Computers, Freedom, and Privacy Conference

As a member of the Program Committee, I just wanted to post this announcement for CFP. This has been a great conference and I'm sure this year's will be a terrific event. Note that the deadline for Panel, Tutorial, and Speaker proposals is March 21, 2008.

COMPUTERS, FREEDOM, AND PRIVACY: TECHNOLOGY POLICY '08
18th Annual CFP conference
May 20-23, 2008
Omni Hotel
New Haven, CT

CALL FOR PROPOSALS

This election year will be the first to address US technology policy in the information age as part of our national debate. Candidates have put forth positions about technology policy and have recognized that it has its own set of economic, political, and social concerns. In the areas of privacy, intellectual property, cybersecurity, telecommunications, and freedom of speech, an increasing number of issues once confined to experts now penetrate public conversation. Our decisions about technology policy are being made at a time when the architectures of our information and communication technologies are still being built. Debate about these issues needs to be better-informed in order for us to make policy choices in the public interest.

Open participation is invited for proposals on panels, tutorials, speaker suggestions, and birds of a feather sessions through the CFP: Technology Policy '08 submission page. More details below.

This year, the 18th annual Computers, Freedom, and Privacy conference will focus on what constitutes technology policy. CFP: Technology Policy '08 is an opportunity to help shape public debate on those issues being made into laws and regulations and those technological infrastructures being developed. The direction of our technology policy impacts the choices we make about our national defense, our civil liberties during wartime, the future of American education, our national healthcare systems, and many other realms of policy discussed more prominently on the election trail. Policies ranging from data mining and wiretapping, to file-sharing and open access, and e-voting to electronic medical records will be addressed by expert panels of technologists, policymakers, business leaders, and advocates.

Suggested topics for discussion include:

* Information Privacy
* Anonymity Online
* Government Transparency
* Voting Technology
* Online Campaigning
* Social Networks
* Citizen Journalism
* Cybercrime & Cyberterrorism
* Digital Education
* Copyright and Fair Use
* Patent Reform
* Open Access
* P2P Networks
* Information Policy and Free Trade
* Media Concentration
* Genes & Bioethics
* Electronic Medical Records
* Web Accessibility
* Open Standards
* Network Neutrality
* High-Speed Internet Access Policy
* Freedom of Information
* Technology Policy Administration

Submission Deadlines:
Panel, Tutorial, and Speaker proposals: March 21, 2008.
Birds of a Feather Session (BoFs) proposals: April 21, 2008.

Panel, Tutorial, and Speaker proposals accepted by the Program Committee will be notified by April 7, 2008.

Registration available online here.

Posted by Frank Pasquale at 11:09 AM | Comments (1) | TrackBack

Radiohead Rules The Charts (But It and Niggy Tardust Rule in a Different Way)

So Radiohead’s album In Rainbows debuted at number one on the U.S. charts (somehow I still hear Casey Kasem saying “And now for our number one”). The album sold 122,000 copies. Some point out that this number “falls well short of Radiohead's 2003 album Hail To The Thief, which made its debut in the US album chart at number three with first week sales of 300,000 - a career best for the band.” AH but wait, don’t order yet! There’s more to the story. As Wired reports http://www.wired.com/entertainment/music/magazine/16-01/ff_yorke (note IE seems to crash with the link; use Firefox as perhaps that is better anyway) the band has earned $3 million from the download sales and Radiohead owns the master which means it can and did license the sales on CD. (Most interesting is that the album is no longer available for download from the In Rainbows site yet is available at Amazon for a download price that equals the CD price. The label probably required that change).

In contrast Trent Reznor and Saul Williams tried a similar download approach and Reznor was not pleased with the results (only 20 percent paid for the downloads; 40 percent paid for Radiohead). Still, Williams was happy. He took the view that unlike a film, music can have a long shelf life and that time to market through the Web and concert dates are still to come. Williams sees touring as his main income. He makes an interesting point that Reznor’s era was sued to having a few dominant bands sell 10 million or more copies. That seems to no longer be the case. BUT Williams who is in his words “an artist not everyone has heard of and not everyone is going to necessarily try if they have to pay for it” sees the upside of exposure. In addition, Williams notes that this approach allowed him to overcome some race barriers.

