Imagine a service that livestreams major broadcast television channels over the Internet for $4.99 a month — no cable or satellite subscription required. For an extra 99 cents a month, the service offers DVR functionality, making it possible to record, rewind, and pause live broadcast television on any broadband-equipped PC.
If this service sounds too good to be true, that’s because it is. But for a time, it was the business model of ivi. Cheaper than a cable/satellite/fiber subscription and more reliable than an over-the-air antenna, ivi earned positive reviews when it launched in September 2010.
Soon thereafter, however, a group of broadcast networks, affiliates, and content owners sued ivi in federal court for copyright infringement. The court agreed with the broadcasters and ordered ivi to cease operations pending the resolution of the lawsuit.
ivi appealed this ruling to the 2nd Circuit, which affirmed the trial court’s preliminary injunction earlier this month in an opinion (PDF) by Judge Denny Chin. The appeals court held as follows:
- The rights holders would likely prevail on their claim that ivi infringed on their performance rights, as ivi publicly performed their copyrighted programs without permission;
- ivi is not a “cable system” eligible for the Copyright Act’s compulsory license for broadcast retransmissions, as ivi distributes video over the Internet, rather than its own facilities;
- Allowing ivi to continue operating would likely cause irreparable harm to the rights holders, as ivi’s unauthorized distribution of copyrighted programs diminishes the works’ market value, and ivi would likely be unable to pay damages if it loses the lawsuit;
- ivi cannot be “legally harmed by the fact that it cannot continue streaming plaintiffs’ programming,” thus tipping the balance of hardships in plaintiffs’ favor;
- While the broad distribution of creative works advances the public interest, the works streamed by ivi are already widely accessible to the public.
As much as I enjoy a good statutory construction dispute, to me, the most interesting question here is whether ivi caused “irreparable harm” to rights holders.
Writing on Techdirt, Mike Masnick is skeptical of the 2nd Circuit’s holding, criticizing its “purely faith-based claims … that a service like ivi creates irreparable harm to the TV networks.” He argues that even though ivi “disrupt[s] the ‘traditional’ way that [the broadcast television] industry’s business model works … that doesn’t necessarily mean that it’s automatically diminishing the value of the original.” Citing the VCR and DVR, two technologies that disrupted traditional methods of monetizing content, Mike concludes that “[t]here’s no reason to think” ivi wouldn’t “help [content owners’] business by increasing the value of shows by making them more easily watchable by people.”
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The English language is public domain (the language itself, not everything said with it). So it’s worthless, right? No dollars change hands when people use it. Perhaps it could be made worth something if someone were to own it. The owner could charge a license fee to people who use English, making substantial revenue on this suddenly valuable language.
Congress can take works in the public domain and make intellectual property of them according to the Tenth Circuit Court of Appeals in a case that approved Congress “restoring” public domain works to copyrighted status. (The case is Golan v. Holder, and the Supreme Court has granted certiorari.)
But would we really be better off if the English language were given a dollar value through the mechanism of ownership and licensing? No. What is now a costless positive-externality machine would turn into a profit-center for one lucky owner. The society would not be better off, just that owner. If we had to pay for a language, we would regard that as a cost.
In a similar vein, Mike Masnick at TechDirt indulges the somewhat tongue-in-cheek observation that Microsoft costs the world economy $500 billion by accumulating to itself that would have gone to other things. It’s a sort of Broken Window fallacy for intellectual property: the idea that creating ownership of intellectual goods creates value. What is not seen when intellectual property is withheld from the public domain is the unpaid uses that might have been made of it.
Now, Microsoft has reaped wonderful benefits from its intellectual creations because it has bestowed wonderful benefits on societies across the globe. But might it have provided all these benefits for slightly less reward, leaving more money with consumers for their preferred uses?
This is all a way of challenging the mental habit of assuming that dollars are equal to value. In the area of intellectual property (whether or not protected by federal statutes), things that have no effect on the economy (because they’re in the public domain) may have huge value. Things privately owned because of intellectual property law may have less value than they should, even though their owners collect lots of money.
No, I’m not here to tell you more about the “supersized” FTC. Berin has done yeoman’s work to highlight that issue, among other things with the PFF event you can review here. On TechDirt, Mike Masnick wrote this morning about how the feds are itching to regulate the Internet.
This is about the direct government invasions of privacy likely to occur if S. 3217 passes. On the Cato@Liberty blog I write about the detailed financial market research that new regulatory agencies would do—research aimed at you.
Example:
Section 1071(b) requires any deposit-taking financial institution to geo-code customer addresses and maintain records of deposits for at least three years. Think of the government having its own Google map of where you and your neighbors do your banking. The Bureau [of Consumer Financial Protection] may “use the data for any other purpose as permitted by law,” such as handing it off to other bureaus, like the Federal Bureau of Investigation.
“Washington, D.C. has determined that Washington, D.C. should manage the financial services industry. Your personal and private financial affairs will be managed there too.”
What would I say about my own writing but read the whole thing?
I’ve written before about my dislike of “the cloud.”
The term implies that there aren’t specific actors doing specific things with data, which will tend to weaken people’s impression that they have rights and obligations when using or providing cloud services. We’re talking privacy problems.
When “cloud” services fail, the results can be widespread and significant. Think of cloud computing as a sibling of security monoculture.
