Category Archives: Uncategorized

Audible Agrees to Delay Rollout of Audiobooks Caption Feature Pending Court Ruling After Big Publishers Sue for Copyright Infringement

audiobook-imageSeven of the US’ largest book publishing companies sued Audible, Inc. for copyright infringement in anticipation of Audible’s rollout of a new captions feature to their audiobooks.  The complaint, filed in federal court in the Southern District of New York on 23 August 2019 alleges that Audible’s planned inclusion of the text of a book in the distribution of an audiobook violates their copyrights in the books.  The publishers say that while Audible has the right to distribute the audiobooks, Audible does not have the right to include the text with the audiobook.

“Audible is a distributor of Publishers’ audiobooks and no more has the right to create and offer Distributed Text than a physical book store selling physical books would have the right to make and sell eBooks,” stated the complaint.

The plaintiffs, all member companies of the Association of American Publishers, asked the court for a preliminary and permanent injunction barring Audible’s planned rollout of the caption feature in their audiobooks on 10 September 2019.

On 28 August 2019 Audible and the publishers filed a joint joint stipulation and order with the court in which Audible agrees to delay its captions feature until the court rules on the publishers’ motion for a preliminary injunction.  A hearing has been set for 25 September 2019 for parties to argue over the preliminary injunction.

The case is important because it will help to clarify the scope of rights that audiobook distributors have.  If the court grants the preliminary injunction (I suspect it will), Audible would likely have to renegotiate the terms of its audiobook licenses to explicitly include text and caption rights so that consumers can continue to enjoy the enhanced features that new technology provides.

This case is a good reminder to build rights regarding future technologies into your licenses, so parties are clear from the beginning what is lawful before they develop technology that depends on licensing those rights.

 

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3rd Circuit to Review Decision That Could Shutter Online Marketplaces

CDA 230 Does Not Protect Online Businesses From Product Liability Claims Related to 3rd-Party Vendors

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The 3rd Circuit Court of Appeals has decided to review en banc a controversial panel decision issued last month over the liability of online marketplaces for the goods they sell.  The 3rd Circuit panel’s order in Oberdorf v. Amazon, (930 F.3d 136, 2019 WL 2849153 (3d Cir. July 3, 2019)) represented the first time a federal appeals court found an online marketplace strictly liable for the products sold on its platform by third-parties.

Amazon’s Marketplace allows third-party vendors to sell goods to Amazon customers via its website.  Ms. Oberdorf purchased a defective dog collar from a third-party vendor, Furry Gang, via Marketplace.  The collar subsequently broke, causing a retractable leash to recoil back and permanently blind Oberdorf in one eye.  Furry Gang could not be located by either Oberdorf or Amazon; Oberdorf sued Amazon for strict products liability and negligence under Pennsylvania state law for selling the defective dog collar.  Amazon’s position is that it is not a “seller” as defined under Pennsylvania products liability law because it merely provides an online marketplace for products sold by third-party vendors.

The panel’s majority ruling held that Amazon could be considered a “seller” and thus held strictly liable for defective products sold via its online platform pursuant to state products liability law.  However a strong dissenting opinion was also issued, disagreeing with the the majority view that Amazon should be considered a “seller” for purposes of products liability law.  The case is important because if the panel’s ruling is upheld, online marketplaces are in danger of liability awards that could put them out of business.

The District Court below had found that Amazon was not liable for Oberdorf’s injuries under Pennsylvania state law.  The District Court ruled that Amazon is not subject to strict products liability claims because Amazon is not a “seller” under Pennsylvania law.  The District Court also found that Oberdorf’s claims were barred by the Communications Decency Act (CDA) because she seeks to hold Amazon liable for its role as the online publisher of third-party content.  Amazon’s motion for summary judgment was granted by the District Court and Oberdorf appealed that ruling to the 3rd Circuit.

Surprising many legal scholars, the panel majority overturned the District Court’s ruling by applying a four factor test to decide that Amazon is a “seller” and thus strictly liable for injuries resulting from defective products sold on Marketplace.  The Pennsylvania Supreme Court uses a four factor test to determine if an actor is a “seller” for product liability purposes and the majority opinion weighed all four factors against Amazon:

(1)  Whether the actor is the only member of the marketing chain available to the injured plaintiff for redress;

(2)  Whether the imposition of strict liability upon the actor serves an incentive to safety;

(3)  Whether the actor is in a better position than the consumer to prevent the circulation of defective products”; and

(4)  Whether the actor can distribute the cost of compensating for injuries resulting from defects by charging for it in his business, i.e., by adjustment of the rental terms.