Apparently, labels told him “Your album isn't hip-hop.” Williams saw this move as “an opportunity for once as an artist that I didn't have to compromise in the face of people who have limited ideas and conceptions about what it is to be black and make music.” So rather than being told that the urban department was where he belonged, he has taken the music to the Internet and can let people decide whether they like it or not. Nonetheless, he is not sure whether he will do it again from an economic standpoint. (in fact, the site now only offers a $5 version but one receives a “high quality download” and “33 page PDF of original album artwork and lyrics”)

Which raises another issue: what is the business model for music? Is there just one? What does one gain or lose from choosing a specific model? Not surprisingly Byrne has thoughts on that too.

In a companion article, David Byrne's Survival Strategies for Emerging Artists — and Megastars, Byrne lays out a range of options. The article is worth a read as it has many charts to help explain the variances in the music business. Many may know about the changes but the article summarizes them nicely. For example

What do record companies do? Or, more precisely, what did they do? •Fund recording sessions •Manufacture product •Distribute product •Market product •Loan and advance money for expenses (tours, videos, hair and makeup) •Advise and guide artists on their careers and recordings •Handle the accounting This was the system that evolved over the past century to market the product, which is to say the container — vinyl, tape, or disc — that carried the music. (Calling the product music is like selling a shopping cart and calling it groceries.) But many things have changed in the past decade that reduce the value of these services to artists.

Byrne offers that an artist may cut a deal from a “360, or equity, deal, where every aspect of the artist's career is handled by producers, promoters, marketing people, and managers” to a “license deal is similar to the standard deal, except in this case the artist retains the copyrights and ownership of the master recording” to “the self-distribution model, where the music is self-produced, self-written, self-played, and self-marketed” at the complete control end.

There are pros and cons regarding support and guaranteed revenue in each model. For example, in on model, “the profit-sharing deal. [The artist receives] a minimal advance from the label … and [label and artist] share[] the profits from day one. [The artist] retains ownership of the master; [the label] does some marketing and press.” In Byrne’s experience “I may or may not have sold as many records as I would have with a larger company, but in the end I took home a greater share of each unit sold.”

Music has been a flashpoint for copyright debates. Radiohead and the Reznor Williams alliance show that there are many ways to think of music. And they show that although one way to approach music may be fading, it appears that new ways to offer more music to more people in more categories are present. In some cases the artists make more money too. So as DRM seems to fade and artists control their music maybe a hyper-individualized music scene will be our future. Maybe it already is.

Posted by Deven Desai at 03:42 PM | Comments (0) | TrackBack

Paradoxes of the Pirate Party

Last month Stanford hosted Rick Falkvinge, the head of the Swedish Pirate Party, which advocates fundamental changes to patent and copyright laws. Falkvinge's "personal candidacy came in at rank #15 out of over 5,000 candidates for the 349 parliamentary seats," but "he didn't win a seat due to threshold rules." I listened to his talk on iTunes University, and was surprised by the comprehensiveness of his case against excess copyright and for more open competition.

Falkvinge explained the unfortunate historical origins of copyright-type restrictions, as a tool first for censorship and later for the preservation of monopolistic practices of the stationers' guild in England. He argued that many current copyright laws resulted from the undue influence of "crumbling monopolies" trying to protect their business models against new forms of competition. But he made an interesting concession: he admitted that certain works that cost a huge sum wouldn't be produced if their makers had no hope of financial return, so he favored some copyright protection for commercial uses of those works. However, Falkvinge said the threat to privacy posed by modern copyright enforcement techniques was too great to allow any legal monitoring of personal use of works.

Two thoughts after the break...

1) Having blogged a panel on "civil disobedience and copyright," I found Falkvinge's discussion of the politics of IP interesting. So much of the dialogue on IP is based on law or economics. Legally, pirates are in the wrong, and oftentimes the academic debate on unauthorized use stalls out in fights over the proper scope of concepts like fair use. Falkvinge sidesteps this debate by saying: "I don't want to interpret the law; I want to change it" (echoing the 11th thesis on Feuerbach). He embraces the language of politics rather than expertise, declaring economic studies of the field radically contestable. Lobbyists try to legitimate IP policy decisions by citing studies commissioned by interested parties, but Falkvinge dismisses their often contradictory conclusions (for a sample debate, see here).

Having criticized the "shamanism in economism," and having recently seen a conference IP presentation where the author basically pleaded that most of the economic variables in his model were unquantifiable, I can sympathize with his frustration. However, I think the most sophisticated observers will try to see the complementarity of various social science methods. I am deeply skeptical of anyone supporting a policy for economic reasons alone, but add in a few other modes of analysis and I am far more likely to be convinced.

