Bytes of Wrath—Thoughts on the Authors Guild Suite against Google

A massive legal storm has entered its Category three phase as the New York Authors Guild with a roster of 8,000 authors has sued Google over its recent attempt to digitize the world's largest publicly searchable body of literary content. However what at first blush seems like the usurpation of copyright by a corporate juggernaut turned Big Brother is only half the story.

At issue is not simply whether Google’s stated policy of asking the copyright holder of a digitized work to opt-out is a reversal of accepted copyright law, but whether Google is actually creating the largest database based on fair use ever. Central to copyright is the right to reproduce or NOT reproduce one's copyrighted work. The basic premise of the Guild's suit is that Google never asked its authors whether or not they wanted to participate in its program and have their work digitally reproduced. However, there is an often cited seldom agreed upon exception to copyright, the "Fair Use Doctrine." Google rests its entire case on this concept that is sometimes as slippery as a bar of soap in the hands of a butter maker.

Unlike other Intellectual property rights, Copyright grants a limited monopoly, meaning that in certain instances normally infringing activities are free from liability. Google's argument is simple: Copyright doesn't apply. Google, based in Mountain View, California, said in a statement that "[w]e regret that this group has chosen litigation to try to stop a program that will make books and the information within them more discoverable to the world." It argues that its actual “reproduction” is minimal, only cribs a fraction of the copyrighted book, and is limited only to a few lines of text and some bibliographical Information. They also make much of the fact that its database will enable many users to purchase certain books online and will help give new life to rare and out of print books. The points they emphasize in their defense are not coincidental and are classic fair use arguments. The general thrust of Google's argument is that it can't replace or compete with the copyrighted books and secondly that it actually creates a revenue stream for the authors.

However there is a critical difference in that Google is claiming the exception several thousand times and potentially exponentially more times when end users access a book. If I were to do the same with say a single law treatise on the firm website it would probably qualify as a fair use exception. This would probably be the first time fair use is applied en masse for a database run by a private company. Moreover, Google’s share value, brand value, and advertising revenue are likely to increase and undercut Google’s implication that the benefit of the service is unilateral.

This is the focal point of the dispute and I am curious how the court will view the fair use exception as applied in this context. Will the court create a basis for the exception to be used in the aggregate? I submit that it is in the public interest to allow Google to continue, as aggregation and dissemination over the internet of literary content is the future of libraries as we know it. The private sector is the engine of progress in that sector and the fact that a profit model exists does not alone negate fair use. Google’s counsel will no doubt link its client’s database to the very progress the founding fathers did not want an impenetrable copyright to stifle. Whether the authors want their works publicly available or not should not be an absolute bar to de minimis reproduction or copyright law will risk resembling a literary moral law (“droit morale").

Kaiser Wahab

You are Invited to the Nuts and Bolts of P2P CLE

The Law Firm of Wahab & Medenica LLC is pleased to be participating in the following program on Peer-to-Peer file sharing. With speakers from Warner Music Group and Thelen Reid, the panel will be discussing the recent Grokster decision and its implications in the future of P2P and the record industry. Please feel free to invite your friends and colleagues to attend this program.

You can find out more and register for the program here.

With the advent of Napster, internet Peer-to-Peer file sharing has become a hot button topic of discussion for the mainstream media, but its overall importance and significance lies specifically within the legal community and the important nuances of copyright infringement as it pertains to the new phenomenon.

Take advantage of this one-of-a-kind opportunity to explore a very timely and prudent topic from the perspective of those in both the legal and music industries.

Join us as New York County Lawyers’ Association CLE Institute presents…………

Nuts and Bolts of Peer to Peer (“P2P”) Software File Sharing

Thursday, September 29, 2005, 6:00PM - 9:00PM

New York County Lawyers’ Association, 14 Vesey Street, New York City

3 MCLE Credits: 1.5 Skills; 1.5 Professional Practice; Transitional

Program Co-Sponsor:

NYCLA Entertainment, Media, Intellectual Property and Sports Law Section (EMIPS)

Program Co-Chairs & Moderators:

Olivera Medenica, Partner, Wahab Riveles & Medenica LLC

Martin Novar, Principal, The Law Firm of Martin Novar

Faculty:

Judith Finell, President, Judith Finell MusicServices Inc.

William F. Patry, Partner, Thelen Reid & Priest LLP

Ariel Taitz, Vice President, Warner Music Group

Course Overview:

This program is geared towards the entertainment and non-entertainment practitioner alike and is meant to provide a solid background and discussion of copyright infringement liability in the context of peer to peer (P2P) file sharing software.

