Fair Use vs. Extortion in Copyright: A Legal Analysis

[00:00:02]YouTube's mxr plays fair use extortion and the muddy middle of copyright hello and welcome to another episode of Virtua legality I'm your host Richard Hogue managing member of the Hogue law business law firm of North Phil Michigan and today we're going to be responding to a story that came across my Twitter feeds and my social media again kind of in the muddy middle of how YouTube operates how fair use operates when you can use content when you can't and exactly what happens when someone sends one of these nasty kind of cease and desist letters to you because one of the things that is being floated around that I've seen is whether or not such an action is extortionate and we're going to talk about that a little bit I've seen a couple of other lawyers on my social media talk about whether or not this is extortion unfortunately as you can probably tell from the title to my video I view this particular issue as pretty much the muddy middle of copyright and if you followed this channel and if you've listened to me either on help us out howe with the easy allies talking about fair use talking about use of another's intellectual property for your purposes whether that's commentary parody or just making something off of what they have made you know that one of the main issues with fair use is that primarily it's a defense to a copyright infringement claim so somebody can drag you into court claim copyright infringement and you can then defend with the concept of something being fair you so we're gonna talk about these definitions at length a little bit more so that you have the right legal kind of language to rely upon and to think about but before we do that I do want to give the disclaimer that if you are a youtuber if you are otherwise using this stuff if you think that this case that we're about to talk about relate specifically to you I have to give the disclaimer this isn't official legal advice right this is commentary on something I'm looking at from afar and well I think it's good commentary I've talked about these issues with you before in virtual legality and I will undoubtedly talk about them with you again it is not specific to your facts and circumstances and you as you are about to see in this video the host facts and circumstances make the entire case on both sides on whether or not you're permitted to use the intellectual property or clay to use and on whether somebody can claim that you are infringing on their rights and are maybe extorting you in an unlawful manner so without further ado let's take a look at the actual issue here this is related to a YouTube channel that I was not familiar with called mxr plays and they put up a video that at least went viral in my neck of the woods the the law Twitter legal social media neck of the woods and it said we are being extorted which is a term of art in the law for all of our money and we don't know what to do anymore and I said okay well that's interesting one of the things you'll note here is that they have eight hundred and thirty thousand subscribers one of the things that pops out in their video and I'm not going to be using any video clips in this video because we don't want to have our own issues with copyright infringement regardless of how we feel about whether or not it's valid or not it doesn't make a lot of sense to just go and poke the bear on these kinds of things so one of the things that always comes up here is why these people right why these folks got this letter and we're about to talk about that letter in just a second but one of the main reasons and we've talked about this in virtual legality is because they got the money and know eight hundred and thirty thousand subscribers doesn't mean that they're rolling in it but it means that they're rolling in it more than say hoe claw channels six thousand subscribers and at some point the people that own these videos whether they're trolls whether they own them or not and they're gonna just make trouble for you and they're gonna extort you and they're gonna act illegally if that's what you think happened here that's gonna take place only when they think there's a significant enough pot of money to go after so the question here raised you know why did this happen to us why does it happen to us and not X Y or Z who does a very similar thing to us one of the answers to that question is the people that do this kind of thing evaluate where there are pockets to go and get money out of and where they're or not and they pick and choose their opponents on that premise so here you've got eight hundred and thirty thousand subscribers they presume you're making some money you've got a patreon here advertised you've got some money to go after or at least these folks think that you do and that's one of the reasons why this becomes an issue but these folks in general and I looked at the videos here in question that we're about to talk about they take viral videos or meme videos that presumably they find on the internet some and they comment over them and we'll take a look at what that looks like for a second here but that's primarily what they do as best I can tell and if you've got better information on this particular YouTube channel let me know in the comments to this video but that's what appears to have happened here is that they had these videos that they found on the internet that are viral and they put their video up in the top corner and they comment on them and the end result of that process was this so here's the tweet that I saw and that was linked to me a couple times it says mxr MMO X review here are the charges Junkin media gave me three thousand dollars for a single meme because it contained footage from two of their clips if I don't pay this they'll strike and take down my channel so we go and we click on this and it says Junkin media settlement fees already a good sign this means in general this is what they do on a day to day basis they send these things out to various people and you see here charged by a video so they've essentially identified four separate videos that they think infringe on their rights to videos that they own and they have asked for fifteen hundred dollars in settlement of each so one the one thing we note is that they aren't distinguishing between the various usages regardless of how long they were what kind of commentary was on top of them or not it's just always fifteen hundred dollars you violated our rights and so we're going to now go and ask for fifteen hundred dollars from you now that's a lot of money obviously one of the things that pops up there is is it too much money when you start