The Supreme Court's decision in Grokster left Sony in intact, but found it did not shield those who promote and encourage use of a product to infringe intellectual property. Euclid Managers Blog points out that "the case raised new concerns and considerations for some technology companies, particularly those whose product or service can be used for making unauthorized copies."
They go on to relate this to insurance costs for technology companies, saying:
"Companies may face a more fact-intensive examination of intent and objectives. That kind of lawsuit can make discovery more expensive, it can lead to more cases being filed for the purpose of going through the discovery process to see what’s there, and such a suit can be more difficult to defend. And summary adjudications may be more difficult to achieve in such cases.
Tech companies should be aware that someday a court may perform a balancing test of the product’s legitimate and illegitimate uses, and the standards that will be applied in that test are not entirely clear.
Predictability has gone down for developers, and their insurers, meaning that risk has gone up."
Source: Euclid Managers Blog - Home - Grokster, the Supreme Court and the Impact on Risk (June 30, 2005).
The Canadian Recording Industry Association (CRIA) wants copyright reform and claims that peer-to-peer ("P2P") file has cost its members billions in lost sales in Canada.
A new peer-reviewed article published by FirstMonday.org analysizes industry statistics to test CRIA's claims. The report found exaggeration in loss claims and challenges CRIA's position. It also examines the possibility that an existing private copying levy system may already compensate artists adequately for private copying in P2P networks.
Piercing the peer%u2013to%u2013peer myths: An examination of the Canadian experience
Countless volunteers engaged in a great effort, Wikipedia, are testing whether that effort, or any effort so conceived, and so dedicated, can long endure. The process and product provides a laboratory into the open source process and into the systems we call (for want of more precise analysis) "self-organizing." How will it react to vandals, well-meaning but uniformed contributors, and disputes over process, doctrine and "truth"? What intellectual property issues will arise, and how will they be resolved? What sort of governance mechanism will evolve to manage the Wikipedia phenomenon? Time will tell.
For those not familiar with Wikipedia's back-room process, this Wired article provides some illumination. Wired 13.03: The Book Stops Here
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See also, Reading Weber, "Success of Open Source" (Unintended Consequences 1/5/05)
And: Free, Open Access Science Publishing Debut (Id. 10/15/03)
And: Powell's Studies of Network Forms of Business Organization (Id. 9/9/03)
Public Library of Science has announced three new open-access journals--PLoS Genetics, PLoS Computational Biology, and PLoS Pathogens.
PLoS Computational Biology is accepting submissions at www.ploscompbiol.org and is scheduled to launch in June 2005 with the involvement of the International Society for Computational Biology (ISCB),
PLoS Genetics is expected to launch in July 2005 and is accepting submissions at www.plosgenetics.org.
PLoS Pathogens, begins accepting submissions in March 2005 and is expected to start publishing in the fall. PLoS has not yet identified a website for submissions, but a check for www.plospathogens.org recovered a report that it was recently registered.
Public Library of Science applies the Creative Commons Attribution License to all works it publishes.
Traditional property rights protect the owner's right to exclude; property rights in "open source" material protect the right to distribute, according to Berkeley Professor Steven Weber's analysis in "The Success of Open Source," (Harvard University Press 2004). Traditional thinking holds that exclusion rights are necessary to motivate invention by reducing the effects of "free riding" and the "tragedy of the commons." Weber analyzes the progress of open source software projects such as Linux and proposes the elements that may be essential to success of open source models generally. He speculates about possible extensions of the open source development model beyond software, into fields such as medicine and genomics.
Success of a true open source model depends upon the presence of particular characteristics in the tasks to be accomplished and particular motivations and capabilities of the agents performing those tasks. Weber's analysis dissects those characteristics out of case studies of software development and presents them in terms transferable to other fields. He also suggests general organizational principles for distributed innovation and compares aspects of alternative legal structures including the General Public License ("GPL").
Some notes on Weber's book follow.
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Property and the Problem of Software
Under the principles of open source as applied to software, the instruction set necessary to reproduce and modify the package ("source code") is set "free," (as in “free speech,” not “free beer”). Weber summarizes the "Open Source Definition" as providing that:
Weber p. 5. The full Open Source Definition is available at: http://www.opensource.org/docs/definition.php
Under traditional economic analysis, this model lacks incentives for creators and capitalists, yet under certain conditions it motivates a swarm of self-directed volunteers to cooperate, create and assemble working computer code. Weber attempts to identify and analyze those conditions using the principles of political economy with frequent reference to writings of Eric Raymond. See, e.g. Eric S. Raymond, “The Cathedral and the Bazaar,” (O’Reilly, 2001) and the original essay of the same name at http://www.firstmonday.org/issues/issue3_3/raymond/ .
Weber focuses on three component questions posed by open source models:
He also addresses four broader subjects illuminated by the open source models:
Early History of Open Source
A joint project at MIT, Bell Labs and GE to develop an improved time-sharing OS led to frustration and Bell’s withdrawal. A Bell researcher, Ken Thompson, working alone over a period of four weeks, built the central core of Unix and its philosophy:
AT&T feared that it would breach the 1956 antitrust consent decree if it sold Unix, so licensed it free, “as is,” and included the source code. It first went to research centers and was used as a research and learning tool. Lacking AT&T support, a community of early users made and freely shared their own bug fixes, enhancements and extensions, with Berkeley taking a leading role. In 1983, at the urging of DARPA (which feared ‘lock-in’ from dependency on a proprietary system), Berkeley’s Bill Joy integrated TCP/IP into Berkeley Unix, fostering its role as a foundation of the Internet.
In the 1970’s, Microsoft pressed for broader recognition of proprietary rights in software about the same time as AT&T was broken up on antitrust grounds. Free of the 1956 consent decree that limited its role in commercial software sales, AT&T jacked up license fees for the popular Unix system. Berkeley organized a network that developed an alternative that was free of code owned by AT&T and distributed it under liberal terms. Tensions grew between those supporting the proprietary versions of Unix and those behind the “free” version, eventually leading to years of disruptive litigation as AT&T fought to protect its interests.
A philosophical backlash was led by Richard Stallman, founder of the Free Software Foundation and developer of GNU (“Gnu’s Not Unix”) as an alternative to Unix. Stallman saw software as an expression of human creativity, not just a tool to run computers, and saw traditional property rights as constraints on a cooperative community. The FSF supported the elements of four freedoms essential to Stallman’s vision, including the freedom to charge a fee for the distribution of the free software. Stallman’s views and the meaning of “copyleft” are explained and supported at the GNU/FSF website, www.gnu.org.
He developed the General Public License (“GPL”) to protect what he called “copyleft,” an inversion of copyright concepts to ensure that free software and its derivatives remain free. A “viral” provision in the GPL bars use of GPL code in another program unless the combination is also GPL-licensed. These self-imposed philosophical restrictions limited the potential applications of Gnu and other GPL-licensed products as alternatives to the proprietary systems defended by AT&T.
What Is Open Source and How Does It Work?
Frederick P. Brooks, a scholar of the software development process, separated two kinds of problems in software engineering: essence (what is inherent in the structure) and accident (what happens in the process). Weber writes that in "The Mythical Man-Month" (Addison-Wesley Professional, 1995), Brooks takes the position that the complex nature of software is an essential property rather than an accidental property. Resolving this complexity calls for the creative work of an individual or a small, close-knit group of individuals. Adding programmers, according to “Brooks’ Law,” multiplies the vulnerability to bugs faster than it multiplies the work done, as the number of pathways between workers and operations (and the necessary coordination effort) increases geometrically. As software systems and their desired uses become more complex, Brooks Law presents escalating challenges for proprietary and open source software alike.
The ideal form of open source process, according to Weber, relies upon voluntary participation and voluntary selection of tasks. The process relies upon suggestions, requests and contributions of solutions from ordinary users as well as developers, but remains ordered and methodical, with vigorous debate over alternatives. Despite sometimes heated differences, the resulting system is stable, even though an essential freedom of all users is to take the source code and a sub-set of followers in another direction (“fork the code base”).
Weber writes of open source labor as being distributed, but not divided in the industrial sense of that term. As an example, statistical studies of Linux indicate hundreds of central members do most of the coding, with thousands of others making some contribution. All are volunteers, with no formal distinction between the role of user or consumer and that of producer or developer.
Weber suggests eight principles to capture the essence of the open source process:
The Internet has facilitated collaboration among open source participants. The formal licensing schemes, such as the GPL, explicitly shift property rights away from protection of the author to protection of users, expanding the commons. These schemes manifest the social structure underlying the process. The social structure of the open source community influences the structure of the code it writes, resulting in modular code adaptable to voluntary parallel processing. Different coding projects resolve conflict differently, but none have a central authority to enforce rules and all are free to “fork,” or leave the system with the code.
A Maturing Model of Production
Disagreements over paths for development of proprietary Unix extensions led to competing forks with higher costs, incompatibilities and fragmented development efforts. Linus Torvalds created Linux as an alternative to Unix, which many developers believed to be “dying.”
Torvalds elected to create a large, “monolithic” kernel, despite recent trends toward less complex “microkernels.” Weber attributes Torvald’s decision to a belief that the open source process would allow management of a monolithic kernel’s complexity. Asked to allow distributors to charge fees for distribution, Torvalds adopted the GPL as the standard license for Linux, with its “viral” clause that required derivative code to be similarly licensed. Both decisions were responses to open debate over the best path for the process. As the Linux code writers publicly battled over the best technical solutions, AT&T and BSD battled over ownership of the Unix code, mostly in private without involvement of the code writers.
As an alternative to the basic command prompt, Linux users wanted a GUI. Orest Zborowski ported X, a public domain GUI application to Linux. Torvald encouraged the initiative by reworking the Linux kernel to better work with X. The “lieutenant” organization of Linux development evolved as Torvalds chose between the products of rival code projects and thereafter routed new code submissions to the “winning” leader.
Linux evolved further as it was ported to architectures other than Intel’s x86 line, was distributed as part of packages with business goals and as its release numbering matured to distinguish between “stable” and “experimental” releases.
As Linux 2.0 was released and Torvalds took a position with Transmeta in 1996, participants in the process began to articulate a self-consciousness, of which Eric Raymond’s “The Cathedral and the Bazaar” (1997, 2001) was an example. With that self-awareness came the realization that the label “free software” and the rigid moral stance of Richard Stallman’s Free Software Foundation were limiting and problematic. The label “open source” and its accompanying Open Source Definition clarified its agnostic goal of meeting the needs of users rather than serving any particular moral ideal.
As Linux and its community grew, the load on Torvalds increased. By summer of 1998, the system was stretched to its limit and heated disputes broke out in the open discussion boards, threatening a fork. To the community, Eric Raymond styled the problem in technical terms and proposed a new code management system. The principals agreed to a pyramidal structure to better manage work flow and the crisis passed, the dispute resolved through open public debate in archived Linux email lists. See “Linus tries to make himself scale,” Linux World, February 11, 2002, http://www.linuxworld.com/story/32722.htm
Linux demonstrated its value to commercial enterprise platforms in 2000 as developers ported high-end database systems to work on it. Netscape attempted to counter Microsoft’s free browser tactic by contributing its browser code as open source, but Mozilla never caught on with the community due to problems with the code and the licensing scheme. IBM was more successful in opening its hardware to Linux and announcing a corporate bet on open source as a core IBM strategy.
Microsoft’s Vinod Valloppillil analyzed the threat of open source to commercial business models in an August 1998 “Halloween Memo” that was later leaked. It presented for Microsoft’s management the challenge of competing with the open source process. “The intrinsic parallelism and free idea exchange in OSS has benefits that are not replicable with our current licensing model and therefore present a long term developer mindshare threat,” wrote Vallopillil, and “the ability of the OSS process to collect and harness the collective IQ of thousands of individuals across the Internet is simply amazing. More importantly, OSS evangelization scales with the size of the Internet much faster than our own evangelization efforts appear to scale.” The memo addressed the serious challenges for a hierarchical organization that must competitively target a process rather than a company.
Explaining Open Source: Microfoundations
Weber opens an examination of why and how individuals contribute to open source projects by dispelling “myths” that open source is the product of like minded individuals acting out of altruism, and that it can be explained by merely labeling it “self-organized.” He finds a variety of individual motivations that do not rely upon the traditional monetary rewards. For the economic logic, he suggests that software is not just “nonrival,” but actually “anti-rival” and subject to positive network externalities, whereby the value of a system increases with the number of users, even benefiting from free riders, as long as some fraction of the users make a contribution. The highly diverse population of the Internet, combined with low connectivity costs, increases the impact of the small percentage of “outlier” users who actually contribute to code solutions.
Weber recognizes the views of Mancur Olsen that the larger the group size, the lower the benefit to any marginal contributor, and the less the likelihood that a social good will be produced. See Mancur Olsen, “The Logic of Collective Action; Public Goods and the Theory of Groups,” (Harvard Univ. Press, 1971). As an alternative Weber proposes that: “Under conditions of antirivalness, as the size of the Internet-connected group increases, and there is a heterogenous distribution of motivations with people who have a high level of interest and some resources to invest, then the large group is more likely, all things being equal, to provide the good than is a small group.” Weber, p. 155.
Explaining Open Source: Macro-Organization
The coordination of an open source effort can be explained by several mechanisms, suggests Weber. Individual disincentives to fork are inherent in a system that has positive network externalities, because segmenting the user population reduces the value of the forked product. A variety of cultural norms common to open source participants govern control of distribution and successful decision-making. Leadership practices reflect the system’s dependency upon participants by emphasizing responsiveness to that group’s followers, the reliance on rational explanation and the focus on technical justification. Weber recognizes the potential for such an emergent system to get stuck in a local maximum (as do ecological systems), and that the systems are testing the balance between the power to fork (that supports creativity) and the disincentives to fork (that support stability).
Open source efforts manage the complexity of software development in part by modular design of the code, which reduces organizational demands on the social and political structures. Sanctions upon violators of community norms take the form of public expressions of disapproval (“flaming”), and denial of cooperation and access to the community’s support (“shunning”). The variety of open source licenses seen in the environment also demonstrate the norms and standards of the particular process and reflect the common realization that participants expect to be on both sides (licensor and licensee) of the bargain at different times. Early examples of formal governance structures reflect the need to accommodate asynchronous, “bursty” communication and the lack of a hierarchy for division of labor (although a hierarchy for decision making may exist).
