There are untold riches in running the internet of other people’s things: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle, Part 4

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 4.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

II. GOOGLE’S USE IS CLEARLY COMMERCIAL.

Against this backdrop, Amici agree wholeheartedly with the Federal Circuit that “the fact that Android is free of charge does not make Google’s use of the Java API packages noncommercial.” Oracle Am., Inc. v. Google, LLC, 886 F.3d 1179, 1197 (Fed. Cir. 2018) (“Oracle II”). In arriving at this conclusion, the Federal Circuit cited evidence that Google generated over $42 billion from Android through advertising. Id. at 1187, 1197.

Google concedes that its creation of Android was “a commercial endeavor,” but argues more amorphously that its copying of Oracle’s code and organization served the noncommercial purpose of “promoting software innovation.” Pet. Br. at 43-44. Likewise,
Google’s amici argue that because Android was offered to consumers for free, its copyright cannot be commercial. See Copyright Scholars Br. At 12.

Yet contrary to the views of Google’s amici, the Federal Circuit properly found that Google’s use was commercial and properly weighed such a commerciality finding in the fair use inquiry. Just because Google did not sell Android to consumers does not mean its
copying did constitute commercial use. In fact, the $42 billion figure cited by the Federal Circuit is likely only the tip of the iceberg.

A. Google’s Market Dominance Lowers the “Customary Price” of Copyrighted Works.

As this Court stated in Harper & Row, whether a use is commercial “is not whether the sole motive of the use is monetary gain but whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” 471 U.S. at 562 (emphasis added). In other words, a commercial use is found where a defendant is “[g]iving customers for free something they would ordinarily have to buy.”  Oracle II, 886 F.3d at 1197 (quoting A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9th Cir. 2001)).

The Federal Circuit is in accord with the other Courts of Appeals that have considered this proposition. See, e.g., Soc’y of Holy Transfiguration Monastery, Inc. v. Gregory, 689 F.3d 29, 61 (2d Cir. 2012) (“‘Profit,’ in this context, is thus not limited simply to dollars and coins; instead, it encompasses other non-monetary calculable benefits or advantages.”); Weissmann v. Freeman, 868 F.2d 1313, 1324 (2d Cir. 1989) (factor one disfavored use where professor’s benefit in academic prestige and recognition was “ill-measured in dollars”); A&M Records, 239 F.3d at 1015 (“Direct economic benefit is not required to
demonstrate a commercial use.”); see generally Nimmer on Copyright 13.05  “Commercial uses’ are extremely broad.”).

Here, there should be no question that the purpose of offering a mobile platform was commercial in nature: Google simply wanted to maintain its ad sales dominance. See Oracle II, 886 F.3d at 1210.

One thing that content creators have grown to understand is that Google is not a tech company—it is an advertising company. When one sees this, all is revealed. See Jake Swearingen, Can Google Be More Than an Advertising Company? New York Magazine
(Feb. 5, 2019) (“Of the $39 billion [Google’s parent Alphabet] brought in [during Q4 2018], $32.6 billion of it was in advertising revenue — that’s 83 percent of its total revenue.”). Google has become enormously successful, though not always transparently.
Moreover, Google dominates the market for online advertising, with disturbing  implications for privacy.

As is well-known by now, Google extracts value from its users through selling advertising on works that Google makes available at no charge to the user, and through scraping user data in the background that Google then adds to its ballooning behavioral knowledge database through highly complex user profiling. Google extracts this value by selling targeted advertising, often in connection with verbatim copies of works generally offered for free to users on YouTube. There are untold riches in running the
internet of other people’s things.

The reason is this: free is critical to Google’s model, which depends on the en masse exploitation of copyrighted content. This business model is the sort that this Court has analyzed as commercial:

[Defendants] make money by selling advertising space, by directing ads to the screens of computers employing their software. As the record shows, the more the software is used, the more ads are sent out and the greater the advertising revenue becomes. Since the extent of the software’s use determines the gain to the distributors, the commercial sense of their enterprise turns on high-volume use, which the record shows is infringing.

