What the 1930s fashion industry tells us about Big Content's "six strikes" planMark Patterson in ars technica, July 28, 2011
By Timothy B. Lee
Does the "Copyright Alerts" system announced by major copyright holders and ISPs earlier this month run afoul of antitrust law? That possibility was first suggested to us by law professor James Grimmelmann. We decided to pursue the question, and our investigation led us to an unexpected direction: the Depression-era fashion industry.
High-end women's fashion during the 1930s was dominated by a trade organization called the Fashion Originators' Guild of America. Then, as now, clothing wasn't eligible for copyright or patent protection. But the guild established an elaborate system of privately enforced quasi-copyright protection for fashion designs. Retail outlets wanting to carry merchandise from guild members had to agree not to carry merchandise from manufacturers that created knockoffs of members' designs.
The system included regular inspections by guild representatives to verify that retailers were complying with the rules. Retailers caught selling knockoff merchandise could be banned from buying clothing from guild members, and members caught selling to blacklisted retailers faced stiff fines.
Retailers and the Federal Trade Commission challenged the system under antitrust laws. In 1941, the Supreme Court upheld the FTC's position, holding that the system "constituted an unfair method of competition" under antitrust law.
Does similar reasoning apply to the "copyright alert" system that major ISPs and content companies announced earlier this month? Mark Patterson, a law professor at Fordham University who specializes on antitrust law, told Ars that the system could be vulnerable to an antitrust challenge similar to the one the FTC made against the Originators' Guild.
The similarities are striking. The alerts system, like the Originators' Guild's enforcement system, is an effort to fight unauthorized copying of incumbents' creative works. The Supreme Court described the Originators' Guild as an "extra-governmental agency" that "provides extrajudicial tribunals for determination and punishment of violations, and thus trenches upon the power of the national legislature." The same could be said of the review process envisioned by the Copyright Alerts system.
"Intellectual property law strikes a balance," Patterson said. "What the agreement in the Originators Guild case did was try to break up that balance by creating a new IP right and also by creating this whole private enforcement mechanism."
In an e-mailed statement, the Motion Picture Association of America's Dan Robbins rejected the comparison. He told Ars that the 60-year-old Originators' Guild case "deals with an entirely different situation. More far reaching efforts have been held perfectly lawful under the antitrust laws." He pointed to endorsements from the White House and other public officials as evidence that the system passes legal muster under antitrust laws.
"The courts and enforcement agencies have indicated that collaborative efforts to help educate and protect against intellectual property infringement are procompetitive," he said. For example, he cited a 2000 opinion by the United States Court of Appeals for the Second Circuit, which stated that "no one but a copyright violator can gain by denying to copyright holders the right to engage in cooperative efforts to enforce their copyrights against a common infringer."
Patterson acknowledged that the six-strikes system is designed to enforce existing rights under copyright law rather than create a new IP right. But he argued that this aspect of the Originators' Guild case wasn't essential to the Supreme Court's holding in Originators Guild. He says that the Copyright Alerts system "doesn't create a new right, but it creates its own enforcement mechanism. It disrupts the balance that copyright law has struck in a couple of ways."
For example, the copyright alert system shifts the burden of proof to an accused subscriber, forcing her to prove that she did not infringe copyright law. That's the opposite of how things work in the traditional court system, in which the burden of proof rests with the accuser. "From a lawyer's point of view, the allocation of the burden of proof is huge," Patterson said. The system also requires the defendant to pay for the privilege of defending herself, which is at odds with ordinary court rules requiring the plaintiff to pay.
Patterson expressed surprise that the parties to the agreement didn't seek advice from regulatory authorities before announcing the Copyright Alert system. Both the Department of Justice and the Federal Trade Commission provide guidance on this kind of question. But Robbins told Ars that the movie and recording industries didn't seek formal regulatory guidance because they are confident the system is legal. And, he said, "the actual agreement was vetted by Administration officials—including at the Department of Justice—before the White House endorsed the program."
A long shot
Theoretically, a wide variety of parties—the Department of Justice, Federal Trade Commission, state attorneys general, and private plaintiffs—have standing to challenge the Copyright Alerts system on antitrust grounds. But political and resource constraints make it unlikely that any of these parties will act. The Department of Justice is apparently out since it was already consulted by the White House prior to the agreement's announcement.
The FTC is an independent agency, so on paper it has discretion to pursue antitrust cases without the approval of the Obama Administration. But Patterson said it "doesn't seem very likely" that the FTC will do so. Nor are state attorneys general likely to act. "For many, maybe all of them, politics plays a role," he said. "You don't want to pick an unpopular case."
What about private parties? Patterson said that private parties have to overcome procedural obstacles that government officials would not. Government officials automatically have standing to sue under antitrust laws, whereas private parties need to show that they've been harmed.
"It's not clear that a court would view the prevention of (alleged) copyright infringement as an injury," Patterson said. "On the other hand, a court might also say that the injury was not the inability to infringe, but the inability to choose among ISPs that had different anti-infringement policies. It's an argument that a plaintiff could make, but I don't know whether it would succeed."