I was fortunate to moderate an excellent panel at the SXSW Continuing Legal Education seminar this week. Our topic was “The Future of Mechanical Licensing in the U.S.” Little did we know when the panel was booked in September that this would be such a hot topic following the introduction of the deeply controversial Music Modernization Act on December 21.
One of the legal process questions the panel discussed was the MMA’s “reachback” safe harbor that retroactively limits infringement claims filed after January 1, 2018 without regard to when the MMA’s blanket license is actually available.
The biggest story of 2017? To my mind, there is no contest — the broad emergence of an awareness that the irresponsibility masquerading as Internet freedom represented a threat to global societies and to cherished aspects of our humanity, and that a course correction was badly needed.
While recognition of the fact that rewarding lack of accountability would likely incentivize anti-social and illegal conduct took longer than it should have, such an awareness came to fruition throughout 2017. Whether motivated by concerns about sex trafficking or the prevalence of other internet-enabled crimes, fake news, foreign government interference in elections, monopoly or monopsony power, or the perceived political or cultural biases of platforms, the question at the end of 2017 wasn’t whether the current legal framework for platform responsibility should be amended, but how.
It became clear that the twin pillars upholding the current lack of accountability in the internet ecosystem — Section 230 of the Communications Decency Act and Section 512 of the DMCA, each of which was adopted at the dawn of the commercial internet, would need to be reexamined and a new framework established.
Your margin is my opportunity. Now bend over.
Inspired by Jeff Bezos
If a record company pulled your music from a retailer because of a commercial dispute that had nothing to do with you or the label itself, how would that make you feel? If you ran to your contract to see if you could stop them, do you think anyone would have ever thought to negotiate protection against anything so philistine? This little life parable shows you why you should never underestimate the highly innovative monopolists forcing their way into our lives.
Alphabet Inc.’s Google pulled support for its YouTube video service from Amazon.com Inc.’s streaming-media devices, citing the internet retailer’s failure to make Amazon Prime Video available through Google’s gadgets and the recent halt of the sale of some Nest products on its website.
What’s interesting about YouTube’s behavior is that you would think that YouTube actually owned the videos on YouTube. Which in probably 99% of the cases, they do not. (It’s unclear if the Amazon boycott includes Vevo, the premium content provider co-owned by Google, but I would assume it does.) I’m no fan of Amazon, God knows, so I’m not suggesting that YouTube’s move here is hard on Little Jeffie, the destroyer of worlds.
I’m suggesting that it is hard on artists and is not something that any other distributor would think they could get away with. And the fact that YouTube exists to screw artists and songwriters doesn’t excuse YouTube’s tone deaf wielding of other people’s property to gain a commercial advantage against Amazon accruing almost entirely to Google. So what did Google do, exactly? Bloomberg tells us:
Google blocked YouTube access via the Echo Show, Amazon’s smart speaker with a touchscreen, on Tuesday and will stop supporting YouTube on Amazon’s Fire TV set-top box on Jan. 1. In a statement, a Google representative said it’s taking the action because the YouTube apps on Amazon products aren’t made by Google, like the YouTube app on the iPhone is, and the retail giant doesn’t sell some Google products, such as Chromecast and Google Home.
“We’ve been trying to reach agreement with Amazon to give consumers access to each other’s products and services,” Google said in a statement. In its own statement, Seattle-based Amazon said its gadgets now send users to the YouTube website, and the company hopes to resolve the dispute as soon as possible.
In other words, Amazon stopped carrying totally unrelated Google products and Google responded by blocking your videos from Amazon devices. Did anyone ask you if that was OK? According to the Verge:
Three months ago, YouTube pulled its programming from Amazon’s Echo Show device — the first skirmish in what is apparently an ongoing war. Shortly after, Amazon stopped selling the Nest E Thermostat, Nest’s Camera IQ, and the Nest Secure alarm system. Two weeks ago, Amazon got YouTube back on the Echo Show by simply directing users to the web version, a workaround that left a lot to be desired. But even that version won’t be available after today.
In other words, this boycott of the billionaires has nothing to do with any YouTube artist or Vevo artist, but all are being harmed by it for reasons they have no control over. You might, however, be able to file a complaint with the Federal Trade Commission against Google and possibly both Google and Amazon by clicking here.
