July 2, 2003

The Future of Entertainment - Panel [7:29 pm]

(entry last updated: 2003-07-02 20:53:55)

the future of entertainment: music

with Fred von Lohmann, Les Valdasz, Charlie Nesson & Jonathan Zittrain

Z: Digital music as a case on the subject. An agenda; (a) Defending the current business model and (b) toward a new business mode (see the full outline below)

But first, introductions: Fred von Lohmann of the EFF. An unreconstructed status quo-ist - the digital world should be as free as the real world. Les Valdasz of Intel, his fifteen minutes of fame, telling Fritz Hollings that what Fritz wanted (in the SSSCA/CBDTPA) was not what Intel wanted. Charlie Nesson: I am not a status quo-ist. Although I can see all the arguments that Terry makes, the problems of getting from here to there seem immense, and some very powerful interests are going to have to be defeated or deflected to get to the changes that Terry considers.

Z: Fred, should the record industry get the same rights in the digital world as they do in the real world.

Fred: Careful - the goal should be to protect the rights of the artists, but not necesarily that of the recording industry. They did this in the past, but there’s no reason that they should get the digital franchise too. I’m favorably disposed toward Terry’s plan, but I don’t see that we should protect Sony, EMI, etc.

Z: But aren’t companies people too? Don’t these firms have rights that are being violated.

Fred: In copyright law, yes. But the scope of Title 17 has expanded as a technological accident because computers are about copying. It may be that the law is being violated, but is it really the case that more music is being listened to, or that artists are getting paid less?

(Black letter infringements?) The industry purports that each infringement means a loss of income. An examination of the CD business suggests that there is more to the downturn than copyright infringement. If we turn to movies, we aren’t even seeing losses yet.

Z: Charlie, you’re a realist. What do you think of Fred’s idea.

Charlie: First a question: If you could end p2p without harming people and the world became law abiding, would you do it?

Fred: No - I would rather change the law than to impose legality - shove things into a box that no longer fits them. That doesn’t mean that I’m in favor of infringement, but the law should change with the people.

Z: can we sue the problem into submission, Charlie? C: Yes, that would certainly be part of that. Z: They have gone after universities, and now after the end users.

Charlie: Yes, with the Verizon decision, these companies can now get information. Z: Were you really surprised that Verizon lost, Fred? Fred: Not really

Charlie: So, getting back to the suit game. A clever watching of the network, combined with a Verizon subpoena to see who develops new copies, should mean that a suit could be used to stifle new releases of rips to KaZaA.

Fred: No way it would work. Between international jurisdiction and the advance of technology, this strategy will suffer, particularly in the face of the EU privacy directive. Plus, there are now reports of proxy servers that

Z: Yes, there’s Blubster - and another technology - Earthstation

Les: Go to a public wireless and operate from there - no one will find you.

Z: What if I were wardriving and uploaded that way, Charlie?

Charlie: Uhhhh - let’s go on to the next topic!

Fred: P2P will evolve faster than the strategies can evolve, but in the interim there will be a ton of collateral damage - consider the Verizon decision which raises a set of privacy concerns. And even though Verizon is trying to mitigate this, they are not legally required to make that effort.

Charlie: Let’s run with that - as a prt of the RIAA, I don’t want to see that anyone can exchange bits without being able to surveille - the end to end anonymity is at risk, right?

Fred: The collateral damage is the real story here. No one’s going to stop sharing.

Z: Come on - a college student can be stopped in his tracks with a threatening letter

Fred: No way - war driving among students who have lots of time means that there will be no stopping it. And the music industry might get even more damage brought about to achieve their ends while ruining the network.

Z: OK - Les, can we build some digital locks that preserve the net and preserve the music industry

Les; I don’t think it can be done solely via technology. The cat and mouse game will continue without an economic foundation for real change.

Z: Won’t TCPA solve this for us - trustedcomputing.org?

Les: Well, it’s a machine that is supposed to make sure that you can keep your stuff away from/or transmit without worrying about snoops - encryption.

Z: So TCPA is Blubster? Les: Wrong side of the question - I really don’t know what they have in mind.

Z: I thought this was about building a machine that would act in trusted ways - enforcing the eBook restriction for example

Les: If Larry wants to ensure that he can impose the controls that he wants, the computer will enforce it.

Fred: Wait, wait. That’s not what TCPA does. According to the discussions that we have been having, and I think that I have a sense what the early versions will be. First and most importantly, everyone should learn more. IBM hardware is out, MS has software.

One thing it does is keep the computer clean, so that you can trust it. That may be ok, but it’s also about making sure that others can also trust the computer to behave as they expect.

Fred: Bunny Huang’s book is of course a guide to hacking (suggesting that for less than $100 anyone can do it), but all it takes is one person to hack the protected content. With that information posted, now everyone can get at it - and, most interestingly, the TCPA tech can then be used to securely accessing the P2P net. And Microsoft has asserted that unsigned applications will certainly still run.

Fred: TCPA may mean that the power will shift from the user to other actors.

Ben Adida: Doesn’t this lock up your data in ways that keeps you from accessing your data, putting it behind a wall that you can’t get around?

Z: Come on! We have trusted machines (sealed meters like in a taxicab)


Fred: A technology producer has no obligation to make it easy to hack the machine; but an innovator should be allowed to exert that effort. And the DMCA has become a legal limitation upon exerting that effort. And now, with TCPA and DMCA, now innovating on the platform is going to make things really hard.

Lisa Rein: I don’t care about interoperability of programs, but I do want interoperability of data.

Les: As long as you give the permission, then it should be openable.

Fred: I don’t expect that problem, and I have to worry about a lot of things.

Z: So digital locks can be left unlocked according to the will of the creator.

Question: What does Verizon/notice and take down subpoenas mean for the university roles in this sort of space?

