Amazon targets authors and marketers for alleged abuse of Kindle Direct Publishing system

From Geekwire

Amazon has filed arbitration demands against several book authors, publishers and marketers, alleging that they abused the Kindle Direct Publishing system to artificially inflate their profits and sales rankings.

The five arbitration demands, filed Wednesday with the American Arbitration Association, make a variety of allegations, including fraudulent customer reviews, the creation of fake user accounts and other schemes to increase rankings and royalties on the company’s self-publishing platform for e-books.

One of the demands, for example, alleges that a man from the Philippines offered a service to authors to boost the number of pages read in their books using hundreds of fake Amazon customer accounts, in exchange for a 40 percent cut of their profits. Amazon pays authors who participate in the Kindle Unlimited and Kindle Owners’ Lending Library program using a formula based on pages read.

“While the vast majority of authors and publishers using Kindle Direct Publishing are genuinely working in good faith to publish and promote their books, a small minority engage in fraud to gain an unfair competitive advantage,” an Amazon spokesperson said in a statement. “Today’s news reflects yet another step in our ongoing efforts to protect readers and authors from individuals who violate our terms of service and manipulate programs readers and authors rely on.”

Link to the rest at Geekwire and thanks to Nate at The Digital Reader for the tip.

PG notes that most arbitration proceedings are not made public (it’s an advantage for some litigants). Amazon made a decision to publicize/leak these to send a message.


What if Barnes & Noble went bankrupt?

From Nathan Bransford:

I should emphasize from the start of this post that as of this writing there are no signs that Barnes & Noble is close to bankruptcy.

And yet in publishing circles, the prospect of Barnes & Noble going the way of Borders is sort of like a doomsday conversation that is impossible to resist. It’s the rare business lunch that does not at least reference this nightmare scenario.

But what would really happen if Barnes & Noble bit the dust?

I turned to publishing sage Mike Shatzkin, who has been involved in the book business for decades and has advised some of the biggest players in the publishing industry.

. . . .

Nathan: Barnes & Noble has an uncertain future as a print bookseller, as its revenues decline and it transitions toward diversifying its products toward games and toys. It didn’t take long for B&N to go from being the bad guy in You’ve Got Mail to the equivalent of the little shop on the corner everyone is rooting for. What impact is this going to have on publishers?

Mike: These three sentences open up a world of things for publishers to be thinking about.

There are two big shifts taking place in the book business that are not favorable for Barnes & Noble.

1. More and more printed books are being purchased online and fewer and fewer are being purchased in stores. The takeaway: sales of books in stores in total are likely going down.

2. More and more book titles are being delivered to the market with motivations other than pure commercial intent and fewer and fewer are being delivered by publishers trying to make a profit from publishing books. The takeaway: sales of books issued by those not overtly trying to profit will steal markets and mindshare and reduce margins for the publishers trying to run businesses.

. . . .

What would the landscape look like if B&N exited the book business entirely or, god forbid, went bankrupt?

Without Barnes & Noble, the business models of most of the publishers we know are severely challenged.

Although publishers would almost certainly have some warning about either a bankruptcy or an exit from the book business — neither would happen “suddenly” without at least a bit more “gradually” than we’ve yet seen — the absence of B&N would be a painful blow to the core business model of trade publishing. For about 100 years, the core proposition for mainstream publishers doing fiction and non-fiction for consumers has been “we put books on shelves”. That’s the proposition to the authors, as well as the service to consumers.

. . . .

So were it to happen that the chain that supplies probably about ⅔ of the available shelf space for most titles were to disappear, the business model itself would be broken. The incentive for authors to shift to a self-publishing model, where they get a lot more per copy for ebooks and specially ordered POD books, would strengthen. And it would be pretty compelling in any case where the author brand was powerful or the author did most of the marketing of the book.

So publishers would be hurt at the revenue end and the IP supply end of their chain, which is the entry and the exit.

. . . .

Were a bankruptcy to occur, the stock in B&N, even the books that were not yet paid for, would be owned by the company in receivership and the the amounts owed to the publishers would be in a queue for payment along with what is owed to other creditors.

. . . .

B&N’s share of the business keeps declining. They are losing share to Amazon and to independent general bookstores consistently. And bankruptcy for them is certainly not imminent. So the chances are that when the day comes that they go bankrupt, they’ll be 10% or less of most publishers’ business.

Link to the rest at Nathan Bransford

PG says not all bankruptcies are the same. Some are “successful,” at least from the standpoint of many of the stakeholders and some are “unsuccessful” and almost everybody except bankruptcy counsel and business liquidators gets a bad deal.

Managing a business organization through a bankruptcy requires real skill and if inept management lead to the bankruptcy, inept management will likely screw up the bankruptcy if it tries to remain in charge through the often lengthy business bankruptcy proceedings.

Barnes & Noble has hosted a rapidly-revolving door for top managers during the past few years and PG doubts that talented managers will be more attracted to a BN that is in bankruptcy. Any managers who can bail out of BN for other jobs are quite likely to do so.

If BN stores develop a bankruptcy vibe (see half-empty Sears stores), a great many of BN’s best customers will stop shopping there. Who’s going to bring children into a creepy-feeling bookstore when they have an Amazon app on their phone?

A lot of the knick-knack manufacturers whose products fill up the front of a Barnes & Noble store are small companies who haven’t any experience with a bankrupt customer and don’t want to spend a lot of money on their own bankruptcy lawyers. Many are likely to cut off sales completely. Others will demand payment up front and refuse to ship without it. Overnight, Barnes & Noble will transition from their biggest customer to their biggest headache.

As far as major publishers are concerned, PG predicts that the big conglomerates that own those publishers will quickly exert greater control. Bertelsmann doesn’t want losses from Penguin Random House screwing up the quarterly results any more than absolutely necessary. Verlagsgruppe Georg von Holtzbrinck will clamp down hard on Macmillan. Ditto Hachette Livre. The US managers at the Big Five will experience intense micromanagement from different time zones.

One proven cost-reduction method that these conglomerates understand is to reduce personnel costs. A few senior management types may hang on, but employees with high salaries provide the most bang for the firing buck, so decades of experience, relationships, etc., will walk out the door at the Big Five.

To be clear, PG doesn’t wish business failure on any organization and, especially, those individuals who rely on that organization for their livelihood. He doesn’t make these gloomy prognostications with any joy.

Suing critics using copyright doesn’t work

From Rebecca Tushnet’s 43(B)log:

Hosseinzadeh v. Klein, No. 16-cv-03081 (S.D.N.Y. Aug. 23, 2017)

Hosseinzadeh posts original video content on YouTube, playing a character known as “Bold Guy.” Ethan and Hila Klein criticized “Bold Guy vs. Parkour Girl,” in which the Bold Guy flirts with a woman and chases her through various sequences, in a video titled “The Big, The BOLD, The Beautiful.” The accused video is almost fourteen minutes long, and intersperses long segments of commentary with short clips of the Bold Guy video, ultimately using three minutes and fifteen seconds of that five minute, twenty-four second long video. “As critical as it is, the Klein video is roughly equivalent to the kind of commentary and criticism of a creative work that might occur in a film studies class.” From that, you can fill in the rest of the fair analysis: Kleins win.

. . . .

Defamation: nothing in the lawsuit video was defamatory; it was either substantially true or opinion. E.g,, Ethan Klein’s statement “I think that the heart and soul of this is . . . he doesn’t like that we made fun of him, and so he’s suing us” was “a quintessential statement of pure opinion.”

Link to the rest at Rebecca Tushnet’s 43(B)log

PG has posted a couple of items relating to this lawsuit to help visitors to TPV understand the concept of fair use under copyright law.

While it hasn’t happened for a few years, in the early days of TPV, PG occasionally received an email to the effect that he had copied too much of an original post and was violating the author’s copyright.

One email said PG should simply provide a link to the OP. PG’s personal experience floating around the web has been that he virtually never clicks on a link without some reason to do so beyond the existence of the link. The days when PG was excited about a page full of links are long past. He suspects he may not be the only individual that behaves in this manner.

Speaking of those long past days, PG remembers when Yahoo had a daily list of links to new websites it had added to its website and it was possible to visit every new site within 15 minutes or so.

