Independence Day @ ILaw!

(entry last updated: 2003-07-04 13:43:31)

Happy July 4th! Today’s topic, appropriately, is privacy – particularly since we have learned that there are 5 cameras in this classroom, and it’s not clear who/what is connected to them.

Everyone is trickling in, at a little slower rate than usual – it’s clear that everyone had a good time last night, and the early arrivers got to hear Charlie reveal another secret of Jonathan’s past – his dancing partner at the Brazil ILaw.

It looks like Jonathan will be starting us off today, after some announcements from Larry. A lunch barbecue today; and the wrap up today is about your questions. Surveys will be available and we hope you can take time to fill them out.

Jonathan and Molly Van Houweling will be speaking about privacy.

Molly and I have been talking about how to do this, in that it’s something people feel strongly about it, but when you get into it it becomes “a big pile of moosh.” (Term of art? <G>)

So, the topic is going to be why we don’t like teaching about privacy.

So, what is privacy – what do we mean?

We start with things that we want control over… …collection of personal data; …use of personal data; …personal environment; …vital personal decisions. (Note a return to notions of control, and who has it)

Classical concerns are the government, industry and other people, all of whom might collect information or undertake actions that challenge these domains of control. This generates a matrix of issues. So we get some special topics within that framework. For example, the state’s involvement in birth control issues; identity theft. But we have special ones that we want to tackle in this session; and then we’ll move onto other issues in the discussion.

So, a classic issue – the government collecting information about you. First, Carnivore – tool for essentially wiretapping at ISPs. It’s not just collecting communications, but also filtering on specific characteristics under a court order.

The issue is that Carnivore grabs everything first, then spits out the ones that meet the filters set in the court order. So, it “reads” everything; rather than those specified elements. Now there are some legal remedies, potentially.

Suppose, for example, the filter erroneously belches out your message; a fourth amendment violation, yet no easy way to prosecure. Kyllo is a case looking at surveillance via thermal imaging of a suspected marijuana grower. At the Supreme Court, this was found to be a 4th amendment violation,

In Scalia’s opinion (the majority), this was agreed to be an excludable search because the technology was not generally available, meaning it was a special tool of loaw enforcement – but, as technology evolves, that means that the characteristics of and limitations on legitimate searches will change.

So, we see a see-sawing of the technology/counter-technology fight in this area, just as we see in copyright/circumvention/etc. The maintenance of an equilibrium, upset by technology, leads to a strange kind of cat and mouse game, where first one side, then another, cries “foul.”

A term of art – “reasonable expectation of privacy” – a context that is always in motion. This term emerged to articulate notions of privacy outside the home, where the notion of privacy starts. Kyllo now means that technology can erode notions of privacy in your home, a tradition domain of presumptive privacy.

Chris Kelly: chief privacy officer of the firm Excite! speaks up.

This feedback loop between our individual relations and the rules of law; the law is usually the instrument of response to violations of privacy, leading to exclusion of the information at trial. When it’s a question of individuals and governments, other recovery is necessary.

So, let’s speak of cookies. As we have been told, cookies are a technical solution to the fact that HTTP is a stateless protocol – there is no memory from event to event. A cookie is a data deposit on a client machine by the server. The server can put any datum onto that machine in the form of a cookie, labeled as belonging to this particualr server (breadcrumbs left in the woods, for example; or blazes on a trail). Up to this point, no particular privacy problem.

Now, let’s look at how cookies are actually used. Say, I go to a dog page at I get a cookie that says, visited a dog site. Then I go somewhere else, where I might fill out a form; then somewhere else where I query some specific things. And my dog preferences seem to come along with me. A so called cookie consortia agrees to pool cookies (or DoubleClick, a banner ad company, compiles information about me as to run into DoubleClick banners on all my sites). So, we get targeted ads – a privacy problem?

Other tracking instruments are possible – IP addresses or MAC addresses. And thus your computer gets indentity

It still may not be a problem; can’t I turn off cookies, or wipe them? Sites are designed to throw cookies, so the advisory dialogs are inescapable and unending.

There are two ways this is attacked – the US way and the European way. The US approach is to say that it’s all about consent and your expectations are set – so the FTC focus is on the privacy policy is publicized, and the consumer makes the choice to visit the site or not. Leading to the opt-in vs. the opt-out debate.

We see that privacy is terribly important, unless I can get frequent flier miles <G> This seems to indicate that there’s nothing really troubling here.

Maybe not – here’s a possible story. A surfer goes to a www site and considers a record to buy. By suggesting it to someone else, he goes to the site and finds that the same album is offered at a different price. Your mouse droppings make it possible for data miners to develop a stunningly focused description of your preferences and your behavior. Is this a problem?

Not obviously. Seems like a good thing. But with a certain degree of information, noxious discrimination in treatment might emerge.

What about the idea of selling my privacy? Like selling a kidney?

Let’s try this. The IRS doesn’t like tax cheats; but don’t want to spend money. So they did a statistical analysis of tax returns and the incidence of tax cheating, leading to the DIF formula. This formula becomes the basis for deciding whether or not to audit. This formula was requested under the Freedom of Information Act, prevented from release as a challenge to national security.

Total Information Awareness; with the collection of a host of innocuous data, combined with analysis and pattern data, judgments can be made – and a result emerges that cannot be explained. So someone can be damned, without recourse to questions of due process/probably cause – how did this happen is a question that cannot exactly be answered. A Minority Report world. Moreover, a host of things we have said shouldn’t be a basis for decisions (gender, age, race, etc.) suddenly are taken into consideration.

What are the alternatives? Investigation by individuals have their own problems.

Information wants to be free, right? So privacy becomes a counter example to Barlow’s thesis – some information should not be free.

A comment raises my thought – it’s the fact that I can interrogate and query a process, rather than rely upon a computer program based on statistics – the due process issues are the thing that is troubling.

Jonathan points out – what if we just use the tool as a screen, and then we go on to do a formal investigation using traditional methods.

And, we are fundamentally confronted with a politically determined problem – how to balance the desires for certain government functions (e.g., security) in exchange for giving up privacy.

So what tools might be used: (a) stop the collection; (b) limit the uses of data; (c) audit the uses of the data – the sort of rights in the EU Data Directive. So people have the opportunity to check, but most people don’t.

Q: Transparency is the thing I care about; as long as I can verify that they are doing what they ought to be doing, it’s not a problem. Z: So what if the government asked you to fill out a form about everything? A: Well, no. But reasonable collection is OK with me.

Ray: I’m concerned about Big Brother, but it’s little brother – recourse and accountability for data collection by firms. Without that, there’s no reason to expect that industry will do the right thing in this space.

