March 30, 2005

Salon on Grokster [11:32 am]

Music rules

The case before the Supreme Court does not pertain to whether the actual act of file sharing is illegal. Let’s accept for now that when you or I grab a copy of the newest Aimee Mann track from Kazaa or LimeWire, we are committing intellectual-property piracy, stealing royalties from starving artists, and threatening the entire economic basis of the music industry. Personally, I enjoy supporting the artists I like by purchasing their records on iTunes, and I especially savor doing so after I have heard a free sample of their music over the Net. But that’s an entirely separate issue from what’s at stake in this case. MGM vs. Grokster deals with whether the creators of a technology are responsible for how it used. It’s not an understatement to say that the case could influence the future of the Internet.

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(Somebody at) SAVVIS.NET Wants My Content [8:46 am]

And they’re flooding my server/desktop with HTTP requests for just about everything I have — although I see a Search query for Michael Speck — gonna have an interesting time going over the logs today, I see….

Sorry to everyone else who wants to see what’s up. If this persists, a change to my firewall setting might be in order. When sitting at the end of a 10 Mbit pipe (all we get in this building), something like this is a little overwhelming.

Later: Guess they’re done

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WaPo Editorial on Grokster [8:41 am]

The nuance in their reporting is not here, of course: Not an iPod [pdf]

But Grokster and StreamCast are not simply technologies that can be used for good or ill; they are technologies that were designed and marketed precisely so as to facilitate theft. Both companies positioned themselves to inherit Napster’s user base when the courts ordered that company to stop permitting illegal file-sharing. Both have promoted themselves based on the wide variety of materials illegally available. And both have frustrated copyright holders’ efforts to police their use. A company that builds its entire business model around facilitating illegality should not be immune from liability because of the possibility of innocent use. Drawing a clear distinction between such a product and an iPod would protect both innovation and intellectual property.

Funny: I thought that one of the important roles of law is to define the boundaries; if so, isn’t engineering something to stay within the bounds a reasonable effort? The distinction between “business model” and “technology” that the Court strained over seems to be completely absent here.

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New LoC “American Memory” Archive [8:13 am]

Now online a the Library of Congress — digital copies of The James Madison Papers

The James Madison Papers from the Manuscript Division at the Library of Congress consist of approximately 12,000 items captured in some 72,000 digital images. They document the life of the man who came to be known as the “Father of the Constitution” through correspondence, personal notes, drafts of letters and legislation, an autobiography, legal and financial documents, and miscellaneous manuscripts.

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Changes In The Movie Business Model? [8:05 am]

In Face of Soaring Costs, Studios Cut Films

But studio bosses say their parent conglomerates are trying harder to rationalize spending, seeking a sweet spot: the least number of film releases that can keep enough profits pumping through their cable networks, theme parks, music and book publishers and other subsidiaries.

“The consensus is that things have gone too far,” said a top studio executive who spoke on condition of anonymity so as not to alienate his peers. A crucial complaint is marketing costs, which reached an average of $39 million a film in 2003 before falling last year to $34.4 million, according to the Motion Picture Association of America.

But studio executives also lament that release dates are cluttered by too much competition. And the studio-owned specialty divisions created to capture the market for independent movies could feel the pain first. [...]

“You’ve got to start out with a plan that says, how many films should we release a year, and work back,” the executive said. “In the ’90’s, all the international markets were still opening up, DVD and video were still growing by leaps and bounds, and the revenue profile was still growing at a very accelerating rate. Now, most of the world’s opened up, DVD is flattening - all the markets are maturing.” And video-on-demand and high-definition TV - the next big things - seem a few years away from invigorating the industry, he added.

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Who’s Surprised? [7:56 am]

But the closing lines of the article point out the special (peculiar?) nature of this product: IPod Thieves Hit Subways. Is Anyone Listening?

It would be hard to conceive of a better criminal target than the iPod. Those white cords snaking down from listeners’ ears into the recesses of their jackets signify an instant status symbol, hundreds of dollars worth of merchandise and a mark who may be blissfully unaware of his or her surroundings.

[...] [A] recent spike in subway felonies, reported in The Daily News yesterday, has been driven by an increase in iPod thefts, the police said. As of Sunday, there had been 304 robberies in the transit system citywide this year, up 24 percent from the same period last year, the police said. Grand larcenies are up 10 percent, with 462 so far this year. Over all, transit crimes are up 16 percent.

