Why a Loss for Aereo Wouldn’t Threaten Cloud Services

Aereo Judge
Oliver Munday

Aereo, which will fight for its life before the Supreme Court next month, has issued dire warnings that if its TV-streaming service is ruled illegal, it would spell the doom of “cloud-based” services like Dropbox or Google Drive.

“If the broadcasters succeed, the consequences to American consumers and the cloud industry are chilling,” Aereo said this week, in a statement after filing its response brief with the court. “A decision against Aereo would upend and cripple the entire cloud industry.” But that’s just not true.

Aereo’s defense relies on a 2007 appellate court ruling (upheld by the Supreme Court in 2008) that Cablevision Systems’ remote-storage DVR was legal. The reasoning: An individual user — not Cablevision — initiates recording and playback, from dedicated hardware, ergo it’s a private performance. Same thing with Aereo, according to Aereo.

The 2nd Circuit Court of Appeals agreed with Aereo in denying broadcasters’ request to shut down the service. But that decision was based on a finding that the discrete transmissions to users constitute private performances — incorrectly, the broadcasters say, pointing out the Transmit Clause of the Copyright Act determines public vs. private performance on the relationship between transmitter and receiver, not the nature of the transmissions.

SEE ALSO: Aereo: Broadcasters’ Challenge ‘Imperils’ Cloud Computing

Cablevision likewise asserts that the broadcasters’ legal strategy would threaten the cloud, but for an entirely different reason: The MSO doesn’t want its network-based DVR suddenly found to be illegal — a reversal that would cost Cablevision millions. In the same breath, Cablevision agrees with broadcasters that Aereo is an illegal appropriation of TV content.

The Aereo case isn’t really about “the cloud” at all. Rather, it’s about the “Rube Goldberg-like contrivance” Aereo has built (in the words of Judge Denny Chin, who dissented in the 2nd Circuit’s 2-1 ruling on Aereo), a sleight-of-hand to make a service that’s actually a “public performance” appear as if it were a “private performance.”

Aereo is not simply a cloud-storage service. Nor is it just the equivalent of an antenna-plus-Slingbox-plus-DVR in the cloud (the argument Aereo and its defenders use to posit its legality: I can buy all this stuff at RadioShack and set it up myself; the only difference is Aereo is doing the hosting and heavy lifting for me).

Aereo isn’t a passive hosting service, and it’s not merely renting equipment to customers. Despite its gyrations to build a service that streams only individual TV shows from physically separate spinning disks to stay within the letter of the law, it’s undeniable that Aereo uses a shared data-center infrastructure — exactly like pay-TV providers, from whom broadcasters are entitled to receive compensation under federal law.

Moreover, Aereo’s antennas are not actually dedicated to specific users. The system allocates each tiny antenna to a user when a TV channel is requested, then frees that up for another customer to use after the session is over, according to the startup’s patent filings. This is not at all like me putting up an antenna on my roof and letting my buddy next door borrow or even rent it.

The Copyright Act specifically precludes businesses from profiting from copyrighted works in this way. Yes, individual Americans have a right to free, over-the-air broadcasts, but those rights can’t be assumed by a service provider that’s reselling the content. In a critical difference between Aereo and Cablevision’s RS-DVR, the cable company already has those broadcast rights. (The 2nd Circuit ruling, oddly, said whether Aereo had a license was irrelevant, citing the basis of the Cablevision RS-DVR decision. By contrast, a Utah federal judge last month ordered Aereo to shut down the service, saying Aereo clearly provides a public performance that requires a license.)

SEE ALSO: CBS Chief Moonves: We Can Go Over-the-Top If Aereo Wins at Supreme Court

Unlike cloud storage services, Aereo “provides a means by which consumers can gain access to copyrighted content in the first instance — the same service that cable companies have traditionally provided,” the U.S. Solicitor General and the Copyright Office wrote in their Supreme Court amicus brief this month. “There is consequently no sound reason to suppose that a decision holding (Aereo) liable for copyright infringement will threaten the use of different technologies that assist consumers in hearing or viewing their own lawfully-owned copies.”

Aereo would have you believe it’s “just a technology service,” not marketing or selling TV programming, another position aimed at dressing itself up as a Dropbox-style system. Aereo even avoids featuring TV shows or networks in its advertising and marketing — even though you’d think that would be an obvious thing to do — since that would undermine its legal arguments.