2) I want to question one of Falkvinge's concessions regarding the need to recompense producers for their investments. In the patent field, I certainly can see the need to do so. However, the cultural field features some competitive dynamics that should lead us to question a continuing subsidy to the largest players who invest the greatest deal of money. As Guy Pessach has noted, over time, the largest and most powerful players not only meet current demand but also shape tastes. If we're going to be giving out subsidies, we should be careful to avoid handing them out indiscriminately. If a culture stops spending money on movies that cost $100 million to produce and starts watching free community theater (or, more likely, pet videos), hasn't it saved money? Rishab Aiyer Ghosh has begun to model the ways in which economies save money by substituting the free for the costly.

Photo Credit: Earl What I Saw 2.0 (Flickr).

Posted by Frank Pasquale at 10:43 AM | Comments (0) | TrackBack

Microsoft, Google, and Copyright Scofflaws

I saw in Michael Geist's BNA newsletter that Tom Rubin, Microsoft's Associate General Counsel, will accuse Google of having a "cavalier" attitude towards copyright in a speech to the Association of American Publishers. FT.com has a preview of the speech, and WSJ online has the text available to subscribers. I've only the read the FT.com preview (I don't subscribe to wsj.com), but I'm curious how far Mr. Rubin's speech will go to address the problem of online piracy.

Rubin describes Google as a copyright scofflaw, saying "“companies that create no content of their own, and make money solely on the back of other people’s content, are raking in billions through advertising and initial public offerings”. Rubin will apparently try to distinguish Microsoft from Google by offering to cooperate with content producers to eliminate piracy.

I wonder how far Microsoft is prepared to go in eliminating piracy from the online sites like YouTube. I went to Microsoft's YouTube competitor Soapbox, and put in searches for "Mariah Carey" and "Ice Age." Both searches turned up what I presume content providers consider infringement. If Microsoft is offering to police its site for infringement (presumably the behavior most respectful of copyright), they've obviously done a poor job. If they're not prepared to go that far, then they must think that there is some less aggressive behavior that is a reasonable, appropriate response to the problem of user piracy. I hope and would very much like to see what Mr. Rubin's company thinks is the right thing for sites like Soapbox to do. If Microsoft is not prepared to do everything content creators demand, it has to articulate a theory of what their obligation is. Otherwise, it looks like Microsoft is simply criticizing its more commercially successful rival.

Posted by Alfred Yen at 09:35 AM | Comments (2) | TrackBack

Best and Worst Internet Laws

[Preface: I've already overstayed my guest visit, but before I go, I want to say thanks to the Concurring Opinions team for the opportunity to blog here, and thanks to all of you for the great comments and stimulating dialogue. A complete index of my guest blog posts. Meanwhile, I'll keep blogging on technology and marketing law at my main blog and on all other topics at my personal blog. Hope to see you there!]

Over the past dozen years, the lure of regulating the Internet has proven irresistible to legislators. For example, in the 109th Congress, almost 1,100 introduced bills referenced the word “Internet.” This legislative activity doesn’t always come to fruition. Still, in total, hundreds of Internet laws have been passed by Congress and the states. This body of work is now large enough that we can identify some winners and losers. So in the spirit of good fun, I offer an opinionated list of my personal votes for the best and worst Internet statutes in the United States.

[Keep reading for the list]

Best Internet Laws

With my libertarian leanings, it should not be surprising that my list of good Internet laws is both brief and skewed towards laws that minimized the scope of Internet regulation.

#2: Internet Tax Freedom Act

Many people mistakenly think this law eliminated sales tax for purchases over the Internet. It didn't (if you don't pay sales tax, you owe use taxes on those purchases). Instead, the law placed a temporary moratorium on states enacting Internet access taxes or e-commerce-specific taxes. By freezing new taxes, the law forestalled a tax frenzy during the dot com boom. The current moratorium expires in November, but Congress is proposing to extend the law permanently (see the Permanent Internet Tax Freedom Act of 2007, S.156 & H.R. 743). To which, I say: amen!

#1: 47 USC 230

The law was enacted in 1996 (as part of the Communications Decency Act, discussed below) during the heyday of the cyberspace exceptionalism movement--about the same time as Barlow’s Declaration of Independence and Johnson/Post’s Internet self-governance article. Indeed, this law is one of the most conspicuous examples of setting different rules for physical space and cyberspace. In this case, the law provides websites and other intermediaries a near-absolute immunization from liability for their users’ content—even if offline publishers would be liable for publishing the exact same user content in dead trees.