Business Models and the Law
An open source process not only releases control of source code but also assures that no one can control the source code, complicating the search for business models that accommodate the increased customer control. Weber suggests approaching the problem by focusing on protectible rights other than the source code (e.g. brands and trademarks), and on accumulation of valuable knowledge necessary to implement the source code. He describes several early experiments with such business models attempted in the initial years of open source.
Open source licenses rely upon copyright law to enforce requirements for control of source code, but few “copyleft” controversies have been resolved by the courts. Weber poses the question whether or not the Digital Millennium Copyright Act’s bar on anti-circumvention tools could be used to prevent creation of systems that provide the functionality of proprietary systems using open source code. Open source uses non-negotiated, “click-wrap” licenses with untested provisions that purport to disclaim warranties and that bind downstream users much like a restrictive land covenant.
Recent decisions allowing patenting of algorithms and business methods have intensified an ongoing controversy over patentability of software. See State Street Bank & Trust v. Signature Financial Group, 149 F.3d 1368 (Fed.Cir. 1998). Weber asks what might be the impact of a threat of patent litigation against users of open source software when there is no license warranty binding a “deep pocket” to defend against such challenges?
The Code That Changed the World?
Open source is a process with elements that can work in fields other than software development, suggests Weber. Traditional notions of intellectual property focus on rewarding creativity by limiting distribution, making the producer more powerful than consumers. Open source systems protect distribution, shifting power to the consumer. Yet under proper conditions, creativity is sufficiently rewarded in an open source environment that it continues. The open source process shifts innovation to the edges of the network, taking away the role of central authority that architects and make labor assignments and in its place leaves a system of distributed innovation.
Weber suggests four organizational principles that enable distributed innovation:
Weber also cautions that without a central authority, distributed innovation systems can get stuck in a sub-optimal equilibrium, falling into the trap explained by Clayton Christensen in "The Innovator’s Dilemma," (Harvard Business School Press 1977). Distributed innovation may also be unequally responsive to all segments of a diverse international community. It is unclear what effects open source processes will have on standards setting. Open source may also accelerate the rate of performance improvement for projects such as cluster and grid computing.
Open source processes transcend national boundaries and may shift decision-making toward people in the developing world, and enables users in the developing world to drive technology development to serve their needs, suggests Weber. Open source may serve nationalist desires to avoid lock-in and dependency on a particular vendor or on products of a particular nation’s industry. The changes in power relationships and property rights may have more impact than the lowering of transaction costs, and may “destabilize the foundations of existing cooperative arrangements and institutions … .” Weber p. 257.
Yet to be explored are the political and economic phenomena resulting when open source communities interact with traditional hierarchies. Weber suggests some examples in the interaction between Microsoft and the open source software movement and between the United States and terror networks as described by John Arquilla and David Ronfeldt.
Weber closes by suggesting avenues for possible generalization of the open source process beyond software development, such as to develop engineering techniques common to players in an industry, sharing of knowledge in the medical field, and in the study of genomics. Weber suggests characteristics of tasks that may be suited to open source solutions:
Weber, p. 271.
He also suggests the most suitable motives and capabilities of the involved agents:
Weber, p. 272.
Weber’s “The Success of Open Source” (Harvard, 2004) includes numerous footnotes and a bibliography. It provides a thoughtful perspective on an emergent phenomenon of creative development that tests the frontiers of intellectual property law and policy.
Washington Post's Cynthia Webb surveys news media comments on the "Artists, Musicians and the Internet" study results released by the Pew Internet & American Life Project. While the majority of music artists agree that unauthorized P2P file sharing should be illegal, they also agree it poses at best a minor threat to them. Webb links to articles in the New York Times, Wired and others. Musicians Sing Different Tune on File Sharing (washingtonpost.com).
Such studies are consistent with theories that the Internet is less a threat to producers of goods and services (individual artists, for example) and more of a threat to intermediaries, (the record distribution industry, for example) and their ability to control distribution, create artificial scarcities and thereby create opportunities for "rent-seeking" behavior.
Other featured Pew reports online include:
The Pew Internet Project (PIP) also provides a summary of "Surprising, Strange and Wonderful Data" from a presentation made in November to the 10th Anniversary of the World Wide Web Consortium.
A letter from The College Board, alleging copyright violations arising from publication of data about its test results has been challenged by The National Center for Fair and Open Testing ("FairTest").
According to a copy FairTest published of The College Board's letter of October 27, 2004, FairTest's presentation of data from the 2004 SAT scores, broken down by gender, ethnicity and family income, violates The College Board's copyright. According to FairTest's letter of response, dated November 30, 2004, "the raw data on SAT scores, from which this chart is derived, are widely available in the public domain, having previously been published by a variety of news media outlets and research journals, they are not subject to copyright protection."
FairTest, a long-time critic of The College Board, said they would continue publishing the data. Source: College Board Letter Press Release at FairTest.org
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Copyright protection of the contents of databases has been a controversial topic for some years. Those whose livelihood depends upon revenues from licensing data argue that data should be protected under current law, or that the law should be changed to provide such protection. Critics of such laws point to the impairment of scholarship and critical commentatary that could result from laws that allow punishment of those who republish known facts, as well as the philosophical problems of a concept of "ownership of facts".
Among the online sources for further study of this topic are:
EFF reports: Ninth Circuit Declares Grokster, Morpheus Not Liable for Infringement . EFF has the decision in PDF format. Sufficient non-infringing uses saved the widely-used Peer-to-Peer (P2P) technology from charges from the Recording Industry Association of America (RIAA) plaintiffs that Grokster, Sharman Networks and Streamcast Networks had contributed to copyright infringement by those using its software and systems.
The decision has been compared to the Betamax decision years ago by the United States Supreme Court.
Read more ...
Plaintiffs ("Copyright Owners" in the decision) alleged that over 90% of the files exchanged through use of the “peer-to-peer” file-sharing software in question involve copyrighted material, 70% of which is owned by the Copyright Owners. This was sufficient, argued the Copyright Owners, for a finding of vicarious and contributory copyright infringement pursuant to 17 U.S.C. §§ 501-13 (2000). In April, 2003, the District Court disagreed and granted partial summary judgment to defendant software companies, in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp. 2d 1029 (C.D. Cal. 2003) (“Grokster I”) and the Copyright Owners appealed.
The three-judge panel found that the District Court's application of the Betamax standard was correct, saying:
In this case, the Software Distributors have not only shown
that their products are capable of substantial noninfringing
uses,[fn 10] but that the uses have commercial viability. Thus,
applying Napster I, Napster II, and Sony-Betamax to the
record, the district court correctly concluded that the Software
Distributors had established that their products were capable
of substantial or commercially significant noninfringing uses.
Therefore, the district correctly reasoned, the Software Distributors
could not be held liable for constructive knowledge
of infringement, and the Copyright Owners were required to
show that the Software Distributors had reasonable knowledge
of specific infringement to satisfy the threshold knowledge
requirement.
The Court's analysis found that the inherent nature of the defendants' Gnutella-type network and KaZaa-type network isolated them from knowledge of specific infringement.
Results from the 2004 Computer Crime and Security Survey indicate that theft of intellectual property was the second most expensive computer crime, with denial of service (DOS) being number one. The survey found a "noticeable downturn" in the percentage of companies reporting intrusions to law enforcement, with companies citing concern over negative publicity as a reason. The study noted the availability of cybersecurity insurance despite the shortage of actuarial data, but found that 72% of respondents did not have cybersecurity insurance. The results include data from 494 survey participants and are available at the Computer Security Institute (CSI). Now in its ninth year, The Survey is conducted by CSI with the participation of the San Francisco Federal Bureau of Investigation's (FBI) Computer Intrusion Squad. The survey results are free in PDF format with registration.
Thanks to beSpacific for the tip about this cybercrime resource.
Increasing access to online resources and pre-written papers has increased the temptation for students, journalists, even university presidents, to pass off others' writing as their own. Sharon Stoerger, MLS, MBA, created materials for the Office of the Vice Chancellor for Research at the University of Illinois at Urbana-Champaign and adapted them in a valuable listing of resources on the topic at: Plagiarism. This includes links to scholarly papers, to comparisons of plagarism detection software and services, and to some of the hundreds of sites where term papers are bought and sold online.
For clients seeking guidance on basics of trademark, copyright and other intellectual property law, a short primer accessible online may be a good backgrounder for them to read before a conference about their particular goals. Some of the primers I found online include:
The leak and frantic P2P sharing of the Windows source code, reported by Reuters, is only the latest in intrusions that spill important intellectual property and trade secrets into the public domain. So many potential suspects exist that finding them may be impossible, suggests Reuters in this story: RPT-Net file-swappers snap up Windows source code
Has the Windows system become too big and unwieldy to be sustained as a trade secret? The sack of Rome did not end civilization, but it ended Roman hegemony and set the stage for the emergence of more complex distributed organizational systems. Of course, there was that uncomfortable interim stage we call the Dark Ages. But, you can't make omelets without breaking eggs.
IDG News reports (seen via The Standard) that DVD CCA, the holder of the rights to the CSS technology, has dropped its complaint against Andrew Bunner and others who published the DeCSS tools that allowed decryption of the DVDs protected by CSS. Their advocate's statement cites an "evolving legal strategy." See: Industry group drops DVD copying case. This case was outlined in a context of legal theory of trade secrets in Unintended Consequences: Institutional Secrets in a Time of "Smart Mobs".
Two central themes come to mind thinking about the sequence of four cases that I sketched in Institutional Secrets in a Time of "Smart Mobs".
Both derive from the Internet's ability to provide cheap, instant and global communication and its even more powerful ability to facilitate self-organization. Some thoughts follow.
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The Discipline of the Free Press
At the time of the Pentagon Papers, the Internet was an immature system used by a handful of rocket scientists; the World Wide Web did not exist. The ability to globally publish something like the Pentagon Papers resided in a few centrally managed institutions like the New York Times or the U.S. Government Printing Office. While the Constitution of the United States protects the freedom of the press, that protection has limits, and when the Times began publishing articles based upon the Papers, the government sought to assert those limits and stop the Times. The Times won that court battle, with minimal delay, thanks to the readiness of a majority of the Justices of the Supreme Court to take jurisdiction and make a decision.
What if it had lost? Would the publishers of the Times have chosen to defy the federal government, disregard a definitive decision of the United States Supreme Court, and proceed to publish information from documents labelled "Secret" by the United States Government?
Such a radical step would likely lead to an escalation of contempt citations, arrests of senior management, even seizure of the presses by federal marshals enforcing court orders. Not a choice likely to be supported by a board of directors responsible to public shareholders.
The University of California faced similar realities when considering its options with the Cigarette Papers. An arm of the state, the University had been preparing to publish the Papers on compact disk and over the Internet, but once sued by Brown & Williamson, shut off public access pending the decision of the courts. Like the Times, they were allowed to publish.
What if the ruling had gone the other way? Had the University's management any real choice to defy the court and publish the papers anyway?
If it had, one might expect a scenario like that of August 2003, when Alabama Chief Justice Roy Moore refused to comply with a federal court order to remove a stone monument of the Ten Commandments from the rotunda of the Alabama Supreme Court building. After a brief moment in the limelight, the Chief Justice was suspended and the court order was carried out by his successor.
In both cases, publication was dependent upon a centrally managed institution that was in turn dependent upon the tacit approval of the government. That dependency assured that the Times and the University (and others similarly situated) would act in a manner most would characterize as "disciplined and responsible to the rule of law."
De-Centralization of the Free Press
By the close of the Millenium, the publishing environment was rapidly changing in dramatic ways. Access to the World Wide Web was fast, cheap and ubiquitous, particularly among students using high-speed university connections. Those young people had grown up publishing and collaborating on the Web, through email, personal web pages, peer-to-peer "instant messaging," online bulletin boards and multi-player games. Despite stern warnings against piracy, they were making and sharing unauthorized copies of music, videos and software in increasing quantities, reciting the mantra that "information wants to be free."
This peer-to-peer publishing capacity and ubiquitous access combine to add a channel around the centrally managed institutions that were once necessary to achieve widespread global distribution of information. The DeCSS code, for example, could be quickly and easily spread through individual websites or peer-to-peer file exchanges, virtually free. Because there was no central institutional "choke point," shutting down continued publication became a much more difficult challenge for intellectual property rights holders and authorities.
In the case of institutional secrets, such as the elements of the CSS code, the peer-to-peer publishing capacity had especially powerful effects. The widespread publication of the information, by compromising the essential claim of "secrecy," damaged the holders' claim to trade secret protection, as Justice Moreno argued in his concurring opinion in the Bunner case.
This same fast, cheap and global publication capability was tapped by the students that came upon Diebold's compromising email records. However, they found that their publication ability was dependent upon the cooperation of the universities that operated the infrastructure. Presented with take down notices based upon the DMCA, the universities' reaction was predictable and just what the DMCA was designed to accomplish: the shut down of students websites that published the Diebold records.
Emergence of a Self-Organized Network
It was at this point another the other interesting thing happened: the emergence of a self-organized network that swiftly distributed copies of the resources to multiple servers faster than Diebold could discover and shut them down.
A pre-existing group of activist students centered at Swarthmore became a key hub of the network. The group called "Why War?" had been formed shortly after the United States invasion of Afghanistan in 2001 and focused upon distribution of information favoring non-violent efforts for peace and justice. It found appeal among various student and activists groups and developed a following among subscribers to its email list and RSS feed.
At their website, the founders of Why War? advocate applying the principles of swarming and "flash mobs" to political expression. An August 2003 essay by one of its founders, Micah White, "Swarming and the Future of Protesting," (2003) proposes practical implementations of the concepts in Howard Rheingold's "Smart Mobs" and RAND Corporation's John Arquilla and David Ronfeldt's studies of "Netwar" tactics. As they explored theoretical applications, an actual case study emerged on their doorstep.
In October of 2003, a few weeks after the Diebold Emails emerged onto the Internet, WhyWar? published them on its website. Its host, Swarthmore, was soon faced with DMCA take down notices from Diebold. Swarthmore decided to comply with the take down notices, even threatening Internet termination for students that included links to sites carrying the Diebold materials. WhyWar? and the Swarthmore Coalition for the Digital Commons responded by announcing a campaign of civil disobedience. Within hours, the story was picked up by Wired News: ("Students Fight E-Vote Firm," Oct. 21, 2003) and by Slashdot ("Swarthmore Students Keep Diebold Memos Online," Oct. 21, 2003).
