True to his reputation as a maverick, Arizona Senator John McCain has authored a bill seemingly designed to please nobody, while arguably disserving just about everybody. Dubbed the “Television Consumer Freedom Act of 2013”, it consists of clumsily crafted legislative language that mashes together in one bill three disparate and contentious aspects of the current video delivery system. In only one of those three areas does McCain’s proposal come to remotely practical terms with the problem it seeks to address.

McCain’s bill aims to: (1) promote “a la carte” program availability for MVPD subscribers; (2) discourage broadcasters from removing their programming from over-the-air availability (in response to the success that Aereo has recently enjoyed); and (3) eliminate broadcast blackouts of sports coverage in certain situations.

Promoting “A la Carte” MVPD offerings

McCain has long been an advocate of an a la carte approach to program availability. Under that approach, cable and satellite TV subscribers would be able to sign up for only those channels they want to watch – no more required “bundles” or “tiers”, i.e., packages of channels including some really desirable choices and a bunch of others that probably won’t be watched much, if at all. 

The practice of “bundling”, of course, is not unique to the MVPD operator/MVPD subscriber relationship.

Basically, it’s a win-win set-up – except (as far as McCain is concerned) for the viewer/consumer, who is forced to pay for channels he or she probably won’t watch.

McCain’s bill would provide program producers (including broadcasters) and MVPD operators certain “incentives” to offer MVPD subscribers a la carte options. “Incentives”, here, is really just a polite term for “threats”.

Under the bill, MVPD operators would be free not to provide an a la carte option. But those who don’t offer an a la carte option would lose the benefit of the statutory copyright license that for years has made their lives much easier and, probably, cheaper. 

Broadcasters who happen to be under common control with non-broadcast program producers (think any of the major TV networks, for the most obvious examples) be similarly “incentivized”: such broadcasters would lose the right to retransmission consent and the protection of network non-duplication and syndicated exclusivity rules if all of the programming under common control is not made available to MVPD operators on an a la carte basis.

And what about program producers who don’t happen to control any broadcast licensees? Lacking any legislative benefit to withdraw (such as retrans consent for broadcasters or statutory copyright licenses for MVPDs), McCain would simply say that program producers cannot offer packages of various programs to MVPDs unless those producers also offer those same programs a la carte.

One additional twist: The bill would require that, if a program producer and an MVPD can’t come to terms on the availability of programming on an a la carte basis, the two parties would have to notify the FCC of the last terms each side offered the other. The bill is silent about what, if anything, the FCC could or should do with that information.

McCain’s proposal isn’t likely to thrill either MVPDs, or broadcasters, or program producers. Each derives some benefit from the current bundling system: MVPDs get their desired programming, along with the ability to bundle that programming with a bunch of less desirable programming and charge subscribers more; and program producers (including broadcasters under common control with producers) are able to use their popular material to assure carriage of their less popular material. A mandatory a la carte option would arguably undermine this mutually beneficial arrangement.

That is immaterial to McCain, though, because he attaches overriding importance to the availability of an a la carte option to MVPD subscribers. Let’s give the people what they want, and only what they want!

Many MVPD subscribers might agree with him, at least at first blush. But think about the real consequences. Since the current system allows popular programming to subsidize, in a sense, the production of less popular programming, the cost to access the less popular shows would likely increase in an a la carte universe, where the potential for such subsidization would be dramatically diminished. As with ordering a la carte at a restaurant, sure, you can get exactly what you want, but in the end you’ll probably end up paying more and getting less. Can we be sure that that’s what viewers really want?

And let’s not forget the niche programming that might not garner enough viewers to warrant continued production. While many of us may share the Boss’s despair at the seeming lack of viewable programming fare, the fact is that even the narrowest of niche programming presumably has some viewers. And niche programming contributes to the much-vaunted diversity of information we hear so much about. By discouraging various bundling practices, McCain’s bill could threaten that diversity by forcing lesser-viewed programming out of production. 

Deterring broadcasters from defecting from OTA operation

Since Aereo started to get traction with its system allowing mobile Internet access to over the air broadcasting – and particularly since that system survived an initial challenge in the Second Circuit – some broadcasters have been making noises about removing their programming from their OTA operations in favor of some subscription-only venue (e.g., cable, satellite, or maybe even their own version of an Aereo set-up). McCain obviously thinks that that’s not a good idea, and he means to do something about it in the second section of his bill.

Here’s where he hauls out the big guns: TV stations that engage in such mischief will lose their licenses! Yikes! While that threat is guaranteed to get your attention, upon closer scrutiny that threat largely disappears, thanks to some truly bad wording.

According to the bill, the mischief that would lead to license loss occurs when a “television broadcast station does not retransmit the signal over-the-air that is identical to the signal retransmitted” to an MVPD. 

Can we be frank here? That language makes no sense at all. A TV station doesn’t “retransmit” its signal – it transmits it. And in practical terms, it’s unlikely in the extreme that a broadcast station would attempt to broadcast one batch of programming while simultaneously feeding a different batch to the local MVPDs. More likely, the broadcasters’ threat alluded to above would play out by having the networks opt not to provide their affiliates with primo, prime-time programming. So, for example, the Fox prime-time schedule might end up exclusively on the MVPD-only FX channel, while the Fox Network feeds its affiliates re-runs of old Fox shows. In that case, the station affiliates would still be feeding their OTA programming to the MVPDs, so McCain’s proposed threat wouldn’t reach them.

Maybe we’re missing something, but this proposal would achieve nothing in terms of addressing the issues swirling around Aereo. (If McCain really wanted to revolutionize copyright law to ensure that the next Aereo controversy doesn’t occur, he would take a crack at redefining “MVPD” in a way that reflects the increasing level of online viewership that is tied to the decreasing level of scheduled OTA television viewing.)

Prohibiting blackouts of certain sports programming

The final section of the bill is probably the only one likely to please both the broadcast and cable industries. It provides that sports programming cannot be blacked out (like when an NFL team doesn’t sell out its home game within a certain period before kickoff) when the game is played in a publicly-financed stadium.   Hard to argue with that, unless you’re a professional sports league or team that has negotiated out extensive agreements based on the existence of the blackout.

But really, in the overall scheme of things whether or not blackouts are permitted in some limited instances isn’t likely to compel support for McCain’s bill.

Hopefully, the bill wasn’t intended as something to be enacted, but rather as a starting point for further change. But even there, you have to wonder: why? After all, McCain’s bill is more or less a recycling of identically titled legislation originally introduced by Senator Ron Paul in 2007. 

Over the years, John McCain’s maverick nature has garnered him his fair share of supporters and detractors. That’s not just because he’s been willing to go out on a limb for what he believes in, popular support be damned, but also because he’s been a very skilled and effective legislator that produced results on a regular basis. Sadly, this time, it looks like he’s just gone off on a tangent.

[Blogmeister’s Note: Paging Dr. Heimlich! A couple of months ago, our Supreme Court Haruspicator Extraordinaire, the Swami (a/k/a Kevin Goldberg) confidently predicted that the petitioners in McBurney v. Young would win, 6-3, in the Supreme Court. That’s the case involving a constitutional challenge to Virginia’s FOIA law, which is available only to Virginia citizens.  The decision is now out and, oops, the Court went 9-0 the other way. When we were finally able to track the Swami down for a follow-up post on the decision, his initial response was to send us a tear-stained resignation letter expressing his sense of commitment, his pride, his dedication to process, etc., etc. Upon closer examination, however, the letter turned out to be a transparent semi-plagiarism of Richard Nixon’s 1974 resignation speech. We talked the Swami off the ledge, leaned on him a bit, and he has now provided the following take on the Court’s decision.]

Yep, I was wrong, but seriously, nobody – and I mean NOBODY – saw this coming. Sure, plenty of folks might have thought the Court would uphold the law. But none of them would have put their own hard-earned money on a 9-0 verdict.  Not even the most accommodating bookie would have given odds on a unanimous verdict in this one.  And even knowing the final result, I stand by my earlier words that “Justices Ginsburg, Sotomayor and Kagan seemed clearly to favor Messrs. McBurney and Hurlbert”. 

So I’m shocked – not only by the result, or the Court’s unanimity, but by the overwhelming and radical antipathy toward open records laws expressed by the entire Court through Justice Alito’s pen. And I’m angry at the Court’s liberal block for signing onto that position (more on that below).

Here’s how Alito addressed each of those attacks:

1. “Virginia’s citizens-only FOIA provision abridges [Hurlbert’s] ability to earn a living in his chosen profession, namely obtaining property records from state and local governments on behalf of his clients.”  The Court agreed that the Privileges and Immunities Clause protects the right of citizens to “ply their trade, practice their occupation, or pursue a common calling”. But according to Alito, a law violates the Clause only when the law is enacted for “the protectionist purpose of burdening out-of-state citizens”.  Here the Court found no such “protectionist purpose”. The Virginia statute was enacted to “ensure [Virginians] ready access to public records in the [state government’s] custody . . ., and free entry to meetings of public bodies wherein the business of the people is conducted.” The law is, thus, non-protectionist: it merely allows citizens to oversee the actions of those who govern them.
2. “The Virginia FOIA abridges the right to own and transfer property in the Commonwealth”. Alito simply found the Virginia law has no such effect, since it provides for the release of these property records through other means (primarily the court system).  
3. “[The Virginia law] impermissibly burdens [Petitioner’s] ‘access to public proceedings’”. Alito responded here (figuratively, unlike his literal, but silent, mouthing during the 2010 State of the Union Address): “Not true”. First, the Privileges and Immunities Clause doesn’t require that citizens and non-citizens be treated equally. But, more important, citizens and non-citizens do have equal access to Virginia’s judicial records. In fact, when McBurney’s FOIA request was denied, he used another law to receive much of the same information he had sought under FOIA. So the restriction cannot be said to impermissibly burden non-citizen’s ability to access Virginia courts.
4. “[T]he Virginia FOIA . . . denies [non-Virginia citizens] the right to access public information on equal terms with citizens of the Commonwealth.”  Here, Alito claimed that the Court has “repeatedly made clear that there is no constitutional right to obtain all the information provided by FOIA laws.”   Taking a stroll through the history of access to information, he observed that, prior to the enactment of the federal FOIA in the late 20th Century, any access to information was guaranteed only to persons with a direct interest in the matters contained in the requested records. So, while Petitioners might have legitimate constitutional rights to earn a living, own or transfer property, or have access to public proceedings (i.e., the rights addressed in the first three arguments summarized above), there simply is no fundamental right in access to information. [Swami’s note: I just threw up in my mouth a little as I wrote that]. 

However, as I made clear in my post-argument prediction, I didn’t think the case would turn on the Privilege and Immunities Clause, even though I firmly believe that access to information is and should be a fundamental right in a democracy. The fact that at least some members of the Court don’t share my belief was apparent during the argument (as I reported). But I sensed at least a split on the Dormant Commerce Clause issue, which a two-part analysis: (a) FOIA-obtainable information is part of the stream of commerce, and (b) the law impermissibly favors Virginia citizens over non-citizens.   

How wrong could I be? As it turns out, the Court didn’t even get to the second portion of that analysis because the nine Justices, led by Alito, concluded that Virginia’s law doesn’t regulate or burden interstate commerce. Rather, the Virginia FOIA law – and, presumably, all FOIA laws – are purely political creatures not related to commercial matters. (This will doubtless come as news to the biggest single segment of requesters of information under the federal FOIA: commercial requesters seeking information about competitor businesses). Further, the Court decided, even if there were a “market” for public documents in Virginia, it’s a market that Virginia created and administers, which, based on earlier cases, means it cannot implicate or violate the Dormant Commerce Clause.

So where does this leave us? 

In the short term, we can expect to see more states start to limit FOIA requests to citizens only (for those keeping score, states already doing so include, in addition to Virginia: Alabama, Arkansas, Missouri, New Hampshire, New Jersey, Tennessee and, though the Third Circuit threw out their law, Delaware). Why? Because from the state’s perspective, such citizens-only restrictions keep costs down and limit the amount of information the state must produce.  What state doesn’t want to do that? And now everybody knows exactly how to draft and justify such a restriction to ensure they withstand constitutional scrutiny.

More disturbingly, perhaps, we have all nine Justices of the Supreme Court of the United States on record as viewing open records laws with disdain, if not outright contempt. How could the Court – and especially its liberal members – endorse this flip blow-off of the right to access public information:

[The broad-based right to access public information is not] “basic to the maintenance or well-being of the Union.” . . .. FOIA laws are of relatively recent vintage. The federal FOIA was enacted in 1966 . . . and Virginia’s counterpart was adopted two years later. . . . There is no contention that the Nation’s unity foundered in their absence, or that it is suffering now because of the citizens-only FOIA provisions that several States have enacted.