Who can forget Zoe Lofgren, the Member from San Mateo (aka Google) who is currently the #3 most senior Democrat on the House Judiciary Committee? You may remember Ms. Lofgren’s scorched earth campaign against Maria Pallante, the former head of the Copyright Office who I think was the subject of a retaliatory termination by the Librarian of Congress. Lofgren’s campaign went absolutely nowhere and has been on the side of monopoly power emanating from Silicon Valley her entire career. Which company does she favor with unwavering loyalty?
You guessed it–the Leviathan of Mountain View, the multibillion dollar multinational monopolist, Lessig’s long-time benefactor and funder of a host of NGOs–Google. Google wants control of the House Judiciary Committee through their influence over Lofgren.
The current Ranking Member is Rep. John Conyers who has resigned his position as Ranking Member after harassment allegations and some allegations of misuse of funds to settle sexual harassment claims (which are coincidentally also surfacing or resurfacing about top Google executives like Andy Rubin, Larry Page, Sergey Brin and, of course, the notorious “serial womanizer” Eric “Uncle Sugar” Schmidt). This leaves the Ranking Member seat open, although Rep. Jerry Nader is next in line in seniority, you know, like “Ranking Member” implies. Rep. Nadler has long been a staunch ally of the little guy, especially our legacy artists on pre-72 recordings that Google made it their mission to screw over through their price fixing cartel and Lofgren pals, the MIC Coalition.
This is nothing new, of course, as Lofgren has been measuring the curtains for a long time, way before the Conyers story came out. Lofgren didn’t make any friends in her attacks on Maria Pallante after the House overcame the Google smear operation that Lofgren led in the House and voted 378-48 in favor of taking away the Librarian of Congress’s power to appoint the next Register. (Even so, Google has been effective in stalling the Senate version of the bill despite Lofgren’s lopsided loss).
For recent historical reasons, the position of Ranking Member is not automatically filled by the most senior member of the applicable party. That position now requires a vote of the Democrats on the Judiciary Committee, which Nadler will surely win when his acting position comes for a vote by his colleagues–but–the Member from Google reminded members of her caucus that she wanted the gig real bad in a November 29 letter:
“Whenever an official vacancy at the top Democratic position of the Judiciary Committee may occur in accordance with Caucus Rules, I will put my credentials forward for my colleagues’ consideration.
I am confident that, as a 23-year veteran of the Committee with nearly 9 years of prior staff service, I fully meet all the criteria for the position as outlined in Caucus Rule 21. That rule states that, in selecting a successor to a Ranking Member vacancy, the Democratic Caucus ‘shall consider all relevant factors, including merit, length of service on the committee and degree of commitment to the Democratic agenda, and the diversity of the Caucus,’ and that the top Committee position “need not necessarily follow seniority.”
Had Rep. John Conyers, D-Mich., then well into his 80s, retired from Congress, Lofgren would have been well-positioned to claim the top-ranking seat on the Judiciary Committee. Yet he ran for re-election. Again. And again. And again.
He stayed so long that Lofgren’s brand of Silicon Valley politics is now past its expiration date, her once virtuous alliance with the forces of progress and innovation curdling into a protection racket for increasingly unpopular monopolies.
Conyers on Sunday announced he is stepping down as the top-ranking Democrat on the Judiciary Committee, launching a battle for his successor that has pitted two Democratic rivals — Lofgren and Rep. Jerrold Nadler, D-N.Y. — against each other. On the one hand, his resignation comes in a politically fortuitous way for Lofgren, with Conyers felled not by age but by allegations of sexual harassment. The political logic of replacing him with a woman is obvious. But then there’s Google.
The race for committee chair threatens to become the first fight over monopoly politics after the rollout of House Democrats’ “Better Deal” platform for 2018, which was built on going after concentrated power, particularly in the tech sector. Elected to Congress in 1994, Lofgren represents San Jose and the Bay Area, and is far and away the most stalwart defender of big Silicon Valley firms among House Democrats.
“It certainly may raise questions to have someone from Silicon Valley in a position where one of the key responsibilities is to oversee the conduct of Silicon Valley,” said Jonathan Kanter, a prominent antitrust attorney.
The problem that The Intercept put their finger on is that very few–and I mean very, very few–in the Congressional leadership believes that the whole SOPA dustup was for real and was instead one of the worst cases of astroturf ever perpetrated against a legislative body and its shell shocked staff. Lofgren associated herself with that assault and has been heard to bring it up as a threat that sounds more hollow by the day.
