(Author’s note:  In this article, I get to use one of my favorite theories:  The Sergeant Schulz Theory.  Read on.  Also, I posted this initially at Tubefilter.tv.)

By now you probably know that Google won the most recent round of its legal battle with Viacom (which initially sued YouTube, now owned by Google).  A federal district court judge in New York issued a summary judgment that dismisses the $1 billion claim of infringement against postings on YouTube that were, in the opinion of Viacom, infringing on their copyrights.  It’s an opinion worth reading. [LINK HERE.]  If you are a legal wonk, then you will appreciate the succinct manner in which Judge Stanton weaves together the holdings of previous DMCA cases. (Here’s a hint: The Coase Theorem.)

The judge bought the argument that Google made—namely, that it was protected under the “Safe Harbor” provisions of the Digital Millennium Copyright Act from the copyright infringement claims made by Viacom.  More important, Judge Stanton said that YouTube’s actions demonstrated that the “takedown” provisions in the DMCA actually worked.  (Those provisions enable copyright holder to require that copyrighted material to be removed from public view.)

There are some unintended consequences (the Sergeant Schulz Theory) that may arise from this opinion, but they are likely to be acceptable for the time being.

It is not over yet.  Viacom has vowed to appeal the decision.

So What?

In a nutshell:

The burden of policing copyright infringement now squarely sits on the shoulders of the copyright owner (or the one with the rights).

With a little more detail:

  • The Safe Harbor Is Open. The DMCA safe harbor provisions are available for certain types of companies if they have and actually use the takedown provisions of the DMCA.
  • You Are Your Own Policeman. If you own (or hold rights in) a copyright, then you are responsible for policing the use of that copyright by others.

The Details

Let’s go a bit deeper in what the opinion means.  The merits of the positions of either side are not relevant here.  What is relevant is what the opinion means to players in the digital content space.

1.         Companies like Google Have a Safe Harbor. Companies that post digital content can rely on the “Safe Harbor” provisions of the DMCA when that content is posted, provided that they are serious about taking down content that may be infringing (more on that point below).  This holding is important because there was some confusion as to whether or not a company like Google was actually permitted entry to that harbor.  One view of the DMCA provisions holds that it applies almost exclusively to ISPs, but this view now appears to carry little weight in the federal courts.  Getting there was not without some abstruse legal reasoning to adapt the language of a statute written before places like YouTube existed, but it is probably solidly established by the various legal opinions on this point.

But be careful: It is not clear what sites would have this protection.  Google made the (winning) argument that, in essence, it was just providing transmission, storage and indexing of the content—sort of like an ISP.  Another UGC site might not be so lucky.  For sites that aggregate content from other sources, this opinion may incrementally strengthen their position, but they would have to fight holdings going the other way in other courts.

2. The Safe Harbor Has Some Rules. Judge Stanton emphasize that the takedown procedures worked in this case.  YouTube immediately responded to Viacom’s takedown notice:  Within 24 hours of receiving the notice, YouTube removed almost all of the more than 100,000 clips that Viacom claimed were infringing.

So the implication is clear for companies posting digital content: The Safe Harbor is available if and only if your takedown procedure actually works.

3.         Red Flags and Knowledge. The opinion also turned on the “red flags” of infringement that would be enough for YouTube to take down allegedly infringing content.  It gets complicated but Judge Stanton accepted (and essentially paraphrased) Google’s argument in its court filings that there was no practical way to check every posting for infringement.  The opinion essentially holds that a company in the position of Google’s YouTube basically has to have notice or actual knowledge of infringement of specific content.  Although the judge did not say it, the standard for actual knowledge would be, say, that Eric Schmidt (head of Google) went to the YouTube site and watched Iron Man the day after it was relased.

So the rule is: If you receive a takedown notice about specific content or if you have a really, really good reason to believe that it is infringing, then take it down.  Immediately. Then you’ll be OK.  (True, taking something down can cause other problems but that’s outside of the scope of this article.)

4.         Unintended Consequences:  The Sergeant Schulz Theory. Remember Sergeant Schulz on the TV show, Hogan’s Heroes?  He knew nuzzeen, he saw nuzzeen and that way he did not get in trouble with his superior.  Think about it for a moment:  If the opinion says that if you don’t know about the infringement then you don’t have liability.  Therefore, if you don’t try to find out if something is infringing, then you’ll be OK.  By definition, you see nuzzeen if you don’t look too hard.  And so you won’t.

5.         For Copyright Owners: Spend All Your Time Scouring the ‘Net. The implication of the opinion is that copyright owners (or the rightsholders) must now police the use of their copyrights.  Their first remedy for companies sitting in the position of Google’s YouTube is the “takedown” procedure specified in the DMCA.  It’s a clunky system, to be sure, but it is pretty much all you have.  Moreover, other recent opinions are now shifting the burden of policing the use of IP rights to those who hold such rights.