Commenter: People seem to be willing to give up amazing things – 30% are willing to give out their physical location in exchange for a free sandwich. If this is the situation, is it possible that the idea of privacy insurance could develop?

Z: The theory of these sorts of markets are the ability to construct a financial/risk instrument that can compensate for certain kinds of losses. We might be able to set up identity theft insurance, since we can quantify the costs; but loss of privacy? What’s the monetary damage to be compensated – how to set it.

Molly: OK – I’m getting a little more scared. But there’s more out there still. Let’s talk about RFID chips.

Z: The next cookies – how the internet is becoming part of the real world. RFID are devices that function as physical cookies. Jonathan has a RFID in his dog – the dog runs away often – and now the dog can be recovered. If it’s good enough for a dog, isn’t it ok for my child? Why not RFID my kid – we have them in razor blade packages now, for example. So, now I can point an antenna at a home and I can ID the products that are in there. Or, as you walk into a car dealership, they can scan your clothes RFIDs and know whether it’s Armani or Gap slacks – and make appropriate judgments.

Comment: It seems like this is Napster inside out – Fred von Lohmann as the Scott McNealy of file sharing. Is there a creative commons license functional equivalent.

Let’s talk about P3P – a technical tool for expressing your personal privacy preferences – a standardized set of of questions that allow you to specify your privacy preferences – and it will screen your WWW access activities. So this helps with the opt-in/opt-out transaction costs. But I can still elect to give up my data in dribs and drabs. Plus, P3P is just a way of automating the contract – enforcement is still an issue,

Larry: There is also a part of the story where Microsoft plays the good guy. IE6 rolled P3P into the browser, with the default being to reject cookies by default from wites without P3P facility – leading to a dramatic increase in WWW sites that implement P3P – so tech plus the market power does offer up a little more facility.

One more topic – so now I should worry about my own failings and my accidental mouse droppings. What about the things that I need to make available, like my name.

Like the Nuremberg Files – a WWW site that includes names, addresses, and other public listings, all of people with whom this group has differences. A host of noxious things, done in public

Note that the Nuremberg prosecution was done under the theory of limiting threats, rather than a privacy case.

Two other cases: the SpamHaus project – list of know spam operations – the Nuremberg files for spammers. (; the NC sex offender and public protection registry. Convicted offenders, released after doing their time, are identified, located and characterized.

Comment: Don’t forget web bugs – little graphics in pages to track cetain kinds of actions without the user knowing

Comment: Maybe we have started in the wrong place – shouldn’t the first thing be a discussion of what we mean by privacy – what is the policy objective that we are trying to devise instruments to serve.
Molly: This is why this is hard – the issues are both wide and deep, and articulation of all these elements is terribly complicating.

Comment: This has shown why this is complex and difficult. It seems like being given a choice of what to give up makes a difference. The difference between the US and EU approaches is that ALL personal data in the EU is presumptively regulates in the EU, while that is not the case on the US – only certain data is treated that way. It makes for a huge difference, particularly the regulatory overhang

Lisa Rein: A clarification on IE6 and P3P – yes it did raise the bar; the bad news is that it was a platform-specific implementation that other programs have a hard time working with it.

Z: Note, this is the state of things after 10 years of internet technology. And already the world of privacy has dramatically changes, as has been out perception of our visibility in the world. So far, the law has proven to be unweildy in this space, and the technology that is being given to consumers is not actually facilitating the objectives that we would expect that they are being set up to help.

Molly: the 9/11 dimension has changed the notion of what represents reasonable expectations of privacy – another key domain


2003 July 4

(entry last updated: 2003-07-04 11:59:41)

A blast was had (literally and figuratively) at the social event tonight. The event was held at the Stanford Lively Arts Event: The Preservation Hall Jazz Band Plus Fireworks. The conference attendees got to sit up front at tables, where we were served a buffet dinner, plus drinks. Jim Flower was happy to see that the vegetable concentration in this meal was lower than some over the past week.

The band was not out for more than 10 minutes before there was a complete breakdown of the social order <G> as the conference attendees began to dance off to the side of the stage – leading to the influx of a host of others into the dancing area. There was general dancing, and a conga line for at least one song. What the band made of it I cannot say, but in the early stages they spent quite a lot of time watching the dancers instead of the crowd.

Although the flash on my digital camera died, I did get some good pictures and, if I can find someone to read my 80 mm CDs (I can’t figure out how my PowerBook is supposed to be able to do it), I’ll get some posted tomorrow/today.

Until then, a few links and then I’m off to bed.

  • From Slashdot: the Xbox mods have been published and the suits have been threatened: Xbox Linux Made Possible Without a Modchip

  • A propos of the Jason Matusow discussion: Microsoft Eases Licensing Under Pressure From U.S. [pdf]

    Microsoft’s antitrust troubles may be mostly behind it. Yet in its 32 pages, the legal filing provides a glimpse of the extent to which the company’s business remains under the watchful scrutiny of federal and state antitrust authorities. At the same time, the document points to Microsoft’s efforts to use licensing terms to limit the access of rivals to its technology.

    The focus of much of the tension between the government and Microsoft, as described in the compliance status report, was over the seemingly arcane software that enables Windows desktop operating systems to share data and work smoothly with the Windows programs that run big server computers.

    The report in question comes from this page: Joint Status Report on Microsoft’s Compliance with the Final Judgments; U.S. dissatisfied with Microsoft licenses

    As part of the settlement, Microsoft had promised to license he code, or protocols, on “reasonable and non-discriminatory” terms.

    However, Microsoft rivals, who opposed the settlement, have since complained to the department that the licensing terms are anything but reasonable.

Terry Fisher on Proprietary Legal Strategies in Computer Software

(entry last updated: 2003-07-03 20:34:07)

(Hoo boy; on rereading, it’s clear I was getting pretty tired here. I have done a little editing, but more probably ought to be done)

This presentation is going to be awkward, in that the schedule change means that you already got to hear the debate, and you only heard from Yochai on open source; and you didn’t have this part. Sorry

Because of the depth of the earlier discussion, I can probably go faster than I expected. Here we go

Four regimes that can be used to protect software: trade secret law, copyright, patent and contracts

Roughly speaking trade secret and copyright are becoming less important, and the other two are becoming more important. I think I will be laying the foundation for the proposition that, between these various systems, my view is not a clear cut as Larry’s that patent protection is necessarily bad. In particular, if construed properly, patents might be better. And, in fact, the real danger is the in the domain of contracts

Trade secret law is potentially a basis for protection because of the difference between source code and object code. In order to shield, one only reveals the object code; and the legal system steps into protect the secret of the source code via trade secrets. Note that trade secret law is state law; in some states it’s common law, in some states it’s statutory. Specifics differ by jurisdiction, but only in small ways.