The second important issue on appeal is whether Oberdorf’s claims, both for negligence and strict liability, including failure to provide adequate warnings regarding the use of the dog collar, are barred by § 230 of the Communications Decency Act (CDA).

The CDA states, in relevant part, that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

This section, referred to as the CDA safe harbor provision, precludes courts from entertaining claims that would place a computer service provider in a publisher’s role, and therefore bars lawsuits seeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone, or alter content.  The CDA is intended to allow interactive computer services companies “to perform some editing on user-generated content without thereby becoming liable for all defamatory or otherwise unlawful messages that they did not edit or delete. Section 230 is largely credited with protecting Internet innovation and is widely considered a key driver for the recent growth in online business and fostering the free flow of information.

The 3rd Circuit found that to the extent Oberdorf’s negligence and strict liability claims rely on Amazon’s role as an actor in the sales process (a “seller”), they are not precluded by the CDA. However to the extent that Oberdorf is alleging that Amazon failed to provide or to edit adequate warnings regarding the use of the dog collar on its website, those claims are precluded by the CDA.

So while the majority ruled that the failure to warn claims were barred by the CDA, the products liability claims against “sellers” were not barred by CDA. This ruling heightens the legal risk for online businesses that facilitate the sale of products by third-party vendors.

Panel Judge Scirica issued a stinging dissent to the majority ruling, “like every federal court to consider this issue so far, I would find Amazon Marketplace not a seller.”  The dissent noted that in no other scenario has a Pennsylvania court imposed “seller” liability on a defendant whose role in the sale did not include transferring ownership or possession of the product.  Scirica reasoned that Amazon’s role in providing the the product was too tangential for liability to attach.

The dissent also pointed to the 6th Circuit’s ruling that Amazon Marketplace is not a “seller” for products liability purposes (Fox v. Amazon.com, Inc., — F.3d —, 2019 WL 2417391, at *5–7 (6th Cir. June 10, 2019)) and to the 4th Circuit’s ruling that Amazon Marketplace was not a “seller” even where Amazon had shipped the goods to the consumer (Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135, 144 (4th Cir. May 22, 2019)).

Given the number of cases to find contrary to the 3rd Circuit’s ruling, its powerful dissent, and the economic significance of the outcome of this legal battle in the online marketplace, it comes as no surprise that the 3rd Circuit has decided to review the case en banc.

Don’t Kill the Golden Goose: Communications Decency Act (CDA) Section 230 Fosters Internet Innovation

Screen Shot 2019-08-13 at 2.45.32 PMPoliticians on both sides of the aisle in the US face mounting pressure to curtail the limitations on liability for online activity provided by Section 230 of the 1997 Communications Decency Act (DCA).  47 US Code Section 230 is the primary law that allows online companies like Facebook, Twitter, Amazon, Google, YouTube, Instagram, VRBO, and thousands of other businesses to provide online services to consumers without fear of liability for the postings of their customers or other third-parties.

In other words, CDA 230 is critical to technological innovation and the development of tools that enable a robust public dialogue.  As described in Reason:

“…practically the entire suite of products we think of as the internet—search engines, social media, online publications with comments sections, Wikis, private message boards, matchmaking apps, job search sites, consumer review tools, digital marketplaces, Airbnb, cloud storage companies, podcast distributors, app stores, GIF clearinghouses, crowdsourced funding platforms, chat tools, email newsletters, online classifieds, video sharing venues, and the vast majority of what makes up our day-to-day digital experience—have benefited from the protections offered by Section 230.

Without it, they would face extraordinary legal liability. A world without Section 230 could sink all but the biggest companies, or force them to severely curtail the speech of their users in order to avoid legal trouble.”

CDA 230 was designed to empower individuals with user-defined control over what information is received online, but calls to replace that freedom with government-approved speech are on the rise in the US.  In addition to the chilling effect on freedom of expression, such regulation would dramatically stifle innovation and technological development.  Since legal liability would attach for the actions or statements of third-parties, companies and entrepreneurs would be discouraged from design choices that enable the free flow of information and promote social interactivity.

Such calls to restrict CDA 230 should be resisted because these protections have proved critical to fostering technological innovation, democratic processes, and economic development.  Protection for intermediaries means companies and entrepreneurs are free to build online tools that enable the expression and social interaction of others without the burden of liability for what is said by others.  Without these legal protections, companies and entrepreneurs would be stopped dead in their tracks by the threat of legal liability for others’ actions.