It is impossible to say how many of those robberies were iPod thefts, but they were a major factor, the police said.

[...] Elliot Aronow, 24, an editor at The Fader, a music magazine, described the aggravation when his iPod was stolen after he left it on a table last weekend at a Duane Reade drugstore on 23rd Street. Mr. Aronow estimated that he had downloaded about 12,000 songs from friends and other sources in the past year. He last backed up his files on his own computer a few months ago, and when his iPod was stolen, he lost some songs that would be difficult to track down again.

“All the value was really in the music,” Mr. Aronow said. “The thing itself was just a stupid device.”

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NYTimes’ Grokster Writeup [7:53 am]

Plus some quite uncertain coverage of Brand X: Lively Debate as Justices Address File Sharing

The much-heralded Supreme Court showdown in the Grokster case between old-fashioned entertainment and newfangled technology found the justices surprisingly responsive on Tuesday to warnings from Grokster, the software maker that allows Internet users to share computer files on peer-to-peer networks, that a broad definition of copyright infringement could curtail innovation.

[...] That Justice Souter, the least technically minded of the justices - he still drafts his opinions by hand on a legal pad - could even invite a dialogue about Apple iPods, much less suggest that he could be tempted to engage in illegal file sharing, was an indication of how this confrontation of powerful interests had engaged the court.

But by the end of the lively argument pitting Grokster and its allies on the electronic frontier against the entertainment community’s stalwart defense of intellectual property rights, any prediction about what the court will actually decide appeared perilous. The justices themselves seemed taken aback by the procedural complexities of the case, Metro Goldwyn Mayer Studios v. Grokster Ltd., No. 04-480, which moved through the lower federal courts on summary judgment, without a trial.

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Promoting Innovation [7:44 am]

How Ampex’s patent portfolio has resurrected the value of a moribund company: The Profits in the Attic

The hottest tech stock in America hasn’t been surging because of what its products promise to do in the future, but for breakthroughs it made more than a decade ago. Ampex has quietly risen a whopping 2,000 percent in the past six months. It is perhaps the most extreme vindication of Kevin G. Rivette and David Kline’s book Rembrandts in the Attic, which argued that companies’ patent collections could constitute an overlooked treasure trove. In the past year, Ampex has found several Rembrandts in its attic, and maybe even a Renoir or two.

Never heard of Ampex? It has a long and storied history. Founded in 1944 in what is now Silicon Valley, Ampex was a pioneer in audio and video recording. [...] In the 1960s, Ampex invented slow-motion instant replay and then focused on developing efforts to store and retrieve digital images. In the early 1990s, it introduced digital compression technology (or DCT), which is used in the industrial-strength recording machines it sells to the government and television stations.

[...] As Ampex struggled, the continuing revolution in consumer electronics—in particular the spread of digitization—laid the groundwork for Ampex’s rebirth. Have you visited a Circuit City lately? The aisles are full of DVD players, DVRs, digital cameras, camera-equipped cell phones, and digital camcorders. None of these was a major consumer product 10 years ago. And all of them rely on the storage and retrieval of digital images. And can you guess who held a bunch of patents on the storage and retrieval of digital images? “We were finding that the patents we gained as a result of developing DCT in the 1990s were being used in today’s ‘trendy’ electronics,” says Karen Dexter, director of investor relations at Ampex.

And so the company began to contact consumer electronics giants, an American David twirling a patent slingshot at Japanese giants. [...]

The suits themselves didn’t garner much attention. But last fall, the Japanese electronics giants began to fold. [...]

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Slate’s Grokster Coverage [7:36 am]

Dahlia Lithwick’s on maternity leave, so Grokster argument coverage comes from Emily Bazelon: Grok Around the Clock

Outside the courthouse today, a few feet away from the open-source guys are folks with guitars. Their signs read “Don’t Steal My Future” and “Feed a Musician.” That’s one way of putting the choice the court faces today—the techies vs. the musicians. (The choice is also between the big fat technology industry and the big fat recording industry, but never mind that.) The justices seem vexed by their choice. They don’t want to be the Luddites who killed off the next iPod, but they also don’t want to abandon all pretense of enforcing federal copyright law. So they vent a little by giving lawyers on both sides a hard time. Donald B. Verrilli Jr. is representing the studios that sued Grokster and StreamCast. When he implies that the court needs to clarify Sony, the justices want to know what he has in mind. “It’s not clear to me what your test is,” Justice Anthony Kennedy says (testily).