I expected that from Alito and Scalia (shoot, I’ve heard Scalia express it in so many words before). But not from some of the others. It’s very disheartening.

Still, the Swami will press on, firmly committed to the goal of maximum access to government information. I won’t let this get me down. I can’t let this get me down. Big majorities of the Court have been wrong before (obvious examples: Plessy v. Ferguson 7-1, Dred Scott 7-2). Let’s just hope that this latest instance can somehow get turned around before too much damage is done.

We told you the Aereo saga wasn’t over. 

Having lost the most recent (but certainly not the last) round in their litigation war with Aereo, the broadcast plaintiffs have filed a “petition for rehearing en banc” with the U.S. Court of Appeals for the Second Circuit. In that petition, the broadcasters are asking the full 13-member court to review the 2-1 decision of a three-judge panel that affirmed a lower court ruling allowing Aereo to continue to operate while the trial of the case moves ahead.

[Before we get into the nitty-gritty of the petition, let’s take a brief introductory side trip into the world of appellate procedure. Each of the 13 federal courts of appeals consists of between six (in the First Circuit, covering New England) and 29 (in the Ninth Circuit, which sprawls across nine western states and a couple of territories) judges. When an appeal is filed, it is normally heard by a panel consisting of three judges from the particular circuit court where the appeal is filed. 

After the panel issues its decision, if the losing party believes that that decision was wrong, the loser has three options. It can ask: (1) the three judges to re-think their disposition of the case; (2) all the judges in the circuit, sitting “en banc”, to review the panel’s decision; or (3) the Supreme Court to look the case over. Supreme Court review is usually the longest of long shots. Similarly, since the panel has just deliberated over the issue and come up with the result at hand, it’s usually a pretty good bet that the panel won’t be eager to reverse itself. But en banc review brings a bunch of different judges into the mix, so it presents at least some source of hope to the party unhappy about the panel decision.

But the rules are set up to make en banc review hard to get.

According to the broadcasters’ petition, the decision allowing Aereo to keep operating “will wreak commercial havoc by allowing new and existing distributors to design around [the requirement to get a license] and profit from the delivery of copyrighted programming while paying nothing for it.” If that’s not dire enough for you, they also claim that the decision could cause “the entire retransmission licensing regime” to be “swallow[ed]”.   The swallowing (according to the petitioners) will occur thanks to Aereo-like set-ups supposedly being contemplated by Time Warner Cable and Dish Network, and the recent statements made by one of their own – Newscorp COO Chase Carey’s threat to convert the Fox Network to a subscription-based cable channel.

The broadcasters’ petition presents a two-fold attack. 

First, it argues that the panel’s 2-1 ruling misinterprets the Copyright Act. This argument depends to a great degree on linguistic subtleties, like whether the terms “transmission” and “performance” were intended by Congress to mean the same thing. According to the petition, the Act clearly contemplated that “‘transmissions’ and ‘performances’ are not the same thing” – “the ‘performance’ is the thing that is communicated and the transmission is the means of communicating it.” This, of course, is a distinction made by dissenting Judge Denny Chin in the earlier Aereo decision. (Oh yeah, it’s also a distinction made by the United States District Court for the Central District of California in the AereoKiller case.) It is likely to be the predominant legal issue when the case is ultimately resolved (with the predominant – and only – factual issue being whether Aereo can actually do what it claims with just one antenna per subscriber).

But the challenged interpretation of the Copyright Act itself derived from the Second Circuit’s 2008 Cablevision decision on which Aereo relies to justify its operations as legal. So in a separate section the broadcasters’ petition takes dead aim on the rationale of the Cablevision decision as well.

As the broadcasters see it, Cablevision was based on a “false premise” and the earlier decision in Aereo compounds the error in several ways.

The three-judge Cablevision panel’s decision was based in large measure on the notion of a hypothetical “hapless customer” who wanted to use the Cablevision remote DVR service to record a program in his den but play it back in his bedroom. The Cablevision panel concluded that that consumer wasn’t engaging in a public performance.  Within the context posited by the panel, the broadcasters agree with its conclusion: “a subscriber who records a program in his den and watches it in his bedroom is not transmitting the program to the public; he is transmitting it to himself”.   

But, say the broadcasters, that’s not the case with Aereo’s system, which doesn’t simply involve one person retransmitting to himself. Rather, third parties are involved; it’s important to focus on who transmits and who receives a given performance.

The Petition also homes in on Cablevision’s notion that aggregation of individual transmissions could create a public performance only if they came from a single master copy. But, the broadcasters observe, the all-important Transmit Clause in Section 117 of the Copyright Act says nothing about master copies. The broadcasters argue that “a far better reading of the Transmit Clause would aggregate all transmissions of the same performance of a work by the same transmitter to members of the public, treating them collectively as a public performance regardless of whether the source is one or many copies.” Under this interpretation, Aereo, ivi, cable systems, and satellite services would all require a license. 

Having thoroughly beaten up on the Cablevision rationale, though, the broadcasters stop short of arguing that that decision should be discarded.  In a deft pirouette, they urge that “[w]hile the reasoning of Cablevision . . . needs to be rejected, that does not mean there cannot be private performances.” In other words, the petitioners are willing to concede that the result in Cablevision was correct – that is, the “hapless customer” should be permitted to record a program in his den and watch it in his bedroom without incurring the wrath of the Copyright Police. But the path by which the Cablevision court reached that result was flawed. We’re guessing that this delicately crafted argument is intended to attract the broadest possible support across all the Second Circuit’s judges, including those who would prefer not to overrule the Cablevision case.

So, what now? We sit back and wait to see whether the Second Circuit agrees to en banc review. If it doesn’t, the case stays in its current posture: Aereo can continue to operate while the trial of the broadcasters’ claims proceeds before the district court. If the Second Circuit takes the en banc appeal, in all likelihood Aereo’s operation will be stopped pending the outcome of that process. 

But regardless of how any of this turns out, we still think it’s likely that the underlying copyright issue here will eventually be resolved either by the Supreme Court or by Congress. The issue is already in play in both the Second Circuit, with the Aereo case, and the Ninth Circuit, with the AereoKiller case. And, since Aereo is promising to roll its service in more markets in the near future, it’s entirely possible that other cases will be brought in other circuits as well. Obviously, the issue has national implications demanding a uniform, national, resolution. Check back here for updates.

Talk about mixed signals! March 25 very likely marked a crucial turning point in the up-and-down, back-and-forth tug of war between Mission Abstract Data (MAD) and many radio broadcasters, but it’s hard to tell for sure which way it turned and in whose favor.

On the one hand, in the federal court lawsuit in Delaware, on March 25 the judge denied MAD’s motion to lift the stay that has held that case in suspended animation for more than a year already. But in the same order the judge held that the stay would be lifted “upon the issuance” by the U.S. Patent and Trademark Office (“USPTO”) of “Notices of Intent to Issue Reexamination Certificates” (NIRCs) with respect to MAD’s two patents. As our loyal readers know, those patents have undergone not one, but two separate reexaminations at the USPTO over the last year or two.   Indeed, it appears that the judge in Delaware has held his case in abeyance until the USPTO reaches some final conclusion about the nature and validity of the patents.

But in a remarkable coincidence, also on March 25 it appears that the USPTO issued an NIRC relative to Patent No. 5,809,246 (the 246 Patent) and a “final rejection” relative to at least some aspects of Patent No. 5,629,867 (the 867 Patent). (The term “final rejection” appears in the PTO’s online description of the document.)

If you weren’t confused already, hang on.

All of this provides us with a reminder (which we really didn’t need) that we are not patent attorneys. There is obviously much going on here, but we are not now in a position to try to explain it. (We expect to be getting with patent counsel in the near future to review all of these developments so that we can have a better handle on them.) But based on our experiences thus far in the MAD saga, we expect that these developments may cause MAD to begin another high-pressure outreach effort to sign radio stations up to patent license agreements. Because of that, we think it important to provide our readers with access to the underlying documents – the order from the Delaware judge and copies of the USPTO’s actions – so that they can review them first-hand and share them with their own counsel.

As we have repeatedly suggested in previous posts, radio operators would be well-advised to consult with their own patent experts before making any decisions as to how best to proceed. The PTO’s recent decisions will have to be carefully parsed to determine, among other things:  (a) precisely what aspects of MAD’s patents may remain; (b) whether any particular station’s facilities in fact can be said to infringe on what’s left of the patents; and (c) even if there may be some infringement, what the likely exposure would be if MAD were to sue for damages. Again, the area of patent law is complicated, as the March 25 developments plainly demonstrate. Before you try to tiptoe through the minefield, you’d best get yourself some expert advice from patent-savvy folks.

It looks like the Supreme Court may have dumped a final, fatal treatment of Roundup on ivi, Inc.  In a standard nine-word order (“The petition for a writ of certiorari is denied.”), the Supremes unceremoniously rejected ivi’s last-gasp effort to get out from under the preliminary injunction imposed by the federal District Court in NYC two years ago.  As a result, ivi is still barred from operating in the Second Circuit, and its future prospects are decidedly dim.

We’ve reported on several occasions on ivi.  It’s one of a handful of companies seeking to revolutionize television viewing by making broadcast signals available to viewers via the Internet.  ivi’s approach involves a liberal interpretation of the Copyright Act that would allow it to stream television programming directly to your computer, tablet or smartphone.  

ivi claims that its Internet-based streaming operation is the equivalent of a cable system as defined in Section 111 of the Copyright Act.  Under that theory, it has argued that it’s entitled to retransmit broadcast programming without the prior consent of the broadcasters as long as it pays applicable copyright royalties.  The broadcast industry has disagreed, naturally; in 2010, even before ivi started operation, broadcasters peppered ivi with cease and desist letters.  Undaunted, ivi went on the offensive, filing a lawsuit in the U.S. District Court for the Western District of Washington seeking a declaratory judgment that ivi is a cable system under the Copyright Act.  The broadcasters promptly countered with their own suit (alleging copyright infringement) in New York.

ivi’s Washington case was tossed by the judge there in January, 2011.  The following month, the broadcasters convinced the judge in the New York case to preliminarily enjoin ivi from operating pending the outcome of the case.  ivi appealed that ruling to the Second Circuit, to no avail.  In its trip to the Supreme Court it was trying to get the Supremes to lift the injunction.

Let’s be clear that I am not reveling in any of ivi’s misfortune.  I distinctly appreciate and support innovation and have argued that Congress and the Copyright Office should consider changing the relevant laws to create a place at the video distribution table for ivi and its brethren. But let’s face facts.  ivi hasn’t operated in about two years, and it’s hard to see how ivi could have raised revenue to keep the fight going; one also has to wonder whether it’s been able to attract funders to its cause in the face of repeated judicial defeats.

Lacking the nutrients necessary for any business to survive, and facing the toxicity of multiple losses on the judicial front, ivi may simply wither away like so many innovators before it.

But even if ivi does wither, other contestants remain in the video-delivery-by-Internet race.  Ivi’s legal theory was, for instance, distinct from the theory underlying approach taken by Aereo and its quasi-twin, AereoKiller. As our readers know, though, that latter approach has received mixed reactions in court, with Aereo preliminarily succeeding while AereoKiller not so much.

[Blogmeister’s note: The Supreme Court recently heard arguments in McBurney v. Young, a case involving a “citizens-only” limitation on state FOIA rights in Virginia. This was smack in the wheelhouse of Kevin Goldberg, a/k/a the Swami, who has long specialized in matters affecting access to information and the rights of the media. He attended the argument and provided this report.]

If you want to hear (and see!) what I had to say right after the McBurney argument, click here – that’s where you’ll find a video interview with me conducted by our friends at LexBlog only hours after the argument wrapped up. In the interview I hit the high points of the case, but for you, my faithful readers, I’ll flesh out a few more facts and the reasoning behind my prediction.

The case started when two individuals – neither of them a Virginia citizen – filed requests for information under the Virginia Freedom of Information Act.  Mark McBurney requested records relating to child support owed to him by his ex-wife; Roger Hurlbert sought property assessment records for business purposes.  Each request was denied because the Virginia FOIA is (with some limited exceptions) available only to Virginia citizens and neither McBurney nor Hurlbert is a Virginia citizen.

Those denials were upheld by the U.S. District Court for the Eastern District of Virginia, which held that Virginia’s law does not unreasonably discriminate against non-residents. The case was appealed to the U.S. Court of Appeals for the Fourth Circuit.

I got involved in the case at that point.