talking about whether something is extortionate one of the main kind of functions is are you going and misrepresenting what somebody's legal exposure is to you in order to encourage them to settle to pay you money and if you get way too far afield from what is actually a legitimate source of damages what you would actually be able to go and get from a court it's possible that someone could turn around and you and say you are trying to extort me and we're going to talk about that towards the end of this video for the most part you think hey Rick isn't that what a lawsuit is in all cases you go you send somebody a threatening letter and say if you don't settle with me we're gonna sue you yeah absolutely that's allowed but if you go and you say hey we're also gonna take you know 600 million dollars from you if you don't settle for thirty thousand then if you start to use misrepresentations if you start to use the law as a cudgel in a way that you know factually is inaccurate you can start to get into trouble with these kinds of wire fraud or interstate extortionate communications statutes that we're going to talk about in just a minute now junk and media actually responded to this tweet and they said we left a comment on your video here's a screenshot you are making money off of videos that don't belong to you our only goal here is to ensure that the rightful owners of the videos are compensated we're happy to talk and try to find a resolution that works for everyone let's actually take a look at what they copied here from their comment to the video they say hi we'd like the check take the chance to respond to this for starters it's important to understand that we provide a service for video creators we allow them to list their content on our website so that TV shows publishers youtubers influencers or advertisers can buy a license to use their content it's no different from a company like Shutterstock where photo photographers or videographers can make their content available for sale only we specialize in viral style videos as we've mentioned repeatedly you can completely avoid any issues related to copyright by simply licensing videos on our website for $49 now that's let's stop right there for just a second that's interesting right they actually say in their comment hey you could have bought this for $49 only we're not going to ask you for $1,500 which is an order of magnitude above that $49 price so you look at this and you say well what is that $1500 about if you're actually gonna come out in writing in a comment to this and say you could have made this alright for $49 there is some ability for someone that has been essentially infringed upon to say no we don't offer you the license anymore because you're a bad actor and you actually owe us damages and we think we lost you know $1500 on your use of the video but obviously with a one-page settlement price that we just saw that was delivered to mxr that doesn't exist there and instead all we have to go on is the fact that they usually sell rights to this for $49 and now they're asking for $1,500 that's the kind of fact pattern where you step back and say that actually does start to look like somebody coming into your shop and saying hey nice place you got here it would be a if something were to happen to it which is of course the kind of standard Goodfellas mob movie version of extortion which we don't get necessarily in YouTube commentary but it starts to look like that it's not a good look for joking media and so we press on with their statement but on the understanding that it's now starting to look a little fishy we have no ill will towards you or your channel we'd like nothing more than for you to eat licensed content using our website or if you'd rather not another option is simply not to use our videos that you don't have permission to use YouTube's policy is clear on this it says you should only upload content including music videos and artwork that you created or that you're authorized to use now that's a little sleight of hand right because we're about to talk about fair use here and fair use is deliberately and explicitly written into the Copyright Act to essentially say if you are using something for fair use you do not infringe under the law that is authorization and we're also going to talk about the fact that DMCA abuse takedown notice abuse essentially now requires people that are going to hit that button and claim abuse to do a fair use analysis that you are supposed to think about whether or not it's fair use before you actually hit the button you put a copyright strike on somebody you threaten their livelihood in effect you're taking other people's videos without asking them then posting them to your channel and making money off of them by visiting our website and paying a modest $49 license fee to use videos you'd be making sure the videos rightful owners are compensated while also ensuring that your channel remains free of copyright issues again shame if something were to happen to it as always we're happy to discuss your situation and try to come to a reasonable solution moving forward we'd also be willing to discuss some kind of longer-term deal that would allow you to have access to our entire library of 60,000 videos we never want to issue copyright strikes we have a duty to do so to protect the copyright of the creators who have signed with us again there's no reason we can't work together so that you can have access to amazing videos and that the creators of those videos share in the economics so again they're claiming you have no authorization to use the video and you could have gotten that authorization for $49 or hey since we don't want to issue copyright strikes maybe you'd like to purchase the whole library I'm sure we could come to something economical a bit of protection money for you if you will and that's the statement that jookin media has put out there and what mxr is reacting to now they call it extortion in their video one thing I'd want to point out here is they also say that they could strike down and take my channel so what you've got here is a settlement fees that actually identifies four separate videos so they could potentially strike on four separate videos and YouTube's policy if you're not familiar with it this is for the non youtubers who listen to virtual legality YouTube's policy is to essentially take your DMCA takedowns and issue copyright strikes if somebody asks for them and say hey if and when you get three of these if you get three copyright strikes your account along with any associated channels is subject to termination all the videos uploaded to your account will be removed and you can't