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@andreworlowski: Google had Obama’s ear on antitrust probe — Artist Rights Watch

August 21, 2016 Leave a comment

According to emails released under the US Freedom of Information Act, Google briefed the White House on an antitrust investigation into itself, breaking a 40-year precedent of the President’s office staying out of competition issues. It’s no smoking gun – just another small but valuable piece of evidence showing how close the ties are between Obama’s White House and the giant ad-slinger.

via @andreworlowski: Google had Obama’s ear on antitrust probe — Artist Rights Watch

hesserenata

Obama Songwriter Czar Renata B. Hesse

david_edelman_final

Google White House Fixer Doogie Howser R. David Edelman

ginny hunt

Google White House Fixer Ginny Hunt

johannashelton-540x1158

 

Maybe we don’t really need them…

August 16, 2016 Leave a comment

Guest Post by Stephen Carlisle: ASCAP and the Terrible, Horrible, No Good, Very Bad DOJ Decision That’s Going to Create Chaos in the Music Industry

August 14, 2016 Leave a comment

[We’re pleased to have another outstanding guest post by Stephen Carlisle, an entertainment lawyer with over 25 years experience in private practice in the State of Florida.  The post first appeared on the Nova Southeastern University Office of Copyright site where Mr. Carlisle is the university’s first Copyright Officer.  Posted with permission of the author.]

My previous blog post detailed all the reasons why the U.S. Department of Justice could not do what it had announced it was going to do: rule without any hearing, court order or rule-making procedure that ASCAP and BMI were required to engage in 100% licensing. 1 Now, we have seen the written ruling, and you can read along if you wish. 2 With all apologies to author Judith Viorst for stealing the title of her book 3 (which I read to my sons many times), what happened last week was a terrible, horrible, no good, very bad decision by the DOJ, which, in truth, is an unmitigated assault on the rights of composers by their own government.

What this decision represents is a thoroughly dishonest explanation of what is in fact a gross violation of due process. So, let’s take these one at a time.

PART I

The DOJ claims:

“First, the plain text of the decrees cannot be squared with an interpretation that allows fractional licensing: the consent decrees require ASCAP to offer users the ability to perform all ‘works’ in its repertory and BMI’s licenses to offer users the ability to perform all ‘compositions’ in its repertory.” 4

No, the consent decrees fully endorse fractional licensing. Here is what the 2001 revision to ASCAP’s consent decree says:

“ASCAP shall not restrict the right of any member to withdraw from membership in ASCAP…provided that any writer or publisher member who resigns from ASCAP and whose works continue to be licensed by ASCAP by reason of continued membership of a co-writer, writer or publisher of any such works, may elect to continue receiving distribution for such works on the same basis and with the same elections as a member would have, so long as the resigning member does not license the works to any other performing rights organization for performance in the United States.” 5

So, ASCAP cannot, by the very plain text of the consent decree, continue to license and collect the share of a former member who has licensed his share to another PRO. Yet, this is exactly what the DOJ says that ASCAP must now do:

“[F]or a song co-written by one ASCAP member and one BMI member, the co-writers might designate the ASCAP member to collect all revenues from the licensing of public performance rights to the song and require that the ASCAP member distribute a share of the revenues to the BMI member.” 6

Did you read your own consent decree, DOJ? You just suggested what the plain text of the consent decree states unequivocally is prohibited conduct!

The DOJ tries to wiggle out of these consequences by stating:

“Under these circumstances, the song would not be included in BMI’s repertory.” 7

No, you can’t go there either. Because your rationale for reading into the consent decrees the 100% licensing rule is that a PRO writer agrees to license everything in which they have an ownership interest to their PRO. Here is the direct quote from your ruling, DOJ:

“Similarly, a songwriter affiliating with BMI grants to BMI the right to license non-dramatic public performances of ‘all musical compositions . . . composed by [the member] alone or with one or more co-writers’ and promises that ‘no performing rights in [these compositions] have been granted to or reserved by others except as specifically set forth therein in connection with Works heretofore written or co-written by [the author].’ BMI Writer Agreement, available at http://www.bmi.com/forms/affiliation/bmi_writer_kit.pdf.” 8

Followed by this threat:

“In the process of clarifying the works that ASCAP and BMI are able to continue to license under a full-work licensing requirement, the PROs may remind their members that the members made grants of rights to their PRO to license all works of which a member is a partial or complete owner and warranted that there were no other agreements that would prevent licensing on the basis described in the grant of rights.” 9

In other words, DOJ, you’ve just recommended that composers breach their licensing agreements with their own PRO’s.

So, let’s recap the loopy logic of the DOJ’s argument:

  • An ASCAP and BMI writer write a song together.
  • ASCAP must now license both the ASCAP and BMI share and can collect for both writers, because “[u]nder the copyright law, joint authors of a single work are treated as tenants-in-common, so ‘[e]ach co-owner may thus grant a nonexclusive license to use the entire work without the consent of other co-owners, provided that the licensor accounts for and pays over to his or her co-owners their pro-rata shares of the proceeds.’” 10
  • This is the case even though the ASCAP consent decree says that ASCAP cannot do this.
  • The remedy for this is for the BMI writer to breach his agreement that licenses “all” of his works to BMI, and instead agree to let ASCAP collect everything.

So, this reading of the consent decrees is inconsistent with not only the plain text of the consent decrees, but the plain text of your own opinion.

PART II

Next, the DOJ attempts to say that the Courts have consistently ruled in favor of 100% licensing. Of course, it’s no surprise they have never said such a thing. The DOJ contends:

“[T]he Supreme Court explained that the ASCAP and BMI blanket license ‘allows the licensee immediate use of covered compositions, without the delay of prior individual negotiations, and great flexibility in the choice of musical material’… If the licenses were fractional, they would not provide immediate use of covered compositions; users would need to obtain additional licenses before using many of the covered compositions.” 11

This is, in fact, the time honored practice of taking a quote out of context. What the SCOTUS is explaining here is why the blanket license is not an anti-trust violation, not that fractional licensing is not allowed in the blanket license system. Because, without the blanket license, the broadcaster would have to perform thousands of individual negotiations, a net benefit to the broadcaster.

Here are the sentences that immediately precede the language quoted by the DOJ:

“This substantial lowering of costs, which is of course potentially beneficial to both sellers and buyers, differentiates the blanket license from individual use licenses. The blanket license is composed of the individual compositions plus the aggregating service. Here, the whole is truly greater than the sum of its parts; it is, to some extent, a different product.” 12

And the sentences which immediately follow the DOJ quote:

“Many consumers clearly prefer the characteristics and cost advantages of this marketable package, and even small-performing rights societies that have occasionally arisen to compete with ASCAP and BMI have offered blanket licenses. Thus, to the extent the blanket license is a different product, ASCAP is not really a joint sales agency offering the individual goods of many sellers, but is a separate seller offering its blanket license, of which the individual compositions are raw material ASCAP, in short, made a market in which individual composers are inherently unable to compete fully effectively.” 13

Quite a different thing, isn’t it? Nothing in this opinion says anything about fractional shares.

Next, the DOJ asserts:

“Similarly, the Second Circuit has held that ASCAP is ‘required to license its entire repertory to all eligible users,’ and that the repertory includes ‘all works contained in the ASCAP repertory…’ Accordingly, the consent decrees must be read as requiring full-work licensing.” 14

Baloney. Again the quote is taken out of context. The Second Circuit isn’t ruling on anything in the quote, it’s just providing factual background. In fact, all the Court is doing here is directly quoting from the consent decree! Here’s the complete quote, which, by the way, is contained in a section of the opinion labeled “Background:”

“The core operative provision of AFJ2 provides, in pertinent part, that ASCAP must ‘grant to any music user making a written request therefor a non-exclusive license to perform all of the works in the ASCAP repertory.’ AFJ2 § VI. The decree defines ‘ASCAP repertory’ as ‘those works the right of public performance of which ASCAP has or hereafter shall have the right to license at the relevant point in time.’ Id. § II(C). ‘Right of public performance’ is defined, in pertinent part, as ‘the right to perform a work publicly in a nondramatic manner.’ Id. § II(Q).” 15

The Court’s ruling here was whether ASCAP could withdraw “subsets” of their license, particularly digital broadcast rights. The Court concluded it could not. It did not rule that the consent decrees require 100% licensing. No Court has ever said that or anything close to that.

The DOJ is just making this up.

