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1.30.2004
Open Source & Intellectual Property
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I recently published an article "Today Linux, Tomorrow the World?" in the ezine TechCentralStation. The piece discussed the phenomenon of open source software, with particular focus on the effort by some (called "leftist academics" by me, but feel free to substitute a more neutral term if you like) to extend the model to the production of other types of intellectual creations.
One thing I have learned in writing about the topic of open source is that it usually produces intense flame wars. This effort is an exception, so far; I did get objections, but they were uniformly thoughtful and courteous, and they made some excellent points.
Attached here are my capsule descriptions of the comments, together with responses. At the end, the comments are attached in full. The names have been removed, however, since we have not sought permission to disclose them.
We look forward to more dialogue on this important topic.
posted by James DeLong : 1/30/2004 04:35:49 PM
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1.28.2004
And the Survey Says...
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According to Tuesday's Wall Street Journal, Harris Interactive just released a poll finding that three-quarters of adult Americans believe downloading music from the Internet and reselling it is wrong, but that downloading for personal use in "an innocent act." Interpretation of this finding is clouded by Harris Interactive's decision to ask a single question combining both of these issues. It is not clear whether the results are mainly attributable to the agreement that downloading and reselling is wrong or agreement that downloading for personal use is OK. (In addition, the survey did not distinguish between unauthorized P2P downloads and downloads from the rapidly growing authorized online music services.)
Further complicating interpretation is the fact that nearly two-thirds (64 percent) agreed that "musicians and recording companies should get the full financial benefit of their work." How companies and artists could be expected to obtain full value if free music downloading is permitted was not covered in the survey.
Since many Americans engage in P2P downloading for personal use, it is not surprising that they would like to think the activity is innocent. The price is right. But if unauthorized P2P transfers are treated as innocent, many consumers will opt for free content, free-riding on the increasingly small number of paying customers who foot the bill for content creation. The availability of high quality content will suffer. Consumers as a group will be better off under a regime that protects rights in content and thereby promotes the development of legitimate markets in digital content. (For more on market approachs, see the recent study by Professor Robert Merges.)
posted by Bill Adkinson : 1/28/2004 12:52:59 PM
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1.27.2004
It's not over 'til it's over
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Everyone who follows the IP business knows about RIAA v. Verizon -- the D.C. Circuit ruling that section 512(h) of the DMCA does not empower a copyright holder to lay a subpoena on an ISP demanding the identity of an unauthorized P2P music downloader, unless it has already filed formal legal action against an unknown "John Doe."
It turns out that the issue is not closed. RIAA subpoenas are also being litigated in the 4th and 8th Circuits, and in those venues the industry is arguing that the D.C. Circuit was wrong. The cases are still at the trial level, or at preliminary stages of appeal, so briefs are not yet available, but the crux of the RIAA's argument can be found in the opinion of the district court that was reversed by the D.C. Circuit. Also, the industry has not yet decided whether it will seek rehearing en banc or Supreme Court review of RIAA v. Verizon.
An analysis of the issues, written before the D.C. Circuit decision, is here. Many experts were surprised by the D.C. Circuit decision, so the other circuits could come to a different conclusion.
posted by James DeLong : 1/27/2004 04:30:24 PM
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1.26.2004
Compulsory licenses
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The Cato Institute has just posted a piece by Professor Robert Merges of the University of California-Berkeley entitled Compulsory Licensing vs. the Three 'Golden Oldies': Property Rights, Contracts and Markets. The accompanying press release says: "America's creative energy and entrepreneurship are known the world over. Property rights, contracts and voluntary markets have played a primary role in the development of our vibrant industries. . . . . Merges argues that these, the 'building blocks of all creative endeavors,' are just as relevant in the digital era as ever, and, in fact, underpin the conditions for 'future growth and diversification' in intellectual property."
posted by James DeLong : 1/26/2004 12:53:40 PM
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1.15.2004
iTunes: Time's "Coolest Invention of the Year"
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Time's decision to name Apple's iTunes the "coolest invention" of the year illustrates an important point: realizing the benefits of the digital content revolution depends not just on cool technology, but also on establishing economic institutions and business arrangements that promote vibrant marketplaces.