Topics to be discussed include:

• A broad-strokes overview of copyright infringement liability within the context of peer to peer software. Discussions will focus on the underlying economics of file sharing as well as strategies and techniques for avoiding litigation.

• The underlying technology in P2P software, examining the right to control the swapping of files in P2P technology within the context of contributory copyright infringement liability. Essential technological background concepts needed to properly advise clients on copyright infringement liability under the Copyright Act will be discussed.

• The perspective of record labels, providing attendees with knowledge to proactively protect copyrights in musical work. Panelist will include in-house counsel for a record label discussing issues such as: impact of file sharing on recording contracts, availability of additional distribution outlets, and enforcement proceedings in light of the high velocity of file sharing activity.

Who Should Attend: Prosecutors, defense attorneys, judges, and civil legal services attorneys.

Registration Fee: Member: $ 125 Non-Member: $ 165

Nuts and Bolts of Peer to Peer (“P2P”) Software File Sharing

Thursday, September 29, 2005, 6:00PM - 9:00PM

Olivera Medenica

SEC Enforcement Action Under Regulation FD Rejected

In June 2004, the Securities and Exchange Commission charged Siebel executives Kenneth Goldman and Mark Hanson with violating Regulation FD. Regulation FD (“Fair Disclosure”) prohibits public companies from providing information to Wall Street insiders, such as analysts, ahead of the public.

At issue were statements made by Hanson and Goldman to a group of analysts in April 2003. Hanson and Goldman asserted that these statements were no different from statements made at a public meeting a week prior. However, the SEC alleged that they made positive statements to analysts, which as a result prompted an 8 percent rise in their stock price the next day. This was as opposed to the allegedly negative statements made to the public in the days leading up to the meeting.

The Southern District's recent SEC v. Siebel Systems et al. decision provides considerable comfort to companies in balancing the imperatives of Regulation FD with the practicalities of informal investor communications, such as Q&A sessions and industry conferences. The decision firmly rejected the SEC’s enforcement approach in the case dismissing for failure to state a claim the assertion that Siebel’s CFO improperly shared material nonpublic information about the company’s business activities in private investor meetings. The Court made several key points regarding the application of Regulation FD, the following of which are two of the most important:

□ Company statements must be reviewed in context. The SEC argued that the appropriate judicial standard of review compelled the Court to accept its allegations as true and compelled the Court to limit its review to the portion of Siebel’s public statement outlined in the complaint. Rejecting this argument the Court found that: “Since the SEC relied on the non-disclosure in public statements, as an integral component in framing its complaint, the full context of the statements, as opposed to the limited portions of that the SEC selectively decided to include in the complaint, is properly considered by the Court."

□ Stock price movement is relevant but not determinative in establishing that information divulged was material or nonpublic. Although stock purchases or sales by those privy to the private meetings may be instructive in determining whether the information disclosed to them was material or nonpublic, the Court found that the investors reaction to the information provided to them – which included heavy buying of the companies stock - alone was insufficient to conclude that the statements were material or nonpublic. The Court cited the SEC’s own adopting release which provided that “The focus of Regulation FD is on whether the issuer discloses material non public information, not whether an analyst, through some combination of persistence, knowledge and insight, regards as material information whose significance is not apparent to the reasonable investor.” More particularly, the Court found that the CFO’s statements did not regard information that the SEC’s own guidelines indicated would likely be material, such as information regarding M&A activity, new products, developments about customers and suppliers, changes in company control, or debt defaults.”

Simon Riveles

New Private Patent Database

For those of you interested in the highest velocity intersection of science, law, and politics, look no further than the PTO and patents in general. I received an email recently from someone who is attempting to maintain a parallel patent database to the PTO's for public consumption. To his credit, the organization is interesting and effective, though nothing but a few million beta testers will do to settle the question as to whether it is a viable resource for those other than the academic. And speaking of which, there is a terrific section on the bizarre world of useless and outright faulty patents that definitely deserves a gander. So I encourage you all to check out www.freepatentsonline.com.

Law and Disorder - Is NY carving out exceptions to its Civil Rights Laws?

An interesting case came out the Supreme Court of New York on the issue of right of privacy. In Jerry Orbach v. Hilton Hotels (July 08, 2005), the court allowed a case to proceed even though the Plaintiff alleging a right of privacy claim was deceased (Jerry Orbach of Law & Order fame). For those of you unfamiliar with the rights of privacy, it is just that - the right to be left alone. This personal autonomy right has developed out of the 14th amendment of the U.S. Constitution (to a limited extent, the 1st, 4th and 5th amendments also provide some protection of privacy).

