March 30, 2007
Last week, a federal court in New York ruled against Cablevision's plan to provide digital video recorder (DVR) capability that would store recorded TV programs on a central server instead of on a device (think TiVo) in a user's home. The decision could have implications beyond Cablevision's specific proposed offering -- though the risk could be reduced if, as one part of the decision hints, future courts hold that its reasoning isn't applicable in the context of Internet-based services.
Cablevision's "remote storage DVR" would have provided users with the same functionality - no more, no less - as the DVRs incorporated into many set-top boxes today. But the court stressed the differences between the two types of DVRs "under the hood." In other words, the court seemed to attach greater legal significance to the architecture of the technology than to its function. As a general matter, that kind of approach departs from the principle of technological neutrality and can be harmful to innovation.
In terms of legal precedent, though, it seems to me that the main risk is that the decision could be read to narrow significantly the applicability of the pro-innovation rule announced in the 1984 Sony case regarding the VCR. That case held that, so long as a product is capable of substantial lawful uses, the distributor of the product isn't liable for copyright infringement committed by some users. (The 2005 Grokster case added the caveat that the distributor must not take active steps to promote the product's infringing use.) The bottom line is, innocent innovators can devise products without being liable for how users may eventually use or misuse them.
But the Sony rule applies to products that enable users to make copies. The Cablevision court took a different tack. It said that, in the case of the remote storage DVR, Cablevision would be engaging in unlawful copying itself, not merely providing the means by which users might do so. The court drew a distinction between "devices" and "services." It said the VCR is a device because it is a "single piece of equipment" - meaning, I suppose, that all its circuitry is contained in a tidy black box. The remote storage DVR, in contrast, consists of a variety components not so neatly contained. In my favorite line from the opinion, the court points out that a Cablevision customer "would not be able to walk into Cablevision's facilities and touch the [remote DVR] system."
The possible implication is that the Sony rule about products with lawful uses applies only to devices that fit inside a compact casing and are housed in locations where users can touch them and the distributor cannot. Internet-based services that involve remote storage or processing and require some ongoing actions by the provider could be excluded. Needless to say, this would be a very narrow interpretation of the Sony rule.
It also would be a serious threat to innovation. Many valuable innovations today and in the future would fail a "touch test." One of the great benefits of the Internet is that it enables users to overcome geography. The location of storage space or processing power is losing its relevance; capabilities can be provided remotely via the network, and used on an "as needed" basis. Often these types of Web-based services are more efficient than having a black box in each user's home. And even where capabilities rely on devices, those devices will tend to be connected to the network, so that the provider can upgrade software, add new capabilities, or interact with the user in other useful ways. They will share many characteristics of services.
When these types of new services have the potential for both lawful and infringing uses, they should be eligible for the protection of the Sony rule. The Cablevision decision has the potential to call that into question.
On the other hand, it's important to note that the decision also contains some language suggesting that its reasoning should not be applied to Internet-based services, which handle information flowing in from many sources rather than just from the service provider itself. If future courts focus on aspect of the opinion, the risks of the decision could be reduced.
In addition, lack of Sony-based protection doesn't translate into automatic liability. Many services involving remote storage of user-provided content should be eligible for the safe harbor provided in section 512(c) of the DMCA.
But that safe harbor itself faces an important test, and is at some risk of being pared back, in Viacom's recently filed lawsuit against YouTube. In suing YouTube for hosting infringing videos posted by users, Viacom will need to argue that YouTube is not eligible for the safe harbor. To do so, it may seek to establish new precedent concerning when a service provider's level of knowledge, financial interest, or degree of control concerning infringement makes safe harbor treatment unavailable. If it succeeds, the result could be narrowed applicability for the 512(c) safe harbor.
All of which means, the legal framework for innovation is in flux in some potentially dangerous ways in the courts. It's a battle that will likely go on for some time; the Cablevision decision is likely to be appealed, and the Viacom/YouTube suit is only just beginning.