ACT to Come Out against DMCA and Software Patents?

by on August 10, 2008 · 20 comments

I was pleased to see Braden’s excellent new paper on the use of self-serving lobbying tactics to limit competition and promote particular business models at the expense of others. As Braden and his co-author point out, some of the most important competition in the software industry has become less about products than about business models. Some software companies sell the software directly, while others give software away as a means of selling hardware, services, or advertising. And in many cases, public policy debates in the software industry are thinly-veiled attempts to give some business models unfair advantages over others.

Braden produced a chart that gives some helpful examples of policies that tilt the economic playing field toward one business model at the expense of the others:

As you can see, software patents promote proprietary software business models at the expense of business models based on giving software away for free (and, it should be said, at the expense of people who want to give software away for free on a non-commercial basis). Similarly, the DMCA promotes proprietary software business models. They neglected to put it on the chart, but the flip-side is obviously true: the DMCA harms free software, commercial and otherwise, by making unauthorized interoperability with DRMed software a crime.

Braden does a great job of explaining why we should be concerned about public policies that limit competition or tilt the playing field toward particular business models:

It rarely serves the public interest to erect barriers that favor specific business models. Yet companies will try to game the system to their advantage by lobbying policy-makers to create policies that favor their business model over those of their competitors…

We expect companies to embrace public interest values in marketing campaigns appealing to multiple stakeholders, including employees, investors, and consumers. However, when a company links its business model to the public interest in order to obtain regulatory advantages, then it’s caveat
legislator. Policymakers should be cautious when pursuing public goals through business regulation.

Indeed they should. On the other hand:

It’s unequivocally beneficial to lobby policymakers to remove legacy regulations that prevent competition from new business models… Businesses, consumers, and our economy all benefit from lobbying efforts to remove barriers to competition…

Quite so. The report isn’t really focused on the DMCA or software patents, so you have to read between the lines a little bit, but I think the implications of Braden’s argument are pretty clear. In many cases, public policy debates between companies are little more than thinly veiled rent-seeking. Each company figures out which policies would most benefit its own bottom line and then comes up with plausible-sounding public interest rhetoric to justify the policy that happens to be in its own interest.

In contrast, Red Hat lobbies for the repeal of software patents, it’s not merely advocating its own self interest, but a level playing field free of regulatory distortions. Red Hat isn’t seeking any special regulatory favors, it just wants to be free to innovate without having to consult patent lawyers at every turn. As Braden says, consumers, business, and the economy all benefit from efforts to dismantle legal barriers to competition. It’s a great report, and I hope ACT will follow up their inspiring words with bold actions.

  • http://www.techliberation.com/contributors/braden_cox.php Braden

    Tim, thanks for the glowing review! But your call for ACT to go beyond exposing the motivation to affirmatively oppose the merits of software patents and the DMCA is more than what we were trying to accomplish with the paper. We meant to explain business motivation instead of the merits of different public policy choices – and the effect on business models.

    The effect on business models – not software technologies, not particular businesses – is the key point. It’s a nuanced distinction, but an important one that forms the basis of the paper. It’s not as clear as it should be in the chart you reference, and you’ve caught-on to the need for better semantic distinctions.

    First, the paper should not lead one to necessarily advocate for eliminating software patentability. Software patents are not strictly a tool for empowering just one business model. The Open Invention Network helps pool patents to benefit Linux-based systems. And some companies that do very well at giving away software to drive hardware sales or services revenue pursue their own patent strategies (IBM). There’s nothing to prevent companies that give away software from patenting an innovative feature, and — patent in-hand — still give the software away to help drive even more hardware sales.

    Its a business decision whether or not to use software that’s patented, and this is true for businesses that give away software or businesses that make most of their money from licensing software. A public policy allowing software patents won’t per se preclude a business model. It may make certain licensing models (GPL v.3) or even hobbyist models (due to licensing fees) less viable but these aren’t business models.

    This is not to say that software patents — or the patent system overall — isn’t in need of reform. Software and other new technologies have exposed problems at the PTO. Last week the Reason Hit & Run blog described a recent IBM patent on paper or plastic bag preference storage on a customer cards and I know you’ve analyzed many on the TLF blog.

    So you were right to pick-up on how the chart only partially shows how license fees can impact business models, as fees can also apply to business models that license software and rely on advertising (in the chart there should’ve been a similar bullet for these two too). But you’re wrong about the DMCA’s harm to business models that give away software.