What we have to realize though is that even if Rep. Nadler–who is one of the truest blue progressives in the Congress–gets the Ranking Member position, in my view Lofgren clearly has her marching orders and will not stop until she’s told to stand down. Her supporters clearly have a lot of cash to hand out and are feeling the consequences of the election which severely curtailed their influence in the Executive Branch. And one of the ways that members get influence is not only raising money for themselves, but having the ability to raise money for other members or their party.
Late last month, Mark Zuckerberg wrote a brief post on Facebook at the conclusion of Yom Kippur, asking his friends for forgiveness not just for his personal failures but also for his professional ones, especially “the ways my work was used to divide people rather than bring us together.” He was heeding the call of the Jewish Day of Atonement to take stock of the year just passed as he pledged that he would “work to do better.”
Such a somber, self-critical statement hasn’t been typical for the usually sunny Mr. Zuckerberg, who once exhorted his employees at Facebook to “move fast and break things.” In the past, why would Mr. Zuckerberg, or any of his peers, have felt the need to atone for what they did at the office? For making incredibly cool sites that seamlessly connect billions of people to their friends as well as to a global storehouse of knowledge?
Lately, however, the sins of Silicon Valley-led disruption have become impossible to ignore.
Facebook has endured a drip, drip of revelations concerning Russian operatives who used its platform to influence the 2016 presidential election by stirring up racist anger. Google had a similar role in carrying targeted, inflammatory messages during the election, and this summer, it appeared to play the heavy when an important liberal think tank, New America, cut ties with a prominent scholar who is critical of the power of digital monopolies. Some within the organization questioned whether he was dismissed to appease Google and its executive chairman, Eric Schmidt, both longstanding donors, though New America’s executive president and a Google representative denied a connection.
Meanwhile, Amazon, with its purchase of the Whole Foods supermarket chain and the construction of brick-and-mortar stores, pursues the breathtakingly lucrative strategy of parlaying a monopoly position online into an offline one, too.
Now that Google, Facebook, Amazon have become world dominators, the question of the hour is, can the public be convinced to see Silicon Valley as the wrecking ball that it is?
These menacing turns of events have been quite bewildering to the public, running counter to everything Silicon Valley had preached about itself.
According to a recent civil lawsuit, a plaintiff is suing Google for violating the racketeering laws (aka “RICO”). (Attia et al v. Google et al, Cal. Sup. Ct. (Santa Clara) Case No. 1:14-cv-270143.) I’ve been waiting for this since 2012 when it dawned on me one day that Google is running a criminal enterprise (see “Google’s Guide to RICO“). So what does this RICO business mean?
If you’re even occasionally exposed to contemporary crime movies you’ll have heard of “RICO”. The “RICO” statute is the acronym for the Racketeer Influenced and Corrupt Organization Act which allows a criminal prosecution against the leaders of an “ongoing criminal enterprise”, particularly where the leaders of that organization order others to commit crimes, often called “RICO predicates”. The loophole was that leader didn’t do the crime, but ordered or assisted others in committing it. (Recall the Senate hearings in The Godfather II, and see the first major RICO criminal case, US v. Scotto, 641 F.2d 47 (1980) for those reading along.) You know, that thing that happened with those guys down at that place we used to go back in the day.
Often overlooked is the civil cause of action that may be brought either by the government or by private citizens under both the federal RICO statute and the 33 or so state law versions of RICO. This allows private citizens who have been harmed by corrupt organizations to sue for treble damages and attorneys fees. The Department of Justice civil RICO manual is also instructive for government action under the statutes:
Civil RICO, 18 U.S.C. § 1964(a), authorizes potentially intrusive remedies, including injunctive relief [typically sought by the government], reasonable restrictions on defendants’ future activities, disgorgement of unlawful proceeds, divestiture, dissolution, reorganization, removal from positions in an entity, and appointment of court officers to administer and supervise the affairs and operations of defendants’ entities and to assist courts in monitoring compliance with courts’ orders and in imposing sanctions for violations of courts’ orders.
RICO remedies are ample and were intended to be applied against white collar criminals as well as organized crime bosses. The statute was drafted by Professor G. Robert Blakey–remember that name–now the William J. and Dorothy K. O’Neill Chair in Law Emeritus at the University of Notre Dame School of Law. As Professor Blakey told Time magazine:
“We don’t want one set of rules for people whose collars are blue or whose names end in vowels, and another set for those whose collars are white and have Ivy League diplomas.”
