The FCC’s inquiry involves Google’s call-blocking policy.  In June, Google began noticing extremely high-cost calls to a concentrated number of rural destinations which generated vastly disproportionate costs.  Its internal investigations, using data filters to sort out call patterns, revealed that the top 10 telephone prefixes (the area code plus the first three digits of a seven digit number) to US destinations generated more than 160 times the expected amount and accounted for 26.2 percent of its monthly U.S. costs.  By August, Google began restricting calls to certain high-cost destinations.  Google’s response letter to the FCC describes the Google Voice service and explains Google’s investigation into and rationale behind its call blocking policy.  It claims that its engineers developed a “tailored solution” so that Google Voice currently restricts calls to fewer than 100 specific phone numbers, a practice which Google’s counsel believes is necessary to “prevent these schemes from exploiting the free nature of Google Voice.” 

While Google has only recently began blocking costly calls, the practice whereby rural telecoms charge long distance carriers exorbitant rates to connect and terminate calls from their networks is not new.  In may cases these telecoms partner and share revenue with adult chat service, conference calling centers and others to attract traffic to their networks.  AT&T, and other long-distance carriers, have long complained and sued over these so-called traffic pumping schemes.  However, as common carriers subject to FCC regulations, they were banned in 2007 from blocking calls and are required to deliver phone calls without discrimination to all numbers dialed.  AT&T’s complaint to the FCC is rooted in its contention that Google’s call blocking policy is enabling it to dance around this ban that applies to other carriers.

However, this recent skirmish over Google Voice is really part of a larger debate currently playing out in the regulatory stage over “network neutrality” rules being reexamined by the FCC and AT&T has framed Google’s actions as part of the debate. 

In its Statement on Google Voice and Net Neutrality, AT&T stated that “By openly flaunting the call blocking prohibition that applies to its competitors, Google is acting in a manner inconsistent with the spirit, if not the letter, of the FCC’s fourth principle contained in its Internet Policy Statement.“   The FCC’s fourth principle on net neutrality states that “consumers are entitled to competition among network providers, applications, and service providers, and content providers.“  

Some members of Congress are also concerned about the adverse impact on the market and support for universal service if Google is allowed to operate its telephone services outside of the rules that govern carriers.  As they stated in their letter to the FCC “[I]t is our opinion that a company should not be able to evade compliance with important principles of access and competition set forth by the FCC by simply self-declaring it is not subject to them without further investigation.”

Google responded to these charges by stating that “The FCC’s open Internet principles apply only to the behavior of broadband carriers – not the creators of Web-based software applications.” Google claims that AT&T is attempting to blur the distinction between Google Voice and traditional phone service but maintains that web applications like Google Voice and Skype shouldn’t be treated like traditional phone service.

Google distinguishes Google Voice from traditional phone carriers by explaining that unlike traditional carriers which charge users for their services, Google Voice is a free, web-based software application similar to e-mail rather than a telecom service designed to “supplement and enhance existing phone lines, not replace them” and should therefore be exempt from common carrier rules.   The service is currently available to a limited number of users on an invitation-only basis.  Users are still required to have an existing land or wireless line in order to use Google Voice and are still able to make outbound calls on any other phone device.  Therefore, because Google Voice is a software application, not a telephone company, Google believes that its service is not and should not be subject to common carrier laws or the FCC’s jurisdiction.

Distinctions aside, with nearly 1.5 million users, the increasingly popular service is viewed by some as running a rival service to traditional phone companies.  The heart of the FCC’s inquiry is whether Google Voice is a telecom service or an online software application and whether this distinction really matters.  How different is a call traveling directly over carrier lines from one that goes through software applications?  As of now, the difference appears to be the ability to block less than 100 calls, an option not available to AT&T and other carriers.

Whether the FCC agrees with Google’s characterization of its service and its interpretation of the current open Internet principles may have a dramatic impact on both the telecom and internet marketplaces.  And the FCC’s newly proposed rules on network neutrality may also play a prominent role in this debate.  We will continue to monitor the proceedings and keep you posted.