TechDirt’s indefatigable Mike Masnick reminds us of this with a tweet today about hiccups in Google Calendar that may have prevented him getting on a conference call. He’s written once or twice about the cloud in terms of legal/discovery issues, privacy issues, and business/regulatory hurdles.
Remote computing is not going away, but it’s a fad that should fade over time. I think I hit the right notes in an earlier post where I said:
There will always be a place for remote storage and services—indeed, they will remain an important part of the mix—but I think that everyone should ultimately have their own storage and servers. (Hey, we did it with PCs! Why not?) Our thoroughly distributed computing, storage, and processing infrastructure should be backed up to—well, not the cloud—to specific, identifiable, legally liable and responsible service providers.
Over at TechDirt, Mike Masnick has an interesting post asking “Why Did Apple Approve Spotify?” which builds on an AdAge column asking a similar question: “Did Apple Sacrifice ITunes With Latest Apps?” As the title of that AdAge piece suggests, some folks are wondering if Apple shot itself in the foot by approving Spotify, a music streaming app that some regard as a potential iTunes killer. I don’t really have any comment on the business angle here, rather, I wanted to just comment on Mike’s suggestion that one possible explanation for Apple’s approval of the app is that:
As we noted when the app was approved, Apple appears to be somewhat gunshy, following the FCC inquiry into why it “blocked” Google Voice on the iPhone (and, yes, Apple still insists it didn’t actually block the app, but Google says otherwise). Given the scrutiny, Apple probably realized that it was in for some serious political trouble if it blocked an app like Spotify, which would have received a lot of press attention. Oddly, the AdAge article doesn’t mention this at all.
Indeed, it is odd that
AdAge didn’t bother mentioning that fact. But what I find doubly odd here is that nobody is even blinking an eye at the prospect of such political meddling with — or even possible FCC regulation of — Apple, iTunes, or music streaming market in general! Seriously, have we gotten to the point now in our Bold New World of Neutrality Regulation that innovative high-tech companies must live in fear of constant regulatory intervention even when they completely lack any statutory authority to play these games? Moreover, does anyone think that the a bunch of Beltway bureaucrats can micro-manage music and high-tech application markets and give us more options than we have today?
I know the prospect of such meddling makes some academics and regulatory activists groups happy, but I can’t see how this ends well for consumers or high-tech markets more generally. Regardless, for those of you who laugh when we suggest that the slippery slope of regulation is real, consider this case to be Exhibit A. Or perhaps it’s Exhibit B since the Google Voice spat with Apple was already moving the FCC in the direction of becoming a device regulator and applying “handset neutrality” principles that have no basis in law. It’s your anything-goes government at work.
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The Federal Circuit significantly limited the patentability of software and business methods today. Mike Masnick at TechDirt summarizes the holding of the case as follows:
the court has said that there’s a two-pronged test to determine whether a software of business method process patent is valid: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In other words, pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable.
I’m sure several of my TLF colleagues will have a great deal to say about this. Tim Lee has already written about this on Ars Technica:
The Bilski decision, then, is a clear signal that the pendulum has begun to swing back toward tighter limits on software and business patents. However, it remains to be seen how far the court will go in this direction. Bilski was a relatively easy case. The applicant made little effort to hide the fact that he was seeking to patent a mental process, something the Supreme Court has clearly said is not allowed. Therefore, the Federal Circuit’s rejection of this patent doesn’t tell us how it will rule when confronted with software or business method patents that are tied more directly to a physical machine or a transformation of matter. And indeed, the Federal Circuit reiterated that some software and business method patents are valid, so we are unlikely to return to the near-prohibition on such patents that prevailed until the early 1980s.
Thoughts?
… environmental attorney Dusty Horwitt, who recently published this outlandishly stupid and highly offensive editorial in the Washington Post calling for an information tax to reduce the supply of information in society. “[I]n our information-overloaded society,” he argues, “the concept of [too much information] is no joke. The information avalanche coming from all sides — the Internet, PDAs, hundreds of television channels — is burying us in extraneous data that prevent important facts and knowledge from reaching a broad audience.” His repressive solution?
It’s possible that over time, an energy tax, by making some computers, Web sites, blogs and perhaps cable TV channels too costly to maintain, could reduce the supply of information. If Americans are finally giving up SUVs because of high oil prices, might we not eventually do the same with some information technologies that only seem to fragment our society, not unite it? A reduced supply of information technology might at least gradually cause us to gravitate toward community-centered media such as local newspapers instead of the hyper-individualistic outlets we have now.
Mike Masnick of TechDirt and Richard Kaplar of the Media Institute do a fine job of ripping Mr. Horwitt’s absurd proposal to shreds. As Kaplar argues, it is “sheer lunacy” to “tax the technologies of freedom.” Unlike gasoline, there are no good reasons — not one — for government to ever take steps to reduce the supply of information. Mr. Horwitt is calling for public officials to use their taxing powers to destroy or limit opportunities for human communications and the free exchange of speech and expression. It is completely antithetical to a free society.
Moreover, if Mr. Horwitt really thinks there is too much information in this world, then perhaps he should lead by example and take his own site offline first! The rest of us will take a world of information abundance over a world of information scarcity any day of the week.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.