Trade secrets are (a) Information pertainting to manufacture; (b) processes for treating or preserving materials; (c) information relating to business operations; (d) consumer lists; computer programs; (e) single or ephemeral events and (f) negative information (note a socially pernicious effect – the waste of monies chasing something that is already known by others to be a failure).

So this is an opportunity. How to achieve this protection. First, the information must have been secret initially (and possibly novel). A reasonable effort must have made to keep the secret (efforts to signal the intent to protect, rather than something stringent, like retinal scans). And the information must be commercially valuable

How to show liability – two circumstances (1) the defendant got the information via a breach of confidence (usually migration of employees previously or still under contract); (2) or “improper means” – mostly actions that are independently illegal (B&E, etc). It does include actions otherwise legal; the duPont decision – a competitor hires a plane before the roof on a plant is finished to take pictures and is found to have infringed.

The key doctrine that weakens this protection is that which makes reverse engineering permissible. So, buying a copy of a piece of software, and debug/decompiling, you are perfectly in the clear.


Software is added to copyright as a consequence of Congressional action following the 1977 CONTU (1978 Act). So, software is like a novel, musical composition, etc. The author enjoys the standard entitlements. Exceptions are fair use, merger (part of the idea/expression distinction – when there are only a few possible ways to express an idea, the principle that ideas are not protected dominates, so copyright does not obtain if there are only a few ways to implement the idea in software), and “essential” or “archival” copying.

Apple v. Franklin (CA3 1983) – Franklin copied the Apple OS so that user applications could run on its hardware. Franklin is sued; stipulates copying, but asserts that the only way to run Apple applications requires the Apple OS – a claim that the merger doctrine applies. Court says – NO; Franklin goes out of business.

Under TRIPS (146 countries), the principle is extended to the rest of the world. Article 10 says that source and object codes are protected by copyright. Articles 11, 12 and 13 limit the ability of countries to modify the standard copyright provisions for computer programs.

Yet, there is a diminishing of copyright protection as an exploited strategy. Certain judicial interpretations have been unfavorable to the copyright owner. Nonliteral copying of programs (how close a similar function is too close?) – after offering relatively broad protection, the Altai case leads to a sharper look at the nature of the similarity, requiring a consideration of an analysis of the program at the abstract functional level – leading to less protection to the copyright holder.

Reverse engineering to achieve interoperability is also not an infringement. Development of code to work around lockout is a fair use.

Menu hierarchies are not copyrightable (the Lotus look and feel cases) – on the grounds that a menu hierarchy is a method of operation and thus un-copyrightable

(Jonathan described working on MS Excel 3. There, he was workinf on finding menu text that would be (a) synonymous with the Lotus structure and (b) containing the same key letter so that the same keystroke sequence would generate the same program action in 123 and Excel. After a dispiriting run through the thesaurus, Z’s team hit upon a different approach – the 123 user help system/tutor. Initiated by the forward slash, the same function initiator as 123, the tutor would process the subsequent keystrokes and inform the user that the Excel keystrokes to achieve the same task were as follows, and then would execute as a demonstration. The consequence was that the parser would use the 123 menu hierarchy, even though the formal Excel hierarchy was something else, and Lotus was perfectly happy to accept this approash as non-infringing.)

Ineffective enforcement: the Business Software Alliance’s statistics assuming that loss = copies in use. The world piracy rate is rising overall, especially in Asia. As the piracy rate rises, the presumption that you should be protected falls (you aren’t trying hard enough to protect) – so trouble here too

Patent Protection:

The US is the pioneer in this treatment – in Gottschalk v Benson, the patent is disallowed because software is just an algorithm; Diamond v. Diehr (US 1981) software in hardware patentable. And finally, the Federal Circuit relaxes the impediments. For a while, it has to be combined with a machine; then running on a microprocessor, etc.

Approximately 300,000 applications per year; about half granted – and the trend is up.

How do the doctrines of patent law get applied in this setting; utility, novelty, obviousness and disclosure – in software, the obviousness hurdle is made more difficult to surmount, while the enablement hurdle is lowered – so source code does not have to be disclosed.

Q: How big a deal would it be to remove patent protection for software? Terry: not sure; Another practitioner: I don’t know how to answer. Software will continue to get written, but new activities are likely to be undertaken at a lower rate. More than likely a turn to contract.

We’ll come back to patents, and let’s turn to contract. No given the questioning, we better go with it now. Patent protection has the merit of being harder to get, so the number of programs shielded is substantially lower. Another way in which patent protection is narrower: copyright requires substantial similarity, while the patent law requires that the plaintiff’s patent infringement claim requires a showing that ALL the patent’s claims are infringed (that seems wrong to me – I’m not sure I got it).

We could change the rules so that disclosure is required, and we allow reverse engineering for interoperability as we do is copyright. With this and other adjustments, it’s possible to argue that patent law might be a less onerous property domain.

Politically, however, we have the situation that patents are easier to take away from software writers as a mechanism for protection than copyright ever will be.


Contract law is much more protective. Shrinkwrap licenses and click-on licenses include a host of restraints, removing many of the protections in fair use, first sale, etc. substantially more generous than copyright.

It’s not clear if these things are enforceable. The UCITA effort tried to accomplish this – and luckily a host of law professors managed to head this off. A mixed bag on whether copyright preempts state contract law. Some have been found to be preempted and some not. Bowers most recently says no preemption, in this case on reverse engineering.

So, contract law is the most noxious-looking one of these domains.


Q: Are there any new UCITA efforts out there? Terry: So far, no, but there’s still the case that individual judges could elect follow it anyway

Q: Jim Flower – UCITA was too onerous to try to rearrange the Georgia Code; states viewed it with suspicion, particularly given that they at least understood the law. Inertia as a social benefit in this case.

Q: Does not the difficulty of getting patents lead to distribution effects – low income participation in patenting is unavailable. Terry: You are right that there is a clear disproportionate effect in the favor of those with the resources to pursue patents.

Q: Where does Lexmark fit into this reverse engineering for interop? Terry: The DMCA provisions are distinguishable and able to override the reverse engineering doctrine. The viability of the escape hatch might have been decided in the presence of the DMCA

Q: the SCO case does not include a copyright claim – why not?

Z: The family tree through with the ownership of the unix code to SCO is so convoluted that it’s not clear that SCO know what copyrights they own. So SCO is working to keep it in state courts, and possibly leaving them the option to bring up copyright later.

IMHO, this probably was poor performance on my part here – be sure to check out the other weblogs that Donna cites here

Larry Lessig and Jason Matusow: Open Source and Proprietary Software

(entry last updated: 2003-07-03 18:55:46)

Charlie: I’m here to moderate this discussion: Larry as the pessimist that free software will be swamped; and Jason believes in coexistence. And it’s going to be up to the audience to get the discussion going. 15 minutes each for Jason and Larry on their respective sides. This is their third meeting.

