The students founded the Journal of Intellectual Property and Entertainment Law (JIPEL) with the goal of encouraging scholarly discourse between academics, practitioners, and students interested in intellectual property and entertainment law topics.
On Wednesday, March 21, 2018, the Ninth Circuit ruled that the song hit song, Blurred Lines by artists, Pharell Williams, Robin Thicke and Clifford Harris Jr, infringed on the copyright in Marvin Gaye’s song Got to Give it Up. The panel of the appeals court affirmed that the award of actual damages, infringers’ profits and a running royalty were all proper. This decision will likely have several implications in IP law specifically on music infringement claims.
Background of the Case
This appeals case stemmed from a jury finding that Blurred Lines, by Pharell Williams, Robin Thicke, Clifford Harris Jr (otherwise know as T.I) infringed on the Marvin Gaye estate’s copyright on the 1977 hit song “Got to Give It Up”. The panel of appeals judges held that, “ Got To Give It Up was entitled to broad copyright protection because musical compositions were not confined to a narrow range of expression”. In addition, the panel accepted the merits of the lower courts ruling that the scope of the defendant’s copyright was limited to the sheet music deposited with the Copyright Office and not extending to the sound recordings. The Circuit court upheld an award of $7.4 million and 50% of all future royalties from Blurred Lines to the Gaye estate.
One of the major issues presented in this case was the level of deference that should be accorded to the jury in the trial. The majority found that substantial deference must be given to the jurors who were present in he room during trial. Those eight jurors who heard the testimony first hand, saw the witnesses’ faces, and listened to both the music and the expert presentations. The most interesting thing about the case is that the jury, and not the judge, made the final decision.
In her dissenting opinion, Judge Jacqueline Nguyen argued that Blurred Lines and Got to Give Up were not objectively similar as a matter of law because they differed in melody, harmony and rhythm. She further explained that the majority’s decision essentially allows the Gaye estate to copyright a musical style. She warns that such a precedent is dangerous for future musicians and composers everywhere.
According to IP watchdog, “Upholding the jury’s verdict, and the ultimate damage award, could very well mean we see a new wave of additional music infringement lawsuits and claims.” Many individuals touted that the case will bring widespread damage to the music industry. While others believe this decision was called correctly, claiming that music industry revenues have not been affected in any way by the Ninth Circuit decision.
Ngwika Crystal Fomba is a J.D. candidate, 2019, at NYU School of Law.
Under the pre-AIA first-to-invent regime, interference proceedings were available to contest which of two (or more) parties invented the claimed subject matter first. With the AIA’s shift to a first-to-file regime, interference proceedings have given way to derivative proceedings. Under the AIA, the first party to invent does not necessarily secure the patent, so interference proceedings no longer fit. Instead, derivation proceedings offer an alternate challenge on grounds of originality. Specifically, derivation proceedings allow a patent applicant to challenge earlier applications on the ground that the earlier applicant(s) derived the invention from the petitioning applicant.
Under the AIA §135, the petitioner must set out the basis for finding (i) “that an inventor named in an earlier application derived the claimed invention from an inventor named in in the petitioner’s application” and (ii) “without authorization, the earlier application claiming such invention was filed.” The AIA’s derivation procedure became effective on March 16, 2013.
One example of the failure to meet the evidentiary burden for conception is reflected in multiple proceedings brought by Catapult Innovations. For example, in Catapult Innovations Pty Ltd., v. Adidas Ag., PTAB denied Catapult Innovation’s petition noting that that Catapult Innovations had merely shown possession (and communication of prior possession) and not the required conception (and communication of conception). While such decisions provide some insight into the PTAB’s method of analysis regarding the evidentiary burden, it also serves as an important reminder that conception remains important even in the post-AIA world. While the date of conception might appear irrelevant due to the shift away from first-to-invent, evidence of conception is still crucially important in derivation petitions and proceedings.
In other cases, PTAB denied on grounds of failure to meet the petition requirements. Under 37 CFR §42.405, the petitioner must also show that the petitioner’s invention is the “same or substantially the same” as the respondent’s invention. This can be particularly problematic for petitioners in the case where the respondents have made improvements or modifications. In Brockman v. Bainter, PTAB denied the derivation petition in part because petitioner had not accounted for differences in elements and limitations present in respondent’s claims. Note that this problem can also impact the conception discussion, as limitations or features that are unaccounted for in petitioner’s documentation or communications will also negatively impact petitioner’s case (see, e.g., Ethertronics, Inc. v. Nextivity, Inc.).
On March 21, 2018, PTAB instituted the first derivation proceeding in Anderson Corp. v. GED Integrated Sol., Inc. The facts in Anderson are particularly well-suited for a derivation proceeding. Anderson contends that one if its employees, Sammy Oquendo, invented the subject matter in question, but shared his designs with GED. GED subsequently applied for a patent, which Anderson is now challenging.
Anderson succeeded on the issue of conception. PTAB accepted the affidavit by Oquendo, which was supported by evidence in the record. Moreover, Anderson was able to show that Oquendo developed prototypes of the subject matter, which were shared with GED. Contrast Anderson to Catapult Innovations, where Catapult could only show that technical information was conveyed through a presentation. In Catapult Innovations, PTAB found that the presentation merely demonstrated possession, not conception. PTAB clarified that possession does not imply conception, since there are alternative ways to achieve possession without conception. The differing outcomes in Anderson and Catapult Innovation suggest that rigorous documentation of the development process and communications with outside parties remain important to meeting the threshold requirements on conception.