The program enables individuals and companies to register a Facebook URL with an address format of www.facebook.com/[username].  Applicant for usernames are generally allowed to choose them freely, without need to prove any connection or ownership to the name itself.  This wide-open nature raises potential concerns for intellectual property rights holders, particularly trademark owners, worried about unauthorized use of their trademarks in connection with the service. 

Facebook has sought to maintain as much of control over the usernames as possible, including the right to remove or reclaim a username at any time for any reason.  This strong proactive stance is probably partially motivated by a desire to preempt and prevent widespread buying or selling of usernames, and the cyber-squatting practices that follow.  (Such concerns are not unfounded; Facebook usernames are already up for sale on Assetize, an online website specializing in the buying and selling of online accounts.)

But back to the ownership issue–Can Facebook actually “own” a username that contains a registered and widely used trademark owned by someone else?  And if Facebook “owns” the username, what happens when a trademark owner seeks to register the username containing its mark?  Is “ownership” (i.e., title) to the username conveyed?  Or does Facebook license the username?  Take for example the username “facebook.com/burgerking”.  As of the date of this posting, Burger King has not yet registered the username, but if it does choose to register it, is it accurate to say that Facebook is transferring ownership over the username to Burger King?  Or is it licensing it?  Either way, how can Facebook transfer to Burger King something Burger King already owns?

Also, Facebook claims that when a Facebook account is cancelled, that account’s username will not become available to anyone else.  If Burger King registers for the user name, and then cancels it, can Facebook prevent Burger King from re-registering the user name if it later changes its mind?  In the end it is not clear or likely that Facebook can legitimately assert power over trademark holders when it comes to the use of their trademarks in the Usernames program. 

Facebook’s terms of service do not help to clarify the matter.  They make no mention of the Usernames program.  On the other hand, Facebook’s “Help Center” does have a section devoted to answering common questions about the program.  When the program was launched, the Help Center materials contained a few scant paragraphs of information.  Since that time, it has become much more developed, but that initial lack of clarity exemplifies the legal ambiguity with which the initiative got off the ground.  The uncertainties surrounding the Usernames program may be of particular concern for businesses in light of their increasing reliance on Facebook as an avenue through which to connect with customers (and concerns about businesses’ dependence on Facebook are not new).

We will eventually see if Facebook’s experience with the Usernames program proves a cautionary tale as to the pitfalls of rolling out new programs without fully anticipating the potential legal issues.  As the Username feature develops and more companies become aware of it, Facebook may see both disputes and angry markholders multiply. 

This may turn into yet another cyber-battleground over trademarks.  Numerous trademark infringement claims have been brought against Google in connection with its search ad business.  The claims are based on Google’s sale of trademarked keywords through its AdWords program.  In large part, the plaintiffs have asserted that such sales constitute trademark infringement because consumers could be confused by links to competitors’ ads that pop up alongside a search for the plaintiff’s marks.  While Google suffered a litigation setback in April when the Second Circuit reversed a dismissal of a suit brought by Rescuecom Corp., two separate actions against Google, one by Daniel Jurin and the other by Ascentive LLC, were both recently dismissed.

We will continue to monitor these matters and keep an eye out for developments.  In the meantime, our group would be happy to discuss any specific questions you might have about the impact of Facebook’s Usernames program on your trademark portfolio and help you develop strategies to protect your intellectual property rights.

*  We would like to thank Yoshinori Sasao, a summer associate at the Firm, who assisted in preparing this article.