See Grokster, 545 U.S. at 940. Likewise, Google’s business model enables staggering profits with little to no direct commercial transactions between it and the
end-user, particularly on YouTube. See Jason Fitzpatrick, If You’re Not Paying for It; You’re the Product, Lifehacker (Nov. 23, 2010).

Google’s evangelists have even coined a term to describe such takings: “permissionless innovation.” See Adam Thierer and The Mercatus Center, Permissionless Innovation and Public Policy: A 10 Point Program at 12 (2016). Vinton G. Cerf, Keep the Internet Open, N.Y. Times (May 24, 2012) https://www.nytimes.com/2012/05/25/opinion/keep-theinternet-
open.html.

Yet “permissionless innovation” is just another term for what polite creators call the underpinning of the infamous “value gap” currently plaguing the global community of music creators and artists. In fact, the disparity between artists’ royalties and Google’s
enormous ad-based music distribution profits off of their music has become its own market phenomenon and largely led to the adoption of the European Copyright Directive in 2019 which seeks to address the devastating value gap by requiring Google to
operate on a more level playing field for creators.

In order to achieve and maintain permissionless innovation in the United States, accused infringers in contrast continue to lean on burden-shifting regimes like the DMCA safe harbors to impose the costs of policing infringement onto copyright owners while
giving Google leverage in licensing negotiations.

From a copyright perspective, permissionless innovation relies on a system of risk shifting safe harbors and forces artists into an unsustainable game of whack-a-mole to which Google’s amorphous interpretation of fair use is tightly bound. Google leverages this commercial windfall into exerting dominance at scale. For example, while Google makes much of the purported (and unsubstantiated) “lock in” effect that would result from Oracle’s vindication of its copyrights, see Pet. Br. 40, Google itself locks in creators to coerce their agreement to commercial deals with YouTube. For example and
as further discussed below, contracting with YouTube’s subscription service was a condition of access to YouTube’s infamous Content ID system28 a linkage that
continues to draw scrutiny.

Any revenue that copyright owners receive, then, must price in the transaction costs of dealing with Google’s unpredictable policies. The aggregate revenue from Google after deducting transaction costs is a long way from a “customary price.”

[To be continued]

It sure costs a lot of money to give things away for free: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle Part 3

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 3.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

I. INDEPENDENT ARTISTS AND SONGWRITERS RELY ON COPYRIGHT
PROTECTION AND CLEAR FAIR USE STANDARDS TO DEFEND THEMSELVES
IN THE MARKET (continued from Part 2).

Google interacts with the music industry in a variety of ways, but primarily through its YouTube video platform. YouTube is by far the world’s most popular music streaming service, with over 1.9 billion registered users as of June 2018. It is much, much
larger than subscription-based services like Spotify (with 160 million users) or Apple Music (with 45 million users). According to the International Federation of the Phonographic Industry, nearly half of all streaming users consume music on YouTube. It is hard to be in the music business online and not do business with YouTube.

And in turn, music is a large part of YouTube’s business. As of Jan 2020, 93% of the most-watched videos were music videos.” Kit Smith, 54 Fascinating and Incredible YouTube Statistics, Brandwatch (Jan. 17, 2020) available at https://www.brandwatch.com/blog/youtube-stats/; “47% of time spent listening to on-demand music is on YouTube,” Music Consumer Insight Report, International Federation of the Phonographic Industry (IFPI) at 13 (2018). This revenue accrues to Google’s great benefit, with its parent company Alphabet reporting more than $15 billion in revenue from YouTube last year alone.

Unfortunately, despite YouTube’s market success, revenue does not proportionately flow back to copyright owners. In the aggregate, advertising-supported free streaming services (of which YouTube is by far the largest) contributed one-third of all streams in 2018, but only 8% of total revenue. See Recording Industry Association of America, RIAA 2018 Year End Music Revenue Report (Feb. 2019). YouTube’s royalty rates are consistently lowest among the top digital music services.  In fairness, Google does contract with aggregators representing independents to collect YouTube royalties, such as Audiam.
However, in Amici’s experience, YouTube is the primary music service that actually incorporates an ad hoc and arbitrary exploitation of copyright safe harbors
and exceptions like fair use as a part of its largely advertising-supported business model which is grounded substantially on “user-generated content” or “UGC.”