Anderson also succeeded with respect to the petition requirements. Anderson’s strategy in this area is particularly interesting in that, as far as the contested claims were concerned, Anderson filed the exact same claims as GED. Consequently, PTAB spent very little time on “same or substantially the same” analysis, essentially just making the fairly self-explanatory statement that Anderson had shown at least one claim was the “same or substantially similar” to GED’s. Bethany Ford of Baker Botts suggests PTAB’s decision regarding the identical claims means petitioner’s now have an easy option to avoid the hurdle of “same or substantially the same,” if the facts allow. As such, conception is likely to be the main battle ground for future petitions.
As the first case that PTAB has permitted to proceed to a derivation proceeding, Anderson could prove instructive. Given PTAB’s historically unfriendly stance towards petitioners, however, it is still unclear how high the threshold is. Nonetheless, the case should provide interesting insight into how PTAB will approach the merits in a derivation proceeding. In turn, this should provide companies and inventors with more concrete guidance on what types of evidence will be useful on both sides of the derivation proceeding. Oral argument, if requested (and granted), is tentatively scheduled for November 14.
 Some PTAB orders denying/instituting derivation proceedings are available on Lexis and/or Westlaw. The orders can also be accessed (for free) through the USPTO website. This particular order can be found by searching “DER2014-00006” as the AIA Review Number.
I have been vaguely aware of YouTube’s practice of “demonetization” for some time, that which has something to do with ad revenues. However, it wasn’t until a recent tragedy at YouTube’s headquarters that I began to comprehend emotional and symbolic challenges smaller YouTubers (i.e. creators/owners of small YouTube channels) face because of demonetization. In this blog post, I briefly introduce the YouTube Partner Program (YPP), explore the arguments for and against the recent change in YPP, and argue that intellectual property law should be applied to make monetization available for all content creators.
YPP is a monetization program, which allows YouTube content creators to earn revenue from advertisements. To participate in YPP, a YouTube creator’s channel needs to meet some requirements. In April 2017, the YPP eligibility requirement was 10,000 lifetime views. In January 2018, YouTube announced that the new eligibility requirement is “4,000 hours of watchtime within the past 12 months and 1,000 subscribers.” The change has been considered a stricter criteria than the previous one, and in effect has resulted in demonetization for many smaller YouTubers who were not able to meet the new criteria.
The purported goal of the YPP eligibility requirement is, simply put, quality control. The theory is that viewers would not subscribe to channels that are inactive or to channels with potentially inappropriate videos. However, in light of YouTube star Logan Paul’s , it is questionable who is benefiting from the new change and whether the change will help YouTube achieve the purported goal of quality control.
There are valid arguments supporting the new criteria, some of which include: YouTube is a private company with its own rules and terms; the change will not affect smaller YouTubers, most whom do not depend on YPP for stable income; the new criteria will motivate serious creators to work harder for ad revenues. In fact, YPP was originally introduced out of YouTube’s fear of losing its stars to its competitors. So it makes sense that its monetization program is catered towards incentivizing and rewarding bigger channels.
Nevertheless, the YouTube platform is increasingly becoming unfriendly to smaller content creators. The recent change in YPP has left many smaller YouTubers feeling alienated, as was the case with the often-inaccurate and unfair implementation of the Content ID technology (which was discussed in my previous blog post). With alternatives almost non-existent, smaller YouTubers are stuck with YouTube; and with YouTube’s ability to unilaterally change its policies with only a short notice, smaller YouTubers are often voiceless and underrepresented, and thus any change in policy would affect them disproportionately.
Giving voice to these smaller YouTubers is no easy task, and intellectual property law currently cannot force YouTube to include them in YPP. Given the dominance of YouTube in hosting community videos, however, I believe that intellectual property law should be developed and applied to open up the monetization program to any content creator on YouTube, thereby preventing smaller YouTubers from being affected disproportionately. As long as a content creator’s videos are not unlawful, and as long as there are companies that are willing to advertise on his or her channel, then the option to monetize should be available to all, because, ultimately, the market would determine whether or not a content creator’s efforts will be rewarded. The mere fact that the size of a channel is small is not a good proxy for the quality of the channel, and thus should not present a barrier to monetization.
One thing is clear from the demonetization debate: smaller YouTubers are disproportionately affected by the change in YPP. In the midst of its growing pains, YouTube should nevertheless strive to set clear and transparent guidelines that are proven to apply equally across the entire YouTube community and are guaranteed to result in the desired outcome, namely a safer community. Notwithstanding the potential application of intellectual property law on its monetization policy, YouTube must not forget to support smaller but independent creators, because that’s what has set YouTube apart from Disney, Netflix, cable networks, or any other competitors.
 Additional Changes to the YouTube Partner Program (YPP) to Better Protect Creators, YouTube, https://youtube-creators.googleblog.com/2018/01/additional-changes-to-youtube-partner.html (last visited April 16, 2018) (“A big part of that effort will be strengthening our requirements for monetization so spammers, impersonators, and other bad actors can’t hurt our ecosystem or take advantage of you, while continuing to reward those who make our platform great.”).
Joshua S. Kim is a J.D. candidate, 2019, at NYU School of Law.