iTunes is an example of an economic innovation, as Time's description makes clear: "It is a disarmingly simple concept: sell songs in digital format for less than a buck and let buyers play them whenever and wherever they like - as long as it's on an Apple iPod." Restricting use to iPods may offend the sensibilities of those who despise limits or insist on interoperability. But it is essential to making the economics work and cannot plausibly exert an anticompetitive effect.
iTunes success, measured in sales and number of imitators, is impressive - it has clearly moved the ball forward. But we are still a very long way from establishing the economic foundations for vibrant markets in digital content. To reach this goal, we will need innovations that enable authors to better protect their rights to distribute works online - through more effective copyright enforcement, use of digital rights management tools, and other means.
posted by Bill Adkinson : 1/15/2004 05:44:19 PM
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Run! Its an Election Year!
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PFF is not a political organization. In fact, it is a refuge from mindless regurgitations about Iowa and New Hampshire. But politics has intruded into our Eden, in that we have found Howard Dean’s Principles for an Internet Policy.
Most of it is the soporific politico-speak one expects every four years, but one feature is striking. The Internet is portrayed as a sort of manna from heaven, not as a product of the intelligence, money, and entrepreneurial nerve of thousands of people and corporate entities. Thus the statement is long on distributing the fruits of the Internet and short on encouraging its continued development, long on "we all did this" and short on "no, some of us did it and the rest are free riding." Like, what about deregulation of telecom? Or protection of intellectual property? Adam Thierer of Cato characterizes the position as: "Collectivism In, Property Rights Out."
To be even-handed, the Administration has been quiet about these issues, too, especially about deregulation, and it doesn't even have the excuse of being out of power. If the attitude of all parts of the political class toward the Internet is "the Lord will provide and we will distribute," it will not be a happy 2004 for techies.
posted by James DeLong : 1/15/2004 11:46:40 AM
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1.14.2004
Shut those eyes!
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One advantage of an interest in intellectual property is that the topic presents so many bizarre and entertaining questions. The latest conundrum: Can the Chicago Cubs collect money from the owners of buildings that overlook Wrigley Field for erecting rooftop bleachers? ESPN reports on the state of play; Eugene Volokh has a nice discussion of the legal points on The Volokh Conspiracy (scroll down to 01/13/04 3:21 p.m.).
posted by James DeLong : 1/14/2004 08:49:29 AM
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1.13.2004
Verizon v. Trinko: The Limits of Antitrust
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When I first wrote an essay on Verizon v. Trinko, I kept wondering - with all these interesting issues, which ones will the Court actually decide? Today's answer: Almost all. More important, it got them right.
The case arose in the shadow of the 1996 Telecommunications Act, which requires that Baby Bells like Verizon provide a variety of services to competing companies (CLECs) at regulated prices. CLECs and retail customers (like Trinko) have supplemented the regulatory remedies by filing treble damage antitrust actions against Baby Bells, alleging that deficiencies in performing these obligations constituted illegal refusals to deal with a competitor. The petition raised diverse questions - standards for monopolist's conduct, the interplay between the antitrust and the 1996 Act, and even plaintiff's standing to sue.
Trinko represented the Court's first opportunity to address these issues, and it found for Verizon on nearly every ground. First, the Court (per Justice Scalia) found that Verizon's "alleged insufficient assistance in the provision of service to rivals is not a recognized antitrust claim under this Court's existing refusal to deal precedents." It explained that duties to deal with competitors should be "exceptions" adopted "very cautious[ly]," since they can interfere with procompetitive conduct and are difficult for courts to administer. (This treatment was somewhat reminiscent of the Court's approach to predatory pricing claims.)
Second, the Court emphasized that the 1996 Telecommunications Act is "much more ambitious than the antitrust laws" in seeking "to eliminate... monopolies." The Act and its implementing regulations therefore greatly reduced the potential for antitrust harm. The majority also cited the difficulties that a court would face in evaluating behavior and implementing remedies in this dynamic marketplace. And three more justices separately concurred, arguing that Trinko lacked standing to sue under the antitrust laws.