    I can’t agree when you say that “the DMCA harms free software, commercial and otherwise, by making unauthorized interoperability with DRMed software a crime.” I underline “interoperability” to emphasize that a company can still choose to interoperate with DRMed software, regardless of its business model. Again as in the patent discussion above, it may impact certain software or even certain companies that are found to infringe copyright per the DMCA, but the law is business model agnostic.

    ACT’s Debbie Rose just finished a paper on this (which will be released soon) and I’m going to borrow from it when I say that the DMCA really only does two main things: 1). You May Not Circumvent A Digital Lock on Copyrighted Material, and 2). You May Not Make Devices Intended For “Hacking” or Circumvention. You can make devices that circumvent piracy prevention measures, so long as the device is not primarily designed to do so, there is commercial value in its other functions, and is not marketed and sold as a circumvention device.

    The DMCA can be argued as a bad law for a number of reasons, but discriminatory impact on business models is not one of them.

  • http://www.techliberation.com/contributors/braden_cox.php Braden

    Tim, thanks for the glowing review! But your call for ACT to go beyond exposing the motivation to affirmatively oppose the merits of software patents and the DMCA is more than what we were trying to accomplish with the paper. We meant to explain business motivation instead of the merits of different public policy choices – and the effect on business models.

    The effect on business models – not software technologies, not particular businesses – is the key point. It’s a nuanced distinction, but an important one that forms the basis of the paper. It’s not as clear as it should be in the chart you reference, and you’ve caught-on to the need for better semantic distinctions.

    First, the paper should not lead one to necessarily advocate for eliminating software patentability. Software patents are not strictly a tool for empowering just one business model. The Open Invention Network helps pool patents to benefit Linux-based systems. And some companies that do very well at giving away software to drive hardware sales or services revenue pursue their own patent strategies (IBM). There’s nothing to prevent companies that give away software from patenting an innovative feature, and — patent in-hand — still give the software away to help drive even more hardware sales.

    Its a business decision whether or not to use software that’s patented, and this is true for businesses that give away software or businesses that make most of their money from licensing software. A public policy allowing software patents won’t per se preclude a business model. It may make certain licensing models (GPL v.3) or even hobbyist models (due to licensing fees) less viable but these aren’t business models.

    This is not to say that software patents — or the patent system overall — isn’t in need of reform. Software and other new technologies have exposed problems at the PTO. Last week the Reason Hit & Run blog described a recent IBM patent on paper or plastic bag preference storage on a customer cards and I know you’ve analyzed many on the TLF blog.

    So you were right to pick-up on how the chart only partially shows how license fees can impact business models, as fees can also apply to business models that license software and rely on advertising (in the chart there should’ve been a similar bullet for these two too). But you’re wrong about the DMCA’s harm to business models that give away software.

    I can’t agree when you say that “the DMCA harms free software, commercial and otherwise, by making unauthorized interoperability with DRMed software a crime.” I underline “interoperability” to emphasize that a company can still choose to interoperate with DRMed software, regardless of its business model. Again as in the patent discussion above, it may impact certain software or even certain companies that are found to infringe copyright per the DMCA, but the law is business model agnostic.

    ACT’s Debbie Rose just finished a paper on this (which will be released soon) and I’m going to borrow from it when I say that the DMCA really only does two main things: 1). You May Not Circumvent A Digital Lock on Copyrighted Material, and 2). You May Not Make Devices Intended For “Hacking” or Circumvention. You can make devices that circumvent piracy prevention measures, so long as the device is not primarily designed to do so, there is commercial value in its other functions, and is not marketed and sold as a circumvention device.

    The DMCA can be argued as a bad law for a number of reasons, but discriminatory impact on business models is not one of them.

  • Tim Lee

    Software patents are not strictly a tool for empowering just one business model. The Open Invention Network helps pool patents to benefit Linux-based systems.

    The OIN protects free software firms against the threat of software patents, but it doesn’t “empower” them in any way. Linux-based businesses would be at least as well off in a world with no software patents. (And yes, IBM happens to have divisions that benefit from software patents, but its open source business isn’t among them)

    Its a business decision whether or not to use software that’s patented

    I’m sorry, but no it isn’t. There are now so many broad software patents on the books that it’s essentially impossible to write a non-trivial software product without infringing numerous patents. Unlike copyright, businesses don’t have the option to opt out of the patent system. They’re forced to defend themselves against patent lawsuits regardless of whether they themselves benefit from patents.