The digitalization of information and the implementation of computer-based processes in society has fundamentally changed how humans interact with the world and one another. Now, almost everyone in the US has access to an enormous pool of information in some form or another. While this is touted as the necessary step towards information equality, it is not without its problems. In a society where we demand efficient and accurate results, what happens when the pool of information becomes too vast for humans to navigate? How do we assure that a user is getting the relevant information they are seeking? The answer is simple, use more computers.
Algorithms are humanities answer to the information problem. Algorithms not only navigate vast swaths of information in a way that humans could never hope to achieve, but they can be taught to learn and grow while doing so. Machine learning is the process by which computers use large amounts of data to “learn” how to recognize patterns and make decisions without having to be programmed to do so.[i] Machine learning is used everywhere, from Google’s web search algorithm to your phones autocorrect function. When you click the second link in a Google search result, the algorithm notes the “input” and “learns” which result you were looking for so the next person who inputs the same search gets that option as the first choice.[ii] Simply put, a computer using machine learning can “teach” itself how to more accurately accomplish a goal by building complex algorithms, all to achieve what humans could never hope to accomplish on our own.
It comes as no surprise then that the rapid emergence of machine learning has put various long-standing, human run practices on the chopping block. In the world of patents, digitalization has not only expanded the subject matter by which patents can be granted, but it has also expanded the scope of prior art to be considered by the USPTO. As time moves forward, the pool of prior art an examiner at the USPTO has to navigate through continues to grow. Therefore, the USPTO has been implementing a new wave of AI tools for their examiners to utilize while conducting various parts of the patent process:
“USPTO has established an advanced analytics program that combines big data/ big data reservoir (BDR), machine learning, and artificial intelligence (AI) to enhance understanding of USPTO policies, processes, and workflows. AI is basically defined as cognitive assistance using feedback from human users where the AI is capable machine learning (deep/neural) to provide the most useful and relevant information to determine patentability by an examiner during prosecution.”[iii]
While this is an important step forward in bringing the US patent system up to date with the digital world, is there a future where all patent searching is automated by machines? Is that something we ought to strive for, or is the job of a patent examiner something we should protect from automation?
Erich Spangenberg, founder of IPwe, believes that the future of the patent system is going to be found in the blockchain. Blockchain technology “is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”[iv] Using this technology, IPwe is attempting to create a blockchain-based registry to tackle the lack of access to good information on patent transactions. And it is using machine-learning algorithms to better evaluate patent validity and worth.[v] This ambitious goal is not only lucrative to IPwe, but also to the entire US economy and patent industry. In an economy like the US that centers around intellectual property and the right to exclude others, clarity in the patent system translates to real world implications.
The World Intellectual Property Organization has estimated that roughly $180 billion in annual patent value derived from 2 percent of all patents.[vi] Spangenberg believes that by implementing machine learning and blockchain technology into the USPTO could result in an explosive growth in patent value. As previously mentioned, the growing digitalization of prior art has created an enormous issue for the USPTO, how do you assure that the patents that are granted are “quality patents”? Mark Schankerman, a professor at the London School of Economics, believes that as much as 75 to 80 percent of patents are “junk”.[vii] If machine learning, coupled with the blockchain, could be used to filter out “junk” patents, should the USPTO be turning its attention to automation rather than education of its patent examiners?
While the USPTO has the Office of Process Improvement, a department that “provides the methods, resources, and training to optimize United States Patent and Trademark Office business processes and strengthen the agency’s strategic goals of timeliness and quality”, one could ask whether that is sufficient.[viii] It is my opinion that the future of the patent system will turn on how committed the USPTO is to automation of the prosecution process. Unfortunately, the future is not bright as the new administration of the USPTO has “put on hold” an ambitious partnership between the USPTO and artificial intelligence start-up AI patents to implement its prior art search technology. The latest word from the USPTO was that “[t]he Office continues to investigate uses of emerging technology for various applications.”[ix]
It is unclear what the future of patent prosecution will look like in the US, but if recent history has taught us anything it is that the patent system can undergo rapid change and come out the other end for the better, it is now only a matter of time.
Following the Ninth Circuit’s ruling in United States v. Nosal, 844 F.3d 1024 (9th Cir. 2016) (“Nosal II”), several commentators in the media queried whether using a borrowed password for streaming video on demand (SVOD) services such as Netflix and HBO Go constitutes a criminal violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030. Time reported, for example, that “[t]he act of sharing Netflix passwords has apparently been decreed a federal crime, based on a ruling from the U.S. Ninth Circuit Court of Appeals.” Variety published the following headline: “Sharing Netflix or HBO Go Passwords Is Technically a Federal Crime Under 9th Circuit Ruling.”
Are the alarmist commentators correct? Ninth Circuit law remains unclear on this point, as there have been no cases specifically involving CFAA prosecutions of password sharing for non-commercial, personal use. That said, there are several factual distinctions between Nosal II and a hypothetical case involving someone being prosecuted under the CFAA for using a borrowed Netflix or HBO Go password. Given these factual distinctions, I speculate that the Ninth Circuit would probably hold that SVOD password sharing does not constitute a criminal violation of the CFAA, at least under the Ninth Circuit’s current interpretation of 18 U.S.C. § 1030(a)(2)(C).
David Nosal was a regional director at the executive search firm Korn/Ferry International. When denied a promotion in 2004, Nosal declared his resignation. He assented to a one-year non-competition agreement during which time he agreed to remain a contractor for Korn/Ferry. Despite his non-compete agreement, Nosal covertly started a competing firm along with fellow Korn/Ferry employees – Becky Christian, Mark Jacobson, and Jacqueline Froehlich-L’Heureaux (“FH”).
