• 

By: Tallman Trask

For years, privacy rights violators have paid fines and been the subject of consent decrees. They’ve entered into settlement agreements with enforcers, agreed to change behaviors, and sometimes even been required to notify users or consumers of the privacy violations. The Federal Trade Commission’s (FTC) recent Everalbum settlement, however, offers regulators a new tool, and it is one companies ought to be very wary of: unlike previous settlements where companies simply paid a penalty and were able to keep hold of the products and algorithms developed through their privacy violations, the settlement here requires Everalbum to delete not only data they collected as part of a violation, but also to delete any “affected work product” created using that data.

Everalbum operated Ever, a free photo storage app, until August of 2020, when the company shut down the app. At its core, Ever served a simple purpose: users could upload, store, and organize photos to the company’s cloud storage. Over time, however, the app developed a hidden secondary purpose, and was used by Everbaum to develop and train a commercial facial recognition product the company designed “specifically for mission-critical applications” and offered to military and law enforcement buyers. The company’s software apparently worked well and achieved a high degree of accuracy in testing. According to the FTC’s complaint, Everalbum utilized user photos without first obtaining express consent. Problematically, Everalbum’s use of facial recognition may have even conflicted with the company’s own policies. The American Civil Liberties Union (ACLU) of Northern California (where Everalbum is based) called the use of user photos “an egregious violation of people’s privacy” and users described Everalbum’s use of their photos to create facial recognition products as “a huge invasion of privacy.”

The Everalbum settlement requires the company to provide notice and obtain affirmative consent before availing themselves of users’ biometric information in the future. Similarly, it prohibits future misrepresentations about the company’s data collection practices and imposes consent monitoring and recordkeeping requirements. While the settlement does not impose a fine against Everalbum, it requires the company to delete “affected work product” created through the alleged privacy violations highlighted in the complaint. Here, that means Everalbum must destroy years of work on facial recognition software where that work was based on photos uploaded by users who were unaware their photos were being used to develop facial recognition products and including the results of company’s efforts to train their facial recognition software.

The deletion requirements in the Everalbum settlement are novel; prior settlements have imposed fines without requiring deletion. For example, the FTC’s 2019 settlement with Facebook imposed a record $5 billion fine, but did not require Facebook to delete or remove portion of their software built through or  by using information gathered through the improper treatment of user data. Similarly, the FTC’s 2019 settlement with Google allowed the company to keep products it had built using data improperly collected in violation of children’s privacy rules. Praising a portion of the Everalbum settlement, former FTC Commissioner Rohit Chopra described the deletion requirement as a “course correction” from the FTC’s prior privacy settlements which allowed violators to keep products developed through privacy violations.

Beyond a simple “course correction” however, the Everalbum settlement is a new tool in the regulatory toolbox. While fines can serve as a powerful deterrent, they ought not be the only tool available to regulators. Where fines are the only available means, the system becomes little more than a pay-to-violate model. At least one commentator has suggested that the Everalbum settlement provides a roadmap for encouraging Big Tech to care more about privacy, and that very well may be true. However, larger impact may be felt by smaller technology companies and others who collect data, particularly where companies are subject to a wide range of state-level and international privacy regimes. An earlier stage company with a smaller user base may, for example, be likely only to face small fines if caught violating user privacy under the framework of the Facebook and Google settlements, but the Everalbum framework could result in deletion requirements which impact a smaller company’s entire range of product offerings. That is, while the earlier settlements may have wiped out bank accounts, the algorithm deletion framework of the Everalbum settlement could wipe out companies. And that is a tool companies and privacy officers should be very afraid of seeing pointed their way.

• 

By: Joanna Mrsich

Fortnite, League of Legends, Minecraft, World of Warcraft—what do all of these games have in common? Each one of the above was in the top ten “Most Watched Games on Twitch” in December 2020. The video game industry generates billion dollars in revenue each year. In 2018 alone, the industry projected $137.9 billion in revenues. In today’s video game scene, however, it is not enough to just own and play a video game. The goal for many is to find popularity as a streamer. Twitch is the world’s leading live stream platform for gamers, allowing gamers to create free accounts to follow other streamers or stream their own content. However, when the stream uploads and the fun is done, is there a copyright infringement suit just waiting to happen?