Verrilli’s proposed test is that a company like Grokster should have to show that its business is “substantially unrelated to copyright infringement.” Justice Stephen Breyer doesn’t seem happy with that standard. “Under your test, if you were counsel to Xerox, are you sure that you could recommend that your client go ahead with developing its product?” he asks. Then he repeats his question three times, swapping in for Xerox the VCR, the iPod, and Johannes Gutenberg’s printing press.

“My answers are yes and yes and yes and yes,” Verrilli responds—what choice does he have? Breyer says that in each instance, most of the foreseeable uses of the new technology could have involved copyright infringement. Verrilli backpedals. The test he wants now is that a company should be held liable when it makes a “material contribution” to copyright infringement with the knowledge that it’s doing so.

“But the maker of Xerox knows that!” Antonin Scalia exclaims. It’s not a good sign when Breyer and Scalia join forces. Worse, David Souter piles on. [...]

[...] O’Connor asks whether [Acting Solicitor General Paul] Clement thinks the court should restrict itself to holding companies liable for “actual inducement” of copyright infringement. Scalia intercepts. “The actual inducement test doesn’t get you very far, does it, because a successor to Grapster or whatever this thing is called would know very well” how to avoid looking like an inducer. From this we learn that Scalia doesn’t care about sounding cool like Souter. Nor does Kennedy, who has just referred to Grokster as “an instrumentality program.”

Scalia wants Clement to explain how the court can stave off a world in which lawsuits stifle innovation. “What I worry about is the suit that comes right out of the box as a company starts up,” he says. Clement is open to giving the new kid on the block extra leeway. But he warns the court not to fall too hard for the innovation mantra. “The only newfangled idea here is that if you give someone else’s property away for free, you’re likely to attract users and advertisers,” he says. “But that is not the kind of innovation that we want to foster.”

[...] When [Grokster attorney Richard] Taranto starts to invoke Sony—he’s not interested in a new test—Scalia calls him off. “I hope you’re not going to waste too much of your time,” he says. “This court certainly is not going to decide this case on the basis of stare decisis.” That’s Latin for standing by Sony. Ouch.

Breyer, however, is no longer on Scalia’s team. For 21 years, he points out, the Sony test has allowed plenty of technology to flourish. But Kennedy attacks before Taranto can relax. “You want to say that unlawfully expropriated property can be used as startup capital,” Kennedy says. “From a legal standpoint and an economic standpoint, that sounds wrong.”

Taranto retreats to arguing that Congress, not the courts, should resolve the substantial policy questions at stake.

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Freelancer Copyright Sustained [7:22 am]

Freelancers Hit the Jackpot

A settlement reached last Wednesday in a class-action online publishing lawsuit could mean plenty of freelance writers will be eligible to receive their share of up to $18 million dollars from big media companies, once the agreement receives court approval that is expected in the next few weeks.

The settlement, which could net qualifying freelancers a collective minimum of $10 million and maximum of $18 million, is the result of a lawsuit meant to remunerate writers for work that had been published over the years in online databases without their approval.

See also Boston Globe’s Database operators settle copyright suit [pdf]; NYTimes’ Settlement in Freelance Writers' Suit

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Today’s Grokster Rundown [7:19 am]

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Brand X Coverage [7:14 am]

  • Wired News: Will Cable Quell the Competition?

    During oral arguments Tuesday, several justices probed in detail into the supposed logic of the two regulatory classifications, often questioning why cable operators should be treated differently than telcos.

    “The question is whether you’re still offering a telecommunications service to the public,” said Justice Antonin Scalia.

    Thomas Hungar, deputy solicitor general in the U.S. Justice Department, cited the different regulatory histories for cable operators and telcos, and pointed out that phone companies — unlike cable operators — offer telecommunications services on a stand-alone basis.

    NCTA’s lawyer, Paul Cappuccio, argued that cable-modem service involves both telecommunications and data services in a bundled offering, which in turn makes it a “separate product” worthy of its own classification.

    “We view it as two ingredients forming a product that is a distinct product,” he said, arguing that the court should defer to the FCC on such definitional matters.

    Brand X’s attorney, Thomas Goldstein, said the cable industry’s argument “becomes completely circular” if taken to its logical conclusion: Any bundled service can therefore be classified as something different by virtue of its bundled nature.