create new channels now there are ways to fight that we've talked about the DMCA in previous videos in the past one of the main issues that YouTube has had and has been fighting against since they've implemented all these systems is that they don't have a great ability to differentiate between folks that have legitimate ownership claims and folks that just have put together some kind of conglomerate LLC and are going out there and striking people and asking for money back or asking for things like what you are seeing here which you can media now we don't want to accuse jookin media of anything in fact for the premise of the rest of this video we are going to assume that they own all the rights necessary to these various videos that they have claimed on and again there were four and they were actually clips that were taken as part of longer videos so I've brought up here a still screen hae-joo can if you're watching this I'm not using your video this is just a still screen of the mxr plays video and you can see here how they use their videos and what exactly mxr play does they put their faces in the top corner this is a video about a Papa New Guinea volcano eruption it's about 13 seconds long in a 19 minute video now that's not dispositive we're gonna get back to that some people do the math wrong on fair use with respect to that but this video is about 13 seconds long and they mostly don't comment over it now I don't want to give spoilers here you can check out this video for yourself but one of the issues that I saw immediately is for this particular video which is a volcano explosion and then a shockwave hitting the videographer mostly the only person who talks here is is the male in the video and he says wow that's cool essentially and then after the video they talk about it a little bit more than they move on to the next video one of the issues is going to be you know did they comment on it enough to be transformative in their usage you say well Rick it's part of a 20 minute video and that might go towards transformation but probably not considering I didn't see at least in my kind of brief view of this video any links to other descriptions they're not using it as a bouncing off point to talk about something else it's just they watch this video they say wow that's cool there's a shock wave and then it hits the boat and then they move on to the next thing and without that commentary without kind of talking over it and that kind of thing you can potentially get into issues again we want to see if that is actually at you can media and we can see that pretty easily we can take a look at their site we see the same kind of front image on that volcano eruption volcano eruption in Papua New Guinea they say it was added in September of 2014 and you can see here on the right side of your screen what they would like to charge for its standard editorial that's that forty nine dollar fee that they have for it they have enhanced editorial $4.99 ultra editorial for $2.99 and to actually advertise using the video to make commercials with it to directly have commercial impact from the video they asked you to inquire something more something more expensive probably not too far afield from two hundred and ninety-nine dollars but one thing that you definitely don't see here is $1500 so you come back and you say alright well if there is a copyright infringement they could be asking for extra damages they can use statutory mechanisms to do that etc etc but you don't see an easy kind of pathway from $49 for standard editorial license to $1500 per video that starts to look like you're just asking for more money to make that exposure high enough that essentially the person that gets that letter from you can't risk not responding can't risk at bare minimum putting up a YouTube video and complaining about it so that folks like ho get virtual legality talk about it but also that you can't risk not paying it because if your livelihood is on your YouTube channel now they've got you right now they can say hey you know six thousand dollars is a lot of money but it's not sixty thousand dollars or whatever you might otherwise be earning maybe you should just pay us or hey maybe you should buy our whole library wouldn't that be nice if we never came back around your shop and decided to break up a few things now that's the state of play you see what they did you heard me talk about the fact that maybe there wasn't enough commentary on the video and to get into why I said that we have to look at what the actual Copyright Act and how fair use operate says so if you've been in virtual reality you know we have been in 17 USC 106 before this is the bundle of Rights that people talk about when they talk about copyright so this is jookin media again we are assuming that they have all the ownership rights to that video that they have signed a license with whoever made that video and are again remitting some of the fees that they otherwise earn on a license to the owner of that video and they have the rights through that license to one reproduce the copyrighted work which there was a reproduction in mxr plays they have the right to prepare derivative works based upon that copyrighted work okay so again a derivative work is something that is based off the existence of the copyrighted work that would be like the commentary video that you saw so they have these exclusive rights to do these things to distribute it to perform it and to do these various other things related to a video we don't want to get into pantomimes and choreographic works and things of that nature but suffice it to say if they hold the copyright and we are assuming that they do they have the exclusive right to make copies it's a copy right right and a story dunzo not quite right because we have fair use as the main concept again still in USC still in the actual code language itself limitations on exclusive rights this comes in after you've established that you have a copyright in something and says for somebody else using that copyright hey I'm going to use it for this reason that is specifically excluded from your rights and the law says that's okay the law says that is in fact authorized it says notwithstanding the provisions of sections 106 and 106 a 106 a is author attribution and things of that nature the fair use of a copyrighted work including such use by reproduction in copies or phonorecords or by any other means specified by that section for purposes such as criticism comment news reporting teaching including multiple copies for classroom use scholarship or research is not an infringement of copy let's stop there that's the main sentence that's the operative