It’s hard to overstate the importance of this law to the Internet's evolution. Without this law, all Internet content probably would be subject to a notice-and-takedown regime like we have for copyright law (see discussion about the DMCA Online Safe Harbors below). If websites had to remove user content upon notice to avoid liability, they would act conservatively, quickly pulling down complained-about content without much fuss. So, any company unhappy with negative consumer comments could simply contact the web host, claim that the comments were defamatory (making the web host potentially liable for the content), and expect the web host to scramble to take down the user’s comment.

But in this takedown melee, only negative remarks would be targeted (there would be no legal grounds—or reason—to target positive comments). Thus, notice-and-takedown rules would result in “lopsided” databases where only positive opinions/commentary would remain, but many negative comments could be quickly excised. This would ruin the ability of the consumer opinion sites (e.g., eBay’s feedback forum, Amazon product reviews) to hold people and companies accountable for their choices. Indeed, by undermining the credibility of Internet content generally, a notice-and-takedown scheme could diminish the Internet’s vitality as a mainstream information resource.

47 USC 230 eliminates the notice-and-takedown option for people and companies trying to escape accountability. As a result, 47 USC 230 is a big part of the reason why the Internet has been such a massive success.

Effective but Questionable Internet Laws

Two additional laws are noteworthy for substantially accomplishing their intended goals, even though I can’t classify them as “good” because of their deficient policy rationales.

#2: No Electronic Theft Act (NET Act)

In 1997, Congress changed the basic paradigm for criminal copyright infringement. Previously, the law required that defendants had to infringe for the money. After the NET Act, infringers may be criminal even if their infringement was non-commercial.

The NET Act specifically targeted warez traders, a group of hobbyist infringers who aggregate and disseminate copyrighted works as trophies—by finding and publicly presenting a hard-to-get copyrighted work, the warez trader demonstrates his/her prowess as a trader and earns recognition from the community. Warez traders generally subscribe to the “information wants to be free” philosophy, so they never exchange copyrighted works for the money, but their trading can have adverse consequences for copyright owners.

There are many reasons why the NET Act is lousy policy, most importantly because it will not change warez traders’ behavior. Yet, it has given the DOJ an effective tool to nail warez traders, and a couple hundred warez traders have been busted using the law.

#1: Anti-Cybersquatting Consumer Protection Act

The 1990s saw a frenzy of domain name registrations, often involving the registration of domain names containing well-known trademarks by someone other than the trademark owner (a process called “cybersquatting”). Courts struggled to apply trademark law to this behavior, so trademark owners appealed to Congress for help. Congress initially hoped that ICANN would promulgate its own anti-cybersquatting administrative regulations (which ultimately became the UDRP). But ICANN took too long, and an impatient Congress enacted the ACPA.

The ACPA targeted cybersquatting, and in that respect the law has worked well. The classic 1990s cybersquatting “land-grab” registrations of [trademarkowner].[tld] have effectively dried up, and the few cases where a true cybersquatter has gone to court to defend against an ACPA claim generally have resulted in resounding victories for the trademark owner.

A silver lining of the ACPA: it contains an immunization of domain name registrars and registries that completely eliminated them as the targets of trademark owners. Prior to ACPA, domain name registrars (especially Network Solutions, the monopoly .com registrar for most of that time) had been sued repeatedly. Now, plaintiffs don't even think about it.

However, the ACPA isn’t all good news. From a defense perspective, the ACPA has emerged as a tool to attack gripers and other critics. From a trademark owner’s perspective, the ACPA hasn’t curbed domain name parking, domain tasting and other AdSense-fueled sites all using trademarks or typographical versions of them. So no one is really happy with the law. Nevertheless, as a point solution to the cybersquatting problem, I think ACPA is fairly characterized as a solid success.

Worst Internet Laws

I want a little credit for finding 4 laws that I could say something good about. It wasn't easy. In contrast, the list of bad laws is much longer, so I’ve limited myself to 10.

What makes a law “bad”? Unfortunately, there are many routes to ignominy, and mere legislative cluelessness isn’t sufficient. Some common themes: poor/ambiguous drafting, unintended consequences, justification bait-and-switch (publicly declaring that the law was designed to do X, when it was never likely to do so), and attempts to legislatively manufacture markets or change consumer behavior.

The dishonor roll:

#10: E-Sign

E-Sign generally says that online contracts won’t be denied enforcement simply because they are in electronic form rather than on paper. Superficially, this sounds positive because it stops courts from underenforcing electronic contracts or engaging in funky cyberspace exceptionalism. The problem? This law was completely unnecessary, as many states had already enacted the Uniform Electronic Transactions Act (UETA) before Congress passed the substantially identical E-Sign. Worse, E-Sign has a partial preemption clause that makes it difficult/impossible to figure out what state laws survived it. So E-Sign is a prime example of how Congress cannot resist the lure of Internet regulation—even if it adds no value (or even subtracts value)in the process.