The 2nd Circuit Court of Appeals issued a significant ruling regarding CDA 230 recently, clarifying that companies such as FaceBook are not liable for the postings of terrorists on their platforms.  Case Force v. Facebook made clear that CDA 230 immunity should be read broadly to protect online companies from having to police and control their platforms for offending material.   “The Circuits are in general agreement that the text of Section 230(c)(1) should be construed broadly in favor of immunity,” opined the Court.

Both Congress and the US President have threatened to amend CDA 230 in order to regulate online speech in accordance with their own preferences for censorship, jeopardizing the immunity that has protected entrepreneurs and innovators for more than two decades.  But such restrictions would surely “kill the golden goose” that has harnessed such incredible economic growth and technological development in recent years.

Notably, CDA 230 does not apply to criminal activity; nor does it immunize intellectual property violations, which are regulated under the US Digital Millennium Copyright Act (DMCA) and laws related to contributory and vicarious infringement.  CDA 230 does however strike a balance between technological development and accountability under the law, ensuring the freedom of innovators while not immunizing the most egregious online behavior.  CDA 230 should be protected, not curtailed, in order to promote the future health and growth of the Internet.

Trent Reznor Puts Fans in Charge with Successful Experimental Business Model

Trent Reznor & Atticus - NIN-Ghost

Trent Reznor has rocked the music world once again. The long-time front man for Nine-Inch-Nails is convinced the current music business infrastructure is broken since it requires artists to rely on labels. Reznor is looking for a new model.

Last year NIN broke free from its major label and decided to go independent, look to its fans for support, and experiment with new business models made possible by the Internet.

So far, I’d say its working for Reznor and NIN. Within 36 hours of releasing the band’s latest album online with a variety of payment options, including free, it sold-out the 2,500 $300 Limited Edition Ultra-Deluxe Packages, grossing the ARTISTS $750,000 on the album’s first 2 days available, from that option alone.

NIN’s album, “Ghosts I-IV” is released in 320 kbps .MP3 and a variety of other DRM-free formats (so there won’t be annoying incompatibility or permissions issues). The album includes many options like DVDs, CDs, booklets, music tracks for re-mixing, vinyl LPs and an assortment of other goodies that add value for the fan.

There are several payment options for fans including free, a $5-pack, a $10-set, $75-kit, and the deluxe $300 Limited Edition pack. NIN offers the album from its own website and also sells it in traditional music stores. Radiohead released an album online recently under a similar “optional” business model and it also proved a financial success for the artists.

NIN’s album is released under a Creative Commons Attribution Non-Commercial Share-Alike license so NIN’s fans will be able to remix and share the tracks with their friends through lawful file-sharing.

My appreciation goes to artists like Trent Reznor for having the courage to experiment with new business models and pave the way for other artists to make a living from sharing their music.

The Contract Behind the Curtain: A Glimpse into the San Francisco Ballet Dancer’s Contract

If you are also a ballet geek, you may find the Basic Agreement between the San Francisco Ballet and the American Guild of Musical Artists fascinating.

I wrote an article highlighting some of the more interesting terms in this collective bargaining agreement that is signed by every ballet dancer (and choreographer) who works with the San Francisco Ballet.

However the Basic Agreement contains only *minimum* commitments to artists. Dancers and choreographers also sign an “Individual Artist’s Agreement” with the company that can include higher salaries and other negotiated perks. The dancers and choreographers pay AGMA dues of 2% of their gross compensation under the Basic Agreement. Read the full article for the details:

Monterey Jazz Festival’s Innovative Digital Music Education Project

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Jazz Music Education for the Masses

My client, the legendary Monterey Jazz Festival (MJF) has launched an exciting new project, the Digital Music Education Project (DMEP) that uses the power of the Internet to bring jazz music education to the masses.

Besides hosting the hottest jazz concert each year, the Monterey Jazz Festival is a nonprofit organization that invests its resources in jazz music education programs, especially in the local public schools. But now thanks to MJF’s Digital Music Education Project, those educational opportunities are captured, digitized, and made available for free download by anyone in the world. Listen to today’s top jazz artists give advice to students or discuss their own musical influences from the DMEP website. “Master classes” taught by renowned jazz experts can be accessible by anyone via the Internet.