• While we haven’t quite figured out if there is a direct link, as the economic news got worse at the end of 2008, online video activity increased.  According to comScore, online viewing reached a record high with U.S. Internet users watching 14.3 billion videos in December.  This was a 13% increase from November.  comScore found that 150 million U.S. users watched an average of 96 videos each and spent more than five hours watching online video during the month.  Read here about how the big video sites split the market.
• While there is little public information available about the negotiations over the Anti-Counterfeiting Trade Agreement, the proposed multi-national treaty to assist in the enforcement of global IP rights, some leaked language is causing concern.  More information here.  
• The GOP appears to be following in the White House’s footsteps by overhauling its website to be more open and accessible to its Internet-using citizens.  The new site makes it easy to get the latest news, contact representatives through e-mail and even has an API in which developers can create applications that pull data from the site and format it in a number of ways.  Read more here.
• The watchdog group Privacy International has raised concerns about Google’s new phone tracking system, Latitude, which was unveiled this week.  The system allows users to track other people via smartphone.  And while it does have some built-in privacy protections, there are some potential gaps, including the possibility that the phone’s tracking settings could be changed without its owner’s knowledge.  More here.
• In a closely-watched case, defunct BitTorrent search site TorrentSpy has asked a federal appellate court to reverse a judge’s decision ordering the site to pay movie studios $111 million for copyright infringement in which they were trying to protect users’ privacy by purging the records of visitors’ IP addresses.  Read here for more on the ruling and TorrentSpy’s appeal.

On Wednesday, the Internet Safety Technical Task Force, led by The Berkman Center for Internet & Society at Harvard University, issued a report entitled “Enhancing Child Safety & Online Technologies.”  The report was compiled at the request of the Multi-State Working Group on Social Networking, comprised of 50 state Attorneys General.  The task force includes representatives from several well-known Internet social network and online service providers, including Google, AOL, Facebook and MTV Networks/Viacom.  The report, which was a year in the making, sought to determine the extent to which currently-available technology could help to address online safety risks to youths in the U.S., with a primary focus on social networking. 

The task force consulted with experts in the field of youth online safety and technology and sought input from the public upon which to base its findings.  Most significantly, eight leading social networking sites (including AOL, Bebo and Orkut (Google)) provided submissions to the task force detailing their efforts to enhance online safety for children, including the development and implementation of technologies focused on age and identity verification/authentication, filtering and auditing, text analysis and biometrics. 

While “cautiously optimistic” about the innovations they’ve observed, the task force cautioned against overreliance on technology, and noted that there is no one technological solution, or combination of solutions, that can provide complete online safety for minors.  Rather (and probably one of the more obvious solutions), the task force noted that the importance of parental oversight and education in use of the Internet must not be underestimated.  Ultimately the task force does not believe that the Attorneys General should endorse any one technology or set of technologies, but should work collaboratively with all stakeholders in pursuing a multi-faceted approach in protecting children from the risks of Internet usage.

Above all else, it is important to recognize that child safety, whether online or offline, in the virtual world or the real world, starts at home.  Putting that aside, it is definitely interesting to see social network providers coming around and taking a proactive role, particularly those that traditionally took a “hands-off” approach to filtering and monitoring the content on their sites and/or implementing security and safety procedures to protect minors. 

• One report says that ad spending on social networking sites will be lower than expected this year and will remain relatively flat in 2009.  Details from the WSJ are here. 
• The House Committee on Energy and Commerce has released a report entitled “Deception and Distrust:  The Federal Commmunications Commission under Chairman Kevin J. Martin.”  Some of the highlights of the criticism: lax oversight of telecommunciations companies and pushing for revisions to agency reports in a less-than-open fashion.  One caveat:  the report was prepared and released by the majority staff and is not necessarily a consensus view.  Here’s a link.
• Google has reached agreement to bring the magazine archive and current issues online as part of Google Book Search.  Titles involved in the project are a diverse bunch and include New York Magazine, Popular  Mechanics and Ebony.  The announcement was made via this post on Google’s official blog.
• The New York Times takes a look at licensing and other revenue opportunities that are being exploited in virtual worlds.  We’ll be looking at the legal impact that emerging technologies in the virtual space might have on licensing arrangements in the coming weeks.  Check back for the full post.

The DMCA was initially intended as the US implementation of two treaties adopted by the World Intellectual Property Organization (WIPO) in 1996 to establish rules for two evolving forms of digital media: music and computer software and databases.  However, as the legislation was introduced in Congress, additional provisions were added in response to lobbying efforts by two distinct constituencies.  