    I underline “interoperability” to emphasize that a company can still choose to interoperate with DRMed software, regardless of its business model.

    Really? So if I wanted to sell an open-source DVD player, how would I go about getting the necessary license? I’m pretty sure the DVD-CCA won’t give me one, and it’s a federal crime to write DVD playing software without the DVD cartel’s blessing. The DMCA means, in practice, that open source applications cannot participated in DRM-encumbered media platforms. That strikes me as a pretty big impediment to open-source-based business models.

  • Tim Lee

    Software patents are not strictly a tool for empowering just one business model. The Open Invention Network helps pool patents to benefit Linux-based systems.

    The OIN protects free software firms against the threat of software patents, but it doesn’t “empower” them in any way. Linux-based businesses would be at least as well off in a world with no software patents. (And yes, IBM happens to have divisions that benefit from software patents, but its open source business isn’t among them)

    Its a business decision whether or not to use software that’s patented

    I’m sorry, but no it isn’t. There are now so many broad software patents on the books that it’s essentially impossible to write a non-trivial software product without infringing numerous patents. Unlike copyright, businesses don’t have the option to opt out of the patent system. They’re forced to defend themselves against patent lawsuits regardless of whether they themselves benefit from patents.

    I underline “interoperability” to emphasize that a company can still choose to interoperate with DRMed software, regardless of its business model.

    Really? So if I wanted to sell an open-source DVD player, how would I go about getting the necessary license? I’m pretty sure the DVD-CCA won’t give me one, and it’s a federal crime to write DVD playing software without the DVD cartel’s blessing. The DMCA means, in practice, that open source applications cannot participated in DRM-encumbered media platforms. That strikes me as a pretty big impediment to open-source-based business models.

  • Braden Cox

    There are now so many broad software patents on the books that it’s essentially impossible to write a non-trivial software product without infringing numerous patents. Unlike copyright, businesses don’t have the option to opt out of the patent system. They’re forced to defend themselves against patent lawsuits regardless of whether they themselves benefit from patents.

    We agree that there are broad patents, the system is broke and needs fixing, and lots of money is wasted on lawyers instead of developers. But this is the environment for all companies, regardless of business model! Lots of companies that make money from software licensing fees get sued, or live under the fear of a lawsuit…not just companies that make money from giving away software to sell hardware or services. When I was in-house counsel for a software development company, I sweated the occasional call from a company “inquiring” as to whether we’d “like” to join their patent licensing program.

    Here’s what I’m getting at. You can choose to play the game, or you can choose not to — patents are available to companies in any business model. But if you have chosen not to play for various philosophical or business reasons, you can’t then righteously fold your arms in disgust and complain that your business model is unfairly hurting because of it. Your business may be hurting, but software patents have nothing to do with the structure of a business model.

    And as one that believes that in many occasions the best offense is a good defense, I’d say that absolutely OIN empowers companies that utilize Linux.OIN is a great example of the point I’m trying to make — look at the diverse group of OIN’s investors: IBM, Novell, Philips, Red Hat, Sony and NEC.

    So if I wanted to sell an open-source DVD player, how would I go about getting the necessary license? I’m pretty sure the DVD-CCA won’t give me one….

    I’m disappointed. A quick Google search finds this O’Reilly blog post entitled A Fully Licensed, DMCA Compliant DVD Player For Linux that discusses exactly what you presumed impossible. Montavista offers an embedded Linux solution.

  • Tim Lee

    I’m disappointed. A quick Google search finds this O’Reilly blog post entitled A Fully Licensed, DMCA Compliant DVD Player For Linux that discusses exactly what you presumed impossible. Montavista offers an embedded Linux solution.

    Um, did you read the article? The player is “closed source and proprietary.” I asked about an open source player, not a Linux one. Obviously, if you want to make a proprietary player that runs on Linux, you’re allowed to do that just like you can make a proprietary player on any other platform. What you can’t do is release an open source player that others can freely use, modify, and redistribute. And that’s an essential part of many companies’ business models.

  • Braden Cox

    There are now so many broad software patents on the books that it’s essentially impossible to write a non-trivial software product without infringing numerous patents. Unlike copyright, businesses don’t have the option to opt out of the patent system. They’re forced to defend themselves against patent lawsuits regardless of whether they themselves benefit from patents.

    We agree that there are broad patents, the system is broke and needs fixing, and lots of money is wasted on lawyers instead of developers. But this is the environment for all companies, regardless of business model! Lots of companies that make money from software licensing fees get sued, or live under the fear of a lawsuit…not just companies that make money from giving away software to sell hardware or services. When I was in-house counsel for a software development company, I sweated the occasional call from a company “inquiring” as to whether we’d “like” to join their patent licensing program.