I am honored to have provided legal counsel to the Monterey Jazz Festival to enable this innovative project’s development; and you can also contribute to MJF’s jazz education program here.

MJF’s Digital Music Education Project launch coincided with the 50th year anniversary of the festival (Sept. 2007). Dave Brubeck, who performed at the first MJF festival in 1957, took center stage 50 years later to captivate the fair grounds yet again with his fingers on the ivory. Diana Krall, Sonny Rollins, Terence Blanchard, Gerald Wilson and hundreds of other jazz artists performed in the sold out jazz music extravaganza.

If you couldn’t make it to Monterey last September to sway to the jazz among the Redwoods, you can still catch the national tour of MJF’s 50th Anniversary Band, which ends in Michigan on 16 March 2008 (sans Redwoods). And the 51st Monterey Jazz Music Festival will be held 19-21 September 2008.

ARTISTS BEWARE: Language to Look Out For

The Internet has created exciting new opportunities for artists to distribute their music to the world, but cyberspace is not without its share of hucksters ready to trick artists into signing away all ownership rights to their music for a song.

A musician recently came to me to review a recording contract that had been offered to him from an independent record company. Although the artist had already recorded the CD of his original compositions, he wanted a record label to distribute his CD.

He thought he was signing a distribution deal. But buried in the back of the contract was a clause requiring the artist to assign all of his publishing copyrights in the music to the record label. Although the contract was labeled as a “Exclusive Recording Agreement”, it was in fact, also a Publishing Agreement, and this distinction is worth everything to an artist.

Artists, resist this contract language with your life!:

“If ARTIST writes and/or composes any of the songs recorded under this agreement, ARTIST agrees hereby irrevocably and absolutely assigns, transfers, sets over, and grants to COMPANY its successors, and assigns each and every and all rights and interests of every kind, nature and description in and to the results and proceeds of ARTIST Writer’s services hereunder, including, but not limited to the titles, words, and music of any and all original arrangements of musical compositions in the public domain in any and all licenses relating thereto, together with all worldwide copyrights and renewals and extensions thereof, which musical works have been written, composed, created, or conceived, in whole or in part, by Writer alone or in collaboration with another or others, and which are now owned or controlled, directly or indirectly by Writer, alone or with others, or as the employer or transferee, directly or indirectly, of the writers or composition, and all worldwide copyrights and renewals and extensions thereof, all of which ARTIST does hereby represent are and shall at all times be COMPANY sole and exclusive property as the owner thereof free from any adverse claims or rights therein by any other person, firm or corporation. A separate songwriter agreement will be signed for all musical compositions written and made by ARTIST during the term of this agreement.”

Who can’t understand a sentence that is 23 lines long?

So while this Artist thought he had been offered a distribution deal, he was actually given a contract that would have transferred all of his publishing rights to this label forever. And any music he writes in the next 4 years would also belong to the label. Besides taking all rights to his music, the contract would not have allowed him to record with anyone else either. What great inducement was this label offering the artist as an advance to give up all of his rights? Nothing – $0 advance. Just old-fashioned artist exploitation.

A little background on copyright. There are several copyrights to a piece of recorded music, and these copyrights are often owned by different people or entities. There is the copyright on the song itself, the musical composition and the lyrics, and this makes up the Publishing Rights to the song. The author of the song, typically a songwriter or her publishing company, is the owner of the copyright on the song. So the artist who composed the song typically owns the publishing rights to the music.

Then, separate from the publishing rights, there is the copyright on the sound recording of the music. The copyright on the sound recording is typically owned by the record label who makes the recording. So the artist typically owns the copyright on the song, while the label typically owns the copyright on the recording of the song.

There are exceptions to this generalization. Sometimes artists assign a portion of their publishing rights to a major label’s publishing company if the label offers a sweet deal, like a large cash advance or access to major distribution channels.

But any reputable record company will not try to mask a publishing deal by labeling it a recording agreement and then bury the clause that transfers all of the artist’s publishing rights to the company in an unlabeled and unintelligible clause near the end of the agreement.

The real insult to injury in this case is that this record label markets itself online as a ‘label that protects artist’s publishing rights’. Ironically this label’s president said the terms of the contract (which take away all of the artist’s publishing rights) are “not negotiable”.

A label that engages in such deceptive practices risks becoming a defendant in a class-action lawsuit by disgruntled musicians who eventually realize they have been ripped off. Besides being an unfair and deceptive trade practice, the labels’ conduct violates Section 17200 of California Business and Professions Code.