Cyberlocker Responds To MPAA Lawsuit Which Tries To Give Hollywood A Veto On Tech It Doesn't Like

from the it-shouldn't-be dept

Ever since the Supreme Court's Grokster decision, in which it made up a non-legislative "inducement" standard for copyright infringement (a standard, it should be noted, that Congress had a chance to put into law, but declined), the entertainment industry has tried to expand what "inducement" actually means. In the entertainment industry's general definition, it appears to mean "anything we don't like" or "anything that challenges our existing legacy business models." Case in point: cyberlockers. The MPAA has been screaming about "cyberlockers" as this new horrible piracy scheme for a couple years now, ignoring (of course) that cyberlockers serve important and useful legitimate functions in allowing people to share large legal digital files. Like many people, I've used cyberlockers to share PowerPoint presentations, photos and videos I've taken. They're incredibly useful and have significant non-infringing purposes.

However, obviously, those tools can (and perhaps frequently are) used for infringement as well. But, we already have laws to deal with that. The DMCA's notice-and-takedown provision allows copyright holders to alert service providers, who then need to takedown the content. A couple months ago, however, the MPAA went after Hotfile, one of the larger cyberlockers out there, with what struck me as a surprisingly weak case. It was as if whoever wrote the filing didn't quite understand how cyberlockers work, made a bunch of (mostly really bad) assumptions, and then twisted the facts in the most ridiculous possible way to make a case that Hotfile "induces" infringement.

For example, the MPAA claimed that because Hotfile charges fees for premium service, that's a sign of inducement. But that makes no sense. Plenty of online services charge for premium accounts, and since there are real marginal costs here, it makes basic economic sense for cyberlockers to charge premium users for additional services. That has nothing to do with infringement. Separately, the MPAA tries to spin the fact that Hotfile encourages people to use it to share widely, claiming that no legitimate "backup" service would do that. But, the MPAA is (incorrectly) assuming that Hotfile is a backup service. It's not. It's a tool for sharing digital files. None of that adds up to inducement.

The Supreme Court tried to dance around the earlier Betamax ruling, in which it allowed the VCR to exist because it had "substantial non-infringing uses," by creating a specific "standard" for inducement, which (as standards go) is pretty vague:

"[O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties . . . [but] mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct . . . ."

Basically, the Supreme Court says that you have to do something to specifically purposely encourage infringement. Just because your service is used for infringement, that doesn't cut it. Grokster and others lost because there were signs that they advertised or marketed their services specifically for infringement. In the Hotfile case, the MPAA didn't seem to be able to show that at all.

So it's not surprising that Hotfile is fighting back pretty hard on the lawsuit, pointing out that (1) it meets the Betamax standard of significant non-infringing uses, but (2) doesn't come anywhere near the inducement standard of purposefully inducing infringement. The company notes that it promptly responds to DMCA notices and is quick to take down content, once made aware that it's infringing. It notes that providing a legitimate data storage business is not against the law, and it doesn't appreciate the MPAA's insinuations. It goes through the specifics of the Grokster ruling, which clearly don't apply to Hotfile. In fact, they note that one of the reasons Grokster ran into trouble was because it didn't receive revenue directly from users -- and now the MPAA is trying to use the exact opposite argument (that Hotfile does get money from users) to argue it's the same as Grokster?

Similarly, it points out how the fact that Grokster, Isohunt, Limewire and others have had a search function has been one of the key points used against those services to "prove" inducement. The courts have reasoned that since they allow searches for any file, they're "inducing" infringement. Yet, with Hotfile, there's no search. That should settle the issue... but this is the MPAA we're talking about, and so they twist the lack of a search engine into a charge that Hotfile "concealed" the content its users uploaded.

Sued if you do. Sued if you don't.

This seems like a pretty strong filing in response to a clear attempt by the MPAA to twist and extend "inducement" theory way beyond what was intended by the Supreme Court. Hopefully the courts recognize this, but you never know when it comes to these kinds of cases. As Professor Eric Goldman is fond of pointing out, there's regular copyright law, and then there's file sharing copyright law, in which the judges creatively reintepret the law to make activities they don't like illegal, rather than following the actual law.

Either way, this case could become important in determining the boundaries of what really is "inducement." If the MPAA gets its way, it will effectively erase the Supreme Court's Betamax ruling, because it will mean that even if you have substantial non-infringing uses, if there are a lot of people using it for infringement, even if you did not push them to use your service for that particular reason, you automatically become liable. This is a complete fabrication by the MPAA who appears to effectively want to overturn the Betamax ruling here by suggesting that if enough people are infringing, you're automatically guilty of inducement, because any action you do (have a search engine? yes! don't have a search engine? yes!) is interpreted as inducement.

Filed Under: copyright, cyberlockers, inducement, infringement
Companies: hotfile, mpaa

MPAA Files Surprisingly Weak Billion Dollar Lawsuit Against Hotfile

from the you'd-think-there'd-be-a-bit-more-'there'-there dept

Hotfile, one of a number of cyberlockers out there, has been in the news increasingly lately, as various entertainment industry firms have been attacking it as one of the more popular cyberlockers. It appears that the MPAA and its whole content protection staff finally decided to go beyond complaining and actually sue Hotfile, asking (of course) for the maximum $150,000 in statutory damages for each infringing file it found on Hotfile.

The full lawsuit is embedded below, but what shocks me is how weak the case appears to be. Nearly the entire lawsuit is based on innuendo and insistence that perfectly reasonable practices couldn't possibly have legitimate purposes. Hotfile acts as a cyberlocker -- a service that has perfectly legitimate purposes for sharing large files. The MPAA tries to spin the fact that Hotfile charges subscription fees for premium services as nefarious, but that's ridiculous. Hotfile -- like other cyberlockers -- is offering a service in which it pays for all of the bandwidth and storage costs upfront. Offering premium accounts for faster/better service is the very basis of the whole "freemium" model. It does not automatically imply, as the lawsuit suggests, that the company is inducing infringement. The MPAA also tries to make it sound nefarious that Hotfile encourages people to upload stuff that is downloaded more widely, but again that's the whole point of the service. No one ever said that cyberlockers are for personal backup, but they're designed to act as a service for distributing content. And, of course, encouraging people to use it in a way that gets more attention makes perfect sense, but does not automatically imply inducement to infringe.

The most ridiculous section, of course, is where the MPAA lists out all the things that Hotfile could do to reduce infringement -- such as only letting people with accounts download. But the MPAA ignores how that would defeat the legitimate purpose of a service that allows anyone to distribute legal content quickly and easily. It also notes that Hotfile does not use any copyright filters, but there is no law requiring that it has to.

And that's really the biggest problem with the lawsuit. Basically, the MPAA and the big studios it represents have decided they don't like the fact that Hotfile isn't protecting their business model and have decided that, therefore, it must be illegal. But that's not how the law works. It's entirely possible that a court will get blinded by the "but... but... piracy" aspect of this lawsuit. But looking through the details, I'm really shocked at the lack of any actual evidence for direct or contributory infringement. Instead, the crux of the entire lawsuit seems to be: (a) Hotfile makes money (b) people use Hotfile for infringement (c) Hotfile doesn't do the things we want it to do to stop infringement. What the MPAA glosses over is the fact that it appears that Hotfile does, in fact, respond to DMCA takedowns and removes the files in question.

Frankly, I'm surprised. I knew that the entertainment industry would get around to filing lawsuits against cyberlockers, at some point, but I figured they'd have at least something more compelling than "but... but... piracy."

Filed Under: copyright, cyberlockers, filesharing, hollywood
Companies: hotfile, mpaa