Charlie: You’d think that universities would take a leadership role in this area, but it doesn’t look like they are.


Charlie describes the Penn State suggestion and someone from the General Counsel’s office at Vanderbilt agrees that it might work/be palatable.


A commenter points out that the developing world isn’t going to buy into the copyright regime if it’s this draconian

Fred: Prof John Barton’s look at IPR in the developing world. Integrating Intellectual Property Rights and Development Policy - Commission Intellectual Property Rights. The US trade treaties are being used to spread this IP approach; countries can choose to accommodate or reject these approaches - and the shape of these laws look like they favor the producers of IP.

Les: As a country develops an IP based industry, they will become more appreciative of the notions of copyright

Charlie: This trend of IP imperialism - locking countries, school systems, governments into the idea that you need to pay copyright to get access to the technologies - on to open source

Q: The BSA as a “machine of terror” is articulated, the copyright police for monitoring businesses.

Z: Let’s move on to spoofing and interdiction: Charlie?

Charlie: I looked for a real copy of a file, and spent a half an hour and never found one. It looks like spoofing could collapse the KaZaA net. And according to Fred, it’s completely legal.

Charlie: Interdiction, however, is different. It could be that the industry, by pretending to download a file, sucking bandwidth and locking others out. It’s a denial of service, and its legality is questionable. Under the power and abuse act (??), it’s a grey area. A law firm won’t give you an OK, but let’s remember that, as a powerful industry, and as a strategy that doesn’t effect the rest of the network, although it will lead to local damage. Will a US attorney prosecute - you are not allowed to damage someone’s machine in excess of what’s authorized (that can’t be exactly right).

We’re talking about property, but power does matter at this stage.

Fred: No copyright owner has not admitted to interdiction. Second, IMHO it’s an illegal denial of service.

Z: injection of hypotheticals, with charlie, to assert puzzlement.

Fred: Law professors bearing hypothericals should not be trused!!

Fred: It’s one thing to attack pirates, but once you tackle something that gets at the business model of the cable companies, etc. At that point, other lobbyists will make sure they don’t get what they want.

Fred: In response to Z’s argument that iTunes solves all the trouble. Note that these are not MP3s, there is DRM in this and, as an Apple product, of course it looks great and works well!

[Les slaps his forehead!]

Fred: and it still doesn’t get rid of the file sharing nets. KaZaA is not available for Macs, so there’s a pent-up demand.

Les: Not to be unkind, but Macs are a small market; and we need to teach our children not to be thieves.

Z: What about Terry’s proposal?

Charlie: I think it’s the right way to approach the problem, but there’s a lot of problems before we can get there.

Fred: I agree, although the obstacles I see are probably different than those the Charlie sees. And we still have to do something about file sharing, because it’s not going any anywhere.

Head of IP from Warner Studios: My reaction to Terry’s proposal. It’s interesting, but my concerns are that we’re not going to be able to measure the loss that we are trying to compensate. Eventually we either need to set the taxes as compensation, but instead it becomes an affirmative selection. How we’re going to get the numbers, we’re going to have to rely upon government to set that number. So investors won’t be able to value investment in these industries. Moreover, the injection of the government into the process to sustaining the creative industries is something risky to undertake.

More generally, I would argue that we need both to defend the current model as we evolve to the next business model. The innovation-reaction process that Terry described this morning is still the most satisfactory process for achieving change. Particularly in the face of the potential disruption costs.

Terry: Those are helpful comments. First, as to the risk that shifting to a government-based arrangements - those are serious concerns that could be mitigated through careful design and probably by setting up the tax and royalty systems in ways that limit their volatility over the timetables of the political processes. It certainly is not going to be costless - the only reason to risk it is that things are so broken now.

As to the notion of incremental change - the problem is that there is this effort to seek the local maximum rather than the global maximum. Incrementalism is more likely to perpetuate the current model, and it may be that a sea change is really needed.

Your reaction and others are suggestive that the political impediments to upsetting the copyright scheme are huge. This suggest that the transition will require a voluntary initiative on the part of the industry to move in the necessary direction through a voluntary association - setting up an artist’s coop. Artists could elect to sign up, as could the consumers of the artists’ creations. And, if this sytem were to work (depending upon critical masses - a chcken and egg problem, since neither will participate without a large group on either side).

Z: One such set of artists who might do this would be those whose works are old enough such that their contracts disappear - they now own their works - and they might be interested in seeing what sort of new deal might be offered and these artists might be an option.

Summary; Music remains the hottest and most entertaining part of the internet law problems and we’re all involved. We barely got started on the problems, and it’s a look at the way that there are key ideologies that underlie the way we think about this, and ultimately effect how were’re going to resolve these problems as well.

Jonathan has an outline:

  1. defending the current business model

    1. the legal battles against users, ISP, etc. to stop

      unauthorized sharing

    2. the prospects for strong digital locks

    3. from shield to sword: spoofing and interdiction

  2. Toward new business models?

    1. itunes

    2. Terry’s approach

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Larry Lessig on Free Culture [5:08 pm]

(entry last updated: 2003-07-02 18:34:58)

Made it! I have been asked to revise my Reed Hundt quotes (i.e., expunge them for the moment), so I didn’t think I’d finish in time, but I made it.

And away we go - oops - now….

Larry Lessig: We’ve talked this morning about the technology of content distribution; Terry talked about the law; I’m going to try to bring these pieces together to discuss a key transformation that has occurred. We need to synthesize technology, law and the market to see what I want to say - and I think you’ve now been conditioned to see what I really want to talk about - free culture.

I want to invert your thinking - free markets, free labor, free software, free elections, free enterprise. A set of free things - versus the notion of free lunch or free beer, i.e. no cost to accessing a resource. Borrowing from Richard Stallman we are talking about freedom.