ASNE’s interest in the case is understandable. Virginia is one of only three states that have citizens-only FOI laws; a decision upholding Virginia’s law could lead the other 47 states to jump on the citizens-only bandwagon. And that in turn could result in unnecessary burden and expense for journalists, who would be forced to pursue state-based FOI requests by proxy, i.e., hiring others to make the requests on their behalf.

The issues before the Court were whether the “citizens only” provision violates one or another of two constitutional provisions, either (a) the Privileges and Immunities Clause (Article IV, Section 2, Clause 1) or (b) the “Dormant Commerce Clause”. The latter is a doctrine, derived from the Commerce Clause (Article I, Section 8, Clause 3), which provides that a state shall not unreasonably discriminate in favor of its own citizens and against non-citizens in matters of interstate commerce. 

To win, McBurney/Hurlbert will have to show: first, that access to records under a state FOI law is either: (1) a fundamental right (triggering the Privileges and Immunities Clause) or (2) an activity constituting or affecting interstate commerce (thus triggering the Dormant Commerce Clause); and second, that the law unreasonably discriminates against non-citizens.

As I joined fellow amateur-court watchers – and some professional reporters – outside the courtroom post-argument, at least a few thought the Court would rule in favor of the state.  I initially thought so as well. After all, the first 20-30 minutes didn’t go so well for the challengers. But by the end of the arguments, the tide had swung quickly and swung hard, so hard that I swore I saw Earle Duncan Getchell, Jr., Virginia’s Solicitor General, noticeably fidgeting.   So trying to pick up reliable signals from the back-and-forth between Justices and counsel wasn’t easy – it seldom is.

But I’m the Swami, and reading those tea leaves is what I do. So here goes.

I think the Court will, by a 6-3 vote, find the Virginia statute violates the Dormant Commerce Clause.   Chief Justice Roberts will be joined in the majority by Justices Kennedy, Breyer, Ginsburg, Sotomayor and Kagan. Justices Scalia, Thomas and Alito will be in the minority.

Let’s start with my predicted minority. 

As usual, Justice Thomas didn’t ask a single question; Justice Alito didn’t either. But, given their historical positions, I think it’s safe to say they’ll side with Virginia on this one. Justice Scalia, who did ask a number of questions (no surprise there), also seemed skeptical of the notion that Viriginia should be required to open up its records to anybody. At one point he mused that Virginia “do[es]n't want outlanders mucking around in – in Virginia government. It's perfectly okay for good old Virginians to do that, but they don't want outlanders to do it. Why – why is that unreasonable?”

On the other end of the spectrum, Justices Ginsburg, Sotomayor and Kagan seemed clearly to favor Messrs. McBurney and Hurlbert. While – sadly – none seemed convinced that access to governmental-maintained information is itself a fundamental right, each did seem to believe that this information (and access to it) is an essential element of national commerce and that the state had no valid reason for hindering non-Virginians’ access to it.  (Sotomayor, in particular, launched into her questioning of Virginia’s Getchell before he even got a word in edgewise.) Each of these Justices appeared to have trouble understanding how the state could claim to be burdened by providing information to non-citizens, given that it really doesn’t cost the state any more to do so.

Chief Justice Roberts and Justices Kennedy and Breyer seemed a little more on the fence. But, in the end, I think they share Justice Sotomayor’s concerns. Both Roberts and Breyer, at different points, appeared frustrated by Getchell’s attempts to portray the Virginia FOI law as simply “political in nature” (which, according to Getchell, would mean the law couldn’t violate the Dormant Commerce Clause – an argument that Scalia seemed to buy completely). 

Roberts even dropped his usual poker face, wincing as Getchell tried to explain that the Virginia FOI law is not intended to, and does not, affect “commerce”. Breyer seemed to literally swat that argument away with the back of his hand. Kennedy pressed hard on the issue of whether the Court had the power to determine that the law does in fact affect commerce, contrary to Getchell’s insistence that there was no evidence to support such a conclusion.

So there you have it, kids. To repeat my bottom line – 6-3 in favor of McBurney/Hurlbert, in what would be a welcome affirmation of the importance of access to information. (The framers would have wanted it that way.)

Like that gambler who just doesn’t know when to quit, always looking for the big score, our friends at Mission Abstract Data (MAD) – through their latter-day identity, DigiMedia – are back at the table.  On February 14, DigiMedia filed lawsuits against four radio companies with stations in Texas, arguing that the companies have engaged in patent infringement. (You can find links to the complaints, sans attachments, here, here, here and here.) The allegations are essentially identical to those advanced by MAD in federal court in Delaware against seven large radio companies back in March 2011.  The fact that the new lawsuits aren’t markedly different from those earlier, still pending, suits actually raises some questions.

We’ve been dutifully following and reporting on the Mission Abstract Data (now “DigiMedia”) patent saga for nearly two years.  (Standard disclaimer: we are NOT patent attorneys, and make no claim to special familiarity with patent law in general or as it might apply to MAD’s arguments.) As of late December it looked like the saga was nearing its end. That’s when the United States Patent and Trademark Office (USPTO) – for the second time – reexamined the patents underlying MAD’s claim and appeared to narrow the scope of those patents dramatically. 

Despite that apparent setback, MAD has now come roaring back, suing four separate licensees with FM stations in Tyler, Greenville, Denison and Palestine, all in Texas.

You may be asking the same question we are.  Why are these cases being filed against these defendants just now?  As we said, we’re not patent attorneys, so we’re hoping that some actual patent attorneys might offer up their thoughts.

To the non-expert eye, DigiMedia’s timing is curious. When the USPTO issued its second reexamination order regarding the two patents in December, it looked like the end of the line for DigiMedia. Then they moved – again – to lift the stay that has stalled their Delaware lawsuit for more than a year, and the court there scheduled a hearing on that motion for March.  Could it be that there’s still some life in DigiMedia’s claims?

Or is there a reason that these defendants were singled out from all possible candidates around the country that have also refused to sign the licensing agreements that MAD and its cohorts have been pushing?   One theory: might these stations have been chosen because they are all located in an area under the jurisdiction of a federal court reportedly known for fast-track processing of patent cases. (That would be the U.S. District Court for the Eastern District of Texas, Marshall Division.)  Is this simply a last roll of the dice, a double down, an “all in” at the best table it could find?  Is MAD trying to get a quick win to revive its flagging campaign before they have nothing left in their wad? 

It does appear that they’re trying to move fast.  The choice of the Eastern District of Texas, with its reputed “rocket docket”, is one clue. Additionally, it looks like DigiMedia didn’t spent a lot of time on putting these complaints together.  As we said, they’re all pretty bare bones and identical to each other – so identical, in fact that the complaint filed against one defendant referred to that defendant with an abbreviation used for one of the other defendants, which suggests that the complaints may have been just a bunch of cut and paste jobs. 

What’s peculiar about the complaints is that they don’t mention the USPTO’s December, 2012 further reexamination of MAD’s patents. MAD clearly is aware of that reexamination – they have indicated that they intend to respond to it this month – so why DigiMedia would rely in its complaints on the USPTO’s reexamination action from last July but not say diddly about the more recent reexamination in December is something of a mystery. (Of course, the fact that the December action arguably gutted MAD’s claims might be one serious disincentive, but still, does DigiMedia really think that the court isn’t going to find out about that action sooner or later?)

Whether the latest flurry of lawsuits is anything more than a bluff remains to be seen. We may know more on that score when we get the answers to a few more questions, such as:

Will MAD sue anywhere outside the Marshall Division of the U.S. District Court in the Eastern District of Texas?

What will MAD produce in its response to the USPTO in the second reexamination proceeding that might finally convince the USPTO of the validity of MAD’s various patent claims?

Will the United States District Court for the District of Delaware lift the stay in the first lawsuit and, if so, what will it then do?

At a minimum, DigiMedia’s suits have gotten the defendants’ attention, and our attention, and probably the attention of other similarly situated, small- to mid-sized radio stations. Check back here for updates.

We expect some of our readers may disagree with Kevin’s views, and we expressly invite those who do disagree to share their views with us in comments, or possibly even in a guest post.]

Nearly 50 years ago, Congress passed the federal Freedom of Information Act (FOIA), giving all of us citizens access to the records of every executive branch agency (subject to nine very narrowly-construed exceptions). The FOIA embodies the fundamental premise that the public has a right to know how the government does the public’s business.

A decade later, in the wake of the Watergate scandal, Congress passed the Government in the Sunshine Act (a/k/a the Sunshine Act), again seeking to ensure the public’s right to know. (In Congress’s words, “Government is and should be the servant of the people, and it should be fully accountable to them for the actions which it supposedly takes on their behalf.”) The Sunshine Act gives us all access to the meetings of certain executive branch agencies, much as the FOIA give us access to those agencies’ written records.

Maybe not for long, though, at least as far as the FCC is concerned.

Bills proposing the “Federal Communications Commission Collaboration Act of 2013” have been introduced in Congress – as S. 245 by Senators Amy Klobuchar, D-MN, and Dean Heller (R-NV) and H.R. 539 by Representatives  Anna Eshoo (D-CA), John Shimkus (R-IL), and Mike Doyle (D-PA). Under the bills’ provisions, FCC Commissioners would be allowed to engage in a significant amount of regulatory activity outside of the public’s view.

For years, officials subject to the Sunshine Act – including a number of FCC commissioners – have complained that it doesn’t easily allow for informal brainstorming sessions or other get-togethers involving multiple agency members. Maybe so, but I see that as at most a minor inconvenience when the goal is holding those in power accountable for their actions. Others obviously don’t agree with me, because the possibility of a Sunshine Act exemption specifically for the FCC has been repeatedly advanced for nearly a decade. A version of the FCC Collaboration Act was inserted into larger FCC reform legislation last year, but that legislation didn’t pass, which is why we’re back here again. 

The current bills would effectively exempt the Commission from the Sunshine Act by allowing three or more Commissioners to meet if:

• The meeting is bipartisan;
• No votes or formal agency actions are taken at the meeting;
• Everyone attending the meeting is either an FCC Commissioner, a Commission employee, the member of a federal-state joint board or on the staff of such a joint board;
• An attorney from the Commission’s Office of General Counsel is also present; and
• No later than two days after the meeting concludes, the Commission publishes on its website a disclosure listing those who attended and providing a summary of matters discussed.

So why do the bills’ sponsors believe that the FCC deserve this exemption? According to the bill’s “Findings” section:

FCC Commissioners past and present have complained that the Sunshine Act has “hindered the ability of the Commission to have a substantive exchange of ideas and hold collective deliberations on issues pending before the Commission.”

One of the main reasons for having agencies in the first place is to “obtain the benefits of collegial decisionmaking by the members of the agency, who bring to the decisionmaking process different philosophical perspectives, experiences, and areas of expertise.”

To avoid the procedural requirements of the Sunshine Act, Commissioners have resorted to “an inefficient combination of written messages, communications among staff, and a series of meetings restricted to two Commissioners [i.e., less than a quorum, thus not triggering the Act] at each such meeting to discuss complex telecommunications matters pending before the Commission.”

“Extensive use of such methods of communication has harmed collegiality and cooperation at the Commission. “

The FCC is facing a years-long backlog of “[n]umerous regulatory matters . . . continued inaction on [which] has the potential to hinder innovation and private investment in the domestic communications industry.”

The Commission must be able to work “more collaboratively and efficiently than in the past to meet the current challenge of expanding broadband Internet access to the extent necessary to serve the business, educational, health, and cultural needs of all people in the United States.”

So the FCC Commissioners don’t like the Sunshine Act because compliance somehow makes it a little harder for them to be collegial and cooperative and collaborative with one another? And that’s why there are backlogs at the agency? Seriously?

Sure, the FCC Collaboration Act – and Commissioners past and present – may pay lip service to the idea of the Sunshine Act and its goal of governmental accountability, but they plainly don’t think that that notion necessarily applies to the FCC. For some reason, the FCC is supposedly special and thus shouldn’t be hog-tied with the pesky procedural niceties the Sunshine Act requires. 

At this point I’m reminded of the opening statement of one Vincent LaGuardia Gambini in the fictitional trial of Alabama v. Gambini. Mr. Gambini (known familiarly as “Vinny”) tersely but emphatically expressed incredulity at the claims advanced by the government in that case. Ditto here.

The FCC isn’t special and it doesn’t deserve a special Sunshine Act exemption any more than, say, the Securities and Exchange Commission does. And the SEC doesn’t deserve such an exemption any more than the Postal Rate Commission does. They’re all agencies that are making decisions which affect billion dollar companies and industries, as well as the lives of millions of Americans, every day. They all deal in complex, often rapid-moving, issues, just like the dozens of other agencies subject to the law. 