Korn/Ferry assigned each of its employees a unique login credential to its computer system. Access to Korn/Ferry’s computer system in turn gave users access to “Searcher” – Korn/Ferry’s internal database. Searcher’s value derived from the vast amount of data which had been compiled in searchable format on its server since 1995, including resumes, contact information, and employment history for over one million executives. When filling vacant executive positions, Korn/Ferry employees plugged criteria into Searcher. Searcher then recommended a “source list” of candidates. Korn/Ferry deemed the source lists generated by Searcher to be proprietary.
Nosal’s computer access credentials were revoked on December 8, 2004. Christian and Jacobson’s computer access credentials were revoked when they quit their jobs at Korn/Ferry in 2005. FH remained at Korn/Ferry at Nosal’s request.
Nosal, Christian, and Jacobson wanted to continue accessing Searcher to expedite work for their new clients. FH willingly shared her Korn/Ferry username and password with Christian and Jacobson. Christian used FH’s login credentials to run Searcher queries on two occasions – once in April 2005 and again in July 2005. Jacobson logged in as FH and ran a Searcher query in July 2005.
The Ninth Circuit affirmed Nosal’s conviction for conspiracy to violate the CFAA, holding that Christian and Jacobson accessed a protected computer “without authorization” within the meaning of § 1030(a)(4). The majority’s construction of the phrase “without authorization” applies equally to § 1030(a)(2), which imposes criminal liability on whoever “intentionally accesses a computer without authorization . . . and thereby obtains . . . information from any protected computer.” The CFAA’s broad definition of “protected computer” basically encompasses any computer connected to the Internet.
In reaching its conclusion, the majority considered the plain and ordinary meaning of “authorization,” including dictionaries which define “authorization” as “permission or power granted by an authority.” The authority with exclusive power to grant or revoke permission, the majority held, is the system owner (i.e. Korn/Ferry), not the system user (i.e. FH).
In dissent, the late Judge Stephen Reinhardt expressed concern that the majority’s holding would sweep in innocuous conduct, such as logging into a coworker’s email to print a boarding pass and other password sharing among family and friends. Reinhardt failed to see a “workable line [in the majority’s opinion] which separates the consensual password sharing in this case from the consensual password sharing of millions of legitimate account holders, which may also be contrary to the policies of system owners.”
Differences Between Nosal II and SVOD Password Sharing
There are several factual distinctions between Nosal II and a hypothetical case involving SVOD password sharing. First, it is not entirely clear that using a borrowed password is even contrary to the policies of certain SVOD services. For example, Netflix’s terms-of-use do not categorically forbid password sharing, stating as follows: “The Account Owner’s control is exercised through use of the Account Owner’s password and therefore to maintain exclusive control, the Account Owner should not reveal the password to anyone.” The use of the word “should,” as opposed to “shall,” reads more like a recommendation (i.e. a word to the wise for those who wish to maintain exclusive control) than a prohibition. However, HBO Go’s terms-of-use are less keen on password sharing. While an HBO Go account owner can create subaccounts for members within one’s immediate household (each with a unique username and password), the terms-of-use prohibit sharing subaccount passwords outside of one’s household.
Second, many CFAA cases, including Nosal II, involve employees stealing an employer’s trade secrets or other proprietary information, such as the source lists generated by Searcher. SVOD password sharing, however, does not involve employees stealing an employer’s trade secrets or proprietary information. It is highly unlikely that Netflix’s video content, which it publishes online for mass viewing, would constitute a trade secret.
Third, the password sharing at issue in Nosal II was for a commercial use – launching a competing executive search firm in violation of Nosal’s non-competition agreement. However, SVOD password sharing is typically limited to personal use. Presumably, most people who borrow an HBO Go password to watch “Game of Thrones” do so only for their own enjoyment, not to distribute episodes for financial gain.
Fourth, a hypothetical case involving SVOD password sharing probably lacks the element of affirmative revocation, which was a significant factor in the majority’s Nosal II analysis. It was not enough that Christian and Jacobson used FH’s password to access Searcher. Using FH’s password only amounted to accessing Searcher “without authorization” when coupled with the fact that Korn/Ferry had deactivated Christian and Jacobson’s accounts. “[A] person uses a computer ‘without authorization’ under §§ 1030(a)(2) and (4),” the majority concluded, “when the employer has rescinded permission to access the computer and the defendant uses the computer anyway.” The majority elaborated, as follows: “once authorization to access a computer has been affirmatively revoked, the user cannot sidestep the statute by going through the back door and accessing the computer through a third party.” The court went on to say that “[u]nequivocal revocation of computer access closes both the front door and the back door.”
What would affirmatively revoking SVOD access even look like? Even if all SVOD services, arguendo, updated their terms-of-use agreements to categorically prohibit using someone else’s password, this would still seem to fall short of the type of affirmative, individualized revocation contemplated in Nosal II. Affirmative revocation would seem to require Netflix or HBO take stronger, more direct action. This could take several forms. Affirmative revocation might require, for instance, sending an individualized cease and desist letter to someone who is flagged for using a shared password. As far as I am aware, however, Netflix and HBO do not currently send cease and desist letters to individuals who use borrowed passwords, at least not as a general business practice.