Free culture does not mean artists don’t get paid; just as the argument for free markets doesn’t mean no property. Rather, we are talking about a set of freedoms associated with a set of actions. In this case, freedoms to build a culture. A free speech society exists, even though I don’t get to run the NYTimes Op-Ed page.

Some stories: 1928 the birth of Mickey Mouse at the hands of Larry’s hero, Walt Disney in Steamboat Willie. What is notable here is that a goat ate sheet music, and with a crank of the tail, out came music that animated the rest of the cartoon - music and cartoons. It is notable that Steamboat Bill, a Buster Keaton movie, was the basis for Steamboat Willie..

A kind of creativity, building upon elements preceding and around you. The creations of the Disney Corp are largely based upon building on the creations of others, up to this date - Treasure Planet. An expression of creativity based on others’ creations. Grimm’s Fairy Tales become Snow White. To take change and release culture around it.

Japanese manga is 40% of the publications, 30% of the revenues. Doginchi (sp?) - copycat comics built upon manga; take the work and extend it in different ways (dojinshi - 33,000 circles of these creators and 450,000 people convene to exchange the content)

This dojinshi leads to a kind of creative competition, spurring both sides to get ahead of the tales and compete in the innovation and creativity. Why did this happen - three features technical, market, legal reasons lead to this circumstance.

Legal notions: first, we have copyright duration. Copyright is for limited times, so copyrights expired. (Hard to think through Steamboat Bill, though). Once copyright expires, works move into the public domain, which is the lawyer-free zone of creativity - I don’t have to ask - I just do it. No costs, no opportunities to censor.

Gershwin estate requires Porgy and Bess with an all african-american cast, or no permission; Shakespeare has no such control.

In 1774 the Statute of Anne said that copyright we not, in fact perpetual, but expired. The US copied english law - “Promote the progress of science by securing for limited times exclusive rights.” At the outset, only 5% of all copyrighted material was actually copyrighted; and only a small portion was renewed after 14 years.

This has changed - the beginnings of extending copyright in the last century - the animated term list. Terms have tripled over the last 30 years. In 1973, the average term was 32.2 years (most people didn’t renew). Today the average term is the maximum - no matter what you do. Sonny Bono Copyright Protection Act/Mickey Mouse Protection Act. Approximately 2% of the work at the outset of the Sonny Bono Act had commercial value, but with the passage of the act, that work has become that much more inaccessible.

Second important change has been the expansion of the scope. Started w/ maps, charts and books, and publishing of the same work, assuming it has been registered and delivered. 174 publishers at that time.

Now, almost anything in a tangible form; not just the same work, but also derivatives; not if deposited and registered, but merely created.

Now a change to look at the technological shifts. In 1909, the law was changed to regulate “copies.” Many uses of a book are unregulated in the real world - you can read, give, sell a book because no copies entailed. Some are regulated by copyright, like publishing, with a fair use exemption for things like quotes, etc.

Enter the Internet, where every act is a copy. Now the presumptive uses are now all infringing, and now it is necessary to argue that the use is fair - presumptive freedom to presumptive control. The Copyright Office FAQ now seems to upset the whole tale (look up and link)

Moreover, we used to have humans involved - Warner Brothers/Marx Brothers - letters on the possibility of parodying Casablanca (look up and link)

We are changing the interpreter and implementer of the law from judges to machines that are being programmed to implement certain controls - via the code of the platform that gives access - Adobe eBook Reader story. Permissions of Middlemarch (a public domain book); Permissions of The Polities of Aristotle; Permissions of The Future of Ideas.

The controls exerted here are implemented through the technology as deployed. So, now we have code that supports the law. The technological wrapper upon content can now protect/implement the law. The question: does this yield to the notions of fair use?

Let’s look at the Aibo. Aibopet.com teaches people how to hack their dog. How to dance jazz. Posting the information that teach your aibo to dance is illegal under the DMCA. So now we have code, protecting copyright, is now also protected by the law via the DMCA.

So now we turn to the third set of changes - the changes in the market. In particular, the concentration of our creative assets in the market. Essentially, what was once a set of little petty monopolies under copyright has now become something else. 80% of music by 5 firms, etc. Huge concentration in these content delivery industries.

And a change in the scope of control. Let’s start with All in the Family - a contribution in television to the debate on many key topics in culture. In 1969, Lear shows the pilot to ABC. CBS loved it and ran it; because the creator (Lear) owned it - artistic control under the law. The law required splitting of the ownership of content and ownership of the conduit. In 1992, still a large number of independent producers under the FIN-SYN rules. In 1994 these were under consideration, and J Valenti fought the removal of the FIN-SYN rules.

75% of prime time now owned by the networks in 2002.

Concentrated, protected and even more so as the FCC relaxed media ownership on June 2 of this year. And more concentration coming.

With these changes, we have now unprecedented control over the culture held in the hands of a very small number of actors, with a host of technological and legal controls in place. A free culture has now become a permissions culture. You cannot create unless you are on the right side of the owners/ Now no one can do to Disney Inc. the same thing that Walt Disney did to the Brothers Grimm.

Unintended consequence of changes in an 18th century law, plus market and technological changes.

It’s now “property vs. priracy” - no sense of middle measures allowed in the dialog that we now have in this domain. These pirates need to be fought to defend our property, even though we’ve seen a host of changes in the context.

So far, the pushback from the other side has been marked by failures in the courts, so far. Larry goes through the Eldred v. Ashcroft case - Hal Roach Studios’ brief points out that the nitrate based films will be gone by the time the copyright expires. Supreme Court says - up to Congress.

The Eldred Act is the request to the Congress - pay a dollar after 50 years to get an extension of the copyright. Expectation that 98% would become public domain. Lobbyists are rallying around opposing this, claiming that it’s too great a burden.

