Last Friday, I could not write the normal entry on Friday due to illness. I feel much better now, so I’m going to resume writing these blog entries on the normal schedule. Sadly, there isn’t too much in the way of news today. I’m going to briefly discuss a rather interesting settlement: the Hotfile case.
The Motion Picture Association of America (MPAA) recently sued Hotfile, a digital locker service. Hotfile, rather than taking the matter to court, decided to settle shortly before the start of the jury trial. Despite a number of high profile motions (like one stating that the MPAA could not use terms like ‘piracy’ or ‘theft’ to describe infringement at trial), Hotfile opted to settle with the MPAA for $80 million. In some ways, it’s kind of a shame Hotfile opted to settle. Digital lockers (sometimes referred to as cyberlockers) represent something of a gray area when it comes to tech law. These sites allow a user to store files on a server run by the site, limiting access to those files to the user and those with whom the user chose to share the unique link.
However, there are a lot of issues to sort out regarding their compliance with the Digital Millennium Copyright Act (DMCA). The trial did delve into safe harbor issues, ruling that Hotfile did not qualify for safe harbor protections. The court noted that Hotfile rarely terminated the accounts of repeat infringers and that the company put incentives in place to encourage downloading. Finally, the court noted that storage of the files is not secure since a user need only the correct URL to download the file stored on Hotfile’s servers. These incentives, in the court’s judgment, caused Hotfile to go from a storage service to a distribution service.
Does this ruling provide any insight into whether digital lockers receive DMCA protection? At minimum, Hotfile’s case seems to provide some ground rules for operating a digital locker service while maintaining some safe harbor protections. The first is implementing some system to deal with repeat infringers, likely by terminating their accounts on the site. The court made a big deal about how Hotfile only terminated 43 accounts, despite receiving 10 million DMCA notices. The court also felt that there was no system in place, since the records showed that the 43 accounts only got a closer look due to the threat of litigation (at page 18 of the ruling). While they theoretically had a policy in place of suspending accounts that received two or more DMCA takedown notices, there were over 47,000 active accounts that met this threshold while remaining active. The distinction made by the court between a “storage service” and “distribution service” is also rather interesting. The court seems to imply that there is a higher bar for internet services that distribute content, instead of simply store content. Digital lockers may, if this ruling holds sway or courts find it persuasive, need to ensure that files stored on the site must be difficult to share between users. It’s unclear how this affects other online storage sites that allow for some sharing between users, but through methods that are more difficult than simply posting a link (Dropbox immediately comes to mind).
Here’s hoping that the next case involving digital lockers that inevitably pops up will answer these questions in a bit more detail.