The Register: Google Buzz Settlement Pays “organizations that are currently paid by [Defendant Google] to lobby for or to consult for the company”.
The Register has a great article about a recent Google debacle, the Google Buzz class action settlement (see also Robert Levine’s piece in Bloomberg, “Google’s Spreading Tentacles of Infuence” and also see Music Rights Now to send a letter to your Members of Congress). The article notes that the Google settlement involved “cy pres” payments to “independent” groups often called “watchdogs” like the American Civil Liberties Union and the Electronic Frontier Foundation. Apparently, the selection process of the groups to receive millions in cy pres payments was a two step process. The first list of cy pres largess was objected to by the Electronic Privacy Information Center for an interesting reason as the Register notes:
“Amongst the groups that failed to squeeze its snouts into the trough was EPIC, which complained that the selection process favored “organizations that are currently paid by [Defendant] to lobby for or to consult for the company”.
To say the least, that’s an interesting description of the ACLU and the Electronic Frontier Foundation, which both hit the jackpot, receiving $1m each.”
So there was a first cut at the cy pres process and when EPIC objected, the judge modified the settlement to include EPIC and at least one other lucky beneficiary:
“In addition to EPIC’s ticket on the gravy train, Judge Ware managed to find $500,000 for the Markkula Center for Applied Ethics at Santa Clara University. Why that particular faculty? It’s anyone’s guess, but quite coincidentally, the Honorable Judge Ware is a lecturer at Santa Clara University.”
You’ve probably never heard the term “cy pres”. It is vulgarized French that has come to describe an ancient legal doctrine that first arose in application to wills and was a doctrine that allowed a court to comply with the intent of the deceased as nearly as possible when to do so directly would not be legally possible or practicable.
But the direct contemporary translation in class action practice would be more like “snout in trough.” The cy pres process is an inside way for groups to raise essentially free money. I’m not sure of the tax implications, but I’d be interested to know if cy pres contributions are taken as a deduction for liability losses.
For example, the ubiquitous Samuelson-Glushko legal clinic at Berkeley received contributions from The Dennis v. Metromail Cy Pres Fund, The Supnick, et al. v. Amazon, Inc. and Alexa Internet Cy Pres Fund, The UCAN v. Financial Services Companies Cy Pres Funds and the Zadeh Cy Pres Fund. Oh, and the Google Buzz Cy Pres Fund.
They’ve done this before.
Now imagine this scenario. A corporation that thinks itself above the law gets caught doing something illegal to potentially millions of its customers. Big liability, bad for the balance sheet. What to do? The corporation can avail itself of the class action process.
But wait, you say. Class actions are supposed to be the heroic actions of white knights protecting consumers, right? True. But if you think that, you clearly have not been to the Temporary Autonomous Zone known as the Northern District of California with its locus in San Jose, the capitol of Silicon Valley and home to People Who Are Smarter Than We Are.
So just go with me on this and hear out my interpretation of a class action in modern times, which will get back to “cy pres”, I promise. The corporation who has done the bad thing calls a class action law firm. They say, how about you find you some class representatives, sue us, we will do a prepackaged settlement, we’ll pay you some millions, pay the class representatives some walking around money (and maybe some non-cash goodies–like oh say stock options–we can keep between us), and then we can dump a bunch of money into the pockets of people we like through the cy pres. And then we get a class settlement that will apply to all of our customers not before the court so we can close off any liability because no one pays attention to these things and probably none of our customers will opt out of the class. Sounds good? Big money, not a lot of work? Kind of like Google Books, but without the messy scanning.
But wait, you say–there’s more. We have heard of a “prepackaged bankruptcy” in Chapter 11 bankruptcy reorganization, which is a plan for financial reorganization that the bankrupt company drafts alongside its creditors (represented by its creditors committee, a group that are designated as the good fiduciaries of all creditors, or all of its creditors) that everyone agrees will be the winning plan once the company enters bankruptcy. The prepackaged plan must also be voted on by shareholders of the soon-to- be bankrupt company before the company files its petition for bankruptcy.
Note–the essential aspect of the prepackaged bankruptcy is that it has some efficiency benefits, but it does one thing that is often overlooked. It very often guarantees that the management that drove the company into bankruptcy will still be in control when the company comes out of bankruptcy.