sentence when we are describing fair use in the Copyright Act if you are using something for criticism or comment it will not be an infringement of copyright now again you say okay well fine then Rick you're done they were using it to comment and so they're fine not quite the next sentence establishes some very vague factors that are going to be used by courts to determine whether or not something falls under the bucket of that first sentence in determining whether the use made of a work in any particular case is a fair use in such a fair use as we just talked about the factors to be considered shall include the purpose and character of the use including whether such uses of a commercial nature or is for non-profit educational purposes the nature of the copyrighted work the amount and substantiality of the portion used in relation to the copyrighted work as a whole and the effect of the use upon the potential market for or value of the copyrighted work and then also the fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made using all the previous factors that we just discussed so a couple things here this is what we call a balancing test under the law this says factors will be considered by the court and the court will look at these various things and determine whether fair use was made based on balancing of these various factors the other thing you might note here is that even though these are kind of quantified into four separate sections they don't actually establish which way things go right this is all what we might consider unwritten law what you understand kind of intuitively what they mean it isn't actually written in the statute so when we talk about the nature of the copyrighted work that doesn't say anything if you followed YouTube it large in the virtual reality series you know we have talked about things like this in respect of the definition used for a website directed at children in respective Coppa that they just throw out here a bunch of factors that we will consider and they don't actually establish which way various directions go on these things so the statute is only really the starting place now it's a good starting place because they actually have these four factors for consideration you don't need them all you don't need to win every paragraph you basically just need to win the bulk of the paragraphs to be considered fair use but when you go and you sit in a law firms office and you ask the lawyer is this thing that I'm doing fair use this is the reason you get it depends from all the lawyers you might otherwise talk to because what we can only evaluate is how a judge or a court if it's higher than the judge if it's appealed might consider these various factors and that's our judgment and we can give you that judgment but we can't make guarantees on that because this is essentially someone else considering these various things and trying to come up with the answer now there is a little bit more guidance given to us in various places on these particular items and I've pulled up now the copyright offices website copyright gov that says more information on fair use they talked a little bit more about what these various factors mean and they helpfully put them in four different boxes so they said the purpose and character of the use including whether the use is of a commercial nature or is for non-profit educational purposes what do we mean by that says hey courts look at how the party claiming fair use is using the copyrighted work and are more likely to find that non-profit educational and non-commercial uses are fair if you're not making money off it you get a checkbox on this because the court says hey if you're not making money we are more inclined to find that the use was fair this does not mean however that all nonprofit education and non-commercial uses are fair it's just one box to check and all commercial uses are not fair and if you don't get this box that's okay you can still win the balancing test instead courts will balance the purpose and character of the use against the other factors below additionally and here's the important part for YouTube for virtual legality you might be saying as you watch this video hey Rick you do this a lot you comment on other people's videos you comment on other people's commentary you discuss legal documents that might be copyrighted by one or more of the authors of those legal documents how does this work for you here's the answer additionally transformative uses are more likely to be considered fair transformative uses are those that add something new with a further purpose or different character and do not substitute for the original use of the work so if you're thinking about this you say alright Rick I've seen you comment on some kind of filing that was made or maybe some statutory code or maybe even a news article how are you in fair use I say okay I look at that I read that and then I explain things to you hopefully well I give commentary I give critique on how that was written what problems there are with what was written what I have on is my own thoughts from a legal or business perspective and hopefully that's transformative that is changing the nature of the news item that was trying to be delivered in that news article or the fact that it's a brief and a claim brought in a court and it's changing it to hopefully some legal education some legal information something that helps people that follow a virtual legality that listen to this channel that watch it on YouTube have a little bit of a better understanding of what that news item means that's the purpose of this channel that's the purpose of this particular series virtual legality and that's what we find ourselves in in terms of fair use we're transforming what we're commenting on what we're talking about and that's what a lot of people on YouTube find themselves in when when related to fair use so the primary issue that I have in just that clip and I didn't look at all four clips and you can look at those and you can comment on them in the comments to this video the primary issue I have in that clip is you know sitting over it and saying wow that's awesome I don't view is particularly transformative now it's only part of a bigger work and it's a very small piece but it's also apparently the entirety of that video in terms of copyright so that's one of the primary issues that they're going to find themselves in and it wouldn't surprise me if the other clips on that particular list our areas where jukka media has found a similar kind of situation where there isn't a lot of commentary the audio is fully played they mostly just watch the video and if it's the entire video