H3H3 Wins Summary Judgment

From Plagiarism Today:

Yesterday, much of the internet rejoiced as word came down that Ethan and Hila Klein, better known as H3H3, had emerged victorious in their lawsuit against Matt Hosseinzadeh, better known as “The Bold Guy”.

The case has been one of the most intensely-watched lawsuits in recent copyright history. Not only because it deals with issues of fair use, criticism and Youtube, but also because it pitted two of the internet’s most beloved YouTubers against an antagonist seen as trying to stifle their free speech.

. . . .

On February 15, 2016, the Kleins posted a video on YouTube entitled “The Big, the BOLD, The Beautiful” (link points to reupload). The video was a criticism of a video by Hosseinzadeh, which featured him as his character “The Bold Guy” attempting to pick up women.

The Kleins’ video featured short clips of Hosseinzadeh’s video interspersed with their reactions, criticisms and various jokes that mocked the original work.

On April 23, 2016, Hosseinzadeh filed a Digital Millennium Copyright Act (DMCA) takedown notice against the video, requesting its removal on copyright grounds. YouTube complied but the Kleins quickly responded by filing a counter-notice-requesting that YouTube restore their video. Without a lawsuit, the video would have been restored within two weeks.

Three days after that counter-notice Hosseinzadeh filed a lawsuit against the Kleins, which prompted the duo to post a video about the case entitled “We’re Being Sued.”

. . . .

[O]n May 24, 2016. Three days later, Hosseinzadeh filed an amended complaint adding defamation allegations to his lawsuit based on the content of that video.

Shortly after this, there was an outpouring of support for H3H3. This led fellow YouTuber Philip DeFranco to launch a GoFundMe in support of the Kleins, which raised more than $170,000 for their defense. That amount was then dedicated to the Fair Use Protection Account (FUPA), which was set up to protect all YouTubers, not just the Kleins, from attacks on their fair use.

. . . .

Yesterday, the judge ruled on those motions for summary judgment and sided completely with the Kleins, ruling their use to be a fair use, dismissing allegations of misrepresentation with the Kleins’ counter-notice and even dismissing Hosseinzadeh’s defamation claims.

Link to the rest at Plagiarism Today

PG says that GoFundMe and similar sites can be of great assistance in raising funds for litigation and other unexpected problems.

Unfortunately, attracting attention to a legitimate GoFundMe campaign can require either a strong public platform or a lot of work publicizing the campaign.

Costco Owes Tiffany More Than $19 Million, Judge Rules

From The New York Times:

There’s no place like Tiffany, the famous jeweler says on its website — and that includes Costco.

A federal district court judge has ordered Costco to pay Tiffany more than $19 million for selling generic diamond engagement rings that were marketed using Tiffany’s name.

The rings in question had a pronged setting that Costco said is “commonly known as a ‘Tiffany’ setting,” however, some of the display cases simply described the rings as “Tiffany” instead of “Tiffany setting” or “Tiffany style.”

Judge Laura Taylor Swain ruled on Monday that Tiffany is entitled to $11.1 million as profits for trademark infringement, plus interest, and $8.25 million in punitive damages, which was awarded by a jury in October.

Judge Swain also said Costco was permanently prohibited from using “Tiffany” as a stand-alone term when selling its products.

. . . .

Tiffany sued after it discovered that salespeople at Costco were responding to customer inquiries by calling certain solitaire diamond rings “Tiffany” rings.

Furthermore, the salespeople “were not perturbed when customers who then realized that the rings were not actually manufactured by Tiffany expressed anger or upset,” Judge Swain wrote.

“Tiffany has never sold nor would it ever sell its fine jewelry through an off-price warehouse retailer like Costco,” the lawsuit said.

. . . .

“This was not a case about counterfeiting in the common understanding of that word — Costco was not selling imitation Tiffany & Co. rings,” Costco said, emphasizing that the rings were not marked with the Tiffany name, and were not sold using Tiffany’s trademark blue boxes.

The judge was not swayed by these arguments, however.

“Costco’s upper management, in their testimony at trial and in their actions in the years prior to the trial, displayed at best a cavalier attitude toward Costco’s use of the Tiffany name,” Judge Swain wrote.

Link to the rest at The New York Times

PG says you and Costco should respect trademarks belonging to other people.

Copyright and the Historical Record

From Copyhype:

Lawyers rely on history a lot in practice. Common law itself is built on history—we rely on precedent—and when we are interpreting statutory and constitutional provisions, we’ll often turn to history to find insights and help us guide our interpretation.

But, of course, there’s always a danger with using history. Someone who’s trying to make a point may try to find evidence in the historical record to support that point, so there’s a danger of abuse. And perhaps there’s no period more prone to this type of myth and mischief then the Founding period, the period beginning after the end of the Revolutionary War, through the drafting and ratification of the Constitution, and through the first Congress. Because this is when the Constitution was drafted, so a lot of people discussing hot-button topics will try to look at the historical record from the Founding era to find some support for the positions that they are advancing.

And that’s true for copyright law as well, because the constitution does authorize Congress to enact copyright legislation—as well as patent legislation in the same clause, but I’ll be focusing here on copyright (though there is some overlap).

One of the unfortunate trends that a few people have observed is that supporters of a more minimalist copyright, of drawing back the current scope of copyright protection and enforcement, have been trying to advance this narrative that the Founding Fathers would be appalled if they looked at copyright law today, that they intended something completely different from what we see in the statute and in practice.

For example, a few years ago the Electronic Frontier Foundation wrote an article in response to some comments, saying, “Don’t be so sure you’ve got the Founders on your side.” They said, “We suspect that if anyone had described today’s copyright system to, say, Thomas Jefferson, he would have been shocked.”

Instead they advance this alternate narrative, which goes something like this: the Founders conceived copyright for a very narrow utilitarian purpose; authors’ interests aren’t at the central part of this equation; and they are only given protections begrudgingly through a narrow government privilege in order to advance this narrow utilitarian purpose.

The problem is when I look at the historical record that we have in front of us, I don’t see a lot of evidence for this view. Instead, I see evidence for something different about what the Founders intended.

Very briefly, I think it’s good to get some context of the timeline we’re looking at here before delving into the details. The Revolutionary War ends, and the Continental Congress is put together. Around the early 1780s, a number of authors started asking the states to pass copyright legislation. Chief among them was Noah Webster, whose dictionary bears his name, and he was lobbying a number of state legislatures to pass copyright legislation, along with others like John Ledyard, who petitioned the Connecticut General Assembly. In 1783, Connecticut was the first of the states to pass its own copyright legislation.

. . . .

That brings us to the drafting of the Constitution. By August 6 during the Constitutional Convention, there was a first draft. It did not mention copyright or patent law in it, but in the middle of August, James Madison proposed that Congress does have the power to pass copyright and patent legislation, and that was added without debate—or without controversy—and sent to the Committee on Style, which came up with the language that we see today in Article I, Section 8, Clause 8.

So why did they include copyright? Why did the Founding Fathers think copyright was important enough both at the state level and eventually to be given to the federal congress in order to enact? I think we could get some idea if we turn to the proponents who were pushing for copyright. When Noah Webster wrote a letter to one of the Connecticut representatives in favor of passing copyright legislation, he said, “America must be as independent in literature as in politics, and as famous for arts as for arms.” In the same fashion, Joel Barlow, when he wrote to the delegates of the Confederate Congress, said, “America has convinced the world of her importance in a political and military line by the wisdom energy and ardor for liberty which distinguish the present era. A literary reputation is necessary in order to complete her national character. And she ought to encourage that variety and independence of genius in which she is not excelled by any nation in Europe.”

So they thought this was important for the country as a whole, to complete its national character, and set it on equal stage among its international brethren.

. . . .

So the idea was that we’ll give property rights to authors, we’ll create a market for these types of expressive and cultural works, and this will induce people to create these types of great works for the benefit of the public.

Property, of course, was central to the Founding Fathers in general. John Adams famously said, “Property must be secured, or liberty cannot exist.” Property was really important, and they saw copyright as a type of property. By giving authors these exclusive rights, it enabled this marketplace for creative works. This is consistent with other things you hear. When the Continental Congress recommended to the states, the Committee that made that recommendation said they were “persuaded that nothing is more properly a man’s own than the fruit of his study and that the protection and security of literary property would greatly tend to encourage genius, to promote useful discoveries, and to the general extension of arts and commerce.”

