Entertainment and Media Markets and Economics Intellectual Property

Entertainment and Media: Markets and Economics Intellectual Property Principles and Background 4: A - 1(36) Property RIghts

Intellectual Property Rights Ownership: Congress may give them to the public (constitutional) p Forms: Copyrights, Patents, Trademarks, Service Marks p Defense: The civil court system p Challenges to rights: The USPTO, Copyright Office, Appeals and Supreme Court p 4: A - 2(36) Property RIghts

Copyrights What: Literature, music, drama, pantomime, choreography, pictures, movies, other AV, architectural design, computer programs 4: A - 3(36) Property RIghts

Requirements Ø Ø Fixation: Transmission medium (? Music can be in sound form, not written down) Copyrightable subject matter: Expression, not the ideas themselves (e. g. , computer programs, not the algorithm, which is patentable) Originality; not necessarily uniqueness Authorship: Some “spark” of creativity or originality 4: A - 4(36) Property RIghts

Copyright = Right to Copy Ø Ø Ø Right to reproduction Not the right to usage – this is not a patent Not the right to control the use of the content 4: A - 5(36) Property RIghts

Terms of Copyrights Ø Ø Ø Life of the author +70 years, up from 50 Mickey Mouse, post Walt Disney: 1999, now 2019. (The Sonny Bono Law) Revenge: Winnie the Pooh, purchase rights by Disney (after a court battle) Ø Original offer, $150 M – until 2006 Ø Changed life to 2026, cost rose to $340 M 4: A - 6(36) Property RIghts

Brave New World Ø Ø Ø Infinite reproducibility reduces MC to 0 Digital Millennium Copyright Act Changes the need for “copyright protection” The positive marginal cost of making copies has until now protected owners of copyrighted materials. Making 1, 000 copies of a piece of music or a book or a movie was hard. Now it isn’t. Finding a million friends to give the million copies to is much easier than it used to be. 4: A - 7(36) Property RIghts

Napster Set Several Precedents and Focused Attention on Others Ø Ø Napster. com Central depository vs. peer to peer (Gnutella) Ø Ø One Napster “problem” was the central server Peer to Peer changed this aspect. The burglary tools defense The sky is falling on the music business 4: A - 8(36) Property RIghts

The DMCA p Protects copyright holders by providing a mechanism to pursue violators who copy content to the web with the assistance of services (such as Napster). p Provides safe harbor protection to ISPs from the illegal activities of their users. 4: A - 9(36) Property RIghts

A&M et al. v. Napster, Inc. , 9 th Circuit, 2001 – Injunction Mandated p p Burglary Tools Defense: OK if you make burglary tools, not if you help people steal copyrighted music The users committed the copyright infringement: n n n p Users are infringers, not Napster (not denied by Napster) Users who upload file names to the index on the server violate the copyright holder’s distribution rights. Users who download files violate the copyright holder’s reproduction rights. Napster argued it was “Fair Use. ” Was it “fair use? ” n n n Generally requires the work to be “transformed” by the use, not just copied. Rejected. This was just copying – not fair use. Generally rejected when the use is commercial. Use was commercial – property taken to avoid paying for it. (Does not require the copies to be offered for sale. ) May be accepted if copies are only in part. These were in whole. Harm caused to the market makes the use commercial. 4: A - 10(36) Property RIghts

AEREO. Burglar? 4: A - 11(36) Property RIghts

Price Discrimination 4: A - 12(36) Property RIghts

Burglary Tools Defense Rejected? The 2 nd Circuit said NO. Aereo can intercept and rebroadcast the signals. 4: A - 13(36) Property RIghts

Supreme Court Will Hear After April 22, 2014 It's clear why the broadcast networks hate Aereo. Up to 10% of their revenue now comes from licensing fees that the cable companies pay for the rights to carry their programming. It's less clear, at least from the consumer viewpoint, how It could be illegal to offer a service that sounds like a soupedup modern version of the old rabbit ears on top of the television. After all, about 7% of Americans still get broadcast television over an antenna, according to the latest figures from the Consumer Electronics Association. (About 83% pay a cable subscription fee. ) Nobody's accusing them of piracy. And, after all, isn't broadcast television supposed to be "free" TV, as opposed to "premium" TV? But that's consumer logic, not lawyer logic. It's also pretty much the logic used by Aereo to defend its business. Consumers may buy antennas to receive television broadcasts for private entertainment. Aereo rents them an antenna and keeps it at a remote location. 4: A - 14(36) Property RIghts

