A Paywall Without Them Realizing It

from the totally-not-cool dept

Last year, I wrote about some issues I had with the way Scribd tried to avoid liability by suggesting that public domain documents couldn't be hosted on the site or that fair use was not allowed. To the company's credit, it responded quickly and fixed the situation, but soon after that I switched to (mostly) using Docstoc to host documents. Doctstoc has its own problems as well, but for the most part has worked well for me. Still, in my experience Scribd is still quite popular among folks -- especially for uploading and hosting legal documents. Apparently, the company recently made some quiet changes and it's seriously pissed off law professor Eric Goldman, who has relied on the site for quite some time.

The key problem? Without clear notification, it took "older" (and older is left undefined) documents and put them behind a paywall. As Goldman notes, the whole reason he used Scribd was to make the documents available, and it was quite a shock to suddenly find them behind a paywall:

Scribd's paywall stunt instantly put Scribd on my shitlist because it vitiates the reason I chose to use Scribd in the first place. I don't know that they ever promised me perpetual free access to the documents I post, but their value proposition always has been open access to the documents--freely shared with everyone and indexed in the search engines. The paywall destroys that value proposition. They've taken the documents that I wanted to freely share with the public (many of them public documents like court rulings and filings) and made them inaccessible. If my readers can't freely get the documents I wanted to share with them, then what's the point of using Scribd in the first place???

I also feel like Scribd used me. With their implicit promise of open access, they got me to share a lot of high-interest documents and generate lots of link love, then they flipped the default (from free to paywall) as part of a cash grab. I could check out of Scribd, but then I would break a lot of links and it would take a lot of time. So now I feel trapped. It's a terrible feeling.

Goldman is looking at other options, including Docstoc and Rapidshare. Another one worth checking out could be Slideshare, or even potentially Google Docs. However, all this has me thinking again about the wisdom of relying on third parties for such things (even though I do it myself). I do like the ability to display PDF documents, such as legal filings, embedded within a post, but I'm wondering if there are any simple solutions for setting up that sort of thing on your own server. Anyone know of any?

Filed Under: eric goldman, paywall, user notification
Companies: scribd