The WhyWar? site was promptly "Slashdotted," or swamped with traffic from Slashdot readers. Some of those visitors copied Diebold files to their own local archives and passed word about the controversy in their own weblogs, discussion forums and email list servers. The resulting positive feedback loop raised the visibility of the controversy in traditional media and increased the number of copies of Diebold records loose on the Web. Such effects are a common result of a mention of a new online resource at Slashdot.org. See "Slashdotted: Surviving the Slashdot Effect," Geek.com, Oct. 17, 2002, and Stephen Adler, "The Slashdot Effect: An Analysis of Three Internet Publications," (undated, circa Feb. 1999).
An Organic Response to Threat
EFF's John Gilmore is credited with first saying that "the Internet interprets censorship as damage and routes around it." Gilmore appears to have been speaking about the Internet in the sense of its infrastructure of lines and routers. In the Diebold/WhyWar? conflict we observe an effect that is more organic, more like an immune response to a viral infection or the transplantation of foreign tissue.
In an organism's immune response, a foreign object or tissue is detected by individual cells at the locus of entry. Those local cells release chemical signals which migrate through the organism, triggering the release of a swarm of antibodies that find and counteract the threat.
In the case of Diebold and WhyWar?, the threat was an attempt to suppress the publication of certain information. Word of the attempt spread through the network, and other network users swarmed the locus of the threat, counteracting it by carrying off copies for preservation elsewhere. Although encouraged by WhyWar? people, this response emerged without central organization or direction, as the result of many individuals independently reacting to the threat.
As such, it appears to invoke a more complicated order of network response, higher than the physical infrastructure level of circuits and routers. These patterns of response, of emergent order, are the continuing subject of the evolving science of networks and complex, self-organizing systems. It is to these sciences that we may look for ideas on how holders of intellectual property or institutional secrets might (or might not) succeed in countering such global, decentralized and organic behaviors.
Technology and constitutional rights intersect in ways that challenge traditional expectations of the security of government and corporate secrets. Networks allow "smart mobs" of individuals to share information in ways that are fast, cheap and out of control. Those with an agenda can today extract and publish institutional secrets in ways that may be hard to detect, let alone remedy with money damages or sanctions.
Q: Where should government and business look for protection? Tighter information security? Tough criminal laws and prosecutions? Prayer?
Q: What is the future of institutional secrets? (More ... )
The Pentagon Papers
In 1971, someone leaked to the New York Times the "Pentagon Papers," a top-secret DOD study critical of the United States involvement in Vietnam. The Times began publishing articles based on the contents, but the United States sued to block any further publication of the Top Secret material. The case quickly reached the Supreme Court, which decided that the damage to national security from publication did not outweigh the damage to the freedom of the press from prior restraint. The Court's ruling is a landmark decision on the balance between secrecy and free press. New York Times Co. v. United States, 403 U.S. 713 (1971)
The nine separate opinions (6 to 3 in favor of the defendants) left open the possibility of criminal prosecution of the Times and the Post after publication, but found insufficient basis for prior restraint. Of the majority, two maintained that the First Amendment provided no room for any prior restraint of the press. The other four conceded that prior restraint could be justified in proper cases, some noting as exceptions publication of troop movements in time of war, prohibitions of obscenity, and restraints on publication of material in violation of copyright, which protects the form of expression rather than the ideas expressed. Ibid. Members of the Court have since written about the importance of the Pentagon Papers to a matter of significant public debate as an essential element in the outcome. Bartnicki v. Vopper, 532 U.S. 514 (2001).
The Cigarette Papers
In 1994, thousands of pages of internal documents previously kept secret by Brown & Williamson Tobacco Corporation were anonymously delivered to the University of California, San Francisco (UCSF) with portions also sent to Congressman Henry Waxman and the New York Times. In a related case, District Court Judge Harold Greene characterized the documents as possible evidence "supporting a 'whistle-blower's' claim that the tobacco company concealed from its customers and the American public the truth regarding the health hazards of tobacco products." Maddox v Williams 855 F.Supp. 406, at 414, 415 (D.D.C. 1994).
The university library added the papers to its tobacco industry archives, made them available to the public and prepared to publish scanned copies electronically. They quickly became a popular source for anti-tobacco litigators and activists, through whom B&W learned of UCSF's collection in January 1995. B&W demanded that UCSF return the documents, deny public access and disclose the names of all who had seen them, and sued when UCSF refused.
The California Superior Court allowed UCSF to keep the documents and publish them. In its opinion, it emphasized the lack of evidence that UCSF was involved in any wrongful taking of the documents, the fact that they were not being introduced into evidence against B&W, the strong public interest in the documents' relevance to public health issues, and the futility of action against UCSF when the documents were widely available elsewhere. The California Supreme Court let the decision stand and on June 30, 1995, the University began publishing the documents on the Web. A year later, both a hard-bound and an online analysis of the collection was published by University of California Press.
The DeCSS Algorithm
In 1999, "DVD Jon" Johanson, a Norwegian, reverse-engineered the proprietary technology inside the Content Scrambling System (CSS) used by the DVD Content Control Association (DVDCCA) to protect commercial DVDs from unauthorized copying. He wrote an algorithm that enabled unscrambling of the disks, and called it "DeCSS." He posted it on the Web and copies spread rapidly. When it learned about DeCSS, the DVDCCA demanded that operators of websites where it appeared take it down and sued those that refused, including Andrew Bunner.
In California, the Superior Court hearing the case against Bunner found that DVDCCA had a likely case for Bunner's violation of California's trade secret act (a version of the Uniform Trade Secrets Act or "UTSA"). The Court entered a preliminary injunction against Bunner using or disclosing DeCSS or linking to sites that disclosed it. The Court of Appeals found that DeCSS was "pure speech" and overturned the injunction as a First Amendment violation. In August of 2003, the California Supreme Court reversed the appellate decision and sent the case back for further proceedings.
The California high court agreed that DeCSS qualified as speech protected by the First Amendment, but ruled that an injunction could be justified by an actual trade secrets act violation. They balanced the governmental interests served by the trade secrets act against the magnitude of the speech restriction that would result from an injunction. They found that publishing the DeCSS code was not necessary to debate on a matter of substantial public interest such as that which characterized the 2001 decision in Bartnicki v. Vopper, 532 U.S. 514 (2001).
Justice Moreno, in his concurring opinion, agreed that an injunction could be justified in a proper protected speech case, but maintained that this was not one of them. He argued that the record was clear that DVDCCA had no case against Bunner because DeCSS was so widely disseminated that it was no longer actually "secret." As a result, he wrote, it was not protected by the trade secrets act, making an injunction an unlawful prior restraint on speech.
The case was sent back to the Superior Court for further consideration of the merits of the claim that the CSS technology is a protected secret and that Bunner's publication of DeCSS violated the trade secrets act. DVD Copy Control Association, Inc. v. Bunner, 31 Cal. 4th 864 (2003). The DeCSS code continues to be widely available on the Internet at international locations easily discoverable through use of a common search engine.
In December, a Norwegian appeals court affirmed the acquital of "DVD Jon" Johanson on criminal charges of breaking the CSS copy protection on DVDs he bought. The charges were brought by the Norwegian Economic Crime Unit (ØKOKRIM) under Norwegian Criminal Code 145(2), upon the complaint of DVDCCA and the Motion Picture Association of America (MPAA). The Norwegian court ruled that his action was legal under Norwegian law. An earlier acquittal had been appealed by the government. See "Legal victory for 'DVD hacker," BBC News 12/22/03, and " and "DVD-Jon" Defeats Hollywood: Consumer Rights Upheld in Norway," IP Justice.
The E-Voting E-Mails
In August of 2003, electronic copies of thousands of internal e-mail messages between employees and contractors of Diebold, Inc. were posted on a publicly accessible website. The e-mails indicated Diebold had knowledge of security flaws and regulatory violations involving its electronic voting software widely used by state and local governments. News of the material spread, and other websites hyperlinked to the compilation, including student websites hosted on university computers.
When Diebold learned of the material, its lawyers issued "takedown" notices to ISPs that were hosting the material or sites linking to it, triggering the "safe harbor" provisions of 17 U.S.C. §512, the Digital Millenium Copyright Act (DMCA). Universities responded by directing students to take down the material and links, and cut off Internet access of students who failed to comply. Rather than filing the counter-notifications provided for in the DMCA, students moved the files to other sites and urged others to copy the files and "mirror" the archive on multiple hosts elsewhere, which many did. At Swarthmore, an activist group's website tracked the efforts of Diebold, the reactions of universities and students, and the spread of mirror sites throughout the Internet.
The national media picked up the story in October, widely publicizing the existence of the documents and Diebold's attempts to discourage their publication. In November, the website of Congressman Denis Kucinich posted excerpts from the material, adding a public scolding of Diebold and a call for a Congressional investigation into its actions.
Online Policy Group (OPG), an ISP to which Diebold sent a takedown notice, filed a federal lawsuit to enjoin Diebold from further efforts to discourage publication. OPG got legal represetation from the Electronic Frontier Foundation (EFF) and the Center for Internet and Society Cyberlaw Clinic at Stanford Law School. In a November 17 procedural hearing on a motion for a preliminary injunction, the District Court judge's questions focused on the public interest in information about voting systems and First Amendment issues raised by the controversy.
Diebold seemed to realize that the harder it pushed, the more adverse publicity it got and the further the information spread. On November 24, it advised the District Court that it would not sue those hosting copies of the materials for copyright infringement and was withdrawing its DMCA notices, as an indication of its commitment to an open discussion of "helping America vote better."
http://www.eff.org/Legal/ISP_liability/OPG_v_Diebold/DieboldResponse.pdf.
_____________
Some sources:
The Pentagon Papers
The Cigarette Papers
The DeCSS Algorithm
The E-Voting E-Mails
In August 2003 the California Supreme Court resolved a conflict between the status of DeCSS software as protected speech and the status of trade secrets as protected property, applying the "Madsen" standard of scrutiny of speech restrictions proposed as a remedy for actual trade secret misappropriations. It found no application of the Bartnicki decision, which it read as limited to speech addressing matters of more substantial public concern than those involved in the publication of DeCSS. It reversed a Court of Appeals ruling that an injunction on use and republication of DeCSS was an unconstitutional prior restraint, and remanded for appellate review of the factual determinations in light of these principles.
Judge Moreno's concurrence called for a higher threshold of proof of actual trade secret misappropriation before allowing such restrictions on speech, cast doubt that DeCSS still actually qualified as a secret, and challenged the efficacy of license agreements that attempt to override statutory shelters for "reverse engineering."
DVD Copy Control Association, Inc. v. Bunner, 31 Cal. 4th 864 (2003).
Procedural Status
The controversy arose from the Internet publication of DeCSS, a program that decrypts content on DVDs secured with the Content Scrambling System ("CSS"). The program was developed by a licensee of CSS that reverse engineered its proprietary technology despite a provision in the license forbidding such reverse engineering. The program was widely republished on the Internet, one of its republishers being Mr. Bunner.
When DVD CCA discovered the decryption tool was at large, it filed legal action alleging trade secret misappropriation in violation of the California version of the Uniform Trade Secrets Act (UTSA), Cal. Civil Code §3426 et seq. The District Court found that DVD CCA was likely to prevail on the merits and issued a preliminary injunction against the defendants (one of whom was Mr. Bunner) forbidding use, copying, or distribution of DVD CCA's trade secrets generally and DeCSS specifically.
The Court of Appeals assumed as true the trial court finding that a trade secret misappropriation had occurred but found that the injunction constituted a prior restraint of "pure speech" and violated the First Amendment.
The California Supreme Court also assumed that a trade secret misappropriation had occurred, but reversed the Court of Appeals and remanded for further consideration, holding that the First Amendment did not preclude a preliminary injunction on the assumed facts.
The Court's Analysis
First, the Court acknowledged that computer code such as DeCSS qualified as speech protected by the First Amendment, citing, with discussion:
* Junger v. Daley, 209 F.3d 481 (6th Cir. 2000)
* Universal City Studios, Inc. v. Reimerdes, 111 F.Supp.2d 294 (S.D.N.Y. 2000)
* Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2nd Cir. 2001)
* United States v. Elcom, Ltd., 203 F.Supp.2d 1111 (N.D.Cal. 2002)
Second, the Court found that the injunction was "content neutral" because its principal purpose was protection of a statutory property interest, with only incidental impact upon the content of the enjoined communication, citing, with discussion:
* Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)
* Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974)
* San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522 (1987)
As a "content neutral" sanction, the Court applied a lower level of scrutiny prescribed by Madsen v. Women's Health Center, 512 U.S. 753 (1994), under which the Court ust ask "whether the challenged provisions of the injunction burden no more speech than necessary to serve a significant government interest." Madsen, 512 U.S. at 765.
The Court distinguished the decision in Bartnicki v. Vopper, 532 U.S. 514 (2001), noting that "five justices in Bartnicki endorsed the application of a lesser standard even though the statute arguably prohibited 'pure speech.'" The California Supreme Court favored Rodney A. Smolla's analysis of Bartnicki in "Information as Contraband: The First Amendment and Liability for Trafficking in Speech" 96 Nw. U.L.Rev. 1099 (2002). In that article, Smolla makes the intriguing argument that the true holding of Bartnicki was expressed not by Justice Stevens' majority opinion, but by the combined opinions of the two concurring and the three dissenting justices in that case.
Bunner provides useful guidance about what might qualify as specially protected speech on matters of public concern. It does so through its discussion of why Mr. Bunner's situation does not qualify. The Court applied the test found in Connick v. Meyers, 461 U.S. 138 (1983) and examined the following elements of the content, form and context of the statements in question.
* The information in question was not publicly available and conveyed only technical information.
* DeCSS was not posted in order to comment on a public issue or to participate in a public debate. With the exception of a few "encryption enthusiasts," as the Court called them, the public would be interested only in the use of DeCSS, not the content of its code.
* The public debate over the use of encryption and copy protection of DVDs does not require disclosure of DeCSS, and the debate will not be impaired by enjoining its distribution.