But nobody would dare propose repeal of the Sunshine Act in its entirety. It’s too important to our freedom from government corruption. That’s why the Act was passed in the first place: to push back against excessive government secrecy. In my view, the law’s real flaw – and that of the FOIA – is that they don’t do enough to truly hold government agencies accountable. To some degree the Sunshine Act and FOIA have almost become paper tigers. Indeed, the “findings” set out in the FCC Collaboration Act make clear that agencies have identified, and implemented, multiple ways of circumventing the Sunshine Act – communicating through intermediaries, or by memo, or in serial meetings none of which include a quorum. 

Maybe compliance with the Sunshine Act is less convenient than it might be. But note that the central impetus for the FCC Collaboration Act appears to be not inconvenience, but rather the odd notion that Commissioners are somehow less likely to be “collegial” or “cooperative” or “collaborative” with one another if they have to communicate in writing, or through aides, or by serial conversations. And because of that supposed lack of “collegiality”, “cooperation” and “collaboration”, we should simply abandon the Sunshine Act for the FCC.

Let me get this straight. Commissioners find it hard to be collegial or cooperative or collaborative with one another if they’re required to do their business in public, but if we let them have at each other behind closed doors, collegiality, cooperation and collaboration will reign and backlogs will melt away? Uh huh.

Back in the 1960s, when the FOIA was enacted, my former boss and mentor, Richard M. (“Dick”) Schmidt, was General Counsel for the United States Information Agency (USIA). Dick was a political appointee who spent much of his time before government (and all of his time afterward) advocating for open government and the First Amendment. He preceded me as the Legal Counsel to the American Society of News Editors.

As Dick told the story, a longtime USIA staffer came into his office complaining of the supposedly adverse impact the FOIA would have on the USIA’s operations. As the complainant saw it, “everything we do will be public. The [people out there will] know what we’re up to. They’ll know everything!”

To which Dick replied: “Those people out there pay our salaries. We work for them. They deserve to know what we’re up to. They deserve to know everything”. 

The Sunshine Act doesn’t guarantee us that we’ll ever know everything, but it’s at least a long step in the right direction. The FCC Collaboration Act, on the other hand, would constitute a sad retreat, a concession that closed doors and backroom deals are the preferred SOP in government.

An important irony here is that the current FCC is seeking to expand its reach into all kinds of new areas that directly impact individual citizens, from Internet governance to net neutrality to cyber security. In the face of such expansion, is it really wise to allow the Commission to cloister itself further away from the public who will feel the brunt of its decisions?

[Blogmeister’s epilogue: Here’s a thought. Let’s say, for the sake of argument, that the inconvenience of providing seven days’ notice before a “meeting” can be held, and the requirement of opening those meetings to the public, really are stifling collegiality, etc. So why not simply allow Commissioners to meet and do as much business as they like, whenever they like, provided that all such meetings are recorded in toto – video would be nice, but a clean audio recording would probably do the trick – and made available on the FCC’s website within 24-48 hours of the meeting? It might be useful to have an independent person – maybe an attorney from the General Counsel’s office, or maybe the Inspector General – attend any such meeting and certify that the recording in fact reflects the entirety of the session. The Commission’s meeting room is equipped for such recording – and we’re guessing that Commissioners’ offices could be set up for such recording as well, if they’re not already. 

Since the ability to meet on short notice, without an intrusive audience, would supposedly lead to increased collegiality, cooperation and collaboration – not to mention increased productivity and reduced backlogs – it’s hard to imagine that any Commissioners, newly liberated from the oppressive restraints of the Sunshine Act, would object to the immediate availability of such recordings.]

According to famed lyrical poet Paul Hewson (“Bono” to his millions of friends), “nothing changes on New Year’s Day”. He reportedly started writing the song as a love paean to his wife, although it eventually morphed into a political statement inspired by the Polish Solidarity Movement. Regardless of the song’s broader political statement (or anybody’s personal notions about the significance of New Year’s Day), the plain statement isn’t true: things do change on New Year’s Day. 

Compliance with the statutory license applicable to webcasting is one of those things. 

When the ball drops in Times Square, webcasters are faced with updated forms to fill in and submit, a new cycle for reporting, and a clock ticking down the 31 days until the annual minimum fees of $500 per channel must be sent to SoundExchange. 

Thankfully, much like last year, the changes from 2012-2013 are pretty minor. The rates have increased slightly. The forms have changed a little (with a new look and feel), although that shouldn’t be anything to worry about if you’ve done this before. And, in perhaps the most noteworthy change, there are actually fewer forms for some webcasters to file. Here’s an overview of what will be expected of webcasters in 2013.

Radio stations who are streaming online (most often consisting of a simulcast of the station’s over-the-air signal, though perhaps offering one or more “side channels” as well) normally fall into one of three categories: commercial broadcaster, noncommercial webcaster, and noncommercial educational webcaster. Remember that the distinction between “commercial” and “noncommercial” is based not on the station’s FCC license, but rather on whether the entity offering the webcasting service is exempt from federal income taxation under Section 501(c) of the Internal Revenue Code. There is a further distinction between “noncommercial webcaster” and “noncommercial educational webcaster”, the latter being affiliated with an accredited educational institution whose students substantially staff the webcasting operations.

There are also sub-categories within each category. For instance, a noncommercial webcaster can self-classify under the “CRB” or “WSA” designations. “CRB” stations are subject to the rules put in place by the Copyright Royalty Board in its Webcasting III decision applicable to the years 2011-2015; “WSA” stations are subject to the relevant Webcaster Settlement Agreement. 

The designations of “commercial broadcaster”, “noncommercial webcaster (WSA)” and “noncommercial educational webcasters” include special categories for smaller entities which come with some benefits. By paying an extra $100 “proxy fee” with its annual minimum payment, a commercial broadcaster who had fewer than 27,777 “aggregate tuning hours” in the previous year and expects to do so again can receive an exemption from the rather onerous monthly “Playlist Report of Use” requirement. Ditto both for a noncommercial webcaster (WSA) who had fewer than 44,000 aggregate tuning hours in the previous year and expects to do so again, and for the noncommercial educational webcaster who had fewer than 55,000 aggregate tuning hours in every month (though you can go over in one month) and expects to do so again. 

You choose your category – or, if applicable, your status as a small broadcaster or microcaster – when you file your Annual Minimum Fee Statement of Account form with SoundExchange. That form is due by January 31, 2013. Note: in prior years, small broadcasters or microcasters had to file a separate “Notice of Election” form; this year that election is incorporated into the Annual Minimum Fee Statement of Account form, which includes a line where the webcaster will indicate its election to pay the $100 “proxy fee”. 

But that’s not all: your obligations continue throughout the year. With the exception of the noncommercial educational microcaster, everyone – whether payment is required or not – must file a Monthly Statement of Account form with SoundExchange within 45 days of the end of the month in question. Full-sized commercial broadcasters, noncommercial webcasters and noncommercial educational webcasters have to file Playlist Reports of Use on a regular basis – generally monthly – as well.

So consider yourself reminded: if you are engaged in “non-interactive webcasting”, you will need to find the proper Annual Minimum Fee Statement of Account Form and send it to SoundExchange along with your payment of $500.00 per channel by January 31, 2013. If you qualify either as a “small broadcaster” or under one of the “microcaster” categories, you may also pay an extra $100 per channel in exchange for an exemption from the requirement that you file Playlist Reports of Use on a monthly or quarterly basis (but you don’t need to use a separate Notice of Election form this year).  However – with one very minor exception for noncommercial microcasters – regardless of your classification or size, your obligations do NOT end on January 31, 2013. You will need to file Statement of Account forms and, possibly, Playlist Reports of Use throughout the year.   

You can get more detailed information about every category via the “How do I Pay” page on the SoundExchange website. We’re here to help as well.

[UPDATE:  This morning, after we had posted this piece, our friends at SoundExchange sent around a note advising webcasters of a new SoundExchange-produced video in which they “break down what your service needs to submit to be compliant with the statutory license for 2013”.  You can find that video at this link.  And, of course, webcasters can also get help from the SoundExchange Licensee Relations group at 202-559-0555.]

With four minutes to go in the AFC Championship game and the Ravens looking good for a trip to Super Bowl XLVII®, I noticed that the hashtag #Harbowl was already blowing up on my Twitter feed.  That’s because a Ravens victory would mean that, for the first time in NFL history, two brothers – those would be John and Jim Harbaugh, of the Ravens and Forty-Niners, respectively – would be facing each other as head coaches in the Super Bowl®.  Look for “Harbowl” to become the unofficial moniker for the game.

Being a trademark lawyer geek, I immediately flashed on two thoughts: (1) how quickly could  I get an application on file with the U.S. Patent and Trademark Office (USPTO) to register “Harbowl” as a trademark (for hats, shirts, bumper stickers, temporary tattoos and all the other impulse items that NFL fans will be craving for the next two weeks); and (2) what are the chances that I could get that application granted?

Answer to Question One: I might be able to have an “intent to use” application on file before the game is done – it’s just that easy to file for trademark protection.  (Tip to readers: The ease of filing for such protection is a reason all of you should consider protecting your call signs, program names, slogans and other important brands by filing applications for federal trademark registrations.)

Answer to Question Two: “slim” and “none”, since – thanks to federal trademark law – I’d probably need the permission of the Harbaugh brothers to trademark something referencing their names. 

And that’s before the NFL has its say.

Geek that I am, I searched the USPTO database for “Harbowl”.  Turns out I wasn’t alone in this thought, but I was about a year too late.  Back in February, 2012, Roy Fox of Pendleton, Indiana filed an “intent to use” application for “Harbowl” in conjunction with “hats; t-shirts”.  Mr. Fox’s application made it through the initial processing steps.  (I’m guessing that the USPTO examining attorney wasn’t a football fan and thus may not have recognized “Harbowl” as a reference to a Harbaugh v. Harbaugh Super Bowl®.)

But then the NFL stepped in. 

The NFL and NFL Properties, LLC each filed multiple requests for more time in which to oppose Mr. Fox’s application.   Those requests were granted, giving the NFL and NFL Properties, LLC until early November, 2012 to file their objections.  (The original due date for objections was in July, 2012).  For whatever reason, Mr. Fox abandoned his application for “Harbowl” on October 26, 2012.

I personally don’t really believe that the NFL has a legitimate beef about “Harbowl” because that neologism doesn’t create a likelihood of confusion – the legal test for trademark infringement – with any of the “Super Bowl” trademarks that the NFL owns. (I addressed some of those in last year’s post.)   “Harbowl” doesn’t incorporate other NFL trademarks like the Ravens’ or Forty-Niners’ names, logos (or, to be safe, colors), much less make any reference to “Super Bowl”.   

Even so, this underscores how aggressive the NFL is when it comes to asserting control over anything that could conceivably be related to the Super Bowl®.  (Shades of the “Who Dat” kerfuffle that arose in 2010!)  Because of that, all broadcasters should exercise extreme care when it comes to using NFL-trademarked words or logos – including, most obviously, the many uses of Super Bowl® – in any way that makes it appear that you have a connection with, or the endorsement of, the NFL. 

That means that you should not promote your contests with the words “Super Bowl” or anything resembling those words. Don’t promote events like game-watching parties.  Familiarize yourself with the list of NFL-owned trademarks, which include all team names and logos.  You may use those terms on-air, but only for news and information, not commercial or entertainment, purposes.  Don’t even accept advertisements from others using the term “Super Bowl” unless you have absolute certainty that the advertiser has a license to use the trademarked term.

(And as long as we’re on the subject, we’re giving you a couple months’ notice that the same applies to “March Madness” when the NCAA basketball tournament starts up in that month.  Ditto for most other recurring, high-profile events (e.g., the Oscars®, the Olympics®, etc., etc.))

As you can see from the way that they got right up in Mr. Fox’s grill at the USPTO, the NFL doesn’t mess around.  And while his encounter with the NFL probably cost Mr. Fox a mere $275 (that is, the extremely modest filing fee for his application –another reason you should consider applying for protection of your own marks), you might find yourself in a much more expensive predicament.  When it comes to trademark infringement claims, the NFL doesn’t just litigate at the USPTO; rather, they’ve shown an affinity for going to big boy court and seeking big time damage awards when it suits their needs.

So, we salute you, Mr. Roy Fox.  Not just for your creativity, foresight and entrepreneurial spirit, but also for the relatively inexpensive reminder you’ve given to broadcasters around the country.  The take-home lesson here: do NOT promote yourselves, your stations, your events or any of your commercial interests using the words “Super Bowl” or other NFL trademarks unless you have permission from the NFL to do so.  You CAN report on the game and/or events (including official NFL events) surrounding the game, but using NFL-registered trademarks for promotional purposes without permission can cause you a world of grief.