Larry: The last time we met it was Brazil. Here’s the story I want to tell; laying out some distinctions and then speaking on the importance of free software. Larry’s skepticism is whether there will be coexistence

The words we will be fighting about will be free, open, shared and proprietary. I’m going to focus on the copyleft software, contrasting it with proprietary software. Free software gives you the machine plus the plans, while proprietary software gives you a machine. A number of humorous distinctions between the degree to which the user is empowered.

Jason will put shared source between these two extremes – Jason will explain that.

I want to talk about the advantages that come along. There’s zero price; good code; does the code teach others; does the code enable strategic behavior; is there a mode that destroys intellectual property?

open free shared proprietary
“free” y y m n
good y y y y
teach all all some none
strategy unlikely never y, hard y
destroy n ? ? n

There are a series of characteristics that each of the four classes of software within this heirarchy

Businesses that engage in the business of using and building copylefted software, that kind of software will make it very hard for a business to be made around software – threatens to undermine the ability of a business to protect any of its software – the fuzziness of derivative work gets the firm into terrible problems – viral. It’s a question that free software and shared source software both come with some kinds of encumbrances; so it may be that both are viral.

The key thing is to recognize that both introduce conditions upon the user. Copyleft dictates the nature of release; proprietary software says you have no right, even with $$, to distribute or modify.

Which should we prefer? Who’s the we? Microsoft has acknowledged that free software is a threat. From Microsoft’s perspective this is a threat to their business model. Governments have expressed an increased interest in using free software. Oregon initiative. Peru has also pushed this, articulating a set of values that have to do with freedom of access, permanence of data and security, free software is appropriate. Germany; UK Commission (Barton – see earlier) on developing company; the US DoD.

So the notion of transparency, efficiency, security, and a rich ecology all support free software initiatives.

Microsoft has resisted narrowly; the US government should avoid GPL because (1) IP protection is fundamental to software business; (2) GPL undermines this by prohibiting certain kinds of licensing – commercial but not proprietary; (3) Code developed under the GPL by the government is now not available to proprietary software businesses – a loss to these taxpaying firms. So what is the principle – government should not promote models of development that foreclose some business models. If so, this rule cuts both ways – government could only support public domain software under this principle.

Jason Matusow: [Jason gets his punches back] And Larry gets a Darth Vader cape, and a light sabre – and Larry looks quite fetching!!

I’m going to start with giving the Microsoft perspective, rather than directly treating Larry’s points.

Part of this discussion has been at the product level, and I’m not here to talk about the relative merits of specific applications. Rather, I’m talking at a somewhat higher level

There has been a cycle of innovation within a number of communities, including the government, academia, industry and consumers. This cycle has led to the products that have become commercial products. TCP/IP as an example. While the e2e design is a part of the success, the commercial development in hardware is at least as big a part.

Most software development is a product of private investment. The government investment is very small, in comparison with the private investment.

The discussion becomes a split around the question of whether the business of software is directly commercializable, indirectly through services, or not at all – and Microsoft believes in direct commercialization.

There are many ways to build software product; and good products emerge from these different models.

Turning to commercial and noncommercial software. Red Hat is commercializing Linux directly, just as Microsoft does. Red Hat is striving to become more commercialized. So there is commercialized open source.

The industry is moving to the middle. There are both closed and open source elements of many of the business strategies we see today. Both community and proprietary based work.

Much of what is going on has been the issue of commoditization of software. The market value in software is all about the innovative changes done on top of the commodity elements. If the commodity elements dominate, then the space for innovative distinction gets narrower.

Microsoft wants to maintain the space for competitive innovation in the software space. And to extend that as far as possible.

And why all this focus on source code? Transparency is critical, I agree. Transparency increases trust. But, it’s not clear what’s wanted. 68% want to see source, less than 5% have actually looked, and less than 1% will modify the source.

This means that the real need is trust, not access. Shared source initiative is the effort to work to build this trust around a mechanism for sharing source.

The OSI list of licenses is very lengthy; with 9 direct derivatives of the GPL. Microsoft has also tried non-commercial licenses; and other variants. There are lots of ways that we are licensing to stimulate innovation. And the Windows source is available, but it’s not open source – it’s shared source.

So we’re looking for the balance on commercialization and licensing

Charlie: What question would you most like the other to address.

Larry (likes his cape!): First, we agree on transparancy. So, is Microsoft being transparent about its motives for shared software. If there are all these models, and governments should not be banning things – on either side. Yet, these initiatives keep appearing. So, what is should be the government role?

Jason: We have been very clear – we don’t like the GPL; relative to governments, I have been asked about procurement preferences. Microsoft believes that there should not be procurement preferences based on development models, but should instead be based on value for money. Agreement with the OSS representatives there.

The Mitre Report is possibly biased; moreover, Microsoft has never said don’t use GPL, but you should make sure that you understand the license. And the technology transfer requirements of the US government mean that there will be some implications of the developemnt of GPL software.

Larry: Followup – you said two things about value. I agree that the government shouldn’t discriminate on development models. But what does value mean? It’s not just financial?

Jason: Agreed

Larry: So developing countries should go with open source

Jason: I agree up to the point that it becomes a mandate, rather than a rational choice.

Larry: The gove’t could articulate the appropriate values in legislation, right?

Jason: Could be, I guess. But I worry about the legislative element. But what happens, then, when they build the knowledge base up (c.f., India). And unique things are developed. But the GPL locks him out of direct commercialization of that unique thing. And don’t governments have an interest in making that work?

Larry: In the case that I gave, the government can choose what parts are GPL and what parts are not GPL. And governments can choose where the commodity and the innovation spaces should be.

Jason: Windows Server 2003 – with file sharing in transactional, but I’m not going to do it using SMB – and when I innovate in that space, shouldn’t I be allowed to claim commercial rights to that?

Larry: But the government shoudl be allowed to set make the choice.

Now Jason gets to ask his question (Larry brandishes his light sabre): Is direct commercialization of software always bad? Software patents are bad?

Larry: Lots of direct commercialization is good. The fundamentally different question is whether or not software patents are bad – software patents are bad because of the awfulness of the patent system as applied to software. These are separate issues – one is the action, and one is the protection methods.

Jason: You started a discussion: if transparency is good, and opening source is good, has the relative importance of patenting become more important (versus trade secret) in this space to ensure commercialization?

Larry: Brad Smith and I agreed that there might be a better patent system that would make software patents lead to more opening of ideas. But in the real world, software patents are bad because the existing systems is terribly poor at doing this, and managing it poor – especially measured against the benefit.