Now see how the analogy works in class actions, remembering that Google spent a lot of time learning how to twist the class action process on its head during the Google Books litigation. How would you blunt the class action from someone else’s sword into your shield? Get an agreement among the class action lawyers, potential class representatives (like a potential creditors’ committee), and file the action in your home town where people don’t think you’re evil.
Then reach a quick class certification, a quick settlement agreement, and make sure you funnel money through the class action to all the groups that are likely to challenge you (through the cy pres process).
The settlement, however, applies to all members of the class, most whom probably have no idea what is happening, that they have a claim, or that there’s anything they can do about it. In fact, only 578 class members opted out. In case anyone is interested, there is a list of their names at buzzclassaction.com (see Exhibit A).
So see what may have happened: Google knows it is exposed to a class action by all users of Google Buzz. Somehow, class action lawyers find Google. Largely silent class representatives are identified and certified by the court. A settlement is reached–less than a year after filing, rather quickly in my curbstone point of view–and then large payments are made to “watchdogs” and to counsel. And perhaps most importantly–any member of the class who has not opted out of the settlement–and as we saw in Google Books, Google is all about opting out–is prohibited from pursuing a claim against Google. And what consideration was paid to the class members for giving up these valuable rights? Nothing. Zero. Zip.
Presto chango–Google limits its liability to chump change, lawyers make money, cy pres recipients make money, the class gets zero.
Google justice if I ever saw it.
I don’t know that this is what happened, I’m just guessing. But it sure looks like it’s worth a second look. Whether or not it was premeditated, the result is the same.
To be continued.
Here are the cy pres recipients (Settlement at p. 6):
” (a) American Civil Liberties Union $700,000
(b) Berkeley Center for Law & Technology $500,000
(c) Berkeley Law School, Samuelson Law, Technology & Public Policy Clinic $200,000
(d) Berkman Center for Internet & Society at Harvard University $500,000
(e) Brookings Institution $165,000
(f) Carnegie Mellon, Cylab Usability, Privacy & Security Lab $350,000
(g) Center for Democracy & Technology $500,000
(h) Electronic Frontier Foundation $1,000,000
(I) Indiana University, Center for Applied Cybersecurity Research $300,000
(j) Stanford, Center for Internet & Society $500,000
(k) YMCA of Greater Long Beach $300,000 [that well known hotbed of privacy watchdogs]
(l) The Electronic Privacy Information Center $500,000
(m) The Markkula Center for Applied Ethics Santa Clara University $500,000
(n) Youth Radio $50,000″
Staff picks from Semaphore:
1. LA2019 (London) “Artic Stars Melt the Clouds” @tomla2019
2. Dive (Brooklyn) “Sometime”
3. Julian Lynch (NJ) “Terra”
4. High Highs (NYC) “Horses” @highhighs
5. Emily Zuzik (Brooklyn) “You Want to Go Out Tonight” @emilyzuzik
As MTP readers will know, Sirius XM is in the middle of a land grab, what one might call reverse “payola”–Sirius wants to gut SoundExchange and subvert artist rights by a not so implied threat of no airplay if independent artists or independent labels don’t give them a direct deal. Meaning that the artist’s share of webcasting royalties won’t be paid to the artist but instead to the label and at that it will be paid at a lower rate.
Now we don’t know but can guess what the connection is between Sirius and Google. So it comes as no surprise that a search for “soundexchange” on Google buries SoundExchange.com down about 5 or 6 pages of results.
As Senator Mike Lee told Eric Schmidt at the recent hearing of the Senate antitrust subcommittee, they’re cooking the books.
The enormity of Google’s breathtaking $500 million forfeiture for selling illegal drug advertising to consumers sinks in slowly. For many in the creative community the second thought after “How could they?” is “How does Google treat our fans?”
Google defends their dominant position in search by claiming that users are “one click away” from another search provider and that Google’s essential goodness maximizes consumer welfare for Google customers. We’ll see. If profiting from selling illegal drugs to Americans is an example of maximizing consumer welfare, or if promoting the reprodution and distribution of illegal music and movies promotes consumer welfare, I will be very interested in how they convince the Congress. Google has certainly failed to convince the Department of Justice. Given their most recent escape from prison time by buying their way out of an indictment, I would say that Google is one click away from stir, among other things.