#9: DMCA Online Safe Harbors

Another law that looks good on the surface, the law purports to provide safe harbors to protect online intermediaries from copyright infringement caused by other people. However, this law has at least two major flaws. First, it sets up a notice-and-takedown procedure which has led to significant abuse.

Second, and perhaps more importantly, the law only governs late 1990s technologies. It doesn’t contemplate P2P file sharing and other decentralized forms of communications. This technological dependency makes the safe harbor increasingly irrelevant as technology evolves. As a stark example, consider that the online safe harbors didn't get mentioned--not a single reference!--in the most important online secondary infringement case to date, the Grokster Supreme Court opinion.

#8: Unlawful Internet Gambling Enforcement Act of 2006 (see the end of this file)

As I have said elsewhere, this law is a “a flagship example of how special interest lobbying combined with legislative mumbling can produce an unreadable mess.” First, the law is written in unintelligible Congress-ese. Second, the law is pockmarked with special interest exceptions, clearly showing who has the best lobbyists. Third, and most importantly, Congress did not specify (in this law or elsewhere) what constitutes illegal Internet gambling, yet the law requires third party money sources to block the flow of money to illegal gambling operations. Thus, just like Kafka might write it, Congress deputizes private actors to block illegal activity without deciding for itself what constitutes illegal activity. The consequence is that banks and other money sources are going to curtail lots of legitimate activity to be on the safe side.

#7: DMCA Anti-Circumvention

There are lots of reasons not to like the DMCA anti-circumvention law. Most obviously, the law targets “bad” technology rather than bad behavior—a regulatory model that usually fails when technological innovation bypasses such restrictions, or worse, the restrictions inhibit the development of socially beneficial technology.

However, the anti-circumvention laws make this list principally because of their unintended consequences. The law was designed to bolster content protection technology: the purported justification was that content owners wouldn’t feel comfortable putting content online without content protection measures, and this law restricts the ability to bypass those measures.

As it turns out, the hottest area of anti-circumvention litigation has nothing to do with such content protection schemes but instead involves companies using the DMCA as an anti-competition law. Two flagship examples—Chamberlain, involving the sale of compatible after-market universal garage door openers (a case the EFF calls "mind-bogglingly absurd") and Lexmark, involving refilled printer cartridges—ultimately reached pro-competitive outcomes, but only after significant litigation and some disconcerting early rulings. Even with these rulings, companies now routinely consider anti-circumvention claims as part of a general anti-competitor campaign. As a result, the law has increased the cost of doing business, given plaintiffs another tool to try to restrict legitimate competition, and done almost nothing to protect content owners.

#6: Electronic Communications Privacy Act

This law was written in 1986 (amending earlier versions), back when the Internet was an obscure academic network. Although the law wasn’t written with the Internet in mind, it has the heroic responsibility of governing a huge swath of private Internet communications, including emails, private chat, VOIP and others. Even if the law were well-drafted, applying a pre-Internet law to these communications would create plenty of ambiguity and friction. Unfortunately, this is not a well-drafted law; in my opinion, this law as one of the most poorly drafted statutes ever. The result is a tangled convoluted hairball that no one (even privacy experts) can understand or apply.

#5: Utah Digital Signatures Act

In 1995, there was some concern that the lack of Internet authentication would inhibit the development of e-commerce. As a result, VeriSign (and others) advocated that everyone on the Internet—both users and websites—should have digital certificates to validate their identity (the equivalent of an Internet driver’s license) so that websites and users each could figure out who they were dealing with. However, VeriSign and others expressed concern that a digital certificate issuer would face significant liability if the authenticated information was wrong. Thus, the argument went, if only digital certificate vendors could get some liability protection, digital certificate vendors would provide the necessary authentication that would allow e-commerce to explode.

In response to these concerns, Utah enacted the Digital Signatures Act to regulate the process of granting accurate certificates and limit the liability of digital certificate vendors. Utah hoped the law would make cause digital certificate vendors to relocate to Utah to take advantage of its friendly legal climate, making Utah a leader in e-commerce.

As it turns out, digital certificates weren’t needed to catalyze e-commerce, nor did the market materialize for digital certificates in the form contemplated by the statute (as a PKI-based system). As a result, this law was a complete failure, and no companies ever complied with the statute’s formalities. Indeed, the law proved to be so irrelevant that Utah has taken the highly unusual step of repealing the law. At least they owned up to their mistake (this time).

