World Watch: The Safe Harbor Loophole and the Internet of Other People’s Things

“Americans are freedom loving people and nothing says ‘freedom’ like getting away with it.”

From Long, Long Time by Guy Forsyth.

How many times have you heard the expression, “DMCA license”?  The expression is completely baseless, yet it has come to be used to describe an online company that uses music, movies, television, books and images that are intentionally used without rights and commercially until the company receives a take down notice.  The examples given of companies using the “DMCA license”?  Most frequently YouTube, Grooveshark and whatever Michael Robertson is doing at the moment.

If you tell these people that there’s no such thing as a “DMCA license” and that the very expression is internally contradictory, the comeback usually is “Why does YouTube get away with it?”  And of course the answer is the same answer to why does YouTube claim to be struggling to break even–Google is willing to bankroll any litigation using the monopoly rents they derive from their search business to extend their control including fighting any suggestion that they are not entitled to the safe harbors under the U.S. Copyright Act.  If it’s any comfort, the Europeans have the same problem.

The problem with this, of course, is the sheer volume of notices that Google receives for their search business as well as for YouTube.  Google received over 350 million take down notices for search alone.  Google doesn’t disclose the number of takedown notices it receives for YouTube, but a “Google representative” (whoever that is) said that YouTube took down 180,000,000 infringing videos in 2014 according to PC World:

Google argues that new laws aren’t needed to protect copyright holders.

“We’ll continue working to protect people using our services,” Google’s lawyer said Monday. Last year alone, he said, it removed 500 million “bad ads” and over 180 million YouTube videos for policy violations.

Unclear if all those videos were for copyright violations, but the context of the quotation was about copyright infringement.

There is, of course, a threshold question of whether YouTube is even within the definition of a “service provider” under the safe harbors in the first, place, but here’s what the “DMCA” actually says–you’ll note the “knowledge predicate” that is the threshold requirement for the service provider qualifying for the relief:

A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider – (A)(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing; (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material; (B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and (C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

Would you say that receiving 350 million take down notices would constitute “actual knowledge” or “facts or circumstances from which infringing activity is apparent”?  Or would you say that Google views the massive number of notices as a feature set that tells them their business model is working to plan?

As Beggars Group Chairman Martin Mills told an audience at Canadian Music Week in 2014:

The American government is increasingly looking at reforming copyright laws. As long as that reform creates a balance between strengthening copyright and allowing investment in the creative world, and adapting it to a world never envisaged, I support that intention. But I believe part of that change must be to remove the safe harbour loophole.

We are at the point at which notice and take down must become notice and stay down.

To conclude, whilst thanking you all again, I would like to quote from one company’s evidence to Australia’s Communication Ministry a few months ago.

“ We believe there is significant, credible evidence emerging that online piracy is primarily an availability and pricing problem “

Whereas that might have been true ten years ago, today, in an era with myriad licensed services (and Australia has more than most ), and with streaming services with free tiers, I think that’s, frankly, rubbish.

Who was it from? Google, the parent of YouTube, one of the companies that have made billions on the back of a statutory provision intended to protect ordinary people acting innocently.

The purpose of the DMCA safe harbors was to provide a little latitude to reasonable people acting reasonably, not to provide a rationale for the “DMCA license” and not to impose one of the biggest income transfers of all time.  I’m still looking for the conga line of Congressmen who think that Congress intended to strike that balance.

The Europeans have the same problem with the EU Copyright Directive.  Given Google’s massive lobbying and cronyism in the United States, it is likely that we will need to look to Europe to fix the “notice and shakedown” loophole just like we have to look to Europe to reign in Google’s many other abuses of its monopoly powers.  As Music Week reported last week:

The IFPI is taking action against what it sees as an abuse of safe harbour rules by platforms like YouTube and Dailymotion, which is resulting in the music industry losing out on billions of potential income every year.  [Hence, the income transfer.]

Legislation that allows passive intermediary digital platforms to host content without getting “caught up in copyright liability” needs to be clarified, said IFPI chief executive Frances Moore during a press conference….

Moore highlighted YouTube and Dailymotion as websites that define themselves as intermediary hosts and use safe harbours to avoid getting full licenses and paying creators the same rates as the likes of Spotify and Deezer [that do not rely on the safe harbor fiction]….

“Spotify and Deezer have something like 141 million paid and unpaid subscribers who generate something like $1.6 billion for the industry. On the other hand, YouTube or Dailymotion, who have over 1bn users, generate something like $641m for the industry.”

This year, the IFPI will be working to try and get governments to clarify the “legislative flaw” through campaigning for change within European law via the courts, but any change could take “one or two” years to go through.

Google will, of course, fight tooth and nail to keep the income transfer under the “DMCA license”.  The other dynamic that isn’t often discussed is that there are two forces at work here:  one is the income transfer that causes label revenues to decline across the board and due in no small part to infringing activity of which Google is well aware across all its platforms.  The other is the effect of the advances that YouTube does pay for the videos and songs it does license.  As revenues decline, those advances, breakage, “technology fees” and the like that YouTube pays out become more and more important to survival.

This allows Google to use YouTube for the opportunity to turn the screws if the industry gets too uppity.  And, oh, by the way–don’t forget that Google has a seat on Spotify’s board of directors.

So watch this space–things may get interesting.

One thought on “World Watch: The Safe Harbor Loophole and the Internet of Other People’s Things

  1. Chris, you and your team are always spot on with your news and analysis. No pun intended. Only wish more people who can make a difference are reading your blog. Best, David


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