that becomes an issue as we're about to see nature of the copyrighted work that was one of the issues in the statute that we just read read what does that even mean nature of the copyrighted work this factor analyzes the degree to which the work that was used relates to copyrights purpose of encouraging creative expression thus using a more creative or imaginative work such as a novel movie or song he's less likely to support a claim of fair use than using a factual work in addition use of an unpublished work is less likely to be considered fair in other words if you are using a novel movie or song in your own stuff you're gonna be less likely to be found to be using fair use because the entire purpose of the Copyright Act as a kind of philosophy is to encourage people to make new stuff so if you are using something without renumeration if you're using something without giving somebody money that is of a creative nature then they're gonna find potentially that it's not fair use more often than if you're using a technical manual and you're putting that in your science fiction book things that make it look like hey I'm actually contributing to the creative environment the creative ecosystem and I'm using a reference to this technical manual that's gonna be more likely to be found fair use that's something that could potentially go in mxr plays favor on this right that wasn't a creative work that was somebody taking video of a volcanic explosion seeing the shockwave having the shockwave hit the boat you know if they had paused that video and they were a science YouTube channel and they were talking about how the shockwave comes out of the volcano what it means to hit that boat what kind of speed it's going at giving that kind of informational quality and flare I don't think that they would have as significant a problem with transformation as what I potentially see in the issue that they have that's why this video is called the muddy middle but since they didn't do that you've got juking media saying hey you just took our video you put it up entirely and you didn't really say anything off of it what are we supposed to do and while I think that the prices they've given are potentially extortionate while that might be an issue in and of itself their actual claim here is not as obvious for somebody like me looking at it and saying well it's clear that this is fair use I don't know that it is the third factor amount and substantiality of the portion used in relation to the copyrighted work as a whole under this factor courts look at both the quantity and quality of the copyrighted material that was used if the use includes a large portion of the copyrighted work fair use is less likely to be found so that's even with respect to a short video right the jookin media video of this volcanic explosion isn't terribly long and so what is used in the mxr plays video isn't terribly long either but it is primarily most of what the video is I'm not sure if they made any kind of smallish cuts it looked to be about the same length when I did my review here and also it says hey that said some courts have found use of an entire work to be fair under certain circumstances and in other contexts using even a small amount of the copyrighted work was determined not to be fair because the selection was an important part or heart of the work so even if they did make certain small edits to that video and I can't confirm or deny that just based on what I could see even if they did it's clear that the heart of the video was the explosion and the shock wave hitting the boat and they used both of those clips in what they were commenting on so they used the heart of what this video was so if you're keeping track at home you know their purpose maybe wasn't transformative it it maybe was just a news or factual work rather than a creative ones they might be okay there but they also use basically every bit of the video that jookin media was trying to license or sell so they've got an issue here with fair use factors if I'm just looking at this from hopefully a non biased perspective then they say effect of the use upon the potential market for or value of the copyrighted work here courts review whether and to what extent the unlicensed use harms the existing or future market for the copyright owners original work in assessing this factor courts consider whether the use is hurting the current market for the original work and/or whether the use could cause substantial harm if it were to become widespread now on this I think the answer is no I think they have a better fair use position on this fourth factor this is basically designed to look around and say what you did what you made can it substitute for the video in and of itself the answer here is because it's not transformative maybe but because it's also part of a longer twenty minute video because there's a box in the upper right corner it probably doesn't substitute for what jookin media is trying to sell now they might claim that it does that may be why they're asking for fifteen hundred dollars but I think that's a difficult case for them to make so ultimately we go through these four factors and you say right I'm keeping track at home I think two of those factors you said were for fair use give or take and two of those factors were against fair use give or take where does that leave us I say hey I don't know that leaves us in a place where Juke and media's claim that fair use was violated or that fair use isn't available to them as a defense to copyright infringement he's probably plausible that they aren't simply sending this letter as a fully kind of gangster extortionate move they aren't just saying hey this is not fair use it is infringing our copyright and they really should have thought about it harder that at the end of the day if I'm their lawyers or I'm giving them advice I say yeah you know I'm not sure I would ask for $6,000 but you probably aren't going to get kicked out of court for not even considering fair use and you've probably got reasons to at least argue that fair use wasn't available on that clip in particular I'm not speaking to the other three clips because I didn't go and find them in all the various videos so we're in a situation now where we're talking about this and it looks very unfair to the people that made that YouTube video it's a very small portion of that video however maybe they don't have fair use as a defense maybe they do but it's an open question so the secondary question here is let's say that they do let's say that ultimately the court would find hey this is fair use it's a pretty short clip they have that big box in the corner they do talk over