PART III

Then there’s this doozy of an explanation:

“This statement seeks to explain the bases for the Division’s determination and describe why an express recognition that ASCAP and BMI do currently and must continue to offer full-work licenses should not meaningfully disrupt the status quo in the licensing of public performance rights. As discussed below, the Division encourages the industry to use the next year, during which the Division will forgo enforcement of the full-work licensing requirement, to transition to a common understanding regarding the scope of the ASCAP and BMI licenses. This period should allow stakeholders to resolve any practical challenges relating to complying with the fullwork licensing requirement, including the identification of songs that can no longer be included in ASCAP’s or BMI’s repertories because they cannot be offered on a full-work basis or the voluntary renegotiation of contractual agreements between co-owners to allow ASCAP or BMI to provide a full-work license to the song.” 16

Let me get this straight:

  • The Consent Decrees currently, and have always, required full work licenses.
  • The fact that everyone thought differently doesn’t matter, and this does not evidence a change in policy.
  • The fact that the PRO’s based their entire business model on an entirely contrary reading of the consent decrees will “not disrupt the status quo in the licensing of public performance rights.”
  • Since this will not disrupt the status quo, we will NOT enforce what is NOT a new rule for a year, so you can figure out the “practical challenges” of what is NOT a new rule.
  • And, BTW, since this is NOT a new rule, some songs will no longer be available through ASCAP and BMI as they were in the past.

If this were not bad enough, here’s the kicker:

““[T]he Division will not take any enforcement action based on any purported fractional licensing by ASCAP and BMI for one year, as long as ASCAP and BMI proceed in good faith to ensure compliance with the requirements of the consent decrees.” 17

Gee. You might as well get out your signet ring and hot wax, my liege. 18

Words cannot convey how much I resent being threatened by my own government. Because they won’t enforce their “new rule that’s not a new rule” for the next year, only if ASCAP and BMI knuckle under to their heavy handed violation of my due process rights as a composer. So, if the PRO’s go to Court to challenge this “new rule that’s not a new rule” (which BMI has already started 19), is the DOJ is going to drop the hammer on them?

You seriously call yourself the “Justice Department?”

PART IV

It’s an unconstitutional taking under the 5th Amendment.

Says the DOJ:

“In the unlikely event that a user sought to depart from this practice by relying on a single PRO license as a basis to perform all co-owned works, the Division anticipates that the user would see an increase in the license fee corresponding to that portion of the works it is no longer paying for through a different PRO, as well as an additional administrative fee to cover the PRO’s costs associated with the license (which may include the cost of contracting with other PROs to make payments to those PROs’ members).” 20

Except there’s only one problem with this thinking. In the event of a dispute, the “rate court” gets to decide what ASCAP and BMI charge. Surely you remember, DOJ. You participated as amicus curae in the suit by Pandora Media against ASCAP on those very grounds. 21 So, the rate for thousands of licensees is already set (like Pandora), the result being that the PRO’s will be unable to charge any extra “administrative fees” as you so blithely indicate. This means the PRO’s will in fact earns less money, which turns into songwriters getting less money.

You cannot do this under the 5th amendment, namely, impose costly new regulations without “due process of law,” which you have utterly failed to do. Which, of course, is why the DOJ continues to insist that this is not a new rule, when it clearly is a new rule.

And what about SESAC? They are not a party to any consent decree. But this “new rule that’s not a new rule” makes them a party to the consent decrees if their writer has co-written with an ASCAP or BMI writer. What happened to their due process rights?

As explained before, this is really rule-making. 22 This would require all sorts of notices and procedures, and yes, due process that the DOJ doesn’t want to do.

PART V

Finally, don’t kid yourselves, folks. It’s going to be chaos.

The Copyright Office, in opposing the interpretation of 100% licensing, listed the numerous ways in which the current, very effective, licensing system would be damaged, not only in a practical basis but an economic basis: http://copyright.gov/policy/pro-licensing.pdf.

It’s already started. The Songwriters of North America have released the following statement:

“Based upon the marketplace uncertainty the DOJ’s proposal is likely to cause, some music licensees have already insinuated that they intend to withhold payments from ASCAP and BMI and rely upon an application for a license to continue to use our works free of potential infringement.” 23

This is because under section VI of the consent decree, ASCAP must give a license to anyone who requests one. They don’t have to pay what ASCAP wants. If there is a disagreement, they can then go to the “rate court” under section IX, under which ASCAP has the burden of proof. So, the music goes on playing, but the user stops paying.

And what about restrictive agreements between co-writers? At least the DOJ acknowledges that it cannot invalidate them.

“Of course, the obligation under the consent decrees that ASCAP and BMI offer full-work licenses binds only the two PROs and not any individual songwriter. Co-writers of songs remain free to split up their joint rights by contract in a way that makes their songs unlicensable (sic) by ASCAP or BMI… If co-owners decline to grant ASCAP and/or BMI the right to license the song on a full-work basis, the PROs will not be able to license that song.” 24

David Lowery over at The Trichordist has already suggested a civil disobedience strategy that will make the DOJ’s new interpretation unworkable.

How Songwriters Could Legally Strike and Bring the Entire Music Licensing System Down

A further complicating factor is that many times in this day and age, one becomes a co-writer of a song without a conscious collaboration to do so. This happens when a song gets sampled without permission, or in some cases, stolen.

It happened to a client of mine. Another writer completely ripped off my client’s song to serve as the verses for his song. Of course we caught him, but the problem was, the song was a hit. A Top Ten Billboard hit, in fact. So the smart thing to do was take ownership of part of the copyright of the new song, and not deep-six a song that was a hit. But, being the cautious attorney that I am, in the agreement, I provided that neither writer could license the song without the consent of the other. So, up to this point, we all assumed that BMI had one share and ASCAP had the other.

What happens now? Neither writer can grant full rights to ASCAP or BMI by themselves that the DOJ says they must have. So, if the other writer declines, or my writer declines, this song vanishes out of their catalogs. And this song is still popular, I just worked out placing it into a TV show. (And please note, the production company cleared both ends of the song without asking if it was necessary.) But now, the network that wants to show it, can’t, because neither ASCAP of BMI hold the necessary rights.

See? This “new rule that’s not a new rule” really isn’t going to cause any problems at all.

So, does either ASCAP or BMI know about our restrictive agreement? Nope. How could they? I guess the DOJ is going to insist that they send out letters to the composers of several million musical compositions to try and find out if there are any restrictive covenants between writers that they need to know about.

See? This “new rule that’s not a new rule” really isn’t going to cause any problems at all.

Further consider that “[i]n jurisdictions outside the United States, the default rule is that individual co-authors may license only their fractional share in a work (absent an agreement by all co-authors to the contrary). See 1 Nimmer on Copyright § 6.10 (“[I]n foreign jurisdictions, a license will not be valid unless all joint owners are party to it.”). 25

So, did you co-write a song with Max Martin, who is a resident of Sweden? Whose law applies, DOJ? Perhaps we’re going to see his 21 Billboard #1 hits 26 vanish from the airwaves?

See? This “new rule that’s not a new rule” really isn’t going to cause any problems at all.

Finally, consider that this “new rule that’s not a new rule” is likely to cause writers to remove their works from ASCAP and BMI, maybe taking them to SESAC, and maybe taking them to Irving Azoff’s GMR.

And then the fun really starts.

Consider an artist like Billy Joel. He single-handedly wrote all the music and all the lyrics to virtually every song he recorded. 27 What if he pulls his catalog and takes it to GMR? That means no Billy Joel gets played anywhere, unless you pay what he wants. If you do, you get a lawsuit by return mail. What if others do the same?

Chaos, that’s what will happen.

Which is what we’re going to get with this terrible, horrible, no good, very bad decision by the DOJ.

