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IP Policy: Up in a Cloud

Jul 27, 2012
Thomas A. Hart, Jr.

The advance of "cloud storage" and file-sharing technology demands action now

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The rapid advance of "cloud storage" and other file-sharing technology needs coordinated action by the courts, Congress and private industry.

Last Wednesday, the House Subcommittee on Intellectual Property, Competition, and the Internet held hearings to discuss cloud computing technology and the issues facing American innovators both domestically and abroad. Then on Friday, the Federal District Court in Northern Virginia heard arguments on the Motion to Dismiss federal criminal charges against Megaupload, a cloud storage and file sharing firm targeted by the Department of Justice, in one of the largest and most complex anti-piracy cases in history. Both hearings exposed numerous legal and policy voids for Congress, the courts, and the high-tech industry to fill before the dual goals of technological advancement and protection of digital media can be harmonized.

In order to combat the evils of online piracy in the wake of the failure of the “Stop Online Piracy Act” ("SOPA") to achieve passage last session, the Department of Justice (“DOJ”) chose to combat the evils of online piracy by instituting criminal copyright infringement proceedings in January against Megaupload and several principals. DOJ’s initial legal volley scored a devastating blow. The international raid on Mega’s corporate assets and the principals’ personal property included $60 million in cash and the shutdown of its major file-sharing and storage site. As a consequence, innocent Americans and legitimate file sharing sites were caught in the snare when access to legitimate content was denied and other firms were confused as to their potential legal culpability.

It is often said that difficult cases make bad law, and the Megaupload case may be one such case. The Subcommittee hearing generated questions as to how innocent users could be protected from having their content frozen in the face of legal action. None of the witnesses could provide answers. The federal court hearing on Friday made plain that the due process issues presented by the Megaupload prosecution are of first impression and touch the international reach of US law enforcement in criminal proceedings where the company in question operates exclusively beyond America’s shores. The uncertainty of both the legislative and judicial proceedings cast doubt on whether political bodies and federal courts can resolve complex issues before they transform into an entirely new set of challenges. Congressional action is always subject to unintended consequences while courts are unpredictable.

There is always the risk that a judicial decision may be counterproductive to the overriding public policy position that served to drive the legal action. Cases are typically limited to their facts, and there is enough creativity in the high-tech community to continually present new and novel fact patterns based upon a reshuffling of network deployments or new application features. Courts can rarely act broadly enough to fully level the playing field and balance the interests of each of the parties interested in their fair share of the high-tech value chain.

Advances in "cloud storage" and file-sharing technology demand action now. However, efforts to pass SOPA or set benchmarks in the courts will themselves be overtaken by controversies generated by polarized stakeholders who have legitimate concerns to air, conflicting policy positions to defend, and businesses to protect. Proponents of legislation, including movie studios and recording companies, say a bill protecting American intellectual property and consumers against counterfeit goods is desperately needed. Critics say that the legislation as drafted places an unreasonable burden on sites to police links flagged for bad behavior. They also argue that asking search engines to remove links from sites marked as being dedicated to piracy could be a threat to free speech.

Steve Jobs showed us how to solve these types of issues: through negotiated solutions. Jobs’ true genius may have been his willingness to openly acknowledge that there were others with equally legitimate stakes in the future of technology. He got the industries to the table in earnest and I-Tunes came into being. That is what Congress and the courts must do in these complex and evolving IP issues.

We know the outcomes we desire in the effort to stop online piracy: protect the value of intellectual property; let the internet and high-tech communities develop new, more efficient, and more open distribution models; permit cloud computing to evolve unfettered by onerous obligations to censor stored content or risk a shut down; provide voluntary safeguards and filters that protect property and creative rights; and impose strong sanctions against future violations. Content creators and owners need to be paid for the use of their products and those who consume them must acknowledge that nothing is free simply because it is obtained over the Internet.

Ultimately, it is to no one's benefit to shape IP enforcement and policy worldwide on the outcome of this litigation when Congress and the administration appear to have begun the process of reintroducing SOPA during the next session. Some form of negotiated alternative dispute resolution -- crafted with significant input by content providers, cloud storage companies, and public interest advocates -- may be a preferable alternative to a prolonged trial or stalled legislative efforts.

Any such decree would provide guidance on acceptable operational standards the parties and the public could live with which would then provide the framework for passage of a comprehensive SOPA bill in Congress in 2013. The bill would address key issues presented by ever-advancing technology without stifling global innovation or compromising the legitimate interests of content providers and producers of intellectual property.

Thomas A. Hart, Jr. is the Director of Government Affairs at the national law firm of Quarles & Brady LLP. He is also the Chairman of the Telecommunications Advocacy Project, a public interest organization that promotes open markets and new opportunities in Telecommunications and High-Tech ventures.

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