Congrats to Fred Von Lohmann and EFF as well as Joe Gratz and his colleagues at Keker & Van Nest, for their victory in the promo CD copyright case I wrote about last summer:
Like other record labels, UMG distributes free CDs to radio stations and music reviewers in the hopes of drumming up publicity. The CDs come stamped with the label “promotional copy, not for sale.” Based on this notice and the fact that the copies were given away rather than sold, the labels argue that these “promo CDs” remain the property of the labels and are only leased to recipients for their personal use.
California resident Troy Augustino makes a living selling various merchandise, including promo CDs, on eBay. UMG sued him in May for copyright infringement, claiming that it had merely licensed the CDs rather than transferring ownership and that Augustino was therefore committing copyright infringement by reselling them.
The fundamental issue in the case is the First Sale Doctrine, which says that when a copyright holder sells a copy of a CD, the new owner of the CD is entitled to give or sell that copy to someone else without getting the copyright holder’s permission. This is the principle that makes libraries and used book stores possible. It was first articulated by the Supreme Court in 1908 and has since been codified into statute.
Fred describes the ruling:
In its ruling, the district court found that the initial recipients of “promo CDs” own them, notwithstanding “not for resale” labels. The court rejected the notion that these labels create a “license,” concluding that the CDs are gifts. According to the opinion, “UMG gives the Promo CDs to music industry insiders, never to be returned. … Nor does the licensing label require the recipient to provide UMG with any benefit to retain possession.” (The court also found that federal postal laws relating to “unordered merchandise” establish that promo CDs are gifts to their recipients.)
I’m nominally on vacation this week so I won’t have time to read the decision for a while, but it looks like a great ruling.
We did a podcast on the case and its implications, featuring Fred and Randy Picker of the University of Chicago law school, last summer.
Washington Post columnist Harold Meyerson has a truly outrageous editorial in today’s Post comparing Sam Zell, the investor who just took the Tribune Co. private, to a domestic terrorist. Meyerson suggests that Zell belongs behind bars for his attempt to restructure the Tribune’s struggling newspaper business:
On Oct. 1, 1910, a bomb set by James McNamara, an operative of the Iron Workers union, then embroiled in a ferocious dispute with the Los Angeles Times, blew up the Times building, killing 21 pressmen. McNamara was arrested the following April, convicted and later sentenced to life in prison. He died in San Quentin in 1941.
The question for today is: Would a similar sentence be appropriate for Sam Zell? Zell, for those of you fortunate enough not to follow news of the newspaper business, is the Chicago real estate magnate who last year purchased the Tribune Co., which owns the Times, the Chicago Tribune and a number of smaller papers. At the rate he’s going, he’s well on his way to accomplishing a feat that McNamara didn’t even contemplate: destroying the L.A. Times.
This is absurd and insulting on its face since Zell can hardly be equated with someone who engaged in an act of violent terrorism
that killed people. Attempting to restructure a struggling business is hardly on par with that. But let’s ignore Meyerson’s ridiculous analogy and instead just look at the facts about what Zell is doing and why he is doing it. Meyerson is apparently oblivious to the fact that the newspaper industry finds itself facing something akin to a marketplace perfect storm. Advertisers are flocking to alternative platforms. Classified ads are being cannibalized by CraigsList and Google. Readers have discovered myriad other media platforms and forms of content to occupy their time. And policymakers still won’t give newspapers an ounce of regulatory relief that might let them restructure their business by partnering with others in their local communities who might help them stay afloat. [I thoroughly documented all of this bad news in part 7 of my ongoing “Media Metrics” series, “An Uncertain Future for Newspapers.” ]
Meyerson is undeterred by these pesky facts and instead shifts all the blame of downsizing at Tribune papers to Zell. Has Sam Zell gone too far in suggesting that papers may need to get slimmer, trim staff, find a way to run more ads, and so on? Some would say yes, and I might even agree with them to some extent. You can’t have great papers without great journalists and editors, after all. And if the whole paper is full of nothing by ads and recycled content, no one will read it.
Others, however, would argue that Zell isn’t going far enough fast enough to retool and restructure for a digital future. Regardless, despite Meyerson’s attempt to paint him as a pariah, Zell is only doing what most industry analysts have suggested must be done–at least in some measure–to keep newspapers alive going forward. And make no doubt about it, the evidence (which is presented down below the fold) makes it clear that newspapers are in serious trouble. Instead of offering even one constructive solution, however, Meyerson inappropriately channels his rage about the demise of the daily paper at a man who is doing his best to make sure that the daily paper will even continue to exist ten years from now. Is that really akin to an act of terrorism? I think not, and shame on Harold Meyerson for suggesting as much.
Incidentally, what I found somewhat ironic about Meyerson’s piece is that he is ranting about what he regards as the over-zealous effort of an
individual owner to restructure a private company. (Again, Zell took Tribune private not that long ago). And yet, that model—individual or family ownership of newspaper vs. public / shareholder ownership—is what most media critics claim is part of the salvation for media markets! That is, many media critics constantly complain about “Wall Street pressures” or “shareholder influences” on newspapers and claim that individual or family ownership shelters papers from unreasonable marketplace demands (namely, the need to make money). Well, that theory was always highly dubious as we now see quite vividly with Tribune and other media properties as they go private. Private owners end up taking most of the same steps publicly-owned enterprises do in an attempt to restructure or save their struggling business.
