The following is Section II.C of the comment I submitted in the Copyright Office’s study on the operation of Section 512 of the copyright statute.
Veoh was a video hosting service akin to YouTube that was found to be eligible for the DMCA safe harbor. Unfortunately this finding was reached after years of litigation had already driven the company into bankruptcy and forced it to layoff its staff. Meanwhile SeeqPod was a search engine that helped people (including potential consumers) find multimedia content out on the Internet, but it, too, was also driven into bankruptcy by litigation, taking with it an important tool to help people discover creative works.
History is littered with examples like the ones above of innovative new businesses being driven out of existence, their innovation and investment chilled, by litigation completely untethered from the principles underpinning copyright law. Copyright law exists solely to “promote the progress of science and the useful arts.” Yet all too frequently it has had the exact opposite effect.
The DMCA has the potential to be a crucial equalizer, but it can only do so when the economic value of what these service providers deliver is considered by policymakers with at least as much weight as that given to the incumbent interests who complain that their previous business models may have become unworkable in light of digital technology. Service providers are economic engines employing innumerable people, directly and indirectly, and driving innovation forward while they deliver a world of information to each and every Internet user. We know economic harm is done to them and to anyone, creators and consumers, who would have benefited from their services when they are not protected.
But what needs careful scrutiny and testing are economic arguments predicated on the assumption that every digital copy of every copyrighted work transmitted online without the explicit permission of a copyright holder represents a financial loss. This is a presumption that needs careful scrutiny, with reviewable data and auditable methodology. It is quite a leap to assume that every instance (or even most instances) of people consuming “pirated” copyrighted works is an instance they would otherwise have paid the creator. For example, it tends to presume that people have unlimited amounts of money to spend on unlimited numbers of copyrighted works, and it also ignores the fact that some works may only be consumable at a price point of $0, which is something that institutions like libraries and over-the-air radio have long enabled, to the betterment of creators and the public beneficiaries of creative works alike. Furthermore, even in instances when people would be willing to pay for access to a work, copyright owners may not be offering it at any price, nor are they necessarily equitably sharing the revenues derived from creative works with the actual creators whose efforts require the remuneration.
The DMCA does not adjust to reflect situations like these, nor does it incentivize copyright holders to correct their own self-induced market failures. On the contrary; it allows them to deprive the public of access to their works and to threaten the service providers enabling their access with extinction if they do not assist in disabling this access. None of these outcomes are consistent with the goals and purpose of copyright in general, and care must be taken not to allow the DMCA be a law that ensures them.