But Google explicitly holds itself out as providing fair and unbiased search results and is a publicly traded multinational corporation—asking the public to trust them. Not only does Google want consumers to believe that Google search is not “evil”, but that its search results legal and maximize consumer welfare. This goes a long way to explaining how thousands of consumers were duped into buying illegal drugs as well as a $500 million forfeiture—unless you are prepared to accept without criticism the Government Accountability Office report that in determining consumer welfare companies like Google get to take into account the positive effects of crime. That is certainly consistent with the statements of Google’s antitrust counsel that her client Google “promote[s] consumer welfare” in a manner consistent with the antitrust laws. (See Thomas Sydnor, Punk’d: GAO Celebrates the “Positive Economic Effects” of Counterfeiting and Other Criminal Racketeering available at http://www.pff.org/issues-s/pops/2010/pop17.10-Punk%27d_GAO.pdf.) Maybe we now know why the GAO stonewalls on who the sources were for its report.
But we now know there is a fire in the house of Google.
Even though safe and legal music, movies and television could be “one click away” from any Google user, when it comes to sending consumers to websites dedicated to distributing illegal content, Google is the dominant method. The Pirate Bay has said in its own defense that it is no different than Google.
That’s exactly the point.
My belief is that the vast majority of our fans search for music, movies, song lyrics or television programs that they have heard of offline from word of mouth or more likely the hundreds of millions if not billions of dollars that the creative community spends marketing these creations both online and offline. Unsuspecting fans should be able to rely on Google to point them to safe and legal search results, particularly when links to the thousands of legal sites are literally “one click away.”
Google’s search and advertising products appear to be creating results that are at odds with Google’s promise to consumers to deliver fair and unbiased search results. This perverse outcome is particularly apparent in searches for music or movie titles.
Try looking for the hit music artist Paramore by searching for “paramore music” in Google. You will get first page search results for the official Paramore website and some other authorized sites. (And of course—videos linked to Google’s You Tube, legality unknown (the only embedded video search results that have been returned in every music search I have done.)
If you then search for “paramore music torrents” you will get pages and pages of links to illegal sites and there are no legal sites returned. Topping the results will be sites like the Pirate Bay and Isohunt that are well known rogue sites due to the vigorous criminal prosecutions and litigation to shut them down. Isohunt is the subject of a recent U.S. District Court decision finding it to be a massive infringer.
Yet Google flaunts links to these sites offering unauthorized content. I guess this is what Google’s antitrust lawyer meant by “promoting consumer welfare.”
Isohunt is the number two link in my Paramore search and that Isohunt does not link just to a single track, not to an album, but the entire Paramore discography is “one click away” from Google in a single download—5 albums which can be downloaded in minutes.
Try the same process by searching for “avatar movie” and “avatar torrents” and you will find the same results as the music search. Try a search for any artist and add the word “lyrics” and you will find thousands of illegal lyric sites.
In another example of Google “promoting consumer welfare” from 2009, Google reportedly deleted the Pirate Bay from search results, and then quickly reversed the deletion. Google thought this was important enough to issue a public statement that said in part “’[the Pirate Bay] URL was accidentally removed from the Google search index,” Google said in a statement. “We are now correcting the removal, and you can expect to see Thepiratebay.org back in Google search results this afternoon.’” (CNET, October 2, 2009.) (A Pirate Bay spokesman referred to the removal as “censoring a competitor” according to Computerworld UK.)
Why was deleting the Pirate Bay URL of such concern to Google and to the Pirate Bay? Is the Pirate Bay a Google customer for Google’s advertising products?
Google’s “accidental” removal of the Pirate Bay from search demonstrates that Google has the ability to put out at least one fire in its house. But if Google could remove a known infringer accidentally, couldn’t Google do it intentionally to protect consumers from the harm of illegal sites?
How is it that this obvious and misleading disparity exists on Google when users are “one click away” from legal search results? Because it profits Google to do so through selling its dominant advertising products to dupe consumers into illegal behavior? Is it for the same reason that Google defied our laws protecting consumers from illegal drugs to the tune of a $500 million forfeiture? “Promoting consumer welfare”?
But these are also examples of how Google uses its dominant position to mislead another group of customers—advertisers. You know, the ones that actually pay Google money. Because in the House of Google, nothing is free. Google’s advertisers realistically have one place to go with their advertising dollars—Google’s many advertising products. And once they buy their advertising, they have virtually no control over where it appears. (See Ellen Seidler’s Popup Pirates for a film maker’s account of trying to contact Google’s advertisers to get them to stop paying for advertising on rogue sites.)