Two ideas: one is to find a middle ground between the all or nothing camps. The Creative Commons is directed around the notion of “some rights reserved.” And offering up the option to stay away from the extremes. A set of projects to create a layer of “reasonable” copyright law to give the creator a middle ground to allow volunteers to offer up their content under the rules they like.

Cory Doctorow: Down and Out in the Magic Kingdom. Available online under a CC license, leading to promotion, leading to rapid sell out of printing run. Some also have seen that with an internet release, the used book price has also risen.

So far, there are about one million licenses that have been set up. More are needed - 10,000,000? This may become a demonstration to Congress that there’s something other than the extremes.

Second idea: is it really about fair use, or is it the free use? Fair use is too limited a doctrine to build a battle upon. Rather, we need to focus on free use; fair use is still a lawyer’s domain, because we still need a judge’s decision. We want to get to areas without lawyers for this creativity. Need a zero-cost freedom, not this high-cost freedom.

Consequences are that publishers are imposing a narrower set of ideas of fair use because it’s too expensive to go to court to fight over the grey areas.

Summary: This is not about ending IP; it’s about maintaining the notion of free culture. A transformation in the context has put us in a place where we have moved from free culture to a permission culture. And something out to be done.

Larry turns the floor over to Terry so that he can talk about his alternative compensation system that he is proposing in the music domain - in the spirit of moderation.

The target is the copyright law as applied to the music and film industries. The law has not liberated the benefits of the new technologies, but has instead focused entirely on avoiding harms, that have turned out to be unavoidable.

A possible set of reforms. One might be to enhance property rights, strengthening property rights might offer new instruments. Another might be to think of these industries as public utilities and regulate them accordingly. Or, an alternative compensation system.

Intellectual products are “public goods” - non rivalrous goods that it’s difficult to prevent others from accessing once the first release has taken place. The danger of public goods is that the creators won’t recoup the costs of such goods, and therefore they will not create them - national defense, navigational aids, etc. Governments have to intervene to incentivise this. Five avenues have been employed:

  1. The government supplies the good

  2. The government subsidizes the production of the good

  3. The government issues prizes for the successful production of the good
  4. Government confers monopoly power on producers
  5. Government assists private parties in increasing “excludability” - helping to make it hard to access the public good

Over the past decade, strategies 4 and 5 have been the key approaches, and they both are failing in the music industry. So, let’s think about strategy 3

tfisher.org has the details

Four parts: register, tax, count and pay.

First, you have to register your creation with the copyright office, and you are issued a number that you put in the file name. Your application must indicate what else is used; and you pay a fee.

The government then imposes a set of taxes to fund an alternative compensation system. How much money is required? The suggestion is that the social surplus should be given; impractical. Instead, set the level according to that needed to make creators whole in the face of copying; eventually enough to keep the creative culture operating.

Bottom line for music: about a billion dollars (I’ll post numbers later). Bottom line for movies: about 1.7 billion dollars (?). With admin costs it comes to 2.25 billion.

20% tax on cd burners, 20% tax on dvrs, 25 cent tax on blank cds; 20% tax on MP3 players, about $3 on broadband rental.

Count consumption: webcasts already count; www sites must could number of downloads; KaZaA etc offer up counts; surveyts to estimate replays; sampling to verify counts

Distributes monies according to the count of the uses of their work.

Large cost savings for consumers; elimination of the deadweight loss in production; convenience; no price discrimination; cultural diversity and semiotic democracy. artists get paid and more of them get paid. Manufacturers although taxed, should come out ahead since their products are move valuable.

Who gets hurt: the manufacturers of the packaged materials. Do the intermediaries? It depends. If they exploit their supposed skills in talent identification, packaging, etc, they should be OK. But if they don;t work, they lose

There are problems - distortions and cross subsidies - the payments don’t quite line up with the actors. And it gives a government agency a considerable amount of power. It’ll take some work, but it should put us in a far better situation than we are now.

(I see there’s some glitch in my calendar - it doesn’t point to the latest posting, but I’ll see if I can fix it)

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Terry Fisher and Copyright Law [2:02 pm]

(entry last updated: 2003-07-02 15:33:29)

Before we start: from Slashdot, this article: Hormel’s pique e-rupts over Spam mail

For years, Hormel Foods Corp. has watched as the name of its famous product has come to mean junk e-mail, a source of heartburn for computer users.

Now Hormel is asserting its trademark rights, filing complaints against Spam Arrest LLC, a Seattle technology company that provides spam-blocking software.

Terry: The relationship between law and the internet distribution of digital entertainment. About 2/3’s of the time will be focused on music, but there will also be the analogous treatment of the coming wave of movie distribution.

  1. Potential Benefits - Three forms for music distribution - downloading; interactive streaming; and noninteractive streaming. Why should we seek to encourage or enable these forms for distribution? There are opportunities and harms, potential or otherwise.

    Cost savings is the first benefit - 38% to the retailer; 8% to the distributor; 14% to rc overhead; 5% artist and repertoire rc; 8% to rc marketing; 8% to rc manufacture; 1% is record co profit; 12% to the artist; and 4% to the publisher. Opportunities to save - no retailing, no physical CD to manufacture. Other savings are harder, based on what record companies do - ID artists, produce, promote, distribute and spread risk (recall that most artists don’t make money). Internet distribution affords cost savings in these record company actions - studio costs are falling; promotion costs can drop with internet promotion; distribution costs are vastly reduced; and potentially a reduced need for risk spreading because the risks are smaller.

    Net out that somewhere between 1/2 and 2/3 of the retail price of a CD disappears.

    Another advantage - over and under production is avoided because of JIT production, as well as increased convenience and precision. Moreover, we could potentially achieve the "celestial jukebox". With the reduction in risk, the barriers to entry are lowered, so many more musicians can make a living and the variety would increase. Finally, there is this opportunity for semiotic demoncracy, taking real form in this context - a spreading of the opportunities, and democratizing the “vehicles of meaning-making.”