Link to the rest at Copyhype

Life, Literature, and Litigation

From The Millions:

When my debut novel came out, I had two firsts—a work of published fiction—and a lawsuit.

I had never thought about lawsuits before. I incorporated everything and everyone I knew or imagined into my fiction, spinning them into characters. At first, to my surprise, most people didn’t know they were any part of my stories. I was sure my mom would be delighted that I used a story in my novel that she had told me a million times over: how at 19, she had been jilted at the altar by the man she thought she loved, marrying a brute on the rebound. She was later visited by her ex, who brought his wife with him, taking my mom aside to whisper to her that he had made a mistake. “It’s really lovely you wrote that,” she told me, “but that character is not anything like me at all. Plus, that never really happened that way.”

My mother might not have recognized herself in my pages, but another family—one I didn’t know—did. A week after my first novel came out, I received a letter from a lawyer. A family, who lived in Pittsburgh, where I was living at the time, just happened to share the same (very common) names I had given my characters, along with the same dramatic conflict. They were suing me for invasion of privacy. I called my publisher, shocked. “I want to countersue.” I cried. “Even if I did know them, which I don’t—how could they imagine I’d be stupid enough to use their names and their situation?” There was a funny silence and then the publisher said, “We’re changing the names in the paperback. We don’t want to hold up the book because of some lawsuit.” I was upset. These people were claiming that I had stolen their life when I hadn’t! And worse, I had to change the names because of them and only then was the lawsuit dropped.

. . . .

When I was asked to write an essay about food issues for an anthology, I wrote about a long-gone ex who monitored my food intake until I was down to 95 pounds, who clouded my vision so I couldn’t see how controlled I was. Of course I knew enough not to use his name, his physical description, or his job, but even so, two weeks after the anthology was published, I got a call from the publisher’s lawyer. Somehow my ex, who I hadn’t seen in years, had read the essay. Though he insisted he had never done a single thing I had mentioned in the essay, he still recognized himself. And he wanted to sue.

“His wife is very upset,” the lawyer told me. “He said that’s why he called. Did you ever tell him you were writing about him?”

“Never,” I said.

“Okay, good,” the lawyer said, “then I can make him go away.”

So was that the key, I wondered? You had to ask people before you wrote about them, even if you disguised them? When I was asked to write an essay for an anthology about infidelity, I played it safe. I asked permission. I was writing about one long, hot brutal summer when my first husband was cheating on me. His sister, who was also my best friend, was orchestrating his trysts without my knowing, and her shrink was stalking her. She not only okayed the piece, she enthusiastically provided extra details. She was fine when my piece was reprinted in a major magazine, fine when it landed me on the Today Show, but when I got a movie option, she immediately threatened me with a lawsuit. I was gobsmacked. “But you gave permission!” I insisted. “And it’s my point of view of what happened!” I had to hire a lawyer from The Author’s Guild who assured me that because she had known about the story for so long, because it had been out there, she had no recourse. And he wrote a polite letter to her to tell her so.

Link to the rest at The Millions

PG doesn’t do litigation any more, but earlier in his legal career, he spent a lot of time in court and enjoyed most of his experiences there.

As an aside, it is almost always more fun to be a lawyer than a client when you walk into a courtroom.

As yet another aside, from his experience representing other lawyers and one judge in litigation matters, PG can attest that most lawyers make terrible clients.

That said, how do you avoid being sued and having to go to court as some lawyer’s client?

While there’s no bulletproof method that always works, based upon PG’s lengthy legal experience, following are some rules which will reduce your chances of having to go to court:

  1. Don’t be a crazy person.
  2. Don’t be born into a family full of crazy people.
  3. Don’t hang around with crazy people and, in particular, don’t marry a crazy person.
  4. If you are a lawyer, don’t represent crazy people.
  5. If you are a doctor, Hippocrates notwithstanding, don’t have crazy patients. (Psychiatrists are on their own here.)
  6. If you are an author, don’t write about crazy people you have known.

The large majority of the general population doesn’t go to court. Most people live and die without seeing the inside of a courtroom except for Judge Judy on TV.

In PG’s experience, the incidence of crazy people in courtrooms is significantly higher than their distribution among the general population.

This doesn’t mean that non-crazy people aren’t dragged into court on a regular basis.

However, if you spend a day in an active courtroom, you’ll see more people who aren’t quite right than you would if you spent the day in a dentist’s office or grocery store.

The problem with avoiding crazy people (or accepting them as clients for legal work) is that crazy people can be very cunning about concealing their true character.

Being crazy doesn’t always mean they aren’t intelligent. An experienced crazy person understands that drooling on the floor will put people off, so he/she/they/zie/sie/ey/ve/tey/e will try to appear normal and sometimes succeed long enough to make it through a marriage ceremony, meeting with a lawyer or even, on occasion, an appearance before a judge.

That’s about all the wisdom PG can generate today, so he must now devolve to his normal self.

Given that the collective wisdom of visitors to TPV is vast, insights into crazy people and how to avoid them (or any other subject) are always welcome in the comments.




Court vacates apparent fake-defendant libel takedown order in Patel v. Chan

From The Washington Post:

About a year ago, Matthew Chan — whom I knew from another Internet free speech case— let me know that someone had apparently gotten a bogus court order aimed at removing one of Chan’s Yelp reviews. Chan, a Georgia resident, posted a negative review of Mitul Patel, a Georgia dentist, on Yelp and a few other sites. Several months later, Yelp emailed him, saying that it was considering taking his comment down because it received a court order that was issued against him, and the court concluded that his comment was defamatory.

But wait, said Chan — he had never been sued. And sure enough, the order was against a supposed Mathew Chan of Baltimore. As best we can tell, no such Mathew Chan exists in Baltimore, but in any event no Baltimorean is the author of the post. Yet the order was supposedly based on that Mathew Chan agreeing with Patel that the review was defamatory and should be removed. (Patel told the court that he did not authorize the lawsuit or sign the pleadings, though he did hire a “reputation management company” to do something.)

In any event, this led Paul Alan Levy and me to investigate what seems to be a pattern of such fake-defendant libel takedown orders — at least about two dozen seem to fit that mold, and several of them have been linked to reputation management companies run by one Richart Ruddie (such as Profile Defenders). It also led me to investigate many other shenanigans related to such orders.

Link to the rest at The Washington Post

Notice and take down is a process that is supposed to protect online hosts in response to court orders or allegations that content is illegal.

After a website receives a notice that it has published illegal content – content that infringes copyright, is libelous, etc., and the notice includes a demand that the illegal content be removed from the website, if the website operator promptly removes such content, under US and EU law, such removal limits the liability and/or provides safe harbor from claims by the copyright owner, the person libeled, etc., against the website operator.

As indicated in the OP, sometimes parties abuse the notice and take down process to remove content which is not illegal but which those parties want to suppress.

The abuse of notice and take down described in the OP takes things a step further, intentionally misrepresenting facts to the court during litigation and intentionally failing to serve the defendant with notice of the lawsuit. In a perfect world, the court would declare the plaintiff and plaintiff’s counsel in contempt and impose substantial penalties upon them.

If any TPV visitors would like to learn more about the consequences of abusing the notice and take-down remedies, check out this discussion of Online Policy Group vs. Diebold.

Tolkien Estate and Warner Bros. Settle Lawsuit Over Licensing

From The New York Times:

Warner Bros. and the estate of J.R.R. Tolkien have settled an $80 million lawsuit over the digital merchandising of products from “The Lord of the Rings” and “The Hobbit.”

“The parties are pleased that they have amicably resolved this matter and look forward to working together in the future,” Warner Bros. said in a statement to The Hollywood Reporter.

Terms of the settlement were not disclosed.

The lawsuit, filed in 2012 by Mr. Tolkien’s estate, claimed that Warner Bros. was in breach of contract and also violating copyright infringement for merchandising characters from Mr. Tolkien’s books — and the subsequent successful film adaptations — beyond the scope of what was agreed to when the rights were sold in 1969, causing harm to Tolkien’s legacy.

. . . .

The lawsuit said that the estate had only granted the right for Warner Bros. to sell “tangible personal property,” giving as examples “figurines, tableware, stationery items, clothing and the like.” It said it did not grant “electronic or digital rights, rights in media yet to be devised or other intangibles such as rights in services.”