And a personal note to Mr. Fox: I hope you put your obvious foresight to profitable use.  When you applied for the “Harbowl” mark in February, 2012, the Ravens were around 14-to-1 and the Niners were about 20-to-1 to win the Super Bowl back then.  I’m sure the odds of both teams getting to the Big Game would have been astronomically higher, and any of those “prop bets” would have made you more money than selling t-shirts would in any event.

[And now for my annual prediction.  This is tough.  It’s going to be a great game, and I’m personally torn between the two teams.  On the Ravens side, I grew up in Maryland and know that a Ravens Super Bowl win will tick Redskins fans (and Redskins owner Dan Snyder, a megalomaniac in the eyes of many) off to no end, and I love that.  On the Niners side, I love SF, having split time between that city and DC for about three years and knowing many people that will be very happy about a Niners win.  But San Francisco already celebrated a World Series win in the past few months – their second in three years to boot – and I’m all for spreading the wealth.  (Plus I’m not sure the Mission can stand another championship celebration).  So you heard it here first: the Swami sees the Ravens over the Niners, 24-21.]

Remember Aereo, the Barry Diller-backed startup seeking to revolutionize the way we watch television? (Hint: It’s the video delivery service that uses rooms full of dime-sized antennas, each assigned to a different subscriber, enabling said subscriber to watch broadcast television via any mobile, Internet-based device.) As we reported last summer, Aereo won a key legal battle in New York in July, when a federal judge OK’d the continued provision of Aereo’s service at least temporarily. (Technically, the judge refused to issue a preliminary injunction requiring Aereo to shutter its service while it’s being sued by a number of broadcasters claiming that the Aereo service infringes their copyrights.) 

You may also recall Alki David, the owner of several services providing online distribution of over-the-air television (and other) programming. The most relevant for our purposes are FilmOn.com and Aereokiller. 

David’s Aereokiller service seems to have drawn inspiration (not to mention its name) from Aereo’s service. While not absolutely identical to Aereo, Aereokiller rests on the same general technology and the same basic legal principles as Aereo. (In its court filings, Aereokiller argues that it is not only technologically analogous to Aereo but, in fact, “better and more legally defensible”). And further highlighting the influence of Diller’s Aereo service on David’s Aereokiller service, the latter was originally launched via a website found at www.barrydriller.com (though it has now migrated to David’s FilmOn.com site and is available via an Aereokiller app); it appears to be operated by the David-owned “Barry Driller Content Systems, PLC”. At least I think I’ve got that corporate structure right (there’s clearly a lot going on here). 

In any event, it’s easy to suppose that David may have Aereo and Barry Diller in his sights, at least competitively. But a recent decision by a federal judge in Los Angeles could deep-six both Aereokiller and Aereo: Judge George Wu from the United States District Court for the Central District of California has issued a preliminary injunction against at least some aspects of Aereokiller’s operation.

Like Aereo, Aereokiller was sued by virtually every major broadcast network soon after it began streaming signals of the network affiliate stations in Los Angeles. Using the same approach they had tried, unsuccessfully, in the NYC litigation against Aereo, the networks sought a preliminary injunction, asking Judge Wu to stop Aereokiller from retransmitting the networks’ over-the-air broadcasts until the litigation had been concluded. 

As we learned in the Aereo preliminary injunction post, the networks could win their motion for preliminary injunction only if they could show:

• A likelihood of succeeding on the merits of the case itself;
• That they would suffer irreparable harm in the absence of preliminary relief;
• That the balance of equities tips in their favor;
• That an injunction is in the public interest.

In both the Aereo and Aereokiller cases, the broadcasters were able to satisfy three of those four criteria. But you need all four, and in the Aereo case in New York, the judge was not convinced that the broadcasters were likely to prevail on their central infringement claim – because the Second Circuit’s Cablevision decision posed an insurmountable obstacle to that claim. So Aereo was allowed to continue to operate.

Aereokiller was not so lucky. Judge Wu in Los Angeles concluded that the broadcasters are likely to prevail. 

First, and foremost, he reminded everyone of basic geography: California is in the Ninth Circuit, not the Second Circuit. Therefore, he is not bound by either the Aereo decision or the Second Circuit’s Cablevision decision. 

More importantly, Judge Wu surmised that the Ninth Circuit – whose decisions are binding on Wu – would have come out differently in the Cablevision case. His disagreement with the Second Circuit is based on an alternate interpretation of the Copyright Act. In his densely reasoned opinion, Judge Wu parsed the meaning of terms such as “transmission”, “copy”, “work”, “performance” and “performance of a performance”. He concluded that, in Cablevision, the Second Circuit placed too much importance on whether the end user (i.e., the Aereo subscriber/viewer) was ultimately receiving a public performance of a transmission; the key issue should have been whether the end user is receiving a public performance of a copyrighted work “irrespective of which copy of the work the transmission is made from”. 

As the Judge explained:

Very few people gather around their oscilloscopes to admire the sinusoidal waves of a television broadcast transmission. People are interested in watching the performance of the work. And it is the public performance of the copyrighted work with which the Copyright Act, by its express language, is concerned. Thus, Cablevision’s focus on the uniqueness of the individual copy from which a transmission is made is not commanded by the statute.

Judge Wu also cited a law review article by the esteemed (by some) Judge Richard Posner (from the U.S. Court of Appeals for the Seventh Circuit), who proposed this analysis of the considerations relevant to the assessment of copyright infringement claims:

A rational resolution of the issue requires discerning the purpose of giving the owner of a copyrighted work the exclusive right to perform it. The purpose is to prevent the form of free riding that consists of waiting for someone to spend money creating a valuable expressive work and then preventing him from recouping his investment by copying the work and selling copies at a price below the price the creator of the work would have to charge to break even.

As Wu sees it, in Judge Posner’s terminology, Alki David and (presumably) Barry Diller are in effect free riders. 

All of which puts the Aereo decision (from a District Judge in the Second Circuit) and the Aereokiller decision (from a District Judge in the Ninth Circuit) on course for a collision in the Supreme Court.

If both the Second Circuit and the Ninth Circuit affirm their respective lower courts’ views as to what constitutes a public performance, the result will be a classic “circuit split” that could be resolved only by the Supreme Court (unless Congress were to intercede with legislation addressing the problem). In my mind, it’s dead-on certain that the Supreme Court would agree to resolve the split in Circuit law, should such a split develop. The Supremes would have to resolve that split because avoiding it would result in a nationwide service being treated differently according to region, with similar parties treated in vastly distinct manners under the law.

In that case the Supremes would likely consider not only how the statutory language itself must be read, but also what Congress intended and how much weight that perceived intention should be accorded. That, in turn could, lead to Congressional revision of the definition of “public performance”, should Congress disagree with the Court’s decision. In which case, there is still the possibility that David, Diller and innovators everywhere win in the end (and for that, from a strictly legal-nerd perspective, I love them . . . because this will be fascinating to watch). 

But that’s all a bit speculative – we probably won’t get to that point for a year or two, if ever.

In the meantime, the situation will have to remain geographically muddled. In the Second Circuit, Aereo may still operate its service (although the legal momentum Aereo had been enjoying may be diminished some thanks to Judge Wu’s contrary analysis). But in the Ninth Circuit, Aereokiller – although offering a service extremely similar to Aereo’s – may not

retransmit[ ], stream[ ], or otherwise public perform[ ] or display[ ] within the geographic boundaries of the [Ninth Circuit], directly or indirectly, over the Internet (through websites such as filmonx.com or filmon.com), via web applications (available through platforms such as the Windows App Store, Apple’s App Store, the Amazon Appstore, Facebook or Google Play), via portable devices (through applications on devices such as iPhones, iPads, Android devices, smart phones, or tablets), or by any means of any device or process, the Copyrighted Programming.

For purposes of the injunction, “Copyrighted Programming” refers to all broadcast TV programming in which any of the plaintiff broadcasters holds an exclusive right under the Copyright Act. The plaintiffs include NBCUniversal, Telemundo, ABC/Disney, CBS, Open 4 Business Productions and Big Ticket Television, Inc.

The Second Circuit encompasses New York, Connecticut and Vermont. The Ninth Circuit covers Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, the Northern Mariana Islands, Oregon and Washington – and Guam and the Northern Mariana Islands, too! 

That leaves a huge chunk of America’s heartland in which Aereo and/or Aereokiller may or may not be deemed legal. For now, the Swami will remain silent on where he sees this going. . . .

Holiday cheer came a little early for many radio broadcasters this year: Santa Claus (disguised as patent examiners at the U.S. Patent and Trademark Office (USPTO)) issued two “Detailed Actions” with respect to challenges that had been directed to the two patents held – and vigorously brandished – by Mission Abstract Data (MAD). Both of those “Detailed Actions” (one related to Patent No. 5,629,867, the other to Patent No. 5,809,246) rejected multiple claims to the patentability of MAD’s technology.

As a result, the likelihood that MAD (or its successor, Digimedia, or its licensing agent, IPMG AG) might receive a significant damage award in any patent infringement litigation which it has broadly hinted at has been reduced substantially.

Regular CommLawBlog readers should be familiar with the MADness that has afflicted the radio industry since 2011. (New to the subject? Get a refresher course by checking out our archives on the subject here.)

Litigation ensued, as a number of the targeted broadcasters sued MAD in federal court in Delaware. They claimed that MAD’s patents were invalid. Meanwhile, at least one equipment manufacturer pressed the USPTO, which had issued the original patents, to take another look. The USPTO agreed to do so, at which point the court in Delaware stayed further proceedings in the broadcasters’ suit pending further USPTO action.

The USPTO initially appeared to rule against MAD in the fall of 2011, but MAD sought further review.  Last summer MAD seemed to be claiming victory when the USPTO appeared to un-toss some of MAD’s patent claims that had appeared to have been tossed in the 2011 action. With that new USPTO ruling in hand, MAD launched another round of FedEx-borne licensing offers (along with follow-up telephone sales pitches) to many radio licensees; it also asked the Delaware court to lift the stay.

Not so fast, said the broadcasters. Further USPTO proceedings were going to be sought, so let’s not be acting prematurely. And sure enough, such further proceedings were sought. The end result (at least as of now): the USPTO’s latest “Detailed Actions”, which appear to reject all of MAD’s claims. It seems that the patent examiners identified a number of technologies similar to MAD’s that had been in existence prior to the issuance of the patents MAD holds. In the examiner’s view, many aspects (possibly all) of MAD’s technology were simply obvious extensions of the earlier technology, and were therefore not properly patentable.

This, of course, is what the radio industry has been arguing from Day One. Not surprisingly, MAD has disagreed, claiming in a June, 2012 blog post of its own that its patents were valid. In that post, MAD also pooh-poohed its initial USPTO set-back (in fall, 2011), saying that such reexamination and reissuance of the patents was statistically normal and of little bearing on the patents’ ultimate validity and value.   (Personal note: in its blog post MAD even went out of its way to take issue with statements I had made in earlier posts here on CommLawBlog; I stood by my statements then and I stand by them even more now.) Whether MAD will continue to stick with this story in the wake of the USPTO’s latest action remains to be seen.

Is this the end of the line? Don’t bet on that. For one thing, we understand that MAD has until January 19 to respond to the USPTO’s latest decision. Following that date, the USPTO could either issue a “final action” formally rejecting MAD’s patent claims, or it could once again re-issue the patents. In the latter case, though, any reissued patents would likely be narrower in scope than they are today (which – and this is disputed by MAD in its blog post – are narrower than the original patents). No matter what, the reexamination procedure is likely to go on for some time – this is something no one disputes.  (Another thing that no one disputes -- we here at FHH are not patent lawyers.  We strongly encourage any radio broadcaster to consult with competent patent counsel before doing anything based on the USPTO's latest actions.)

Still, there’s no doubt that the latest development at the USPTO favors the broadcasters more than MAD. The passage of time and likely narrowing of the MAD patents will limit any eventual damage recovery MAD might get via court order or licensing agreement. So while the saga may not yet have come to its final end point, broadcasters can and should enjoy the end-of-2012 holiday season thanks to the early treat left under everyone’s tree by the USPTO – everyone, that is, except MAD.

So now all NCE broadcasters – small community stations, educational institutions and large scale public radio and television stations) – know exactly how much they’ll be paying to ASCAP, BMI and SESAC for the right to use the underlying music and lyrics in all songs included in their over-the-air broadcast programming for the next five years.  (As I have previously mentioned, the new rates/terms technically also cover the use of pictorial, graphic and sculptural works, but the reality is that it’s all about the music.)  