In New York, however, the courts and legislature have been notoriously strict in denying post-mortem right of privacy claims. The court in the Jerry Orbach matter went through great pains in underlining the fact that the case was started before the Plaintiff passed away and therefore the ruling did not run afoul of judicial precedent and sections 50/51 of the NY Civil Rights Laws. In other words, NY seems to allow a limited post-mortem right of privacy only where the plaintiff has filed a lawsuit prior to death. The case is of first impression and is one that will be closely watched by many.

Olivera Medenica

Voice Over Ebay--Skype Up for Purchase

Ebay continues it smart moves in a bid to acquire VOIP boy wonder Skype. As a trumpeted move to enhance the core Ebay experience, the acquisition will no doubt offer an additional pillar business to the company in the same vein as PayPal. It’s beginning to look like the old dot com M&A days but with much more solid foundation and long term strategy.

Mannion v. Coors Brewing Co.

In Mannion v. Coors Brewing Co., No. 04 Civ. 1187 (S.D.N.Y. July 22, 2005), the Southern District recently addressed the extent to which copyright protects a photograph against commercial imitation. NBA star Kevin Garnett was the subject of a photograph taken and copyrighted by freelance photographer Jonathan Mannion. In that photo, Garnett is seen posing against a cloud and sky backdrop, Garnett wears a white t-shirt and a large amount of jewelry including bracelets, watches, rings and necklaces, so that the athlete is seen hovering above the earth. In 2001, Coors created a billboard advertising campaign using a photograph depicting an African-American male wearing a lot of jewelry against a cloudy background. Mannion sued Coors for copyright infringement.

Arguing that Mannion’s photograph merely depicted the generalized idea of an African-American wearing a white t-shirt and a large amount of jewelry and therefore did not contain any protectable expression. In a rejection of the classic idea/expression dichotomy as a wholesale bar to the suit, the court instead mused that where photography is the medium, “the idea/expression distinction is not useful or relevant.”

The court held that “to the extent that a photograph is original in the creation of the subject, copyright extends also to that subject.” The court then reviewed the Garnett photograph finding that the unique angle, lighting and posing of the subject in the photograph demonstrated Mannion’s originality.

Simon Riveles

Proactive Podcast Licensing

The commercialization of technology often rests on the sound licensing and rationalization of the underlying intellectual property rights. Failure to achieve that goal often results in court and congressional friction to bless or dismantle a technology. Consider the long list of examples: The Sony VTR, Napster, Morpheus, Kazaa, the impending battle over bittorents, etc. Each of these defied easy licensing structures, largely due to the perception of them as a zero sum game that would redefine the landscape of winners and losers.

Other technologies however, were aggressively corralled into mutually profitable licensing arrangements that have spawned multi-billion dollar industries. The ringtone industry is a prime example of this concept. At some point, it was viewed as a technology providing another avenue to profit from existing content. So rather than immediately attack the notion of a ringtone provider using a top 40 song, the various players devised a licensing scheme (for patents, music copyright, and network usage) that made people very wealthy. Rosy as this sounds, this was something of a miracle.

Podcasting, the new hipster kid on the tech block, is now entering a phase of confused adolescence. Home grown and grassrooted into a tenuous popularity, there is an ever increasing number and variety of podcasting stations, offering listeners the opportunity to experience radio the way they experience TV with TiVo (on their own terms, on their own schedule, prerecorded and ready for download into their portable devices.) However, at this point most podcasting is powered by talk radio due to the serious potential for legal difficulty. Since each podcast is essentially a digital quality mp3 recording of a broadcast, the use of copyrighted music would clearly be an infringement in the absence of licensing. And there lies the rub, in that there is no clear and predictable licensing system for podcasts.

As a result, Podcasting may peak and burn out before the powers that be seize it as a new frontier to deliver content on demand. Without variety or familiarity, listeners will only subsist on novelty and empty convenience for so long. Unfortunately, many industry pundits see a uniform podcast license as something at least several years out. In the meantime, some stations are taking an indie approach, using podcasts to showcase unsigned bands and some offering their own popular content in syndication through podcasts. However, maybe it’s time that industry players begin looking at the ringtone success as a model for approaching these new technologies with top level coordination and proactive discussion, as opposed to a “let’s see where this goes attitude.”

Some postive devleoptments (BMI's-Podcast License)

Kaiser Wahab