If you can’t beat them, buy shares in them

SoundCloud, the self-proclaimed ‘social sound platform’, has been an effective tool at getting new music out in the public domain quickly and to a wide audience. Because it relies on user-generated content, copyright infringement is inevitably an issue. SoundCloud is looking to offer shares to Universal, Sony and Warner in exchange for licenses to their content in order to avoid a potential legal dispute. This is not the first time that major music companies have taken this approach; the labels are adapting to the ongoing struggle with online copyright infringement. The share percentage is reportedly around a 3-5% stake (based on a valuation of SoundCloud of between $500m and $600m). This certainly appears to be a winning business strategy for both the labels and SoundCloud.

Previous examples of this sort of deal include:

  • Universal Music had a 14% stake in Beats Electronics before Apple offered to buy Beats for $3 billion (see previous newsletter for insight into Apple’s change of patent strategy as a result of this acquisition). Universal also controls a 5% stake in Spotify and 47% of Vevo, the music video service.
  • Warner Music also held stakes in Spotify and Beats, including investments made by owner Len Blavatnik. Several of the labels also owned a piece of YouTube before it was purchased by Google in 2006.

This is potentially an amicable and profitable way to settle copyright disputes in a notoriously difficult market.

MasterCard plans to control all of your purchases worldwide

A company’s patent filings provide great insight into its future technological expansion plans. A recent patent application by MasterCard shows they plan to offer a multipurpose online global shopping cart. This ambitious idea allows potential purchases to be identified and made from multiple sources (particularly social media) and then assigned to particular tasks or projects. The online cart will be able to handle currency exchange rates and is designed to work on both mobile and desktop devices. Although clearly designed with MasterCard in mind, the patent does envisage other operators such as mobile phone companies. There is even an opt-in function for alerts; as the patent notes, ‘cat enthusiasts may be interested in receiving alerts relating to cats, such as cat food, cat grooming and cat health products and services.’

UK parody defences in force from 1 October 2014

From 1 October 2014 a new fair dealing defence to copyright will apply in the UK for caricatures, parodies and/or pastiches. These changes are seen to be bringing our copyright law further in line with the rest of the world which, given the problems with online copyright infringement and jurisdiction, is no bad thing.

However, this may not be a laughing matter for rights holders. It is still not clear how this new defence will be interpreted and where the line will be drawn between a parody and insensitive treatment of a creative work. A test case is needed to see where that line will be drawn.

Are you prepared for the Consumer Rights Bill?

The Consumer Rights Bill is heading closer. The Bill adds new provisions on digital content which are particularly relevant to the technology world.

You need to be aware of:

  1. a new non-excludable statutory remedy for damage to a device or other digital content caused by downloaded digital content;
  2. the need for digital content to be of satisfactory quality, fit for purpose and match the description (requirements which currently only exist for physical products); and
  3. pre-contractual information which must be provided to all consumers of digital content e.g. the right to a price reduction if repair or replacement is not possible.

The government currently expects the bill to come into force in October 2015.

Counterfeit tech products: get the stats

The latest stats from the EU Commission are out and, as always, counterfeiting is still a major problem for tech companies. The number of products involving potentially dangerous health and safety issues (e.g. electrical household goods) has nearly doubled. There has also been >50% increase in detentions involving products such as mobile phones, CD/DVDs, toys, games. Apart from luxury goods, these counterfeits are increasingly sold at a similar price to genuine goods (i.e. they are a substitute rather than a cheap alternative). Notable exporters are China, including Hong Kong, (79% of total detained goods) as well as Greece and Turkey.

Twitch removing unlicensed copyright in its users’ videos

Twitch, the user-generated video game streaming service, has announced new ‘Audible Magic’ software to scan its videos for unlicensed music content, including in-game and background music. When unlicensed music is identified, rather than remove the video, the software will simply mute it. Originally it was thought that this move was influenced by rumours of Google acquiring Twitch for $1 billion but competition concerns meant that a deal with Google wasn’t possible. Amazon has since confirmed that it will be acquiring Twitch for $970 million.

The new technology is hoped to limit any claims for copyright infringement which might damage the value of Twitch and demonstrates the financial significance of the IP issues in user-generated content. However, this compromise may not be so popular with Twitch’s users who are at the heart of Twitch’s business and credited with its value through advertising revenues. If users were to leave Twitch because of this move, it would also damage Twitch’s value ahead of the now confirmed acquisition by Amazon