Third, the Court noticed significant governmental interests served by California's trade secrets law, including innovation incentives, maintenance of commercial ethics and the protection of property interests. The Court found that the DeCSS content disclosed by Bunner did not address, involve or illustrate matters of substantial public concern, so that Bartnicki did not control its decision. It also saw a clear distinction from the cases involving attempts to enjoin publication of information lawfully obtained, such as:
* Florida Star v. B.J.F., 491 U.S. 524 (1989)
* Smith v. Daily Mail Publishing Co., 443 U.S. 97 (1979)
* Landmark Communications, Inc. v. Virginia, 435 U.S. 829 (1978)
* Oklahoma Publishing Co. v. District Court, 430 U.S. 308 (1977)
* Cox Broadcasting v. Cohn, 420 U.S. 469 (1975)
On balance, it found that the injunction satisfied the Madsen standard of scrutiny, assuming that an actual trade secret misappropriation occurred.
Fourth, the Court found that the injunction was not a prior restraint because it was content neutral and based upon unlawful conduct that had already occurred. It distinguished CBS Inc. v. Davis, 510 U.S. 1315 (1994) invalidating an injunction of a broadcast of a video revealing unsanitary practices in a meat packing plant. Without a finding that the video was unlawfully obtained, the substantial public concern with the facts revealed outweighed the interest of the packer in preventing the broadcast.
Finally, the Court applied the same analyses to dispose of Bunner's claims under the Constitution of the State of California.
It remanded the case for further review, emphasizing that the injunction was justified only if appellate review supported the finding that DVD CCA was likely to prevail at trial.
Judge Moreno's Concurring Opinion
In his opinion, Judge Moreno analyzed the case differently and questioned the validity of the trial court's findings. He cited the dangers that a preliminary injunction may work to bar protected speech before adjudication of the merits of the speaker's constitutional claims, citing Pittsburg Press Co. v. The Pittsburg Commission on Human Relations, 413 U.S. 376 (1973). Criticizing the majority's analysis as "incomplete," Judge Moreno characterized the injunction as "subject matter censorship" that was unjustified because DVD CCA's proprietary information had become so widely disseminated on the Internet that it was no longer actually a secret.
He acknowledged that trade secret laws serve sufficiently important societal purposes to justify limiting First Amendment rights in proper cases, citing:
* Cohen v. Cowles Media Co., 501 U.S. 663 (1991)
* Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562 (1977)
* Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974)
* Ruckelshaus v. Monsanto, 467 U.S. 986 (1984).
He called for a more rigorous evidentiary standard in order to "separate meritorious trade secret claims from those involving protected speech." A plaintiff, contended Judge Moreno, "should be required to actually establish a likelihood of prevailing on the merits, regardless of the balance of harms," or the injunction may constitute a prior restraint.
He noted that a higher hurdle would also apply when substantial public concern was implicated, even when secrets were unlawfully obtained, as in New York Times v. United States, 403 U.S. 713 (1971).
He contended that there was "no likelihood that DVD CCA would prevail on the merits," because "DeCSS was not demonstrably secret in this case when Bunner republished it, and Bunner was neither alleged to be the original misappropriator nor to be in privity with any such misappropriator."
He also cast doubt on the use of a license agreement to nullify statutory language excepting reverse engineering from the definition of "improper means" of acquiring a trade secret, citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989) and the exclusive jurisdiction of federal patent law.
Electronic Frontier Foundation reports that Diebold has backed down from its suit threats over those publishing or linking to their corporate records that reveal information concerning their electronic voting system. The court had ordered mediation, and Congressman Kucinich had entered the controversy in opposition to Diebold's actions. EFF has a series of links to documents in the case. EFF: Diebold Backs Down, Won't Sue on Publication of Electronic Voting Machine Flaws
Ohio Congressman Dennis Kucinich - has posted excerpts from controversial Diebold documents on his House.gov website, with commentary on Diebold's position regarding other posters and his intention to investigate and to introduce legislation appropriate to the situation. Thanks to Donna Wentworth at Copyfight for the pointer to this. (Read more ... )
Rep. Kucinich says, at the posting linked to above, that "Diebold has been using coercive legal claims to intimidate internet service providers and even universities to shut down websites with links to its memos and remove the memo content. Under copyright laws, however, universities are exempt, and posting links to the memos is not considered a violation of the law. By abusing the Digital Millennium Copyright Act, Diebold has intimidated numerous internet service providers to comply with its requests. The damage is two-fold: 1) limiting the public’s information about the security of its voting machines, and 2) expanding corporate control over our most free medium of expression, the Internet.
EFF's Cindy Cohn, Counsel to OPG, has written a letter to Judge Fogel stating that Diebold has sent cease and desist letters to San Francisco Indymedia, an alternative media source that has posted excerpts of the controversial material. According to Ms. Cohn's letter, "Diebold claims that Indymedia's hosting of excerpts from the e-mail archives, as part of a story discussing the 'gems' available in the archive, also violates its copyrights."
The facts in this matter are developing in ways like that involving the Brown & Williamson tobacco documents back in 1993-1994. Privileged documents were taken from B&W by one of their paralegals, then released to national media and to Rep. Henry Waxman, then Chair of the House Subcommittee on Health and the Environment. At the time, Rep. Waxman was conducting hearings about health effects of tobacco and manipulation of nicotine levels.
At the time B&W found about the release, they had a pending civil suit in Kentucky against Williams, their former paralegal. In that Kentucky court, they obtained a subpoena for Rep. Waxman to provide them with all copies of the B&W documents he had received, and to submit to a deposition. Rep. Waxman's response was to remove the case to D.C., where the District Court quashed the subpoena as in conflict with the Speech and Debate clause of the United States Constitution.
The resulting opinion of the Court of Appeals for the District of Columbia is illuminating on the Speech and Debate clause and the scope of its immunities, as well as the removal of the Williams case to the District. Brown & Williamson Tobacco Company v. Williams 62 F.3d 408 (D.C. Cir 1995).
Question: Can we expect Diebold to send Congressman Kucinich a cease and desist letter, with a takedown notice to the ISP hosting House.gov? I'd like to be a fly on the wall when those arrive.
Electronic Frontier Foundation is supporting and publicizing a lawsuit seeking to quash Diebold's notices to ISPs under the DMCA "safe harbor" clauses. EFF: Online Policy Group v. Diebold, Inc. EFF is hosting copies of the parties' pleadings and briefs at its site. Diebold had served DMCA notices on several ISPs (including OPG and Swarthmore College) that were hosting sites containing copies of Diebold emails and other records in which Diebold claims copyright. Swarthmore took down the sites in question, OPG decided to counterattack. OPG's complaint seeks injunctive relief alleging, among other things, copyright abuse. It alleges that the publication of Diebold's material is protected free speech on a matter of public interest: allegations of defects in electronic election systems made by Diebold and widely used in elections in the United States. A hearing was scheduled for 11/17.
18,000 students gain access to Napster's premium service under a site license to Penn State, effective January 12, 2004. The remainder of 83,000 PSU students and (possibly) 150,000 alumni will get access later. 500,000 titles will be in the accessible library, all copyright-legal and CD-burnable, under an agreement with Napster's parent Roxio. The service will be paid for by the university out of funds from existing student fees, all according to a Napster.com press release Penn State and Napster Team Up and PSU press releases.
An article in the New York Times quoted Robert Haber, chief executive of CMJ Network, who saw such deals as impacting unlicensed competitors: "I don't want to say it's the death of file-sharing services," he said, "but I think it will put a significant dent in them because it's easy to use and it's really a viable alternative." See Amy Harmon, "Penn State Will Pay to Allow Students to Download Music" New York Times November 7, 2003. (free - registration required).
Question: If other universities follow suit, will such site licenses neutralize the P2P threats to the music distribution channel? Do they raise new legal issues?
Five years ago, Penn State was an early adopter of USA Today's Collegiate Newspaper Readership Program to provide selected free newspapers to all students, in consideration of a blanket payment to be paid out of pre-existing student fees. The move has been emulated by several hundred other universities, though some student publications have complained that it hurts their sales and advertising revenues. The Cornell Daily Sun noted concerns that the free distribution of certain newspapers could create or foster a monopoly and subsidize their competition. The concerns were debated last year in the student government body, which approved the program pilot.
A 1999 feature article in the Chronicle of Higher Education discussed the pros and cons of the newspaper program, including the concerns about the impact upon student-run publications if universities use student funds to make commercial competition "free." See "Free Newspapers Prompt Boom in Campus Readership-- But competition from 'USA Today' and 'The New York Times' may threaten student papers" (subscription required). It cited concerns by College Media Advisors, an association of faculty and staff working with student publications.
The president of CMA, Chris Carroll, was quoted by the Chronicle as saying: "The huge concern of advisers is that this presents a threat to the survival of student newspapers on these campuses, and we're not included in these discussions." John K. Hartman, a journalism professor at Central Michigan University, and author of two books about USA Today, saw the program as a positive, and was quoted as saying that: "If colleges across the country would widely adopt this daily-in-the-dormitory program, it would give young adults a chance to develop a newspaper habit while they're in the formative stage, and it's a way for the newspaper industry to dramatically increase newspaper readership."
Commentators have contended that the music industry was shortsighted in killing Napster instead of getting control over it to sell licensed music. The central directory structure of the Napster system affords more control over users than does the decentralized system used in Kazaa, Gnutella and others that now have more users than old Napster ever had. This move may indicate that Roxio has capitalized upon the controversial 2002 purchase of the Napster name and technology out of its bankruptcy estate.
The move also fits in with some aspects of recent economic analysis concluding that providing a low-cost, high-membership system of licensed music distribution in unencrypted MP3 format is the only effective way to depopulate unlicensed P2P networks, and could increase recording industry profitability. See Shuman Ghosemajumder, "Advanced Peer-Based Technology Business Models: A new economic framework for the digital distribution of music, film and other intellectual property works," MIT Sloan School of Management (2002) (pdf).
Ghosemajumder's ideal system varies in some ways from the Napster/PSU model. His comprehensive article is worthwhile reading just for the statistics on file sharing and music industry profitability, as well as historical notes on copyright enforcement and antitrust controveries involving the music industry in the recent past.
One question not clear from the announcements is the relative scope of music that will be available through the system. 500 thousand titles are mentioned, but it is unclear what percentage that is of a selection of current popular titles that most students would regard as complete.
Other questions:
Posner on Exclusionary Practices in the New Economy
Court of Appeals Judge Richard A. Posner has for decades spoken for the "Chicago School" of economic analysis of antitrust law, and views with skepticism charges that unilateral firm action violates antitrust law. In his 2001 edition of Antitrust Law, he analyzes exclusionary practices in the "new economy." In the new economy, he includes software companies, Internet-service companies and the communications providers that enable them.
The new economy is different from industrial economies. Much of its product is intellectual property and it enjoys economies of scale in consumption ("network effects"). These characteristics of the new economy, "tug it toward monopoly yet, oddly, also toward competition. The paradox is dissolved by remembering that competition to obtain a monopoly is an important form of competition." Posner (2001) p. 248.
"A firm that will have the protection both of intellectual-property law and of economies of scale in consumption if it is the first to come up with an essential component of a new-economy product or service will have a lucrative monopoly, and this prospect should accelerate the rate of innovation, just as, other things being equal, the more valuable a hoard of buried treasure is, the more rapidly it will be recovered. What is more, the successful monopolist is likely to be a firm that initially charges a very low price for the new product that it has created. ... The prospect of obtaining a network monopoly should thus induce not only a high rate of innovation but also a low-price strategy that induces early joining and compensates the early joiners for the fact that eventually the network entrepreneur may be able to charge a monopoly price." Posner (2001) p. 249.
The Chicago School accepts the burden of temporary monopoly prices as a cost of attracting new entrants seeking to replace the current monopolist. Judge Posner sees societal benefit in a Schumpterian "gale of creative destruction." Posner (2001) p. 249. Yet, even the Chicago School admits that unilateral acts of a monopolist may rise to the level of exclusionary practices violative of the antitrust laws.
As an example, Judge Posner points to the Supreme Court decision in Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346 (1922). Standard Fashion created popular dress patterns and sold them through thousands of retailers or "pattern agents." Competitors imitated or copied the most popular dress styles and sold them more cheaply than did Standard Fashion, which called the competitors "style pirates." To counter them, Standard Fashion required all of its pattern agents to contract to sell no patterns other than those made by Standard Fashion. Through these exclusive dealing contracts, it controlled about 40% of all pattern agents in the country. The Supreme Court struck down those provisions as violative of Section 3 of the Clayton Act due to their tendency to create a monopoly.
In its exclusive dealing requirements, Standard Fashion was leveraging its economies of scale in distribution, to increase its monopoly power, as Judge Posner analyzed it. By forcing pattern agents to choose between the dominant provider's full line of products and any new entrant's more limited line, Standard Fashion dramatically increased the business risk to its competitor at little risk to itself, effectively excluding it from competition. In later years, scholars have examined this "raising rival's cost" analysis as a means of excluding competition.
Judge Posner suggests that the new economy may be in a state of development like that of the retail trade in 1922, "where distribution facilities may be sufficiently limited to create bottlenecks that monopolists can exploit to perpetuate monopoly." Posner (2001) p. 252.
To test practices that may serve both efficiency and exclusion (such as anti-piracy measures), Judge Posner suggests a comparison of the practice to those employed in markets recognized as competitive. Use of the practice in competitive markets would raise a presumption that it is available to a monopolist. A challenger could rebut that presumption, however, by a showing that the social harm from the practice exceeds the cost to the monopolist of denying its use.
Roxio/Napster is implementing a methodology already in use at over 200 universities without legal challenge for several years. Besides being potentially successful and effective in deflating music piracy where it is most damaging, it may also fit Judge Posner's comparison test. As the intended effect is to counter copyright violations and widespread music piracy, it has a strong argument that the social merit balance is in its favor.
For a further exposition of Judge Posner's views, see:
See also:
Electronic voting software code was left unprotected by a contractor, then accessed and republished, according to Wired News E-Vote Software Leaked Online. A company spokesman for Sequoia Voting Systems stated that the disclosure of its code did not compromise the security of the system itself.
The recent history of such leaks involving Diebold software suggests that the disclosure may yield more benefit than harm, by opening once-secret proprietary code to independent security analysis. (Read more ... )
An unrelated disclosure of Diebold software in January led to software analysis of it at Johns Hopkins and Rice. Their report of security flaws (PDF) includes their recognition that "the integrity of the election process is fundamental to the integrity of democracy itself. And, unsurprisingly, history is littered with examples of elections being manipulated in order to
influence their outcome."