Link to the rest at The New York Times

The Association of American Publishers Welcomes Major Judgment Against “Sci-Hub” Pirate Site

From The Association of American Publishers:

The Association of American Publishers (AAP) welcomes the June 21, 2017 ruling of the United States District Court for the Southern District of New York regarding the willful infringement of scores of scholarly articles protected by copyright law. Ruling in favor of Elsevier, the publisher that brought the action, the Court entered a default judgment against Sci-Hub, the Library Genesis Project, and a number of related sites, and against the defendant operator.

The Court awarded Elsevier $15,000,000 in damages based on a representative sample of 100 infringed works and makes permanent a 2015 preliminary injunction that required U.S. domain name registries to suspend the defendants’ U.S.-administered domain names. The award is the maximum damages award permitted by law and reflects the intentional nature of the infringements. It should be a deterrent to those who support or do business with illegal operators.

“As the final judgment shows, the Court has not mistaken illegal activity for a public good,” said Maria A. Pallante, President and CEO of AAP. “On the contrary, it has recognized the defendants’ operation for the flagrant and sweeping infringement that it really is and affirmed the critical role of copyright law in furthering scientific research and the public interest.”

Link to the rest at The Association of American Publishers

Amazon Bites Off Even More Monopoly Power

From The New York Times:

Amazon on Friday announced plans to acquire Whole Foods, the high-end grocer. If approved by antitrust enforcers, the $13.7 billion deal would give Amazon control of more than 400 stores, an extensive supply chain and a new source of consumer data.

Amazon will argue to federal authorities, most likely the Federal Trade Commission, that the deal should be blessed because the combined entity’s share of the American grocery market will be less than 5 percent.

But antitrust officials would be naïve to view this deal as simply about groceries. Buying Whole Foods will enable Amazon to leverage and amplify the extraordinary power it enjoys in online markets and delivery, making an even greater share of commerce part of its fief.

The company has established its level of dominance because of the failings of our current antitrust laws. To understand why, you first need to understand the scope of Amazon’s power. It has captured 43 percent of all internet retail sales in the United States, with half of all online shopping searches starting on Amazon. In 2016, it had over $63 billion in revenue from online sales in the United States — or more than the next 10 top online retailers combined. It controls 74 percent of e-book sales, is the largest seller of clothes online and is set to soon become the biggest apparel retailer in the country.

. . . .

 Think of Amazon as a 21st-century version of the 19th-century railroads that connected consumers and producers. Because of their gatekeeper role, railroads had power to discriminate, both among users and in favor of their own wares. These middlemen could tax the farmers and oil producers who depended on their rails — or deny them a ride and sink their livelihoods.

. . . .

In several key ways, Amazon uses its power as the railroads did. By integrating across business lines, Amazon now competes with the companies that rely on its platform. This decision to not only host and transport goods but to also directly make and sell them gives rise to a conflict of interest, positioning Amazon to give preferential treatment to itself.

The vast troves of information it collects enable it to self-deal with great finesse. News accounts tell how Amazon exploits data collected on the businesses using its platform to go head-to-head with them.

And like the railroads of yore, Amazon dictates terms and prices to those dependent on its rails. During negotiations with the publisher Hachette over e-book pricing, Amazon showed its might by effectively disabling sales of thousands of Hachette’s books overnight.

. . . .

Antitrust laws, which were passed by Congress to prevent these kinds of concentrations of private power, have been largely reduced to a technical tool to keep prices low. The change in thinking traces back to the Chicago School revolution of the 1970s, which ushered in decades of mergers and consolidation.

Embodying this “consumer welfare” regime, Amazon has largely avoided government scrutiny by devoting its business strategy and rhetoric to reducing prices. The company has marched toward monopoly by exploiting the defects of contemporary antitrust law.

Preventing Amazon from concentrating even more control will require that antitrust enforcers block the company’s bid for Whole Foods. But lawmakers and officials should go even further, embracing the original goals of antitrust law and adopting a competition policy fit for the digital age. Unless we recover our antimonopoly tradition, Amazon will centralize exceptional control.

Link to the rest at The New York Times

Somehow, PG has problems with the logistics of “embracing the original goals of antitrust law” while “adopting a competition policy fit for the digital age.”

Consider the dates the principal antitrust statutes came into being: the Interstate Commerce Act – 1887, the Sherman Act – 1890, the Clayton Act – 1914, the Federal Trade Commission Act – 1914, and a newcomer, the Robinson–Patman Act – 1936.

These laws were passed primarily to deal with market abuses by railroads and oil companies. The classic problem this legislation was designed to solve was a farmer in Iowa who, in the absence of any network of reasonable roads, had only one railroad available to ship corn to market. If the railroad raised shipping rates, the farmer had to pay those prices or not sell the corn.

So, Amazon is exactly like a railroad because, when you open your web browser, the only place where you can buy anything online is Amazon. Walmart is completely inaccessible. So is Google Shopping. And Apple? Forget about it. It’s absolutely impossible to buy anything from them. Ebay, Rakuten, Not a chance. The internet train tracks don’t run there. How about Alibaba, whose 2016 profits were 55% greater than the combined profits of  Wal-Mart, Amazon and eBay. They can’t sell anything because Amazon.

The author of the OP is a “legal fellow” (is that sexist?) at “the Open Markets Program at New America.” From a quick visit to their website, the fellows appear to dedicate themselves to Amazon bashing.

And this “New America” organization?

New America was founded in 1999 to nurture a new generation of public intellectuals—scholars, policy experts, and journalists who could address major social, economic, and political challenges in ways that would engage the public at large—and to provide a set of blueprints for American renewal in an era of globalization and digitization. The initial challenge, which continues today, was to find the minds and foster the debates needed to guide American renewal in an era of profound, exhilarating, but often threatening change.

Further, “New America is a 501(c)(3) non-profit organization and all donations are tax deductible”, which means that, unlike Amazon, New American pays no income taxes and is excused from paying lots of other taxes as well.

But nurturing a new generation of public intellectuals doesn’t come cheap.

New American receives most of its funding from other organizations that also don’t pay any taxes. The minority of listed donors who do pay taxes includes Google, Walmart (plus the Walton Family Foundation), Netflix, Comcast, DISH Network Microsoft (plus the Bill and Melinda Gates Foundation) and Facebook.

If you identified any competitors of Amazon among New America’s donors, you would be correct.

By mere coincidence, neither Amazon nor Jeff Bezos are listed as donors. Perhaps if Jeff wrote a check, New America would discover that Amazon’s business practices fit perfectly into “a competition policy fit for the digital age.”

Supreme Court’s Lexmark Decision Expands Scope of Patent Exhaustion Defense

From Fenwick & West LP:

For the fifth time this session, and following fast on the heels of its landmark decision in TC Heartland v. Kraft Foods earlier in May, the Supreme Court again reversed the Federal Circuit. The case, Impression Products, Inc. v. Lexmark International, Inc., significantly expands the scope of the patent exhaustion doctrine. The doctrine of patent exhaustion limits the rights that remain available to a patentee following the initial authorized sale of a patented item. In a 7-1 opinion issued on May 30, the Supreme Court reversed the Federal Circuit analysis concerning both domestic and foreign sales, overturning more than two decades of precedent at the lower courts. It held that “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose or the location of the sale.”

This case arises from a dispute between Lexmark, a manufacturer of printer cartridges, and resellers of its cartridges. Lexmark makes proprietary toner cartridges for printers, which it markets and sells both internationally and domestically. The Lexmark cartridges are sold either at full price, or at a discounted rate under its return program. Each return program cartridge carries a contractual single-use/no-resale obligation on the purchaser not to refill the cartridge with toner and reuse it. Other companies known as “re-manufacturers” acquire empty Lexmark cartridges (including ones sold under the return program) from purchasers in the United States and abroad, refill them with toner, and then resell them at lower prices.

Lexmark brought a patent infringement suit against several of these resellers. The litigation proceeded until only a single count of infringement remained against a single defendant, Impression Products. Impression Products did not contest the enforceability of Lexmark’s patents, or that the patents covered the cartridges that Impression Products imported and sold. Rather, Impression Products contested liability based solely on the defense of patent exhaustion and moved to dismiss Lexmark’s claim of infringement with respect to both cartridges sold domestically and those sold abroad.