Copyright protection, as codified in 17 U.S.C. §102, exists in original works of authorship fixed in any tangible medium of expression such as motion pictures and other audiovisual works. Under 17 U.S.C. §106 of the Copyright Act, copyright owners have six exclusive rights that they may do or authorize others to do with their work. This list includes rights to reproduce the copyrighted work, prepare derivative works based upon the copyrighted work, distribute copies of the copyrighted work to the public, and more. Therefore, under copyright law, game developers and publishers legally own exclusive rights to the use, images, and videos of their games when in a fixed form. The issue is likely not with streaming videogame play alone—this arguably does not satisfy the “fixation” requirement within copyright law—but rather the moment a user uploads their recorded stream.

However, today’s streamers arguably are not required to gain permission from game developers and publishers to record and upload their gameplay online on platforms like Twitch. Hours upon hours of copyright protected gameplay is uploaded to Twitch, YouTube, TikTok, and countless other platforms. While these platforms typically protect themselves through Digital Millennium Copyright Act of 1998 (DMCA) safe harbors and community guidelines, they still more or less allow and perpetuate an environment of infringement; enough game publishers and developers just have not enforced their copyrighted works. Ultimately, while there is little to no precedent for the enforcement of copyright within the video game streaming and uploading realm, users should be aware of the law and possible legal implications should the day arise when a copyright owner chooses to enforce their exclusive rights.  

Applicable law

As stated above, 17 U.S.C. §106 awards video game developers and publishers the rights to authorize, limit, and control who can reproduce, publicly distribute, create derivative works, publicly perform, publicly display, and/or digitally perform a sound recording from their copyrighted works. This means that developers are able to file takedown notices for infringing material and refuse to allow streamers to stream their game. However, popular social media platforms typically find protection under the DMCA. The DMCA amended and updated U.S. copyright law in three main ways: (1) established protections for online service providers in certain situations if their users engaged in copyright infringement; (2) encouraged copyright owners to give greater access to their works in digital formats by providing legal protections against unauthorized access to their works; and (3) made it unlawful to provide false copyright management information or to remove or alter that type of information in certain circumstances.

 Moreover, DMCA §512 shields online service providers from liability for infringement—also known as safe harbors—in exchange for implementing the notice-and-takedown system and other conditions.’ Essentially, the DMCA copyright law treats online service providers as “innocent middle-men” in disputes between the owners of a copyrighted work and a user who posted the infringing content. This means that sites like Twitch will not be held liable for any streamer who posts infringing content under the DMCA’s “safe harbor”—found in 17 U.S.C. §512—provided that platforms promptly remove or block access to infringing materials after being appropriately alerted. Therefore, so long as Twitch itself—the online service provider—is not engaging in infringing conduct themselves or enabling end-users to infringe, they will likely be protected under a safe harbor.

Most recently, Nintendo issued a mass DMCA takedown where 379 fan-made games were removed from a gaming website and hosting service, Game Jolt. Nintendo’s DMCA notices explained that all of these games infringed on trademarks owned by Nintendo, such as images of Nintendo’s video game characters, music, and other features of their video games. Additionally, Nintendo’s legal team also forced a popular TikTok user and Twitch streamer formerly known as “Pokeprincxss” to rebrand and pay them for infringing on the Pokémon franchise via merchandise based around her branding and her username. While all of this happened within the last year, it is possible for more developers and publishers to follow Nintendo’s footsteps. Furthermore, while these current examples are claims of copying popular protected works, uploaded video game streams are a direct reproduction of a protected work and thus susceptible to DMCA takedowns and further legal action should a copyright owner choose that route.

What copyright laws are flagged in video game streaming?

In the status quo—or existing state of affairs—platforms like Twitch clearly flag issues around copyright and channel content for their users. Within the site’s “Learn the Basics” page, Twitch clearly explains that creator content should be respected and the process for requesting a takedown notification. Moreover, while they do not require proof of permission to post content, their platform does state “…the rights that you need to secure for copyrighted material in your live broadcast may be different than the rights needed for the same material in your recorded content…”. This is followed by a suggestion to read Twitch’s DMCA Guidelines, Community Guidelines, Music Guidelines, and Terms of Service. YouTube and TikTok’s rules and copyright complaint systems and policies are very similar. Therefore, under status quo rules, so long as Twitch itself—the online service provider—is not engaging in infringing conduct or enabling end-users to infringe, they are likely protected under DMCA safe harbors.

However, just because these platforms are protected from legal liability does not mean that the users who uploaded the infringing content are also protected. Without a license, streamers do not have any legal right to upload streams of a copyright protected video game. Current copyright law clearly allows for video game publishers and developers to pursue legal courses of actions against streamers who upload recordings of their game play—it just has not occurred yet and there appears to be some kind of unspoken and informal agreement between the two groups. Some people within the gaming community also believe there is an incentive to allow streamers to upload infringing content on platforms like Twitch because it is a free and advanced form of social transmission that allows for their games to grow in popularity at rates much higher than normal advertising or word of mouth. The question is: will this always be the case?