Media companies wanted the bill to include provisions to protect their IP, which was increasingly available in digital form, from widespread infringement.  They therefore pressed for the inclusion of anti-circumvention rules that prevent anyone from bypassing any technological measures used by copyright owners to control access to their works.  And ISPs, hosting companies and interactive services sought provisions to provide a safe harbor from infringement claims based on the actions of their users.  In hindsight, these provisions, which were ultimately included in the DMCA, have each impacted the technological landscape in ways that are felt everyday

Without the anti-circumvention provisions, it is unlikely that DVD technology, which was being test marketed when the DMCA was enacted, would have been embraced by movie studios.  The adoption of DVD technology has led to the blossoming of new lines of electronics manufacturing and rental businesses that have far outpaced those which evolved when VHS was the primary medium for home viewing of movies.

However, these same provisions have also led to disputes and litigation that, to some, run counter to their original intent.  For example, while developing and improving methods to ensure the security of the internet and computers connected to it would seem to be an unassailable goal, the anti-circumvention provisions have created a Catch-22 for security experts and researchers.  In order to improve copy-protection systems and computer security programs, these experts and researchers need to determine what flaws exist in any currently deployed security system.  Thus, the very act of testing those systems is a violation of the anti-circumvention provisions of the DMCA.  For a more detailed, albeit one-sided, view of this debate, here is the Electronic Frontier Foundation’s report, entitled “Unintended Consequences: Ten Years under the DMCA.”

The safe harbor provisions have enabled the explosive growth of the web, particularly as an interactive medium.  In effect, website operators from MySpace to WordPress were able to provide forums for users without a constant fear of being sued based on the acts of their users.

In order to maintain “safe harbor” protection, the “provider of online services” must meet certain conditions.  It cannot have knowledge of an infringement nor derive any direct financial benefit from the infringing activity where it has the right and ability to control it.  A provider must also expeditiously remove material if a copyright holder sends a take-down notice, without the need to evaluate the notice to determine if it is accurate or whether the user who uploaded the content has any rights to it.   From a simple perspective, this seems to make sense:  a provider should not be put in a position of having to adjudicate disputes over content.  As a pure intermediary, its obligations should be as simple as possible (If receive take-down notice è then take down content).  The principals are the ones with the vested interest in the content and should be the only ones debating the merits of who has the right to make content available.

However, some content owners believe that too much emphasis is being placed on the take-down “remedy” enabling it to serve as a blanket of immunity for all infringement claims.  What if an online provider’s sole business model is to provide users with a readily available means to post content online?  And what if the site becomes wildly popular, with the potential to earn substantial amounts of money selling ads to companies seeking that vast user base and audience? And what if it is clear that users are posting content they don’t own?  Doesn’t the online provider lose its safe harbor protection because it has knowledge of the infringement?  Or is deriving financial benefit from the infringement? 

These are the basic facts underlying Viacom’s lawsuit against Google.  The case is headed for trial next spring.  The outcome will undoubtedly have major repercussions throughout the digital media world.

The intermediary function of online providers has also recently come under assault in a somewhat surprising context, the presidential campaign.  John McCain’s campaign had posted various videos on YouTube that included snippets from broadcast news footage.  In response to take-down notices from the news outlets, YouTube pulled the videos.

The McCain campaign then sent a letter to YouTube claiming its use of the footage was privileged under the fair use doctrine.  While recognizing that a fair use analysis could not be undertaken in response to every take-down notice, the McCain campaign proposed that such an analysis be done, at the very least, when the content at issue was posted by a political campaign.

In response, YouTube, politely, told the McCain campaign “thanks but no thanks.”  In a possible overstatement, the letter said that “[l]awyers and judges constantly disagree about what does and does not constitute fair use.  No number of lawyers could possibly determine with a reasonable level of certainty whether all videos for which we receive disputed takedown notices qualify as fair use.”  While acknowledging that some parties abuse the take-down notification process, YouTube essentially passed the burden of policing those abuses to the users who upload the content who, according to YouTube, “operat[e] from a position of strength, with knowledge of exactly where the content in [their] videos came from.”

Ironically, McCain voted for the DMCA.  But YouTube’s response appears to be more in line with both the express language and intent of the safe harbor and take-down notice provisions of the act.