Jason: Software patents are good in that they are available to be defensive in nature. I am in favor of these patents

Larry: Craig Mundie went further, claiming that they would be used offensively, rather than defensively.

Jason: IBM is patenting a lot of stuff, too, in their patent portfolio.

Charlie: I’m asking the audience to formulate some questions that will sharpen the distinctions between these two perspectives.

Q: You say s/w patents will be used defensively, then it’s hard to see what’s the benefit – if they didn’t exist at tall, you also wouldn’t have to acti defensively.

Jason: But it does exist, so we have to. It might be true, but the system does exist in this form.

Larry: Microsoft is working to ensure that they can indemnify others against IP problems be working through the IP issues that our firm might face. A fallout from the SCO case. Larry explains the SCO/IBM case – Microsoft settled, reinforcing the case against the other defendants (Jason: that’s an interpretation)

Larry: The Gates memo on IP; arguing that patenting as much as possible to defend against problems and (possibly) new entrants.

Jason: This e-mail was lamenting the situation, not gloating over it.

Q: from Etienne – What about open data formats, rather than open source.

Jason: This is pushed hard, and there are open data formats that are available today. Some are simplistic, ASCII; more elaborate, like HTML, XML, RTF. This could be required, and governments could require that. But they don’t – because the higher functionality that is the competitive differentiator is demanded.

Larry: Should governments be allowed to require that all documents be in Word? Jason: Legislated? Larry: Yes; Jason: No

Q from Renata: Isn’t shared source look but don’t touch? And isn’t that a transparency issue?

Jason: Some licenses are touch – and we give significant access to sovereign governments and 3 supranational organizations, as well as documentation. And the question is that will we go after others who we believe have used our source? The answer is that, under the notion of derivative uses under copyright, we would have to pay attention – and we may decide it’s a license violation.

Larry: Here’s a distinction. When I install gcc, or Apache, I don’t engage in a licensing agreement with the owner. When I do a shared source license, are there some rules about what I can and cannot use?

Larry: what about combining without distributing?

Jason: we don’t make any such restriction.

Charlie: We’ve been talking about developing countries facing IP problems, yet wants to be legal, would you encourage them to go open source?

Jason: this is probably the most direct question that could be asked of us. We still believe that they should look to acquire the highest value for their money in software – so they should consider everything. In reality, there are a lot of questionmarks that this raises, that I won’t answer in a public forum.

Larry: China has hundreds of millions of computers, where they cannot possibly afford to install Windows. To comply with IP they could install Red Flag Linux – is that OK?

Should they break the law and pirate Windows, or should they install linux.

Jason: We want them to pay for Windows; I don’t have a good answer. SCO litigation means that Linux is not allowed; but FreeBSD – I’m not going to answer. In my personal experience, we’ve had to wrestle with some peculiar problems – for example, we didn’t ask for license proof to help people get throuth Y2K

Larry: (after much discussion) There are some things under shared source that I cannot do that I can do on the free source computer (without distribution)

Jason: At an intent level, we don’t mean to limit free software. Under certain situations, however, we don’t want you to use the software in certain ways.

Larry’s takeaway: We don’t know if there’s a devil here. If there is a devil, it’s in the details. In the details, there’s a question of a covert tilt against the software ecosystem. And, in the evolution of the next state, the .NET space, is the consequence that developers will not be able to participate in that arena. Jason wants all kinds of development to happen; but the IP game may lead to problems, particularly in developing world – c.f., the question Jason couldn’t answer in this forum

Jason’s takeaway: I think that ultimately the intent of shared source will appear over time; and the ways that we intend to remain a direct commercializer of software. We believe direct commercialization is a good thing. How are developing nations going to work in this IP regime? That’s going to be a key issue going forward; they are going to want to use development from other nations; and open source is not going to solve all their problems. Fundamentally, Microsoft believe that in the end of the day all this discussion should be superseded by the quality of the product, and that product quality should be the determinants of consumer choice.

(This seems like a lot of inside baseball, but let me give a simple example. Suppose I am a shared source developer and I want to develop a modular application, say within the .NET environment. As I look at the MS source, I see how to do this, and I design my code to be plug compatible with this (set of) software elements.

Now, if I understood Jason right, the construction of that tool, and testing it on my machine, would be a violation of (at least some of) the shared source license, even if I don’t ever distribute my code. Under free software, I can certainly do this, but it seems that I can’t do it with shared source.

More importantly, there were three key pieces to Jason’s talk and the subsequent discussion that I want to reiterate here:

  1. A key question that Jason was not prepared to answer was centered on the question of the preferred strategy for the hotbeds of piracy in Asia. Would Microsoft prefer that these regions persisted in their illegal copying of Microsoft products, or would Microsoft prefer that these areas move to an open source product, given that the list price of Microsoft products is beyond the means of the country to supply to all its users. All Jason was prepared to say was that Microsoft would prefer that users in these regions employed legal copies of Microsoft software.

  2. As a perfectly legitimate product strategy, Microsoft is actively working to track all the IP content of their products, worldwide, so that they can be able to indemnify their users against the kind of IP challenges that Linux is currently facing from SCO.

  3. (This is the one that requires the most reading between the lines) Microsoft’s shared source licenses, or at least some variants thereof, require that licensees never combine elements of Microsoft code with any code that limits the commercial use of the result (read: GPL code). Note that this is a limit that is more stringent than that of the GPL, which only makes requirements of such combinations UPON DISTRIBUTION of the result. Arguably, this could mean that any open source product that appears to interoperate at the code level (think .NET) with Microsoft object code that is produced by a coder who had a shared source license might very well be subject to action under the shared source license. Granted, a certain amount of proof would be required, but it would be hard to argue that this interoperability was achieved without the combination of code (through testing) that the license specifically prohibits.

Yochai on Peer Based Software Production: July 3 2003

(entry last updated: 2003-07-03 15:40:36)

and we’re off…

Free Software and Common-Based Peer Production

Today we’re talking about controls on the logical layer, and in particular the relation to the content layer. This lecture is going to be about a new model of production, of content and software, that seems to be emerging throughout the digital environment – this development requires explanation, because it does not match our current working models to explain production of valuable goods. So, some observations

  1. Free Software – chacteristics and institutional framework

    It’s getting harder and harder to ignore the success of free software – it just works. A graph of webserver adoption – with Apache as an illustration. Linux, also beginning to capture a larger portion of platforms today.

    Proprietary software depends upon exclusion. Use is permitted only in exchange for payment. Learning is generally prevented altogether because of the need to prevent copying in the business model. Customization if allowed only within the space that the software vendor allows – again the risk of letting the user into the guts of the software challenges the economic value of the instrument in the face of potential redistribution, which is not allowed.

