Our inaugural issue of What's Next in November 2017 began with a quote from the Hacker's Manifesto. I'd like to kick off this reboot of the briefing with a bit more camp, something you may come to expect from me as I jump into this newsletter as your new guide.

The “X-Files,” a show whose content and fandom was inextricably tangled with the growth of the Internet, flashed the tagline “The truth is out there,” at the end of most episodes. Like the show's main characters, Fox Mulder and Dana Scully, I cultivate a healthy skepticism of the world and an overgrown curiosity. During my past life covering labor and legislation for the restaurant and retail industries, I had a front row seat to the technological and legal disruption that's allowing consumers to get a driverless car to deliver a Domino's pizza to a middle-of-nowhere GPS location.

Now that I'm covering the future of law, I'd like to create a space where lawyers, academics, activists and regulators get together to search for the truth and geek out a bit. It will be like a work happy hour that you actually want to go to. We will continue to look at the intersection of law and technology, covering how the legal field is panting to keep up with innovation in some cases, or grinding into a new form in others. I look forward to creating something that gives us all a minute to slow down each week and think about the biggest possible picture, and as always, look ahead to What's Next.

This week, Meredith Filak Rose, policy counsel for Public Knowledge, breaks down the copyright hurdles users face on YouTube and other streaming websites. Also, cryptocurrency company Kik raises funds to fight back against the SEC. Plus, China plans to hit back after Huawei's U.S. blacklisting.

Feel free to reach out to me with tips or comments on Twitter, or by email: [email protected].

Meredith Filak Rose, the policy counsel for Public Knowledge.

A Sampling Error: Streamers Left to Navigate Copyright Law

Everyone's a content creator in 2019, but copyright law was not written with livestreamers and social media influencers in mind. We caught up with Meredith Filak Rose, the policy counsel for Public Knowledge, a nonprofit working with copyright, telecommunications and internet law to promote internet accessibility. Rose shared what happens when an industry booms as the law buffers.

➤➤ How are YouTube and livestreaming platforms creating more complexities in copyright law?

Music sampling law right now is just a mess. As an artist making a sample, you clear the rights to the content, but that sample might've contained another sample so minor that you couldn't hear it. Dani Deahl of The Verge wrote how music metadata is the industry's biggest problem. Metadata is supposed to track who has rights on the songs and who gets paid. That requires everyone to agree on an industry standard to enter the information—the three major labels, indie labels and software companies like Bandcamp. It's like the Dewey Decimal System, except everyone in the United States has to follow it, otherwise the whole system starts to fall apart. It impacts if creators get paid, so there really hasn't been an incentive for labels to deal with this, because they're going to get their money either way.

In the last couple weeks, there was a YouTuber who got a takedown notice. And he went back to YouTube and said, “I actually licensed this music, reached out to the rights holder, got the license, here's my paperwork.” And YouTube said, “Yeah that's fine, that's not the guy who sent the takedown notice. The takedown notice was generated, because that thing that you licensed had another sample inside of it that you didn't clear.”

➤➤ So how can YouTubers and streamers keep up with licensing? 

It's this really wild situation, where you have a lot of folks who want to be good actors. This is a business for a lot of video content creators. I work with a lot with streamers who are on Twitch (an Amazon-owned live streaming site for gamers.) Twitch has fewer sitewide sync licenses than YouTube does, arguably almost none for music. So you have a lot more of the burden shifting to streamers, who have to cobble together their own licensing arrangements, which is a wild exercise if you're just a guy in the suburbs who wants to drum on your Twitch channel. The law is structured in such a way that it assumes sophisticated actors with more or less equal bargaining power and access to relatively comparable information. You really don't have that anymore in a democratized environment of creation.

➤➤ What can be done to help streamers comply?

I think the law needs to catch up. A lot of people say it's not the law, it's the market. I heard from a Twitch streamer who tried to get the sync license for a track that's not super well-known outside of the video gaming community, and it was $15,000. Sync licenses are priced for major platforms or car commercials or movie studios, not a guy with a Twitch channel.