Whether SVOD password sharing is or is not a violation of the CFAA, there are other reasons why you might be better off getting your own Netflix account instead of borrowing a friend’s password. There are ethical reasons, of course. Also, it might not be in your best interests to use someone else’s password. SVOD services often limit the number of concurrent streams per account. Netflix’s “Basic” plan, for example, allows only one screen at a time. This means that if you use a shared password, you might find yourself blocked out of Netflix next time you attempt to watch that latest season of “Stranger Things.”
 United States v. Nosal, 844 F.3d 1024, 1033 (9th Cir. 2016) (quoting LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir. 2009) (quoting Random House Unabridged Dictionary 139 (2001))).
 See Futoshi Dean Takatsuki, Case Comment, United States v. Nosal II, 37 Loy. L.A. Ent. L. Rev. 305, 333 (2017) (discussing how “‘revocation’ is more obvious if Netflix were to personally serve the person who accessed content through the use of a valid account holder’s login credentials, for example, via a cease and desist letter”).
Alexander Koster is a J.D. candidate, 2019, at NYU School of Law.
On Feb. 22nd, the Federal Communications Commission (FCC) published a new rule overturning net neutrality. Aptly named the “Restoring Internet Freedom” order, it directly repealed the previous “Open Internet Order” put in place in 2015 raising alarm bells all across the country. Reactions ranged from heralding the coming of Doomsday for the internet to celebration over the “freeing” of the internet from overregulation by the government. Although a litany of states have filed suit against the FCC, challenging the rule under the APA’s arbitrary and capricious standards, and a number of states have sought to introduce state-level net neutrality protections through legislation, the end of net neutrality as we know it is in the books for the foreseeable future. But is it really all doom and gloom as the tech world suggests? There are a glut of articles lamenting the fall of net neutrality, but few that consider the potential advantages a more deregulated market may bring to broadband consumers and/or content providers. This blog post will seek to briefly recap what broadband services looked like before Tom Wheeler’s “open internet,” the hypocritical embrace of “Zero-rating” during the age of net neutrality, as well consider what upsides may potentially exist under Ajit Pai’s “restored free internet.”
Life before the “Open Internet Order”
At the core of the 2015 Open Internet Order was a ban on blocking, throttling, and prioritization of content and reclassifying broadband service from an “information service,” to an “telecommunication service,” subject to Title II regulation by the FCC as a common carrier. The obvious question that comes to mind then is, does that mean prior to 2015 internet services providers (ISPs) could block, throttle or prioritize content? The short answer is “Yes,” and the most infamous case is that of Comcast’s secret throttling of peer-to-peer sharing (i.e. Bittorrent). The FCC brought action against Comcast but ultimately lost in the 9th circuit in 2010, and lost again in 2014 to Verizon when they attempted to enforce new regulations meant to prevent throttling and blocking. One of the things that few proponents of net neutrality would like to admit is that before 2015, net neutrality was not, and never had been, the de-facto rule. The courts had largely sided against FCC regulation, holding that FCC did not have the statutory authority to regulate ISPs. So at the very least, a repeal of the open internet order would merely be a return to the state of affairs 4 years ago, hardly the end of days.
The Hypocrisy of Zero-Rating and Net Neutrality
The idea of net neutrality at its heart simply means treating all data equally without discrimination. While there are numerous positives associated with net neutrality such as freedom of speech, equal access, and leveling the playing field for startups, there seems to be an incorrect underlying belief that discrimination cannot possibly be beneficial to consumers. Zero-rating programs are essentially “sponsored data plans” that exempt access to certain services and websites from counting against your data cap in data plans. Popular programs includes T-Mobile’s “Binge On” and Verizon’s Fios Mobile App which allow for video and music streaming from counting against your monthly data cap. There is a strong argument that these zero-rating programs go against the central tenet of net neutrality by providing preferential treatment to certain content, but the popularity of these programs prompted even the FCC to step back, likely fearing consumer anger. As such, once can argue that in certain situations preferential treatment can still benefit consumers and that complete net neutrality might reduce some benefits that might be afforded to consumers.
Best Case Scenario of a “Free Internet”
Proponents of net neutrality have long feared the potential for abuse that an unregulated market would allow, such as charging consumers for access to Facebook or Netflix or allowing for the creation of monopolies by blocking content providers who are unwilling to pay extra. So what is the best case scenario of the reality we’re facing post net neutrality? Proponents of the repeal have long argued that with deregulation, the free market competition will lead to benefits to consumers because ISPs will compete to offer better incentives and innovative services like zero-rating will become more commonplace. A market with increased competition may allow for newcomers to provide benefits and services that established players refuse to offer (e.g. T-Mobile’s disruption of the mobile service industry), driving down prices and increasing options available to consumers. Allowing ISPs to discriminate means that we can have dedicated “fast lanes” to reserve bandwidth telemedicine or other emergency healthcare services. Additionally, allowing ISPs to discriminate incoming/outgoing traffic might also provide cybersecurity benefits by allowing ISPs to control the flow of traffic during distributed denial of services (DDoS) attacks. Do the potential upsides outweigh the downsides? Only time will tell, but the answer may largely depend on how much faith you have in the free market…
Sam Lee is a J.D. candidate, 2019, at NYU School of Law.