it a little bit come on Juke in media asking for fifteen hundred dollars for this small clip when you otherwise sell rights for forty nine dollars we have you on the record in commentary actually taking a picture of your own comment saying $49 would have been fine for this and then asking for an order of magnitude more you know frankly that starts to look like an unlawful threat and why does unlawful threat matter to us so much well in this case we go to a different section of the USC we actually go to 18 USC 1951 interference with commerce by threats or violence whoever in any way or degree obstructs delays or affects Commerce or the movement of any article or commodity in commerce by robbery or extortion or attempts or conspires so to do or commits or threatens physical violence to any person or property and furtherance of a plan or purpose to do anything in violation of this section you gotta love statutory code shall be fined under this title or imprisoned not more than twenty years or both and for our purposes here the definition is important the term extortion means the obtaining of property from another with his consent induced by wrongful use of actual or threatened force violence or fear or under color of official right so broadly it means going and threatening someone unlawfully you see here their use of the word wrongful wrongful use of actual or threatened force and going and asking for property going and getting property in this particular instance and this is a pretty common concept so I've brought up the federal law here which talks about interstate commerce things that they need to do for a constitutional hook in order to give them the rights to actually make a law like this I don't know where mxr plays is I don't know where jookin media is but there are other jurisdictions California various states that will have their own kind of extortion law on the books but the premise is this if you go and you send a letter or you make a communication and you are using unlawful means to try to go get money or property from someone you could potentially be liable for extortion now the issue is that happens all the time to some respect as we've talked about earlier in this video with threats of lawsuits right we at Hoag law have sent cease and desist letters after consulting with our clients and talking about what issues they might have whether it's a violation of a non-competition agreement or a violation of a license that they've entered into with respect to their intellectual property things of that nature where you have somebody breaching a contract otherwise potentially liable to your client you send a letter and says hey you are breaching our contract please stop that or Pete or please pay us these damages and if you don't we're gonna have to consider our legal remedies and go to a litigator and potentially bring you to court and that's totally legitimate because we've got a reason to believe that we've had some rights or obligations that have been breached that are owed to us and we are hopefully making a claim of damages that are relevant to what it is that we've actually experienced however if we start to make misrepresentations in going after that lawsuit if we start to make claims that are otherwise going to be considered unlawful then you can get into an area and this happens with lawyers as we're about to see in this NBC News article where you can be brought up on extortion charges if you don't remember this story from pretty early last year Michael avenatti and Nike when does a lawful threat cross into extortion now I don't usually use NBC news articles for legal analysis but this was actually pretty good like most news articles it has a few things that it kind of glides over but I think it's useful enough for us to kind of get the groundwork for talking about this it says hey analysis threatening a lawsuit is legal just like we talked about but if Michael Evan he engaged in misrepresentation such as when he said he could ruin Nikes reputation that could be considered extortion and if you're not familiar with the story basically he said you know I can threaten to sue you you have to settle with me and if you don't I can take a huge amount of money off your market capitalization I can just kill your stocks I can get all you CEOs fired you better settle with me and he was brought up on extortion charges it says here attorney Michael avenatti has been charged in federal court in the Southern District of New York with trying to extort up to twenty five million dollars from Nike avenatti was charged with the conspiracy to transmit extortionate communications this crime is committed when someone transmits in interstate commerce a threat to a corporation's reputation with the intent to extort money the statutory maximum is two years avenatti was also charged with Hobbs Act extortion which is the obtaining of property from another with consent induced by wrongful use of actual or threatened fear of economic harm that's what we just looked at they will try to dismiss the case going in paraphrasing some of this article because it's always okay to bring a lawsuit even if it's meritless as this article continues a lawsuit actually filed in court by lawful means cannot be wrongful as defined by the Hobbs Act but note the heavy lifting that some of that language is doing by lawful means you have to have reason to actually bring the claim and if you don't if you're just trying to get someone to do something for you and you're using the legal system as essentially your big hammer that can be a problem they go on to say if court started holding that meritless lawsuits were extortion and every unsuccessful lawsuit would lead to an extortion claim we don't want that we want people that have had their rights infringed upon that have otherwise been wronged to be able to avail of themselves the legal system we want that so we don't want to just have everything be extortion however on the other hand sometimes threatened litigation crosses the line and is extortionate very helpful so far right we're very much sitting in this lawyer's office and having him say it depends the federal appellate courts have held that when a lawsuit is not pursued exclusively by lawful methods threats of litigation may constitute extortion and I looked at that link that's actually a case where the court does say hey you can't have lawsuits that are extortionate however there's a lot of muddy facts in that particular case they have an actual situation where officials are being bribed and claims are being made for our purposes the most important part of that case is the claim that making misrepresentations about what your rights