The analysts noted that despite warnings about security concerns with new computerized voting systems, "neither source code nor the results of any third-party certification analyses have been available for the general population to study, because vendors claim that secrecy is a necessary requirement to keep their systems secure."
The report detailed technical standards against which they evaluated the revealed software, and, in its abstract stated that "this voting system is far below even the most minimal security standards applicable in other contexts," and emphasized "the fallacy of the closed-source argument for such a critical system." Only once the code became accessible for independent tests were the security flaws disclosed.
These issues echo the cautions of security experts such as Bruce Schneier, author of Secrets and Lies.
This critical report led to an audit by the State of Maryland, which proceeded with installation of the system after encryption and digital rights management tools recommended in a SAIC report (PDF) were incorporated into the Diebold system and the state e-voting process.
The Chronicle reports that Three More Colleges Receive Cease-and-Desist Letters From Maker of Voting Machines. Diebold contends that students have put stolen, copyrighted internal memos on college-hosted websites, in violation of the Digital Milleneum Copyright Act, others allege that publication is "fair use," because they evidence Diebold knowledge of defects in its electronic voting machine technology used in many states. A student-run Swarthmore website tracks the controversy over the publication of the memos and a "civil disobedience" response. (Read more ... )
An AP story carried at SiliconValley.com reports that the materials were first put online in August, after a hacker took them from a Diebold website, but only became general knowledge after Diebold threatened legal action against the colleges hosting the student sites.
Ernest Miller is also following the controvery and commenting in his "The Importance of " blog. He noted that the civil disobedience moves (and the controversial files) have now migrated onto the P2P networks.
LawMeme, at Yale Law, has picked up the story as well.
Open Questions:
These may not be the Pentagon Papers, but is there a broader-than-usual "fair use" exception for revealing evidence of fraud or misrepresentation concerning a system of material importance to the processes of government?
Could a private party successfully maintain a civil copyright infringement action against a whistle-blower who took documents to law enforcement or the Washington Post?
What about revealing concealed (and copyrighted) evidence of terrorist acts? Is that fair use?
Diebold may be trying to make some law here, or just clumsily trying to shoot its way out of an embarrassment. Either way, it could be seen as a rather self-destructive tactic, once the story becomes big enough that state and federal authorities are forced to investigate.
The situation also beautifully illustrates the defense mechanisms of a self-organized network with access to global communications systems.
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A hearing that addressed consequences of the struggle between peer-to-peer networks and the entertainment industry was held 9/30 by the Senate Committee on Governmental Affairs. Material on the site of the Committee on Governmental Affairs includes hearing statements from three U.S. Senators, representatives of the recording industry, of the file-sharing industry, and two disinterested experts. Thanks to beSpacific for this item.
In 2001, a suit alleging contributory and vicarious copyright infringement was filed by artists and publishers against Grokster and two other file-sharing software makers. In April 2003, the District Court entered summary judgment for the defendants, which became final and appealable in June, and MGM et al appealed. Electronic Frontier Foundation has taken an amicus position in the case, favoring the defendants. They have collected online links to complaints, briefs and decisions in the case, which is now on appeal before the U.S. Court of Appeals for the Ninth Circuit. See EFF: MGM v. Grokster
Thanks to beSpacific for the pointer to this resource.
Copyright holders that separately lack market power but act in concert to restrain competition may be subject to private suits by injured consumers. Successful consumers can recover treble damages and attorneys fees under a Sherman Act suit. These principles may come into play as RIAA members file suits against alleged individuals who share copyrighted music, some of whom may choose to file countersuits for Sherman Act violations. Similar liabilities were discussed in the case of Microsoft, which had sufficient market power to be subject to such liabilities even when acting alone. See Unintended Consequences: Copyright Limits in Microsoft 2001. (Read more ... )
Judge Patel, in her February 2002 order in the Napster case, addressed Napster's allegations of antitrust violations as evidence of copyright abuse by plaintiff copyright holders. Napster's charges were that the RIAA plaintiffs acted in concert to enter the digital distribution market and agreed on license terms that enabled them to control prices and availability of music through the digital distribution channel. Judge Patel noted that the U.S. Justice Department was investigating similar allegations and allowed further discovery of potential evidence relevant to the misuse charges. She also ordered Napster to take certain steps to limit the use of its service for exchange of copyrighted files.
The discovery was not concluded. Within a few months Napster was shut down for inability to fully comply with the district court's orders protecting the copyright holders. Ultimately, over the objections of the other plaintiffs, its assets were sold to one of the plaintiffs, Bertlesmann, from which Napster had received funding and support over the years, and Napster went into bankruptcy.
Findlaw maintains Patel's opinion and other primary legal sources in a special page on the Napster Suit.
Shortly after Judge Patel's decision, Robert G. Badal wrote "Be Careful What You Ask For." It reviews the antitrust exposures that emerge with the enforcement of intellectual property rights. He reviews cases about potential liabilities for misuse and antitrust violation, specifically discussing patent pools, the "essential services" cases such as Aspen Skiing, plus the Microsoft and Napster decisions noted above. Badal raised the question whether intellectual property rights can constitute an "essential service," leaving the question open after noting its treatment in the 1999 decision in Intergraph Corp. v. Intel Corp.
IP Watchdog maintains a comprehensive suite of links to primary and secondary sources of study regarding antitrust law in the IP context.
Sharman Networks continues bringing antitrust charges against RIAA, despite early defeats, and RIAA has brought suits against other P2P networks such as iMesh. Neither side appears ready to back down, suggesting a fertile field for development of these issues in the future.
In an earlier note, I posed a question whether RIAA may have crossed a line in antitrust law by its recent combination of lawsuits and "Clean Slate" program regarding users of P2P file sharing networks. In a later posting, I sketched the outlines of the concept of copyright misuse, including reference to a thought-provoking article by Professor Gifford in which he opined that the courts will eventually agree that "exercise of intellectual property rights cannot violate the antitrust laws."
One case in which that statement may be too broad is United States v. Microsoft, 252 F.3d 34 (D.C. Cir. 2001)(en banc). Earlier decisions against Microsoft dated back to United States v. Microsoft, 56 F.3d 1148 (D.C. Cir. 1995) ("Microsoft I") and United States v. Microsoft, 147 F.3d 935 (D.C. Cir. 1998 ("Microsoft II"). Microsoft 2001 makes clear that antitrust law still constrains the exercise of intellectual property rights when the rights holder has dominant market power.
In June 2001, the U.S. Court of Appeals for the D.C. Circuit upheld the decision that Microsoft possessed monopoly power in operating systems for Intel-compatible personal computers. Monopoly power is not by itself illegal under U.S. antitrust law as long as it was obtained through competition or product excellence. The United States charged that Microsoft had violated the Sherman Antitrust Act §2 by going farther, to the offense of monopolization. Through restrictive provisions in its licenses for Windows, Microsoft worked to maintain its monopoly position, using methods other than competition on the merits of its products and services.
A violation of Section 2 of the Sherman Act requires that one with monopoly power engage in "exclusionary conduct." Mere growth or development resulting from a better product, business skill or market accident doesn't qualify. To qualify as "exclusionary," acts must have "anticompetitive effect" -- harm to the process of competition and thereby to consumers. Harm to competitors is not sufficent.
The Court found that Microsoft negotiated provisions in its licenses of Windows that interferred with the process of competition in the market for Internet browsers. In particular, Microsoft used its rights to withhold licenses of its Windows operating system in order to prevent Netscape's Internet browser from gaining enough market share to be a competitive threat to Microsoft's Internet Explorer ("IE"). The Court found that those restrictions were "exclusionary," and when combined with Microsoft's market power, a violation of Section 2 of the Sherman Act.
Microsoft argued that as a holder of a valid copyright, it had the right to impose even those restrictions found to be "exclusionary." That argument "borders on the frivolous," said the Court of Appeals. "Intellectual property rights do not confer a privilege to violate the antitrust laws," said the Court, citing In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000) (the "Xerox Case").
The Court rejected other attempts by Microsoft to justify its actions, and found that Microsoft used its market power to protect its monopoly, without legitimate justification, violating the Sherman Act.
The Court also found to be exclusionary certain "exclusive dealing" clauses in Microsoft license agreements. Such clauses can be used by a dominant firm to harm the process of competition. See generally Dennis W. Carlton, "A General Analysis of Exclusionary Conduct and Refusal to Deal -- Why Aspen and Kodak are misguided," 68 Antitrust L.J. 659 (2001). Microsoft struck deals with major potential distributors that they would distribute only Microsoft's Internet Explorer or else make it the default browser. These restrictions had the effect of keeping the usage level of the competing Netscape browser below the critical threshold at which it would be a viable threat to Microsoft's extension of its operating system monopoly into the market for Internet browsers.
The Microsoft 2001 outcome was quite different than those in the cases (such as those cited by Gifford) in which a copyright holder was allowed to impose similar restrictions on the licenses of its copyrighted products. The principle difference lies in the existence of market power, the existence of a monopoly in the Sherman Act sense. Cases allowing copyright holders to exclude competitors from access to their product (such as in the Kodak case and others cited by Gifford) involve sellers that had valuable, desireable products, but which lacked a "monopoly" in the true, Sherman Act sense of the word.
What does Microsoft tell us about the current controversy over peer-to-peer (P2P) sharing of copyrighted recordings? It appears that no one artist or publishing house commands sufficient market share to constitute a monopoly under the meaning in the Sherman Act. Yet the Sherman Act has a Section 1, that is potentially applicable: the prohibition against "combinations and conspiracies" in restraint of competition. If two or more separate parties act in concert to interfere with the competitive process, they may violate Section 1, even if none of the parties separately possess enough market power to constitute a monopoly.
Cases like Microsoft, Kodak and Xerox each address a situation in which a single copyright holder imposed license restrictions that negatively affected competition. In Microsoft, "exclusionary" restrictions were violative of the Sherman Act because it had monopoly market power. In Xerox and Kodak, the copyright holders had market power over their particular product, but less than a monopoly in the relevant market in which their product was but one competitor, making the Sherman Act inapplicable. Their imposition of conditions on licensure of their products were lawful because they fell short of "copyright misuse."
A different outcome might result if facts reveal concerted action among competing copyright holders, in restraint of trade or commerce, which action interfered with the process of competition. Concerted action among competitors is not by itself illegal. For example, competitors can compare notes on best practices, can agree on industry standards, can form joint ventures to undertake projects not practical for individual firms and cooperate in other ways, all within the antitrust laws.
Some concerted actions are prohibited by the Sherman Antitrust Act §1 and can be the subject of civil or criminal suits and penalties. The most well-known is the operation of a cartel, the fixing of prices by express or tacit agreement among competitors. Mergers that result in the combined firm having more than a threshold level of market power can also lead to Section 1 liability. Yet another is a concerted refusal to deal, or boycott, about which the Supreme Court has written in recent years.
It is to such forms of concerted action that I'll turn in the next of this series of notes.
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In 3rd Circuit Breaks New Ground on Copyright Misuse, 8/26/03., Tech Law Journal summarizes and discusses the August 2003 decision in Video Pipeline v. Buena Vista Home Entertainment . This extended note includes a review of the history of copyright misuse through the Lasercomb and subsequent decisions. (Read more ... )
The perceived offense in Video Pipeline was suppression of criticism, rather than unfair competition or violation of antitrust law. Such use by the rights holder undermines the purpose of copyrights derived from the United States Constitution, said the Court, which in the end found the defense inapplicable in the facts of Video Pipeline's case.
The commentator also briefs a decision by Judge Posner in Ty v. Publications International (7th Cir. 2002), involving the manufacturer of "Beanie Babies" and a publisher of books about the collection of such toys. Ty sued to prevent the publisher's unlicensed use of images of the toys, which are copyrighted by Ty. In his opinion, Judge Posner discussed the potential for using a copyright monopoly in one market (the toys) to take over and monopolize a second market (the publication of critical guides). He wrote that "ownership of a copyright does not confer a legal right to control public evaluation of the copyrighted work."
Judge Posner noted some of Ty's actions to suppress criticism by licensees. Ty reserved rights to veto any text in the publisher's guides. It forbade licensees to reveal that they were licensees of Ty. Despite Ty's control over content, it required licensees to expressly disclaim sponsorship or endorsement by or affiliation with Ty. But the facts of the case did not require determination of the issue, so Judge Posner left it with the sentence "We need not consider whether such a misleading statement might constitute copyright misuse, endangering Ty's copyrights."
The TechLawJournal commentator continues with a discussion of several other possible factual contexts in which the theory in the Video Pipeline and the Ty cases might be applied in 3rd Circuit Breaks New Ground on Copyright Misuse, 8/26/03.
One need not turn to antitrust law to address the questions posed in RIAA v. P2P Net: Notes in the Key of Antitrust. One may also examine RIAA's assaults on P2P networks through the lens of "misuse of copyright." (Read more ...)
Professor Gifford's analysis of the interface between intellectual property and antitrust law concludes that courts will migrate to the Federal Circuit's view, that "exercise of intellectual property rights cannot violate the antitrust laws." Id. p. 414. He admonishes, however, that the intellectual property laws themselves contain strictures against rights holders' misuse of such rights.
Copyright misuse was found to be a valid affirmative defense in Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990). Lasercomb held copyrights on certain CAD/CAM software, which it licensed to others. Its usual license agreement purported to preclude licensees from creating their own competing CAD/CAM software. Lasercomb sued Reynolds for copyright infringement, and Reynolds claimed that Lasercomb was attempting to use its copyright to control competition in an area outside the copyright: the use of CAD/CAM in Reynolds' industry.
The Lasercomb Court reviewed the history of patent and copyright law and noted the recognition of the equitable defense of "misuse of patent" in Morton Salt v. G.S. Suppiger, 314 U.S. 488 (1942). While the Lasercomb Court found no comparable Supreme Court decision relating to misuse of copyright, "since copyright and patent law serve parallel public interests, a 'misuse' defense should apply to infringement actions brought to vindicate either right." 911 F.2d 970, 976.
The Court of Appeals rejected the application of the antitrust law's "rule of reason" to Lasercomb's behavior. "So while it is true that the attempted use of a copyright to violate antitrust law probably would give rise to a misuse of copyright defense, the converse is not necessarily true -- a misuse need not be a violation of antitrust law in order to comprise an equitable defense to an infringement action. The question is not whether the copyright is being used in a manner violative of antitrust law (such as whether the licensing agreement is 'reasonable'), but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright." 911 F.2d at 978.