Notes:

  1. You Can’t Make This Stuff Up! The Department of Justice v. ASCAP ↩
  2. Statement of the Department of Justice on the Closing of the Antitrust Division’s Review of the ASCAP and BMI Consent Decrees ↩
  3. Alexander and the Terrible, Horrible, No Good, Very Bad Day ↩
  4. DOJ decision at 12 ↩
  5. United States of America v. American Society of Composers, Authors and Publishers at page 19. ↩
  6. DOJ decision at page 20 ↩
  7. Id. ↩
  8. DOJ Decision at 6-7 ↩
  9. DOJ Decision at 21 ↩
  10. DOJ Decision at 8 ↩
  11. DOJ Decision at 12-13 ↩
  12. Broadcast Music, Inc. v Columbia Broadcasting System 441 U.S. 1 (1979) at 21-22 ↩
  13. Id. at 22 ↩
  14. Pandora Media Inc. v. ASCAP, 785 F.3d 73, Second District Court of Appeal 2015 at 77-78 ↩
  15. Pandora Media Inc. v. ASCAP, 785 F.3d 73, Second District Court of Appeal 2015 at 77 ↩
  16. DOJ Decision at 4 ↩
  17. DOJ Decision at 18-19 ↩
  18. Liege: noun (1). a feudal lord entitled to allegiance and service. ↩
  19. Re: United States of America v. Broadcast Music, Inc., No. 64 Civ. 3787 ↩
  20. DOJ Decision at 21-22 ↩
  21. Pandora Media Inc. v. ASCAP, 785 F.3d 73, Second District Court of Appeal 2015 ↩
  22. You Can’t Make This Stuff Up! The Department of Justice v. ASCAP ↩
  23. @wearesonala: Songwriters Organization of North America Letter to Renata Hesse at Dept. of Justice [sic] on 100% Licensing ↩
  24. DOJ Decision at 21 ↩
  25. Re: United States of America v. Broadcast Music, Inc., No. 64 Civ. 3787 ↩
  26. Ask Billboard: Max Martin Has Written How Many Hot 100 Top 10s?! ↩
  27. Billy Joel Song Lyrics ↩

 

How Google Took Over the Justice Department Antitrust Division: Renata Hesse’s Timeline

August 9, 2016 3 comments

 

If you have been following the machinations by the Obama Justice Department [sic] over amending the ASCAP and BMI consent decrees,  you may have found yourself wondering who was responsible for rejecting the good faith efforts of the songwriting community in favor of a cynical back room deal with multinational tech companies and broadcasters.  I have some thoughts about this, and ask your indulgence–it will take some of your time to read this timeline, but I think you’ll be glad you did.

As you read, ask yourself this question:  If it looks, acts and quacks, is it corrupt?  And if it is, what can you do about it?

As I understand it, Obama lawyers made clear to at least the songwriter groups invited to participate in private conference calls that there was one person pulling the strings.  That’s consistent with the public statements from SONA and the NMPA.

We can infer that person did so probably with the blessing if not the instruction of the White House.

I suggest to you that the Obama Justice Department’s ruling on 100% licensing and partial withdrawal is so illogical and divorced from reality that it can really only be understood in one way–corruption.  And this is why the House and Senate Judiciary Committees need to investigate what really happened here.  And credit where credit’s due–the idea for this investigation comes from Rep. Doug Collins and the questions raised by Rep. Hakim Jeffries, Rep. Jerry Nadler and Rep. Judy Chu.

The Ghost in the Machine

As MTP readers will recall, a Silicon Valley lawyer named Renata B. Hesse was appointed to oversee the sections of the Antitrust Division of the U.S. Department of Justice, and was recently appointed to oversee the entire Antitrust Division.  After that elevation, her portfolio still includes Litigation Section III–run by a lawyer named David C. Kully–which itself has responsibility for the entire entertainment industry and newspapers among other sectors of the U.S. economy.

—>Kully sued to block the court-supervised sale of the Orange County Register to Tribune Publishing in a bankruptcy auction.  Too bad Google wasn’t buying, that sale would have sailed right through the Justice Department [sic].  Oversight of newspapers may be one reason why you don’t seen many newspapers brave enough to criticize him.  (We’ll come back to whether Litigation III’s portfolio is a proper allocation of the taxpayers’ resources given that the structure just makes agency capture that much easier.)

On July 12, 2016, Rep. Collins called for an investigation into conflicts of interest at the DOJ on its handling of the ASCAP and BMI consent decrees, and was he ever correct.  Of course, if the Obama Administration intends to request Senate confirmation of Hesse and William J. Baer (a long time Washington Establishment type who is now Acting Associate Attorney General), that will be an excellent opportunity to raise some of these questions.  Since I’ve been known to be a betting man, I will tell you right now that I doubt seriously whether Hesse will ever see a confirmation hearing in the lame duck term of President Obama.  And since Baer was recently confirmed in his last role at the DOJ, there may not be a pressing need to go through the confirmation process with him, either.  But we can dream.

principal-deputy-assistant-attorney-general-renata-b-hesse-head-of-the-justice-departments-antitrust-division

Ms. Hesse appears to be the thought leader behind imposing 100% licensing on the songwriter community.  I arrive at this conclusion by process of elimination, as the DOJ professional staff do not appear to be taking credit for coming up with it on their own.  Ms. Hesse is the one who has authority over the process, at least most directly, so if the DOJ professional staff did not originate the idea, and if no one in the voluminous consent decree public comments came up with it, it must have come down from on high.  At least within the DOJ or even higher.

However, it is worth noting that the ASCAP/BMI consent decree review started before Hesse took over as head of the Antitrust Division from Bill Baer.

I doubt that Ms. Hesse came up with this all on her own, so I asked myself how did this person end up being in the position she is currently in with the authority to do so much damage to so many people who don’t deserve it.  Not to mention the fact that when it comes to anything that the Google network touches, which is pretty much everything in human experience, the U.S. Government–at least currently and unlike their European counterparts–only seems to be interested in enforcing the antitrust law to protect Google, not to challenge it.

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So how did this relatively obscure lawyer end up where she is?  Let’s take a look at a timeline of events in Ms. Hesse’s career.  I started a few months ago by reading Ms. Hesse’s official biography on the Justice.gov website, but noticed immediately that it omitted large chunks  of her most recent career path.  That omission led me to look elsewhere in other public sources, such as the White House visitor logs and other public sources.

After graduating from Clinton alma mater Wellesley and Boalt Hall at Berkeley, Ms. Hesse worked at Brobeck, Phleger & Harrison for 7 years.  Brobeck was a casualty of the Dot Bomb Bubble explosion and went out of business in 2003.  Ms. Hesse’s LinkedIn profile tells us that she left Brobeck in 1997 and joined the U.S. Department of Justice in 2002 as Section Chief of the Networks and Technology Enforcement Section of the Antitrust Division where she worked until 2006 when the revolving door deposited her at the top Silicon Valley law firm of Wilson Sonsini Goodrich & Rosati (the major Silicon Valley competitor of Brobeck when Ms. Hesse worked at Brobeck).

According to an interview she gave to an American Bar Association journal, Ms. Hesse started her legal career in intellectual property, presumably Valley-style at Brobeck which she “kind of” likes because it’s “fun and interesting”:

ANTITRUST SOURCE: [Intellectual property] is an issue that you’ve been very invested in personally. Why is that?

RENATA HESSE: I actually started out as an IP lawyer, and so this has always been an area that’s been of interest to me. I also have historically worked a lot in the technology sector and the tele- com sector in particular. As a consequence, this was a subject matter that was innately interest- ing to me and an industry sector that I was familiar with. And I kind of like it; it’s fun and interesting and it’s important. But I don’t have a personal agenda here, other than trying to ensure that consumers get the benefits of competition and do not see higher prices or less innovation as a result of conduct that harms competition.

The Second Resume Gap

I often say that the fastest way to get a jihadi video taken down from YouTube is for me to blog about it on MTP.  I don’t know if this is also true of Ms. Hesse’s bio, but I can’t help noticing that it got cleaned up recently on the justice.gov website.

As Artist Rights Watch noted in a previous post, Ms. Hesse’s “old” official biography on the justice.gov website omitted her job at Wilson Sonsini which omission was determined by comparing her Linkedin profile to the official bio.  But that LinkedIn profile also includes its own unexplained gap about what she did prior to joining the DOJ in 2012–her then-current employment as Deputy Assistant Attorney General for Criminal and Civil Operations:

Member
Wilson Sonsini Goodrich & Rosati
July 2006 – June 2011 (5 years)

Section Chief, Antitrust Division
U.S. Department of Justice
January 2002 – May 2006 (4 years 5 months)

Associate
Brobeck, Phleger & Harrison
1990 – 1997 (7 years)

Notice, there is a gap of five-odd years between 1997 and 2002.  Which is strange, because during this time she is mentioned in a November 2, 2001 Justice Department press release as the contact for public comments on the DOJ consent decree with Microsoft–at which point she was the lower rank of “Trial Attorney” before being promoted to Section Chief in January 2002:

The proposed Final Judgment will be published by the Federal Register, along with the Department’s Competitive Impact Statement, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed consent decree within 60 days of its publication to: Renata Hesse, Trial Attorney, 325 7th Street, N.W., Suite 500, Washington, D.C. 20530, (202-616-0944). At the conclusion of the 60-day comment period, the
Court may enter the proposed consent decree upon a finding that it serves the public interest.
According to an updated bio on the DOJ website, we now have an update to her resume that cleans up the gaps–sort of:

Ms. Hesse served as the Deputy Assistant Attorney General for Criminal and Civil Operations and Principal Deputy Assistant Attorney General between 2012 and 2016.  During this period, she also served as the Acting Assistant Attorney General from November 2012 to January 2013.  She was a career trial attorney in the Division between 1997 and 2006 [overlapping Jamie Gorelick and Eric Holder’s respective terms as Deputy Attorney General and Bill Baer’s term as head of the FTC Competition Bureau], during the last four years of which she served as the Chief of the Networks and Technology Section.  Over the course of her 15 years at the Division, Ms. Hesse has played a leading role in a number of the Division’s most challenging and important investigations and litigations, including serving as the Acting Assistant Attorney General in the Division’s review of the mergers between Comcast and Time Warner and Applied Materials and Tokyo Electron, Deputy Assistant Attorney General overseeing the Division’s challenge to the US Airways/American Airlines merger, and lead attorney during the remedy phase of the Division’s monopoly maintenance case against Microsoft.