Some takedown notices are done by an algorithm. YouTube's Content ID scans the platform and will yank unlicensed material or kick a percentage of the ad revenues from a video to licensors YouTube has agreements with. It's not particularly good at its job. Algorithms are not capable of telling when something is fair use. It's a mathematical equation at the end of the day. If it spots something that is close enough, it's going to send a takedown notice, demonetize the channel or send an automated copyright strike. So this situation where we are outsourcing the admittedly very tricky problem of enforcement to robots has had a pretty negative effect on people who are making uses that pretty much everyone can agree are harmless economically.

Kik Tries To Shirk Securities Status with Crowdfunded SEC Battle

The U.S. Securities and Exchange Commission is suing Canadian messaging and cryptocurrency company Kik Interactive for allegedly making an illegal $100 million securities offering through the launch of its Kin digital tokens. Kik, however, was already preparing for a court battle with the agency to determine whether the legal test that defines securities that come under the agency's jurisdiction applies to initial coin offerings.

The SEC claims that Kik should have registered the Kin ICO with the agency as a security since it met the definition of an offering under the so-called Howey test. Established in Securities and Exchange Commission v. W.J. Howey Co., the four-prong test determines when an asset qualifies as an “investment contract” based on if an exchange includes an investment of money, a common enterprise, an expectation of profits and is dependent on the efforts of others.

The SEC claims that Kik should have registered the Kin ICO with the agency as a security since it met the definition of an offering under the so-called Howey test. Established in Securities and Exchange Commission v. W.J. Howey Co., the four-prong test determines when an asset qualifies as an “investment contract” based on if an exchange includes an investment of money, a common enterprise, an expectation of profits and is dependent on the efforts of others.

After years of back and forth with the commission over the ICO, Kik last week launched the Defend Crypto campaign, putting up $5 million of its own cryptocurrency funds toward potential litigation. The campaign has resulted in an additional $4.5 million in crowdfunding in assorted digital assets to fund a legal battle with the SEC.

“This is the first time that we're finally on a path to getting the clarity we so desperately need as an industry to be able to continue to innovate and build,” Kik CEO Ted Livingston said in an email Tuesday.

Take a minute to explore Kik's history with the SEC in our timeline below:

Dose of Dystopia

It's been almost three weeks since the U.S. ramped up its assault of Chinese telecommunications behemoth Huawei. President Donald Trump issued an executive order on May 15 barring companies from using information and communications technology firms considered a threat to the nation's security, policy goals or economy. Trump also declared a national emergency and added Huawei to its “Entity List,” which requires companies to first get government approval before trading with listed businesses. Since then, Google revoked Huawei's Android license, depriving it of tech support and security updates.

In light of the United State's aggressive tactics, China does not plan to pull any punches in the escalating trade war. The country is set to publish its own list of American “unreliable entities” in response, according to the South China Morning Post.

“This is a last resort,” said Mei Xinyu, a research fellow at a research institute under China's commerce ministry. “The companies that have been blacklisted will be restricted in terms of sales, investments and business licences. For relevant individuals, their travel, activities and employment in China will all be rejected.”

If trade relations continue to boil over, the two countries could trigger a global economic downturn. It would only take nine months for a worldwide recession to catch if Trump slaps tariffs on an additional $300 billion in Chinese exports and China retaliates, according to Morgan Stanley.

On the Radar

➤➤ Apple's Antitrust Streak Fresh off an antitrust loss at the U.S. Supreme Court and a congressional probe investigating the Apple's market dominance, Hagens Berman Sobol Shapiro sued the tech giant on behalf of app developers who claim they are harmed by the Apple Store's anti-competitive nature. Read more from Ross Todd here.

➤➤ Locking Down Encryption Backdoors Nearly 50 tech companies, including Microsoft, Apple and Google, have signed on to an open letter imploring the United Kingdom's Government Communications Headquarters to abandon a proposal that would allow the furtive addition of law enforcement participants to encrypted group chats or calls. Read more from Frank Ready here.

➤➤ Data Dump A Delaware Chancery Court judge has ordered Facebook to show its work regarding how the company handled user data. In a post-trial decision, Vice Chancellor Joseph R. Slights III said he could infer wrongdoing on the part of Facebook by a preponderance of the evidence. Read more from Tom McParland here.

Thanks for reading. I will be back next week with more What's Next.