With respect to cartridges that Lexmark sold domestically, the district court found that the doctrine of patent exhaustion barred Lexmark’s claims, even for cartridges subject to the post-sale use restrictions of Lexmark’s return program.

. . . .

Sitting en banc, the Federal Circuit ruled in favor of Lexmark on both the domestic and international exhaustion issues, holding that the neither Quanta nor Kirtsaeng overruled the limits on patent exhaustion under prior Federal Circuit case law.

. . . .

The Lexmark Court first considered the question of whether a patentee that sells a patented article domestically subject to express restrictions on a purchaser’s right to reuse or resell the product may then enforce those restrictions by bringing a lawsuit for patent infringement. In examining this question, the Lexmark Court drew heavily from its prior patent exhaustion decisions in Quanta and United States v. Univis Lens Co., 316 U. S. 241 (1942). These cases uniformly held that the first authorized sale in the U.S. of a material object terminates patent rights associated with that object and leaves a patentee without the ability, under patent law, to control the use or disposition of the product after the initial sale. These cases, however, left open the possibility that a patentee may still be able to place contractual restrictions on the use of the items it sold.

With Lexmark, the Supreme Court slammed that door shut. Indeed, all eight Justices agreed that—under the patent exhaustion doctrine—Lexmark’s sale of the cartridges extinguished the asserted patent rights, notwithstanding the contractual restrictions on reuse Lexmark attempted to place on the articles prior to sale. The Court based its decision not only on its prior patent exhaustion cases, but also on its copyright ruling in Kirtsaeng, which addressed the first sale doctrine codified at Section 109(a) of the Copyright Act. It explained its view that: “This well-established exhaustion rule marks the point where patent rights yield to the common law principle against restraints on alienation.”

. . . .

The Court noted that, while “[i]t is true that a patented method may not be sold in the same way as an article or device, [m]ethods nonetheless may be ‘embodied’ in a product, the sale of which exhausts patent rights.” Quanta also held that the patent exhaustion doctrine applied if the item sold is only a component of a device but “the incomplete article substantially embodies the patent because the only step necessary to practice the patent is the application of common processes or the addition of standard parts.” In other words, if an item “embodies essential features of the patented invention,” including method claims, and “their only reasonable and intended use was to practice the patent,” the sale of the item will exhaust the claim.

The Lexmark decision does nothing to disturb the Quanta framework. Accordingly, under the combination of Lexmark and Quanta, patent exhaustion applies where critical components of a claimed apparatus or method are sold by the patentee either domestically or internationally.

. . . .

The Lexmark Court suggested two situations where patent exhaustion may not apply.

First, because the doctrine depends on an initial sale, it may not apply where a patentee distributes a patented article pursuant to license, as opposed to in an outright sale. As the Court noted, “[a] patentee can impose restrictions on licensees because a license does not implicate the same concerns about restraints on alienation as a sale.” After all, “a license is not about passing title to a product, it is about changing the contours of the patentee’s monopoly.” By contrast, “[p]atent exhaustion reflects the principle that, when an item passes into commerce, it should not be shaded by a legal cloud on title as it moves through the marketplace.” It is, of course, common to distribute software, firmware, and other technology via license rather than sale, and thus patent exhaustion may be inapplicable for such distributions.

Second, patent exhaustion may also not apply where the unauthorized sale of a patented article occurs.

Link to the rest at Fenwick & West LP and thanks to Colleen for reminding me to post on this topic.

Colleen wondered if the Lexmark decision might have an impact on ebooks and the first sale doctrine that permits the resale of printed books by the purchasers thereof without restriction.

PG could hold forth on this topic at great length, but, in a reversal of his usual practice, he will restrain himself on this occasion.

The Lexmark decision is of interest to traditionally-published authors because it clearly distinguishes between the rights of the patent holder if a product embodying the patented apparatus is sold or if it is licensed.

If the product is sold, the patent is exhausted and the patent owner has no further rights to prevent anybody from doing almost anything with the product, including refill it. If the product is licensed, but not sold the patent holder may be able to control what happens to the product later on.

A US Circuit Court of Appeals has held that there is a distinction between licensing and sales under copyright law. PG has previously posted about this decision, FBT Productions LLC v. Aftermath Records, 621 F.3d 958 (9th Circ. 2010).

The FBT case involved the rapper, Eminem. For iTunes downloads, Eminem’s publisher was paying the same royalties as would have been due upon the sale of CD versions of the songs. Eminem contended that the relationship between the publisher and iTunes was a license of a subsidiary right, for which a much higher royalty was due under the singer’s publishing contract.

Ultimately, the court held that downloaded songs were licensed, not sold. Elements of the court’s decision were that only a single master copy of the song was provided to iTunes and Apple then made copies for downloading by the customer as opposed to Apple selling a separate CD to each purchaser.

The impact on authors comes with ebooks.

The Terms of Use for ebooks on the websites of Amazon, Barnes & Noble, Kobo, etc., say that ebooks are licensed to the purchaser, not sold to the purchaser.

For a long time prior to the Eminem case and, unaccountably, after the Eminem case, a great many publishers provided boilerplate royalty provisions that paid a percentage of the net income from each ebook sold by the publisher. Typically, this percentage is 25%. Quite often in a separate subsidiary rights section of the contract, a much higher percentage royalty is paid for the licensing of the author’s books.

The Lexmark case addresses a point of great concern to publishers – pirated copies of ebooks.

If a court were to apply the Lexmark reasoning to copyrights, the first sale of an ebook would exhaust all of the rights the publishers hold via their contracts with authors and ebooks could be freely resold on the used books market just like printed books are. If ebooks are licensed, resale of ebooks can be restricted. But higher royalty rates would seem to apply.

Finally, a bit of background – The Federal Circuit is an appeals court that only handles appeals from decisions of US District Courts on patents (plus a bunch of even more obscure items), regardless of the location of the original action.

US Circuit Courts of Appeal handle appeals of decisions within a particular geographical area, e.g. the Third Circuit Court of Appeals handles appeals of cases tried in Pennsylvania, New Jersey, Delaware, and the Virgin Islands.

Sometimes the various circuit courts of appeal issue conflicting decisions. That requires the US Supreme Court to straighten out the conflicts.

The theory behind the establishment of the Federal Circuit is that patent law is its own weird little area of the law, sometimes with a lot of technology and math thrown in, and that judges who specialize in hearing cases of that sort will usually be able to handle those appeals more efficiently.

As with the Circuit Courts of Appeal, decisions of the Federal Circuit can be appealed to the Supreme Court. The Supreme Court declines to hear most appeals from any of the lower appellate courts, however.

Lately, the Federal Circuit has gone off on a few frolics of its own and the Supreme Court has accepted more appeals in order to straight the law out.

Bookstores Suffer Unintended Consequences From Mark Hamill’s Campaign Against Fake Autographs

From Reason:

In a galaxy far, far away, Luke Skywalker is the ultimate hero (or is he?), but here’s a note to state lawmakers in this galaxy: maybe don’t trust him to make policy for you.

California is learning that the hard way, as a new law championed by Star Wars actor Mark Hamill has landed the state in court. In that lawsuit, the owners of a California-based book store argue that new rules governing the sale of autographed memorabilia—like books signed by authors at events hosted by their store and scores of others around the state—are overly burdensome, threaten harsh punishments for minor infractions, and above all else are poorly written.

Under the terms of the law, which passed last year and took effect in January, retailers have to provide certificates of authenticity for all autographed merchandise worth more than $5. That doesn’t sound like a difficult burden for retailers, but look at what has to be included on that certificate.

The law specifies that those certificates must contain a description of the collectible and the name of the person who signed it, the purchase price and date, and an “explicit statement” of authenticity. It must also indicate how many items were signed, whether they are numbered as part of a series, and whether any more might be sold in the future. Oh, and there has to be proof that the seller is insured. And, of course, there has to be a certificate number provided by the bureaucrats at the State Board of Equalization (a real thing, believe it or not, tasked with collecting various taxes and fees for everything from gasoline to recycled computers). There’s a separate requirement for an “identifying serial number,” which, naturally, has to match the serial number of the receipt—a receipt that must be kept by the seller for no less than seven years after the transaction. Finally, the certificate of authenticity has to say whether the author provided his John Hancock in the presence of the dealer, or another witness, and include the name of the witness. (There is no word on whether the witness’ first born must also sign the form.)