Teasing out implications for Section 2 analysis will keep scholars busy. But of more immediate interest is how this will affect the resolution of the various sister cases that have been awaiting this decision. Here the implications seem doubly clear. The Court refused to extend liability for refusals to deal to cover the alleged activity citing both substantive antitrust doctrine and the existence of a "more ambitious" regulatory system. Most importantly, it made this determination "on the pleadings," permitting dismissal without costly discovery. Plaintiffs are likely to be hard pressed to maintain antitrust actions under these standards.
posted by Bill Adkinson : 1/13/2004 03:27:28 PM
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1.12.2004
Carly Fiorina: Singing in Harmony
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HP chief Carly Fiorina used her keynote address at the Consumer Electronics Show to proclaim HP's commitment to promoting high quality content and combating piracy:
"We all know that the best system in the world won't mean much if the content you're receiving isn't rich, and exciting, and meaningful to you. From creation, to distribution, to consumption, we are working today to ensure that the music and the movies that will be a part of your digital entertainment system are as rich and compelling as they can be."
How will HP do that? By joining hands with the content industry, figuratively and literally, to fight digital piracy. Fiorina described how HP is collaborating with content providers, sharing the stage with music and movie industry notables (e.g. Jimmy Iovine, Sheryl Crow, Ben Affleck) and singing the praises of iTunes, DreamWorks, and the Sundance Film Festival. She not only condemned Internet piracy as "illegal and wrong," she outlined specific steps HP is taking to combat it.
Fiorina's vision reflects enlightened self-interest - recognizing mutual interest in protecting incentives for the creation of a steady stream of high-quality music, games and movies. PFF has long emphasized the mutual dependence of four sectors - computer, software, telecomm and content - that must all work together to provide valuable digital content to consumers. Jeff Eisenach and I have dubbed this the "virtuous circle." But the feuds between the content industries and the tech and telecomm sectors over content protection have often degenerated into a vicious circle.
Does this signal the end of the battle between Hollywood and the tech and telecom industries? Hardly. Finding common ground will remain difficult. But let’s hope we see more of Carly Fiorina's spirit of cooperation and enlightened self-interest.
posted by Bill Adkinson : 1/12/2004 12:05:32 PM
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1.7.2004
Homer Nods
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Usually rational blogger Glenn Reynolds has been replaced, at least momentarily, by a pod person. He notes today that: (a) Used copies of an out-of-print book by his wife were selling for $99.95; (b) She made it available in pdf format; (c) The price of used copies has held firm or even gone a up a bit. Therefore, he says, the RIAA should conclude that free downloads do not cannibalize sales of music.
The problem is that a used copy of an out-of-print book has three forms of value: Information value; Convenience value (viz., a neat binding rather than the loose-leaf pages of a pdf printout); and Rarity value. If the book becomes posthumously popular, then both the convenience value and the rarity value can increase even if those who care only about information value meet their needs via the pdf version.
If Glenn's wife were now to bring out a new edition in paperback (no rarity value), I think she would find that her pdf distribution did indeed reduce her royalty check, like, to pennies, even as the popularity of the book skyrocketed.
Furthermore, to analogize this situation to the perfect and unlimited copies of digital music downloading, where information value is all important, makes no sense at all.
posted by James DeLong : 1/7/2004 12:32:53 PM
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1.5.2004
File Sharing
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The Pew Foundation's Internet and American Life Project released a report yesterday that concludes: "The RIAA law suits against online music file sharers appear to have had a devastating impact on the number of those engaging in Internet peer-to-peer music sharing."
This is good news, not least because it indicates that people can be shifted over to the increasing number of legitimate downloading services, which means that creators and distributors of music will make more money, which means that we will all get the benefit of more music.
Why the pro-downloaders think this whole matter is a zero sum game of music fans versus the RIAA is a mystery. The real dilemma is how music fans can pool their money to support the producers, and the best way to do this is through property rights and markets.
posted by James DeLong : 1/5/2004 11:13:59 AM
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