Continue reading →
Time Warner, Verizon, and Sprint will restrict access to tens of thousands of Newsgroups in order to stem
illegal child pornography as part of an agreement with New York State Attorney General Andrew Cuomo announced yesterday. Although ISPs have no obligation to provide newsgroup access, and there are plenty of alternative methods for users to browse Usenet discussion groups, the agreement raises serious Constitutional questions.
The agreement is supposedly “voluntary,” but this doesn’t necessarily resolve all First Amendment concerns. Hans Bader, CEI’s Counsel for Special Projects, posted a good overview on the Constitutional implications of the New York announcement over at OpenMarket.org:
“In truth, the settlement blocking access to newsgroups is not really “voluntary.” It’s the coercive result of threats of litigation from the New York Attorney General’s office. Supposedly “voluntary” settlements can constitute government regulation that violates the constitution. The Supreme Court has said that even a State’s “contractual condition” is subject to constitutional scrutiny (See South-Central Timber Dev. Co. v. Wunnicke, 467 U.S. 87, 97 n.10 (1984)), and federal appeals courts have observed that the fact that a state official and a business “have entered into an agreement does not necessarily insulate it from scrutiny under” the Constitution. (See Automated Salvage Transport, Inc. v. Wheelabrator Ent’l Sys. Inc., 155 F.3d 59, 78 (2d Cir. 1998)). And a “voluntary agreement” incorporated into a consent decree can constitute state regulation that is preempted by federal law, as the Supreme Court observed in 1981. (Ridgway v. Ridgway, 454 U.S. 46, 47, 53 (1981)).
This isn’t the first time Andrew Cuomo has pressured firms to engage in online censorship. Back in October 2007, I discussed how Facebook “voluntarily” agreed to censor user content to reduce the chances that minors would encounter obscene images.
Mr. Cuomo seems awfully effective at persuading providers to curtail user speech–perhaps he made an offer the ISPs couldn’t refuse.
Two contrasting examples of different paths to take for Internet Safety: beefing up our criminal laws vs. imposing pseudo-verification requirements on social networking sites.
First, the good news–a Virginia appellate court upheld the commonwealth’s law criminalizing online solicitation. The law makes it illegal to send sexual content to a minor online with the intent to engage the minor in criminal sexual conduct offline.
Enhancing existing or creating new criminal laws is the crux of a model legislation strategy NetChoice has been promoting before state legislators. It’s a way to direct an understandable legislative urge to protect children toward a productive, meaningful end. And to avoid the bad news – age verification.
Last week the Attorney General for Washington, Rob McKenna, called for sites like Facebook and MySpace to use credit cards as a way to prove identity. Now, age verification has been a pet project of AGs for over two years now. I’ve written on why age verification won’t work to keep kids safe, and so too has Adam Thierer (see his most recent post). I mean, really, don’t sexual predators have credit cards too?
As I mentioned, Cato Unbound this month is focusing on the challenges technological changes are creating for copyright law. My first contribution to the discussion is now online. I find myself basically persuaded by Rasmus’s argument that the war on file sharing will fail for the same reason that the wars on drugs, gambling, prostitution, and other vices will fail. Personal copying is becoming too cheap and easy for the law to effectively control what goes on in the privacy of peoples homes.
It’s a conclusion I’ve reached with some reluctance. I’m personally not comfortable with peer-to-peer file sharing and if I thought there was a practical way to prevent it I’d probably be in favor of it. But it has become increasingly clear that stopping file sharing is futile, and the strategies used to curb file sharing have grown more and more illiberal. If we have to choose between file sharing or a police state, and I think we do, then I choose file sharing.
But it’s important that we don’t over-state the consequences of a
de facto legalization of non-commercial file sharing:
It is often supposed that giving individuals more freedom to share copyrighted materials with one another will amount to the abolition of copyright. But this is far from true. The starkness with which the copyright debate is often framed reflects a misunderstanding of the function copyright served in the 20th century. Copyright is commonly conceived as a system of restrictions on the copying of creative works. But until recently, it would have been more accurate to describe copyright as governing the commercial exploitation of creative works. From this perspective, the inevitable legalization of non-commercial file sharing looks less like a radical departure from copyright’s past, and more like an incremental adjustment to technological change. It will require the rejection of some misguided policy developments of the last decade, to be sure, but in a sense it will simply restore the common-sense principles of 20th-century copyright law.
In my essay, I argue that copyright law will continue to be important for the music, movie, software, and other content industries. And I contend that there will still be plenty of opportunities for people to make a living producing creative works.
This morning the Senate Committee on Foreign Relations held a hearing on Sovereign Wealth Funds–those growing state-owned investment funds (often invested in the tech sector) causing a political stir as of late.
