On March 4, 2024, the European Commission fined Apple €1.84 billion “over abusive App store rules for music streaming providers”.¹ In particular, the Commission was concerned about the anti-steering provisions that Apple imposed on these providers. Although the full decision has not yet been published (I am told it could be a matter of months), the public information underpinning this decision is already interesting on several levels. In the following, I explore the good (1.), the bad (2.), and the ugly (3.) of the “App Store Practices (music streaming)” decision based on the information available as of this writing.

Read the full piece here.

ICLE Director of Law & Economics Programs Gus Hurwitz was a guest on The Cyberlaw Podcast, where he discussed the U.S. Supreme Court’s Murthy v. Missouri free speech case and a unanimous decision by the court on when a public official may use a platform’s tools to suppress critics posting on his or her social-media page. Other topics included AI deepfakes, the congressional bill to force the divestment of TikTok, and the Federal Trade Commission’s lawsuit against Meta. Audio of the full episode is embedded below.

Given how important digital connections are to Americans’ daily lives, it’s urgent that Congress move to renew the Federal Communications Commission’s authority to auction parts of the public airwaves.

That authority lapsed a little over a year ago and efforts to reinstate it have been repeatedly stuck in partisan gridlock.

Read the full piece here.

In a recent guest essay for The New York Times, Aaron Klein of the Brookings Institution claims that the merger between Capital One and Discover would “keep intact the broken and predatory system in which credit card companies profit handsomely by rewarding our richest Americans and advantaging the biggest corporations.”

That’s quite an indictment! Fortunately, Klein also offers solutions. Phew!

Read the full piece here.

Abstract

As bans on noncompete agreements (NCAs) become more frequent, commentators are increasingly concerned that costly trade secret litigation will rise. The logic underlying this claim is that bans on NCAs will spur worker mobility, resulting in more secret sharing, and thus opportunities for trade secret litigation. We test this claim leveraging the many state-level NCA bans for high- and low-wage workers, alongside data from Westlaw and the Courthouse News Service on trade secret filings. We find that the number of trade secret claims filed falls in the long run after NCAs are banned, even as mobility rises. This long-term drop in the number of filed trade secret claims is not driven by a decline in dual NCA and trade secret filings. It is also not driven by a decline in reliance on trade secrecy by firms. Instead, it appears firms rely more on trade secrets after NCAs are banned. Finally, we find that endorsing the inevitable disclosure doctrine causes a rise in both NCA and trade secret claims. Taken in sum, this evidence suggests that NCA and trade secret litigation are complements, and not substitute approaches to protecting valuable firm knowledge.

Read at SSRN.

The lawsuit filed yesterday by the U.S. Justice Department (DOJ) against Apple for monopolization of the U.S. smartphone market (joined by 15 states and the District of Columbia) has big implications for American competition and innovation.

At the heart of the complaint is the DOJ’s assertion that…

Read the full piece here.

INTEREST OF AMICI CURIAE

Amici Curiae are 24 former government officials, former judges, and intellectual property scholars who have developed copyright law and policy, researched and written about copyright law, or both. They are concerned about ensuring that copyright law continues to secure both the rights of authors and publishers in creating and disseminating their works and the rights of the public in accessing these works. It is vital for this Court to maintain this balance between creators and the public set forth in the constitutional authorization to Congress to create the copyright laws. Amici have no stake in the parties or in the outcome of the case. The names and affiliations of the members of the Amici are set forth in Addendum A below.[1]

SUMMARY OF ARGUMENT

Copyright fulfills its constitutional purpose to incentivize the creation and dissemination of new works by securing to creators the exclusive rights of reproduction and distribution. 17 U.S.C. § 106. Congress narrowly tailored the exceptions to these rights to avoid undermining the balanced system envisioned by the Framers. See 17 U.S.C. §§ 107–22. As James Madison recognized, the “public good fully coincides . . . with the claims of individuals” in the protection of copyright. The Federalist NO. 43, at 271–72 (James Madison) (Clinton Rossiter ed., 1961). Internet Archive (“IA”) and its amici wrongly frame copyright’s balance of interests as between the incentive to create, on the one hand, and the public good, on the other hand. That is not the balance that copyright envisions.

IA’s position also ignores the key role that publishers serve in the incentives copyright offers to authors and other creators. Few authors, no matter how intellectually driven, will continue to perfect their craft if the economic rewards are insufficient to meet their basic needs. As the Supreme Court observed, “copyright law celebrates the profit motive, recognizing that the incentive to profit from the exploitation of copyrights will redound to the public benefit by resulting in the proliferation of knowledge.” Eldred v. Ashcroft, 537 U.S. 186, 212 n.18 (2003) (quoting Am. Geophysical Union v. Texaco Inc., 802 F. Supp. 1, 27 (S.D.N.Y. 1992)). Accordingly, the Supreme Court and Congress have long recognized that copyright secures the fruits of intermediaries’ labors in their innovative development of distribution mechanisms of authors’ works. Copyright does not judge the value of a book by its cover price. Rather, core copyright policy recognizes that the profit motive drives the willingness ex ante to invest time and resources in creating both copyrighted works and the means to distribute them. In sum, commercialization is fundamental to a functioning copyright system that achieves its constitutional purpose.