Before rejoining the Division in 2012, Ms. Hesse served as Senior Counsel to the Chairman of the Federal Communications Commission, where she was responsible for overseeing the FCC’s review of AT&T’s proposed acquisition of T-Mobile.  She was also a partner in Wilson Sonsini Goodrich & Rosati’s antitrust group.

No mention of Google or what happened while she was at Wilson Sonsini Goodrich & Rosati.  Despite her obvious “revolving door” status, Open Secrets has not gotten around to a revolving door profile on Hesse as yet.

Yet here is where the timeline gets interesting.

The Timeline

July, 2006: Wilson Sonsini Goodrich & Rosati hires Ms. Hesse, most immediately the former chief of the Networks and Technology Enforcement Section of the Department of Justice Antitrust Division.  Hesse joins WSGR as a partner in its antitrust and trade regulation practice, joining another revolving door person Susan Creighton, the former Director of the Federal Trade Commission’s Bureau of Competition from 2003-2005 (the post previously held by Bill Baer).  Ms. Creighton appeared before the 2011 Senate Antitrust Subcommittee investigation into Google’s business practices along side Google boss Eric Schmidt (the hearing where Schmidt refused to answer Senator Cornyn’s questions about Google’s prosecution for violations of the Controlled Substances Act on the advice of counsel, aka taking the Fifth).  Hesse and Creighton are two revolving door hires.

December 18, 2008: In a Meet Innovators interview with Hesse, interviewer Adrian Bye asks, “There’s been obviously antitrust issues between Google and Yahoo! Are you able to comment on any of those?” Hesse replies, “I’m not, really, I’m afraid since I did a lot of work for Google on it.”

July 29, 2010: The Google legal team consisting of Hesse, Creighton, Dana Wagner and Matthew Bye begin lobbying state attorneys general investigating Google for violations of state antitrust law.

September 24, 2010: DOJ settles U.S. v. Adobe Systems Inc., et al. stopping Adobe, Apple, Google, Intel, Intuit, and Pixar from signing non-solicitation agreements for employees. The settlement requires annual monitoring by the DOJ Antitrust Division for five years.

December 14, 2010:  Then-Attorney General Eric Holder presided over a December 14, 2010 meeting at the White House requested by Google during the DOJ’s drug investigation into Google’s bad acts.   (Eric Holder followed Jamie Gorelick into the position of Deputy Attorney General under the Clinton Justice Department.)

March 23, 2011: Hesse, Wagner, Bye, Creighton actively trying to make state investigations into Google’s business practices go away.

April 8, 2011: Department of Justice Antitrust Division approves Google acquisition of ITA Software, issuing consent decree that set the requirements governing Google’s future operation of the ITA business. The term of the consent decree is five years and requires Google to report all complaints to the DOJ.

May 20, 2011: FOIA logs from the Ohio Attorney General’s office reveal email communications between Hesse and Beth Finnerty, the Ohio AG Section Chief, referencing Ms. Hesse’s “Google portfolio” of work at Wilson Sonsini: (Hesse): “Beth: Google would prefer that you serve them directly, but cc Dana Wagner and also someone at our firm. Since I will be moving on relatively soon, I think it makes sense for you to copy Chul Pak (copied on this message) in my stead. Chul is a partner in our New York office (used to run Mergers IV at the FTC) and is going to be taking over my Google portfolio. He’s terrific and I know you guys will work well together.

June 3, 2011: A Global Competition Review article highlights Wilson Sonsini’s work for Google and Hesse’s involvement in the five-partner team advising Google on antitrust matters: “Susan Creighton leads a five-partner group at Wilson Sonsini Goodrich & Rosati in Washington DC. Creighton, Scott Sher and Renata Hesse are all Who’s Who entrants…A renewed flow of deals is keeping the team very busy. It advised Google throughout the DOJ’s investigation of its just cleared purchase of ITA software.

June 24, 2011: The Federal Trade Commission opens its antitrust investigation of Google.

August 19, 2011: Google enters into non-prosecution agreement with U.S. Attorney’s Office for the District of Rhode Island, avoiding a grand jury appearance but admitting that it violated the Controlled Substances Act in marketing products to U.S. customers (that apparently included minors). Google pays a fine of $500 million and enters into a two-year remediation program monitored by the Department of Justice and the Food and Drug Administration as part of deal blessed by the Department of Justice and, presumably, the Attorney General of the United States.  (See MTP post “Questions for Mr. Holder on Google Drugs“.)

February 6, 2012: President Obama appoints Arnold & Porter partner William J. Baer to head Antitrust Division of DOJ.  (See Baer’s Revolving Door profile.)

February 29, 2012: After the nonprosecution agreement detailed Google’s many violations of the Controlled Substances Act, not to mention business ethics, Google is sued by multiple stockholder groups for breach of fiduciary duty, etc., relating to the use of the stockholder’s money to pay the $500,000,000 fine for its executives’ bad behavior.  According to the Wall Street Journal and the hearing transcript, Google’s lawyer told the court that the stockholders should not have access to the 4,000,000 documents Google produced in the Rhode Island grand jury investigating the Controlled Substances Act violations that lead to the $500,000,000 fine.  In particular, documents that established the culpability of Larry Page that was at issue in the stockholder case:

“The U.S. attorney in Rhode Island went off the reservation and gave a long interview about all the evidence and why it was he was so excited about the case,” [Google’s Wilson Sonsini] lawyer Boris Feldman told the judge at a Delaware state court. “It ended up being so far off the reservation that the Justice Department apologized to Google for it and muzzled him.”  (See court hearing transcript.)

I have heard a rumor that this apology was arranged by Washington wheeler-dealer Jamie Gorelick, former Fannie Mae executive, former Deputy Attorney General under President Bill Clinton who was succeeded by Eric Holder and who represents Google in a variety of matters.  And mentor of Beth Wilkenson who the FTC brought in to run the busted Google antitrust investigation.

March 26, 2012: Google Chief Economist Hal Varian meets with former Deputy Attorney General Carl Shapiro, a member of the Obama Council of Economic Advisors (and co-author with Varian of Information Rules: A Strategic Guide to the Network Economy.) Shapiro’s Google connections include:

–Senior consultant to Charles River Associates before joining the Obama Administration and again from 2012 to present. Charles River Associates advised Google during the FTC’s antitrust investigation.  Shapiro re-joined Charles River on November 19, 2012, days before the FTC opened settlement negotiations with Google on that antitrust investigation.

–Shapiro co-authored several white papers and studies with other academics and scholars who have received Google funding in the past including Durie Tangri partner and Stanford Professor Mark Lemley  and Brookings’ Robert Litan.  (Professor Lemley is also a founding partner of Durie Tangri, the San Francisco firm that gleefully screwed the world’s authors in the “Google Books” case and represented Goldieblox against the Beastie Boys for Goldieblox knowing use of a Beastie’s song in an ad against the dying wishes of MCA.)

April 26, 2012: Google Chairman Eric Schmidt meets privately with White House Chief of Staff Jack Lew.

April 27, 2012: Federal Trade Commission announces the appointment of Jamie Gorelick crony Beth Wilkenson to oversee Google antitrust investigation because there just aren’t enough qualified lawyers at FTC’s professional staff–you know, the ones that recommended prosecution of Google.

—>>May 1, 2012: Carl Shapiro meets alone with Hesse in the White House mess. This was the first White House meeting Ms. Hesse attended.

May 4, 2012: A few days later, Global Competition Review reports that Hesse “has emerged as a likely candidate to take over the vacant deputy assistant attorney general position at the Department of Justice.”