Important note: the CRB’s determination does not relate to the use of sound recordings for webcasting purposes.  The current webcasting royalties, for both commercial and noncommercial webcasters, were set back in 2010, as I described in my post back then.  (As to webcasting royalties, NCE stations should not forget that their annual reports, payments and (in some cases) elections will be due in January, 2013.  Check back here for additional reminders on that score -- although I'll be sending out reminders to many of our clients starting next week.)

The proceedings leading up to the adoption of the 2013-2017 royalties could not have gone more smoothly (even though it did take almost two years to reach this point).

Sure enough, essentially all of the relevant parties were able to get together and hammer out mutually agreeable arrangements, as I reported back in April (with respect to Non-PBS and Non-NPR stations) and June (with respect to PBS and NPR stations).  The CRB has now formally accepted those deals, rejecting minimal objections from a few parties who were technically not even eligible to participate before the CRB.

As an overall matter, rates for the next five years will increase over those currently in effect – there’s a surprise – but not by much.  The increase in every category tends to be no more than 2% over the corresponding rate from the previous five-year period.  The precise dollar figures that will apply are set out in a number of tables and rule sections in the Federal Register.  Since there are close to 200 separate data points, I’m not going to lay them all out here.   I will, however, briefly summarize the factors that come into play in determining which of those figures applies to which types of NCE broadcaster. 

Type of Station.  First, as has historically been the case, royalty rate calculations will vary depending on the type of station in question.  For these purposes there are three types of station: (a) NPR/PBS affiliates; (b) non-NPR radio stations affiliated with educational institutions; and (c) other NCE radio stations that are neither NPR affiliates nor licensed to an educational institution. 

NPR/PBS stations.  For NPR and PBS affiliates (including radio stations licensed to educational institutions), royalties will be based on how each individual piece of music is used.  In particular, they will vary depending on whether the broadcast is (a) a network program or (b) the work of an individual affiliated station (with the latter costing less than the former), and also on whether the musical work in question appears (i) in a “featured presentation” or (ii) merely as background or theme music (again, with the latter costing less than the former).  Rates for PBS and its affiliates will be greater than those for NPR and its affiliates.  The same rates will apply regardless of whether the piece of music is licensed by ASCAP, BMI or SESAC.

Non-NPR radio stations affiliated with educational institutions.  The most obvious change for this universe of stations is the elimination of the one-size-fits-all flat fee approach which has historically been used.  Instead, 2013-2017 rates payable to ASCAP and BMI will involve a tiered system that takes into account the size of the educational institution’s student body.  Different rates will apply to schools with (a) fewer than 1,000 full-time students; (b) 1,000-4,999; (c) 5,000-9,999; (d) 10,000-19,999; and (e) 20,000 or more.  Stations with ERP of 100 watts or less will be entitled to the lowest rate (i.e., the rate for schools with fewer than 1,000 full-time students), regardless of the actual size of the school’s student body. 

No such tiering will apply for SESAC music, however.  Instead, this class of station will pay a flat annual fee of $140, with increases each year thereafter based on a cost of living coefficient equivalent to the greater of: (a) the change in the Department of Labor’s Consumer Price Index in the prior year or (b) 2%.

Other NCE radio stations.   NCE stations not fitting into either of the two classes described above will, as expected, pay flat annual rates, but the rates will vary based on: (a) the size of the population within each station’s 60 dBu contour (along with any additional population provided by translators or boosters); (b) the nature of the station’s programming; and (c) whether the music is licensed by ASCAP/BMI, on the one hand, or SESAC, on the other.  

With respect to the first variable, there are eight separate population tiers, the lowest being fewer than 250,000 and the highest topping off at 3,000,000 or more.  

As to the second, there will now be separate grids of royalty rates for (a) music stations and (b) “talk format” stations.  The former category includes all stations which devote at least 20% of their programming to content in which music is the “principal focus of audience attention”.   The latter includes stations whose program content “primarily consists of talk shows, news programs, sports, community affairs or religious sermons (or other non-music-oriented programming)” and who don’t devote at least 20% of their programming to music annually.

And finally, the royalty grids for music and talk NCE stations will be the same for ASCAP and BMI songs.  SESAC content will be subject to a separate set of rates which will be lower than the ASCAP/BMI rates.  The rates will all rise in gradual increments annually over the five-year term.

Recording Rights

Finally, the cost of the recording rates and terms will increase very slightly (by only a few dollars) for every type of noncommercial broadcast station.

The grids laying out all the various rates are set out in the Federal Register notice.  You can use them to find the rates that will apply to your particular station.  And you can always contact me if you have questions finding the rate applicable to you.  That may not be necessary, though, because you can rest assured that ASCAP, BMI and/or SESAC will be contacting broadcasters sooner rather than later, asking them to put pen to paper on their new agreements, with these new rates, for 2013.

The Radio Music License Committee (RMLC) has sued SESAC in an effort to bring SESAC within the same general judicial constraints as the other two major performance rights organizations (PROs), ASCAP and BMI. According to the RMLC, SESAC (initially founded as the “Society of European Stage Authors and Composers”, but since officially shortened to just “SESAC”) is violating a number of antitrust laws.

The case pits two somewhat misunderstood organizations against each other. 

SESAC, of course, is a PRO, i.e., an organization which represents song composers and to which broadcasters must pay royalties for the right to perform the musical works of SESAC-affiliated composers over the air and online.  (In fact, unlike ASCAP and BMI, which are not-for-profit entities, SESAC is a for-profit PRO).  Comments I’ve received about SESAC from a number of broadcasters have tended to be negative, if not flat-out vitriolic. That may be because of significant royalty rate hikes in recent years, or possibly SESAC’s perceived reluctance to negotiate or otherwise deal with broadcasters when problems arise. Or maybe it’s the fact that SESAC requires radio broadcasters to get a separate license when engaged in webcasting (ASCAP and BMI incorporate webcasting into the existing radio license).

{Blogger aside: As far as general perceptions of both SESAC and RMLC go, stick with the basic principle that you should not believe everything you hear – as well as the journalistic corollary that, if your mother says she loves you, check it out. A healthy dose of skepticism is always a good thing, even (especially) when the general consensus runs one way.  For example, I’ve had several good experiences with individuals at SESAC, especially when working with me on new media issues. And as for RMLC, I’ve spoken favorably about Bill Velez and his crew on several occasions and I still can’t say enough good things about them.   And you can’t argue with the RMLC’s results, which – at least in their recent negotiations with ASCAP and BMI – garners radio stations savings far in excess of the miniscule amount they’re required to pay to RMLC. And any of you who have met Bill Velez know that he is one of the nicest people you’ll ever meet in broadcasting or any other industry, always quick to return a call or help you out when you’re in a jam.)

Whatever the public impression of the players, we’re now looking at RMLC v. SESAC, a court fight initiated by RMLC earlier this month in the U.S. District Court for the Eastern District of Pennsylvania (located in Philadelphia).

The lawsuit alleges multiple violations by SESAC of Sections 1 and 2 of the Sherman Antitrust Act , including horizontal price fixing, a group boycott/refusal to deal, and monopolization. RMLC is asking for a judicial declaration that SESAC’s activities violate the Sherman Act. RMLC is also looking for the court to impose on SESAC the same court-overseen-and-approved ratemaking process that has applied to ASCAP and BMI for more than 70 years. (Historical background: ASCAP and BMI were hauled into court in 1941 by the Department of Justice, which claimed that their operations violated the Sherman Act. ASCAP and BMI both entered into consent decrees subjecting them to significant restrictions in their activities and ongoing oversight by the courts. Those consent decrees remain in effect today. SESAC, which was rather small potatoes at the time and thus not considered much of an antitrust threat, was not sued, and has operated free of those restrictions – that’s what RMLC is looking to change.) 

RMLC is also asking that (a) SESAC be enjoined from entering de facto exclusive contracts with copyright owners; (b) SESAC be required to make available economically viable alternatives to its license; and (c) the RMLC be awarded legal and other fees. 

The RMLC alleges the following:

SESAC has handpicked the composers it will represent so that radio stations must obtain a SESAC license. One relatively unknown aspect of the licensing process is that any individual copyright owner can license use of that work. So, if multiple songwriters own the copyright to a particular composition and one decides to be represented by ASCAP, another by BMI and another by SESAC, a radio station would need only a license from ASCAP, or BMI, or SESAC to play that song. According to the RMLC, SESAC goes out of its way to represent copyright owners whose works don’t run across multiple PROs – thereby forcing a radio station to get a SESAC license to play that particular song. 

SESAC intentionally obfuscates ownership information on its own site to create a sense of paranoia among radio broadcasters who, absent clear confirmation that a song they are playing is not part of the SESAC repertoire, feel compelled to get a SESAC license just to be safe.  [Pop quiz: who holds the rights to “Silent Night”? “Joy to the World”? “Grandma Got Run Over By a Reindeer”? You may be surprised to learn that, in a 2002 lawsuit, a couple of radio stations were held liable to SESAC for more than $1 million for the unlicensed broadcast of those and a number of other, non-seasonal songs controlled by SESAC.]

SESAC ups the pressure on radio stations by actively and aggressively threatening stations with hefty copyright infringement fines for broadcasting SESAC-represented works without a SESAC license.

SESAC limits the types of licenses it offers. For instance, ASCAP and BMI offer stations that play only a minimal amount of music a more accurate, and economically advantageous, “per program” license as an alternative to the “blanket” license.  By contrast, SESAC doesn’t offer that choice. To the contrary, SESAC requires an entirely separate license for webcasting (and for every separate HD side channel).   This problem becomes even more significant when one notices that SESAC has, on several occasions, raised the price of each of these licenses by between 5 and 10 percent.

The RMLC complaint helpfully summarizes its take on SESAC’s strategy:

SESAC ensures that it has exclusive rights to a critical mass of ‘must have’ works so that entitles like RMLC’s members cannot avoid taking a SESAC license, but SESAC carefully restricts its choices to those affiliates who will generate the highest profits for the company.

As the RMLC sees it, the fact that SESAC has raised its rates significantly works to reinforce the illegal activities: with increased revenues squeezed out of broadcasters, SESAC can entice more copyright owners to switch from ASCAP or BMI to SESAC (or at least not leave SESAC for ASCAP or BMI) by offering those copyright owners more royalty revenue.

In the RMLC’s words:

SESAC is a cartel that has illegally monopolized an essential repertory of copyrighted music, that has quashed all competition with and among its 23,000 copyright holding affiliates, and that uses its monopoly to coerce the U.S. radio industry and other consumers into paying SESAC supracompetitive prices.

That’s a pretty strong and inflammatory accusation. But some numbers seem to support the RMLC’s claims. In just ten years prior to March 31, 2012 the number of composers represented by SESAC has increased from 8,000 to 23,000, and SESAC’s adjusted revenue has almost tripled, from $49 million to $144 million. 

Is this growth down to simple good business practices or illegal business practices? Remember that the complaint puts forth the plaintiff’s absolutely best case argument. We will continue to follow this and will report back as developments warrant.

Most people don’t think about how copyright royalties are calculated – they just think that whatever they’re paying (or receiving) is too high (or too low). That’s true regardless of who you are or what you pay.

The recording industry thinks that recording artists don’t get enough compensation for their copyrighted works – especially from broadcasters who have always enjoyed a full exemption from paying royalties for over-the-air performance of sound recordings (i.e., the version of a song you’re actually hearing at that particular moment). 

Each of the various services that provide recorded music to the public – broadcasters , stand-alone Internet radio operators and even Sirius XM – seems to believe that they’re getting a raw deal compared to the way the other such services are treated. For instance, Sirius XM doesn’t like that they have to pay for all their transmissions – both via satellite and the Internet – while broadcasters get that over-the-air exemption. Broadcasters think the per-performance rate for online streaming is too high, especially given online advertising hasn’t increased at a similar rate, which means that increased listenership increases costs but not revenues. And Pandora feels as though it’s at a disadvantage to both, because it, too, pays a rate higher than Sirius XM and doesn’t enjoy any exemption like broadcasters do.  

The disparity in the royalties each of the services get tapped for is the fault of Congress, which has established distinct approaches to royalty calculation for each.

The result? The Internet Radio Fairness Act, introduced last month simultaneously in the House as HR 6480 by Rep. Jason Chaffetz (R-UT) and Rep. Jared Polis (R-CO) and the Senate as S 3609 by Sen. Ron Wyden (D-OR). 

The good news is that Pandora’s push for fundamental legislative change on the copyright front could have a positive effect on broadcasters, whose webcasting royalty rates could be reduced as a result. But don’t crack the champagne yet, because a counter-measure, championed by Rep. Jerrold Nadler (D-NY), could force compromise on the key issue of performance rights for over-the-air sound recordings.