Therefore, YouTube is incentivized to unfairly attempt over and again to utilize narrow, statutory exceptions to copyright protection, including the fair use doctrine, on a seemingly ad hoc and extremely expansive basis to undermine the very protections that
creators rely on. This unpredictable fiat guides YouTube’s partners toward monetizing their UGC—which generates a reward of revenue that YouTube shares with the partner. Google’s exploitation of fair use as a business significantly increases the transaction cost of dealing with YouTube beyond what independents like Amici can reasonably afford. It sure costs a lot of money to give things away for free.

This is particularly true since independents cannot credibly use litigation as leverage against a commercial giant. Examples of these costs include engaging services to identify infringements and send takedown notices under the Digital Millennium Copyright Act (hereinafter DMCA) for infringing links in search or on YouTube, or analyzing fair use claims in counternotifications. See 17 U.S.C. §§ 512(c)(1)(C), 512(g). Nor are these costs common across other ad-supported digital music services. For example, Amici
do not bear these high transaction costs with other ad-supported digital music services such as Spotify’s free version.

It appears to Amici that Google’s business model, both with YouTube and with its verbatim copying in Android, are prime examples of what one of Google’s
amici has repeatedly proclaimed to be the “fair use industries.”

Amici—like most creators—do not think of fair use as the basis for an “industry” whose “rights” can be asserted separately from authorship furthered by reliable rules of copyright protection and narrow exceptions under individualized, special circumstances.
If fair use were an “industry,” Amici would be rendered into both the unlicensed input and the royalty-free output of that economic sector, destroying the market balance that has developed under copyright regimes over a period of centuries. Rather, fair use is a
statutory defense that permits creators to use copyrighted materials for well-defined and generally noncommercial or noncompeting purposes. Without copyright, of course, there is no fair use. At best, the notion of “fair use industries” and its protection is a non-sequitur. At worst, it is a destroyer of markets and eventually of national cultures.

In short, the “fair use industries” spin is Google’s attempt to invent cover for its extremely predatory market practices against creators.  Amici are concerned that “fair use industries” are merely those markets in which Google’s monopoly power permits it to simply ignore the copyright interests of other market actors (including and especially independent creators) and call its conduct fair use, safe in the knowledge that challenging Google in court is a nonstarter for most independents. This spin is bolstered through funding academic research as well as outright lobbying and strategic litigation that consistently weakens copyright and undermines creators. Even Google’s amici in this appeal include individuals paid by or otherwise associated with Google. See Br. of 83 Computer Scientists at A1 n.1.

In fact, Google reportedly said as much to former Prime Minister David Cameron when lobbying him in 2011 to amend UK copyright laws to remove “barriers to new internet-based business models” raised by the “costs of obtaining permissions from existing rightsholders.”  Adam Sherwin, David Cameron’s “Google-Model” Vision for Copyright Under Fire, The Guardian (March 14, 2011) (“[Prime Minister Cameron’s announcement] was greeted with unalloyed delight at Google’s California HQ—and left the music industry, ravaged by web piracy, with that all too familiar sinking feeling.”).

Of course, Google’s responses are essentially the same each time—as they are [in the Oracle case].  Google wields a variety of weaponized copyright exceptions on top of rhetoric that is both deceptively public-spirited (letting Google win is “promoting innovation”) and ominous (impeding Google would “break the internet”). Google further seeks to justify these exceptions by trying to hide behind small players. It engages in astroturfing tactics to give the impression that it has more public support than it does.

All of this is on display in Google’s brief and its many amicus briefs. See, e.g., Pet. Br. 44 (“Android is an open source initiative that benefits hundreds of device manufacturers, millions of developers, and more than a billion consumers around the world.”), 45
(Android “enabled Java developers to unleash their creativity” by using Google’s platform), 49 (“Android benefitted Oracle”); 50 (finding against Google “would
disrupt the ongoing development of modern, interoperable computer software”).