    Free software inverts these circumstances by limiting the owners control (not the owner’s copyright). A self-limitation of the owner’s control via the license. Use for any purpose, study the source, adapt for your own use, redistribute exact copies, and allows making and redistribution of modifications. The so-called copyleft – GPL

    Identifying characteristic is a cluster of uses permitted, not absence of a price (the free v free beer distinction)

    Eric Raymond (Cathedral and the Bazaar), Moody and others have written about it. The basic approach is a crude but workable tool is created and released to a community that interates in the refining of the tool. The net becomes a communication and an organizing basis for this effort; a volunteer effort, self organized.

    A little on free software vs open source software – a schism on the distinctions between the economic and the philosophical arguments – Yochai cares, so he uses free, but he sees little practical distinction

    The institutional frameworks: proprietary, open access, and copyleft – property is a set of legal conventions about what can and cannot be done with something (?). Permissions in this space, provided they can be bought and sold, lead to a market in the property. So, it’s permissions.

    At the other end, we have public domain/open access. Many of the advantages we ascribe to free software would come along with the allocation of their software to the public domain. But, the public domain has a weakness – the public domain can be reappropriated by downstream actors, under the law, taking it out of the realm of usability. The weakness is that your work will be taken and used to enrich someone else – the suckers reward.

    So, we have copyleft – a widely used instrument of open source. A study of SourceForge shows that something over 90% of projects were under a copyleft license – irrespective of the political schism. Copyleft is a cluster of legal provisions designed to make reappropriation of free software by proprietary interests.

    Elements of copyleft – redistribution for profit or not is allowed, but distribution must include source code; others may also redistribute the product as received; freedom to modify and distribute, but the distribution terms are unchanged – a central provision. You can change however you like; but once you distribute your changed version, you must include the source, which includes your additions and improvements – plus notification of changes and attribution of sources. Covenants ensure that all the provisions of the copyleft are associated with the descendents of the first generation licensed object. It is not contractual; you are permitted to employ the program for so long as you behave in accordance with the covenants; once you violate the covenant, the license is revoked – IOW, permissions to do things within the copyleft can be revoked for non-compliance.

    These arrangements do not discriminate between commercial and noncommercial free software.

    Current questions: what counts as a “modification” as opposed to just running an application using functionalities from a GPL program (and then there’s SCO which doesn’t really bring the GPL into question)

    So, copyleft (v. public domain) reduces incentives to adopt proprietary strategies in software; reduces opportunities for defection

  2. Commons Based Peer Production – why has this phenomenon emerged, and is it really the case that software is the only domain within which this approach can work?

    In fact, there are similar phenomena on the net out there. There are clusters out there that, collectively are effectively able to coordinate their behavior without price signals or managerial commands and produce value. Potentially human parallels to the distributed computing activities (SETI@home, etc.).

    Consider other domains where something like this happens:

    • Academic research – self selection of projects, built on what others have done, distribute results as widely a possible, make money elsewhere by teaching or getting grants- an old model

    • The WWW itself – volunteers out there, for their own reasons, put content out there that collectively builds a context that supplies information, glued together via the WWW and a search engine – a diffuse model

    • Mars Clickworkers at NASA.Gov – large scale scientific effort; chop the problem up into small tasks and get people to buy in; kuro5hin – a peer generated op-ed space; the wikipedia project.

    • A question of relevance and accredidation – let’s look at Slashdot. A story gets posted, and lots of comments, many of which are irrelevant. The commenter system gives us some way of evaluating the story and understanding the topics.

    • Google – the ranking system is based on how many other WWW pages refer to a page. The links are essentially votes on relevance. Another peer produced set of information (contrast with Overture, ranking by price; Yahoo! ranking by librarians) More interestingly, consider the open directory project, which does better than Yahoo!, at least in the case of the list that Yochai picked.

    (distributed proofreading)

  3. Economic Analysis

    So, why would anyone do this?!? There are diverse ones. The OSS economics literature maps several motivations – intrinsic (things that make me better off) and extrinsic (things making the rest of the world better/change the world). Intrinsic ones include hedonic ones (it’s fun), ethics; extrinsic – reputation, or demand for service contracts. So that’s what the economists say

    More abstract is an argument that rewards derive from diverse sources, not just money. Money, pleasure and social/psychological interactions – and, moreover, these are not independent from one another. In particular, social unpleasantness (leaving cash at a friend’s home in exchange for an evening ruins the experience) can derive from the injection of money into an activity – it can undermine motives as well as create them.

    So, an argument – when contributions are too fine grained/small to design transactions around, peer production seems to dominate – it’s too small to do for money, but worth doing for the greater good. If, on the other hand, if money is not seen as a disincentive, it can lead to greater participation. When the role of money leads to a loss of psychological benefits, things are very hard to get started.

    Bottom line, it appears that organization of information production is the thing that is needed to make things happen, rather than trying to find the right money incentives; in fact, money may be a disincentive. The organization will depend upon the modularity and granularity of the problem, and the difficulty of reintegrating.

    What’s the value – human capital is hard to define and value, so contracts and pricing are hard to set up. It appears that peer production systems seem to do a better job at getting value out of certain kinds of human capital – the ability to manage this human capital to make contributions is left to the group, rather than the manager. This also means that peer review is needed, since contribution could be defective – but the individual gets to decide to act, rather than being managed into acting.

    Moreover, firms erect an artificial barrier to getting the right person to work on the right asset. When the assets and the people are not in the same firm, a suboptimal allocation of human capital might emerge – while the peer process of development removes this barrier. Increasing ways to work, in collaboration, goes up.

    The Commons problem – commons problems are dependent upon the kind of common. Property does help in some cases; and therefore there are problems in this space. Primary concerns: defection by appropriation of assets will demotivate the other participants; poor judgment of participants; and putting the pieces together.

    Solutions include formal rules (GPL, etc), technology (the organizing code), social norms – these govern behavior. Redundancy and averaging out help to deal with poor judgment. The integration solutions are either iterative assessment/efforts – or you get a market actor who stays within the peer rules yet exploits the assets in ways that garner economic rewards within the peer context (Red Hat)

  4. Business Models

    Surfers – businesses built around the existence of the phenomenon, getting benefits from the product’s existence (IBM selling more servers through Linux) – or pushing pieces back into the market – Red Hat.

    Toolmakers – a platform for developing peer developemnt tools and selling these tools. Massive Multiplayer Online Gaming.

  5. Thematic Analysis – so, we see diverse motivations, with complex monetary relations. Peer production that it not just open source software. Anti difection mechanisms to keep the system working. And a business hook to keep things working at the intersection


Q: So, this seems to work for non-rivalrous goods. What happens with rivalrous goods? The MIT cheap eyeglasses technology example. Yochai: this is not really a non-rivalrous good – the design is still IP. There is going to be this tension of ownership in these sorts of contexts; getting at the economic value without undermining the system that created the valuable assett/IP.