Or whose collars are white, have Ivy League diplomas and live in Silicon Valley.
According to reports, Professor Blakey is advising Mr. Attia in filing an amended complaint in Mr. Attia’s case against Google alleging RICO violations in addition to the core claims of bad behavior by Google against Mr. Attia (The Verge has a good summary of the pre-RICO filing here).
What is particularly interesting about the RICO filing is that it turns on the RICO intellectual property theft predicate (at p. 28):
1. Defendants [meaning Google and certain Google executives and affiliates] have a long history of theft of others intellectual property which continues to date and which constitutes a pattern of racketeering activity
112. Defendants have engaged in a pattern of racketeering activity, as defined in 18 U.S.C. § 1961(5), through the repeated, relentless, and purposeful theft of other companies’ IP and trade secrets.
113. Defendants have engaged, and continue to engage, in a pattern of activity whereby Defendants: 1) seek out inventors; 2) promise such inventors that Google will invest in, partner with and/or seek to acquire a license for any proprietary inventions of the investor; 3) sign a non-disclosure agreement (NDA) with inventors; 4) upon inducing inventors to reveal trade secrets and other confidential information, Google disregards the NDA and misappropriates the trade secrets; and 5) Google then subsequently attempts to box-out the victim inventors from the market by filing numerous patent applications which result in the unauthorized disclosure of the inventors’ trade secrets and the subsequent granting of a monopoly on the technology by the issuance of the patent. Where no NDA is required, Google has simply copied and criminally stole other inventors’ copyrights….
115. Google, Inc. and its executives—among others—have repeatedly had criminal and anti-trust investigations brought against them by governments around the world for their repeated theft. For example:
• Google was fined $500 million by the U.S. government for its role in the promotion of piracy through illegal online pharmacies;
• In June of 2017, Google was hit with a $2.7 billion fine from the European Union for its anti-competitive conduct in skewing search results. Google is still under investigation for its conduct with regards to its AdSense and Android software and business model which may lead the company to face even further fines;
• The U.S. Federal Trade Commission concluded that Google “used anticompetitive tactics and abused its monopoly power in ways that harmed Internet users and rivals”;
• Google was charged by the FTC with engaging in deceptive privacy practices for stealing and publishing consumers email contact lists and was ordered to submit to regular independent privacy audits for the next 20 years; and
• Google was investigated by numerous countries when it was learned that Google’s street-view illegally stole persons’ wifi information, passwords, names, addresses and emails among other personal information….
c. Theft of others intellectual property is the Google and Flux Factory Enterprise’s regular way of doing business
153. Violations of RICO predicate acts (e.g. theft of trade secrets and criminal infringement of copyright) are the regular way of conducting Defendants’ businesses. The previous non-exclusive list of acts of racketeering evidences a pattern of racketeering, the acts of which are related, not isolated, and continue to date by threat of further operation of Defendants’ business and through Defendants continued use of already stolen trade secrets for profits. Based on all of the following, Defendants have demonstrated that their regular way of doing business is through racketeering (e.g. by theft of trade secrets and criminal infringement of copyright) such that they are liable for harm done to others by their acts of racketeering under the Federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961, et seq.
6. Larry Page, Sergey Brin, Google, Inc., and its associates have participated in a criminal enterprise
154. Each Plaintiff is a “person” within the meaning of 18 U.S.C. §§ 1961(3); 1964(c).
155. Each Defendant is a “person” within the meaning of 18 U.S.C. §§ 1961(3) and 1962(c)….
168. Plaintiffs hereby incorporate in the pattern of racketeering shown in ¶¶ 112–153. This pattern of racketeering evidences an intent by Defendants to continuously conspire to make income from acts of racketeering (e.g. theft of trade secrets) and to invest and/or use those funds within the greater Google Enterprise.
169. Moreover, Google, the Individual Defendants, and Flux Factory, Inc., conspired with certain venture capital firms (Does 1, 2, and 3) in order to assist in the development of the Flux Enterprise.
Sound familiar? I’m not a RICO expert, but the RICO portion of the complaint seems to be very well-pleaded and a systematic application of the law and facts. It’s also important to remember that Eric Schmidt, Larry Page and Sergey Brin have absolute control over Google (and Alphabet, the holding company) through Google’s bizarre voting rules as explained by the Motley Fool:
Google prevents activist investors from pressuring the company to do anything via its share class system.
