Cyberlocker Responds To MPAA Lawsuit Which Tries To Give Hollywood A Veto On Tech It Doesn't Like

from the it-shouldn't-be dept

Ever since the Supreme Court's Grokster decision, in which it made up a non-legislative "inducement" standard for copyright infringement (a standard, it should be noted, that Congress had a chance to put into law, but declined), the entertainment industry has tried to expand what "inducement" actually means. In the entertainment industry's general definition, it appears to mean "anything we don't like" or "anything that challenges our existing legacy business models." Case in point: cyberlockers. The MPAA has been screaming about "cyberlockers" as this new horrible piracy scheme for a couple years now, ignoring (of course) that cyberlockers serve important and useful legitimate functions in allowing people to share large legal digital files. Like many people, I've used cyberlockers to share PowerPoint presentations, photos and videos I've taken. They're incredibly useful and have significant non-infringing purposes.

However, obviously, those tools can (and perhaps frequently are) used for infringement as well. But, we already have laws to deal with that. The DMCA's notice-and-takedown provision allows copyright holders to alert service providers, who then need to takedown the content. A couple months ago, however, the MPAA went after Hotfile, one of the larger cyberlockers out there, with what struck me as a surprisingly weak case. It was as if whoever wrote the filing didn't quite understand how cyberlockers work, made a bunch of (mostly really bad) assumptions, and then twisted the facts in the most ridiculous possible way to make a case that Hotfile "induces" infringement.

For example, the MPAA claimed that because Hotfile charges fees for premium service, that's a sign of inducement. But that makes no sense. Plenty of online services charge for premium accounts, and since there are real marginal costs here, it makes basic economic sense for cyberlockers to charge premium users for additional services. That has nothing to do with infringement. Separately, the MPAA tries to spin the fact that Hotfile encourages people to use it to share widely, claiming that no legitimate "backup" service would do that. But, the MPAA is (incorrectly) assuming that Hotfile is a backup service. It's not. It's a tool for sharing digital files. None of that adds up to inducement.

The Supreme Court tried to dance around the earlier Betamax ruling, in which it allowed the VCR to exist because it had "substantial non-infringing uses," by creating a specific "standard" for inducement, which (as standards go) is pretty vague:
"[O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties . . . [but] mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct . . . ."
Basically, the Supreme Court says that you have to do something to specifically purposely encourage infringement. Just because your service is used for infringement, that doesn't cut it. Grokster and others lost because there were signs that they advertised or marketed their services specifically for infringement. In the Hotfile case, the MPAA didn't seem to be able to show that at all.

So it's not surprising that Hotfile is fighting back pretty hard on the lawsuit, pointing out that (1) it meets the Betamax standard of significant non-infringing uses, but (2) doesn't come anywhere near the inducement standard of purposefully inducing infringement. The company notes that it promptly responds to DMCA notices and is quick to take down content, once made aware that it's infringing. It notes that providing a legitimate data storage business is not against the law, and it doesn't appreciate the MPAA's insinuations. It goes through the specifics of the Grokster ruling, which clearly don't apply to Hotfile. In fact, they note that one of the reasons Grokster ran into trouble was because it didn't receive revenue directly from users -- and now the MPAA is trying to use the exact opposite argument (that Hotfile does get money from users) to argue it's the same as Grokster?

Similarly, it points out how the fact that Grokster, Isohunt, Limewire and others have had a search function has been one of the key points used against those services to "prove" inducement. The courts have reasoned that since they allow searches for any file, they're "inducing" infringement. Yet, with Hotfile, there's no search. That should settle the issue... but this is the MPAA we're talking about, and so they twist the lack of a search engine into a charge that Hotfile "concealed" the content its users uploaded.

Sued if you do. Sued if you don't.

This seems like a pretty strong filing in response to a clear attempt by the MPAA to twist and extend "inducement" theory way beyond what was intended by the Supreme Court. Hopefully the courts recognize this, but you never know when it comes to these kinds of cases. As Professor Eric Goldman is fond of pointing out, there's regular copyright law, and then there's file sharing copyright law, in which the judges creatively reintepret the law to make activities they don't like illegal, rather than following the actual law.

Either way, this case could become important in determining the boundaries of what really is "inducement." If the MPAA gets its way, it will effectively erase the Supreme Court's Betamax ruling, because it will mean that even if you have substantial non-infringing uses, if there are a lot of people using it for infringement, even if you did not push them to use your service for that particular reason, you automatically become liable. This is a complete fabrication by the MPAA who appears to effectively want to overturn the Betamax ruling here by suggesting that if enough people are infringing, you're automatically guilty of inducement, because any action you do (have a search engine? yes! don't have a search engine? yes!) is interpreted as inducement.

Filed Under: copyright, cyberlockers, inducement, infringement
Companies: hotfile, mpaa

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  1. icon
    SD (profile), 8 Apr 2011 @ 9:37am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re:

    Second of all, if Hotfile does not have some sort of database of equivalent files, they are under absolutely no obligation to put one in place. Just making that clear.

    I've just realized that possibly even having a database in place might not be enough justification to take any links down that weren't in a notice. Every Hotfile link is accessible publicly but someone needs to know the link first. All of them have 16 digits that Hotfile generates and the filename at the end, making it nearly impossible to find without actual link distribution. It would be stretching the "making available = distribution" argument pretty far but I can see Hotfile losing a case if they had a database of exact files and didn't act on them though.

    However, even a database wouldn't tell you if equivalent files are infringing, or uploaded by the rightsholder. The MPAA might have to specify in the DMCA notices that they want "all copies removed" from the cyberlocker services and assert that they never gave rights to have their content stored anywhere on there. (Something tells me they'd find IP addresses on some uploads originating from movie studios themselves anyway :P)

    Finally, this scenario shows how a simple filename+size match wouldn't be enough verification of exactness.

    Person A:
    Uploads 7 100MB split archives of a bootleg movie... Each file is named along the lines of "Archive.r00" "Archive.r01"

    Person B:
    Uploads 7 100MB split archives of his hard drive... Important documents, personal pictures and home movies. Each file is named along the lines of "Archive.r00" "Archive.r01". His computer is fried in a lightening storm and Hotfile retains the only copy while he looks for a new computer.

    If the host received a DMCA notice for all or some of Person A's files they'd have to take them down. But do they go the extra mile and remove access, or at the very worst, remove Person B's files from their servers too? Only matching file hashes like MD5 or SHA1 can find duplicate files, not simply the filename & size. Person B could file a lawsuit if his files were deleted absent of any takedown notice. Hotfile probably has something in their terms to prevent someone for suing them for anything related to data loss but it wouldn't make it right to delete files before truly determining the contents are exact.

    One way to test this(without trying to sue them of course if they act on it), would be to duplicate a filename of a public link that's imminently going to be removed like "H4ngover2.r00", with exactly the amount of data, but all random chars. Any service that uses a filename or filename+size as "matching" should be called out on it...

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