are what your damages actually were and trying to essentially raise the price of not settling with you in a manner that is false is a is a kind of fraud is a kind of artifice to deceive as the law might say and if you go that far then you can get into issues as we've talked about prior to this in this video that's a muddy middle in and of itself right it's not just copyright it's not just fair use extortion is a very unusual Avenue to go and to claim for a lawful kind of threat and so what we've got here is trying to analyze whether or not jookin media has gone a step too far by actually having in place commentary that $49 would have been fine here's six thousand dollars of fees were perfectly happy to walk away with and whether or not that actually constitutes extortion would be a matter for a court to determine if and when that the court actually took it up and so you know if you are mxr maybe you could go maybe you could go talk to a federal agency and say hey I'm being extorted here but $6,000 YouTuber this particular issue where they maybe do have an infringement actually on the books this is something that is unlikely for somebody as an agency level to actually jump in and kind of protect you on so you've got those issues if you're mxr as well going forward in this article a court considering whether a vanadis threats were lawful or extortion that would look at several factors avenatti allegedly tried to magnify the pressure on nike by inflating the perceived magnitude of Nikes potential exposure and the perceived likelihood that the exposure would result in massive liability for the company so if we assume that there aren't actually $1500 of damages experienced but you can media and $49 is a little bit closer to what we're actually talking about here if we assume that even on the fair use analysis might be tied it's still something that they should think about before actually bringing a claim on because fair use if they do have fair use they shouldn't be able to ask for any money at all and if we assume that they are then going and threatening to close the channel actually getting on Twitter and increasing kind of the pressure on mxr actually getting into their own social media feeds and saying hey you know you gotta settle this we put a comment in your video we put a comment on your Twitter feed we are coming after you and if you don't settle this we would take away your channel then is that all legitimate and that's an open question and I think if I'm jookin media they're probably acting a little bit too far at this point do you send the letter and you let it go you don't you don't kind of argue this in the court of public opinion because at the end of the day it's gonna be the legal claim that wins out for you if you're jokin and if you don't if you lose on an extortion claim it's gonna be based on the fact that you went out there and you did all this stuff to try to get them pressured to give you this settlement that's the kind of thing that results in an avenatti type analysis says hey if avenatti waged a pressure campaign premise ton misrepresentations then that likely takes the threats outside of the protective sphere of litigation if this pressure campaign relied upon dissemination of false information or exaggerated estimates of Nikes damages then that might be extortionate and that's the answer right it might be extortionate it might be fair use it might be copyright infringement this is the world in which we live unfortunately and this is the world that youtubers have to kind of deal with on an ongoing basis and this is why if you've looked at virtua legality and if you looked at my previous stuff you know i do think in the digital world when we're talking about memes when we're talking about viral videos commentary on the same we really do need certain steps to reform copyright and the Copyright Act in general it is not built for this it was not built for the complete and total copying of very small videos across entire internet websites that you can then put your commentary on over and have a successful commercial enterprise through a service like YouTube the Copyright Act still talks about pantomime and phonorecords for pete's sake and it is more than time for a review of the Copyright Act for a reform that helps get not just people that are infringed upon you know the jookin media is the world I didn't have to ask for $1500 of video but they might well have been infringed upon in this particular instance and we want people to be able to have a business model like Juke and media is advocating to say hey I'm gonna go collect this video ownership I'm gonna go license it for myself I'm gonna license it out to people who want to use it we're gonna get money for that service but the owners are gonna get money for that service hopefully the youtubers are gonna get money for making their commentary video and everybody wins we generally want to advocate for that model but we don't want to advocate for extortion we don't want to advocate for trolling the last thing I will say on this is what we talked about early in the video is that the mechanism for this is very very kind of artificial right we've talked about this in virtual reality before but primarily the DMCA takedown notice is what we're talking about here this is a claim that someone makes on a YouTube channel in particular but anywhere else on the internet that says hey you YouTube as a service provider have put up something that is infringing I will attest to the fact that it is infringing and so you should take it down if you want to avoid liability and YouTube basically reacts to that in every single instance they take it down and as we saw in their own description of events if you get three of these copyright strikes that are really bad then they are going to potentially take down your channel and like everything else if you make a lot of money for YouTube you probably get a little bit of extra dispensation on that particular item but that's for another virtual legality video for another time but one of the things that came up here is that the DMCA doesn't actually explicitly talk about fair use so there's been a lot of questions about whether or not somebody that goes and makes a claim hey I clearly own this video do I have to consider fair use before I make the claim to strike that video and it's a little bit away now it's September 2015 it's the lens versus Universal Music Corp case that we have talked about in virtual reality before but basically what this whole thing says and I will link this particular article from Jones day in the description to this video it says yes you have to consider whether it's something is