The question of whether this really works for physical goods (barn-raising, for example) is much more problematic. So far, there is little seen. But since there is so much economic activity in the intellectual level, it may not matter – there are plenty of reasons to consider the importance of this issue just because of that.

Q: Given that OSS programmers are largely employed by software firms that sell proprietary goods. If the proprietary software goods market goes away, what happens to these developers?

Y: Point one, there is a certain amount of slack in the economy, where people have come to combine play with production (clickworkers, slashdot, etc.). The more specific question for software is that roughly 2/3 of the dollars that go to people who write software get their income from services, with the rest from selling software. That means that there is a certain amount of income to programmers that is already services driven – and it’s of the scale of the entertainment industry (I missed the rationales for this leap to entertainment)

Q: Are these two ways of producing exclusive – i.e., one will dominate? Or will they coexist, and, if so, are there legal structures that need to change to ensure that?

Yochai: They are not mutually exclusive. Economies will probably be based on both. The primary threat to peer production is that policies that make the world more congenial for proprietary systems make the world less good for the peer systems. Raising the IP barriers makes access harder for everyone, and may be particularly onerous for the peer development model.

2003 July 3; ILaw; Terry Fisher on (Business Method) Patents

(entry last updated: 2003-07-03 13:34:33)

And Terry’s getting ready to start……

Revised plan for the day; first Terry on business method patents, then Yochai on free software and peer production. in the afternoon, Terry on the legal meaning of proprietary software, and then closing with Larry and Jason Matusow debating on the open, closed software spectrum. And of course, the banquet tonight at 6:00

Business method patents – the central point is that this sort of patent is increasingly important on the net, and they are almost always bad/pernicious. Yet, they are well established here in the US. The secret is that they are not established yet overseas – and we can hope that they will learn from the US’ mistakes.

Most patents are enforced in the US, Japan and the Europeans Patent Consortium (?) – over 80% of them are in these jurisdictions.

The US has three kinds of patents, utility, plant and design; most of which are utility patents. Founded on section 101 of title 35. New or useful products or processes become the two main bifurcations in this space.

Traditionally outside of the domain of patents include abstract ideas, laws of nature, printed matter, animals, plants, naturally occurring substances, surgical procedures and business methods. However, the domain of patent protection has slowly begun to expand into these domains.


  • purified natural substances exhibiting new qualities can be patented (the rosy periwinkle story – leukemia drug of Eli Lilly)

  • The plant protection act (1930) extends patent protection to new asexually produced varieties

  • 1970 – following an international agreement – extends patent protection to sexually reproducing plant varieties, so long as they are stable

  • In 1980, Chakrabarty – non-naturally orcurring organisms are patentable – Supreme Court decision

  • Supreme Court extends plant protection into the general patent law;

  • Cannot patent devices associated with nuclear weapons

  • Software becomes patentable over the course of the 1980s and 1990s

  • Surgical procedures become patentable, like a medical device or a drug. Traditionally, this was NOT patentable. the USTPO – the Palin opthamologist patent for cataract surgery. The shape of the incision makes a difference patent #5,080,111. He then informed other opthamologists of this technique, but he wanted a fee for use. Huge outcry. In the end, Congress overrode the extension of patent to surgical procedure – not by removing the patent, but leaving doctors legally allowed to infringe. However, there remains liability for the device producer that enable the doctor to use the procedure.

  • Bringing us to business method patents

For most of the 20th century, you can’t patent a method of doing business – usually discussed in dicta, because it’s rarely at issue. Quietly, the patent office starts offering these patents, and in 1996 the USPTO formalizes this and in 1998 we get the State Street Bank case – how to account the value of a share in a portfolio of diversified assets. So,a program is written to automate this process and a patent is obtained on this technique.

A complainant filed for declaratory judgement; the court declares that the algorithm/software is patentable in the State Street Bank case; the court also repudiates the business method exception to patents. Leading to a surge in applications for patents.

The surge leads to a surge in grants around 1999-2000 – the internet boom – it then drops.

Some examples:’s dutch auction; amazon’s single click e-commerce checkout system; others

The single click method, developed by amazon, is patented – barnes and noble mimics and is sued.

Behavioral profiling 5,848,396 – gather information on what you are doing, profile you, and then pick ads to sell to you

held by Freedom of Information, Cambridge MA

A backlash starts up – three forms.

  1. (a) Bounties which offers bounties to those who ferret out prior art that would invalidate (generally on the grounds of novelty)

  2. (b) Litigation – to get a patent you have to show that the invention is novel, non-obvious, it’s useful and you have to show how some competent person could implement – the attacks are generally on the basis of non-obviousness (established Hotchkiss – 1850; bar raised in 1941/Cumo case; turned over the Court of Appeals for the Federal Circuit gets exclusive jurisdiction) – other jurisdictions (UK starts low bar and rises slowly, Germany gets very stringent during the 1930s, then lets the bar lower – overall the standards are converging under TRIPS)

    The so-called Graham conditions to establish non-obviousness are established and these form the doctrine. Brought to bear on business methods.

    Amazon single click – the district court finds that there is sufficient novelty. By the time it gets to the appellate court, the controversy arises. At appeal, it was declared insufficiently novel for injunctive relief.

  3. (c) Agitation to get the USPTO to change its processes. Several groups offer up change suggestions, some of which are implemented. Legislative proposal floated, but don’t go anywhere. Nevertheless, the backlash slows the rate of patents in this area

In the EU, we see other activity. Although business patents as such are prevented, a technically derived method is patentable. A complication. Revision of this doctrine is not undertaken as a consequence of the “EuroLinux Alliance.” A kind of stalemete, although some methods have been patented.

In Japan, we see about the same position. Japanese patent law says inventions must be industrially applicable. But it still can be done

Lets turn to theory in this area. There are two economic theories: reward theory and rent dissipation

Reward theory: as discussed yesterday, IP creations are public goods – microeconomics argument – marginal cost curves and demand curves and the argument of perfect price discrimination – capture of all consumer surplus which Terry calls monopoly profits (not exactly accurate, but ok because he puts it in quotes <G>) So Terry then shows standard monopoly pricing analysis – Price – Marginal Revenue, rather than the competitive result where price = marginal cost. Leading to deadweight losses

Thus, we have disadvantages of IP – we need administrators, patents are impediments to cumulative innovation, and we get deadweight loss of consumer surplus. Thus, patents are costly, so their benefits better be worth it.