    Harms also arise - The revenues of creators are threatened if the companies are not paid (as well as the incentives to create are lost). There also is a threat to moral rights, the notion that there is an entitlement to an artist to protect the integrity of his work. (In Europe, an artist can sell a painting, but he retains the right to ensure that the painting is not defaced.) An extension of this could lead to a loss of stable reference points in culture - version 1 is immediately changed into v1.1, etc. The loss of touchpoints.

    The goals of a legal system should be focused on facilitating the benefits, while limiting the harms. A balance should be expected, but it has not occurred.

  2. Background on Copyright Law circa 1990 - Objects of protection - each piece of recorded music entails two copyrights; the copyright of the music composer. The composer gets exclusive rights of reproduction; exclusive right to make derivative works; presumptively exclusive right to distribution; a right of public performance. The second piece is the copyright interest in the sound recording (only since 1972). So, the performer has a copyright. Different entitlements: exclusive right of reproduction, in a narrower sense - verbatim copies are prohibited, but playing by ear is not an infringement of the performer, only of the composer; exclusive right of derivative works - e.g., sampling; exclusive right of distribution of the recording to the public; but until 1996 no public performance right. Radio broadcasting of recordings used to mean that the composer had to be paid, but the performer doesn’t get paid, because public performance is not in the law as of 1996.

    Exceptions and limitations also exist: some of the most important. First sale doctrine - once a performer has sold a copy, the performer has no further control (over resale, etc.) Compulsory licenses (jukeboxes, PBS, cable and satellite retransmissions; “covers”) - the government sets a fee that the copyright owner must accept in exchange for what would otherwise be an infringement - almost entirely related to public performance. Cover licenses - compulsory mechanical licenses - section 115; so covers of songs are legal provided the compulsory license is paid, and the original performer cannot limit. Finally, we get fair use, the most complex of these, so we’ll come back to it in a minute.

    Terry shows how a network of relations leads to the structure of the music business. Payola is the oddity in the network, where record companies pay radio stations to broadcast music produced by the record companies.

    (Z: Isn’t payola illegal? F: A scandal of the 50s likening it to bribery. Z: a distinction from the supermarket. F: The modern payola is public, and is tolerated, while the old style under the table version was made illegal.) (L Rein: What about the payola of paying retailers to put CDs on the shelf? F: Retailers are also getting hurt as the sales of CDs decline. There are three sorts of retailers - the Best Buys sell as loss leaders; Tower Records, etc. sell as a business as a chain; and the little specialized operations. The damage has been disproportionately - the HMVs and Tower Records are getting nailed, so individuals are having to go to the alternatives. And most end up at the Best Buys, which take this kind of payola for shelf space. The size of this $$ means that the record companies won’t do this for all their repertoire, narrowing the scope of music available.)

    Another question: where is Amazon in this heirarchy? So far, they are unaffected by this, and they are largely intermediates. Their retail costs are lower. And intermediate case.

    Clarification: so shelf payola is tolerated because it’s not hidden; at least that appears to be the public policy perception.

    Now let’s get film into the story. The model is more complex, but the rights are simpler. The movie producer gets all the rights enumerated above. The producer aggregates the rights of the author, screenwriters, composers, released from the location, rights from the actors, etc. The producer lies at the center the net (note that this is not the case in Europe, usually). The producer then assigns distribution rights to the studio. Copies of the monies are rented (plus performance licenses) from theaters, TVs, etc. Sales to video stores, licenses to cable companies, etc.

    Fair Use: the key influence has been the Betamax case of 1984. The case introduced a doctrine embodied in section 107 of the law today: a key exception to copyright. Fair use exists in the eye of a court; a declaration has to be made on a case-by-case basis. The factors to be weighed (1) the character of the use; (2) the nature of the copyrighted work; (3) amount and important of the material used; and (4) how serious is the impact on the potential market. Construed by the US Supreme Court over the relation between the studio and the TV network.

    Betamax arises out of a perception that movies are being copied without the advertizing; thus threatening the licensing stream. The studios assert harm, but they need to identify whom to sue. A clear violation of the right of reproduction, so the users could be sued. There was some anxiety that the users might be sued, but in the end they sued the facilitator - contributory and/or vicarious infringement (i.e, helping others to infringe).

    5-4 this is declared legal - we get “significant noninfringing uses” - and a Betamax allows a single noninfringing use (timeshifting), so the machine is legal.


    1. Archiving is illegal - it’s not timeshifting.

    2. The other 2 cases the Supreme Court neede more time for? (a) campbell v. acuff rose - the 2 live crew decision

      and (b) A case involving the Gerald Ford biography

    3. What about Jazz? Isn’t this all improv and building upon each other? How does this work. Is there some internal trick - yes. Partly this requires “fixed in a tangible medium of expression” - jazz is out; partly this is a question of amount copied - it has to be more than a phrase.
    4. A discussion of unintentional mimicking - not illegal under copyright, unlike patents.

  3. Cycles of innovation and resistance

    1. DAT Recorders / AHRA - the DAT is created; the audio home recording act mandated a serial copyright management sytem, a tax and royalty system, and a non-commercial harbor for customer (section 1008). Thus, DAT is frustrated.

    2. Encryption circumvention / DMCA section 1201 - the developers of the technology to play digital entertainment by employing encryption systems to limit consumer access. CSS, SDMI, RealMedia and eBook Reader. All these encryption systems have been cracked, largely by non-US teenagers. DeCSS, Felten, Streamripper and Sklyarov. So, a law is set up. The DMCA and section 1201 - civil and criminal penalties for circumvention. Courts were enthusiastic at one time (Streambox and Reimerdes), but somewhat less so lately in Felten and Sklyarov (acquitted).