#4: Anti-Kid Spam Laws in Utah and Michigan

Nothing fires up the legislative machine like trying to protect kids from Internet dangers. In this case, Utah and Michigan created “do-not-email” registries, similar to the national Do-Not-Call registries, for the registration of kids’ email addresses. Porn spammers are supposed to check these databases and eliminate any registered kids’ addresses from their porn spam distributions.

While do-not-contact registries are generally popular, I'm in the minority of people of who think they are suboptimal policy (I explain my thinking, by deconstructing the federal Do-Not-Call registry, here). In these cases, the do-not-email registries claim to be protecting kids, but they actually don’t try to authenticate registrants’ ages—making them a generic do-not-email registry, something even the FTC doesn't favor. Most importantly, assuming the database actually contains kids’ email addresses, it becomes a juicy targets for criminal hackers, pedophiles and other bad actors. Based on this concern, the FTC has advocated against the idea.

#3: Dot Kids Implementation and Efficiency Act of 2002

As we saw with the Utah Digital Signatures Act, legislators can’t stimulate market demand simply by legislating the market into existence. In my opinion, no legislative act better illustrates this principle than the Dot Kids Implementation and Efficiency Act of 2002. In the name of providing a safe online haven for kids, Congress co-opted the .kids.us domain and decreed that only kid-safe content could reside there. In theory, parents would feel safe letting their kids loose there, and content publishers would have a good place to reach kids. Ultimately, Internet filters could simply enable .kids.us websites and shut off the rest of the Internet to kids.

The problem? Not many content publishers saw the value of creating kid-safe websites and housing them under the restrictive rules of the law. As a result, .kids.us is a virtual wasteland, housing less than 20 websites, almost all of which have less-than-compelling content. (You mean to tell me you've never been there? Check it out yourself). Not exactly the most enticing destination for Junior. So .kids.us is a ghost-town-like reminder that legislators should stay out of the business of trying to manufacture markets.

#2: Utah/Alaska Anti-Adware Laws

Have you noticed a trend here? Utah makes my dud-law list three times—a hat trick of legislative incompetence. This is such a remarkable feat that we might consider banning Utah from enacting further Internet regulations until they can show that they will use their powers wisely.

This law makes my list because of the deceptive rationales used to justify it. Touted as “anti-spyware” “consumer protection” law, it was neither. The law only targeted adware, not spyware, and it gave enforcement rights to trademark owners, not consumers. As a result, the law gave trademark owners the power to take software out of consumers’ hands—even if the consumers actually wanted the technology. Further, by allowing trademark owners to attack competitors for engaging in comparative advertising, the law tried to inhibit beneficial competition rather than promoting it. Thus, despite its billing, this law was a profoundly regressive anti-consumer law.

Given its deceptive nature and adverse policy effects (which I explain in lengthy detail here), it should not be surprising that the law was quickly enjoined. (Disclosure note: I worked on an amicus brief challenging the law). Chastened, the act’s sponsor subsequently amended the law to make it effectively irrelevant.

However, before Utah amended its law, Alaska implemented its own bastardization of Utah’s initial law. Among the Alaska law’s defects, it expects adware vendors to pop-up a notice to potential downloaders asking them for their geography; with this information, in theory, the vendor can avoid downloading the regulated software to Alaska residents. In other words, in an effort to fight unwanted pop-ups, the Alaska law mandates that software vendors deliver lots of unwanted pop-ups to consumers--even when both the vendors and consumers are located outside of Alaska. Gotta love that logic.

#1: Communications Decency Act

Based on the discussion above, clearly there was plenty of competition for the worst Internet law of all time. However, I found picking a “winner” surprisingly easy. In fact, in my book, it isn’t particularly close.

The Communications Decency Act, passed in 1996, was Congress’ first comprehensive attempt to regulate Internet content. Not surprisingly, Congress made a lot of rookie mistakes. The CDA tried to keep kids away from Internet porn, a reaction to a sensational 1995 article (the “Rimm Report”) published in the Georgetown Law Journal that proclaimed that the Internet was awash in porn. But later examinations thoroughly discredited the Rimm Report—meaning that Congress’ efforts/overreactions were based on bad social science.

Worse, Congress mistakenly assumed that non-porn content could be easily segregated from porn. In defense of this assumption, the government’s expert witness proposed a content tagging system that would enable browsers to wall off porn. But this exposed a deep flaw in the law—the tagging system didn’t exist, browsers weren’t written to honor the tag, and it turns out that requiring publisher self-tagging for all Internet content is burdensome and cost-prohibitive.