May 4, 2012: Google chief lobbyist Johanna Shelton, Google Senior Trademark Counsel Annabelle Danielvarda, and Google Legal Director Terri Chen meet with U.S. Intellectual Property Enforcement Coordinator Victoria Espinel.

May 7, 2012: Ms. Danielvarda, Ms. Chen and Google State Policy Counsel David Lieber meet again with Espinel.

August 2012: Hesse appointed Special Advisor to the Civil Enforcement Division of the U.S. Department of Justice.

October 1, 2012: Google General Counsel Kent Walker, Google Senior Patent Counsel Suzanne Michel and Google lobbyist Johanna Shelton meet with Victoria Espinel.

October 11, 2012: Google lobbyist Johanna Shelton and Google IP Counsel Fred von Lohmann meet with Victoria Espinel.

October 13, 2012: Bloomberg reports that FTC staff has circulated a 100 page memo recommending suing Google for abusing its dominance of Internet search in violation of antitrust laws and that the FTC is considering a separate lawsuit against Google for misusing its standard essential patents to block rivals’ smartphones from coming to market.

November 6, 2012: President Obama re-elected.

November 16, 2012: Google’s former Google Deputy General Counsel for Patents & Patent Strategy from 2003-2012, Michelle Lee is announced as the Director of the new satellite Silicon Valley office of the U.S. Patent and Trademark Office, in San Jose, California.

—->November 19, 2012: Renata Hesse named as Acting Assistant Attorney General for the Antitrust Division. News accounts report that Ms. Hesse will be “leading the department’s efforts on intellectual property issues.”

November 21, 2012: Bloomberg reports; “U.S. Said to Waver on Antitrust Case Against Google”. The story quotes anonymous sources claiming, “Google may skirt the most serious antitrust allegations under investigation.”

November 27, 2012: Bloomberg reports that Google CEO Larry Page meets with FTC officials to settle the antitrust probe and that Eric Schmidt is seen on Capitol Hill with Google lobbyist Susan Molinari. The story notes that the FTC has told Google it won’t accept a resolution short of a consent decree and that issues under discussion with the FTC include “alleged misuse of patents to try to block rivals’ smartphones from coming to market.”

November 27, 2012: Hesse meets privately with Victoria Espinel at the White House.

November 30, 2012: Obama campaign manager Jim Messina meets privately with White House Chief of Staff Pete Rouse at 1:30 pm. An hour later at 2:30 pm, Rouse meets privately with the DNC’s Patrick Gaspard. And at 3:30 pm, Rouse meets privately with Google Chairman Eric Schmidt.

—>>November 30, 2012, The Washington Post reports that Google and FTC negotiations avoid search issues, instead focusing on potential issues related to standard essential patents and Google’s Motorola patent portfolio.

December 10, 2012: Renata Hesse, David Kappos, U.S. Patent & Trademark Office; Malcolm Lee, Department of Commerce; Terrell McSweeney, DOJ Antitrust Division; Peter Pappas, USPTO Chief of Staff; Ari Schwartz, Department of Commerce meet with Victoria Espinel.

December 8, 2012:  USC Annenberg releases first corporate responsibility report on brand-sponsored piracy.

December 17, 2012, Former FTC Chairman William Kovacich criticizes the Google-FTC rumored settlement in a Bloomberg story: “The notion of voluntary commitments is close to worthless…They are feeble policy-making instruments and they will not in any way placate the complainants, who will correctly see them for what they are, which is an attempt to provide cover to walk away.”

December 30, 2012: Bill Baer is confirmed as head of DOJ’s Antitrust Division, then investigating Google to no conclusion.

January 3, 2013: FTC closes its antitrust investigation of Google without a consent decree and requiring only a voluntary commitment from Google that it make available to competitors the company’s standard-essential patents on a fair, reasonable and non-discriminatory (FRAND) basis. Senate Judiciary Committee Chairman Patrick Leahy said of the decision: “I am disappointed… [the FTC-Google settlement] relied on simple, voluntary commitments from Google to end certain practices that a majority of Commissioners found to have raised strong concerns about impeding innovation.”

February 14, 2013:  USC-Annenberg calls out Google on brand sponsored piracy.

April 18, 2013:  Reps. Goodlatte and Schiff send letter to Randall Rothenberg at Google-dominated Internet Advertising Bureau asking for explanation of flaws in IAB “best practices” on brand-sponsored piracy.

June 6, 2013: National Association of Attorneys General (NAAG) charges that Google is continuing to allow ads for illegal online pharmacies (at Summer NAAG at which I was a speaker).

August, 2013: DOJ allows Google Drugs non-prosecution agreement with Google to lapse, but illegal drug ads are easily findable all over YouTube.

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—>August, 2013:  Billboard reports that DOJ is investigating UMPG and Sony/ATV partial withdrawals from ASCAP and BMI.

September and December 2013:  Billboard reports that DOJ investigation into UMPG and Sony/ATV paused due to unprecedented rate court decisions barring partial withdrawal from ASCAP and BMI.

December 2013:  Billboard reports that Pandora lost part of its BMI case on an issue that would likely have been solved by Ms. Hesse’s current devotion to 100% licensing;

Pandora was struck a blow on Wednesday when a rate court ruled that the Internet radio leader doesn’t have a blanket license that includes the songs of publishers who have withdrawn their digital rights.

The BMI/Pandora rate court ruling means if Pandora doesn’t cut some kind of deals with publishers like Universal Music Publishing Group, BMG and Kobalt — who all have notified BMI that come Jan. 1, they intend to withdraw their digital rights — Pandora could be in copyright violation if they haven’t pulled those songs by that date.

Judge Louis L. Stanton has ruled the exact opposite of what occurred when Pandora squared off with ASCAP — a rival collection society to BMI — at another rate court hearing on Sept. 17. Judge Denise Cote ruled that Pandora had a license in effect and were covered by the ASCAP blanket license, including songs from all the publishers that intended to withdraw.

Yet both judges came to the same reasoning on how the consent decrees disallow the partial withdrawals of rights. Stanton agreed with Cote that publishers are either all in or all out, a position which was bolstered by Ethan Glass, a lawyer from the Department of Justice [then Assistant Chief of the Litigation III Section, now a partner at Quinn Emmanuel, Google’s “go-to” patent lawyers].

March 2014:  Reps Bob Goodlatte and Adam Schiff send “Dear Colleague” letter to House members calling out ad-sponsored piracy.

April 2014: Billboard and Politico report that Justice Department is leading industry sources to believe that it will amend consent decrees.

June 2014:  DOJ announces review of ASCAP and BMI consent decrees by Litigation Section III, the unit of the Antitrust Division that regulates the entire entertainment industry including the music business under command of Ms. Hesse.  No mention of 100% licensing.

June 6, 2014: DOJ Litigation Section III requests public comments on general review of ASCAP/BMI consent decrees, no mention of 100% licensing.

—>July 2014: Billboard reports that DOJ sends CID to ASCAP, BMI, Sony/ATV and UMPG regarding “alleged coordination among ASCAP, BMI, Sony/ATV Music Publishing, and Universal Music Publishing Group” presumably at the request of music users including Pandora, Google and other DiMA members.

August 6, 2014: Deadline for filing public comments on consent decrees.

November 8, 2014: Loretta Lynch nominated for Attorney General.

November 12, 2014:  Global Music Rights told The Hollywood Reporter that their writers are prepared to take 42 of his clients, representing some 20,000 copyrighted works, away from the YouTube ecosystem, including the new Music Key.

November 26, 2014:  Broadcasters request payola waiver from FCC.

December 2014: Pharell Williams notifies YouTube he is pulling his songs from YouTube.

April 15, 2015:  European Commission sends antitrust complaint to Google for violations of EU competition law.

May, 2015: Google, Pandora and companies with market cap over $2 trillion form MIC Coalition to lobby against songwriters.

MIC Coaltion 8-15

May 15, 2015: Reuters reports that the Obama Administration is locked in “internal wrangling” over what position to take in the Oracle v. Google case and that legal teams from Google and Oracle had made separate March presentations to the Department of Justice and other government officials in the case. The presentations centered around a U.S. Supreme Court request that U.S. Solicitor General Donald Verrilli “weigh in” on the case to provide the U.S. Government’s opinion on the matter. Bloomberg also reports that Public Knowledge lawyer Charles Duan met with Department of Justice antitrust officials to advance Google’s point of view in the case.  (Google has acknowledged funding Public Knowledge in a filing in the Oracle case made under penalty of perjury, commonly referred to as the “Google Shill List”.)