This past year was a dramatic one for the NFL, and not solely because of the spectacular on-field play. On August 11, 2017, Dallas Cowboy’s running back Ezekiel Elliott, the NFL’s leading rusher in 2016, was suspended for the first six games of the 2017 season for violating the personal conduct policy. Five days later, Ezekiel Elliot, through the NFL Players Association (NFLPA), appealed the suspension. The NFLPA’s lawsuit did not try to undermine the factual conclusions from the NFL’s investigation, rather it challenged the process the league undertook to suspend Elliott. The NFL, on the other hand, wanted to enforce Elliott’s suspension in the 2017 season and confirm Commissioner Roger Goodell’s authority to issue punishment based on “conduct detrimental” to the league as mandated in Article 46 of the collective bargaining agreement. The NFL counted on the deep reluctance of judges to interfere in arbitration under labor law. League lawyer Dan Nash argued that because NFL players granted Goodell broad disciplinary powers in Article 46 of the Collective Bargaining Agreement, they surrendered the right to any judicial intervention. This line of reasoning was virtually identical to the winning arguments the NFL deployed in appeals against Tom Brady during Deflategate and Adrian Peterson after he pleaded no contest to misdemeanor reckless assault. Following a lengthy and eventful legal battle, the suspension was ultimately upheld on November 9 by the United States Court of Appeals for the Second Circuit.
As the cases of Elliot, Brady, and Peterson have shown, the NFL’s collective bargaining agreement is an extremely important document to the sport of football. Any fan of the NFL can gain a deeper understanding of the league and its off-field drama by first understanding the collective bargaining agreement itself.
What Is the NFL Collective Bargaining Agreement?
The NFL Collective Bargaining Agreement (CBA) is a labor agreement between the National Football League Players Association (NFLPA) and National Football League (NFL) team owners. The agreement establishes health and safety standards, determines distribution of league revenues, and establishes benefits, including pensions and medical benefits, for all players in the NFL.
The first collective bargaining agreement was reached in 1968 after player-members of the NFLPA voted to go on strike to increase salaries, pensions, and benefits for all players in the league. Later negotiations of the collective bargaining agreement called for injury grievances, a guaranteed percentage of revenues for players, an expansion of free agency, and other issues impacting the business of the NFL. The NFLPA and team owners have negotiated seven different agreements since 1968.
What events surrounded the 2011 NFL CBA?
The 2011 CBA did not disappoint in terms of drama. The negotiation process began in early 2010, but completely stalled by early 2011. After failing to make any progress in negotiations, both sides accepted mediation under the auspices of the Federal Mediation and Conciliation Service (FMCS), set to begin in mid-February. During mediation, players and owners agreed to extend the 2006 CBA by one week. The FMCS failed to mediate a settlement and the previous CBA expired on March 7, 2011.
That same day, the NFLPA announced it was no longer a union. This allowed players to file individual antitrust cases, many of which challenged the legality of the impending lockout. Tom Brady and Peyton Manning were two of the eight named plaintiffs in the action filed in Federal District Court in Minnesota. The Federal District Court initially ruled for the players, declaring the lockout illegal because the players were no longer members of a union. The 8th Circuit Court of Appeals stayed the District Court’s ruling, and the lockout continued pending a final determination in the appellate court. In July 2011, as court-ordered mediation continued between players and owners in New York, the 8th Circuit court announced that the Norris–La Guardia Act prohibited it from enjoining the lockout.
After several months of negotiations, the longest lockout in league history ended on July 25, 2011 following a tentative litigation settlement which reclassified some league revenues for cap purposes. This settlement was conditional upon the NFLPA re-constituting as a union and incorporating the settlement terms into a new CBA. Players reported to training camps in July 2011, and voted to re-constitute the NFLPA as a union. After the vote tally was confirmed on July 31, 2011, the NFLPA began six days of bargaining that resulted in a new CBA being signed on August 5, 2011.
What can we expect when the current CBA expires?
The 2011 CBA included a no opt-out clause and a ten-year term set to expire after the 2020 season. DeMaurice Smith, the executive director of the NFLPA, believes there’s going to be a work stoppage after the current collective bargaining agreement (CBA) expires following the 2020 season. “I think the likelihood of either a strike or a lockout in  is almost a virtual certainty,” Smith said in an interview with MMQB.com last August.
What does this mean for the fans? The last time the NFL had to cancel games due to a work stoppage came in 1987. Smith hasn’t indicated any belief that game cancellations are impending, however the NFLPA is taking the possibility of a work stoppage so seriously that it warned players last May to start saving money….
Daniel Emoff is a J.D. candidate, 2019, at NYU School of Law.
In the past twenty years, the state of the music industry has changed dramatically. Between 1998 and 2014, the industry was in crisis. Total revenue from U.S. music sales and licensing dropped from $15 billion to $7 billion. CD sales were on the decline, pirating was on the rise, and even when consumers purchased their music legally, they tended towards buying .99 cent singles rather than full albums. Since 2014, streaming has taken the music world by storm and is responsible in large part for reviving the industry. Yet, music copyright law remains in 1998, when the last major legislation called the Digital Millennium Copyright Act was passed. Songwriters have not gotten a raise on what they are paid from song sales since 2006. Even as the music industry has started to rebound, songwriters’ revenues have continued to decline. Songwriters earn meager rates per song streamed. Streaming companies have failed to pay a number of songwriters altogether because of information gaps in matching songwriters to songs. As the industry evolves, music copyright law in its current form appears increasingly ill-suited to address concerns about the viability of songwriting as a career in the streaming era.
