Monday, August 08, 2016

Terminate the FCC’s "Enable Copyright Violations" Proposal

By Randolph J. May and Seth L. Cooper

According to the U.S. Copyright Office’s August 3, 2016, letter to members of Congress, the Federal Communications Commission’s mislabeled “Unlock the Box” proposed regulation of video devices and apps conflicts with copyright law protections. It’s now clear the FCC’s proposal might more aptly be named the “Enable Copyright Violations” proposal.

Concerns that the FCC’s proposal would undermine the exclusive rights of video programmers to license and control the use of their copyrighted content have been widely known. Now, the Copyright Office has declared that the FCC’s proposed rules “appear to inappropriately restrict copyright owners’ exclusive right to authorize parties of their choosing to publicly perform, display, reproduce and distribute their works according to agreed conditions, and to seek remuneration for additional uses of their works.” The Copyright Office, with acknowledged copyright law expertise and charged by law with advising Congress concerning interpretation of the nation’s copyright laws, urged that “any revised approach to be taken by the FCC should be crafted to preserve copyright owners’ exclusive right under copyright law to authorize… the ways in which their works are made available in the marketplace.”

Predictably, some supporters of the FCC’s proposal have tried to put their own negative slant on the Copyright Office’s letter. For instance, the Copyright Office’s analysis was attacked with word-twisting and non-starter fair use arguments by Public Knowledge. In our view, the Copyright Office explained, in a careful and compelling fashion, why the FCC’s proposal would undermine the exclusive rights of copyright holders and why the proposal is contrary to federal copyright law.

The Copyright Office’s concerns about the FCC’s proposed improper curtailment of video programmers’ copyrights come from a straightforward reading of the law. The crucial provision concerning the rights of copyright holders to authorize reproduction, transmission, and public performance of their intellectual property is contained in Section 106 of the Copyright Act. As the Copyright Office put it: “The rights protected by the Copyright Act are ‘exclusive’ to the copyright owner, meaning that the copyright owner generally has full control as to whether or how to exploit his or her work, including by entering into licensing agreements.”

Public Knowledge’s press release incorrectly insinuates that the Copyright Office misrepresented the FCC proposal’s mandates. The Copyright Office, Public Knowledge claims, believes the FCC would mandate that copyright owners give away outright their video programming “for free exploitation by third-party devices.” Obviously, such overheated rhetoric is meant to put the Copyright Office letter in the worst possible frame. But a fair reading of the letter shows the Copyright Office understands the distinction between the Commission’s stated intent behind “Unlock the Box” and the actual practical effect of its proposal. Acknowledging that “[t]he FCC has stated that the Proposed Rule is not intended to negate these private contractual arrangements,” the Copyright Office stated the obvious truth: “[I]t is not clear how the FCC would prevent such an outcome under the Proposed Rule, for it appears to obligate MVPDs to deliver licensed works to third parties that could then unfairly exploit the works in ways that would be contrary to the essential conditions upon which the works were originally licensed.”

While the FCC proposal may not affirmatively mandate repackaging of copyrighted video content by third parties who sign no licensing agreements and pay no royalties to the copyright holders, it does mandate that copyrighted video content be made available to third-party device makers – who are unbound by licensing terms. In such circumstances, as the Copyright Office sets forth in considerable detail, neither contract law nor Commission regulations will provide copyright owners a means for enforcing licensing terms of use. This means third-party device makers, among other things, could overlay ads, rearrange channel lineups, ignore “windowing” or “tiering” agreements, or insert new video content without consent and without compensation being paid to the copyright holders. This would be an unavoidable by-product of mandating access to copyrighted content by third-party devices while leaving copyright holders without legal recourse.

Public Knowledge’s press release also engages in plenty of misdirected rhetoric on fair use. It misleadingly claims that the Copyright Office wants video service providers and video programmers to disregard fair use rights. There is no reason to think this is so, and the criticism is hard to understand. The Copyright Office’s letter states that video service providers and video programmers avoid uncertainties regarding fair use by contracting around it through licensing agreements. This is hardly remarkable. Parties to commercial agreements contract away their rights all the time.

It goes without saying that licensing agreements between video service providers and video programmers don’t contract away fair use rights of video subscribers. To briefly illustrate from another context: Suppose a major publisher enters into an agreement with a bookseller for an exclusive promotion and sales effort for a blockbuster novel. The publisher and bookseller could contract around fair use, whereby the bookseller gives up any fair use claims it may have regarding what it might say about the novel in promotional materials or how it might display the novel. But the parties’ agreement would in no way waive the fair use rights of the novel’s subsequent readers and reviewers – and this is the point that Public Knowledge misunderstands or ignores.

In any case, the Copyright Office’s analysis is focused on licensing restrictions directly affecting the fair use rights of third-party devices – not the fair use rights of video subscribers. Discussing the Commission’s proposal, the Copyright Office acknowledged different fair use factors may be present with respect to video subscribers. Its letter even compared video subscribers to non-infringing private home users of VCR devices in Sony v. Universal City Studios (1984). So it’s silly to claim, as Public Knowledge’s press release does, that “[w]hat the Copyright Office advocates is encouraging distributors to negotiate away their consumers’ rights without those consumers’ consent.”

The copyright problems plaguing the FCC’s proposal were explained in an FSF blog post back in February. Public comments and reply comments filed by us in the FCC’s proceeding again explained that the proposal would undermine the exclusive rights of copyright holders in video programming. While we believe the FCC’s more aptly named “Enable Copyright Violations” proposal is misguided in a handful of respects, the proposal’s clash with federal copyright law is one of its most obvious flaws.

The Copyright Office, charged by law with advising Congress on copyright issues and interpretations of the nation’s copyright laws, has now articulated the copyright problems in a manner that the Commission should not ignore:

In its most basic form, the rule contemplated by the FCC would seem to take a valuable good—bundled video programming created through private effort and agreement under protections of the Copyright Act—and deliver it to third parties who are not in privity with the copyright owners, but who may nevertheless exploit the content for profit. Under the Proposed Rule, this would be accomplished without compensation to the creators or licensees of the copyrighted programming, and without requiring the third party to adhere to agreed-upon license terms. … As a result, it appears inevitable that many negotiated conditions upon which copyright owners license their works to MVPDs would not be honored under the Proposed Rule.

The FCC’s disregard of the exclusive rights of copyright owners is serious enough that the Commission should abandon its proposal. If it wishes to move forward with any new regulation at all – although in light of marketplace and technological developments, we submit none is needed – the Commission should explore ways of promoting competition in the video device market that do not enable violations of copyright law or undermine copyright licensing agreements.

Barring this, the Commission should be forthright enough to stop calling its proposal “Unlock the Box” and instead call it the “Enable Copyright Violations” proposal.