There are currently three classes of Google stock — A, B, and C shares. Everyday investors can only buy A or C shares on the open market. A shares (GOOGL) are entitled to one vote, while C shares (GOOG) are entitled to zero votes. The C shares split off the original class A shares last year during its 2 for 1 split. Google uses A shares to pay its employees and fund acquisitions. Meanwhile, B shares, which are entitled to ten votes each, are only owned by Google’s founders and their inner circle.
Simply put, B shares give Google’s top brass the power to defend against any shareholder revolt. Shareholders united against that plan at a previous meeting, casting 180 million votes in favor of the elimination of share classes. Larry Page, Sergey Brin, Eric Schmidt and others crushed the proposal with 551 million votes.
Not only does the voting structure mean that insiders can block any shareholder revolt, it also means that insiders are totally responsible for any of the company’s bad acts. That may explain why Eric Schmidt essentially “took the 5th” under questioning by Senator John Cornyn about Google executives’ narrow escape from criminal prosecution for violating and conspiring to violate the Controlled Substances Act. Schmidt later claimed neither he nor his legal team “understood” the Senator’s questions and were “confused.”
This is, of course, another reason why Google was sued by its stockholders after insiders authorized the payment of $500,000,000 of the stockholders’ money as a fine for the bad behavior of insiders such as Larry Page. In fact, the U.S. Attorney for Rhode Island told the Wall Street Journal that Larry Page was directly implicated in profiting from illegal drug advertising–which may have something to do with why the RICO claim refers to the $500,000,000 fine. That stockholder settlement has one bizarre requirement that may shed some light on the RICO claims:
2.7 Criminal Activity Reporting
Google’s General Counsel shall be responsible for reviewing every situation in which a Google employee is convicted of a felony under U.S. federal or state criminal statutes in connection with his employment by Google and for reporting to the Board (or an appropriate committee of the Board) with respect to that violation. Presumptively, any employee convicted of a felony under a U.S. federal or state criminal statute in connection with his employment by Google shall be terminated for cause and receive no severance payments in connection with the termination. If the General Counsel determines that such termination is not warranted, he shall so recommend to the Board (or an appropriate committee of the Board), which will act upon his recommendation in its discretion.
Leave aside how strange it is to have such a requirement in the settlement of a shareholder lawsuit in the first place–if it turns out that any of the Google insiders have actually been or get convicted of felonies as part of the racketeering case, the shareholder settlement will require the company to terminate that insider’s employment and that will be that.
Where does it go? Before you laugh it off, remember this: If you had told a room full of MBAs in the mid 1980s that in a few years time Master of the Universe Michael Milken would be in prison and Drexel Burnham Lambert would be bankrupt, you would have been laughed out of the room as a quixotic buffoon. But on March 29, 1989, Michael Milken was charged with 98 counts of racketeering and fraud and was facing life in prison. That’s right–racketeering under the RICO Act. Milken copped a plea to six lesser included crimes of securities and tax fraud, paid a $600 million fine and served 22 months in a federal pen on a 10 year sentence.
He’s still rich, just not as rich as he was. But Drexel never would have claimed the “don’t be evil” brand. Even though unlike Google and the drug case, Milken paid his fine himself. Drexel’s stockholders didn’t pick up the tab.
Of course, Milken was being prosecuted criminally and Attia is a civil case. Different proof standards, no doubt, and different remedies, but otherwise, making a civil RICO case and a criminal RICO case are not wildly different.
Watch this space.
[Editor Charlie sez: This is nothing compared to what Google has done to the music business–can you say “notice and shakedown”?]
In an explosive new allegation, a renowned architect has accused Google of racketeering, saying in a lawsuit the company has a pattern of stealing trade secrets from people it first invites to collaborate.
Architect Eli Attia spent 50 years developing what his lawsuit calls “game-changing new technology” for building construction. Google in 2010 struck a deal to work with him on commercializing it as software, and Attia moved with his family from New York to Palo Alto to focus on the initiative, code-named “Project Genie.”
The project was undertaken in Google’s secretive “Google X” unit for experimental “moonshots.”
But then Google and its co-founders Larry Page and Sergey Brin “plotted to squeeze Attia out of the project” and pretended to kill it but used Attia’s technology to “surreptitiously” spin off Project Genie into a new company, according to the lawsuit.