There is some hope.  First, as noted above, it is not clear that all sites can avail themselves of the Safe Harbor provisions.  For example, one could argue that Facebook would not qualify (a tall order).  However, the burden of proof now probably rests with the plaintiff and judges now have a well-reasoned (though not necessarily correct) opinion on which to rely.

Second, the holding now opens up opportunities for companies (say, startups) to create Internet policing services.  Whether they are automated (think “watermark”), manual (think outsourcing to foreign countries) or a combination, there is now a market opportunity.  There are already several such services out there.  They aren’t foolproof but they are good.

To close, the decision is not exactly binding on anyone except those within the district of the New York court.  Plus, Viacom’s vow of an appeal makes the permanence of the holding somewhat uncertain.  Both of these points are largely legalistic, because the opinion, as it now stands, will be used as an important bulwark of any argument in court by a defendant to a claim of infringement.  The bottom line:  Assume it applies.

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Summary:  A librarian decides that iPhone users can jailbreak their phones.  The Librarian of Congress exercise his rulemaking authority and determined classes of works that are exempt from DMCA prohibitions of circumventing security technologies on digital media.  The basic principle is that access constraints should not preclude what would otherwise be fair use such as commentary, education or criticism.  In addition to setting free the smartphones, the rules also extend a class to documentary filmmakers (and others, though those “others” are not discussed here).

By coincidence, a 5th Circuit ruling was issued at about the same time (July 26, 2010) confirming many of the principles inherent in the rulemaking by the Librarian of Congress.  See MGE UPS Systems Inc v. Power Protc Svc LLC, et al.

Introduction

Marian the Librarian in Music Man notwithstanding, it is rare that decisions by a librarian generate vast amounts of commentary that can be fairly called “breathless exultation.”

Well, OK, so it’s the librarian who runs the Library of Congress.  He’s in charge of copyrights.  And it’s the iPhone.

In case you have been living in a cave for the past 48 hours: the Librarian of Congress ruled that jailbreaking a smartphone for two particular purposes does not cause liability under a particular section of the Digital Millennium Copyright Act (for the legal wonks, the ruling relates to Section 1201).

But wait there’s more:  In addition to other “uses” that are now permitted, certain users can crack the Digital Rights Management program on movie DVDs for purposes that have always been considered fair use.  And a teaser so you’ll read more:  Documentary filmmakers now have a bit of freedom.

The Context

Before getting into a bit more detail, let’s consider the setting.  The DMCA makes it a bozo no-no to crack the security codes preventing access to copyrighted material (let’s call that “jailbreaking”).  However, DMCA also commands the Librarian of Congress every three years to review the impact of this section on Fair Use and to create classes of works exempted from prohibitions on jailbreaking.  And that is just what he did (see the entire document—which is worth reading.  See

http://www.copyright.gov/1201/2010/Librarian-of-Congress-1201-Statement.html.)

By ironic coincidence, a 5th Circuit opinion was issued that also provides common law basis for certain types of jailbreaking.  You can find the opinion at http://www.appellaterecord.com/uploads/file/MGE.pdf.

How Fair Use Is Involved

Basically, the Librarian articulates a principle that he (OK, the Library of Congress) does not like technologies that, in blocking access, also preclude what would otherwise be “fair use.”  In the case of the iPhone, it is personal, non-commercial use.  In the case of movie DVDs, it is for education, commentary and criticism.

Jailbreaking Smartphones

The ruling enables users to jailbreak smartphones for two purposes.  The first is to enable a user to download and use pretty much whatever applications that user wants to use.  Google Voice, long prohibited from the iPhone, can now be used.  This also means that you can create your own apps and use them on your iPhone (though why you would do that is anybody’s guess:  the App Store works pretty well).

The second permitted use is somewhat more compelling.  You can jailbreak a smartphone in order to use it on other networks.  Yep.  That got you to sit up.  That’s right:  You can now use your iPhone on the Verizon, T-Mobile, Sprint or other mobile networks.

What you cannot do: Well, you probably cannot make a business out of this.  The decision by the Librarian of Congress rests entirely upon the use being personal and non-commercial.