. . . .

“This law’s expensive mandates — with voluminous reporting requirements and draconian penalties — create a nightmare for independent booksellers that thrive on author events and book signings,” said Bill Petrocelli, owner of the Marin County-based Book Passage, which has three locations around the San Francisco Bay Area. Petrocelli is the plaintiff in the lawsuit seeking a permanent injunction against the enforcement of the autograph law. The Pacific Legal Foundation, a libertarian legal nonprofit, is representing him in the lawsuit. The lawsuit was filed in federal court for the Northern District of California.

Anastasia Boden, an attorney for PLF, says the law does little to protect consumers from the dangers of fraudulently autographed memorabilia. Rather, the lawsuit alleges, the law will have a chilling effect on “truthful, non-misleading speech” protected by the First Amendment, as it will reduce or eliminate book-signing events, like the ones Book Passage hosts hundreds of times each year.

. . . .

“The public is being swindled on a daily basis and the numbers are huge. I just can’t keep quiet when I see people I love being hurt,” Hamill toldThe Los Angeles Times in 2016 as the bill was working its way through the legislature.

Link to the rest at Reason and thanks to Lucy for the tip.

California threatens to shut down book signings and therefore small booksellers

From The Pacific Legal Foundation:

Today we filed this First Amendment lawsuit on behalf of beloved Bay Area bookstore Book Passage, and its co-owner, Bill Petrocelli.

Book Passage is a hub of literary activity and free expression.  In addition to selling books, it hosts over 700 author events a year—in which authors give talks, read passages, interact with readers, and autograph their books.  Bill keeps copies of these signed books to sell later—which you can see scattered down the aisles of his store.  Book Passage also curates a monthly book club, wherein readers are sent a first edition book signed by an up-and-coming author.

Book Passage doesn’t charge a premium for the autograph; all of its books are sold for their cover price. But a newly enacted California law makes it extremely risky, if not impossible, for Book Passage to continue selling autographed books or hosting author events.

Acting on purported consumer protection concerns, the legislature recently expanded its autograph law (which formerly only applied to sports memorabilia) to include any signed item worth over $5—including books.  Under that law, sellers must produce a certificate of authenticity and maintain detailed records of every sale for seven years.  Sellers must, among other things:

  1. Note the purchase price and date of sale,
  2. specify whether the item is part of a limited edition,
  3. note the size of the edition, anticipate any future editions,
  4. disclose whether the seller is bonded,
  5. divulge any previous owner’s name and address,
  6. if the book was signed in the presence of the seller, specify the date and location of the signing, and identify a witness to the autograph.

Link to the rest at Pacific Legal Foundation and thanks to Meryl and others for the tip.

PG suggests an amendment to the state constitution that limits the California legislature to a single two-week legislative session each year so it focuses on matters that really require laws.

Stephen King Sued Over The Dark Tower

From TMZ:

Stephen King stole the idea for his main man in “The Dark Tower” series from a famous comic book character also known as a gunslinger … according to a new suit.

The creator of “The Rook” comics claims King’s protagonist, Roland Deschain, is based on his main character, Restin Dane. He says Deschain has striking similarities to Dane other than just their initials — both are “time-traveling, monster-fighting, quasi-immortal, romantic adventure heroes.”

“The Rook” creator also points out King’s Deschain dresses like a cowboy despite not being from the Old West — just like Restin Dane — and the towers in both books look the same.

. . . .

According to the docs … the Restin Dane character was in more than 5 million comic magazines from 1977-1983 and King admits he read those stories. The first book in King’s ‘Dark Tower’ series was released in 1982.


Link to the rest at TMZ and thanks to Michael for the tip.

PG says TMZ doesn’t do a very good job of covering legal matters.


Tate Publishing loses second major case

From NewsOK:

A vendor that supplied printing services to vanity publisher Tate Publishing & Enterprises was awarded a summary judgment on March 31 that could cost Tate more than $2 million.

Xerox Corp. was granted the award after Tate failed to respond to the motion.

The judgment authorizes Xerox to collect $1,446,070.67 from Tate Publishing & Enterprises, and $450,308.18 from Ryan Tate, the company’s CEO.

. . . .

The vanity press, whose attorneys bowed out of the case early this year after telling a judge they hadn’t been paid, did not send a representative to attend the hearing.

A text sent to the CEO’s phone Friday asking for comment was not answered.

The March 31 decision is the second major setback Tate Publishing has encountered since it lost its attorneys.

On Feb. 9, an Oklahoma City federal judge considering a lawsuit filed against Tate by a Tennessee-based printing services firm also awarded a default judgment worth more than $2 million.

. . . .

Writers and musicians who were under contract with Tate as late as in 2016 continue to share stories about money they paid to Tate Publishing to produce their works.

One writer, Heather D. Nelson, is publishing a series of stories she has written that are based on interviews she has done with other Tate clients. She is publishing those stories on her site,

Nelson said March 31 she understands some authors who have agreed to sign a hold-harmless release against Tate Publishing and have sent the firm $50, have been getting their manuscripts returned.

But Nelson said numerous others are seeking a return of their works without signing the release, and that she has visited with dozens of authors about their experiences with the firm.

Link to the rest at NewsOK and thanks to Meryl and others for the tip.

One of PG’s standard aphorisms when speaking to his clients about business deals is, “Don’t do business with crooks.”

No matter how carefully-crafted the contract may be, it won’t work when the counterparty is a crook.

Perhaps there is a vanity press somewhere that isn’t a crook, but PG doesn’t know who that would be.

What Should We Do with an Artist’s Music After They Die?

From Noisey:

We continue to pry open, quite literally in Prince’s case, the private works of artists to feast on their off-cuts, but is this fair?

. . . .

No one wants to think about their own death. If they do, they’re probably artists, and they tend to do so in an abstract, poetic kind of way, rather than an “I should probably file paperwork confirming the administrator of my estate and intellectual property” way. Which is perhaps why, when Prince died suddenly at the age of 57 last year, he didn’t have even the semblance of a will.
With his death, then, came months of legal complications and hearings over who should manage his estate. And because the stakes were so unusually high, the eyes of the world looked on eagerly as the mess was slowly picked apart like a ball of tangled iPhone headphone cords. Would the silver lining of Prince’s untimely end, his fans wondered, be the unveiling of the contents of his infamous vaults? The answer, it emerged last week, is yes.

After his estate was placed in the hands of bank Bremer Trust, and an extensive search for a will proved fruitless, the announcement everyone was waiting for—either hopefully or with trepidation—finally came: Prince’s vaults were to be opened, and at least some of the contents, including outtakes, demos and live recordings, were to be released to the public.

. . . .

As it turns out, the law is designed to make such a thing as easy as possible. “Celebrities’ right of privacy is extremely limited,” says James Sammataro, an entertainment lawyer and managing partner at Stroock & Stroock & Lavan. “This is the ‘price’ for being a celebrity. With the possible exception of a diary – or some comparable item in which there’s a universally recognised reasonable expectation of privacy – the rights to artists’ creations are alienable, and human nature is to attempt to monetise these creations.” The primary purpose of copyright law, Sammataro explains, is not really to protect the individual musician, but to “stimulate the progress of the arts for the intellectual enrichment of the public”.

“While it seems harsh,” Sammataro continues, “if Prince or other artists truly don’t want their works disseminated, they need to memorialise this intention in a binding document, or either not fix the work in a tangible medium or destroy the work.” In other words, if you’re a musician, and you’ve got a tape lying around of the three-chord song you wrote at 15 after getting dumped for the first time, you should probably just burn it now. It’s the only safe option.

Link to the rest at Noisey and thanks to Michael for the tip.

PG says unless you decide what you want to happen with your property, including your books, manuscripts, etc., after you die and include your decisions in something a probate court will recognize, like a will or trust, somebody else will decide what happens to your property.

While PG doesn’t do estate planning any more, there are lots and lots of lawyers who do. Call one and make an appointment.

Amazon’s Antitrust Paradox

From The Yale Law Journal:

Abstract: Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.

This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.

This Note maps out facets of Amazon’s dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon’s structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon’s power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.

Link to the rest at The Yale Law Journal and thanks to RM for the tip.