[To be continued:  Google’s Use Is Clearly Commercial]

Google’s Fair Use Industries Part 2: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments from the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  This is part 2.  We decided to omit the footnotes for this posting, but you can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

ARGUMENT

I. INDEPENDENT ARTISTS AND SONGWRITERS RELY ON COPYRIGHT
PROTECTION AND CLEAR FAIR USE STANDARDS TO DEFEND THEMSELVES
IN THE MARKET.

Copyright is of critical importance to independent creators and artists. It is not empty rhetoric to say that without the statutory and constitutional protections of copyright, professional creators could not earn their livings and simply would not produce new works, and the world would be poorer for it.  The reason is simple but profound: copyright protection allows for a vibrant creative environment in which artists can predictably recover the gains of their creative labors. See U.S. Const. Art. I, § 8, cl. 8; see also Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 558 (1985) (“By establishing a marketable right to the use of one’s expression, copyright supplies the economic incentive to create and disseminate ideas.”). Because Congress has codified this incentive structure through centuries of copyright legislation, independent artists
and songwriters regularly rely on the exercise of their exclusive rights by creating, reproducing, distributing and publicly performing their works.

Importantly, these rights are not just abstractions.  They tangibly alter the licensing negotiations vital to a modern creative ecosystem. An exclusive right to exploit a creative work (such as a musical composition or a sound recording) can be the only backstop against markets where the marginal cost to digitally create perfect copies of an original is nil. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 928 (2005) (noting “digital distribution of copyrighted material threatens copyright holders as never before, because every copy is identical to the original [and] copying is easy”). These burdens do not fall solely on creators of sound recordings or musical compositions, but extend across copyrightable subject matter, including visual arts, motion pictures, and literary works such as novels or software. See 17 U.S.C. §§ 101, 102(a).

To be sure, independent creators may also benefit from uses that fall under the category of fair use. Fair use helps disseminate the artist’s work to the larger culture, and increases the amplitude and quality of discourse within and surrounding the work—all without compromising the work’s value. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578 (1994) (noting fair use must be analyzed “in light of thepurposes of copyright”); Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105, 1107 (1990). (“[f]air use should be perceived . . . as a rational, integral part of copyright, whose observance is
necessary to achieve the objectives of that law.”). It is therefore not surprising that a significant number of fair use cases arise in the music business. See, e.g., Campbell v. Acuff-Rose Music, 510 U.S. 569 (1994); Estate of Smith v. Graham, No. 19-28 (2d Cir. Feb. 3,
2020); Capitol Records, LLC v. ReDigi Inc., No. 16-2321 (2d Cir. Dec. 12, 2018); Lennon v. Premise Media Corp., 556 F. Supp. 2d 310 (S.D.N.Y. 2008); Fisher v. Dees, 794 F.2d 432 (9th Cir. 1986); Elsmere Music, Inc. v. Nat’l Broad. Co., 482 F. Supp. 741 (S.D.N.Y.), aff’d, 632
F.2d 252 (2d Cir. 1980).

Yet these fair use benefits only accrue when the analysis is predictable, consistent, and respectful of the underlying existing copyright incentives for original creation. Under such market conditions, independent creators nearly always stand ready to license their works at a fair market rate to those who respect their rights. This is how fair use works effectively within the creative industries. On the other hand, the more amorphous and unreasonably expansive the analysis and application of the fair use doctrine, the harder it becomes to establish the value of the copyrighted work during licensing negotiations that are the lifeblood of the creative ecosystem.

In the modern music business, such licensing negotiations are intricate and delicate. The exclusive rights guaranteed by the U.S. Copyright Act have allowed independent songwriters, recording artists and labels to contract with distributors such as Audiam, CD
Baby, INgrooves, Merlin Network, The Orchard and TuneCore. These aggregators in turn sublicense collectively to interactive, on-demand digital delivery services like Amazon Music, Apple Music, Deezer, iTunes, Google Play Music, Pandora, and Spotify in return for royalties that the aggregators pay to their songwriter or artist licensees.