—> August 17, 2015:  MIC Coalition sends letter to Hesse requesting investigation of SESAC.

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Google and Pandora are both members of the MIC Coalition, as are DiMA and the Consumer Electronics Association of which Google and Pandora are members.

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—> September 22, 2015:  DOJ Antitrust Litigation III Section requests public comment on 100% licensing.

October 2015: Pandora and Google lawyers request a vote from ABA IP Section on resolution that supports DOJ position on 100% licensing, which is voted down by experts, does not pass and is withdrawn.

November 2015: DOJ closes public comments on 100% licensing.

January 12, 2016: Rep. Doug Collins requests that the Copyright Office opine on the legal validity of 100% licensing as contemplated by the Department of Justice.

January 29 2016:  Copyright Office responds to Rep. Collins with report on “full work” licensing that rejects DOJ’s ultimate position.

April 15: 2016:  Hesse appointed Acting Assistant Attorney General and head of the Antitrust Division.

July 2016: Kully holds conference calls with songwriters attempting to get them to believe that 100% licensing is normal and seeking industry acceptance of rule change.  Songwriters reject this idea forcefully.

Kully refuses to send a draft of the regulation, instead reading draft aloud over the telephone.

Kully refuses to answer a direct question of whether the White House is involved in decision on 100% licensing.  Kully attempts to solicit criticism of 100% licensing, but songwriters believe this is not in good faith as it would be to DOJ’s advantage to manufacture some kind of industry consensus.

July 7, 2016:  Kully tells songwriters that the ruling is coming whether they like it or not.  Ruling to be released on July 29.

July 29, 2016:  Kully leaves a voice mail on songwriters phones telling them the release has been delayed.  Selected journalists receive copy of regulation embargoed until August 4.

DOJ Embargo

August 4, 2016: DOJ releases “statement” with no attribution to any person.  Entire creative community reacts negatively, Public Knowledge and MIC Coalition take victory lap.  As usual, Google is silent.

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Watch this Space: MTP Podcast on 100% Licensing with David Lowery, Steve Winogradsky, Chris Castle coming soon

August 6, 2016 Comments off

The MusicTechPolicy podcast is back!  Next week we will kick things off with a discussion of the Department of Justice [sic] ruling on 100% licensing and partial withdrawals.

Participants will be David Lowery, Steve Winogradsky of Winogradsky/Sobel and author of Music Publishing: The Complete Guide and me.

Watch this space for links to the podcast when it is completed, probably August 10/11.

In the meantime, you can subscribe to the MTP Podcast on iTunes or on Stitcher.  More recent podcasts can also be found on SoundCloud.

Mr. Obama, Meet Mr. Kafka

August 4, 2016 1 comment

Someone must have been telling lies about Josef K., he knew he had done nothing wrong but, one morning, he was arrested….”And why am I under arrest?” he then asked. “That’s something we’re not allowed to tell you. Go into your room and wait there. Proceedings are underway and you’ll learn about everything all in good time….”

From The Trial, by Franz Kafka.

It occurs to me that President Obama will go down in history as the American president who hurt artists and songwriters more than any other.  And I can’t help noticing that right from the beginning of his Administration–perhaps even before he took office–Google has been an overwhelming influence on all aspects of his decision making.  It should not be lost on anyone that the consistent beneficiary of the economic and emotional devastation visited upon artists and songwriters has been Google–starting with this gathering of the tribes barely a fortnight after President Obama took office held at the swank San Francisco pied à terre of Google’s head lawyer:

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Whether its the Administration’s abject failure to stop Google’s profit from brand sponsored piracy, Obama’s miserable record on protecting the property rights of creators to Google’s benefit, or the latest insult today from the Obama Justice Department on 100% licensing, it is clear that we seem to always come out on the short end of the stick when it comes to Barack Obama.  And I could go on, it’s not just these three points.

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Ginny Hunt, Google’s White House fixer.

Realize this–it’s not political.  Clearly.  Some of President Obama’s biggest contributors and most loyal supporters are from the music business, so unless there is some wild disparity in campaign contributions or other consideration coming from Silicon Valley in general or Google in particular, it’s clearly not political.

Google clearly has an inside track on this Administration, however.  In case you missed it, take a look at the number of White House visits by Google’s chief lobbyist Joanna Shelton (courtesy of the Google Transparency Project):

Google White House Meetings

That’s right–Google’s lobbyist has more access to the White House than the insurance industry, Exxon, Microsoft or Comcast.

And that doesn’t even count the famous Google revolving door:

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This is all of a piece.  It is what perpetuates that ennui of shadows, that foreboding that somehow, some way we have done something wrong.  For why else would they persecute us so?  Don’t you wish they would just tell us what it is rather than bleed us from 1,000 cuts with DMCA takedown notices or today’s absurd through the looking glass ruling by the Obama Justice Department on 100% licensing?

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As NMPA CEO David Israelite said in his statement about the bizarre ruling today, this contradictory mishmash that suggests an innate lack of the ability to think sequentially, this too leads back to Google and corrupt government run amok:

After a two year review of the consent decrees that govern ASCAP and BMI, career lawyers who were never elected nor confirmed to their positions, led by a lawyer who previously represented Google, determined that songwriters should have even fewer rights, less control over their intellectual property and be treated more unfairly than they already are.

The lawyer referred to is Renata B. Hesse, and we will have more on her in the coming days, including her violations of White House ethics rules (rules that don’t seem to apply to Google) and other odds and ends.  Hers is a timeline replete with strange coincidences, secret White House meetings, and missing chunks of resume, all held together by a common thread:  Whenever Hesse is around, Google seems to benefit.

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It’s so blatant, you have to ask yourself why would government bureaucrats like DOJ antitrust lawyer David C. Kully stick their necks out so far in broad daylight.  Easy answer–because they’re not sticking their necks out.  These “jobsworths” are doing what they know the higher ups want them to do, and maybe even demand that they do.  Now where have we heard that defense before?

Of course–if you read the DOJ’s ruling, you won’t find one single name of anyone–nobody–mentioned in the text.  Nobody takes ownership of it.  There’s not even a name in the document metadata.

If these lawyers were so confident of their work product, wouldn’t they have pride of authorship?  Wouldn’t they want to be cited, quoted, pointed to?  Apparently not.  You don’t suppose that’s a sign of true cowardice, do you?

But remember this–it’s not just Renata Hesse.  There are hundreds of Google people planted in the government, and hundreds of government people planted at Google.  This is worse than Halliburton, Brown & Root, United Fruit, IT&T or Teapot Dome.  The difference is that it is extremely unlikely that anyone will ever investigate any of it.

What has happened today is that the Obama Administration has–to the great benefit of Google and the MIC Coalition–kicked the can down the road.

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The Obama Administration have successfully managed to trick the entire music industry into believing that their intentions were good with a two year delay (at least) of “reviewing” thousands of aspirational comments from songwriters about how to make the consent decrees work better for everyone.

You will hear people say that the Justice Department acted in good faith, that they meant well, that they just couldn’t find one single proposal to adopt from the public comments including those made by the Copyright Office.  But remember you heard it here first…

That’s bullshit.

I don’t know how these people sleep at night, but it’s bullshit.  This game was rigged from the beginning.  It’s the only explanation that makes any sense.

Songwriters are now faced with having to dig into meager royalty payments (more meager than seven years ago due in large part to the inaction of the Obama Administration) to sue a defendant that literally prints money–the Obama Justice Department–just to get something that approaches justice.

So stay tuned, I will have a lot more to say about this corruption.  But if you have a vague foreboding that you’ve done something wrong but no one will tell you what it is, you’re right.

Mr. Obama, meet Mr. Kafka, the author.  You’ll remember Mr. Kafka from the Google Books case.

He was on to you years ago.

Guest Post by @schneidermaria: Content ID is Still Just Piracy in Disguise: An Open Letter to Rightsholders and a Music Industry Ready to Renegotiate with a Monster

July 31, 2016 3 comments

By Maria Schneider

Content ID, YouTube’s digital fingerprinting technology, is under fire lately for very good reason.  Originally touted by YouTube as an effective method of blocking illegal uploads, Content ID was ostensibly the service’s way to protect copyright holders.  But Content ID quickly morphed into a self-serving massive moneymaker.  Their pitch goes something like this: “Hey, advertising is good for you.  Why not use Content ID to cash in on all the piracy by getting a share of revenue we can generate from ad placement?”  Well, they don’t call it piracy – but make no mistake, in the end, their whole scheme still depends on a culture of piracy.