    He said that under such logic, retailers could circumvent laws against selling cigarettes to minors by simply bundling cigarettes with other products and calling it a “smoking service.”

    Furthermore, Goldstein said such reasoning allows companies to bundle offerings in an effort to “self-deregulate.”

  • Washington Post: FCC Ruling Limits Competition, ISP Tells Justices [pdf]

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Sustaining Network Openess [7:07 am]

An ex-FCC advisor looks to the future of network development: Is an ‘open’ Internet a doomed concept?

Most openness mandates, by themselves, don’t ensure that consumers get the bulk of the benefit created as more devices, content and applications make broadband networks more valuable.

The last thing the broadband world needs is more regulation.
Rather, these mandates shift the benefit from the companies building networks to companies that develop the devices, content and applications.

To reduce the risk that Congress or the FCC will pick winners and losers in this manner, network owners would do well to offer their own voluntary commitments to preserve consumers’ freedom to choose the devices, content and applications. In early 2004, former FCC Chairman Powell challenged them to do as much.

Because voluntary approaches can remain agnostic as to which companies benefit most as broadband networks grow in value, they offer the prospect of preserving openness while also preserving critical incentives to invest in broadband infrastructure.

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March 29, 2005

Detailed Grokster Writeup [7:10 pm]

A Few Notes from the Grokster Argument [via Copyfight] - As Donna says, read it all…..

MGM’s rebuttal opened with a real howler, and I am a little surprised that none of the Justices interrupted their lawyer to challenge it, but he was speaking pretty quickly and forcefully, so I guess they were inclined to let him sum up. Addressing the relief MGM was seeking, their lawyer said: Grokster is a machine built upon inducing infringement and we are entitled to an injunction shutting it down. The obvious rejoinder, based on the lower courts’ express findings in the case, is that an injunction can’t shut down Grokster, the network, because it exists completely apart from Grokster, the company. If this was an attempt at some sleight of hand with the technologically unsophisticated judges, I don’t see it going anywhere, because the questioning of both sides seemed to reflect that the Justices have a hearteningly clear grasp of what the software does and doesn’t do. MGM also argued that the Ninth Circuit’s decision was itself chilling technological innovation, although they defined “innovation” as innovation authorized by copyright holders. MGM closed with its pity-the-starving-artists line, complaining about the lost revenues from hypothesized sales it says would have occurred absent file-sharing.

See also this CNet-hosted photo gallery

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A First Look at Yahoo!360 [7:02 pm]

Some interesting notes from an early invitee: Looking around Yahoo! 360

More worrisome, however, is the RSS feed. I took a look at it was a bit annoyed by the URL structure for it but that was the least of my worries. When I looked inside is when I made the decision that I would never use the 360 blog for anything serious. My reason was in the code of the RSS feed where the following appeared:

Copyright 2005, Yahoo!

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BBC’s Internet Distribution [2:55 pm]

BBC’s online radio streams ahead

The number of people listening to BBC radio shows on the internet has grown by a quarter in the past month.

Online demands to hear radio programmes passed nine million in February - up more than 25% on the previous month.

The show which is most requested is Radio 4’s long-running soap opera The Archers, with Chris Moyles’ Radio 1 breakfast show in second spot.

Online listening to digital-only networks, such as 6 Music, has soared by 83% in the last year.

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Virtual Work and Taxation Jurisdiction [2:35 pm]

High Court Rules Telecommuter Living Out of State Owes Full New York Taxes

A man who lives out of state while working by computer must pay New York tax on his full income, the state’s highest court ruled Tuesday in a case that could have wide implications for the growing practice of telecommuting.

The Court of Appeals said computer programmer Thomas Huckaby, who lives in Nashville, Tenn., owed New York income tax for his full salary, not just the time he spent working at his employer’s New York offices.

[...] Huckaby’s attorney, Peter Faber, said the case is the first of its kind involving the income tax liability of a telecommuter. He said he may appeal to the U.S. Supreme Court because most states base income tax liability on the residence of the taxpayer.

“To say a person’s taxability depends on where his employer is wrong,” Faber said.

But Marc Violette, spokesman for state Assistant Solicitor General Julie Mereson, said: “New York provides the job, New York provides the professional opportunity, and New York should be able to tax that income, even if the employee for his own convenience was working outside of New York state.”

