Property, intangible

X Corp. v. Bright Data Ltd. is being reported in the press for an odd proposition, quoting this sentence: “X Corp. wants it both ways: to keep its safe harbors yet exercise a copyright owner’s right to exclude, wresting fees from those who wish to extract and copy X users’ content.”¹ Um, no, which I’ll briefly explain, later. What everyone is missing, though, is the opinion is the court’s frontal attack on terms of service used to take away user rights under copyright law.

The U.S. Copyright Act preempts, i.e., prohibits, any claim under a different legal theory that is equivalent to a claim within the general scope of copyright. 17 U.S.C. § 301(a) (“all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright … are governed exclusively by this title.”)

In Bowers v. Baystate Techs., Inc., the Court of Appeals for the Federal Circuit held that a shrinkwrap license that prohibited reverse engineering, generally considered a non-infringing, fair use of a copyrighted work,² was not preempted and the prohibition enforceable under contract. This has been the widely accepted status quo for the last 20 years.

A contract claim doesn’t always survive a preemption challenge; it depends on what the contract says. There was a recent notable case against Google³ which held that a contract that prohibited the unauthorized “licens[ing], … copy[ing], modif[ication], s[ale], … [or] transm[ission] for any commercial purpose” of the content of the website was preempted by copyright law because the contractual prohibition was the same as the copyright prohibition. The losing plaintiff filed a petition for certiorari, but the Supreme Court declined to hear the case.

But this decision goes much further and takes a different approach. When deciding whether a claim is preempted under § 301 of the Copyright Act, the question is generally whether the non-copyright claim is equivalent to a copyright infringement claim. Here, though, the court is not investigating whether the claims are equivalent, but investigating “conflict” preemption, which is where the claim interferes with the full purposes and objectives of the federal law. According to the district court, in very strong language, it does:

We are instead concerned with a massive regime of adhesive terms imposed by X Corp. that stands to fundamentally alter the rights and privileges of the world at large (or at least hundreds of millions of alleged X users). … Recall, our court of appeals has held that giving social media companies “free rein to decide, on any basis, who can collect and use data — data that the companies do not own, that they otherwise make publicly available to viewers, and that the companies themselves collect and use — risks the possible creation of information monopolies that would disserve the public interest. hiQ Labs [Inc. v. LinkedIn Corp., 31 F.4th 1180, 1202 (9th Cir. 2022)]. … [T]his order concludes that the extent to which public data may be freely copied from social media platforms, even under the banner of scraping, should generally be governed by the Copyright Act, not by conflicting, ubiquitous terms.

Terms of service/terms of use generally try to undermine user rights under copyright. If this decision stands, it could lead to a significant change the power balance between the website owner and website user.

And the odd proposition that “X Corp. wants it both ways: to keep its safe harbors yet exercise a copyright owner’s right to exclude, wresting fees from those who wish to extract and copy X users’ content”? That’s a false equivalency. The court is referring to the DMCA safe harbor found in 17 U.S.C. § 512, and equating someone who has an exclusive right in copyright with the speaker of the content. Section 512 exempts “service providers,” defined as “an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received.” 17 U.S.C. § 512(k)(1). But there’s nothing in the Copyright Act that suggests that an exclusive licensee, who did not create the content but may have an exclusive license for distribution only, cannot also be a service provider.

X Corp. v. Bright Data Ltd., No. C 23-03698 WHA (May 9, 2024).

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