Moving forward: what’s the plan?

The status quo seems to be a happy agreement between streamers and video game copyright owners. However, is this what the Copyright Act—and more specifically the DMCA—had in mind as the fiduciary duty of these platforms to their users and to owners of copyrighted works? As society grows increasingly technological and the role of these platforms becomes more interactive with users, should their responsibilities be as easy to fulfill when it comes to the DMCA safe harbors? As it stands right now, platforms do not have a duty to take down infringing content unless copyright holders give “appropriate notice.” Tune in for the next post in this series!

• 

By: Emily Lewis

“All roads lead to Rome”… or these days it seems like Big Tech. Like the fall of the Roman Empire, 2021 may mark the fall of Silicon Valley giants like Apple, Facebook, and Google.

Towards the end of 2020, the federal government filed massive lawsuits against Google and Facebook alleging violations of federal antitrust law. The Biden administration has signaled it plans of curtailing the wave of enforcement. The new administration has confirmed it plans  to continue to investigate potential antitrust violations of U.S. technology companies. Amazon and Apple may be the next tech giants to see antitrust action. There is increasing bipartisan pressure calling for the breakup of tech giants; 2021 may prove to be a watershed year for antitrust action in the technology industry.

Apple’s Antitrust Threat

Apple kicked off the new year by discreetly signaling to investors that federal antitrust action may be imminent. On January 5, 2021, Apple issued its annual proxy statement, but this time it included a new section for the company, a section specifically addressing antitrust concerns. The section states:

The Audit Committee and Board regularly review and discuss with management Apple’s antitrust risks. Apple’s Antitrust Compliance Officer is responsible for the development, review, and execution of Apple’s Antitrust Compliance Program and regularly reports to the Audit Committee. These reports cover, among other matters, the alignment of the program with Apple’s potential antitrust risks, and the effectiveness of the program’s design in detecting and preventing antitrust issues and promoting compliance with laws and Apple policies.

This addition to its proxy statement should not be too much of a surprise to investors. In October 2020, the House Judiciary Subcommittee on Antitrust published a 450 report, examining the competitive practices of tech giants such as Amazon, Apple, Facebook, and Google. Mere days after the House Judiciary Subcommittee issued its report, the Department of Justice sued Google. In late December, the FTC, along with 40 state attorneys general, filed suit against Facebook alleging that the company engaged in anticompetitive behavior and calling for the breakup of Facebook, Instagram, and WhatsApp. Notably, Apple and Amazon have yet to see complaints from federal enforcement agencies.

While Apple has yet to see a complaint from a federal agency alleging antitrust violations, Apple is no stranger to private antitrust action. Currently, Apple is facing a lawsuit from Epic Games. Epic’s complaint alleges that the Apple App Store is a monopoly and violates antitrust laws by

forcing app developers to pay steep royalty fees and use products and services that are tied in together, such as the in-app payment system. The trial has been set for May 3, 2021. The Department of Justice is also reportedly investigating Apple App Store’s competitive practices. The consequences of Epic’s lawsuit and the DOJ investigation have the potential to permanently disrupt a key source of income for Apple . In 2020 alone, the App Store generated $72.3 billion in revenue for Apple.

Epic’s lawsuit has opened the floodgates for similar lawsuits. In December 2020, Cydia, a once-popular app store for the iPhone launched in 2007, sued Apple, alleging Apple used anticompetitive means to nearly destroy Cydia, clearing the way for the App Store. Further, the complaint contends Apple has an illegal monopoly over software distribution on iOS.

Antitrust liability for Apple does not stop with the App Store. Its practices related to its streaming service, Apple Music, could potentially create antitrust liability as well. In September 2020, Spotify, an Apple Music competitor, publicly criticized Apple Music. In its public statement, Spotify claimed that Apple’s bundling of the iPhone and an Apple Music subscription constituted unfair competitive practices and called for federal authorities to act. This type of public comment has carried a lot of weight in the past. In June 2020, the European Union Commission announced it opened formal antitrust investigations on the App Store rules’ impact on competition. The press release credited a complaint filed by Spotify filed in March 2019.

