A Tale of Two Legal Regimes: An Empirical Investigation into How Copyright Law Shapes Online Service Providers’ Practices and How Online Service Providers Navigate Differences in U.S. and EU Copyright Liability Standards By Gwenith Alicia Hinze A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Juridical Science in the Graduate Division of the University of California, Berkeley Committee in charge: Professor Molly S. Van Houweling, Chair Professor Robert P. Merges Associate Professor Deirdre K. Mulligan Professor Pamela Samuelson Spring 2019 This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. To view a copy of this license, see: https://creativecommons.org/licenses/by-nc-nd/4.0/ Abstract A Tale of Two Legal Regimes: An Empirical Investigation into How Copyright Law Shapes Online Service Providers’ Practices and How Online Service Providers Navigate Differences in U.S. and EU Copyright Liability Standards by Gwenith Alicia Hinze Doctor of Juridical Science University of California, Berkeley Professor Molly S. Van Houweling, Chair Most online communication takes place on centralized platforms operated by private companies. These services are accessible globally but operated by companies subject to national laws, including copyright laws, which vary greatly across countries, creating incentives for online service providers (OSPs) to geographically segment their services. Because copyright law is territorial in nature and licensing markets are often national, scholars assumed that national copyright laws exacerbate fragmentation pressures on online services and drive the use of geoblocking technologies to enforce territorial licensing restrictions on digital music and movie content. This dissertation seeks to understand how copyright law actually shapes the practices, policies, and decision-making processes of OSPs, through interviews with current and former legal and policy staff at a range of globally accessible OSPs, including operators of user- generated content hosting and web search services. It also seeks to understand whether, and to what extent, operators of globally accessible online services take into account other jurisdictions’ copyright laws in their day-to-day operations where they differ from U.S. copyright law’s liability standards and enforcement mechanisms. Based on interviews, this dissertation concludes that copyright law has both direct and indirect effects on the practices, decision-making processes, and governance structures of OSPs. It finds that the U.S. statutory OSP limitation of liability regime established by the Digital Millennium Copyright Act (DMCA) plays a key role in shaping OSPs’ practices. For OSPs that have operationalized its eligibility requirements, the DMCA has become constitutive, resulting in companies adopting staffing structures and training programs to implement the DMCA’s notice and takedown process and using its standards to manage nondomestic copyright liability risk. Some also use the DMCA’s ex-post takedown process to afford national treatment to foreign copyright holders’ works, relying on the internationally harmonized nature of copyright law, and the DMCA’s compatibility with other jurisdictions’ statutory limitation of liability regimes. Contrary to the assumed fragmentary impact of national copyright laws, OSPs appear to be using a part of the U.S. copyright system that is not part of the internationally-harmonized copyright framework—the U.S. statutory safe harbor regime’s takedown process—to mediate complex conflict of law issues, reduce transaction costs for copyright holders, and mitigate the potential fragmentary effects of national copyright laws for users of online services. 1 Additionally, it finds that divergences between national copyright laws have differential impacts on OSPs, depending on their level of resources. Some OSPs engage in jurisdictional copyright risk analysis, design and build new products, and modify existing services to minimize copyright liability in multiple jurisdictions. Less-resourced OSPs rely on the DMCA safe harbor regime to manage potential nondomestic copyright liability. This is significant because pending European Union copyright legislation will create a divergence between U.S. and EU copyright liability rules governing OSPs. This dissertation concludes that the new EU Copyright Directive is likely to have a differential and more detrimental impact on less-resourced OSPs but may result in further entrenchment of more-resourced incumbent hosting OSPs. It concludes by considering some of the limitations and safeguards in the pending EU Copyright Directive and how it may affect U.S. copyright law and the regulation of OSP liability globally. 2 DEDICATION For E, C and R i TABLE OF CONTENTS CHAPTER 1 INTRODUCTION .................................................................................................... 1 1.1 Project Scope and Methodological Approach ............................................................... 2 1.2 Research Questions ....................................................................................................... 3 1.3 Conclusions ................................................................................................................... 3 1.4 Overview and Organization of Material ........................................................................ 4 CHAPTER 2 BACKGROUND AND PRIOR LITERATURE ...................................................... 6 2.1 Background .................................................................................................................... 6 2.1.1 Copyright Law’s Distinctive Features .................................................................. 6 2.1.2 National Treatment and Limits on Harmonization ............................................... 7 2.1.3 Developments in Internet Jurisdiction and Conflicts of Law ............................. 10 2.1.4 Displacement of National Copyright Law by Voluntary Measures— Private Ordering Regimes Backed by Filtering Technology and Rights Management Systems ......................................................................................... 13 2.2 Literature—Framing the Research Agenda ................................................................. 15 2.2.1 Territorial Laws, Harmonization, and Fragmentation ........................................ 15 2.2.2 Regulatory Arbitrage .......................................................................................... 16 2.2.3 Regulatory Theory and Governance Scholarship ............................................... 16 2.2.4 Gatekeeper Liability ........................................................................................... 19 2.2.5 Economics Literature .......................................................................................... 21 2.2.6 Socio-Legal Scholarship and Organizational Theory ......................................... 22 2.2.7 Differential Impacts of Laws Based on Level of Resources .............................. 24 CHAPTER 3 HISTORY AND INTERNATIONAL CONTEXT: COMMUNICATION TO THE PUBLIC AND MAKING AVAILABLE RIGHTS IN THE WCT AND WPPT ............................................................................................................ 27 3.1 Introduction ................................................................................................................. 27 3.2 The New Rights ........................................................................................................... 28 3.3 Historical Background ................................................................................................. 29 3.4 Implementation of the Communication and Making Available Rights ....................... 33 3.4.1 Implementation in U.S. Law .............................................................................. 33 3.4.2 Implementation in European Union Law ........................................................... 35 CHAPTER 4 ONLINE SERVICE PROVIDERS’ LIABILITY FOR LINKING UNDER THE COMMUNICATION TO THE PUBLIC RIGHT ......................................... 37 4.1 Introduction ................................................................................................................. 37 ii 4.2 The EU Communication to the Public Right ............................................................... 39 4.2.1 Overview of Interpretive Principles ................................................................... 39 4.2.1.1 Act of Communication .............................................................................. 39 4.2.2.2 Communication “to the Public” ................................................................. 40 4.2.2.3 Knowledge Requirement and Rebuttable Presumption of Knowledge for For-Profit Linking Activity .............................................. 40 4.3.1 CJEU Hyperlinking Judgments .......................................................................... 41 4.3.1.1 Links to Freely Accessible Copyrighted Content ...................................... 41 4.3.1.2 When Links Constitute Communications to a “New Public” ................... 43 4.3.1.3 Links to Copyright-Infringing Material ..................................................... 43 4.3.1.4 Duty to Inspect or Monitoring Obligation ................................................. 44 4.3.2 Further Expansion of the Scope of Direct Liability ........................................... 45 4.3.3 Rebuttable