    3. Music lockers / MP3.com litigation - the Beam-It Service, allowing you to listen to music that you had bought, on demand from your music locker. The recording industry decided that this was not OK, even though the CDs had been bought by the consumers. As a commercial activity, this is not fair use, and Universal won, got willful infringement, and bought MP3.com

    4. Webcasting / DMCA and CARP - radio over the internet, offering up a huge variety of music. Webcasters, like radio stations, had to pay the compulsory licenses. Webcasters did not have to pay record companies; and the record companies saw a new source, since they lost to radio. So in 1996, a digital public performance right in sound recordings was created - a new burden not found in the analog world. There are three kinds of digital audio xmissions - 1-exempt; 2-compulsory licenses, set by the CARP; 3-interactive requires negotiations. The panel came up with a fee schedule, with an uproar leading the librarian of congress to cut the rate. If you do the math. Terry does the math to show the costs for a small caster of a million dollars a year - 10,000 listeners (small)

    5. Centralized file sharing; napster; Napster Scour litigation - 40 to 70 million uses leading to a claim comparable to those in the Betamax - contributory and vicarious infringement was claimed. The Sony defense was asserted. The 9th Circuit said there was no substantial non-infringing uses. Leading to pure peer to peer systems; leading to another round of suits; largely leading to the same outcome. Most recently, the Aimster decision upheld this patter. However, the Grokster decision said that there were non infringing uses.

    6. P2P / P2P litigation - see above

    7. CD burning / CD copy protection - CD burners are now everywhere; less and less CDs being sold; Terry’s children have more copied CDs than manufactured. The response has been technical, via copy protection methods. These technologies have been tried, but there also has been a backlash. The record companies are likely to move to new platforms, DVD-audio

    A continuing cycle, leading to a doubling in the length of the copyright title since 1990. The consequence, we have failed to achieve the benefits.

  4. Defects in the Resulting System - high transaction costs, price to consumer to access to recorded music is high, no celestial jukebox; encryption limits access to smiotic democracy; continued concentration of the music industry; and the P2P system continues to challenge the artists’ compensation.

  5. Where do we go from here? Not enough time to say, but we’ll get there later today

(note: since Terry handed out overheads, I hope I can clean this up later)

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IP Panel - 2003 July 2 [12:02 pm]

(entry last updated: 2003-07-02 13:33:48)

Today’s panelists are Alex Macgillivray of Google, Wendy Seltzer of the EFF and Glenn Brown of Creative Commons.

Right now we’re watching everyone find power outlets and other necessary connections for their presentations - presenters, Stanford A/V, Charlie Nesson and Larry Lessig. And, I am sure to Les Valdasz’ continuing dismay, lots of Mac power adapters are in evidence <G>

And the lights go down, while the music comes up - and we’re off…

Larry: As we have discussed so far, we are working a layered model of the network. Today, our focus is the content layer. Moreover, today will be on creative content, while tomorrow will be about programs, etc. So, today’s about copyright, IP and creative content.

Today’s panelists are all Berkman Center/Harvard Law School graduates, so it’s sort of an alumni day of those at the formation of the Berkman Center.

C. Nesson: Wendy and Alex were the programming core at the outset of the Center, working on what is now H2O. Glenn is of the second generation of the Berkman Center, focusing us on music.

So, today’s focus is going to be on content - raising questions and suggesting issues, rather than trying to answer/resolve them. So, let’s look at a couple of examples.

A series of parody, political statements. in digital/MP3 form to the great amusement of the audience - exmaples of sampling, downloading of digital music and the responses that have been articulated to these various items.

Alex Starts off: Since we’re all disciples of Larry, let’s talk about code as law. So what is peer-to-peer? The concept comes out of client-server models, where you have a more powerful server that supplies information on demand to a client machine - consider, for example, the web browser.

In peer-to-peer, there’s no server - everyone is both a client and a server - a democratization of the client server model.

Of course, there are complex applications. Puretunes, for example, has a server with the music and the index to the music, so the client could just query. Napster had a central index of what each client had, and Napster just mediated a matchmaking process among the clients, who actually shared the files. The most purely peer to peer, we have gnutella, a query involves a network of peers passing along queries until a set of hits appear.

Note that the user doesn’t see anything particularly different among each of the processes, except for performance.

KaZaA is similar to gnutella, but certain computers are identified/promoted into being a supernode through performance and access considerations. Thus, this simplifies the number of queries when a search for a piece of music/file since you can start with supernodes, rather than simple peers.

So, there are lots of ways to do this - the question is which approach makes sense, and how does the law treat it?

Back to Charlie: So, here’s the KaZaA home page. And here’s how to find a song - Satisfaction by the Rolling Stones - lots of successes in the search with characteristics of the file, the node and the number of downloads. We can also monitor progress in download.

KaZaA has been quite successful; starting with the legal “crashing” of Napster, Gnutella arose with a good concept, but a relatively weak implementation because of the pure P2P. KaZaA’s supernode addition to the search strategy has led to agood compromise leading to strong performance. And, here’s the song…. (plays Satisfaction).

So, here’s a clear threat - As Jonathan asks, this is a brazenly illegal act that I just committed - I downloaded, and played for public performance - the “distinguished university exception”

Comment: the shared folder exposes you as now a new potential source of Satisfaction, so you are now actively joining the network, making Stanford a potential flagged infringer to the RIAA spiders.

Charlie: Exactly - and KaZaA comes with default setting not only to share everything that you download, but you are also potentially giving away all your bandwidth to support your sharing behavior. Moreover, the system prefers hardwired/broadband connections, making universities a key element of this network.

Currently, there are 4 million users, offering up 6 million gigabytes.