SoundExchange, for example, administers the limited statutory performance license for
noninteractive exploitations of sound recordings. See 17 U.S.C. § 114. Through this statutory scheme, SoundExchange oversees the statutory license of sound recordings used by many noninteractive services such as Pandora, SiriusXM, iHeart Radio and other Internet radio services as well as business establishments. Meanwhile, performing rights organizations like ASCAP, BMI, Global Music Rights and SESAC collectively license the public performance of the corresponding compositions.

Artists and songwriters rely on this intricate market system of licensing that is entirely based on the exclusive rights of copyright owners and the traditionally reasonable application of the fair use doctrine. These market practices have, over the past two decades, undergone a metamorphosis, as new customs evolved in the digital age, emerging once again into a predictable licensing landscape. The exclusive rights that independents enjoy as copyright owners allow them to compete with the licensing, distribution and marketing operations of major labels and music publishers—when those rights are respected.

And that is where Google’s seemingly perpetual campaign for fair use expansion becomes a major hindrance in the equitable and efficient functioning of
the marketplace.

[To be continued]

The Fair Use Industries: Supreme Court Brief of @davidclowery, @helienne, @theblakemorgan and @sgawrites in Google v. Oracle

Google’s appeal of its major loss to Oracle on fair use is shaping up to be the most important copyright case of the year, if not the decade.  It could set fair use standards for years to come.  We’re going to be posting installments of the friend of the court brief that David, Helienne, Blake and The Songwriters Guild filed in the U.S. Supreme Court supporting Oracle in the Google v. Oracle fair use case.  You can read the whole brief here.

Cover Page

Cover Page of Friend of the Court Brief

SUMMARY OF ARGUMENT
Independent creators rely on copyright protection to safeguard their works. This is true not just of songwriters and composers, but of countless creators, including recording artists, photographers, filmmakers, visual artists, and software developers. Copyright is,
in fact, of existential importance to such creators, who would be utterly lacking in market power and the ability to earn their livings without it.

Google’s business model is a prime example of the need for strong copyright protection. Since Google’s founding, Amici have experienced, observed and believe that Google has used its unprecedented online footprint to dictate the terms of the market for creative works.  By tying together a set of limited exceptions and exclusions within the U.S. Copyright Act and analogous laws in other countries, and then advocating for the
radical expansion of those exceptions, Google has amplified its own market power to the great detriment of copyright owners. Thus, where fair use is meant to be a limited defense to infringement founded on the cultural and economic good for both creators and the public, Google has throttled it into a business model: what its amicus brazenly refers to as the bedrock on which rests the fictitious “fair use industries.”

There is no shortage of amici exhorting this Court to weigh carefully the implications of this case’s fair use issues, and their resolutions. Amici today simply join the chorus of those seeking to illustrate Google’s longstanding pattern of integrating willful copyright
infringement into its business model. Google does so, as it did here, by advocating for fair use exceptions so broad as to include its wholesale, verbatim copying of Oracle’s declaring code and structure without a license.  Google’s flagrant disregard of original expression in order to make a larger profit—by taking without authority the works belonging to others—compromises any argument that its use is non-commercial,
transformative, or in any sense “fair.”

Accordingly, the Federal Circuit was correct in finding that the nature and purpose of Google’s unlicensed use of Oracle’s code and program organization was to create a commercial substitute in the form of Android. It is abundantly clear that this
unauthorized substitution is not in the public interest. Here, Google’s claim to be, “promoting software innovation” is just a code word for promoting Google’s
interest in extracting higher profit margins out of the pockets of creators. Given that its interest in doing so is antithetical to incentives to create original works, finding fair use would clearly not serve the constitutional and statutory purposes of copyright.

[Tomorrow: Independent Artists and Songwriters rely on copyright protection and clear fair use standards to defend themselves in the market.]