So exactly why is there a disparity, how big is it and what would the two bills do about it? 

As noted above, the disparity is Congress’s fault. It has instructed the Copyright Royalty Board (CRB) ultimately sets the royalty rate for performance of copyrighted works, the CRB is told to set the royalty rate for the performance of copyrighted works differently according to the type of media involved. 

Historically, copyright royalties for most non-Internet-related uses have been calculated using four criteria set out in Section 801(b) of the Copyright Act. The resulting royalties apply to satellite services like Sirius XM, cable music services (the music-only channels available on your cable system) and even broadcasters’ payments to ASCAP, BMI and SESAC for performance of the underlying musical works (the music and lyrics or composition) in each song.  The four criteria set out by Congress in Section 801(b) are:

• A need to maximize the availability of creative works to the public;
• A desire to insure a fair return for copyright owners and fair income for copyright users;
• A reflection of the relative roles of capital investment, cost, and risk; and
• A need to minimize the disruptive impact on the industries involved.

But webcasting – which includes broadcasters simulcasting one or more signals over the Internet – is subject to a different standard enacted as part of the Digital Millennium Copyright Act in 1998: the “willing buyer/willing seller” standard. Despite its name, this standard is more theoretical than practical, as it doesn’t even allow the CRB to consider the real world effort of the final royalty rate; instead, it relies on theoretical market rates. 

Why the difference? There are plenty of reasons but the easiest explanation (and I acknowledge that some will quibble with this) is that the recording industry was the loudest voice at the table in 1998. Back then, the broadcasting industry didn’t seem to appreciate yet just how big this whole webcasting thing would get, and the stand-alone Internet radio industry wasn’t really a thing. The recording industry stepped up to the plate, took a big swing, made contact and hit a home run.  (To use an extremely timely phrase: they showed some #Natitude – Go Nats!)

The effect? Looking simply at Pandora vs. Sirius XM, it’s pretty big. Pandora (using rates set by the CRB under the willing buyer/willing seller standard, with certain adjustments) claims it paid approximately 50% of its gross revenues in royalties last year and could pay up to 70% in the first quarter of fiscal year 2013. That’s a boatload more than the percentage paid by Sirius XM (i.e., 6% in 2008, 7% in 2010 and 8% in 2012). While Sirius XM is very concerned that its rates will sharply increase to 13% or more as a result of the CRB proceeding now in process, that would still put its royalties well under Pandora’s.

Enter the Chaffetz/Polis/Wyden Internet Radio Fairness Act, which would remove the distinction between the services. Everyone, including Pandora and broadcasters webcasting online, would have their rates set through CRB proceedings subject to the Section 801(b) standard. 

This can only be a good thing for broadcasters, right? Well, probably but not definitely. 

While the 801(b) standard could bring broadcasters’ webcasting rates down , there’s no guarantee. The CRB, even applying the 801(b) standard, could produce a royalty rate that is markedly different in calculation or amount than broadcasters “enjoy” now. Soundexchange, representing the recording industry, has basically had its way in these CRB proceedings – would that necessarily change?

And then there’s the  proposed Nadler bill. Like the Internet Radio Fairness, Nadler's Interim FIRST Act would not address the broadcasters’ traditional exemption from paying over-the-air royalties as it standardizes the way in which the rates are set. But it is essentially the opposite direction of the Internet Radio Fairness Act in virtually every other way. The biggest difference is that the Nadler proposal would apply the “willing buyer/willing seller” standard across the board (so everyone can be upset about everything?).  

Moreover, the Interim FIRST Act would take a direct shot at broadcasters. Nadler feels that the broadcasters’ exemption from paying for over-the-air performances is unfair. His proposal would address this supposed unfairness not by removing the exemption (because we know the NAB would rise up against that), but by directing the CRB to take the value of those over-the-air performances into account when applying the willing buyer/willing seller standard. The result, according to some reports, could be a doubling or even tripling of the webcasting royalty rates that most broadcasters already feel are too high. 

And even if Nadler’s proposal doesn’t pass, it could still adversely affect broadcasters. With two competing copyright bills on the table – i.e., Nadler’s Interim FIRST Act and the Internet Radio Fairness Act – it’s not hard to imagine the sponsors of each coming up with some compromise measure. One such compromise might, for instance, impose the 801(b) standard for royalty calculation across the board, but also require that broadcasters start paying royalties for over-the-air performances of sound recordings under that standard. (Alternatively, a compromise could include Nadler’s suggestion that over-the-air performance be factored into webcasting royalties.) That would obviously muddy the waters.

Though Congress will probably not take up either bill until early 2013 (addressing this in the post-election “Lame Duck” session is possible but unlikely), interested parties are already throwing their support behind the Internet Radio Fairness Act. Those parties include Pandora (obviously), the Consumer Electronics Association, the Computer and Communications Industry Association (with members including Google, Microsoft, Yahoo! EBay and Pandora) and the Digital Media Association (DiMa).   The Radio and Internet Newsletter (RAIN) reports that the NAB, as well as broadcast companies Salem and Clear Channel, also support the bill.

The last of those – Clear Channel – comes as no surprise and should give broadcasters food for thought. Under the existing sytem, Clear Channel has already reached a direct licensing agreement with one major record label (Big Machine) under which Clear Channel will voluntarily pay royalties for over-the-air performance of sound recordings by Big Machine recording artists in exchange for a set (presumably lower) rate for their webcasting of those same sound recordings. In some regard, given that webcasting listenership – and therefore royalties – are only going to grow in coming years, it makes sense to focus on making sure those royalties are as low as possible.

The Clear Channel example reflects that broadcasters are in a position to take advantage of the devil they know, i.e., the current system. It’s far from clear whether the same would be true in a system forged from some compromise involving the Nadler proposal.

Broadcasters, therefore, might want to think about throwing their full support behind the Internet Radio Fairness Act in the hopes that is quickly enacted. That would, ideally, keep the Nadler Interim FIRST Act from gaining any momentum that could force a compromise, thereby making the devil they don’t know a devil they really don’t want to know.

We notified you last June that BMI and the RMLC had reached an agreement in principle regarding the rates to be paid by broadcasters for the right to publicly perform musical works. At that time, we were able to lay out the basic agreement but cautioned that it was subject to approval by the United States District Court for the Southern District of New York.

The RMLC has now announced that, on August 28, Judge Louis Stanton of that District Court approved the agreement, making the rates and terms specified in the deal effective through 2016. The highlight from our perspective is not just a presumed lowering of the rates for most stations (due in no small part to an industry-wide $70.5 million credit against 2010-2011 payment), but a simplified calculation method based on gross revenue. That puts an end to the old calculation method that was tied to a base fee, a method that many in recent years considered to be way out of date and extremely cumbersome. As indicated in the RMLC announcement, radio stations should already have reaped the benefit of the 2010-2011 credit, as it was being applied to their BMI accounts starting in June 2012.

Kudos once again to Bill Velez and his crew for great work in representing radio broadcasters.

To paraphrase T.S. Eliot, this is the way the MVPD wannabe ends, not with a bang but a whimper. . . and a $1.6 million settlement payment.

You remember FilmOn.com. They’re the folks who were going to revolutionize the video biz by legally delivering broadcast signals via the Internet . . . until they got immediately sued for copyright infringement by the major broadcast networks. 

“Oh, you mean Aereo, right?”, you reply. 

That would be the Barry Diller-financed entity that captures broadcast signals via a series of individual antennas, stores them on individually assigned remote DVRs and allows subscribers to watch programming in (almost) real time or via delay over the Internet. But, no, they’re not who we’re talking about here. Aereo still exists and has even won the first round in its legal battle against the broadcasters, surviving a motion for preliminary injunction.

“Oh, right . . . you’re talking about ivi TV?”, you protest, referring to the wannabe “first online cable system”. No, not them either (but you’re close).

FilmOn.com is very similar to ivi TV. Started in 2010, it’s an online system claiming to fall within the Copyright Act’s definition of “cable system”. Like ivi TV, FilmOn.com was almost immediately sued by the major broadcast networks and, like ivi TV, it was quickly on the back foot. Within a couple of months of its launch in late 2010, Filmon.com was hit with a Temporary Restraining Order prohibiting it from infringing “by any means, directly or indirectly” any copyrighted material. That slowed the service down, but did not stop it immediately. 

And now – almost two years later – FilmOn.com has reportedly agreed to a permanent injunction that will apparently require it to stop streaming the signals of the four major networks – at least until FilmOn boards BarryDriller.com (more on that in a moment). Oh, yeah, according to trade press reports, FilmOn.com will also be ponying up about $1.6 million to settle the case.

But that’s not the end of the story. After all, when you’re funded by billionaire Alki David, you’re not going to go away simply because a federal court tells you to. (Possibly instructive anecdote: David is the gentleman who reportedly offered $1 million to the first person who would streak in front of President Obama with “Battlecam.com” – another David enterprise – written across the streaker’s chest.) So, like a phoenix rising from the ashes, “BarryDriller.com” has emerged. BarryDriller.com is David’s new project (which is reportedly being funded by a related company called “AereoKiller, LLC”). BarryDriller.com is said to be “Aereo-like”. Though there are differences (BarryDriller.com will charge subscribers about half of what Aereo charges and claims that it will pay broadcasters for their content), BarryDriller.com is certainly like Aereo in one sense: it’s been in business for just a few days and has already been sued by Fox.  

If nothing else, the BarryDriller.com suit is interesting for one reason: its locale. The suit was filed in the U.S. District Court for the Central District of California (because BarryDriller.com was retransmitting KTTV, the Fox affiliate out of Los Angeles). Different city = different court = different governing precedent. While Judge Allison Nathan of the U.S. District Court for the Southern District of New York was bound by the Second Circuit’s Cablevision DVR decision in ruling for Aereo last month, the Cablevision decision doesn’t have the same weight in the wild, wild west. I’ve said from the start that the endpoint for the Aereo case would be the United States Supreme Court if at least one federal court outside the Second Circuit were to reject the rationale of the Cablevision decision. Such a ruling would set up a “circuit split” that might induce the Supremes to wade into the thicket and sort things out. If nothing else, BarryDriller.com may have accelerated that process by giving the networks the opportunity to sue David and company in California, where the Ninth Circuit is the top federal dog.

In keeping with our commitment to try to keep our readers on top of ongoing developments in the Mission Abstract Data (MAD) patent litigation in Delaware, here’s the latest: a link to MAD’s most recent pleading in its effort to get the stay of that litigation lifted. Attentive readers will recall that the U.S. District Court in Delaware put a hold on the litigation last year at the request of the defendants, a number of Big Broadcasters. Last month MAD petitioned the court to get things moving. Not surprisingly, the Big Broadcasters opposed that petition, and now MAD has replied to that opposition.

Since (as we have repeatedly acknowledged) we here at CommLawBlog are not patent experts, we won’t opine about MAD’s various arguments. They look pretty much like what you might expect. MAD generally belittles the litigation claims of the Big Broadcasters (and BEI, which has challenged MAD’s patents in the U.S. Patent and Trademark Office) and bemoans the fact that its case hasn’t progressed. Folks familiar with litigation probably won’t be surprised by anything in MAD’s reply.

Perhaps most interesting is MAD’s repeated insistence that continued delay has been and continues to be prejudicial to its “licensing program”. That “licensing program”, of course, is the repeated, insistent effort by MAD (and its cohort, including DigiMedia and IPMG AG) to browbeat radio broadcasters into agreeing to pay for the right to use MAD’s patented technology, whatever that may be. (MAD reads its patents very broadly; others disagree with MAD’s interpretation. That’s where the USPTO and the Delaware court come into the picture.)

MAD’s business – which it describes as “non-litigation intellectual property licensing” (points for making this argument in the context of litigation with a straight face) – will be prejudiced by continued delay, according to MAD, because:

“Sophisticated, multi-pronged approach”? “Calculated effort”? “Coordination”? “Licensing blockade”? Hoo, boy – why not “vast anti-MAD conspiracy”, too?  (Also, how come CommLawBlog wasn’t mentioned? As I have previously observed, MAD has identified us – and this blogger in particular – on its website as a source of “some misconceptions” about MAD’s “licensing program” and “ongoing litigation”.)

So, apparently frustrated by the fact that MAD’s target audience doesn’t seem to be buying what MAD’s selling, MAD ascribes that circumstance to some massive conspiracy. Of course, more obvious, and far less paranoid, explanations exist for the circumstances in which MAD finds itself.  MAD shouldn’t be surprised that parties which MAD has chosen to sue are defending against its claims. Nor should MAD be surprised that equipment manufacturers – who might be on the hook to their customers if MAD’s patents are as broad as MAD claims – are also contesting those patents in an appropriate forum.  And as the Delaware litigation clearly demonstrates, there is considerable disagreement about exactly what MAD’s patents cover and, thus, exactly what MAD has to sell.  Prudent businesspeople tend not to make five-figure commitments when it’s not clear what, if anything, they’ll be getting in return.