Now, instead of looking for a classic, let’s look for something news - Where is the Love by the Black Eyed Peas and Justin Timberlake. As we wait for the download, Charlie points out that the KaZaA folder is pretty much an open book, anyone can see what you are offering up.

And we find that Charlie has downloaded something that sounds like the song, but suddenly degrades into a cacaphony of sound - spoofed files (Z prefers the cacaphony to the snippet that appeared).

So a quick poll: P2P will change the industry (a few hands), the RIAA will respond in a number of legal and technical mechanisms that will allow them to hang on (Hatch, Berman, etc. cited)

Now Glenn: I’m going to talk about sampling - and I am about to cause some real legal trouble, I fear. Several names, mash-up, collage, bootleg remix, bastard pop - really, all collages. So can we characterize them, according to their legal status.

Dreamworks Collage or Hollywood Collage. Starting with the Austin Powers character as a paradoy, and Myers has signed a contract to give him access to essentially all of their catalog, so that he can put himself into these films. “Think of me as the Puff Daddy of film” - the rap art of movies. Sampling become something of a rich man’s name.

Beyonce Knowles is also cited, using samples in her music. She has also been put into several mash-ups. These mash ups are all copyright violations, illegal art. Since they cannot pay to get the samples, they are out of luck.

(A side point: Beyonce’s video has several NASA images, so it was assumed that there was public domain art used in the video. When contacted, however, the researcher for the producer indicated that, since they were in a hurry to get the video out, they simply paid for everything, rather than go to the time and expense of tracking down the specific owners of the public domain stuff. So, it’s come to the point that even real public domain stuff is effectively unavailable.)

Negativland art: U2 + Casey Kasem - bootleg recording of an outtake Casey Kasem mixed with a U2 song - ‘The Forbidden Single” - a voice over on top of U2’s music and Casey Kasem’s voice announcing U2. Illegal art - U2 sued and an injunction was awarded - the physical records all had to be supplied to the copyright holder for destruction, plus the equipment, etc. Get it from Negativland today - Illegal Art

Another one - the littlest mermaid - a bootleg that is an explicitly full of copyright lawyers threatening people issuing from the mouth of the littlest mermaid (see illegal-art.org)

The Hellraiser Collage: Christina Aguilera and the Strokes (a mashup) - and a video mashup was made once it was released - here it is. (Aside: Start with “Genie in a Bottle” –> “A Stroke of Genius” - a completely reimagined tempo, key, etc. Very, very clever thing to hear - stunning skill demonstrated) - is it a parody? Not exactly - it seems to work out pretty well - Illegal Art. The Strokes’ response - "it was a funny idea; but I’m not that impressed" - is it the case that, because they’re on the same label no litigation emerged?

The White & Red Stripes Collage: The White Stripes as a focus - an artist that added a bass line to White Stripes (an uninvited bassist adds a bass track - neil strauss in the times). But, by skipping the intermediaries (in this case, the bassist met the white stripes leader who give permission to the bassist to continue), the creativity was allowed

The Creative Commons Collage: but we also might be able to work around the instantaneous copyrighting of a creative work by getting the creator to formally relinquish certain parts of copyright rights in advance - by declaring a specific legal form, such as those defined by creative commons.

Some themes/keywords; parody, licensing, esthetics, consent, availability, and some other ideas to carry into the afternoon.

Alex: Sampling takes place all the time, even if you aren’t a musician, mashup artist, etc. The WWW and links means that many WWW sites are able to sample from other sites. Also, let’s consider OPML, a distributed writing tool. Or weblogs, picking and sampling from all over the web.

Then, there are large corporations doing this, too. E.g., Google. And Google has a number of services that collect, organize and deliver massaged content.

Questions this poses: everyone samples. What problems does this lead to - who’s the author, what are the boundaries, and who gets to specify them, and when will we get together and recognize that creative works are always based on a certain kind of sampling.

Glenn: Why are we living with a “wink-wink” legal system, and how hard is it to work within it.

Wendy: I want to broaden the question of sampling. Starting with music, expanding to text and into the domain of cultural sampling -

Let’s look at DaveZilla - a www page; and we have Sony’s Godzilla - and we have a legal response by Toho claiming infringement as well as a potential trademark infringement claims. Dave fights back, and an Internet response emerges by the apparent nonsensical assertion that Toho “own” Godzilla - the Zilla Liberation Front emerges and keeps pushing, still today.

Who’s right - the Toho Corp. or the internet community?

The Aibo and Sony - a programmable robotic dog. An independent programmer, at AiboPet, learned how to reprogram the Aibo so that it could dance. He also received a cease and desist, including hardware circumvention, etc. Again, a group rises up, arguing that this is the right of the owners to manipulate the owned device. (Although it now the LegitiMutt) Sony negotaites a middle position.

Other cultural mashups - appropriating different parts of the culture - Homer Aibo, etc.

The Aibo Kennel Club, allowing people to register their Aibo, leading to a cease and desist from the American Kennel Club (!)

It’s not just companies - politicians also get into this sort of fight - see whitehouse.org - and the Lynne Cheney brouhaha.

Others in trouble, or making the point, at least: www.enronownsthegop.com; www.jeb02.com; www.e-gray.com; www.gatt.org

What can the law do against these sorts of distributed cultural attacks? Who’s going to come out on top in these fights and why/how?

Charlie: There’s the questions and that’s our show and tell. We are left with some questions, and we’re going to address them as we go through the day.

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2003 July 2 [11:45 am]

(entry last updated: 2003-07-02 11:50:25)

A few things before the session starts today….