But the idea that Aereo is akin to Dropbox in a legal context is plain nonsense. The Aereo service is custom-built to present TV shows and networks in an easy-to-use way (in an interface that’s actually pretty slick). Whereas cloud storage services act as repositories for personal files, Aereo itself supplies the content to users. Again, just like cable TV.

Here’s more proof that Aereo is not a “passive conduit,” a legal safe harbor that protects ISPs and cloud hosting providers from infringement complaints. Aereo uses geolocation software to block users from accessing the service outside a given designated market area (DMA) for the over-the-air TV stations. This restriction is designed to prove Aereo does not enable access to TV that individuals could not obtain themselves. But in fact, it’s further proof that Aereo — not users — is facilitating the performance of copyrighted TV signals and as such, the service is subject to the Copyright Act’s Transmit Clause. By contrast, a home-brewed Slingbox setup would be accessible from, theoretically, anywhere in the world.

Also worth noting is that Aereo, not users, decides what content is available on the service. For example, Aereo offers cable channel Bloomberg TV to subscribers via a licensing deal. Want something else? You’d have to wait for Aereo to add it. Users can’t even opt to remove Bloomberg TV or any other channels from the lineup.

A Supreme Court finding that Aereo violates provisions of the Copyright Act narrowly tailored to this case won’t kill Dropbox, Apple iCloud, Google Drive, Box, Microsoft OneDrive or Amazon Cloud Drive. Those services aren’t jury-rigged to pull in content from third-party sources without permission. And they’re already protected from liability for copyrighted material illegally uploaded to their services under the Digital Millennium Copyright Act. Cablevision, as noted, already has content rights.

Cablevision and others are worried that the broadcasters’ argument against Aereo is overbroad: ABC et al. say that the original broadcasts of their programming are what Aereo is retransmitting. If the Supreme Court accepted that theory — that making a prior performance available to multiple users constitutes a public performance — that would expand the definition of public performance to then include Cablevision’s RS-DVR (which the 2nd Circuit held in its decision delivers a private performance) or, say, legally acquired songs uploaded to a personal cloud-storage service. But the Supreme Court should decide this case narrowly, mindful of the differences between Aereo and other cloud services, and the court is obviously aware of the implications its ruling would have. “Aereo’s system induces unlawful copying and should be enjoined for that reason alone,” Cablevision said in white paper on the case.

“Innovation” is the magical term Aereo throws around to justify its existence. As Aereo chief Chet Kanojia wrote in a message to users yesterday, “Our innovative technology leverages the power of the Internet to create a smarter, more sophisticated over-the-air antenna for the digital world, and an easy-to-use cloud-based DVR that you can control and watch from a smart phone, tablet, computer or Internet-connected television.”

See? Innovation trumps copyrights. The message is: Deal with it, content creators — you can’t fight progress.

Aereo and its fans say the broadcasters are in a fuss because they want to have their cake and eat it, too: TV stations are obligated to provide free broadcasts under their government-granted spectrum licenses, enjoying virtually universal access for their ad-supported programming, while they also want to cash in on multibillion-dollar retransmission payments from cable, satellite and telco TV providers. Broadcasters’ real fear? That Aereo will shut down the retrans gravy train by making it OK for pay-TV operators to stop paying those fees with the right technical setup — something that will absolutely happen if the Supreme Court court rules in Aereo’s favor.

But TV broadcasters’ dual revenue stream, as it exists today, has nothing to do with the fact that Aereo is repackaging and profiting from content it doesn’t have the rights to. All content owners must be able to control how their works are distributed and monetized. And no “innovative” service should be allowed to wrest that out of their hands.

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  1. Karl says:

    One of the many misleading claims that Spangler repeats is the notion that the Aero ruling won’t affect cloud services, because those services are “already protected from liability for copyrighted material illegally uploaded to their services under the Digital Millennium Copyright Act.”

    For one thing, he’s wrong, because a ruling against Aero would create infringement where there currently is none. If streaming from the cloud to a single user is a “public performance,” then it wouldn’t matter whether the user acquired the content legally. The streaming itself – not the acquisition of the content – would infringe on the public performance right.