Amazon May Escape Unscathed

 While last year’s House Subcommittee report concluded that Amazon has a monopoly over third party sellers, Amazon still may escape enforcement action. As outlined in Linda Khan’s acclaimed Yale Law Journal Note, Amazon’s Antitrust Paradox, Amazon poses a unique problem for antitrust enforcement compared to other Big Tech companies. Modern jurisprudence of antitrust law ties the perceived threat to competition to consumer welfare. Typically, the inquiry into the effect on consumer welfare looks at the impact on prices for consumers. According to David Balto, a Maryland lawyer who has worked both in the Bureau of Competition of the US Federal Trade Commission and in the US Department of Justice antitrust division, courts tend to be reluctant to challenge practices that appear to lead to lower, not higher prices. Thus, to prevail in an action challenging Amazon’s monopoly over third party sellers, there must be evidence of Amazon engaging in a predatory pricing scheme, not just providing lower prices to consumers.

Looking Ahead

The Biden administration is working with Sarah Miller, leader of the American Liberties Project antimonopoly group. The group recently issued a report calling on the DOJ to expand the scope of its suit against Google, in addition to calling on the FTC to sue  Amazon for its alleged monopoly practices. Only time will tell how the Biden administration will decide to take on Big Tech.

• 

By: Alex Arnts

Industry changing antitrust suits have become increasingly rare in recent decades, as this area of law has seen increasingly lax enforcement by the federal government. However, when major antitrust suits do occur, they often target the tech sector. Epic Games, the maker of popular video games such as “Fortnite” and “Gears of War,” has recently commenced antitrust suits against both Apple and Google which have the potential to reshape the distribution of mobile apps and videogames as a whole. 

Epic Games’ lawsuits target the practices of Apple and Google’s mobile app stores, as they each disallow direct in-app purchases to consumers. Instead, all in-app purchases must also go through the respective app stores where Apple and Google skim 30% from every in-app purchase. Epic Games opposes Google and Apple’s marketplace policies as they relate to Epic’s game Fortnite Mobile, which is free to play and derives all of its revenue from in-app transactions. Epic contends that Google and Apple are only able to take 30% of Fortnite’s in-app purchases because they exclude other marketplaces from distributing apps on their platforms, and that doing so is anticompetitive and illegal under the Sherman Antitrust Act, California’s Cartwright Act, and California’s Unfair Competition law. 

Despite the apparent similarity of Epic’s two suits, they may not necessarily share the same outcome. Epic faces a tremendous uphill legal battle in its suit against Google because Google allows its Android devices to purchase apps from third-party markets in addition to its own marketplace. Therefore, because there are other app marketplaces available on phones which use Google’s Android platform, it is thus unlikely that Google’s policies regarding app distribution will be ruled illegally anti-competitive.

Epic will also struggle to prevail in its suit against Apple, but it has a greater chance of success against Apple than Google. Unlike Google, Apple disallows apps from being loaded onto its devices from third party app stores. Thus, the only source of iPhone apps is Apple’s own application marketplace, which means Apple is forcing app developers to choose between having their apps excluded from iPhones altogether, or surrendering 30% of all in-app purchases. If Apple’s practice of disallowing software from third-party marketplaces was applied to other devices, such as computers, that alone would be considered illegally anticompetitive. However, whether courts will apply this rule to app-based devices such as cell phones and tablets remains to be seen.

A court ruling against Apple’s practice of limiting devices to software distributed on its own marketplace could have potentially far-reaching implications for antitrust in the digital sphere, most notably in the realm of videogame consoles. Similar to Apple, the companies behind major gaming consoles such as the Nintendo Switch, Sony PlayStation 5, and Microsoft Xbox Series X all limit their users to downloading apps and digital games from marketplaces run by the console’s developers, which each take a 30% cut from every transaction. If Epic prevails in its suit against Apple, future courts could potentially apply Epic’s logic to content distribution on video game consoles and rule that restricting users to software marketplaces run by hardware manufacturers is illegally anticompetitive in that sphere as well. 

Epic’s cases have been proceeding slowly, but there have been a number notable developments that indicate Epic is gaining momentum, especially in its case against Apple. Since filing its cases Epic has founded the Coalition for App Fairness alongside Spotify and other leading developers of mobile applications to lobby against Apple and Google’s unfair app marketplace practices. Furthermore, Facebook has also pledged to support Epic in its suit against Apple. Perhaps feeling the heat from Epic’s efforts, Apple recently reduced the percentage of in-app purchases it will take from small developers. These developments reinforce the notion that Epic’s suits have the potential to reshape antitrust in the mobile app industry and beyond.