These are questions for Executive Chairman Schmidt as all of this happened on his watch.
As Officer Malone said in The Untouchables, “Everyone knows where the booze is, Mr. Ness. The question is whether you are willing to cross Capone.” Now that Google’s Eric Schmidt is finally coming before the Congress, this will be an excellent opportunity to question him about how consumers are harmed by Google directing consumers to known illegal sites that Google not only can remove from search results but has already done so “accidentally.” Surely no Member of Congress can accept that promoting illegal behavior promotes consumer welfare.
Just think of the human misery that could have been avoided if Google had removed results for illegal drug sellers. Or removed the Pirate Bay and Isohunt URLs as they are clearly able to do.
There’s no question about whether Google promotes illegal activity. $500 million says that they do. The question is whether the Congress is willing to cross Google.
What are they prepared to do?
An example of optimistic cooperation between technology companies and creators, Arts+Labs is a coalition comprised of the American Society of Composers, Authors and Publishers, AT&T, Broadcast Music, Inc., Cisco, Microsoft, NBC Universal, Songwriters Guild of America, Verizon and Viacom. Arts+Labs released this statement on rogue sites legislation:
The introduction in the House of Representatives of legislation to combat the theft of U.S. intellectual property represents an important step in the fight to sustain American creativity and support individual innovators.
The newly-introduced Stop Online Piracy Act, along with the PROTECT IP legislation introduced in the U.S. Senate earlier this year provide a way to push back against rogue websites that seek to profit from digital counterfeiting and piracy.
While adjustments will be necessary to reconcile the House and Senate bills and secure the votes for final passage, Arts + Labs endorses the key premise in both measures: namely, that all actors in the Internet ecosystem must play a role in helping protect the rights of those who create content while fostering innovation. Ultimately, these twin goals help fight the digital theft that robs the U.S. economy and threatens creativity.
We also are pleased that the proposals recognize the critical need for substantial due process safeguards and the central role of federal law enforcement.
Arts + Labs offers a special thanks to House Judiciary Chairman Lamar Smith (R- Texas) and Ranking Member John Conyers (D-Mich) for working across party lines on this economically critical measure. We also applaud the similar bipartisan efforts of IP Subcommittee Chairman Bob Goodlatte (R-Va) and Ranking Member Rep. Mel Watt (D-NC) and the eight other co-sponsors.
We look forward to working with Congress to ensure that the needs of creative communities, as well as those who provide Internet services and sustain its commerce, are fairly represented in this legislation to protect, preserve, and enhance the American workforce.
The MTP Interview: Indie Film Makers Jason Stall and Topper McDaniel on Producing Indie Films in the Age of Google and Rogue Sites Legislation
This is an excerpt from the MTP Monthly Interview with Jason Stall and Topper McDaniel about producing independent films. Sign up for a free subscription and request the complete interview!
MTP: Tell us a little about your background as a film producer, what films have you produced and did you finance all of them outside the studio system?
Jason and Topper: Semi-Rebellious Films is now in pre-production on its fourth film, a narrative due out in 2012. This will be our second full-length comedy feature.
Most recently we wrapped on Queens of Country starring Ron Livingston and Lizzy Caplan. We are also very proud of our two music documentaries: First we made The Heart is a Drum Machine, to tell the world what music meant to us, by asking artists like John Frusciante, Wayne Coyne, Juliette Lewis, Elijah Wood and George Clinton, to tell us what music was to them. It was a great success and very well received, especially our soundtrack which featured an original score by the Flaming Lips’ Steven Drozd, and a cover of Elton John’s Rocket Man sung by Maynard James Keenan of TOOL. We have done this with our amazingly talented directors and co-producers Ryan Page and Christopher Pomerenke.
It was this relationship with Maynard that led to our second film, Blood Into Wine, about Keenan’s journey from vocalist to vintner, as the Grammy winner establishes a wine country in the Arizona desert, and actually succeeds, putting out bottle after bottle of award-winning wine. Blood Into Wine also sported an amazing soundtrack filled with music from Keenan’s other band, Puscifer, and also was an Official Selection at several festivals, winning Best Documentary in Ron Howard’s hometown festival, the Trail Dance. All of our films have been financed outside of the studio system.