    Second, even if he were correct, requiring DMCA protections for what are now private performances would be disastrous for cloud services and anyone who uses them. If they got DMCA protections, it likely wouldn’t be under 512(a) (“Transitory Digital Network Communications”). The content is actually hosted on the cloud provider’s network, so they would be protected under 512(c) (“Information Residing on Systems or Networks At Direction of Users”).

    This is one of the sections of the DMCA that falls under the “notice and takedown” provisions. This means that the only way cloud services would escape libaility is if they allowed copyright holders to issue takedown notices of users private files.

    It also includes the controversial “red flag” sections that were recently (and solely) used to find the MP3Tunes guy personally liable for millions. There is absolutely no way a company is going to risk that sort of liability for cloud services, especially if their officers must operate under the threat of personal liability.

    The only possible way that cloud computing can continue to operate is if they don’t need DMCA protection in the first place. And it should be obvious why they shouldn’t. As long as a single copy of a copyrighted work is streamed to a single user, both the legal history and common sense dictate that it shouldn’t be a public performance.

    • Todd Spangler says:

      This discussion was fun.

    • Todd Spangler says:

      The point is that Aereo acquires the content in the first place — not its users. Aereo decides what channels are & aren’t available on the service. Users have no control over that. (Again, basically just like cable TV.)

      • J. S. Greenfield says:

        Todd: With respect to Aereo, since it acquires the content and performs the work (not its users), it’s subject to the Copyright Act’s TV retransmission provisions and is required to obtain a license.

        Karl: That’s simply your claim. Currently, it is not the law, at least not in the 9th circuit. And you’re ignoring the simple fact I stated above: a “public performance” under copyright law does not depend upon the entity that acquires the content. It depends solely upon whether a single copy of content is transmitted to multiple members of the public.

        Who performs the work (or who acquires it) is irrelevant to the question of whether a performance is public. The transmit clause makes absolutely no mention of who the performer is. Only the audience “capable of receiving the performance” determines whether a performance is public. The question of who performs is relevant only if/once the performance actually is determined to be public, and then only to determine who the direct infringer is.

      • Karl says:

        (This is actually a reply to a later comment – I have no idea why I can’t reply to that comment directly.)

        Cloud services that allow public file sharing do need the DMCA.

        True, but irrelevant.

        Regarding public file sharing, cloud services need DMCA protections to avoid secondary liability against their users violating copyright law. (And in most cases, it still wouldn’t implicate the public performance right, but another right such as copying or distribution.) As I said, nobody is arguing that Aero’s users are accessing content that they couldn’t legally access without Aero. That’s not what the cloud services are worried about.

        The networks’ argument is that, even if the users are legally allowed to access the content, and that copy of the content is unique to that user, transmitting that copy to that user is still a public performance merely because Aero’s relationship to its users (like the cloud services’ relationship to their users) is a commercial one.

        That is the argument before the Supreme Court, and the one they must consider.

        With respect to Aereo, since it acquires the content and performs the work (not its users), it’s subject to the Copyright Act’s TV retransmission provisions and is required to obtain a license.

        That’s simply your claim. Currently, it is not the law, at least not in the 9th circuit. And you’re ignoring the simple fact I stated above: a “public performance” under copyright law does not depend upon the entity that acquires the content. It depends solely upon whether a single copy of content is transmitted to multiple members of the public.

      • Karl says:

        First of all, I notice that you didn’t even address the DMCA issue, which was my main point. I’ll say it again: currently, cloud services don’t need DMCA protections, because nothing they do violates the public performance right.

        Most cloud services are not simply “passive conduits.” Dropbox, for example, can transcode your video files, using different codecs, for transmission to yourself (e.g. on your phone or in a web browser). A ruling against Aero may suddenly make that transmission a violation of the public performance right – even if I uploaded the file myself, and displayed it to nobody else. That’s how Dropbox would need DMCA protections – and why they would be forced to take down that content upon receipt of a DMCA notice.

        The point is that Aereo acquires the content in the first place — not its users.

        You either misunderstand the case, or misunderstand copyright law. The entity that acquires the content has absolutely nothing to do with whether the public performance right is implicated. It may determine who is primarily responsible for violating that right, but it has nothing to do with whether that right is violated in the first place.

        Nobody is arguing that Aero’s users are violating the public performance right. They are arguing that Aero is directly infringing upon it, solely because their relationship to their users is a financial one. That absolutely has direct implications for cloud services.