fair use before you claim it is unauthorized it's one of the reasons why that commentary from jookin media is trying to hide the ball a little bit they have to do an analysis of whether or not it is fair use it says the Ninth Circuit held that the Copyright Act unambiguously contemplates fair use as a use authorized by law and accordingly a copyright holder must consider the existence of fair use before sending a takedown notification under 512 C the point in the DMCA that talks about takedowns says if a copyright holder ignores or neglects are unequivocal holding that it must consider fair use before sending a takedown notification it is liable for damages for a wrongful takedown if however a copyright holder forms a subjective good faith belief the allegedly infringing material does not constitute fair use we are in no position to dispute the copyright holders belief even if we would have reached the opposite conclusion that said a copyright holder who pays lip service to the consideration of fair use by claiming it formed a good faith belief when there is evidence to the contrary is still subject to that liability and this article from Jones Day actually goes on to kind of analyze the decision by the court but it says yeah so you've got a broad kind of area of discretion if you are juking media as long as you went you put a memo in the file you considered whether something is fair use or not you kind of did what we did here in virtual legality and came to the determination that while the factors are somewhat balanced two by two the two that are on your side are more dispositive and so it's not fair use that if you've got that thought process in place and that probably should be communicated to the person that you are actually claiming is infringing upon your stuff if you've got that thought process in place even if you are later proved to be wrong the courts going to allow the initial DMCA claim but if you don't have that analysis if you didn't bother to make the analysis or if you've actually got evidence in your email chains or otherwise that suggests hey you know that it might be fair use and you go and you make the claim anyway you're gonna be in big trouble and that's kind of the current state of play with the DMCA that's kind of what people are dealing with right now is that because of the automated nature of it with respect to YouTube and other services we are still trying to figure out continually exactly where the line should be on what somebody that claims ownership of an intellectual property should be able to do under the DMCA what that counter notice should be able to do and ultimately you know the way the DMCA works and you can check out earlier videos in virtually gout if you look for DMCA on this channel to talk about more specifics on that law itself is that ultimately if there's a big enough fight you got to go to federal court and have it out there and as we've talked about the primary issue with copyright the primary issue that mxr plays now finds itself in and the primary reason that you can media can put them in this position is that use of a federal court system use of the Copyright Act is very very expensive and because you can media can point to that video in Papua New Guinea can say hey it's ours we've shown that it's ours we charge people forty nine dollars at minimum for its use they refused to go and get that from US Court at bare minimum that's probably enough to not get it kicked out immediately and if you don't get the case kicked out immediately you're talking about paying lawyers you're talking about paying for potential discovery you're talking about all the expenses that are inherent in litigation and when we're talking about federal litigation we're talking about a lot more than six thousand dollars so one of the ways a scheme like this works if you think Juke and media is entirely in the wrong is they go and they say okay this is very important to your livelihood okay we think you have the money to pay this okay if you want to dispute or make trouble for us you'd have to take us to federal court and if you did that you would lose more money than the six thousand dollars so we have picked out this amount of money and we think this makes sense for what you are going to pay us is that calculation in and of itself extortionate it can certainly look that way from a kind of common law perspective I have my doubts because I think they have a certain amount of plausibility with what they are bringing as a claim I think the amounts they are asking for and the way they are pressuring them on social media and elsewhere is its own problem and if I were advising them I would tell them to stop that immediately but is it extortionate that's an open question and even if you can use that as some kind of defense you're probably already in federal court your channels probably already been shut down you probably don't already have the money to pay the lawyers to do either the copyright defense or the extortion claim and then where does that leave you and unfortunately that is the rock and a hard place that mxr plays now find themselves in and no it's not fair no it's not fair in the Copyright Act side no it's not fair that fair use is so vague and unknowable no it's not fair that extortion maybe doesn't walk up quite to the line that could defend them in this specific instance none of this is fair however it is the way the current law reads and I do recommend reform across the bar on all this stuff especially as it deals with digital media and the Internet but that's not the world we live in right now and on fortunately that is the muddy middle of copyright and unfortunately that is virtually gala tea for today if you like this video I know the subject matter isn't necessarily that fun but if you liked it if you think it's interesting if you want to share it around with people please do so please likely subscribe to the channel we love having these conversations and discussions especially on YouTube the interface business and law and all the things that go into what we're dealing with in the modern area whether that's video games pop culture or otherwise if you caught this on YouTube thank you so much for watching and if you listened to it in its podcast form thank you so much for listening and I will catch you on the very next episode a virtual legality virtual legality is a youtube video series with audio podcast versions presented as commentary and for education and entertainment purposes only it does not constitute legal advice and does not create an attorney-client relationship if you have legal questions about the topics discussed please consult your own legal counsel [Music]