  • From MI2N: Premier Press Provides Hackers A Dream Guide To TiVo

    Premier Press, an imprint of Course Technology, the worldwide leader in computer education products and services and part of the Thomson Corporation, the world’s largest provider of corporate and professional learning solutions, today announces one of their upcoming titles, Hacking the TiVo, which is releasing into bookstores throughout the country in late July. This book fits into the continued efforts of Premier Press to publish books that enable enthusiasts to enhance their consumer technology experience.

  • Wired News: What a Difference 20 Cents Makes

    Listen.com on Tuesday said it has seen a nearly 100 percent increase in CD burning among subscribers to its Rhapsody online music service since cutting its fee to 79 cents from 99 cents per track.

    Rhapsody would not disclose how many tracks were actually burned in June, but said that on-demand streaming has increased 45 percent to more than 11 million songs, or more than 350,000 songs per day, in June.

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End of the day - 2003 July 1 [12:59 am]

(entry last updated: 2003-07-02 02:30:32)

  • An informative little piece from the WSJ, via Tech Law Advisor (sorry, there’s something wrong with the article link - look for June 29 entries): Key Questions in Music Firms’ Crackdown on File Sharing [pdf]. In the form of a Q&A, there are a couple worth reading, but here’s my pick:

    What does this crackdown mean, in the long term, for file-sharing services? How are file-sharing companies/users reacting to this campaign?

    Expect a high-tech arms race between record companies and file swappers. Already, many former users of the P2P services have switched to fledging alternatives that allow for more privacy. Some are invitation-only, to keep out investigators — but these have the downside of a limited selection of music. Others let people share files without connecting directly, which makes it more difficult to detect the users’ IP address. And some break down files among dozens of computers, so no one computer is supplying copyrighted files. The legality of that practice is unclear, as it hasn’t been tested yet in court.

    If the file-sharing networks see a big drop in traffic, they could adopt some of these technologies. Sharman, Kazaa’s parent, declined to comment. “The next wave of P2P technology is this masking of identities,” says Mr. Gonzalez of Zeropaid.

    In addition to the high-tech arms race, some file swappers may turn to an older technology: CD burning. “The most obvious alternative for the kids will be the CD burner and the ’sneaker net,’ ” or physically handing out copies of CDs, says Mr. Leigh, the Raymond James analyst.

  • Another blow to Microsoft from down under: Aussiechip dares Microsoft to sue

    Aussiechip released for free to the internet last week details of how to make “mod chips” - microprocessors that alter the internal workings of a console - under a licence that requires anyone downloading the plans to issue proceedings in its home jurisdiction of Queensland, should they wish to sue.

    Aussiechip founder Grant Sparks says there have been several downloads of the plans from Microsoft’s corporate network in Redmond, Washington, agreeing to the click-wrap agreement. Microsoft Xbox spokesmen failed to return calls.

    Intellectual property lawyer Simon Minahan says Microsoft is bound by the actions of its workers, who agreed to download the designs under the terms of the click-wrap agreement. “In actual fact it would be a little disappointing if they couldn’t sue me,” says Sparks, known as “Donatus” in the mod chip underground. “You see, I’m quite happy for them to take us to court, I just want to see it happen under conditions where we win.

  • Cory Doctorow points out this situation: Legit Xbox Linux or else!, itself based on this ZDNet UK story: Xbox hackers attempt to blackmail Microsoft

    A group of Xbox-security researchers say they have found a way to run Linux on the Xbox games console without a mod chip and will go public with the technique if Microsoft won’t talk to them about releasing an official Linux boot loader.


    The researchers say they want Microsoft to release a “signed” Linux boot loader which would allow Xbox users to run the open-source operating system on the console without installing a chip.

    A signed Linux boot loader will not allow users to load pirated games, they say. However, the release of the new Xbox-exploits they claim to have developed to run Linux on the console would have the side-effect of allowing rampant piracy without the need to install a mod chip, something the hackers say they would like to avoid.

  • On the Aimster front, Derek’s got some more to say

  • Beyond Blubster, a little more on the P2P alliance that KaZaA ia after: P2P alliance to counter RIAA?

    Kazaa distributor Sharman Networks and partner Altnet hope their new group, called the Distributed Computing Industry Association (DCIA), will help legitimize the much-maligned peer-to-peer industry, which has come under fire from Hollywood, politicians and the recording industry for being a haven for pirates.

    Martin Lafferty, the DCIA’s chief executive, said the group is hoping to provide a neutral forum where companies that are affected by or involved in peer-to-peer or distributed computing technology can meet to establish business practices, to encourage the adoption of standards and to help shape public policy.

  • A propos of Les’ arguments about the need for market pressure to achieve innovation, we have this little bit: Netscape updates as Andreessen yawns

    At a conference in London last week, Andreessen told Reuters that “there hasn’t been any innovation on the browser in the last five years, and five years from now there won’t be any changes.”

    Andreessen went on to call the state of browser navigation “an embarrassment.”

    Slashdot discussion: Netscape Founder Says Web Browsing Innovation Dead

  • Record company realignments all around. From the NYTimes we get Vivendi Snubs Bidder as It Moves to Keep Record Group [pdf] which points out the following interesting bit:

    Vivendi’s decision to exclude Universal Music from the sale was made after the board concluded that it would otherwise be selling the unit — the recording industry leader — at the bottom of the market. Sagging CD sales and concerns about online piracy have devalued all music companies, and the Vivendi board is hoping it can attract a higher price for Universal Music later, once the industry sorts out the piracy problem, the executives said.

    The removal of Universal Music from the bidding contest is likely to benefit Liberty Media, which had been uncomfortable with the state of the music industry and may now be inclined to bid more for the other entertainment assets. MGM, NBC and Viacom were never interested in the music unit.

    And from CNet we get AOL, Bertelsmann music talks heat up which asserts

    Media giants AOL Time Warner and Bertelsmann are making headway in talks over a music merger and could strike a deal over the next couple of months, sources close to the companies said on Tuesday.

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