        Aereo decides what channels are & aren’t available on the service.

        This is false. Aero’s antennas can only pick up TV stations that are broadcast for free over the air – something Aero has absolutely no control over. If a station is broadcast over-the-air in a specific region, Aero’s antennas cannot “choose” not to transmit them to a user in that region. So, no, Aero does not decide what channels are and aren’t available on their antenna service.

        You brought up the Bloomberg TV deal, but that is a red herring, because none of that content is at issue. It is not part of the lawsuit at all, and it certainly isn’t what has cloud computing services worried.

      • Todd Spangler says:

        Cloud services that allow public file sharing do need the DMCA. With respect to Aereo, since it acquires the content and performs the work (not its users), it’s subject to the Copyright Act’s TV retransmission provisions and is required to obtain a license.

      • J. S. Greenfield says:

        (Todd, you should reply through the article like readers do, because your replies end up out of order the way you’re doing it.)

        I think two things about the Utah decision:

        1) Relevant to this particular discussion, I think the Utah decision simply doesn’t address the question of how its determination might or might not impact other cloud services. (In fact, the word “cloud” doesn’t even appear in the decision.) The political contrivance I referenced was a decision holding Aereo transmissions to be public performances, while all other cloud transmissions were held to be private performances.

        2) I think the Utah decision was simply wrong. I would not presume to infer political motives, when it seems far more likely that it instead merely reflects the erroneous reasoning of a Judge that does not rise to the quality of those who sit on the Supreme Court, and who has much less time to dedicate to each case before him.

        Regarding point 2, I would say the same of the Judges in the two FilmOn X district court cases. And it is most assuredly not the case that Denny Chin was playing politics in his overturned district court decision in Cablevision, or his dissent in Aereo. There’s no question that he adamantly believed in the correctness of his position, even as today, almost nobody questions the Second Circuit’s overturning of every element of his decision in Cablevision, other than the public performance question….

      • J. S. Greenfield says:

        So by your theory, Todd, your own argument falls apart if Aereo merely drops Bloomberg?

        Coming back to the relevant…that it is within the realm of the arguable that the Court could issue a decision that finds Aereo infringing without holding other cloud services infringing (assuming we believe that the Court may issue a ruling that is a contrivance, as all proposed interpretations to achieve such, so far, have been predicated on a contrivance), does not support you thesis.

        Unlike the petitioners, themselves, and notable amici such as the Solicitor General, who merely claim that a decision against Aereo “need not threaten” other cloud services (acknowledging that a decision against Aereo could threaten other cloud services), you have, instead, asserted that “a Loss for Aereo Wouldn’t Threaten Cloud Services.”

        That claim, which suggests that concerns over impact to other cloud services are unfounded, cannot be justified by arguing that a decision that doesn’t impact other cloud service is merely possible. Rather, it requires arguing that a decision impacting other cloud services is not possible, or at least, not within the realm of reasonable possibility.

        That simply is not the case. In fact, for anybody that believes that Court would be inclined to issue a coherent decision, rather than a (political) contrivance, the reasonable expectations would be for a decision that either all such services entail public performances, or none do.

      • Todd Spangler says:

        No, an OTA-only unlicensed TV service would be in the same boat. You think the Utah district court’s ruling was a “(political) contrivance”?

      • J. S. Greenfield says:

        Todd, for the purposes of the legal question, which is access to over-the-air broadcasts, Aereo does not decide what channels are and aren’t available. (Carriage of licensed services such as Bloomberg is a completely separate issue from access Aereo provides to OTA broadcast channels.) Broadcasters decide what channels are available, by broadcasting. Aereo makes antennas available to users. It doesn’t pick and choose which channels they may tune. They can tune whatever channels are available over-the-air in that market.

        Furthermore, even if you were correct that Aereo chooses the content, it’s irrelevant. If you understood the details of how petitioners and their amici propose that the transmit clause should be interpreted, then you’d understand that their interpretation would be devastating to cloud storage services, if adopted by the Court. That they subsequently wave their hands and nonchalantly claim that one could easily carve out cloud services (despite the fact that such can’t be reconciled with their proposed interpretation), doesn’t eliminate the threat.