Oculus lawsuit ends with half billion dollar judgment awarded to ZeniMax

From Polygon:

A Dallas, Texas jury today awarded half a billion dollars to ZeniMax after finding that Oculus co-founder Palmer Luckey, and by extension Oculus [a company now owned by Facebook], failed to comply with a non-disclosure agreement he signed.

In awarding ZeniMax $500 million, the jury also said that Oculus did not misappropriate trade secrets as contended by ZeniMax.

. . . .

It remains unclear what sort of impact this will have on the daily retail sale of the Oculus Rift headsets. Facebook is expected to announced its fourth-quarter earnings after the market closes today.

. . . .

The Zenimax versus Facebook trial kicked off in January with testimony from a number of experts and those involved directly in the case including id Software co-founder John Carmack, Facebook CEO Mark Zuckerberg and Oculus co-founders Iribe and Palmer Luckey.

. . . .

During his day in court, Zuckerberg was grilled about his company’s seemingly rushed acquisition of Oculus for $2 billion. And during the first week of the trial, Carmack was questioned about his decision to copy some code from id Software computers before leaving the company to work at Facebook with Luckey.

. . . .

According to ZeniMax’s complaint, Oculus co-founder and Rift inventor Palmer Luckey — along with a half a dozen ex-ZeniMax employees who are now working at Oculus — are building the Rift based on years and millions of dollars’ worth of ZeniMax’s research and copyrighted code.

Link to the rest at Polygon

College Accused of Monopolizing Textbook Market

From Courthouse News:

The local, off-campus competitor of an Illinois community college bookstore claims in court that the school is trying to put it out of business by selling textbooks below cost and withholding course book information.

Joliet Textbooks, which owns a store selling textbooks and related items across from the entrance of Joliet Junior College’s campus in Joliet, Ill., filed a lawsuit Tuesday in Will County accusing JJC of violating the Illinois Antitrust Act.

The off-campus store claims that JJC “engaged in a concerted scheme to thwart competition in the market for the sale of used and new textbooks and to destroy competition in the marketplace by undermining plaintiff’s business through anti-competitive pricing strategies.”

The school’s official bookstore, a half-mile from Joliet Textbooks, “enjoys certain institutional advantages over a private sector competitor like plaintiff,” such as not paying rent and not needing to generate a profit to stay open, the complaint states.

Both stores purchase their new and used textbooks from the same sources, says Joliet Textbooks, and the standard practice is to charge 20 to 30 percent above cost.

However, JJC has allegedly been selling textbooks to its students below cost and is giving out rebates and calculating sales taxes on the artificially lower price.

Link to the rest at Courthouse News and thanks to Nate for the tip.

PG is not familiar with the Illinois Antitrust Act, so he can’t opine about the plaintiff’s chances in court.

He was, however, reminded, of an antitrust suit by the American Booksellers Association and a number of independent bookstores against Barnes & Noble and Borders in 2001. The principal claim was that the big bookstores received secret discounts from big publishers and distributors. The case was ultimately settled before a final verdict.

Controversial e-book sales tactic banned in Canada

From The Globe and Mail:

Apple Inc.’s long legal struggle over alleged anti-competitive e-book pricing took another turn on Friday as the company joined a consent agreement with Canada’s Competition Bureau that will ban a controversial sales tactic for three years.

Three of Canada’s four major book publishers – Hachette Book Group Inc., Macmillan (a subsidiary of Verlagsgruppe Georg Von Holtzbrinck GmbH) and Simon & Schuster Inc. – also agreed to halt a system known as most-favoured nation (MFN) pricing, which prevented competing retailers from selling e-books at a discount compared to Apple’s minimum price. A Competition Bureau investigation had found that the MFN arrangement between Apple and the publishers led to higher prices for consumers.

There was no financial component to any of the agreements.

But a fourth major publisher – HarperCollins Publishers LLC – failed to reach an agreement, prompting the watchdog to refer the case to the Competition Tribunal, a separate body that adjudicates matters of business, economics and law.

Link to the rest at The Globe and Mail and thanks to Tudor for the tip.

Techdirt’s First Amendment Fight For Its Life

From TechDirt:

As you may have heard, last week we were sued for $15 million by Shiva Ayyadurai, who claims to have invented email. We have written, at great length, about his claims and our opinion — backed up by detailed and thorough evidence — that email existed long before Ayyadurai created any software. We believe the legal claims in the lawsuit are meritless, and we intend to fight them and to win.

There is a larger point here. Defamation claims like this can force independent media companies to capitulate and shut down due to mounting legal costs. Ayyadurai’s attorney, Charles Harder, has already shown that this model can lead to exactly that result. His efforts helped put a much larger and much more well-resourced company than Techdirt completely out of business.

So, in our view, this is not a fight about who invented email. This is a fight about whether or not our legal system will silence independent publications for publishing opinions that public figures do not like.

And here’s the thing: this fight could very well be the end of Techdirt, even if we are completely on the right side of the law.

Whether or not you agree with us on our opinions about various things, I hope that you can recognize the importance of what’s at stake here. Our First Amendment is designed to enable a free and open press — a press that can investigate and dig, a press that can challenge and expose. And if prominent individuals can make use of a crippling legal process to silence that effort, or even to create chilling effects among others, we become a weaker nation and a weaker people because of it.

We are a truly small and independent media company. We do not have many resources. We intend to fight this baseless lawsuit because of the principles at stake, but we have no illusions about the costs. It will take a toll on us, even if we win. It will be a distraction, no matter what happens. It already has been — which may well have been part of Ayyadurai’s intent.

Link to the rest at TechDirt and thanks to Scott for the tip.

Case of ‘fattened’ Jorge Luis Borges story heads to court in Argentina

From The Guardian:

One of the best-known stories by the Argentinian author Jorge Luis Borges takes the form of a fake literary essay about a Frenchman who rewrites a section of Don Quixote word for word and is showered with praise for his daring.

It is probably safe to say that Borges’s 79-year-old widow, María Kodama – sole heir and literary custodian of his oeuvre – takes a dimmer view of such rewrites.

The novelist and poet Pablo Katchadjian is facing trial for “intellectual property fraud” after publishing a reworking of Borges’s 1945 story The Aleph. The Fattened Aleph – originally published by a small press in 2009 – extended Borges’s work from its original 4,000 words to 9,600.

Most of the alterations consist of the addition of adjectives and descriptive passages and do not change the original plot, which revolves around a “a small iridescent sphere” in a Buenos Aires basement, through which a person can see the entirety of creation.

. . . .

After five years, a court hearing has finally been set for 14 February, and the judge in the case appears to be leaning in Kodama’s favour. “The alteration of the text of the work by Borges is evident,” Judge Guillermo Carvajal stated in his ruling for a trial.

Kodama’s lawyer Fernando Soto dismissed Katchadjian’s claims that the work was a literary experiment. “Only Katchadjian’s name appears on the cover. It doesn’t say ‘The Aleph by Borges, altered by Katchadjian’. Borges is not mentioned in the index or the copyright page either. The only place Borges appears is in a brief postscript at the end of the text,” Soto said.

. . . .

Katchadjian has rarely spoken in public about the case (and did not respond to an interview request), but he did discuss it at at an event last year at the National Library in Buenos Aires.

“The Fattened Aleph is not plagiarism because no plagiarism is open about its source,” Katchadjian said. “Neither is it a joke that went wrong, or one that went right. It is a book I wrote based on a previous text.”

. . . .

Katchadjian’s laywer, Ricardo Strafacce, said he was confident the lawsuit would not prosper. “Legal forensic experts have already established that The Fattened Aleph is a new work of art. Secondly, the court will also take into account that there was no intent by Katchadjian to deceive the reader as to Borges’s authorship of the original The Aleph, which is clearly stated in Katchadjian’s book.”

Link to the rest at The Guardian

All Romance Ebooks & Visions of The Future: Part One

From Kristine Kathryn Rusch:

All Romance Ebooks and its sister website Omnilit did something incredibly awful on December 28, 2016. It sent out a handful of emails, letting writers, publishers, readers, and others know that it was shutting its doors four days later.

The letter WMG Publishing got said this,

On midnight, December 31, our sites will go dark and your content will cease to be available for sale through our platforms. This includes any content you are having us distribute to Apple.