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Since the media presents YouTube’s misleading talking points without challenge, it’s up to us to expose what’s really going on.  There’s a lot to sift through when one digs deep, so bear with me.  In the end, ask yourself if jumping on board, monetizing through YouTube’s Content ID, makes us all complicit in perpetuating the piracy racket that YouTube created to make billions for itself.

1.  YouTube’s 3 Billion Figure is all Smoke and Mirrors

YouTube dangles Content ID and monetization in general in front of music creators to lure us to participate.  YouTube’s line is that if we jump on the monetization bandwagon, they’ll share ad revenue with us.  Sounds like a good deal, but YouTube’s ad revenue has proven paltry when compared to the real cost of producing music.  Like an Atlantic City casino, YouTube wants us to believe that we just might hit the jackpot.  Stories of viral videos make the news and seem like the new brass ring for rights-holders, but this insightful article explains how rare “viral” is.  And of the very, very few who achieve viral, who can sustain it and make a career of it?

The real truth is that most music creators on YouTube are making nothing or next to nothing from the use of their work.  YouTube acknowledges that out of all people in the world with videos/music on its service, only 8000 “partners” qualify for Content ID.  The rest of us can put ads on the videos we ourselves post, but likely the majority of us are never paid anything, not reaching the $100 threshold YouTube requires of us to receive the first check.  And our own uploaded content is competing with pirated uploads of our music that we’re left to police.  The mountain of cash from all the music creators who haven’t yet reached $100 must be creating one hell of a “float” for YouTube.

YouTube boasts of $3 billion in total payouts, but dig slightly below that surface, and you see a shameful number.  They’ve admitted it’s really less than $1 billion per year.  And think about it:  YouTube has over a billion users each month, and over 12 billion users a year, so do the math.   The measure of fairness is not how much YouTube has paid out in total, but it’s whether those who make the music that fuels YouTube’s fortune are getting paid adequately.  Here would be important questions to ask:

1. How many rights-holders are represented on YouTube?  (That number must be astronomical, and likely impossible to calculate.)

2. How many rights-holders can actually pay for the budget of a record from revenue they receive from YouTube?

3. How many music creators never reach the $100 threshold?

4. Of all the music-rights-holders represented on YouTube, how many make even minimum wage on an ongoing basis, year after year, for their life’s work that sits, year after year, on YouTube’s massive servers?

Every musician knows that as long as music is available on YouTube for free, it won’t likely sell very well elsewhere, especially with all the available apps that can rip mp3s right from YouTube videos into your personal library.  And hey, what happened to the mechanical royalty for all of this, guys?  (I’ll be writing about that soon.)  So, if YouTube is going to corrupt all other income streams for those who invest their lives and means into the making of music, then YouTube should at very least pay a living wage, right?

We’ve had plenty of time to test the ad model, and one thing is for certain:  Ad revenue does not pay for the making of music – not even remotely close.  The music industry should quit banging its head into that same wall looking for results.  Face the facts folks – ads will never fuel the music economy.

2.  YouTube Has Us Haggling Over Popcorn Prices, While They Walk Away With All the “Main Event” Revenue

While we’re haggling over paltry ad revenue, we’re diverted from the far greater value that is being generated from our music.  Every month, our music drives billions of users to YouTube’s platform, and the data that Google then gathers from following our fans around the web is where YouTube’s true value lies.  Google and Facebook didn’t get their billion dollar valuations from ad revenue.  YouTube’s valuation largely comes from the mountains of hoarded data collected on the backs of all musicians and creators.  Therefore, part of the value of the YouTube empire should fairly belong to musicians.  Not only should musicians and creators share in the value of data gathered, but they should also have access to the data their creations generate.  Why in the world is it fair for YouTube to keep all of this data as a “trade secret” when it’s generated from our own fans, often through piracy YouTube expressly facilitates?

3. YouTube’s Dirty Secret about Content ID

Content ID is available only to those whom YouTube chooses – and YouTube runs the place like an exclusive country club.  The simple fact is that the vast majority of independent musician-rights-holders are not accepted into Content ID.  I’ve received five GRAMMY® Awards, and even testified about the DMCA next to Google’s counsel, Katherine Oyama, listening to her boast at length about the virtues of Content ID and its ability to block uploads.  But when I came home from testifying in D.C. and applied for Content ID, I was denied.  Content ID is reserved for big record companies with big catalogues, and probably selected independent artists whom YouTube believes will make YouTube a heap of money.  And who even knows to what degree artists or companies with YouTube contracts are allowed to “block” uploads, as those contracts are under NDAs.  Are we seriously to believe they’d permit independent artists to join, only to block their entire catalogue from being uploaded?

In the press, YouTube has fought back against the recent flood of criticism, saying that all rights-holders can access Content ID – that they can get it through “third-party vendors.”  These third party vendors often take between 20% to 50% of the revenue paid by YouTube—after YouTube takes its share.  That means the rights-holder is paying two overpaid gatekeepers.  So yes, it’s available, but at a completely unreasonable premium.  If big record companies are complaining about their bad revenue from YouTube, they should try being an independent musician, paying yet another middleman!

But here’s the most relevant fact that YouTube keeps hiding: BLOCKING UPLOADS THROUGH CONTENT ID IS NOT AVAILABLE THROUGH THIRD PARTIES.  The use they bragged about before Congress – that they imply is available to everyone – does not exist.  The reason is obvious – without ad revenue, there’s zero incentive for the third-party vendor or YouTube to partake.  The third-party vendors would have to charge a fee big enough to pay YouTube and itself to simply block uploads.  What a sick game that would be – paying some third-party company and YouTube to block the pirated uploads YouTube promotes.

Why can’t a rights-holder protect his/her work from illegal exposure on YouTube according to his/her Constitutional right, and then go sell it where he/she wants, for the price he/she chooses to set?  That’s reasonable, right?  Why is that such an unattainable dream for people like me and hundreds of thousands, if not millions, of my colleagues?

If an independent rights-holder wants to keep all their work off of YouTube and keep clear of YouTube’s ad-based, piracy-driven, self-serving, dirty, lawless racket, he or she is screwed.  Is there a single independent artist that YouTube has allowed access to Content ID for the sole purpose of “blocking” uploads?  Katherine Oyama should stop the bragging about Content ID until her company makes it available to “every” rights-holder for blocking.  And certainly, misleading Congress with false claims and self-aggrandizement in a Congressional hearing, and similarly misleading the American public through a calculated propaganda campaign, is in my opinion, deeply unethical.

4. Content ID Legitimizes Piracy – We Shouldn’t Be Complicit

Music creators who succumb to the false appeal of “monetizing” on Content ID, or those whose record company has made that deal for them, have been swayed by YouTube’s line of baloney that illegal uploads are good and aren’t really illegal as long as YouTube offers a pittance from the ads they generate.  Clearly, the infringement orgy YouTube has sponsored for so many years has brought independent musicians and record companies to their knees, as they accept bad deals to monetize the crumbs that are left on the floor from a devoured industry.

Our music industry’s acceptance of the “monetization” tool from Content ID only serves to “legitimize” the piracy that YouTube systematically breeds.  Monetization erases any last vestige of guilty-feeling-illegal-uploaders.  Content ID actually makes them feel good about themselves as they upload to their hearts’ content with zero inquiry.  “Look! I’m making the artists money AND giving them needed exposure, AND I’m offering the public free music at the same time!”

I’ve heard this logic again and again from young people with bloated YouTube channels.  We’ve all fallen into YouTube’s trap:  By making a deal with the devil, right-holders are basically condoning the piracy that has destroyed the music marketplace.  Content ID monetization is steamrolling our Constitutional right to control our own creative works.  We shouldn’t buy into YouTube’s piracy scheme for the few scraps it might offer.

5.  Content ID Offers a Pathetic Deal

With a straight face, YouTube tells you and the media that they give 55% of ad revenue to the rights-holder and only keep 45%.  But they calculate that percentage split after they first reimburse themselves for their own expenses, which they calculate behind their green curtain.  So the 55% figure is not of gross income.  An article by East Bay Ray explains that after YouTube pays itself about 37% for its expenses, rights-holders receive only about 35%.  That’s not a split, that’s a fleecing.