Because web and email content publishers had no easy way to comply with the law, the law threatened to restrict virtually Internet speaker. Further, Congress imposed punitive and draconian sanctions (including stiff jail time) for breaking the law. Congress really, really wanted to wipe porn off the Internet, but it chose a particularly mean-spirited way of doing so.

Not surprisingly, the law fared poorly in the courts. Within a week, it was enjoined. The next year, the US Supreme Court unanimously struck down the law (although 2 judges would have found a way to preserve some of the law). For its lack of policy support, its sloppy blunderbuss approach to regulating speech, and its flat-out meanness, I hereby crown the CDA the worst Internet law (to date...).

Posted by Eric Goldman at 11:27 PM | Comments (4) | TrackBack

The Limits of Law & Econ in IP: The Case of Digital Music

Once again, the folks at Truth on the Market have celebrated the recording industry’s efforts to assure perfect control over copyrighted content via Digital Rights Management. Free marketeers like Tyler Cowen are beginning to question DRM as a tax on consumers, and even one of the big four record companies is considering abandoning it. Untroubled by such doubts, Josh Wright and Geoff Manne push for ever more latitude for the dominant platform (iTunes) and dominant content providers (the big four recording companies).

Their posts provide classic examples of what Reza Dibadj has called the key shortcomings of conventional law & economics (L&E) reasoning. As Dibadj summarizes,

[T]hree of the most basic assumptions to the popular L&E enterprise--that people are rational, that ability to pay determines value, and that the common law is efficient--while couched in the metaphors of science, remain unsubstantiated.

Let's take a look at how each of these assumptions drives the TOTM approach to digital music markets.

1) Robust Rationality Assumptions: Wright is very gifted at the delicate art of burden shifting. If I can't show concrete, immediate consumer harm arising out of iTunes incompatibility, I can't criticize it. Consumers are rational, they've chosen this platform, DRM and all, and who am I to butt in and interfere with this "market?" Two points in response:

a) Can Consumer Sovereignty Operate in a Cartelized Market?

Of course, we only reach Wright's result if no attention is paid to network effects, and no one interrogates how iTunes as a platform may merely be an outgrowth of cartel power in the recording industry. There’s a deep irony that a scholar working in the field of antitrust somehow refuses to inquire whether the big four record companies engage in tacit collusion—even when every song on iTunes is sold for the same price! Why not take a look at the HHI for the industry (as I and coauthors did here), and wonder if past antitrust investigations (and at least one pro-FTC finding in the three tenors case) of dominant firms in the recording industry might might lead us to question their ability to leverage their copyrights into effective control over all manner of ancillary markets.

Of course, given the direction of antitrust law over the past twenty years, perhaps none of these activities is challengeable under it. But copyright misuse is an entirely distinct cause of action. So even competitive behavior wholly immune to challenge under the competition laws can be challenged under copyright—as Napster tried to do before it was bought by Bertelsmann (rich irony there), and as Judge Patel approved when she permitted discovery on that counterclaim in the Napster litigation.

b) Can we at least get transparency?

What's more, the TOTMers even seem hostile to the idea of government helping to "make the market" for DRM. Consider this insight from Ellen Goodman's exceptionally insightful piece on stealth marketing:

It seems natural that food manufacturers with a relatively good nutritional story to tell would disclose nutritional information. Kraft and Nabisco could then compete on nutritional value or Kraft could use nutritional information to distinguish its premium brands like Progresso. So one might think, and yet the market did not produce widespread disclosure of nutritional information until federal regulation required it. It was the regulation that created a market for nutritional information that now appears to be strong.

So I guess my question for Manne would be: would you at least consider regulation of DRM that made its terms and conditions very clear...and that helped consumers compare rival systems along understandable metrics?