IA’s unauthorized reproduction and duplication of complete works runs roughshod over this framework. Its concept of controlled digital lending (CDL) does not fall into any exception—certainly not any conception of fair use recognized by the courts or considered by Congress—and thus violates copyright owners’ exclusive rights. Expanding the fair use doctrine to immunize IA’s wholesale copying would upend Congress’s carefully-considered, repeated rejections of similar proposals.

Hoping to excuse its disregard for copyright law, IA and its amici attempt to turn the fair use analysis on its head. They acknowledge that the first sale exception does not permit CDL, as this Court made clear in Capitol Records, LLC v. ReDigi Inc., 910 F.3d 649 (2d Cir. 2018).[2] They also are aware that courts consistently have rejected variations on the argument that wholesale copying, despite a format shift, is permissible under fair use.[3] Nevertheless, IA and its amici ask this Court, for the first time in history, to create a first sale-style exemption within the fair use analysis. CDL is not the natural evolution of libraries in the digital age; rather, like Frankenstein’s monster, it is an abomination composed of disparate parts of copyright doctrine. If endorsed by this Court, it would undermine the constitutional foundation of copyright jurisprudence and the separation of powers.

The parties and other amici address the specific legal doctrines, as well as the technical and commercial context in which these doctrinal requirements apply in this case, and thus Amici provide additional information on the nature and function of copyright that should inform this Court’s analysis and decision.

First, although IA and its amici argue that there are public benefits to the copying in which IA has engaged that support a finding that CDL is fair use, their arguments ignore that copyright itself promotes the public good and the inevitable harms that would result if copyright owners were unable to enforce their rights against the wholesale, digital distribution of their works by IA.

Second, IA’s assertion of the existence of a so-called “digital first sale” doctrine—a principle that, unlike the actual first sale statute, would permit the reproduction, as well as the distribution, of copyrighted works—is in direct conflict with Congress and the Copyright Office’s repeated study (and rejection) of similar proposals. Physical and digital copies simply are different, and it is not an accident that first sale applies only to the distribution of physical copies. Ignoring decades of research and debate, IA pretends instead that Congress has somehow overlooked digital first sale, yet left it open to the courts to engage in policymaking by shoehorning it into the fair use doctrine. By doing so, IA seeks to thwart the democratic process to gain in the courts what CDL’s proponents have not been able to get from Congress.

Third, given that there is no statutory support for CDL, most libraries offer their patrons access to digital works by entering into licensing agreements with authors and their publishers. Although a minority of libraries have participated in IA’s CDL practice, and a few have filed amicus briefs in support of IA in this Court, the vast majority of libraries steer clear because they recognize that wholesale copying and distribution deters the creation of new works. As author Sandra Cisneros understands: “Real libraries do not do what Internet Archive does.” A-250 (Cisneros Decl.) ¶12. There are innumerable ways of accessing books, none of which require authors and publishers to live in a world where their books are illegally distributed for free.

No court has ever found that reproducing and giving away entire works—en masse, without permission, and without additional comment, criticism, or justification—constitutes fair use. IA’s CDL theory is a fantasy divorced from the Constitution, the laws enacted by Congress, and the longstanding policies that have informed copyright jurisprudence. This Court should reject IA’s effort to erase authors and publishers from the copyright system.

[1] The parties have consented to the filing of this brief. Amici Curiae and their counsel authored this brief. Neither a party, its counsel, nor any person other than Amici and their counsel contributed money that was intended to fund preparing or submitting this brief.

[2] See SPA-38 (“IA accepts that ReDigi forecloses any argument it might have under Section 109(a).”); Dkt. 60, Brief for Defendant-Appellant Internet Archive (hereinafter “IA Br.”) (appealing only the district court’s decision on fair use).

[3] See, e.g., ReDigi, 910 F.3d at 662; UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349, 352 (S.D.N.Y. 2000); see also Disney Enters., Inc. v. VidAngel, Inc., 869 F.3d 848, 861–62 (9th Cir. 2017).

The big news from the agencies may be the lawsuit filed today by the U.S. Justice Department (DOJ) and 16 states against Apple alleging monopoly maintenance in violation of Section 2 of the Sherman Act. It’s an 86-page complaint and it’s just out. I’ll write more about it next week.

Two quick observations: First, the complaint opens with an anecdote from 2010 that suggests lock-in (a hard case under antitrust law), but demonstrates nothing. Second, the anecdote is followed by a statement that “[o]ver many years, Apple has repeatedly responded to competitive threats… by making it harder or more expensive for its users and developers to leave than by making it more attractive for them to stay.” 

Read the full piece here.

With Monday’s oral arguments in Murthy v. Missouri, we now have more of a feel for how the U.S. Supreme Court appears to be considering the issues of social-media censorship—in this case, done allegedly at the behest of federal officials.

In the International Center for Law & Economics’ (ICLE) amicus brief in the case, we argued that the First Amendment protects a marketplace of ideas, and government agents can’t intervene in that marketplace by coercing social-media companies into removing disfavored speech. But if the oral arguments are any indication, there are reasons to be skeptical that the Court will uphold the preliminary injunction the district court issued against the government officials (later upheld in a more limited form by the 5th U.S. Circuit Court of Appeals).

Read the full piece here.