MTP: Were your films pirated? Is there more piracy for your most recent film as opposed to your first film?
Jason and Topper: We had our World Premiere of Blood Into Wine February 19th, 2010 and by the time we had our first few theatrical releases we were up on the web. The quality unfortunately was good too, so we think a theatrical screener loaded it up. The full download was up everywhere before we even released our DVD.
Sadly, all our films were pirated and our last documentary was hurt the most by this. We saw it on hundreds of sites being downloaded over 25K times, so those are all potential sales we missed and unfortunately the laws need to protect us better and go after and shut these sites down once and for all. Each film has been more affected than the film before it, a lot of this is due to the advances in speed and quality of streaming, etc…
MTP: Did you ever send DMCA notices and how many would you estimate you would have to send if you did?
Jason and Topper: Wow, we at one time had three people working on this. I don’t know what the estimate would be. The sad part is we just could not send enough and everyday it felt like one step forward two steps back.
MTP: How much would it cost you to send DMCA notices and is that an effective remedy?
Jason and Topper: We honestly stopped focusing on this as we had to look at each of our team member’s time value of money. We spent our time marketing our film and trying to spread the word about piracy’s effect on our film. As an independent film company, we could not afford to continue this fight. The rogue sites know this and take advantage of it.
Last year I believe only nine major groups were prosecuted, yet last year over 10% of the US was using peer-to-peer sites. Megaupload and other cyberlockers are some of the most accessed websites. Pirate Bay and others are stealing in broad daylight. PayPal allows payments of illegal transactions by allowing this. Google sends us daily alerts that identify these pirate rogue site, but does not shut them down. The whole system is broken.
MTP: What do you think the long-term effects of the Internet are on film development given current trends?
Jason and Topper: We have already seen what it has done to the music industry. We are going that way at warp speed. We have always said the only thing preventing this from going the same direction is the quality of the pirated versions, the speed of connections, availability of places to store all this data and a way of streaming the videos that looks good. Unfortunately all of these things have happened. Sadly you can now download a quality HD version of a pirated film and show it on your flat screen.
Creative America states on their website that websites trafficking in stolen film and TV content get nearly 150 million visits every day, more than 50 billion visits per year. The impact on jobs and the industry is also becoming quantifiable as over 140,000 jobs have already been lost and they project, “Content theft threatens over 2 million jobs supported by the film and television industry in all 50 states and D.C.”
We have been excited by the recent exposure and press that this subject has received. We were excited by the announcement earlier this month by the new Creative America organization United to Fight Content Theft. As they stated in their press release, “Creative America, the grassroots organization organizing the effort, will begin serving as the unified voice of the more than 2 million Americans in all 50 states whose jobs are supported by film and television, as well as people in other creative fields and anyone who believes that halting the looting of America’s creative works and protecting jobs must be a national priority.” This is huge in giving all of us small indie producers a unified and powerful voice. This seems to be getting a great response with SAG, MPAA, IATSE, DGA, AFTRA, Sony Pictures, Walt Disney, Warner Bros, Viacom, NBC Universal, CBS Corp, 20th Century Fox, and others, all showing their support.
The first issue will be getting The Protect IP Act, now before the Senate, passed [and the Stop Online Piracy Act, now before the House]. This is the first really important aggressive move to target illegal foreign sites. It would authorize the USDOJ to go after foreign websites that are dedicated to illegal distribution of stolen movies and TV. The House of Representatives is also joining the fight by working on the Stop Online Piracy Act to go after these rogue sites that are stealing from artists around the world.
We absolutely need this to pass to save our dying “little” industry that has a huge impact on art and the economy.
As a final thought please contact Congress, and ask them to pass PROTECT IP and the Stop Online Piracy Act and stand up for U.S. jobs and creativity. Also, please join Creative America.
Thanks to Chris and MTP for giving us a voice.
1. Zun Zun Equi (Bristol) “Praise the Waterfall” @zunzuneguirocks
2. H Hawkline (Lundy) “Gelly” @h_hawkline
3. Delicate Steve (Fang Island) “Flyin’ High” @delicatesteve
4. Weekend (San Francisco) “Coma Summer”
5. Kris Davis (New York) “Paradoxical Frog”