2) Common Law as Deviation from Statute-Based Status Quo

I hate to break it to the laissez-faire crowd here, but IP isn't exactly the best example of an untrammeled market. The MPAA and RIAA are persistently agitating for rent-seeking legislation. Is Wright against these interventions? It's odd that regulatory activity to help make markets more friendly for consumers gets trashed immediately as inefficient, but the constant legislative ratchet upward of IP rights never seems to draw fire. Of course, James Boyle has understood this "bipolar economics" very well:

We appear to have a kind of bipolar disorder in our view of the state. When it comes to breaking up high tech monopolies through antitrust, we are deep sceptics. We point out the unanticipated consequences and deadweight losses to state intervention. We say the state is a blundering second or third best to the genius of the market, its efforts to establish limits and quotas will create a mess that even the Invisible Hand cannot sweep clean. But when it comes to setting up some of those same quotas, limits and monopolies in the first place - in this case, by overly broad intellectual property rights that clog the channels of competition and allow companies to leverage their existing property into a control over tied services - we are much more sanguine. This, after all, is “property”, not regulation. Here there seems to be an optimism about unintended consequences, a willingness to believe that vague state regulatory schemes have got it right - even when existing market leaders can twist them to prevent challenges to their position. In one view, the state is a bumbling idiot, in the other a scalpel-wielding genius, carving just the right pound of flesh to satisfy our debts to creators without shedding a drop of the blood of competitors and future innovators. Can this be the same state we are talking about?

Note also how Wright treats the discussion of international norms or the Norwegian attack on Apple’s contrived incompatibility: stony silence. I am always astonished by free marketeers’ supine incuriosity about how other countries manage to build their digital infrastructure. Think about how the recording industry itself forced a compulsory licensing scheme on composers and lyricists. Might a South Korean-style “all you can listen to for a low-fixed-fee” model work for us? Has that destroyed the South Korean entertainment industry? On the contrary, Seoul music and movies are extraordinarily successful. How about a British style "license fee," like the one that funds the BBC (which is now being deemed an "unfair competitor" by industry!) The orthodox L&E fetishization of complete contractual control over IP appears to be a misguided effort to apply without remainder an assumption of common law efficiency, tenuous elsewhere, to an area where it is completely unsuitable.

3) Ability to Pay: Yu's International Take on DRM and Anticircumvention

Why is the instinctive “free market” approach to IP issues to devise strategies for dominant firms to maximize revenue? Isn’t a larger issue the fact that people are being denied access to a resource that takes zero marginal cost to reproduce? As soon as we take a broader perspective on the situation, we can see that there are several ways to define "the problem" here. A paper like Randy Picker’s “Mistrust-Based DRM” imagines a world where decentralized enforcement (including the provision of bounties) scares everyone away from sharing songs over P2P networks. This is a great solution if you define the problem as “avoiding unauthorized uses of works.” If you define the problem as persistent deprivation of culture to LDC's, or the potential stamping out of samizdat, the problem is very different. Consider this careful analysis from Peter Yu:

[I]nstead of providing greater consumer choices and cheaper products, the widespread deployment of DRM systems will generally reduce access to materials that are needed for education, science, and cultural development.

Now, I think one could tell another story: namely, that DRM might allow companies that maximize revenue from the first world to cross-subsidize other operations and not worry so much about "squeezing blood from stones" in the LDCs (though Yu gives several reasons to discount that optimistic scenario.) But regardless of which story plays out, this has to be a major concern in normative analysis. We cannot assume that rising revenues validate a business model when it may well be built on a high margin/low volume approach (or, even worse, amounts to a one-sided privatization of a copyright law that has tried to balance public and private interests throughout its history).

All that I’ve said so far could derive from a general critique of conventional L&E's inapplicability to IP. We haven’t even begun to address the cultural angle here. Do we want a world where large conglomerates track our every purchase, our name and serial number are burned into every digital file we buy, etc? Do we want to continue subsidizing the hegemony of the big four vis-a-vis competitors who may not be adopting DRM, or have other business models? I'll try to address these points in posts later this week.

Posted by Frank Pasquale at 01:30 PM | Comments (13) | TrackBack

And now, from the Department of Ironic Advertising

This weekend, Cory Doctorow at Boing Boing ran a story about DRM problems with Apple's new iPhone; this follows up on prior Boing Boing posts criticizing Apple's DRM, such as Apple's iTunes/iPod tying.

And who is sponsoring these posts? Take a look at the page: One of the sponsors is Nike+.

Now, Nike+ is a pretty really cool idea (as Cory himself pointed out earlier). You put a chip in your running shoes, and a little doohickey on your iPod, and your iPod suddenly tells you your pace, distance, and so on. That's really cool. (It's actually one major reason I'm considering buying an iPod nano; I may actually get one if I can finesse a way to buy it with Amex rewards points). But Nike+ is also, frustratingly, tied to a single type of MP3 player -- the iPod nano. Which kinda-sorta makes it a really strange sponsor for a series of posts blasting Apple's business model for "lock-in" and calling the iPod line "a roach-motel: customers check in, but they can't check out."

Posted by Kaimipono D. Wenger at 06:02 PM | Comments (4) | TrackBack