      • Todd Spangler says:

        Aereo’s integrated service includes OTA and cable programming (Bloomberg) selected by Aereo, functionally equivalent to a cable operator and using a shared ingest & transmission facility like a cable operator. The Supreme Court doesn’t need to agree with the 2nd Circuit’s construction of the Transmit Clause in its Aereo decision, nor does it need to accept the broadcasters’ argument that a public performance occurs whenever a service provider enables consumers to transmit the same prior performance. It can find Aereo infringing without having to peel that onion. To cite the Utah district court’s Aereo ruling: “The legislative history underscores Congress’ desire to use definitions of terms such as ‘transmit’ and ‘any device or process’ to embrace future technologies. Congress made clear that it did not want copyright liability to turn on the technical details of a transmission service and did not want the statute rendered obsolete by changes in the technology used to communicate performances to the public. Even the majority decision in WNET recognized that ‘[p]erhaps the application of the Transmit Clause should focus less on the technical details of a particular system and more on its functionality.’”

  2. Great article. There’s got to be *some* sanctity in copyrights even if J.S. Greenfield (below) is such a sourpuss and would prefer you attend law school before offering your opinion. :)

  3. J. S. Greenfield says:

    With all due respect Todd, you very clearly have not educated yourself, at all, as to the relevant law, or the actual legal arguments in this case. It’s really a shame that you choose, not just to opine on the case, but to purport to tell readers what the legal implications of the case are, and are not, when you haven’t made any serious effort to actually understand the relevant law.

    There’s so much wrong in your post, I’d have to write a comment even longer than your post to explain everything that’s wrong.

    Instead, I’ll focus just on the headline. “Why a Loss for Aereo Wouldn’t Threaten Cloud Services” — it purports that your post will tell us why a loss for Aereo would not threaten cloud services, but your post never actually does anything of the sort. Your post shares a bunch of reasons why you fell that Aereo is different from other cloud services, but that hardly a legal argument makes.

    The reality is that, if petitioners were successful in getting their theory of the transmit clause accepted by the Court, it would absolutely threaten personal cloud storage services. In fact, not just threaten — it would be catastrophic for them.

    The various arguments that have been proposed to suggest that Aereo could be found infringing without similarly impacting these cloud services are predicated on contrivances to distinguish Aereo from the others, and cannot withstand even the slightest scrutiny.

    We’ve now seen the best arguments the broadcasters and their supporters can muster. By comparison to Cablevision’s defense of the Second Circuit holding in Cablevision, and Aereo’s defense of the Second Circuit holding in Aereo, there’s simply no contest. The broadcasters arguments are a hand wave. Their proffered alternative theories have no basis in the statutory language, and would produce absurd results. Meanwhile, each of their specific criticisms of the Second Circuit holdings have now been thoroughly discredited by Cablevision’s and Aereo’s arguments.

    As a longtime skeptic that the courts can be counted upon to produce sensible results, even I am now prepared to conclude that Aereo will win, and win easily — at least in court. The disparity int he quality of the opposing arguments is that stark.

    That doesn’t say that Aereo is right, or Aereo is wrong, in any moral or ethical sense. Cases get decided by the law (or at least are supposed to be), not by whether anybody — not even Supreme Court Justices — think a particular party is wrong or right.

    Almost certainly, there will be more yet to come. Broadcasters will likely respond to a loss by asking Congress to change the law, and Congress is liable to be receptive to that. Then also, it remains to be seen whether Aereo’s technological approach can scale reliably and profitably.

    • Todd Spangler says:

      Just re-read this thread – lots of fun.

    • Todd Spangler says:

      I do discuss the legal implications for other cloud services, and explain why a Supreme Court ruling narrowly tailored to this case would not affect them at all.

    • Todd Spangler says:

      Jonathan, you should disclose that you work for and/or have worked for companies/entities with a vested interest in the Aereo case (e.g., Cablevision Systems).

      • J. S. Greenfield says:

        Cablevision’s argument to distinguish Aereo from it’s own RS-DVR is a hand-wave. They effectively say “Our system is like a DVR, and so should be legal. Aereo’s system is like a cable operator, and so should be illegal.”

        For their own system, they effectively argue that the details matter (and provide a compelling argument that the detailed analysis supports the Second Circuit holding in Cablevision). Then they turn around and argue that for Aereo, on the other hand, we should ignore the details because all that matters is that it is “functionally equivalent” to a cable system (their assertion — not that it matters, but Aereo’s argument that it actually is not functionally equivalent to such is far more convincing).