The question of whether a fair use analysis needs to be employed in connection with issuing a take-down notice is currently the subject of litigation involving not an online provider but content owners.  Universal Music and Universal Publishing Group had issued a take-down notice to YouTube over a 29-second video posted by Stephanie Lenz of her toddler dancing to Prince’s “Let’s Go Crazy.”  YouTube took down the video.  Lenz then sued the Universal entities claiming that they made a misrepresentation in sending the take-down notice to YouTube knowing that Lenz’ use of “Let’s Go Crazy” was not infringing.  In essence, Lenz was arguing that a copyright owner must make a fair use analysis prior to sending a take-down notice to an online provider.

The Universal entities moved to dismiss the complaint.  At issue is language in the DMCA that, when sending a take-down notice, the complaining party must state its good faith belief that the use at issue is “not authorized by the copyright owner.”  Universal argues that fair use is merely an “excused” infringement and therefore a fair use evaluation is not relevant to determine whether the use is “not authorized” for DMCA purposes.  As Universal also pointed out, the DMCA take-down provisions do not even mention fair use, much less place a burden on the party issuing the notice to consider it.

The district court denied the motion, stating that the issue of whether fair use qualifies as “authorized by law” in connection with a take-down notice under the DMCA was a question of first impression. 

Obviously, this is a case that will be closely watched.  However, a final ruling in Lenz’ favor will have considerable consequences, effectively shifting the fair use burden from the user uploading the content (as YouTube noted in its letter to the McCain campaign) to the party issuing the take-down notice, in most cases copyright right owner. 

And so, we usher in the next decade of the DMCA.  And while it is difficult to predict what the next ten years will bring, it is probably safe to say that, regardless of the disputes that will inevitably arise, the digital marketplace will continue to rapidly evolve, with the DMCA serving as the basic framework and foundation for protecting digital rights and the focal point for disputes yet to come.

Google’s primary objective has been to organize the world’s information and make it universally useful. Specifically, their focus to make copyrighted books available digitally to the general public without explicit permission to do so from the respective authors and publishers has been getting a lot of attention in the past few years.

On Tuesday, in what is being referred to as a landmark decision, Google Inc., the Authors Guild and the Association of American Publishers settled a class-action lawsuit dating back to 2005 over Google’s book-scanning project, which would result in the creation of, and free, public access to, a massive online library.  Google has now agreed, among other things, to pay $125 million to resolve the copyright infringement claims brought by the authors and publishers involved in the class action. According to the settlement administration website for the class action, the settlement, if approved, will authorize Google to (1) continue to scan copyrighted works, (2) develop an electronic books database, (3) sell subscriptions to the books database to schools, corporations and other institutions, (4) sell individual books to consumers and (5) place advertisements adjacent to pages of books. Through the establishment of a not-for-profit “book rights registry”, Google will pay rights holders 63% of all revenues earned from these uses, and the registry will distribute those revenues to the rights holders who register their works. Google will also pay $34.5 million to establish the registry and for other costs of administering the settlement.

Ultimately, the settlement agreement will afford Google the ability to expand public access to millions of books, including books that are out of print, as well as offer subscriptions to universities and other organizations.  Many public and university libraries (including the Universities of California, Michigan and Stanford) will make their full inventory available digitally to the public through Google’s online library. 

The parties involved describe the settlement as a victory, particularly for the copyright holders that will be compensated through the registry. However, there is concern that the settlement could have a significant impact on the success of a fair use defense, particularly in the digital space. By Google’s abandonment of its fair use argument, and the precedent that will be set vis-à-vis payment of royalties to copyright holders, it will be much harder for competitors in this space to claim fair use – meaning, now that a major player in the market like Google is going to begin paying license fees to copyright holders, courts will be less likely to rule that others can do what Google is doing for free under the fair use doctrine.  Some also say that by not seeing a judgment on fair use in this case is a downside for copyright law, particularly with respect to advising technology companies about what is protected fair use.  A University of Baltimore Law School professor has even been quoted as saying that the settlement is like “the Brown v. Board of Education of copyright”.  Now that’s a bold statement.  There will be more to come as we wait to see if the settlement is approved. 

    Winning the Digital Race