YouTube’s approach reeks of hypocrisy.  Sure, YouTube has expenses.  But has anyone discussed our expenses in making the recording?  Costs should be figured on both sides.  We all agree that when a potter sells a bowl, the price reflects the cost of clay, glaze, the kiln, firing, etc.  When a clothing designer sells a pair of pants, the wholesale price covers the cost of fabric, thread, pattern design, etc.  But YouTube, or rather, Google, the richest company in the world, wants us to accept a business model where the “price” they pay for our music has no rational relationship to the actual costs of making the music.  Who cares about how much they say they pay out.  Their site contains almost the entire world’s library of music, and it’s not even coming close to paying the cost of making that music.  We invest all we have – time, talent, training, technology, and more.  We have the right to expect a reasonable return on that investment.  YouTube is an imperialist tycoon that is finger-flicking less than third world pay at musicians and the music industry for a product that YouTube shouldn’t even have access to in the first place.

6. Who is Clearing all the Rights for Music on Content ID Anyway?

The answer is, probably no one.  When a record company puts out a record, the record company (assuming the artist hasn’t negotiated for ownership) likely owns the copyright to that recording.  And if the record company has struck a Content ID deal with YouTube, chances are they will monetize the record.  But what about the other copyright-holders?  Likely there are songwriters whose works are represented on the record, too.  Often there are several or more collaborators on any given song.  So, what about their right to block uploads?  Where are their royalties?  How are they accounted?  Are they accounted?  Who asked for permission?  Where is the transparency?  This is happening to me, and my answers are: none, nowhere, not, no, no one, and none.  YouTube is a jumbled, colossal rights violations mess that leaves independent rights-holders with the impossible task of doing DMCA takedowns, where YouTube publicly exposes our identities, leaving us open to repercussions from fans or record companies.  The intimidation leads us to do nothing but accept the loss.  There must be millions upon millions of such copyright violations on YouTube.  Maybe that’s why they don’t allow all of us to have access to the Content ID blocking mechanism, because they fear most records would have some rights-holder that won’t allow it to be monetized.  Well, if there was economic incentive, that wouldn’t be the case.  Isn’t that how a free market economy works?

7. YouTube’s Use of Content ID is Un-American

Here are the bigger and broader questions for our industry and government.  Why aren’t musicians and creators allowed to be a part of the American free market, where we set our prices based on the cost of producing our own product?  That’s how manufacturing works in any freedom-loving country.  Why can’t a music creator set the valuation of his/her work in the same way one sells visual art?  Why are the Department of Justice and government, (all of whom are tarnished by their whirling revolving doors with Google – read it!) who are setting most of our prices for us, doing so based on failed ad revenue models from usurious companies?  Why are the DOJ and our government at large intent on propping up a bogus “freemium” model?  And why are they blind to the simple fact that big data companies operate freemium ad-based models all to the greater end of gathering invaluable data to become the biggest player in the AI (artificial intelligence) race?

Why is the survival of theft-enabling, ineffective, ad-based internet businesses more valued than the future of music or livelihoods of musicians?  Why are we collectively not screaming our bloody heads off?  Our songs and music have shaped our culture and the world’s culture for centuries.  Music has brought people and cultures together, serving as the worlds’ ambassador without fail: a voice for freedom, for the oppressed, for change, for comfort, for celebration, and for transformation.

Music creators should be treated like the valuable citizens of this country that we are.  We should be allowed to set our own price at very least!  We aren’t the indentured servants of YouTube, here to make the Google empire rich and powerful.  Given a fighting chance, the market would show how much our fans value our work, as it has for nearly a century.  Taylor Swift and Adele proved exactly that with their quite recent releases that sold millions of good-old fashioned CDs at regular prices.  But when we’re forced to try and create that market in a society with a complicit government that’s allowed copyright theft to run rampant, it’s an almost impossible situation.

When YouTube serves the world mountains of pirated content on a silver platter without having to take a single step to stop the piracy, or Google is allowed to prioritize pirates in their ‘search’ algorithms (even after rights-holders send takedown notices), how could there ever be a true marketplace?

8. Without an Ability to Block Illegal Uploads with Content ID, We’re All Screwed

For the vast majority of us that are unable to protect our music against piracy, we’re stuck playing Whack-A-Mole with an outdated and anemic DMCA takedown process, fighting a tsunami of piracy from a company that does all they can to keep the flood-waters flowing.

So, let us ask ourselves as composers, songwriters, performers, producers, publishers, and record companies: are we willing to be complicit in this whole scheme, cementing piracy as an acceptable norm, all for the measly pocket lint they’re offering us?  I’d sooner fight piracy to the bitter end, and lose, than do that deal with the richest and scariest (“don’t be evil”) company on earth.

9.  YouTube Should Lose Their “Safe Harbor” for Withholding “Standard Technical Measures”

The DMCA’s safe harbor provision requires that companies like YouTube must ensure that “standard technical measures” “are available to any person on reasonable and nondiscriminatory terms” to identify and protect their copyrighted work.  (17 U.S.C. Sec. 512(i).)  YouTube is not allowed to discriminate as to who gets access to tools that have become “standard” in protecting copyright.  If YouTube does discriminate, it is supposed to lose its safe harbor.

It’s right in the DMCA.  This is a point no one has yet pressed.  Content ID has been around and used billions of times to make billions of dollars for years now.  “Audible Magic” is available at a very reasonable price to any company wanting to offer blocking of illegal uploads.  And on Audible Magic, content owners can upload their content for free.  Apple has now created “iTunes Match,” and Facebook is rolling out its own similar fingerprinting technology, so it’s obvious that fingerprinting technology has become a “standard technical measure.”  YouTube can’t deny it’s become the core of their business.  And, if they also tout that it’s widely available through third parties, as they have in numerous publications, that suggests “standard,” too.  Digital fingerprinting is a standard technology that’s now very accessible, it’s just that YouTube stiff-arms most of us who want to use it to block pirated uploads.  And most other sites that allow music uploads from their users, pretend like Audible Magic doesn’t exist, because they don’t want it to exist.  And though the DMCA safe harbor provision requires YouTube (and all internet companies that also allow public uploads), to use the available fingerprinting technology, no one is yet enforcing this application of the law.  It’s high time.

YouTube reserving its copyright protection feature for hand-picked rights-holders, blocking the masses’ ability to fully protect their Constitutional right, even though the technology is right there in YouTube’s dirty fingers, is like denying a rope to a drowning person.  Sounds like clear grounds to take away YouTube’s “safe harbor” protections to me.  It actually feels criminal by my own estimation, when you consider that the violated rights are Constitutional rights.

I wish record companies would step away from their Content ID contracts entirely, and fight a noble fight to enforce this statute in the DMCA that would protect all rights-holders equally, rather than being a complicit partner in the pathetic and dirty Content ID piracy racket.

10.  Content ID Should Be Made “Open Source” for All Internet Platforms

People are starting to wake up to the dangers of allowing a company to amass such power from data and artificial intelligence (AI).   There’s a movement to quickly develop AI technology and algorithms as ‘open source,’ in an effort to keep a few all-powerful hipster tycoons from having AI power over the entire world.  It’s called Open AI, and many seriously talented scientists are flocking to it.  Thank God there are a few people out there scared stiff by the power of those that are controlling AI.

Since Google’s empire is built on the premise that “open” and “free content” is such a grand idea for us little folk, then it’s high-time it puts its money where its mouth is, and make Content ID fingerprinting technology for blocking illegal uploads available to us little folk as “open source” too.  YouTube likes to say how much it has spent developing Content ID, but that’s exactly the point: if you won’t share YOUR works with us for free because you want to recover YOUR investment, why should you expect us to give away our works for free, without having recovered OUR investment?

And YouTube, don’t dictate how we rights-holders can use this now-standard technology.  Let rights-holders use it as they wish – to block or to monetize – no NDA’s, backroom deals, or intimidation.  Let’s make it all free and open, and see what a real marketplace looks like when we actually take measures to control infringement.

YouTube/Google wants the public to believe that certain “copyright” protection somehow harms the internet.  But when their own trillions are made on their own “copyrighted” software, through their own “copyrighted” algorithms and databases, and through their own “trade secret intellectual property,” they suddenly guard it like Fort Knox.  Somehow, YouTube’s and Google’s own copyrights are “good,” but musicians’ copyrights are “bad.”

Here’s the simple truth: protecting copyright doesn’t hurt the internet, it only hurts piracy.  And in the final analysis, Content ID is really just another sneaky way for YouTube to get rich off of piracy, and to try to appear like they’re throwing us a helping hand.  It’s underhanded and deceitful.  We as a music industry shouldn’t negotiate away the true value of our work out of desperation, giving way to the powerful grip of a racketeer (in my opinion) that just wants to keep us quiet.

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Are you a performer, songwriter, composer, producer, or fan, who wants to to help protect the future of music?  Sign on at musicanswers.org.

Read Maria Schneider’s ‘YouTube’ Installment #1, YouTube, Pushers of Piracy

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