We will be unable to remit Q4 2016 commissions in full and are proposing a settlement of 10 cents on the dollar (USD) for payments received through 27 December 2016.  We also request the following conditions:

1.     That you consider this negotiated settlement to be “paid in full.”

2.     That no further legal action be taken with regards to the above referenced commissions owed….

It is my sincere hope that we will be able to settle this account and avoid filing for bankruptcy[KKR: all bold mine]

I have no books on that site. Hadn’t for a long time. If any of my work is there, it’s there through other publishers or as part of an anthology. WMG pulled its books off All Romance Ebooks (ARe) almost a year ago, because of problems dealing with the site, the people behind the site, and just some really unsettling business practices.

How unsettling? Nothing concrete. It looked (from the outside) like their interface was breaking down. We knew of sales on our account that never were credited to our account. I believe WMG even tested the site by buying (or having someone buy) a book, and seeing if we got credited.

We didn’t. Then we tried to track down what was owed, what payments had been made, and communications issues. We had a handful of truly incompetent employees (nice people; terrible workers) in 2014, and at first, we attributed our ARe problems to them. But after some dealings, we realized that, nope, the problem wasn’t ours. It was ARe’s problem, and that was a very, very, very bad sign.

We pulled all our titles off ARe, deactivated our account, and moved on to other sites.

So when we got this ridiculous letter, we knew it would have no effect on us. But as Allyson Longueira at WMG noted, ARe (a major Apple portal) made its announcement while Apple is shut down for annual maintenance, and writers who have to switch from ARe to Apple direct can’t do so.

Not only that, authors will lose any algorithm from Apple, and probably any revenue from them.

. . . .

ARe is a distributor, mostly, and so it is dealing with its writers as suppliers and unsecured creditors. I’ve been through a bunch of distributor closings, many in the late 1990s, with paper books, and they all happen like this.

One day, everything works, and the next, the distributor is closed for good. In some ways, ARe is unusual in that it gave its suppliers and creditors four days notice. Most places just close their doors, period.

I’m not defending ARe. I’m saying they’re no different than any other company that has gone out of business like this. Traditional publishers have had to deal with this kind of crap for decades. Some comic book companies went out of business as comic book distributors collapsed over the past 25 years. Such closures have incredible (bad) ripple effects. In the past, writers have lost entire careers because of these closures, but haven’t known why, because the publishing house had to cope with the direct losses when the distributor went down.

The difference here is that ARe wasn’t dealing with a dozen other companies. It was dealing with hundreds, maybe thousands, of writers individually, as well as publishers. So, writers are seeing this distribution collapse firsthand instead of secondhand.

To further complicate matters, ARe acted as a publisher for some authors, and is offering them no compensation whatsoever, not even that horrid 10 cents on the dollar (which, I have to say, I’ll be surprised if they pay even that).

. . . .

Now, let me give you all some advice.

Lawsuits cost time as well as money. I know a whole bunch of angry writers are banding together to go to war with ARe. Which is good, on the one hand, because these kinds of things should not ever happen.

But on the other hand, it’s not good, because a whole bunch of writers are going to lose a year or more of precious and irreplaceable writing time to go after this company.

Some writers have that time; others do not.

Frankly, if the writers’ organizations put together some kind of lawsuit, sign on to that, because it will be more effective. They can afford good lawyers and they will have a huge number of writers that they represent.

I know you’re angry. I know you may have serious financial problems because of this shut-down.

You need to take a deep breath, and look at the impact ARe’s shutdown and the loss of fourth quarter earnings will have on you. Then you need to understand that any lawsuit will take a year or more (courts are slow). ARe might settle; they might not.

. . . .

Guessing now, purely guessing.

ARe had run ahead of their money since they started. They used today’s money to pay yesterday’s bills. They had no profit. So they were floating money—payments to authors, payments to creditors, payments like website and rent.

That’s why ARe’s technology grew antiquated, why they weren’t keeping up with the times, why payments in some cases were late or impossible to get. They probably got a line of credit too late or they didn’t have one or they were borrowing off credit cards.

This fall, book sales went down. I discussed some of that after the election, but I’ll be discussing it more and in a different way later in January. Like its authors, ARe was counting on a certain level of revenue. That revenue went down, starting in July (maybe sooner), and continued downward all fall.

ARe paid writers and publishers 45 days after the close of the quarter. So they had to have made the Q3 payments by early November. That probably used most of their capital. They figured the holiday season would save them, along with holiday ad buys.

I’ll wager those were below what ARe expected—significantly below. So, they tried the 2017 ad buy the week before Christmas, hoping that would save them.

Link to the rest at Kristine Kathryn Rusch on Patreon and thanks to C.G. for the tip.

Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.

As usual, Kris’s advice is sound. If you’re involved in the ARe matter, you’ll want to read her entire post.

In a past life, PG represented lots of people in lots of civil litigation. He spent a great deal of time in court.

In some cases, litigation is a necessary part of solving a dispute. The parties are unable to agree, so a judge or jury must decide the matter.

On the other hand, litigation takes a financial and emotional toll on the parties. In some cases, the tangible and/or intangible rewards of litigation outweigh the financial/emotional costs and in other cases they do not.

PG was once involved in finally settling a lawsuit over the validity of a will that had lasted 13 years. He’s comfortable in saying that the costs outweighed the rewards for the litigants in that case.

PG says it is almost always a bad idea to entrust your business or personal welfare to the outcome of litigation.

You can move on with your life without a lawsuit or sue and move on with your life. The moving on with your life part is always the most important.

Court Documents Regarding All Romance E-Books’ Disturbing Business Practices Surface

From Blog Critics:

In a previous article about the sudden closing of All Romance E-Books, LLC and the owner’s announcement that she was not going to pay any royalties for the 4th quarter sales of books from the over 5000 publishers and authors with books on the site.

. . . .

In order to see the whole story, you need to go back to 2014 when a dramatic conflict began between Lori James and her business partner, Barbara Perfetti Ulmer. In fact, Ulmer sued James and All Romance E-Books, LLC in the Sixth Judicial Circuit Court of Pinellas County, Florida – where ARe was established as a legal business entity – on March 2, 2015. Ulmer filed a complaint alleging that James had been “denying access to contemporaneous and current financial information related to All Romance, breach of duties (fiduciary, care, and loyalty) unjust enrichment, inequitable distribution, and judicial dissolution of All Romance.”

The information regarding this lawsuit is easily found thanks to the open court records in the state of Florida, and can be viewed online here.

. . . .

Ulmer and James established All Romance E-Books, LLC together as full partners in 2006. Ulmer was the Chief Financial Officer, and as she was resident in Florida that’s where the physical address of ARe was established. (Remember the three addresses in Florida? One was in Ulmer’s town, Safety Harbor, and appears to be a post office box, which would be understandable as she was the CFO.) James was the Chief Operating Officer, and under the terms of their original operating agreement (Exhibit A) both partners owned 50% of the company and all decisions were to be made by “unanimous agreement” while all financial considerations –  both contribution and distribution – were to be equally shared.

. . . .

According to Ulmer’s complaint, in October of 2014, Dominick Addario, MD – a forensic psychiatrist affiliated with the University of California-San Diego – examined Ulmer to determine whether she was “disabled” and unable to perform her duties under the terms of their operating agreement, which stipulated that if a condition was “permanent or expected to be of an indefinite duration” and prohibited one of the partners from performing their duties, the other partner could assume full responsibility for the company, including all financial and operational decisions.

On November 26, 2014 Dr. Addario sent an email (Exhibit B) to both partners stating that: “…I recommended certain treatment and testing for her and suggest reevaluation in 3 to 6 months at which time she may once again be fit to carry out her duties…”

. . . .

When Ulmer asked to be included in meetings, James told her no and to “stop being a distraction.” When Ulmer asked to return to work, James said no. When Ulmer protested, James told her that “if she did not like what James was doing, that Perfetti(Ulmer) should go get a lawyer.”

Link to the rest at Blog Critics and thanks to A. for the tip.

PG will remind all that the contentions in a court filing are not proven facts.

A quick review of the case summary of Ulmer vs. James reveals that Ulmer’s filing was dismissed “because of lack of prosecution.” This generally means that the plaintiff didn’t do what he/she was required to do in order to move the case forward. There was never a trial or other disposition of the case on its merits.