The Music Modernization Act (MMA) wants to bring music copyright law into the 21st century. In general, the MMA makes it easier for streaming services (referred to as “digital service providers” in the bill) to identify and pay songwriters. The most important provision is the creation of a free, public, comprehensive database to match each song with the appropriate copyright holders. The copyright to the song composition is usually owned by the songwriter and a publishing company. Publishing companies license the songs for use, collect royalties, and distribute them to songwriters. These licenses are referred to as mechanical licenses. Digital service providers’ (DSPs) inability or unwillingness to seek out rightsholders and acquire mechanical licenses has been the subject of manymultimilliondollarlawsuits.
Digital service providers will be able to license music electronically, whereas previously they were forced to send out millions of physical letters to each copyright holder for each song. The licensing process will be overseen by the Mechanical Licensing Collective (MLC), which will tentatively consist of 10 publishers and 4 songwriters. DSPs will pay the MLC for a blanket license to use anything in the newly created song database. In instances where the copyright holders still cannot be identified, the unclaimed royalties will be distributed amongst songwriters and music publishers, rather than remain with the DSPs.
The bill establishes a new standard for determining mechanical royalty rates. Historically, the rate was set by statute and indexed to inflation. The rate was set at 9.1 cents per song in 2006 and has generally been considered a below-market rate. Now, the rate will be calculated by a free market, willing seller/willing buyer standard. Ideally, this will yield higher mechanical royalties payments for songwriters.
In addition to mechanical licenses, DSPs are also required to secure public performance licenses from performing rights organizations (PROs) such as ASCAP and BMI. PROs then distribute performance royalties to songwriters. The MMA changes the process for adjudicating royalty disputes based on public performance licenses by allowing rate courts to consider a wider range of factors to determine a fair payout. Before, rate courts were prohibited by law to consider what performers are paid for the song in order to determine fair compensation for the songwriters. The MMA removes this prohibition and allows rate courts to consider all market evidence.
While the MMA is an important step forward, critics have pointed to a number of inequities and gaps in the legislation. Publishing companies may receive more favorable treatment since they are allotted ten of the fourteen spots on the Mechanical Licensing Collective. The publishers also decide which songwriters will occupy the remaining four seats. Songwriters will comprise half of two important MLC subcommittees: an advisory committee which oversees the unclaimed royalties distribution and a dispute resolution committee. The Songwriters of North America have told its members that this minor power imbalance was a necessary compromise given that they were originally allotted zero seats on the MLC and were able to bargain up to four seats in exchange for other pro-songwriter MMA provisions.
Under the MMA, up to 50% of unclaimed royalties owed to songwriters will be given to publishing companies based on market share. This means that potentially large sums would end up in the pockets of music publishers like Sony, Universal, and Warner even though they are the least likely to own the rights to the songs missing from the database. Music lawyer Harry Gradstein also argues that MLC will be incentivized not to find the rightsholders because their publishing companies will be able to pocket the unclaimed royalties. This will disproportionately impact rap and Latin music songwriters, as they are likely to be self-publish and not be aware of the new requirement to register their compositions with the MLC in order to be paid mechanical royalties. The MMA also lacks a grievance process for unaffiliated songwriters to contest MLC decisions. This issue will be of growing importance due to the increase of self-published songwriters and decline of major music publishers’ market share.
The MMA insulates DSPs from liability for copyright infringement claims not filed by January 1, 2018, even though the bill likely will not be enacted until months later. One attorney has speculated that it may even be unconstitutional to effectively retroactively legalize acts of copyright infringement through the MMA. Songwriters and publishers object to this lack of notice, especially given the millions of dollars at stake. They argue that it is unfair that DSPs effectively operated on a stream now, ask licensing questions later business model and have made billions of dollars off of the unpaid work of songwriters and publishers. MMA proponents have responded that this concession was important as DSPs had begun to argue in court that they did not owe mechanical royalties at all. Had those legal challenges been successful, songwriters would have been far worse off.
Despite these criticisms, the MMA has gotten broad support from many prominent music organizations, such as the National Music Publishers Association, the Recording Industry Association of America, and the Songwriters of North America. Perhaps more surprisingly, in a time of intense political polarization, the MMA has been endorsed by Democrats and Republicans alike. The bill is expected to pass later this year.
Courtney Kan is a J.D. candidate, 2019, at NYU School of Law.
Spotify (SPOT), the music streaming service, is expected to begin trading on April 3. This IPO is one to watch by all fans of music, technology, and finance.
What is Spotify?
Spotify is a music, podcast and video streaming service from Stockholm, Sweden. It came to the United States in 2010 and has been booming ever since. Spotify has about 159 million monthly active users and 71 million subscribers for its premium services. In August 2017, Spotify was the most downloaded music app on the iOS platform in the United States. Spotify made around $5 billion in revenue in 2017. However, it is not a profitable company yet. Spotify pays royalties unlike typical download sales, instead paying based on the number of artists’ streams as a proportion of total songs streamed on the service.
Spotify works as a “freemium service”, as basic features are free with advertisements or certain limitations. Users can sign up for a premium service, which give improved streaming quality and music downloads. Spotify offers 3 types of services: Spotify Free (not free of ads, limited mobile listening) whereas Spotify Premium and Spotify Family allow zero advertisements, mobile listening, enhanced sound quality and offline listening. Spotify Family is the same as Spotify Premium, but allows up to six people to share a subscription and thus reduce the price.
As for the technology, Spotify is proprietary and uses digital rights management protection. Spotify moved away from the peer-to-peer system in April 2014. The service works by allowing users to stream and download music, while also allowing users to add local audio files for music not in its catalogue into the user’s library.
