Tech Law Prof Blog

Sirius XM Contemplating Bankruptcy

So sad about Sirius XM.  When the two companies were urging the feds to approve their merger they argued that the market wasn't just satellite radio but all entertainment sources such as iPods, CDs, terrestrial and Internet radio, etc.  They were right.  The radio is hardly compelling with so many entertainment choices that don't come with a subscription.  With close to 20 million subscribers and growing, the merged company still can't bring in enough cash flow to pay off combined capitalization debts approaching $1 billion this year.  The current recession and sluggish credit markets are not helping.  Looks as if bankruptcy is going to be the option, perhaps as early as Tuesday.  The service will probably survive but the future can't look bright when the operation is nothing but a money pit.  More from the Wall Street Journal and CNNMoney.  [MG]

FTC Issues Ad Privacy Guidelines

The FTC announced principles for targeting online behavioral advertising.  Criticism flows immediately that they don't go far enough.  Find the FTC announcement and texts here.  [MG]

Texas Judge Orders Site to Give Up Info on Anonymous Posters

There is a story in TechDirt regarding a Texas judge who has ordered the Topix web site to reveal the identity of 178 commentators.  They made statements about a couple accused and acquitted of sexual assault charges.  The article complains that the judge made the order too easily without investigating whether the statements were actually libelous.  I'm not so sure about that.  Some of the comments (described in a story in Ars Technica) are pretty dicey. It's important to protect anonymous commentary on the web, but libel is not protected by the First Amendment.  I've never understood why unfettered commentary on the Internet should be treated differently than other media.  In any event, the Texas Appellate Court and possibly the state Supreme Court can settle the issue with these defendants.  Let justice be done. [MG]

FTC Finally Shuts Down Qchex.com

The FTC has finally shut down Qchex.com for unfair business practices.  The case had started in 2006.  Qchex basically allowed its users to create checks and draw on accounts without any verification whatsoever.  The site was a magnet for fraudulent activity and the Court found that substantial fraud against consumers did occur. 

Qchex argued that they didn't commit fraud, it was their users.  The Court didn't buy this at all, noting that without any verification standards in place the fraud could not have taken place.  The penalty imposed included a fine of over half a million dollars.  This was all of Qchex profits in the last year.

The press release from the FTC is here, and there are links to the Court's opinion from the same page.  The arguments raised by defendant are some of the most specious theories one can present in court with a straight face, if that.  The Court disagreed with all of them.

UMG Loses Summary Judgment Motion on Safe Harbor Application

A case that may have some impact on the Viacom-Google litigation has some dim news for copyright holders.  The litigation is between UMG Recordings, Inc., and Veoh Networks.  UMG sued Veoh, for what else, copyright violation due to some UMG content showing up on Veoh.  The Veoh service is similar to YouTube, though its users can download videos from the site in a variety of ways.

UMG argued in a summary judgment motion that Veoh did not qualify for the DMCA safe harbor protection because it does not simply act as storage at the direction of the user.  Veoh converts uploaded video to Flash and a few other formats in certain circumstances and, gasp, makes them available.  The Court shot this argument down saying that the automated conversion process for videos does not pre-empt safe harbor provisions given that Congress did not intend such a narrow reading of the law.

UMG cited five videos for copyright violation, but did not bring them to the attention to Veoh through the take-down notice system established by the statute.  The Court also noted that once a defendant such as Veoh became independently aware of infringing material it had a duty to disable access or remove the infringing content.  Veoh did follow through on these videos by removing access to them once it became aware of their status.

The Court described the notice system Congress created as "cooperative."  Content owners are upset that the Internet is exempt from infringing liability when other distribution channels are not.  The Court here so noted but said that is the scheme Congress created for the Internet, and Veoh qualifies for safe harbor protection.  As the Court stated in footnote 6 of the opinion:

UMG argues that under Veoh's analysis of the statute “acts that would never be permissible outside the online context would be somehow immunized from liability as long as they were done with a computer.”Motion at 15-16. How-ever, in enacting the definition of “service pro-vider” for purposes of § 512(c) that is set forth in § 512(k)(1)(B), Congress explicitly noted that “A broadcaster or cable television system or satellite television service would not qualify, except to the extent it performs functions covered by [section 512(c) ].”H.R. Rep. 105-551(II)at p.64.

This is the system Congress set up when the act was passed.  Internet sites are treated differently from other distribution channels due to the volume and interactive nature of the medium.  A satellite or cable provider does not let the general public upload video to the system for general distribution.  Even public access shows are scrutinized to some extent to eliminate copyright and obscenity issues, though sometimes this kind of materials sneak through.  Content owners should get used to the idea that this is the methodology that they must follow to police their copyrights.  If they don't like the model, they should get Congress to change the law.

The case is UMG Recordings v. Veoh Networks, Inc. (C.D. Cal. Dec. 29, 2008), 2008 WL 5423841.