        It makes no sense that we should analyze the details for one, but ignore the details for the other.

        Cablevision also argues that the presence or absence of a license to retransmit distinguishes the two, but the Second Circuit decision in Cablevision (which they have defended so convincingly) doesn’t rely at all on Cablevision having a license. In fact, they analyzed the service on the basis that it was unlicensed.

        Under the Cablevision precedent, the courts didn’t even need to rely on Aereo’s use of individual antennas to reach the conclusion that the performances were private. In fact, as the district court observed, the use of individual antennas actually made the case for Aereo even stronger than Cablevision’s.

        The reason that the individual antennas are not necessarily relevant is because the transmission of content from the antennas to the hard disks is not a performance, from the standpoint of existing copyright law. But even if they were performances for the purposes of the law, there’s been no credible argument presented as to why individual transmissions from one antenna to one user’s storage on a hard disk should be deemed public, while individual transmissions from a user’s hard disk storage to the user are deemed private.

        The closest anybody has come to even attempting to argue this distinction was the Solicitor General’s attempt to dismiss that the individual antennas were actually individual, on the basis of their dynamic allocation and use of shared control systems. But since all of these cloud systems dynamically allocate hard disk space and also use shared control systems, that simply does not, in fact, distinguish Aereo’s system.

        The bottom line is that Cablevision’s argument to distinguish Aereo from its own RS-DVR and from other cloud technologies — like all of the arguments we’ve seen attempting to distinguish such — is a contrivance that cannot withstand even superficial scrutiny.

        And that’s why this case actually does represent a threat to the cloud. Even if you don’t accept my conclusion that the case for Aereo’s legality is compelling, we’ve simply seen no legitimate basis presented for how Aereo’s system can be substantively distinguished from the other cloud storage systems. So if we give SCOTUS the benefit of a presumption that they won’t issue a ruling that is a mere contrivance, we should expect that either all will be found legal, or all will be found illegal.

      • J. S. Greenfield says:

        It’s not just my about page. In at least 5 of my postings on Aereo, I include an explicit disclaimer to the effect of:

        “I’m not an entirely disinterested party in this matter, inasmuch as I spent many years at Cablevision, and worked directly on Cablevision’s RS-DVR.”

        Furthermore, if you look at my postings (and my comment above), you’d see that my own view differs considerably from Cablevision’s. Cablevision — like you — argues that Aereo infringes, while Cablevision’s RS-DVR and other cloud storage technologies do not.

        Your position is actually more aligned with Cablevision’s than mine is.

        I think it is relevant to inform people as to potential bias on my part, and I have endeavored to do so. But I don’t think it’s required or appropriate for me to disclaim every comment I post on every website with a disclaimer, nor do I think an objective review would conclude that the information and analyses I present are merely ones of advocacy for my former employer.

      • Todd Spangler says:

        Thanks. Interesting – why do you think Cablevision is wrong to assert that Aereo is on its face infringing?

      • Todd Spangler says:

        OK, I see the reference to your working for Cablevision on your blog. Which for the benefit of readers is: http://cimc-greenfield.com/about/. Here’s the link to your prediction that Aereo will win easily at the Supreme Court: http://cimc-greenfield.com/2014/03/28/why-aereo-will-win-and-win-easily-at-the-supreme-court/

      • J. S. Greenfield says:

        What a piece of work. You deleted the link to Aereo commentary on my own website, where I repeatedly make clear that I previously worked (past tense) for Cablevision. I have done anything but hide this fact.

        And after posting your opinion as news and purporting it to be legal analysis, then editing one comment of mine (not for clarity, but to remove a link to other substantive information and commentary on this case), posting a few comments of your own in response, refusing to approve a second comment of mine responding to you, and finally deleting your own comments…you deign to suggest some impropriety on my part, because I didn’t disclaim that I previously worked for Cablevision directly in a comment?

        That is really a hoot.

        Will you post this response? Or will you suppress (or edit) it, because it doesn’t suit you?

      • Todd Spangler says:

        Apologies, I was trying to fix a typo in my previous comment but it was deleted instead (and that deleted the rest of the thread).

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