On the whole, Spotify is praised by the music community but certain artists refuse to engage in their service. Most notably, Thom Yorke and Taylor Swift have pulled their music from the site, in protest of the way Spotify pays their artists.
How is direct listing different than IPO?
Spotify filed for a direct listing on the New York Stock Exchange on February 28. Spotify will not issue new shares and have a traditional initial public offering, but instead will go with a direct listing. This is unusual but becoming a new way for companies to alternate from the IPO. This reinforces the image that creator Daniel Elk envisioned, to disrupt the traditional ways of listening to music.
Direct listings contrast with the traditional initial public offering in a few ways. Instead of seeking to raise money through the process of going public, the direct listing enables existing shareholders to sell their shares to the public. This can prevent a company from having share lockups or share dilution, both which can provide hurdles to the company before the IPO.
Spotify disclosed that it expects the IPO to cost the company between $44 and $50 million. Further, because of the direct listing, Spotify will get zero dollars in return for going public.
Spotify will receive certain benefits from this method. This includes helping employees of the company who own stock, as they won’t have restrictions from selling their shares once the company goes public. Further, it creates the illusion to the public that the company is strong and solid, as it doesn’t need money from the public.
Who are the competitors?
Spotify is a huge streaming service, but joins a group of competitors who are publicly listed. These include Apple (AAPL), Alphabet Inc. (GOOGL), and Pandora Media Inc. (P). Apple Music is only a small sector of Apple, whereas it is the complete focus of Spotify. Alphabet Inc. owns YouTube, which has its own versions of music-streaming services. Pandora is the most similar to Spotify, as it is the most like a streaming service company on the public market.
Sophie Fritz is a J.D. candidate, 2019, at NYU School of Law.
Nearly 1.3 million people die in car accidents each year, amounting to an average of roughly 3,287 deaths a day. Hopefully, with the advent of self-driving cars, that number will begin to drop precipitously. Unlike human beings, the technology behind these autonomous vehicles yields the safest results in every thought out scenario, by using complex algorithms. People can drive drunk, get distracted by text messages, or lack the reflexes to brake in time; self-driving cars are not subject to any of these flaws. Self-driving cars will dramatically reduce the amount of car accident fatalities resulting from human error. However, this new wave of automotive technology should bring out fascinating legal questions in realm of tort and contract liability. These products will reshape, or in some cases stymie, standard claims of negligence, product liability, and breaches of the implied warranty of merchantability.
The very essence of a negligence claim involves a “reasonable person” analysis. For instance, if a driver decides to steer with their feet for fun, and injures someone as a result, they have almost certainly acted in a way that a reasonable person would not, and are thus liable for at least compensatory damages to the extent of the victim’s injuries. Self-driving cars, like all machines lacking direct human input, of course cannot be found to be negligent, as they can’t be compared to the reasonable person. Unfortunately, there have been instances where these cars malfunction and injure people, or even actively decide to hit a group of people in an emergency scenario, in order to avoid killing more people, a modern formulation of the “trolley problem.” Currently, most laws require drivers to have their hands within inches of the wheel at all times. Therefore, negligence claims would still be available to these victims against the driver. But down the road (no pun intended) these cars will be completely autonomous and arguing that the driver was negligent will be fruitless. Perhaps, we will arrive at point where the technology will be so seamless, that any emergency trolley problem scenario will be due to contributory negligence on the part of the victims, barring any negligence claims in the first place.
Victims of malfunctioning self-driving cars won’t be out of luck just because negligence claims will be barred. We may see future case law deciding that self-driving cars constitute unreasonably dangerous activities, and thus the manufacturer or perhaps owner will be held to be strictly liable. From a public policy standpoint, courts may resist imposing strict liability, as a strict liability regime would disincentivize further innovation or manufacture of the product altogether. Perhaps the courts will arrive at a “no-fault” system after seeing how the benefits of these cars greatly outweigh the costs of the predicted minimal amount of accidents of year. Perhaps there will be special courts for these issues where victims could seek redress.
Another route future plaintiffs can take is that of product liability. If the cars malfunction, they can argue for design defect, or if a version lags behind the market, perhaps arguing that there was a manufacturing defect would be more suitable. However, proving either design or manufacturing defect was present will be difficult given the complexity and technological detail that goes into the manufacture of these cars and their artificially intelligent software.
Another interesting issue will arise not when the cars cause fatalities, but when they don’t operate as they should. This will lead to claims under the Uniform Commercial Code, section 2-314, for breach of the implied warranty of merchantability. It is generally easy to untangle which products are not fit for their ordinary purpose and which are. For example, if you buy a table and it collapses when you put your dinner plate down, every court in the United States will agree that the seller has breached the implied warranty of merchantability (assuming, of course, that it has not been disclaimed). As smart phones became more ubiquitous, it was interesting to see the courts struggle to decide a standard for fitness for this new technology. In In re Carrier IQ, Inc. N.D.C.A.78 F. Supp. 3d 1051 (2015), the court found that because certain software on the plaintiffs’ smart phones collected personal information, this was considered a breach of their warranty of merchantability. This may be surprising as one would think the ordinary purpose of a phone is simply to communicate, but the court took it a step further and argued the purpose is to communicate without worry of any invasion of privacy. How will courts approach self-driving cars? What is their ordinary propose? Whatever the answer is, it will surely continue to change as these cars become more efficient and far more autonomous.
Avi Kaye is a J.D. candidate, 2019, at NYU School of Law.
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