DMCA s. 512 pain points: music and technology industry perspectives in juxtaposition.

• Date: 22 March 2017
• Author: Etcovitch, Daniel

TABLE OF CONTENTS I. INTRODUCTION 547 II. BACKGROUND 548 A. The DMCA Safe Harbor: Notice-and-Takedown 548 B. The State of the Market According to the Music Industry 550 C. The State of the Market According to the Technology Industry 551 III. JUDICIAL INTERPRETATIONS OF THE DMCA 553 A. Red Flag Knowledge 554 B. Representative List 556 C. Fair Use and Its Implications for Human Versus Automated Notices 558 IV. POTENTIAL REFORMS TO THE DMCA 562 A. From Takedown to Staydown (or Somewhere in Between) 562 B. Counter-Notices and the Lawsuit Requirement 564 V. CONCLUSION 566 I. INTRODUCTION

On April 1, 2016, the U.S. Copyright Office published the comments it solicited from stakeholders for its Section 512 Study, a program with the goal of gathering opinions on whether [section] 512 of the Digital Millennium Copyright Act ("DMCA") needs reform. (1) Among the commenters, the content and technology industries were not shy to tell the Copyright Office what they think is going right and what they think is going wrong, as well as what they think the systemic implications are. This Note will examine the comments of two groups of stakeholders: those from the music industry, (2) and those from the technology industry. (3) This Note will refer to each industry's arguments collectively while identifying when individual companies dissent. Both industries' comments, which answered the Copyright Office's list of questions in varying degrees of detail, tended to address two types of pain points: (1) major judicial interpretations of DMCA language, and (2) potential policy reforms that would require changing the actual structure of the DMCA system. Their proposed changes show that the two industries sometimes seem to live in entirely different worlds, and that there are serious questions as to whether the DMCA framework is suitable for the online ecosystem. The music industry decries the current system, citing the normalization of free music, the increase in infringement on popular platforms like YouTube, and the notice-and-takedown system requiring the music industry to constantly police the Internet for infringing material. (4) In contrast, the technology industry supports the current system, pointing to rising revenues, the enormous digital economy that the system's limited liability has encouraged, and the potential burden that any change in the status quo would impose on it. (5) Accordingly, this Note aims to critically engage with the policy proposals (or lack thereof) of both industries and place their arguments in direct juxtaposition.

Part II will provide relevant background, explaining the DMCA and the basic ways in which the music and technology industries view the state of the market. Part III will examine judicial interpretations of DMCA [section] 512 that the industries disagree about, while Part IV will examine their respective responses to proposed reforms.

2. BACKGROUND

   1. The DMCA Safe Harbor: Notice-and-Takedown

      Before DMCA [section] 512, providers of online services might have been liable for the content of users under a theory of secondary liability, based on them having facilitated infringement by providing the platform. (6) Section 512 establishes safe harbors for "service providers" that host, store, route, or transmit user-generated content, shielding them from liability for the copyright infringement of users as long as service providers comply with a few conditions. (7) Those conditions impose technical requirements, including (1) that transmission or routing of content be done "through an automatic technical process," (8) (2) that the service provider does not choose the recipients of that content, (9) and (3) that the service provider does not modify the content. (10) Section 512 also creates and requires compliance with a legal scheme referred to as the "notice-and-takedown system." (11) The notice-and-takedown system outlined in [section] 512(c) addresses user-generated content hosted on the service providers' networks. Under the DMCA, if the service provider has actual knowledge of infringing content on its service or is aware of "facts or circumstances from which infringing activity is apparent," often called red flag knowledge, it is required to "expeditiously" take that content down. (12)

      One way an online service provider ("OSP") can acquire actual knowledge of infringement is when a copyright owner submits a DMCA takedown notice, the elements of which are described in [section] 512(c)(3). It must include, among other things, a statement that the owner believes in good faith that the use of the content was "not authorized by the copyright owner, its agent, or the law." (13) When a notice is submitted, the service provider is required to take down the content and notify the uploader, (14) who then has the right to submit a counter-notice attesting that the content is not infringing. (15) The service provider must put the content back online within ten to fourteen days, unless the alleged copyright owner files a lawsuit in response to the counter-notice. (16) This is not an exhaustive list of the conditions service providers must comply with, but it highlights the conditions relevant to the bulk of the comments discussed in this Note.

