When is a safe harbor not actually safe?

I've written about the Digital Millennium Copyright Act (DMCA) before (here and here) in the context of how its "notice-and-removal" and "anti-circumvention" language can be used in unintended ways to limit free speech or stifle innovation. A decision last week by the New York State Court of Appeals 
creates a new problem for innovators trying to keep their services from running afoul of copyright owners.

The notice-and-removal process codified by the DMCA is the result of language (in section 512 [PDF]) that creates a "safe harbor" for service providers, protecting them from damages resulting from claims that their service is being used by third-parties engaging in copyright infringement. To be protected from these claims, service providers must remove infringing content upon notice by the rightful copyright owner.

This extremely important provision is designed to protect innovation. Without such safe harbors, companies might be unwilling to create new products and services given the chance they could be shut down as the result of the illegal actions of their users.

The ruling (in Universal v. Grooveshark) calls into question the DMCA's safe harbor provisions and creates dangerous ambiguity over what protections service providers can expect.

The basis for this ambiguity is existing copyright law.

Prior to 1976, copyright law in the US existed under the dual jurisdiction of both Federal and State law. Congress attempted to eliminate that confusing system, unifying copyright law as part of the 1976 Copyright Act. However, certain elements remain carved out, in this case, pre-1972 recordings that are still protected by State law.

In this case, Universal argued that the DMCA safe harbor provisions only apply to works covered under Federal law (and not State law). Therefore, Groovershark is potentially liable should any of its users upload pre-1972 recordings. (It should be noted too, that these are not insignificant recordings; they include well-known songs performed by Buddy Holly, Chuck Berry and The Supremes.)

This will not be the final word however--the case will undoubtedly be appealed. While the ruling may strip Grooveshark of its protection under the DMCA, a separate ruling in Federal court (Capitol v. MP3Tunes) says the opposite, that works covered by State law are afforded DMCA protections.

What all of this means is that copyright continues to be a confusing system of laws that endangers innovation by not keeping pace with technology. While it is important that intellectual property rights be protected, we must find ways to ensure these protections don't have unintended consequences. Luckily (though the timetable is not clear), House Judiciary Committee Chairman Bob Goodlatte (R-Va.) announced last week his intention to conduct a review of US copyright law. This couldn't come at a better moment, as only through overhauling copyright can we guarantee that our intellectual property laws are in sync with the demands of modern technology.

Aereo: Streaming into the future.

As I watch the lawsuit over the startup Aereo unfold, I can't help but notice the likelihood it will disrupt the television business in the same way that streaming services are disrupting the record business. The company's model has major implications for television broadcasters, and its fight has many similarities to others occuring in the music business.

If you're unfamiliar with the service, Aereo lets users rent a TV antenna (maintained by Aereo) and receive over-the-air (OTA) television signals. These signals are then streamed to the users' Internet-connected device or recorded to a DVR so they can be watched at a different time.

The premise may sound odd (Rent an antenna?), but it is rooted in several long-standing concepts. The first is that the FCC licenses public airwaves to television broadcasters on the basis that they transmit their signals over-the-air for free. Therefore, these transmissions are available to any user who has the equipment to receive them. (Before cable TV, using a "rabbit ears" antenna was the only way to receive television signals at all.) The second is that recording such broadcasts for non-commercial, home use is legal (technically, "fair use" under the Copyright Act, and decided as part of the US Supreme Court's landmark 1984 "Betamax" decision in Sony Corp. of America v. Universal City Studios [PDF]).

Taken together, this means that users can now easily receive and record live television broadcasts, allowing them to watch anywhere and at anytime they want. This may seem perfectly normal, but remember that live television has not had a big impact on the Internet because such use would be considered a "rebroadcast" or "public performance" that needs to be explicitly licensed.

Broadcasters are suing to prevent Aereo from offering their service, saying that Aereo's distribution of these broadcasts infringes on their copyrights. This will not be a short fight, but Aereo recently won an early battle as the Second Circuit upheld a denial of a preliminary injunction against them [PDF]. This poses a major problem for broadcasters, one big enough that Fox has threatened to remove their broadcasts from the airwaves if Aereo wins.

Why such a major disruption?

The money to be made in the content business oftentimes comes from interactions that are not seamless, when tollbooths are placed in the road between the content and the end user. For a long time, construction of these tollbooths was aided by the lack of technology or the cost of distribution. Yet companies are now increasingly able to build businesses based on technological innovations that remove these tollbooths or lower the cost of distribution. For broadcasters, Aereo represents a way around the traditional relationship between content provider and consumer, one that threatens the financial and distribution models they have in place.

The change in user acceptance of streaming content has to do with smartphone market penetration. We are becoming more and more comfortable with our phone being an entertainment device. As that idea becomes more and more prevalent, users will demand even more seamless operation from all content providers, and that will extend beyond phones to any device that people use to enjoy entertainment. Spotify's Daniel Ek was recently profiled on CNET talking about this as it relates to music.

The bottom line is that, as consumers come to expect a certain kind of experience on their phone, they will see all devices similarly. With TV, consumers haven't previously had this kind of flexibility, but Aereo makes it possible. This represents a threat to broadcasters, one they will have to meet head-on if they wish to stay in business.