Further, the Lasercomb Court found that the challenger need not have agreed to the restrictive license terms; "the defense of copyright misuse is available even if the defendants themselves have not been injured by the misuse." 911 F.2d at 978.
Since 1990, the doctrine of copyright misuse has been adopted in several circuits in addition to the Fourth. See Alcatel USA, Inc. v. DGI Techs., Inc. , 166 F.3d 772 (5th Cir. 1999); Practice Management Info. Co. v. AMA , 121 F.3d 516 (9th Cir. 1997). See also Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994). The Federal Circuit has also acknowledged the availability of the doctrine in some circumstances. In re Independent Service Organizations Antitrust Litigation. 203 F.3d 1322 (Fed. Cir. 2000), cert. denied 531 U.S. 1143 (2001).
When sued by A&M Records for copyright infringement, Napster, Inc. alleged that plaintiffs colluded to extend their copyright monopoly to include online distribution. The Ninth Circuit concluded that the bundle of copyrights include the right, within broad limits, to curb the development of such a derivative market. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).
The Court also declined Napster's invitation that it impose compulsory royalties: "Plaintiffs would lose the power to control their intellectual property: they could not make a business decision not to license their property to Napster, and, in the event they planned to do business with Napster, compulsory royalties would take away the copyright holders' ability to negotiate the terms of any contractual arrangement." 239 F.3d 1004, ____.
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Economist Stan Liebowitz sees P2P file sharing as a significant problem for music publishers, and advocates use of Digital Rights Management (DRM) tools to allow both P2P file sharing and protection of copyrights. He takes issue with proposals for compulsory licensing, a method used in the past in similar situations. He maintains an online page of notes and links to his published and to-be-published papers and studies. (Read More ...)
Stan Liebowitz is an economist at the University of Texas at Dallas. He has studied the challenge of MP3 file sharing for several years and assisted with critiquing economists' amicus briefs filed in the Eldred case. His studies had led him to believe (and write) that file sharing technology would have a significant negative impact on the recording industry, and that DRM technologies would provide protection without sacrificing fair use. "Policing Pirates in the Networked Age" (Cato Institute 2002).
Further study and experience led him away from, then back again to that conclusion, expressed in the August 2003 note "The Day the Music Died". It predated RIAA's recent lawsuits against users, but anticipates them and the resulting controversy and repeats his support of experimentation with DRM as a solution. A few days ago, he released "Alternative Copyright Systems: The Problems with a Compulsory License" in which he concludes that cumpulsory licensing is not the solution in this instance, as it was with rights in broadcast music.
He also maintains an informal but more current page of links and notes on the subject of "Copyright Issues, Copying and MP3 Downloading". It contains useful links to his yet-to-be published studies and papers as well as the recent court decision involving RIAA v. Kazaa et al and the continuing controversy over the grant of subpoena powers and privacy.
Liebowitz' logic and data are not without critics, including that of Miriam Rainsford, a pro-file-sharing musician.
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Peer-to-peer (P2P) file sharing network hubs received simultaneous assaults by the Recording Industry Association of America (RIAA). Some industry figures have sharply criticized the RIAA's tactics as wrong-headed and counterproductive. Has the RIAA's latest assault on users of a potentially legal competing distribution channel carried it into the antitrust minefield? (Read more...)
RIAA presaged its main attack with reconnaissance strikes on selected targets that partially shaped the legal and tactical battlefield. In September, a force majeur push included several hundred lawsuits against network hubs, described as the more eggregious participants in the offering of large quantities of recordings copyrighted by RIAA members. Within days, some information about defendants emerged, and RIAA's first tactical victory was disclosed: a $2,000 settlement paid by the mother of a 12-year old defendant.
At the same time, RIAA's "Clean Slate Program", offered limited amnesty to those who used various P2P file sharing systems to download or share copyrighted works, if they submitted a potentially self-incriminating "Clean Slate Program Affidavit". No amnesty was offered to those not using P2P networks to copy or share copyrighted works.
On behalf of P2P network users, a lawsuit against RIAA has been filed, alleging unfair and deceptive practices in connection with the Clean Slate Program, and at least one United States Senator, Norman Coleman, (R. Minn.) has indicated that an investigation of the program is appropriate.
Some recording artists and labels have expressed support of P2P file sharing, due to increased exposure they do not get through the existing system. Further factual research may show the numerical proportion of the RIAA such group represents, and what percentage of the industry revenues accrue to such group.
Some have suggested that RIAA is missing the opportunity to negotiate for the conversion of the "outlaw" peer-to-peer network (lets call it P2P Net) into a licensed, low-cost channel for distribution of recordings and payment of artists. Some suggest that such a system would result in increased opportunities for new, "independent" artists and labels and would increase the supply and reduce the price of recordings in the market. For example, Tim O'Reilly suggests that the RIAA is more concerned about the dominant publishers losing their control of the market than in the interests of copyright holders.
One of those is John Synder, President of Artist House Records, who in February presented a formal proposal titled "Embrace file-sharing, or die" to the New York chapter of National Association of Recording Arts and Sciences (NARAS). His extended remarks review the state of the recorded music industry, suggest recent drops in CD sales are not due to piracy, and is highly critical of RIAA, about which he said: "They overstate their position, misinterpret their own data, and make dubious claims for artists' rights when the biggest abusers of artists' rights are their benefactors, the record companies themselves."
In a note at LawMeme, Ernest Miller speculates that the controversial litigation against file sharers "just might be part of an extremely clever plan of the RIAA's to get the law changed to outlaw Kazaa. "
Has RIAA strayed into the antitrust minefield?
Although "all is fair in love and war," this is just interstate commerce. Even conceding the lawful monopoly rights of copyright holders, the RIAA's tactics raise some interesting issues of antitrust law on which legal scholars can chew. Let the chewing begin with these debatable issues:
Query: Does RIAA's combined campaign go beyond legitimate enforcement of copyrights in the market for recordings and extend to an attempt to restrain competition in a separate but related market: the marketplace for distribution services?
Query: Does RIAA's Clean Slate Program constitute an attempt to intimidate consumers into a boycott of a potentially lawful competing distribution channel (P2P Net), in order to maintain its members' power in the market for distribution services?
Query: Does the RIAA's combined campaign result in economic harm to certain recording copyright holders and to recording consumers by restraining competition from P2P Net in the market for distribution services?
Query: In the event of any affirmative answers to the above queries, is RIAA's combined campaign included within qualified immunity doctrines such as (but not limited to) that described in Noerr Motor Freight?
The issue of copyright abuse was addressed briefly in the 2001 Napster decision. The court acknowledged it as a potential defense, but found a lack of evidence supporting it in that case. A scholarly paper by Daniel J. Gifford explores the developing law in this area. Will new evidence emerge in the discovery processes of the new lawsuits filed this week?
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DougSimpson.com/blog
Joint hearings will be scheduled to consider a bill yet to be introduced that would protect compilers of facts into databases. Mere factual compilations are presently not protected by copyright law. The bill is supported by the Software and Information Industry Association, says CNET News.com in Databases--the next copyright battle? Opponents include Public Knowledge, which describes its mission as advocating a "fair and balanced" approach to copyright and technology policy.
Thanks to the e-newsletter from Online Journalism for the heads up on this story.
DougSimpson.com/blog
GrepLaw | Ernest Miller on DRM, Privacy and Hemingway
GrepLaw is a blog at Harvard Law School's Berkman Center for Internet & Society. Ernest Miller is at Yale Law, and has been an editor at LawMeme, a law and technology blog there.
Miller explains for GrepLaw readers the Information Society Project at Yale Law School, and opines that blogs "are great places for law students to begin to find their voice and practice writing in this new medium. They will also be the center of more and more legal debate and analysis"
About the key issues of cyberlaw for the coming year, Miller tells GrepLaw: "The intersection of copyright law and the First Amendment is perhaps the key modern issue in this field. Until the theories of copyright and First Amendment can be reconciled, the law will continue to be confusing and come up with strange results. I am optimistic, though not overly so, that some movement on this front has already begun."
He has a lot to say about DRM and fair use, privacy and many other issues. An extended interview well worth reading.
Wired briefly sketches the new netwar weapons coded to counterattack MP3 file swappers: "Monsters of Rock". References codenames "Antinode", "Fester", "Freeze", "Shame", "Silence", "Suck" and "Tattle". Some of these tools mimic the tactics of Internet worms and viruses and bandwidth-draining DNS attacks. Others use "disinformation" tactics to create and direct MP3-seeking traffic to fake supernodes. Reminiscent of international netwar scenarios. Is all fair in love and war? (...More...)
RAND Corporation:
* The Advent of Netwar
* Networks and Netwars: The Future of Terror, Crime, and Militancy
Information Warfare, Cyberwar - Future of Internet & Computer Warfare (Infosyssec, current)
Bracing for guerrilla warfare in cyberspace (CNN, 1999)
The Great Cyberwar of 2002 (Wired, 1998) Fiction by John Arquilla, Pentagon advisor and professor of information warfare at Naval Postgraduate School.
CYBERWAR IS COMING! (1993) Introduction of "cyberwar" and "netwar" by John Arquilla and David Ronfeldt of RAND
DougSimpson.com/blog
In January 2003, an EU Directive was proposed to standardize enforcement of intellectual property law within the European Community. The document detailed the perceived needs for which the solutions were proposed, including the implementation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The proposal has met with criticism, most recently by IP Justice, which describes itself as "an international civil liberties organization that promotes balanced intellectual property law in a digital world. " On August 11, IP Justice released its "IPJ White Paper: Overbroad Provisions Threaten Civil Liberties, Innovation and Competition."
The IPJ paper opens with the charge that the proposal "contains a number of seriously troubling provisions that threaten innovation and competition and endanger the civil rights of all Europeans. Specifically, Article 9 creates broad and easily abused subpoena powers for intellectual property holders to obtain personal information on consumers. And Article 21 mandates a ban on technical devices that threatens innovation, competition, the fair use (fair dealing), and free of expression rights of Europeans."
There is a century of history of the complex relationship between antitrust law and intellectual property law, recognized in the "Antitrust Guidelines for Licensing of Intellectual Property" (1975) of the U.S. Justice Department and Federal Trade Commission. In "The Antitrust/Intellectual Property Interface: An Emerging Solution to An Intractable Problem" 31 Hofstra Law Review 363 (2003), Daniel J. Gifford describes his view that recent decisions are shaping a new paradigm for reconciling antitrust law and intellectual property law and the concepts of "patent abuse" and "copyright abuse."
Gifford reviews Supreme Court decisions in the early 20th century applying Section 3 of the Clayton Act, up to the Mercoid v. Mid-Continent and Mercoid v. Minneapolis-Honeywell decisions in 1944 that subordinated patent law to antitrust law and substantially limited the doctrine of contributory infringement. Changes in the Patent Law overruled the Court's Mercoid decisions, but the Court went on reducing the degree of market power needed to define an antitrust violation in the context of tying sales of patented products. This reflected the Court's view that tying sales served little purpose other than the suppression of competition, expressed in the 1949 Standard Oil of California decision.
In the 1950's, scholars such as R.A. Posner and R.H. Bork maintained that tying was principally used for price discrimination, an analyis reflected in the "Chicago School" of antitrust analysis. Recent studies have looked at uses of tying and price discrimination to impede the entry of new market competitors, a technique scholars have compared to "limit pricing."
As these studies emerged, Gifford maintains, the Court and Congress increased the liberty of patentees to tie sales involving intellectual property without committing "patent abuse." The Jefferson Parish decision in 1983 found that a 30% market share was not sufficient to support an antitrust violation for a tie-in sale. Congress added clauses to Section 271(d) of the Patent Act that Gifford describes as allowing patentees to tie a patent license to a specially made component, but prohibited a tie to an unrelated product if the patentee had market power.
Gifford describes and critiques the contributions in this field of four commentators, Louis Kaplow, Mark Patterson, Michael A. Carrier and David McGowan. Gifford found that all four identify transactions in which core intellectual property concerns are triggered and in such cases give intellectual property law precedence over antitrust law. Gifford sees various court decisions following a similar approach.
Concepts of copyright abuse were similarly shaped by the Lasercomb decision and later cases such as Kodak and the Congressional amendments of the Copyright Act in the Digital Millenium Copyright Act (DMCA).
Appellate decisions in recent years have developed a theme of primacy of intellectual property law over antitrust law with certain exceptions, according to Gifford. He points to the Federal and D.C. Circuit's decisions in Xerox, Alcatel and Microsoft that apply objective criteria, and the 9th Circuit's Kodak decision applying a "pretext" criteria. Gifford expresses his favor for the first approach, citing the Supreme Court's preference for objective criteria as expressed in the 1993 Professional Real Estate Investors decision.
Gifford closes by describing the synthesis he perceives to be developing: "The courts, through lines of superficially conflicting cases, are in fact evolving a new synthesis of antitrust law with patent and copyright law. This new synthesis gives priority to the incentive structure of the two intellectual property laws, but recognizes the lawfulness of a range of behavior protected by patents that has no protected analogue under copyright law."
DougSimpson.com/blog
Volunteers, including some from the MIT Media Lab, have created a new community web site "Copywrongs.org" that describes itself as a "clearinghouse and connection point for individuals who are the subjects of P2P-related copyright enforcement actions. We will do our best to provide services that help this large and growing body of people find one another, while working together to increase public understanding of how their lives have been affected by this unprecedented wave of drastic legal action." The site is inviting those who have received NIAA subpoenas to create individual blogs (anonymously, if they choose) at the site in order to share their experiences in a public forum.
DougSimpson.com/blog
An A.P. story, EU Officials Accuse Microsoft of Monopoly reports that Microsoft was charged Wednesday of antitrust violations with regard to its media player and server software. The story reports that this culminates a four-year investigation into activities that are alleged to be still ongoing.
In Forbes.com: Mario Monti Messing With Microsoft, Dan Ackman reports that the EU complaint is that "Microsoft is leveraging its monopoly of the personal-computer operating-systems market to dominate the market for low-end servers and media players. It says that Microsoft's 'tying' of its server and media-player products to the Windows operating system 'weakens competition on the merits, stifles product innovation and ultimately reduces consumer choice.'" Ackman suggests that the existence of Microsoft's dominance in the Windows operating system means that it will always face such legal issues when it adds products to Windows.