   2. The State of the Market According to the Music Industry

      According to the music industry's comments, (17) the industry is struggling and the DMCA's structure is a major cause. (18) While the amount of music being listened to is rising, industry revenue and profitability has been declining for years. (19) According to the music industry, the DMCA's liberally construed safe harbors have allowed copyright infringement to run rampant on online services that host user-uploaded content. The Recording Industry Association of America ("RIAA") has sent more than 175 million DMCA notices since 2012. (20) Sony stated that its recordings alone have been the subjects of 5.7 million takedown notices. (21) Empirical analysis shows music industry groups submitted at least 58.6 percent of takedowns between 2008 and 2012. (22)

      The problem is not just the amount of infringement; the companies are also concerned about the amount of money spent on copyright enforcement. Sony spent hundreds of thousands of dollars policing SoundCloud between April 2015 and April 2016, and still claims it is able to monitor only about fifteen percent of its catalog. (23) Universal used the release of Taylor Swift's album 1989 as a case study because it pursued a particularly aggressive strategy to keep 1989 from becoming available online through unlicensed channels, with only partial success. (24) Employing a full-time in-house staff for four months, supplemented by twelve part-time employees at the International Federation of the Phonographic Industry ("IFPI"), Universal issued over 66,000 takedown notices to online sites hosting copies of 1989 or its tracks, on top of almost 114,000 blocks through YouTube's Content ID filtering system. (25) Universal also issued almost 30,000 notices to other online services. (26) Despite all that effort, Universal claims that 1989 was still illegally downloaded at least 1.4 million times. (27)

      To make matters even worse, the music industry claims that DMCA-enabled infringement of this scale gives substantial leverage in negotiating licensing and other deals to OSPs who rely on [section] 512. Because the DMCA's safe harbor provisions allow OSPs to spend minimal effort removing infringement, and because it is difficult for copyright owners to fight that infringement, copyright owners have an incentive to agree to unfavorable licensing deals with OSPs. IFPI estimates that YouTube, a user-generated video platform, paid $0.72 per user to record companies in 2014, while in 2013, Spotify, a licensed music streaming service, paid $20 per user to record companies, presumably due to that leverage. (28) Universal claims that "[l]iterally every licensed online music service invokes YouTube's below-market rates when negotiating with [Universal]." (29) Lower licensing fees paid across the board means decreased revenues for the music industry. According to Universal, in 2015 vinyl generated more revenue for copyright owners than free on-demand streaming from services eligible for the safe harbor provision. (30) If the record labels--the primary revenue mechanism for many major artists--are not making substantial revenue from digital downloads, then money is not entering the music industry, jeopardizing future music production. By this analysis, a portion of the revenue meant to support the sustainability of the music industry is being captured by the technology companies. (31) That narrative makes the whole system sound like a catastrophe. The music industry's pessimism is best expressed through a constitutional argument made by Universal: the Copyright Clause creates exclusive rights in order "to promote the Progress of Science and useful Arts," so a system that requires spending this much on enforcement rather than spending the money on "progress" cannot be what the framers intended. 32)

   3. The State of the Market According to the Technology Industry

      Technology industry stakeholders see the impact of the DMCA safe harbors as a force for good in promoting the content industry and the broader Internet industry (33) Google cites an Internet Association study to claim that the system is responsible for $966.2 billion of real GDP in 2014 alone, a number which notably would be captured mostly by technology companies rather than content companies. (34) Google also notes that "81% of angel investors would prefer to invest in a digital content intermediary in a weak economy" that has the DMCA system, as opposed to "investing in a strong economy where websites were held liable" for infringing user-generated content. (35) According to Facebook, the predictability of the copyright system plays a key role in facilitating investment and driving growth. (36) Google also claims to have...