The opinion: In the Matter of Thomas L. Huckaby v. New York State Division of Tax Appeals, Tax Appeals Tribunal, et al.

Later: NYTimes’ Telecommuters Not Exempt From New York Tax

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ZDNet’s (and Other’s) Coverage of Grokster Arguments [12:49 pm]

Supreme Court takes hard look at P2P (CNet version)

In their questions, the justices were critical of the entertainment industry’s proposal, which would hold companies “predominantly” supported by piracy liable for copyright infringement. However, they showed little sympathy for the file-swapping companies’ business model.

“What you are suggesting is unlawful expropriation of property as a kind of start-up capital,” said Justice Anthony Kennedy. “From an economic standpoint and legal standpoint, that sounds wrong.”

Donna points to SCOTUS Blog’s report: Court conflicted over file-swapping

Also: learn about what it is to wait in line to get into a hot Supreme Court session from these links at BoingBoing

Later: The Washington Post article seems to be carving out the scope of the compromise — Supreme Court Hears File-Sharing Case (some audio)

Justice Stephen G. Breyer said the same software that can be used to steal copyrighted materials offered at least conceptually “some really excellent uses” that are legal.

Justice Antonin Scalia maintained that a ruling for entertainment companies could mean that if “I’m a new inventor, I’m going to get sued right away.”

While seeming leery of allowing lawsuits, the court also appeared deeply troubled by efforts of the companies that manufacture so-called file-sharing software to encourage Internet piracy and profit from it.

Slashdot: Supreme Court Takes Hard Look at P2P

EFF DeepLinks: Justices Ask the Right Questions in MGM v. Grokster and Grokster: From the Courthouse Steps

Missed the (wholly unbiased <G>) LATimes editorial this morning: California’s Civil War

None of this is to say that peer-to-peer systems like Grokster and Morpheus aren’t allowing consumers to shoplift digitally, victimizing creative artists and their corporate distributors. But there are plenty of non- infringing uses for file-sharing systems, and the justices today will probably quibble about how much legitimate copying is enough to save the likes of Grokster.

Wired News’ File Sharing Has Supreme Moment

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Clearing Copyrights: Movie Scripts & History [12:00 pm]

Historical Epic Is Focus of Copyright Dispute

In a letter this month, a lawyer for James Reston Jr., author of “Warriors of God: Richard the Lionheart and Saladin in the Third Crusade,” accused the studio of violating American and international copyright law by using “events, characters, scenes, descriptions and character tensions” in the film that were “strikingly similar” to his narrative history.

A lawyer for the studio responded last week with a five-page rebuttal that said the creators of “Kingdom of Heaven,” to be released on May 6, had never read Mr. Reston’s book. The letter added: “The works are not substantially similar. In fact they are completely dissimilar, other than having in common some elements that are historically authentic.”

But Mr. Reston’s lawyer, Timothy DeBaets, said his client would decide this week whether to pursue a lawsuit, since he was convinced that his painstaking work over three years - including research in original sources in the Library of Congress and several Arab countries - had been lifted by the screenwriter William Monahan, who was hired by Mr. Scott.

“The key thing in the letter is, they say no one read it,” Mr. DeBaets said. “We don’t believe that, and we have evidence to the contrary. I think they read Jim’s book and took material from there, and after the fact it’s easy to run around and find stuff, since it’s history.”

[...] Michael J. Plonsker, a lawyer with the Los Angeles firm Alschuler Grossman Stein & Kahan who litigates such cases, said winning them was difficult but not impossible.

“History is not copyrightable,” Mr. Plonsker said. “But if the manner in which you tell about a historical event is a particular expression of character or sequence of events, that is copyrightable. If you can show that the defendant had access and that the works are substantially similar, which is the legal standard, then you can win.”

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An eBay For Credit? [7:58 am]

Either a Borrower or a Lender Be

What eBay did for buying and selling, Britain’s Zopa hopes to do for lending and borrowing money.

Zopa, which counts Benchmark Capital, the same firm that funded eBay, among its backers, is taking a variant of the auction site’s business model and applying it to put people who want to lend in touch with credit-worthy people who want to borrow.

“For the first time, people who want to lend or borrow money have a real alternative to going to a bank, financial institution or big corporation,” said James Alexander, Zopa’s chief technical officer. According to Alexander, Zopa is not a bank, but an online exchange that gives lenders access to credit-worthy borrowers.

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