• 

By: Kelsey Cloud

Allowing intellectual property owners control over their creations is a fundamental, constitutionally protected right in America. However, terrestrial radio, or stations broadcast by a land-based AM/FM radio station, is the only industry in the country that allows the usage of others’ intellectual property without permission or compensation. American terrestrial radio generates billions of dollars broadcasting advertisements to listeners without paying the creators of sound recordings, depriving musicians of vital compensation essential to creating music.

The Ask Musicians for Music Act (AM-FM Act), introduced by Congress last November, aims to alter copyright laws exempting terrestrial radio stations from distributing sound recording royalties and strives to compensate copyright holders for an estimated $200 million annually in royalties. If passed, the AM-FM Act would eliminate the provisions of the Copyright Act that limit sound recording royalties to digital performances, making the provisions applicable to all audio transmissions that require radio services to pay fair-market value for the music they play. Given the proliferation of technology, the exemption held by radio broadcasters is antiquated, illogical, and furthers economic inequality amongst music creators domestically and internationally.

The Current State of Music Copyright Law

Every track contains two separate sets of copyright ownership: the composition rights and the sound recording rights. Composition rights are for the lyrics and musical arrangement, while the sound recording rights are for the produced and recorded performance. While the copyright of the composition is generally held by the composer, lyricist, and/or songwriter, the copyright of the sound recording is typically owned by the performer and/or record label.

In 2018, Congress passed the Music Modernization Act (MMA), which implemented groundbreaking modifications to copyright law related to sound recordings. Title III of the MMA, known as the Allocation for Music Producers Act (AMP Act), establishes a procedure for distributing performance royalties to those who made a contribution to a sound recording. While the AMP Act provides royalty payouts for contributors when their recordings play on satellite and online radio, the Act does not apply to terrestrial radio. For example, when a song is played in someone’s car on SiriusXM or iHeartRadio, those stations must compensate sound recording rights holders, while AM/FM broadcasters are exempt ­– even though the same song plays out of the same speakers. As a result, the MMA perpetuates terrestrial radio broadcaster’s exemption from royalty obligations for copyrighted sound recordings and those owning the copyright are denied compensation for their work.

In response, Congress introduced the AM-FM Act in November 2019 which would extend sound recording performance royalties to terrestrial broadcast radio and close this loophole.

Advocates and Opponents of the AM-FM Act

The Senate Intellectual Property Subcommittee held a virtual online briefing on current music rights on May 27th,2020, in which advocates of the Act argued that by failing to provide sound recording royalties, copyright owners essentially subsidize the terrestrial radio industry against their will. Proponents of the Act testified that in the modern age, few differences exist between digital and terrestrial broadcasts, as most broadcasters simulcast online and already pay digital performance fees. Colin Rushing of SoundExchange, the company responsible for collecting digital performance royalties for sound recordings, argued that the “lack of terrestrial performance rights creates a loophole that distorts the market and creates an incentive to invest in [antiquated] technologies.” As the consumption of music continues to steer away from physical media such as CDs and towards digital media, performers become more likely to receive revenue from performances than traditional retail sales, furthering the importance of compensating them properly.

The National Association of Broadcasters argue that the exemption is justified by providing performers and labels with free promotion received through radio play intertwined with public service announcements. Terrestrial broadcasters contend that increased airplay translates to increased album sales, leading to compensation for performers and labels. However, providing a public service does not warrant profiting off musicians’ work for free. If the free market were to decide what the rates should be, any artists desiring to provide their work for free in exchange for promotion would have the power to make that decision. Instead of broadcasters exploiting artist’s works, artists should have the right to negotiate rates the broadcasters must pay in exchange for airing their music.

Moreover, the majority of leading countries distribute sound recording performance royalties for terrestrial broadcasters, making the U.S. one of the few industrialized countries that does not. While foreign terrestrial broadcasters compensate performers, the U.S. does not have that reciprocal right, leaving foreign performance rights organizations with no way to distribute these royalties to American performers. Consequently, an estimated $200 million in performance royalties owned by American performers remain in purgatory. $200 million that would otherwise be paid to them in any other country. Those performers hold a disadvantage in the international arena, discouraging international growth in the music industry and greatly hurting the U.S. economy.

The Bottom Line

According to Neil Portnow, President and CEO of the Recording Academy, terrestrial radio is the “only industry in America that is built on using another’s intellectual property without permission or compensation.” Terrestrial broadcasters use music to bring in listeners which allows them to receive $14.5 billion annually from advertising, while not paying performers a dime for the music that drew in listeners to their station in the first place. The AM-FM Act provides a solution by ending the distortion in copyright law that forces artists to subsidize the terrestrial radio broadcast industry worth billions of dollars and finally remedy a longstanding inequity in copyright law.