Jailbreaking Movie DVDs

The Librarian also expanded a previously created class of works, in this case by adding the use by documentary filmmakers of short clips in their films that are commentary or criticism.  Quoting from the website above, the rulemaking permits jailbreaking the DVD

when circumvention is accomplished solely in order to accomplish the incorporation of short portions of motion pictures into new works for the purpose of criticism or comment, and where the person engaging in circumvention believes and has reasonable grounds for believing that circumvention is necessary to fulfill the purpose of the use in the following instances:

(i)         Educational uses by college and university professors and by college and university film and media studies students;

(ii)        Documentary filmmaking;

(iii)       Noncommercial videos

It looks like documentary filmmakers could use these clips for commercial purposes.  However, what this decision does not do is change the Fair Use doctrine and its accreted case law.  In other words, when a filmmaker uses a clip from a DVD then he or she must still take the risk that the use of the clip will be protected by the Fair Use defense if the copyright owner files suit.  (Remember:  Fair Use is not a “permit” but only a defense if sued.)

Summary:  The Tribune Company just launched Tribune 365 (www.trb365.com) that claims to provide integrated marketing campaigns—that is, ads across multiple platforms available within the Tribune media—newspapers (e.g., The Chicago Tribune and The Los Angeles Times), other print outlets and television stations.  In fact—and probably more important—it represents integrated ad sales:  one team to sell ad inventory across all of their platforms (and, with hope, others, as well).  We think this is a brilliant step—and long, long overdue.

The Details.

It is pretty straightforward—and both astonishing and understandable (OK, OK, so it’s a contradiction:  Call it a paradox)—that a major, and heavily indebted, media company has finally figured out one of their biggest assets:  multiple platforms.  The Tribune Company’s initiative is called Tribune 365 (www.trb365.com).

Selling ads across these platforms to an advertiser in what the ad industry calls “integrated ad campaigns” becomes a lot more attractive.  More to the point, they overcame one of the biggest obstacles, which is the silo-like ad sales structures of newspaper ad teams selling their ads, TV station ad sales teams selling their inventory, and so on.  Media reports point to a recent campaign for Target, with ads in newspapers, on Tribune TV stations and Tribune websites.

So What?

“Integrated ad campaigns” are not that new but what is new is that they are now available where they count:  where the inventory resides.  This makes it likely that we will see them with more frequency.  Moreover, think about it for a bit:  What the Tribune is doing is a classic case of the model that like very much, which is “audience integration.”  That’s what diversified media companies do best.  They bring audiences to advertisers.  The more diversified they are then the more audiences they can aggregate.

Aggregation recognizes that audiences get their content from multiple sources.  While there may be some overlap (someone who reads “The Trib” and watches a Tribune TV station), there are many people who use one medium and not another.  If those media happen to be owned by one media company, why not place ads across all of them?  That’s audience aggregation.

It’s not always so simple.  We have often seen civil war break out in media companies among the ad sales teams.  The sales team responsible for TV ad sales rebels when the website sales team for the TV station calls on the same clients for their inventory.  It can get ugly.

And it is understandable, because you are dealing with the livelihood of salespeople.  Someone who has cultivated the ad agency (or internal ad buyer) of a large advertiser for years relies upon the sales commission to pay the mortgage .  Why should he or she let a competitor—even someone in the same corporate family—put the saleperson in financial jeopardy?

And (we hope) that’s what the Tribune Company has figured out.  We hope that the integrated sales team means that commissions are not limited to one medium because that is the only way that you can (and should) change the ad sales culture.  After all, ad revenues amount to the lifeblood of most media companies.  And selling ad inventory makes that lifeblood pump.  And earning those commissions is what enables the sale of that inventory.

Summary:  CW will launch an ad campaign that encourages viewers to communicate with each other through social networking—texting, Twitter, Facebook and the like.  Now, at least someone recognizes the value of multiple platforms.

Among the more interesting approaches to respond to advertisers’ demands on networks, CW will launch an ad campaign that acknowledges and embraces the viewers’ use of other platforms.  Called “TV to talk about,” the tagline will change with each ad to things like “TV to text about,” “blog about,” “chat about” and “tweet about.”  The New York Times published an interesting article on this point at:

http://www.nytimes.com/2009/05/21/business/media/21adco.html?emc=eta1

CW is probably better positioned than other networks because its programming attracts younger audiences who already interact across digital programs.  What was interesting (according to the NYT article) was that CW had to send researchers to the homes of viewers to find out that viewers do this.  Now that’s funny.  What are they reading?

So here’s an idea:  Let viewers opt in to a scroller that shows the most popular Tweets (or other feeds of comments of other viewers) during the show.  Of course, the scroller will be sponsored by an advertiser. . . .

One more step towards true convergence:

The Open Mobile Video Coalition (OMVC) has announced plans for 60+ stations in 20+ cities to start simulcasts of OTA programming by the end of 09. Cities scheduled thus far include New York, Boston, Chicago, San Francisco, DC and Philadelphia.

This should boost sales of the iPhone and other devices with large screens. Imagine the opportunity now with WiMax being deployed—conversely, imagine the network overload.