    Here’s what I’m getting at. You can choose to play the game, or you can choose not to — patents are available to companies in any business model. But if you have chosen not to play for various philosophical or business reasons, you can’t then righteously fold your arms in disgust and complain that your business model is unfairly hurting because of it. Your business may be hurting, but software patents have nothing to do with the structure of a business model.

    And as one that believes that in many occasions the best offense is a good defense, I’d say that absolutely OIN empowers companies that utilize Linux.OIN is a great example of the point I’m trying to make — look at the diverse group of OIN’s investors: IBM, Novell, Philips, Red Hat, Sony and NEC.

    So if I wanted to sell an open-source DVD player, how would I go about getting the necessary license? I’m pretty sure the DVD-CCA won’t give me one….

    I’m disappointed. A quick Google search finds this O’Reilly blog post entitled A Fully Licensed, DMCA Compliant DVD Player For Linux that discusses exactly what you presumed impossible. Montavista offers an embedded Linux solution.

  • Tim Lee

    I’m disappointed. A quick Google search finds this O’Reilly blog post entitled A Fully Licensed, DMCA Compliant DVD Player For Linux that discusses exactly what you presumed impossible. Montavista offers an embedded Linux solution.

    Um, did you read the article? The player is “closed source and proprietary.” I asked about an open source player, not a Linux one. Obviously, if you want to make a proprietary player that runs on Linux, you’re allowed to do that just like you can make a proprietary player on any other platform. What you can’t do is release an open source player that others can freely use, modify, and redistribute. And that’s an essential part of many companies’ business models.

  • Braden Cox

    what about Videolan?

  • Tim Lee

    What about it? My reading of the DMCA makes it illegal. They seem to agree. That might be why the project is based in France, and why US-based Linux distros don’t include the DVD-playing library with their default distribution. Certainly it’s enough of a legal grey area that no American company would dare build a business around an open-source DVD player.

  • Braden Cox

    what about Videolan?

  • Tim Lee

    What about it? My reading of the DMCA makes it illegal. They seem to agree. That might be why the project is based in France, and why US-based Linux distros don’t include the DVD-playing library with their default distribution. Certainly it’s enough of a legal grey area that no American company would dare build a business around an open-source DVD player.

  • http://www.techliberation.com/contributors/braden_cox.php Braden

    I think it’s fair to say that this is a legal gray area, if only because there’s a lack of case law. But to be clear, VideoLAN did not say its media player was illegal in the U.S., the page you reference said “controversial.” And the Wikipedia link you supplied says “many” distributions don’t include libdvdcss, not “all.” Interestingly, the Wikipedia page makes my point:

    Unlike DeCSS, libdvdcss has never been fought over in a courtroom, in part because Section 1201(f) of the Digital Millennium Copyright Act authorizes such circumvention for purposes of software interoperability.

    But I see that you’ve disputed this comment, and may remove it from the Wikipedia site!

    I also think that VideoLAN starting out as a French project has less to do with the law and more to do with the organic growth of a good student project that just happens to be in France, but who knows. I would think that if the project violated or was perceived as violating copyright, you would not see such American companies as AT&T, HP and IBM supporting the project.

  • bradencox

    I think it's fair to say that this is a legal gray area, if only because there's a lack of case law. But to be clear, VideoLAN did not say its media player was illegal in the U.S., the page you reference said “controversial.” The Wikipedia link you supplied says “many” distributions don't include libdvdcss, not “all.” Interestingly, the Wikipedia page makes this point:

    Unlike DeCSS, libdvdcss has never been fought over in a courtroom, in part because Section 1201(f) of the Digital Millennium Copyright Act authorizes such circumvention for purposes of software interoperability.

    But I see that you've disputed this comment, and may remove it from the Wikipedia site.

    I also think that VideoLAN starting out as a French project has less to do with the law and more to do with the organic growth of a good student project that just happens to be in France, but who knows. I would think that if the project violated or was perceived as violating copyright, you would not see such American companies as AT&T, HP and IBM supporting the project.

    But we're a little off point here, which is business model prevention, not specific technology prevention. And again I appreciate your positive review of the paper.

  • gargouri2001

    Nice write up and blog , Thanks for sharing all those good info

    best regards
    John
    http://thenewsempire.com/Technologies/

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