Supreme Court Will Hear After April 22, 2014 SCOTUS Killed AEREO on November 12, 2014 Lawyer logic -- as expressed in a brief filed with the Supreme Court by ABC, CBS, Fox, and NBC -- argues that Aereo's business is the sale of broadcast television programming. And that, they argue, constitutes "unauthorized exploitation of the copyrighted works of others. " Interestingly, that suggests that Aereo's service might be legal, if it were just supplying aerials that transmit programming. But by storing programming in a cloud-based DVR, the networks argue, it is retransmitting content in violation of one piece of copyright law. Burglary Tools While we're splitting hairs, Aereo argues that its tiny remote antennas serve the same purpose as the old rabbit ears on top of the television. But one of its biggest opponents responds that all the antennas for an entire city share a common facility, which represents an integrated system. Unfortunately for Aereo, that argument was made by the US Justice Department, which is siding with the broadcast networks in this case. The broadcast networks have gone so far as to threaten to remove their programming from the free broadcast spectrum and recreate themselves as pay-TV networks, if Aereo wins its case. The National Football League and Major League Baseball, fearing for their license fees, say they may move their programming from broadcast to cable if Aereo isn't stopped. 4: A - 15(36) 11/12/14 Property RIghts

A&M et al. v. Napster, Inc. , 9 th Circuit, 2001 – Injunction Mandated (cont. ) p p Why did Napster argue on behalf of the users? Napster argued that the users, not Napster, did the burglary. We only taught them how to use the burglary tools. Napster claimed it was liable only for vicarious contribution to the copyright infringement, not for the infringement itself. Finding against Napster requires first finding that users really did infringe on the copy rights. (“Secondary liability for copyright infringement does not exist in the absence of direct infringement by a third party. ”) 4: A - 16(36) Property RIghts

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Fair Use p p Fair use by Professor William Greene (1) Small part of the website; change of form moved to course notes, added material (2) Not using in an attempt to earn money The concept of fair use: Use of parts of copyrighted material for certain purposes. Recent Relevance: Commercial value of posted videos to You. Tube even if not to the person who posts the material 4: A - 18(36) Property RIghts

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A&M et al. v. Napster, Inc. , 9 th Circuit, 2001 – Injunction Mandated (cont. ) p Napster’s Fair Use Argument on behalf of users. n n n p Sampling: Users intended to buy the music. Fact rejected. Argument that this usage increased sales of CDs was rejected as irrelevant, even if true. Copyright holder is not deprived of the right because Napster can increase sales. Space shifting: Users use Napster to get MP 3 s off CDs they already own. Rejected. A precedent exists (recording TV, Sony Betamax), but space shifting does not allow shifting the copy to millions of partners. Permissive redistribution: They had permission. True, but irrelevant. The music for which they had permission was not part of the case. Fair use was rejected. 4: A - 20(36) Property RIghts

A&M et al. v. Napster, Inc. , 9 th Circuit, 2001 – Injunction Mandated (cont. ) p Contributory Liability – Vicarious Liability n n p Did Napster know it was contributing to copyright infringement? Of course. Did Napster contribute materially to the copyright infringement? Without question Direct financial benefit to Napster? n n Definitely to the users. Not obvious with respect to Napster had no idea how to make money. Apparently so, however. 4: A - 21(36) Property RIghts

A&M et al. v. Napster, Inc. , 9 th Circuit, 2001 – Injunction Mandated (cont. ) One last try: p Audio Home Recording Act – users can copy material for their own use. (Videotaping TV) Rejected. p DMCA (1998), Safe Harbor Provisions – ISPs are protected. Nice try. Napster was not an ISP and not protected by Safe Harbor. p 4: A - 22(36) Property RIghts

Not a viable defense. Napster tried it. The labels did not ask for a new business partner. 4: A - 23(36) Property RIghts

As testimony progressed, the jury learned that the song of the summer earned its composers close to $17 million, of which over $5. 6 million went to Thicke, about $5. 2 million went to Williams and about $700, 000 went to T. I. (the rest went to record companies). Williams also earned $4. 3 million in publishing from the song and $860, 000 for being its producer, according to The Hollywood Reporter. The amounts were revealed since the Gayes were seeking a portion of those profits as well as some of Thicke's touring revenue. They also discussed the reported $900, 000 Thicke made for "Love After War, " the song that allegedly borrowed from Gaye's "After the Dance. " The Gayes' lawyer claimed they were owed in the neighborhood of $40 million worth of damages. 4: A - 24(36) Property RIghts

The Safe Harbor Provision Appeared in Viacom vs. You. Tube p p p Viacom and You. Tube (Google). You. Tube successfully argued for Safe Harbor Status. What is the issue? What is the role of the DMCA? 4: A - 25(36) Property RIghts