But we digress. With the filing of MAD’s reply, the ball is now in the judge’s court. Our understanding is that it could take as long as two-three months for the District Court to decide whether to lift the stay. Check back here for updates.

A couple of years ago I urged readers to consider developing, sooner rather than later, policies relating to their employees’ use of social media. That’s because, whether employers like it or not, their employees are using social media, and that use can put the employer’s business at risk. Better to get ahead of the problem than have to play catch-up ball when an employee’s careless or calculated online behavior causes problems.

Then last summer the Acting General Counsel of the National Labor Relations Board (NLRB) issued a report that shed considerable light on the types of social media activities that are protected from sanction by employers. In an October, 2011 post I observed that this dovetailed nicely with my earlier post, as it provided multiple illustrations of the limits on an employer’s after-the-fact ability to sanction an employee’s online activities

And now the NLRB’s Acting GC has issued yet another report. (And, by the way, just how many helpful memos does Lafe Solomon have to produce before he can get “acting” removed from his title?) This one focuses on social network policies adopted by employers, identifying various limits to which such policies are subject. It provides useful guidance to all employers – those who have already formulated a social media policy and those who haven’t but expect to be doing so soon.

As far as the NLRB is concerned, an employer’s social media policies must be consistent with Section 8 of the National Labor Relations Act (the Act). Section 8 prohibits imposition of a rule or policy on employees if that rule/policy “would reasonably tend to chill employees in the exercise of their Section 7 rights.” In this context, the term “Section 7 rights” refers to the types of “protected activities” or “concerted activities” I described in my post last October. (Feel free to check back there now to refresh your recollection. Don’t worry, we’ll wait for you.) 

The NLRB uses a two-step inquiry to determine whether Section 8 is violated. Most obviously, a social media policy that clearly restricts Section 7 rights is impermissible. But a policy may also be unlawful if: (1) employees would reasonably construe the policy’s language to prohibit Section 7 activity; or (2) the policy was promulgated in response to union activity; or (3) the policy has been applied to restrict the exercise of Section 7 rights. 

Consistent with the way we treat the right to free speech in this country, the NLRB looks to encourage speech and frowns on corporate policies that punish or discourage speech. So if a company’s social media policy is so broad and/or ambiguous that it could be read possibly to penalize lawful speech, the rule violates the National Labor Relations Act.

Here are some examples:

Target’s social media policy required employees not to “release confidential guest, team member or company information”. It also cautioned employees not to: share confidential information with other employees unless they “need the information to do their job”; or “have discussions regarding confidential information in the breakroom, at home, or in open areas and public places”. 

All that may sound reasonable – after all, isn’t it OK to try to keep “confidential” information “confidential”? – but the NLRB thought otherwise:  “Employees would construe these provisions as prohibiting them from discussing information regarding their terms and conditions of employment.” Indeed, such discussions would most likely occur in precisely the places (breakroom, home, open areas, public places) specifically singled out in the policy. So the Target policy violated Section 8.

Target’s policy also advised employees that it was their “responsibility” to report “unauthorized access” to, or “misuse” of, confidential information. Again, what’s not to like about that? But the NLRB decided that that provision seemed to threaten employees for not bringing to the employer’s attention violations of the prohibitions discussed above. Since the NLRB had found those prohibitions to be invalid, the NLRB figured that Target’s reporting requirement was equally invalid.

GM’s policy discouraged “[o]ffensive, demeaning, abusive or inappropriate remarks”, and  cautioned GM employees that Internet posts about GM must be “completely accurate and not misleading” and must not “not reveal non-public company information on any public site”.  The term “non-public company information” was defined to include such matters as GM’s financial performance and personal information about other employees, such as “medical condition[s], performance, compensation or status in the company”.

Again, these might look like reasonable limitations intended to protect GM and its employees. Not so, said the NLRB. The Act allows employees to say things that are not entirely accurate (not to mention “offensive, demeaning, abusive or inappropriate”), as long as they are not “maliciously false”. Thus, GM’s insistence on “complete accuracy” was not permitted. Similarly, broad categories like employee performance, compensation and corporate status encompass topics related to Section 7 activities, so GM couldn’t properly prohibit online discussions of such matters. Nor could it generally bar the posting of photos, music, videos, and the quotes and personal information of others, or use of GM logos or trademarks – since all such postings could reasonably include Section 7 activities.

The NLRB also didn’t like GM’s admonition that its employees should “[t]hink carefully about ‘friending’ co-workers”, since that could discourage communications among co-workers. Ditto for a provision that urged employees to check with company officials if the employees had any doubt about whether particular information should be posted. It’s long been an NLRB no-no to require employees to get company permission before they can engage in Section 7 activities.

The McKesson Corporation’s social media policies instructed employees to adopt a “warm”, “friendly” and “professional” tone, and not to “pick fights”. All nice thoughts, maybe, but all illegal, according to the NLRB. McKesson was concerned that, absent a warm, friendly, professional toe, online discussions “could become heated or controversial”. Since discussions of working conditions, unionism and similar matters – all obviously Section 7 activities – could easily become “heated or controversial”, the NLRB figured that employees could “reasonably construe this rule to prohibit robust but protected discussions about working conditions or unionism.” 

The policies adopted by Clearwater Paper Company suffered several of the problems described above. Employees were told not to reveal “confidential”, “proprietary” or “material non-public information”, terms which the NLRB concluded could include communications permitted by Section 7. The NLRB gave similarly short shrift to a provision forbidding employees from opining about “the workplace, work satisfaction or dissatisfaction, wages hours or work conditions”. No surprise there. Likewise to a provision warning employees to “avoid harming the image and integrity of the company” – overbroad, said the NLRB.

The NLRB reviewed social media policies from several more companies – you can review the NLRB’s complete memo here – but you should get the point by now: drafting a legal (and enforceable) policy governing your employees’ use of social media is a complicated process requiring awareness or and sensitivity to a wide range of factors. Even seemingly innocuous and unobjectionable provisions can turn out to be quite the opposite.

The NLRB was not totally dismissive of all the various policies. Clearwater, for example, prohibited online “harassment, bullying, discrimination, or retaliation” between co-workers online if such conduct would not be permissible in the workplace, even if the online conduct were done “after hours, from home and on home computers”.  According to the NLRB, this prohibition is OK because it applies only to plainly egregious content.

The NLRB also gave the thumbs up to Target’s admonition that employees should “[b]e suspicious if asked to ignore identification procedures”.  That simply encouraged vigilance without threatening disciplinary action for engaging in Section 7 activities. Similarly, the NLRB approved a provision in McKesson’s policy reminding employees that statements made in the online world have consequences and that employees should exercise personal responsibility on social media. The NLRB didn’t see such reminders as restricting speech in the least.

And the NLRB seemed OK with policies that are narrowly tailored to protect the company’s right to speak for itself. So, for example, an employer can require employees to get prior authorization before posting a message in the employer’s name or if the message can be reasonably attributed to the employer.   And an employer can require an employee to expressly state that the employee’s messages are the employee’s own and do not represent the employer’s positions, strategies or opinions.

Still, the NLRB’s overall approach is clearly slanted toward protecting the rights of employees. Indeed, in several of the cases described in the NLRB’s most recent memo, the agency disapproved of seemingly routine, boilerplate “savings clauses” that simply said the social media policy would be administered in compliance with all laws and regulations. The purpose of such clauses is normally to underscore the company’s good faith intent to abide by the law. The idea is that, if any other provision of the policy might be thought improperly ambiguous or overbroad, the “savings clause” will establish conclusively that the policy is to be interpreted as necessary to make it legal. 

According to the NLRB, though, such boilerplate provisions will not ordinarily save a company’s social media policy where that policy contains the types of overbroad provisions described above, i.e., provisions that might reasonably be seen as chilling employees’ exercise of the Section 7 rights.

So here are just a few takeaways drawn from the recurring themes we saw through these cases:

• Content-based restrictions on employee speech, no matter how well-intentioned, can – and often will – step on protected speech.  Such policies need to be crafted with imagination and a clear eye to the unintended consequences of those restrictions. When you think you’ve crafted the restriction narrowly enough, think again – and then add limiting language and clarifying examples.
• If a restriction on employee speech fails, a requirement that employees report when others violate that restriction will fail as well.
• Suggesting that employees aspire to beneficial use of social media may be OK, particularly if that aspiration includes no threat of punishment. 
• You cannot require employees to get pre-approval for social media messages posted in the employee’s own name, but you can require them to get such pre-approval for – or refrain entirely from engaging in – speech that purports to be on behalf of the company.
• A generalized savings clause is nothing more than a lazy shortcut that won’t actually help you.  

But the main takeaway is: Drafting a company’s social media policy is a surprisingly difficult task, but a necessary one nonetheless. There are pitfalls galore, even for those with the best of intentions. Before wading into the deep weeds of the drafting process, a company wishing to adopt a social media policy – or revise an existing policy – should seriously consider seeking expert assistance. There are myriad subtleties and conflicting considerations that must be weighed and balanced and, as we have seen in the NLRB memo, even the biggest corporations came up short.

It’s Mission Abstract Update Time! In the lawsuit brought by Mission Abstract Data (MAD) against a bunch of Big Broadcasters, those Big Broadcasters have recently filed a pleading that radio broadcasters should take a look at. You can check out a copy here.

Alert readers will recall that, in its suit, MAD claims that the defendant radio broadcasters have infringed patents that MAD bought up a year or two ago. And with that suit making headlines, MAD (along with its pals DigiMedia and IPMG AG) has been putting the hard sell on other radio broadcasters, trying to get them to sign onto “license” agreements authorizing them to use MAD’s patents. 

That hard sell campaign (which features hefty FedEx packages full of impressive-looking documents, followed up by insistent sales calls from slick salesmen) had died down somewhat after the Delaware court put the lawsuit on hold last fall. But the campaign flared back to life recently, rattling the nerves of the targeted radio stations. (Who was targeted? Based on a conversation I had with a MAD rep, I gather that they’re going after radio stations that play music and have a website. Those two factors, apparently, are evidence that the station has a computer, which leads MAD to figure that the station is using technology which violates the patented technologies.)

We’ve tried hard to keep our readers updated on the lawsuit and related matters.

Like a couple of weeks ago, when MAD asked the Delaware court to lift the stay on the proceeding there. We provided a link to MAD’s pleading. (That link might have come in handy for at least one MAD rep I spoke with, who had been assuring me that the stay had already been lifted. Oops.) And now the broadcast defendants have filed their response to MAD’s request. Here’s a copy for your late-night reading pleasure. We haven’t included the 150 (or so) pages of attachments, but if anyone is interested, we can get them posted, too.

At this point it’s hard to say who’s right and who’s wrong. But the broadcasters’ response sure seems to rebut a number of the points that MAD sales reps have been making (at least they made them to us, in a couple of phone calls we’ve had with them). The response addresses procedures at the U.S. Patent and Trademark Office, the likelihood of further modifications of MAD’s patent claims, the significance of modifications that have already been made by MAD, and MAD’s own conduct in the Delaware litigation. (For example, according to the broadcasters’ response, when asked to clarify its claims of infringement, MAD provided only vague general references to alleged use of computer hard-drive systems in connection with music storage, broadcast, and acquisition at their radio stations.)

Importantly, the broadcasters’ response directly contradicts things MAD states in its “clarifying the dialogue” document and things that MAD’s reps have said to us as they try to get our clients to sign MAD’s licensing agreements. It’s therefore enough to remind us all that we need to continue to learn more about these issues.

Where does this put us? The Delaware litigation remains on hold. MAD will have an opportunity to reply to the broadcasters’ latest pleading, and eventually the court will decide whether to let the case proceed or to keep it in abeyance. Either way there’s a lot of litigation left in that court, not to mention some potentially significant rulings yet to come from the USPTO. 

While the court and USPTO proceedings continue to swirl, individual broadcasters need to do as much as they can to clarify their individual situations. What is your tolerance for risk, given that there are likely to be several ups and downs before a final result? Can you smooth this bumpy ride by clarifying just what it is that MAD owns and, if so, do you need to consult with a patent attorney to do so? What sort of cover do you have in terms of indemnification from your software provider or insurance company? 

These and other questions are not of a one-size-fits-all persuasion. But they can’t be ignored just because they’re difficult, unnerving or even somewhat expensive to answer.