BBC: "EU gives 'last chance' to Microsoft"
In a release on its own website, the European Commission stated: "This Statement of Objections, which includes the identification of appropriate remedies, gives Microsoft a last opportunity to comment before the Commission concludes the case. We are determined to ensure that the final outcome of this case is to the benefit of innovation and consumers alike."
GartnerG2 and The Berkman Center for Internet & Society at Harvard Law School released "Copyright and Digital Media in a Post-Napster World". This 45-page white paper reviews basics of US and EU copyright law, the impact of digital technologies on the business models for music, movies, television and books. It includes briefs of cases dealing with fair use, the DMCA, constitutional issues, e-publishing rights and non-copyright laws protecting creative control or distribution, as well as sketches of pending legislation.
It includes a description of various forms of Digital Rights Management (DRM) tools that embody a rights model, such as Open Digital Rights Language (ODRL), extensible rights markup language (XrML), content scrambling system (CSS) and Johansen's DeCSS program, the Secure Digital Music Initiative (SDMI) and Macrovision's CDS-300.
The authors suggest that the history of "launch and crack" associated with DRM systems will continue, and "points to a longer-term requirement for media companies and copyright holders to shift away from a mindset of absolute control over every piece of content." (white paper, p. 38). The authors also suggest that using technology to enforce copyright rights cannot map the evolving doctrine of fair use, pointing to Prof. Lessig's writings on code as law. Further, they say, such control stifles or penalizes innovation. They close the DRM section by introducing GartnerG2's concept of "perfectly portable content," described in the paper.
The paper closes with some editorial remarks and a promise of another publication to be released addressing five scenarios of possible outcomes under different assumptions of the playout of tech, business, legislative and legal developments.
James Boyle's book Shamans, Software and Spleens (1996) was a reference in Lessig's Code, and attempts to construct a social theory of the information society. He addresses international policy considerations of current intellectual property law and theory, conflicts between incentives and monopolies, efficiency and property. James Boyle is Professor of Law at the American University.
Boyle utilizes four "puzzles" to illustrate the issues he sees: 1) conflicts between copyright and free speech, 2) the prohibition of blackmail, 3) the prohibition of insider trading, 4) the patenting of biologicals obtained from human and native sources, as addressed in Moore v. The Regents of the University of California, 793 P.2d 479 (Cal. 1990), cert denied, 111 S.Ct. 1388 (1991).
He finds that what he calls "a romantic vision of authorship" can explain the outcome of many controversial issues in the realm of intellectual property and privacy, when combined with "the theme of originality, and the conceptual distinction between idea and expression." Id. p. 98.
He raises doubt that such theories will always result in optimal solutions, and that the trend is toward increasing rights for those seen as "authors" at the cost of free speech, the public domain and the interests of indigenous populations and biospheres. His conclusions in this 1996 book are an expansion upon a manifesto published in 1993 called the "Bellagio Declaration"
Swedish attorney and writer Mikael Pawlo, in Professor Fisher and the Red Eye, comments on the news of the professor's proposal of a system where "the creator of a recording would register it with the U.S. Copyright Office and would receive, in return, a unique file name, which would be used to track Internet transmissions of the work. The government would tax devices and services used to gain access to digital entertainment. The primary target of such a tax would be ISP access." The professor's own draft explication of his proposal is online at Berkman Center.
Pawlo warns that a Digital Rights Management (DRM) scheme and prohibition of copying for what would otherwise be "fair use" is implied in the proposal. He argues that such DRM would sacrifice privacy in favor of copyright protection. Pawlo argues instead for levies on recordable media, such as blank CD-Rs, with the resulting revenue being distributed to copyright proprietors by the collecting societies based upon statistical measures comparable to Nielsen ratings. Conceding that levies are less efficient than a DRM system, he favors their greater protection of individual privacy rights.
William Fisher is a professor at Harvard Law School and the director of the Berkman Center for Internet & Society.
ACM has released its "White Paper on Internet Governance: A View From the Trenches. It "discusses ICANN's history, structure, and scope and focuses on the ability of ICANN to create private rules and regulations that impact free speech and robust use of the Internet by noncommercial communities and individuals," according to a cover letter which also says that it discusses "barriers to participation in ICANN for the noncommercial community" and identifies tasks for the noncommercial community to improve its voice. The report was prepared through a grant from the Ford Foundation's Media Arts and Culture unit.
Thanks to BeSpacific for the word on this resource.
ICANNWatch has noted that the major foundations have pulled back from funding public involvement in ICANN governance, in "Will the Foundations Regain Interest in the Public Interest in ICANN?" posted 8/7/03.
Limiting its decision to construction of the phrase "origin of goods," the Court found that no Lanham Act violation occurred when Dastar edited and republished much of the content of out-of-copyright tapes of the "Crusade in Europe" video. Dastar v. Twentieth Century Foxfilm Corp.(2003) The Ninth Circuit Court of Appeals had found Dastar had "bodily appropriated" the series and engaged in "reverse passing off," affirming an award of twice Dastar's profits to Twentieth Century Fox. The Court reversed, cautioning against misuse or over-extension of trademark and related protections into areas traditionally occupied by patent or copyright.
The Lanham Act, 15 U.S.C. §1125(a), allows a tort action to a person injured by another's "false designation of origin" in connection with any goods or services. The Dastar Court found that "the phrase 'origin of goods' is in our view incapable of connoting the person or entity that originated the ideas or communications that 'goods' embody or contain." They dismissed arguments for a different outcome for a "communicative product" valued for its intellectual content rather than physical characteristics, on the grounds that such would cause the Lanham Act to conflict with the law of copyright.
Prior to the June 2 decision in Dastar, Professor Samuelson referenced the case as an opportunity for the Court to add to the constitutional significance of the public domain, on which the Eldred decision was silent, as mentioned in the Unintended Consequences Note: Samuelson: Con Law of IP after Eldred. The Dastar Court referenced Eldred as support for its summation:
From a note at the weblog "Unintended Consequences" at DougSimpson.com
In Kremen v. Online Classifieds, Inc. and Network Solutions, Inc. (9th Cir 2003) the Ninth Circuit Court of Appeals found that a domain name is intangible property to which the tort of conversion applies under California law, reversing the contrary decision of the District Court and opening Network Solutions to a multi-million dollar liability.
Thanks to SoCalLawBlog.com.
Gary Kremen registered the domain name "Sex.com" in 1994. Subsequently, Network Solutions transferred the name to Stephen Cohen, on the strength of a forged letter from Cohen, described by the Court of Appeals as a "con man." Cohen profitably exploited the domain name until ordered to return it to Kremen and to pay $65 million in damages. Rather than pay the judgment, Cohen went to Mexico with the fruits of his misdeeds, leading to a fugitive warrant for his arrest and a $50,000 bounty posted by Mr. Kremen.
Mr. Kremen turned his attentions to collecting his damages from Network Solutions, which was both solvent and subject to service. The parties and the District Court had no trouble agreeing that the domain name constituted property, but Network Solutions persuaded the District Court that such intangible property was not the proper subject for the tort of conversion.
The Court of Appeals discussed the Second Restatement of Torts §242 and various decisions of the courts of the State of California (in which the case arose) which found subject to the tort of conversion such intangible property as corporate stock, a customer list carried on index cards and unauthorized sale of bootleg recordings. The Court also pointed to a federal decision applying California law to domain names when the issue of jurisdiction depended upon finding the name had been converted. The Court rejected a contention that Network Solutions ought not to be be held liable in the absence of negligence, saying:
EFF: Web Linking Need Not Cause Copyright Liability. The Ninth Circuit has revised an earlier opinion regarding a search engine provider's use of low-res 'thumbnail' versions of others' full-sized images. The thumbnails were made and stored by the search engine provider for such purposes. The Court found such to be "fair use," after applying a balancing test of factors described in the opinion issued July 7, 2003.
The so-called "Ditto.com" case has been closely followed by the IP and Internet law bar since the 2002 ruling that such thumbnail use was not within the "fair use" exception. The Court remanded for further consideration the question whether the framing of a full-sized display of an image selected from the thumbnail was or was not a fair use.
The Ninth Circuit's revised ruling in Kelly v. Arriba Soft case (PDF)
The Court cited as the four factors to consider in determining "fair use:"
Commercial use does not end the consideration under the first factor, according to Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994), where the Supreme Court said:
The Court of Appeals found that Arriba's use of the thumbnails of artist Leslie Kelly's artworks was transformative because they served an entirely different function than Kelly's original images. The Court compared the use to the finding of a transformative use in Nunez v. Caribbean International News Corp, 235 F.3d 18 (1st Cir. 2000), where a copy of a photo intended for use in a modelling portfolio was used in a news article.
The Court found the second and third factors more evenly balanced. As to the fourth factor, the Court again cited Campbell, saying that a "transformative work is less likely to have an adverse impact on the market of the original than a work that merely supercedes the copyrighted work."
The Court held the use of the thumbnails "fair use" under the Copyright Act, but remanded the case for further consideration on the use of the full-size images.
A note in the weblog "Unintended Consequences" at DougSimpson.com
Berkeley Professor Pamela Samuelson, in "Constitutional Law of Intellectual Property after Eldred" suggests that constitutional law scholars will have plenty to chew on even after the Supreme Court decision in Eldred v. Ashcroft, 123 S.Ct. 769 (2003) upholding the Copyright Term Extension Act. She disputes the contentions from some that the "Ashcroft-favorable decision" in Eldred will "deconstitutionalize" intellectual property law and reduce scholarly attention to the constitutional law issues of the topic field. She disagrees, outlining the issues in six fields that she sees as likely areas of focus (continued):
2. Challenges to several Congressional acts in the 1990's restoring copyrights in foreign works in the public domain due to non-compliance with U.S. formalities, for which justification has been claimed under various international treaties.
3. Potential legislation (like that in the European Union) to protect databases compiled of public domain content. Constitutional challenges could be based upon Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991).
4. The theory that law changes that alter the traditional contours of intellectual property law should be subject to heightened scrutiny such as that applied by the 2nd Circuit in Universal Studios v. Corley, 273 F.3d 429 (2nd Cir. 2000).
5. Expanded implications of the First Amendment in intellectual property cases, perhaps even in the patent field.
6. Supremacy Clause challenges to mass-market license terms that limit activities that would be lawful under copyright law as 'fair use'. Vault v. Quard Software 847 F.2d 255 (5th Cir. 1988) and Bowers v. Bay State Technologies, 320 F.3d 1317 (Fed. Cir. 2003) reached conflicting decisions that may end up before the Supreme Court to resolve.
This note is from "Unintended Consequences," a legal weblog at DougSimpson.com.
The Fourth Circuit Court of Appeals found no jurisidiction in Maryland in an alleged trademark infringement case. It applied the "sliding scale" model for applying Calder principles to cases arising from electronic commerce, first articulated in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997).
Thanks to TechLawAdvisor.com for the heads-up on this case.
Read more for court's language summarizing its decision on jurisdiction.
Second, we find it pertinent that the overall content of CPC's web- site has a strongly local character.
"In sum, when CPC set up its generally accessible, semi-interactive Internet website, it did not thereby direct electronic activity into Maryland with the manifest intent of engaging in business or other interactions within that state in particular. * * * Thus, while Maryland does have a strong interest in adjudicating disputes involving the alleged infringement of trademarks owned by resident corporations, and while we give due regard to [plaintiff/appellant] Carefirst's choice to seek relief in that state * * *, it nonetheless remains the case that CPC "could not [on the basis of its Internet activities] have `reasonably anticipate[d] being haled into [a Maryland] court.'" Young, 315 F.3d at 264 (quoting Calder, 465 U.S. at 790). Consequently, the website fails to furnish a Maryland contact adequate to support personal jurisdiction over CPC in the Maryland courts."
END
The U.S. Court of Appeals ruled that an agreement to settle a patent dispute constituted a per se violation of the Sherman Act as a horizontal restraint of trade. The parties were the patentee of a drug ("HMR") and the FDA-approved manufacturer of its generic version ("Andrx"). HMR charged Andrx with patent infringement, then agreed to pay Andrx $40 million per year if Andrx refrained from marketing its generic in the U.S. Customers brought an action for violations of the Sherman Act and state antitrust laws.
The court found that the settlement Agreement "cannot be fairly characterized as merely an attempt to enforce patent rights or an interim settlement of the patent litigation. As the plaintiffs point out, it is one thing to take advantage of a monopoly that naturally arises from a patent, but another thing altogether to bolster the patent's effectiveness(13) in inhibiting competitors by paying the only potential competitor $40 million per year to stay out of the market." In re Cardizem CD Antitrust Litigation , 332 F.3d 896 (6th Cir. 2003). (Thanks to Greenberg Traurig for the alert to this decision.)
This decision brings to mind what is sometimes called the "intellectual property defense" to an antitrust action, discussed in the continuation of this posting.
The “Intellectual Property Defense”
United States’ patent law provides for a protected property right for the exclusive use of an invention for which a patent has been granted. The patent holder may practice the patent itself while denying permission for any others to “practice” the patent, keeping any commercial benefit for its exclusive use. Or, the holder may grant patent licenses to some but not others, discriminating among them and setting prices for licenses as high (or higher) than the market will bear. The holder may sit on its patent, neither practicing it nor allowing others to do so. In each of these decisions, the holder has recourse to law to enforce its rights under the patent law, for the limited life of the patent.
Although this property right is sometimes referred to as a “monopoly,” Chief Judge Markey of the Court of Appeals for the Federal Circuit repeatedly admonished against such a characterization, for example, in Carl Schenck, A.G. v. Nortron Corp., 713 F.2d 782, 786 n. 3 (Fed. Cir. 1983), Judge Markey stated:
The interaction between intellectual property law and antitrust law has challenged courts for many years. The Sherman Act, outlaws “monopolization” as well as “contracts, combinations and conspiracies in restraint of trade.” The Federal Trade Commission (FTC) Act and regulations passed under its authority constrain "unfair competition" defined in various ways. Other federal and state laws expand on these two statutes.
The “intellectual property defense” is often cited in response to legal actions sounding in antitrust when the alleged anticompetitive behavior involves the licensing or refusal to license patented inventions. Two recent Court of Appeals decisions illustrate the scope (and limitations) of the “intellectual property defense.”