Music Sharing p p p Napster, 2000 -2001 (the arsonist) Napster 2002 (the phoenix? ) Kaz. Aa, Morpheus (the enemy) MP 3, Press. Play, Music. Net (the also rans) Where is this medium going? (the future) Spotify, Slacker, etc. Technology is evolving as the law tries to catch up. Licensed customizable radio (performances) and i. Tunes (downloads) have provided a viable platform that consumers accept instead of stealing music. 4: A - 26(36) Property RIghts

Did File Sharing Hurt the Music Business? p Oberholzer and Strumpf study: “The Effect of File Sharing on Record Sales: An Empirical Analysis” (Harvard Business School, March, 2004), updated Journal of Political Economy, 2007 p NYT and elsewhere on the web, 4/5/04 p “ 95% of music downloads are illegal” (Financial Times, 1/22/10) p Illegal music downloads are 'on the rise' Around 7. 7 m people have illegally downloaded music this year, according to research commissioned by the British record industry's trade association. Its latest report suggests more than 1. 2 bn tracks were pirated or shared, costing the industry £ 219 m. BBC Entertainment News, 12/10, 2010. 4: A - 27(36) Property RIghts

A Model of Album Sales Sit = sales of album i in month t Dit = number of downloads in month t. Is γDit a large effect? Statistical results say no, and positive!! 4: A - 28(36) Property RIghts

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Patents Ø Ø Ø Patentable: processes, machines, manufactures, compositions of matter, … (just about anything – yellow bean, method of exercising a cat, surgical moves) Useful New Original (prior art must be verified) Nonobvious 4: A - 30(36) Property RIghts

Patents for Despair. Com : -( Albert Firkus, co-editor of IP Monthly, offered a less dire assessment of the grant, "Whether the issuance is a dangerous one remains to be seen. What is certain, however, is that it appears that someone has finally bested patent 5, 443, 036 for most ridiculous intellectual property filing in history. " https: //www. youtube. com/watch? v=9 JHoz. URb. Bl. M Maybe not. See U. S. Patent 6, 293, 874. 4: A - 31(36) Property RIghts

U. S. Patent 5443036 (11/2/93) 4: A - 32(36) Property RIghts

Trademarks - Requirements Ø Ø Ø Denotes source or origin for specific good (trademark), service (service mark), membership (collective mark), standard (certification) Use in interstate commerce Continuous – trademarks lapse if not used Distinctive Nonfunctionality – can’t be used to create a patent on the product (Amdahl sought but failed to trademark ‘Amdahl Red’) 4: A - 33(36) Property RIghts

Apple Corps vs. Apple Inc. p The 1991 settlement outlines the rights each company has to the Apple trademark. While Apple Corps was given the right to use the name on any "creative works whose principal content is music", Apple Computer was given the right to use the name on "goods or services. . . used to reproduce, run, play or otherwise deliver such content, " but not on content distributed on physical media. In other words, Apple Computer agreed that it would not package, sell or distribute physical music materials. p In September 2003, Apple Computer was sued by Apple Corps again, this time for introducing i. Tunes and the i. Pod which Apple Corps believed was a violation of the previous agreement by Apple not to distribute music. Some observers believe the wording of the previous settlement favors Apple Computer in this case. Other observers speculate that Apple Computer may be forced to offer a much larger settlement this time which may even result in Apple Corps becoming a major shareholder in Apple Computer or, perhaps may result in Apple Computer splitting the i. Pod and related business into a separate firm. p The trial opened on March 29, 2006 in the UK. In opening arguments, Apple Corps' lawyer said that in 2003, shortly before the launch of Apple's on-line music store, Apple Corps rejected a $1 million offer from Apple Computer to use the name on the store. 4: A - 34(36) Property RIghts

Apple Wins (? ) Apple Computer Wins Apple Corp lawsuit: May 8, 2006 - 07: 59 EDT Apple Computer has won the lawsuit filed by Apple Corp. of The Beatles fame, reports Reuters. Apple Corps originally filed the lawsuit, saying that Apple Computer violated a 1991 trademark agreement by getting into the music business. "Apple Computer argued in court hearings in London earlier this year that i. Tunes was primarily a data transmission service, which is permitted by the agreement, " notes the story. "The 1991 out-of-court settlement, which included a US$26 million payment by Apple Computer, set out areas in which each party would have exclusive use of their respective fruit-shaped logos. 'I find no breach of the trademark agreement has been demonstrated, ' Mr Justice Mann said in his judgment. 'The action therefore fails. ' Apple Corps has said that no decision has been made as to when The Beatles songs might be available for purchase online, notes Reuters. In addition, Apple Corps said it would appeal the decision and Apple Computer was awarded court costs. 4: A - 35(36) Property RIghts

2010 4: A - 36(36) Property RIghts