The panelists differed at the margins, but all agreed that sovereign wealth funds are a good thing for the U.S. economy. We need the money! The thought that foreign governments would invest in the U.S. to surreptitiously bring down the U.S. is nil, as it’s a mutually assured destruction strategy. There’s just too much money being invested in the U.S. so even some Arab and Asian countries have an interest in seeing our economy prosper.
ACT released a paper on foreign direct investment earlier this year, where my coauthor Nora von Ingersleben and I conclude that there are processes already in place–namely CFIUS review–that will account for any national security threats. I wrote in a past blog post that Congress should refrain from politicizing foreign investment, including the proposed acquisition of 3Com.
Congress is right to be involved, and CFIUS keeps them involved. Congress receives reports from the CFIUS committee that does a national security review of foreign transactions to ensure transparency in the process.
David Marchick of the Carlyle Group was one of the witnesses, and last month he was a panelist at an event on foreign investment that ACT sponsored in the Capitol Building.
Michael Powell seems to have finally found his political voice. Reed Hundt probably never lost his. But both former FCC chairmen got into the spirit of debate at the Federalist Society gathering today at the National Press Club. Reporters William Korver and Cassandre Durocher, of BroadbandCensus.com, were present to record the exchange.
The story is just the most recent of a stream of news articles on broadband-related subject available for free at BroadbandCensus.com. As TLF readers may be aware, the goal of BroadbandCensus.com is to collect user-generated data — otherwise known as “crowdsourcing” — through inviting individual Internet users’ to contribute to our publicly-available database of local broadband information, all sorted by ZIP code.
Now, we’re pleased to announce that we are also following technology and communications policy news in Washington, and elsewhere, through daily reporting. If you haven’t been to BroadbandCensus.com, I encourage you to do so. And don’t forget to Take the Broadband Census!
Read Net Neutrality Disagreement Between Two Former FCC Chairmen at BroadbandCensus.com
In a new
PFF
essay, my colleague Barbara Esbin and I address a recent petition filed by the Rural Cellular Association (RCA) asking the FCC to prohibit exclusive arrangements between wireless handset producers and carriers. The RCA petition claims that large wireless companies have an unfair market advantage by giving their customers exclusive access to certain advanced smart phones, such as the Apple/AT&T iPhone—and that this anticompetitive practice is harmful to rural consumers served by RCA members.
In the piece, we debunk RCA’s arguments premised on a supposed lack of competition in wireless markets. RCA will likely now redouble these arguments by pointing to Verizon’s planned acquisition of Alltel (by far the smallest of the “Big 5” carriers), which was announced the day our piece was published. But even with four large carriers instead of five, the wireless market remains vibrantly competitive—especially as compared to 1992, when the FCC decided that even the two-carrier market was “extremely competitive,” and rejecting arguments that it ban exclusive handset arrangements. Continue reading →
Every month, the Cato Institute has an online symposium on an important public policy issue. This month, the focus is on copyright law, and they’re kicking things off with a fascinating piece by copyright activist Rasmus Fleischer arguing that technological progress will make it impossible for the state to prevent people from sharing copyrighted works:
Record industry lobbyists smell the danger, and now they are urging governments to criminalize [stream ripping]. On their orders the so-called PERFORM Act (”Platform Equality and Remedies for Rights Holders in Music Act”) was introduced in the U.S. Senate last year. [4] The proposed law would force every Internet radio station to encrypt the transmission of file information, such as the name of the song. Yet anything visible on the screen can still be easily obtained by special software, encryption notwithstanding, and such restrictions would therefore be ridiculously easy to circumvent. Thus the PERFORM Act includes a follow-up clause banning the distribution of this class of software.
People with some programming skills, however, won’t need to do much more than combining a few readily available and otherwise perfectly legal code libraries to compile their own streamripping tool, one that would circumvent the PERFORM Act. For regulations like these to be effective, it is necessary also to censor the sharing of skills that potentially can be useful for coding illegal software. The circle of prohibition grows still larger: Acoustic fingerprinting technologies, which have nothing copyright-infringing to them, but which can be used for the same feared identification of individual tracks, must probably also be restricted.
This domino effect captures the essence of copyright maximalism: Every broken regulation brings a cry for at least one new regulation even more sweepingly worded than the last. Copyright law in the 21st century tends to be less concerned about concrete cases of infringement, and more about criminalizing entire technologies because of their potential uses. This development undermines the freedom of choice that Creative Commons licenses are meant to realize. It will also have seriously chilling effects on innovation, as the legal status of new technologies will always be uncertain under ever more invasive rules.
Tomorrow I’ll be offering my reaction to Rasmus’s essay. I don’t want to steal my own thunder, but in a nutshell, my take is that Rasmus is basically right to predict that copyright will grow increasingly difficult to enforce as technology continues to reduce the cost of storing and transmitting information. However, I think it’s a mistake to view this as the end of copyright. Even if the war on file sharing is hopeless, copyright can and should adapt to continue serving its essential function, which is
not to stop all copying, but rather to reward the creation of creative works. Watch the site tomorrow to see my suggestions for how copyright law can adapt to the stresses placed on it by digital technologies.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.