Image Service Technical Servs. v. Eastman Kodak Co. , 125 F.3d 1195 (9th Cir. 1997), involving Kodak’s refusal to sell aftermarket parts to the plaintiffs. The plaintiffs charged Kodak with monopolization, and the Court of Appeals affirmed a jury verdict against Kodak. Kodak’s defense, raised late in the litigation, was to the effect that some of the parts were protected by patent or copyright. The Court found the defense to be inadequate and just a pretext, because not all of the withheld parts were so protected.
In a more recent case, In re Independent Service Organizations Antitrust Litigation , 203 F.3d 1322 (Fed. Cir. 2000), cert. denied, 531 U.S. 1143 (2001), the Court of Appeals upheld the right of Xerox to refuse to sell aftermarket parts and license related software to certain independent service organizations (“ISOs”) that were attempting to compete with it in the servicing market. In the case of Xerox, all of the items in question (not just some) were protected by patent or copyright. The Court noted that "[i]n the absence of any indication of illegal tying, fraud in the Patent and Trademark Office, or sham litigation, the patent holder may enforce his statutory right to exclude others from making, using or selling the claimed invention free from liability under the antitrust laws."
There are several concise discussions of the Kodak and Xerox cases online, including:
The United States Department of Justice, Antitrust Division has published "Antitrust Guidelines for Licensing of Intellectual Property" in which they extensively discuss the basics of this interaction between intellectual property law and antitrust and unfair competition law:
“Market power is the ability profitably to maintain prices above, or output below, competitive levels for a significant period of time.(10) The Agencies will not presume that a patent, copyright, or trade secret necessarily confers market power upon its owner. Although the intellectual property right confers the power to exclude with respect to the specific product, process, or work in question, there will often be sufficient actual or potential close substitutes for such product, process, or work to prevent the exercise of market power.(11) If a patent or other form of intellectual property does confer market power, that market power does not by itself offend the antitrust laws. As with any other tangible or intangible asset that enables its owner to obtain significant supracompetitive profits, market power (or even a monopoly) that is solely "a consequence of a superior product, business acumen, or historic accident" does not violate the antitrust laws.(12) Nor does such market power impose on the intellectual property owner an obligation to license the use of that property to others. As in other antitrust contexts, however, market power could be illegally acquired or maintained, or, even if lawfully acquired and maintained, would be relevant to the ability of an intellectual property owner to harm competition through unreasonable conduct in connection with such property.”
The Guidelines go on to discuss (with example scenarios) situations in which a violation might be found, and those in which restrictions would not be likely to offend the antitrust laws. Certain restraints on trade are considered "per se" unlawful, and include "naked price-fixing, output restraints, and market division among horizontal competitors, as well as certain group boycotts and resale price maintenance." Guidelines, §3.4. In the Cardizem CD case decided in June 2003, HRM and Andrx were found to have fallen into the "market division among horizontal competitors" category of per se violations.
END
Relaunched: Stanford University Libraries Copyright & Fair Use Website
This very handy portal has links to:
* primary materials including statutes, international treaties and cases.
* various exemplar guidelines, articles and communities
* key copyright sites, including a "Copyright Crash Course" at Univ. of Texas
* detailed "Copyright and Fair Use Overview" from Nolo, based upon the book "Getting Permission"
* resources for librarians
* current issues and recent legislation
I'll be exploring this frequently. Thanks to BeSpacific for the heads up on this grand reopening.
Obtaining business method patents on insurance operational processes or new products is a new trend in the marketplace. Walker Digital, L.L.C. in Stamford, CT holds over 200 patents, including some related to financial services and negotiations. Walker's most famous business method is the "name your own price" method used by Priceline.com.
Two consultants, Tom Bakos and Mark Nowotarski, have publicly posted insights into the trend toward patenting of new insurance business methods. A series of their articles in National Underwriter and elsewhere are listed and linked from Mr. Nowotarski's company website . Mr. Nowotarski is a patent agent and inventor based in Stamford, Connecticut. Mr. Bakos, a consulting actuary based in Ridgway, Colorado, offers a digital copy of an article summarizing patent, copyright and trademark principles relevant to insurance. It was published in the July/August 2002 issue of Contingencies, a publication of the American Academy of Actuaries.
I'll be doing additional exploring of the intellectual property realm in relation to insurance and other financial services and noting observations here in Unintended Consequences. If you have some areas of interest to suggest exploring, please let me know via email: douginhartford "at" earthlink.net
Doug Isenberg, an Atlanta attorney and regular columnist for the Wall Street Journal Online and CNET News.com, is the founder of GigaLaw.com, a website focused on the law of the Internet. In his Guide to Internet Law, he has compiled an essential reference work for both attorneys and laypersons seeking to understand or review the multiple elements of law pertinent to activity on the Internet. It would be particularly helpful for generalist attorneys and their clients engaging in "e-business." It is also readable enough that it kept some of my attention while at Cape Cod two weeks ago when I started reading it.
Attorney Isenberg organizes his book into seven major parts of Internet law. The first three parts deal with intellectual property law: "Copyright," including the Digital Millenium Copyright Act, "Domain Names and Trademarks," and "Patent Law." (by Greg Kirsh). As with each of the seven sections of the book, he introduces new legal principles with a case study, and then concisely identifies and explains the statutes and decisions that form the foundation of the relevant law. Where the law is still unsettled, he briefly points out the competing arguments for various outcomes, in clear yet accurate language.
Part IV deals with the hot issue of "Privacy," including short introductions to FCRA, ECPA, HIPAA, the Childrens' Online Privacy Protection Act ("COPPA"), the Gramm-Leach-Bliley Act, as well as European and Canadian regulations. Part V addresses "Free Speech and the First Amendment," including the Communications Decency Act and the Children's Online Protection Act (COPA).
The sixth section includes chapters about "Contract Law and High Technology" that includes an introduction to UETA, UCITA and the federal E-SIGN statute. The book closes with a section on "Employment Law" (by Doug Towns) relevant to employee use of the Internet and considerations particular to high technology companies.
This compact, affordable book provides an invaluable, readable desk reference which Lawrence Lessig described as "an excellent introduction for beginner and expert alike."
Isenberg, "The GigaLaw Guide to Internet Law" (Random House, 2002)
Professor Lessig raises fundamental constitutional debates in "Code and Other Laws of Cyberspace" (Basic Books, 1999). Maintaining that "code is law," and that the freedom found in cyberspace's early years is only due to choices made by those architecting it. He sees the introduction of commerce to cyberspace as "constructing an architecture that perfects control -- an architecture that makes possible highly efficient regulation." (Lessig, Code, p. 6). He then argues for the maintenance of a creative commons to check controversial forms of control over cyberspace.
A few thoughts about the book follow:
Four themes repeat throughout the book's discussion of the tension between relatively perfect freedom and relatively perfect control in cyberspace:
Prof. Lessig maintains that the nature of cyberspace is about to flip from unregulability to regulability, through the use of "architectures of control." As examples, he introduces digital certificates, encryption and the public key infrastructure (PKI). He considers recent history of government action to increase the regulability of the Net, including requiring copy degradation in Digital Audio Tape (DAT) systems; the "V-Chip" in televisions; the failed "Clipper Chip" initiative and the 1998 Digital Millenium Copyright Act (DCMA) ban on software designed to defeat copyright management schemes.
He suggests that indirect governmental regulation could come through facilitating a certificate-rich Net, in which users must provide digital credentials to access certain services. He finds that increasing commercial applications on the Net increases government's ability to regulate indirectly. "When commerce writes code, then code can be controlled, because commercial entities can be controlled." Id p. 53.
He also sees certification tools as enabling regulation across state and international borders in ways not practical today. "With a simple way to verify citizenship, a simple way to verify that servers are discriminating on the basis of citizenship, and a federal commitment to support such local discrimination, we could easily imagine an architecture that enables local regulation of Internet behavior." Id p. 55-56. Lessig sees the market forces pressing towards the "zoning" of cyberspace based upon individual users' certificate qualifications.
Lessig ends the first part of the book with a public policy question for the reader:
"How the code regulates, who the code writers are, and who controls the code writers -- these are questions that any practice of justice must focus in the age of cyberspace. The answers reveal how cyberspace is regulated. My claim in this part of the book is that cyberspace is regulated, and that the regulation is changing. Its regulation is its code, and its code is changing." Id. p 60.
Prof. Lessig introduces a schematic of an individual as a dot, surrounded by four larger dots titled Architecture, Market, Norms and Law, each a source of constraints upon the individual. He reminds us that Law can modify the influence of the other three on the individual, and thereby constrain indirectly. He criticizes indirect regulation because "it muddies the responsibility for that constraint and so undermines political accountability. If transparency is a value in constitutional government, indirection is its enemy." Id p. 96.
He also uses the concept of constitutional "translation," and offers the example of the dissent of Justice Brandeis in Olmstead v. United States, 277 U.S. 438 (1928). In Olmstead, the Court decided that a telephone wiretap did not violate the Fourth Amendment because it was not a physical trespass. Brandeis argued that the Amendment should be translated so as to preserve its meaning despite changes in the technology since its enactment. Prof. Lessig says that Brandeis "wanted to read it differently, we would say, so that it protected the same" and points to this dissent as "a first chapter in the fight to protect cyberspace." Lessig, op cit, p. 116. Brandeis' dissenting viewpoint was not adopted until 1967, with the decision in Katz v. United States 389 U.S. 347 (1967), in which Justice Stewart's opinion created the "reasonable expectation of privacy," the core value of which was the protection of people, not places.
Regarding intellectual property, Prof. Lessig notes that a least two sorts of property protection are possible in cyberspace: "One is the traditional protection of law. The other protection is a fence, a technological device (a bit of code) that (among other things) blocks the unwanted from entering." Lessig, op cit p 122. He credits to a former research assistant the idea that: "since the intent of the 'owner' is so crucial here, and since the fences of cyberspace can be made to reflect that intent cheaply, it is best to put all the incentive on the owner to define access as he wishes. The right to browse should be the norm, and the burden to lock doors should be placed on the owner." Id. p. 123. This raises the basic question, says Prof. Lessig: "Should the law protect certain types of property -- in particular, intellectual property -- at all?" Id. p. 123.
Prof. Lessig goes on to assert that private fences (code) can displace public law as the primary protector of intellectual property in cyberspace. "We are not entering a time when copyright is more threatened than it is in real space. We are instead entering a time when copyright is more effectively protected than at any time since Gutenberg. The power to regulate access to and use of copyrighted material is about to be perfected." He goes on to point to Mark Stefik's work concerning "trusted systems" used to track and control copies of copyrighted material. "What copyright seeks to do using the threat of law and the push of norms, trusted systems do through the code." Lessig, op cit p. 130.
But the professor points out that public interests lie with not giving perfect control to the owners of intellectual property. "The law has a reason to protect the rights of authors, at least insofar as doing so gives them an incentive to produce. With ordinary property, the law must both create an incentive to produce and protect the right of possession; with intellectual property, the law need only create the incentive to produce." Id. p. 133. Fair use, for example, is one limit of copyright law, a limit "constitutionally structured to help build an intellectual and cultural commons." Id. p. 135. The limited duration of copyright protection is another. Lessig asks if private code built to protect intellectual property will also be written to include 'bugs' like fair use and limited terms of protection, concluding that "Loss of fair use is a consequence of the perfection of trusted systems." Id. p. 137.
Another loss is anonymity -- trusted systems need to track use and charge for it, yet monitoring destroys anonymity. Under the "Cohen Theorem," says Prof. Lessig, reading anonymously is "so intimately connected with speech and freedom of thought that the First Amendment should be understood to guarantee such a right," quoting an article in Conn. Law Review 28 (1996) (p. 981, 982). Lessig argues that cyberspace should be architected to preserve a commons to replace that inherent before code made possible "perfect control," pointing the reader to Boyle, "Shamans, Software and Spleens" (Harvard Univ. Press 1997).
Chapter 11 deals with privacy, and suggests three elements behind the constitutional concept of privacy: 1) to minimize intrusion (the right to be left alone); 2) preserve dignity; 3) constrain the power of the state to regulate. The author sees encryption as improving privacy, but argues also for "a kind of property right in privacy." Id. p. 160, and explains why his position is different for privacy rights than it is for intellectual property rights: "In the context of intellectual property, our bias should be for freedom. *** We should take a grudging attitude to property rights in intellectual property; we should support them only as much as necessary to build and support information regimes." Id. p. 162.
Prof. Lessig sees the architecture of the Net as a top protector of free speech, through which architecture the First Amendment (in code) has been effectively exported to the world. One way that happened is by removing architectural restraints on instant global publication of information and opinions, but also removing the function of a publisher that would edit for truth and establish a reputation. "In a world where everyone can publish, it is very hard to know what to believe." Id. p. 171. He addresses means of using the architecture in the application space to control troublesome content such as pornography within the limits of Ginsberg v. New York, comparing a "zoning" approach to a "filtering" approach. He also warns about the hazards of filtering that is both perfect and invisible, and argues for less control over speech than over privacy, and less control over intellectual property.
Code becomes more abstract in its later chapters as it addresses the latent ambiguities inherent in the conflicts and overlaps of competing sovereigns with interests in behavior in cyberspace. "We should understand the code in cyberspace to be its own sort of regulatory regime, and that this code can sometimes be in competition with the law's regulatory regime." Id. p. 205. He sees the emergence of globally unified regulation through code, shifting power from sovereigns to software, suggesting to the reader a reading of Wriston's "The Twilight of Sovereignty". (Scribner 1992). He also sees a certificate-rich Net as re-enabling sovereigns to claim some of their authority: "Sovereigns get this. They will come to understand that there is a different architecture for the Net that would enable their own control. When they do, they will push to facilitate the predicate to this architecture of regulability -- certificates. And when they do, we again will have to decide whether this architecture of regulability is creating the cyberspace we want." Id. p. 207-208.
An important, thought provoking book that should be required reading, and re-reading, for any student of cyberspace and the modern world.
Lawrence Lessig, "Code and Other Laws of Cyberspace" (Basic Books, 1999).
The syllabus and and reading list for Harvard Law's Program of Instruction For Lawyers: Internet Law 2003 includes weblogged commentary by John Palfrey and Donna Wentworth of the Berkman Center.
The program runs 6/16-20 and addresses Jurisdiction, Intellectual Property, Digital Democracy, Litigation and the Digital Environment and Privacy, one topic each of the five days. Thanks to beSpacific.com for the heads up on this resource.
