Netflix Is Stealing Work From Lawyers

At the turn of the century, at least 80 million people were stealing music. Napster was allowing people to ignore copyright owned by artists and studios. You could log onto the Napster app and download unlimited music in the revolutionary MP3 format for free. Peer-to-peer (P2P) file sharing had upended the traditional distribution model for music, and a response came quickly.

On September 8, 2003, the recording industry sued 261 plaintiffs for sharing songs on P2P networks. Over the next 5 years, the recording industry filed, settled, or threatened legal actions against at least 30,000 individuals. Threatening fines up to $150,000 per shared musical track, most lawsuit targets settled their cases for amounts ranging between $3,000 and $11,000. An entire cottage industry sprung up to find, initiate, settle, and profit from copyright infringement lawsuits. The Recording Industry Association of America (RIAA) reportedly spent over $64 millions dollars on big name law firms and investigative services. They filed ruinous suits against thousands of John Doe-linked IP addresses, single mothers, and elementary school children. They received about $1.4 million in settlement money. The RIAA also earned the disdain of the public, the ire of many judges, and the love of every congressman that took their campaign donations (bribes) for increasingly favorable legislation on civil copyright lawsuits.

While the RIAA stopped publicly suing people sharing music files in 2008, other industry groups and law firms have taken their place. Called copyright trolls by the Electronic Frontier Foundation (EFF), groups like U.S. Copyright Group, Righthaven, and front companies established by Prenda Law created their own cottage industry to shake down copyright infringers at scale. Emails making outrageous claims of huge fines, with no research into actual infringement, land in unsuspecting people’s inboxes. These frightened people are then offered “a deal” to settle the unfiled claim for a smaller sum. Done at scale via marketing automation, with online payment options, copyright troll lawsuit threats could be quite lucrative.

Law firms, like the now defunct Dunlap, Grubb & Weaver, and Prenda Law, are often behind copyright trolls. These firms would acquire enforcement permission from copyright holders, not charging up front for their services but taking a percentage of the revenue earned from settlement claims. Prenda Law went even farther, allegedly buying the rights to copyrighted pornographic materials via shell companies, then enforcing the copyright infringement claims of those shell companies. Prenda Law filed suit against thousands of downloaders. After a tortured trail of litigation, brought by groups like the EFF, Prenda Law has been litigated out of existence. Copyright trolls continue to operate.

Netflix just announced that they now have as many subscribers as Napster at its height. More than 81 million subscribers pay Netflix $8 to $12 on a monthly basis. Netflix uses these subscriber fees and their own stock to spend $5 billion in 2016 to both produce content and to acquire license for existing intellectual property. Netflix’s critically-acclaimed original series can be easily streamed to any internet connected location in the world. Their licensed content varies by a subscriber’s country, which can be quite frustrating. A show that can be watched in the U.S.A. may not be available in Canada, and vice versa.

Netflix has to vary their catalog from country to country due to copyright concerns. A company with the rights to stream a television show in Finland may be happy to license Netflix to stream in that country. But a different company may be the rights holder to stream that same show in France. Netflix must juggle a vast library of contracts and licenses to determine if you should be allowed to continue binge-watching old episodes of The Office.

Netflix handles this in two ways. First, they have a fairly robust hiring of legal professionals to help with jobs like:

· Counsel, Business & Legal Affairs, International Originals

· Paralegal, Original Documentaries & Stand-Up Comedy

· Technology Transactions Attorney

Each role helps navigate and negotiate with rights holders and telecommunications companies. There are many details that have be to reviewed when making years-old shows like Weeds available online.

Netflix is also building a robust regulatory technology (RegTech) library to go along with their content library. Team members, like “Senior Full Stack Developer — Legal Apps,” build software tools that streamlines Netflix’s contracts to execution and catalogues the rights acquired. These tools can act as both contract review and broadcast agent. Netflix can determine your country and instantly alter the catalog of content available to you.

Many international Netflix customers use virtual private networks (VPN) that allow them to pretend to be watching in a different country. Canadian subscribers use VPNs to watch U.S. or U.K.-available content, for example. Netflix’s knew this was happening, but seemed to turn a blind eye for a period of time. Right’s holders often complained that Netflix’s inaction allowed people to steal video content, much like Napster let people steal music.

Netflix did not sue their customers that worked around country restrictions. Instead, the streaming service instituted better VPN detection and blocking technology. Want to watch the third season of Peaky Blinders outside of the U.S.? You’ll see a polite error screen telling you to move on to another show.

RegTech is letting Netflix avoid millions of dollars in fees to law firms while still protecting copyright. If only the RIAA had thought of this before spending millions in legal fees.