Lookin at the other theory – rent-dissipation. Inventions give rise to improvements that build upon the invention. Subsequent innovations build upon this primary invention. The race to get to the first breakthrough (and the associated monopoly profits) means that we get overinvestment of innovation effort in specific areas, leaving other innovation needs “underinvested”

Two suggestions to rectify this – the Kitch proposal is to give broad protection for pioneering inventions, giving them control over subsequent development, managing the innovation or leading others to drop out. The Merge criticism says this just makes things worse, so narrow patents are better – of course, this just makes the problem reemerge for the secondary development.

Why BMPatents are unneeded? A) Patent protection is an additional reward that is not needed for those who innovate in this space – first mover advantage already motivates the inventor in this space. B) At the same time, we get all the nasty costs of patents, administration, deadweight loss, impediments to further innovation, and unavoidable rent dissipation.


A set of additional ways of framing the limits are cited. Terry seizes on a key point, which is that there are alternatives to patents, particularly trade secrets, which form a backdrop against which the merits of patents are frequently considered. In the case of business methods, the ease of reverse engineering shows that trade secret protection is not available. (this leads me into something of a muddle, in that I feel like there’s some sort of circular discussion here)

What about software? Most BM patents have a software component, but not many – and we’ll talk about software patent issue later today.

Terry goes on to show that the courts continue to dive down the rat hole – a patent on how to hold a golf club (a putter) #5,616,089 – a push of the notion of patent beyond it’s logical extreme – the Fosbury Flop, for example, could be patented and he would either have made a bunch of money, or won the Olympics for 20 years

A discussion of the eBay litigation and the NetFlix BM patents.

If we are going to repudiate BM patents, how do we define them? Terry: good question. This is tricky, mostly that you have to go back to the pre-state street bank work, and then have the courts establish whether this issue at patent is a business method (in which case it’s not patentable) or it’s not.

Q: I don’t see how to define a bright line. Terry: you’re right; it is difficult to do, but it should be done, blurry as the line might be.

Q: Why is the AMA opposed to patentability of procedures, while drugs and devices are OK? Good point. It shows that it can’t be the case that we don’t want patents on things that effect people’s lives. So it’s hard to locate the priciple that differentiates the cases. It is possible that the AMA saw that the idea that one doctor is making another doctor unable to perform his hippocratic duty – but it’s demonstrably odd.

Q: Why the atomic weapons exception? Not to keep people from learning how to make bombs, but because a new reward system was instituted in its stead,

Going back to the surgical methods, most doctors seem to see this exception as rooted in the ethics of the profession


Late night/early morning 2003 July 3

(entry last updated: 2003-07-03 11:59:47)

After a raucus and enjoyable evening at the Gordon Biersch with Cindy, Yuko, Etienne, Ryan, Kevin, Don and Govind, I have a couple of things to post before hitting the hay (and I’ll probably just add to this list tomorrow before ILaw starts in)

  • Slashdot has an article on the Japanese push to stop people from using their cell phone cameras to "shop lift" images from stores: Digital Shoplifting From Bookstores?

  • Slashdot has a small article on the continuing Lexmark case, pointing to the EFF’s most recent materials and a BBC article: Lexmark DMCA Case Winds On

  • Billboard’s take on the EFF Let the Music Play initiative: ‘Let The Music Play’ Ads Target RIAA

  • Donna channels J.Grimmelmann from Lawmeme on yesterday’s ILaw session: Grimmelmann in the House

  • Dan Gillmor on Intel v. Hamidi: Ruling a defeat for Intel, a victory for free speech

  • Missed this: BMG tinkers with CD copy controls [via a blog doesn’t need a clever name]

  • For those of us who aren’t quite as up on the implications of Jonathan’s suggested constituency for testing out Terry’s proposal, we get a little more detail from John Palfrey: Nesson on Fisher’s Alternative Compensation Scheme for Digital Music

  • Is it possible that Larry just likes going after Declan? Or is he just too attractive a target? what declan doesn’t get (finally, we’re back) takes on Declan’s writeup of the Microsoft lobbying push on cable companies: Microsoft’s new push in Washington

  • Derek says it better than I ever could: What’s New? aka I Can’t Shut Up About Madster – more on AIMster. We also get to hear from Aimee, who focuses on Ed’s comments; and here’s the EFF position

  • To promote the Microsoft eBook, Microsoft offers free e-book downloads

    In a move aimed at bolstering the use of its Microsoft Reader program, the software giant announced on Wednesday that it would offer free downloads of e-book bestsellers over a 20-week period.

    Although Microsoft has launched similar promotions in the past to boost users’ familiarity with Reader and attempt to snag market share from Adobe’s omnipresent Acrobat software, the new promotion is the largest in scope and duration that the company has offered, Microsoft eReading group product manager Cliff Guren said.

  • Bowing to the inevitable, Billboard tracks Net music downloads

    Nielsen SoundScan, which tracks retail music sales and is the source of Billboard’s top music charts, will make data available Wednesday on music downloads sold at several digital-tunes services. These include Apple Computer’s iTunes, Roxio’s Pressplay, MusicNet, Liquid Audio and It also plans to track sales from the upcoming Napster service.

    Nielsen SoundScan’s announcement that it will begin recording download sales lends credence to Web music-retail efforts and could help raise the general profile of online services among consumers and the recording industry. The entertainment industry also will finally have a window into digital music sales after years of fearing that illegal file swapping in peer-to-peer communities is cannibalizing offline album sales.

    Here’s Billboard’s article: Nielsen SoundScan To Track Download Sales

  • From the NYTimes, two pieces:

    • Libraries Planning a Meeting on Filters [pdf]

      Officials of the American Library Assocation will call a meeting with the makers of Internet filtering software next month to voice concern over a federal law that requires libraries and schools to use Internet filters or risk losing federal money.


      Judith Krug, director of the Office of Intellectual Freedom at the American Library Association, said that in the meeting, tentatively scheduled for Aug. 14, librarians will ask the companies to ensure that their software can easily be turned off and on again by librarians.

      The group will also demand that the companies reveal their database of blocked sites to libraries so they can determine which programs best suit the libraries’ needs, or they may work with third parties to develop new filtering software.

      I’m sure that Ben Edelman will be happy to help them work through the list, since the filtering companies should be happy to give it out <G>

    • The Laptop as Recorder, Remote Control Included [pdf]

      A new Toshiba laptop, the Satellite 5205-S705, comes with an unusual accessory: a television remote control.

      The computer is supplied with that channel hopper’s best friend because television programs can be recorded directly to its hard drive. The unit is also supplied with software to schedule recording sessions, turning the laptop into a stripped down variation of the TiVo.

The Future of Entertainment – Panel

(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 –

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

Larry Lessig on Free Culture

(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. 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 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)

Terry Fisher and Copyright Law

(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 / 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

    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)