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P2P can still thrive after Grokster

My view of the Grokster decision mirrors fairly closely that of BusinessWeek Online. Key passages:

True, much remains to be hammered out by the courts. But the content industry might not like the results. There was little subtlety when it came to Grokster and StreamCast's behavior, making them easy targets for Hollywood & Co. However, the entertainment industry might find itself in an uphill fight should it decide to go the next step and take on companies that operate in a gray area by giving lip service to copyright protection and urging their customers -- with a wink and a nudge -- not to steal. For Hollywood, "this is a pyrrhic victory at best," says Gigi Sohn, president of Public Knowledge, a group that supported Grokster's side. "P2P will live on." ...

The worst didn't come to pass. Notably absent from the Grokster opinion is any condemnation of file-swapping networks at all. In fact, the court took pains to point out the technology has legitimate uses, including distribution efficiencies for libraries, universities, and governments.

That's great news for the tech sector. The Supreme Court left Betamax intact -- no technology can be held liable for infringing just because it can -- and set a fairly low bar for innovators to clear if they want to keep on the copyright straight and narrow. Companies simply have to play by some basic rules to keep copyright lawyers at bay, such as not advertising their products' capability to infringe.

"They struck a good balance," says Michael A. Malcolm, chairman and CEO of Kaleidescape, a Mountain View (Calif.) company that builds home-viewing systems for DVDs. "The situation with Grokster and StreamCast was pretty egregious. We've always done everything the right way to be a good actor."

I agree -- and have written about the absurdity of the legal assault on innovative tech companies like Kaleidescape. Hollywood's case against such companies just got tougher.

FBI busts piracy net

San Jose Merc: FBI sting busts piracy net.

Warez groups are described as being run like a kind of co-op, with every member having some responsibility for keeping the enterprise going. Warez is pronounced ``wares'' and comes from the word ``software,'' according to the Internet dictionary Wikipedia. It is used to describe groups trading copyrighted material. Once a term confined to the computer underground, it has become more commonplace in recent years.

The hierarchy includes ``founders'' or ``leaders'' who form the group and scout for new members; ``scriptors'' who build the site; and site operators who take over the day-to-day running of it. ``Equipment suppliers'' provide the hardware for the site -- the role apparently played by undercover agents in the sting. ``Suppliers'' provide the pirated material. ``Encoders'' devise methods for circumventing copyright protection, and ``couriers'' gather it and put it on the site. Users obtained free unauthorized access to software or bartered for it on the sites, according to the affidavit.

'Ten years of chilled innovation'

BusinessWeek Online has a Q&A with Larry Lessig the day after Grokster came out: Ten Years of Chilled Innovation.

Q: Do you think in fact we'll see a dampening of innovation? A: Yes. Now, I don't think we're going to see tons of litigation. What you're going to see is innovation that's channeled in ways the copyright owners can agree to, or channeled in ways that avoids any kind of possibility of this kind of litigation.

That has already had its effect in the Valley, and already money has shifted into places which will avoid any conflict with the copyright holders. Why buy a lawsuit when you can buy a new innovation that doesn't get you a lawsuit? And you don't even see it -- you don't even know what you don't get because people are afraid. ...

Q: How does the decision make the legal situation less certain for tech companies?
A: Take the number of [Apple (AAPL )] iPods sold and take the number of iTunes songs sold, and divide it, and it's something like 25 songs per iPod. You know there's more than 25 songs on every iPod. Where did people get their music? Well, they rip it from their CDs. Is that legal? Good question. It's not protected by the audio home recording act, which explicitly said you're allowed to make an analog copy of your CD. But [on the iPod], it's a digital copy.

Ask [former Motion Picture Association of America CEO] Jack Valenti or ask the recording industry whether it's fair use to be copying CDs. Well, they don't think it's fair use. So in selling iPods...[Apple is] encouraging CDs to be ripped. If it weren't Apple, which is a relatively strong company, but another company that's starting with this new technology, what would happen if you filed a lawsuit against them? Your lawyer would tell you, you can't afford to fight this.

Q: One might say it's not Apple's strength protecting it, rather that it puts a wrapper on iPods that says "don't steal music," thus indicating a clear intent to discourage infringement.
A: I don't think that's right. Is a warning a sufficient step? Probably not, or at least there's a pretty good question whether it's enough.

Go back to the Sony Betamax case. The Sony Betamax was developed and advertised in a way that they knew they were encouraging certain kinds of behavior [copying movies], over 90% of which was illegal. Would that case have really survived the standard that was announced in Grokster? I don't know.

While I agree with many of Prof. Lessig's points -- including the increasing importance of Creative Commons licenses -- I really do think that Congress would have devised much more onerous legislative relief for the entertainment industries than the court fashioned here.

Filmmakers vs. permission society

I had missed this the other day: As Larry Lessig notes, Stay Free! has a fantastically interesting story about the struggles of a filmmaker with the permission society. The documentary Mad Hot Ballroom, directed by Park Sloper Marilyn Agrelo, follows New York public school kids in a citywide a ballroom dancing competition.

When Agrelo and Sewell were filming boys playing foosball after school, Ronnie [a young boy, above] at one point shouted, "Everybody dance now!", a line from a C+C Music Factory hit. Incredibly, the filmmakers' lawyer said the line had to be cleared with the song's publisher, Warner Chappell. The price? $5,000.

Rights remixed

Mike Walsh at The Fourth Estate blog:

As they say – no new tunes in the key of C. But in an age of Tarantino, hip hop sampling and Google API mashups – the remix is generally better than the real thing. What should be a headache for intellectual property lawyers, is becoming fertile ground for legal innovation with the rise of the creative commons licensing regime. But does copyright altruism really add up to new economy affluence? ...

The new remix culture is not just about clever marketing, it is about giving consumers the tools to participate in the media experience.

iTunes isn't a file-sharing service

I've seen several traditional news media reports in the past two days that have referred to "legitimate file-sharing services" such as iTunes. (Sorry, don't have pointers at the moment.)

iTunes is not a file-sharing service, as Roger Ford explains in this comment at the Picker MobBlog:

iTunes is several things. First, iTunes is an application that lets you play MP3s and rip CDs to mp3 (or AAC or WAV) so you can play them on your computer without the CD. This is much like Windows Media Player and WinAmp and any of a number of other programs.

Second, iTunes lets you stream music that is on one computer to play it on another computer. A copy is not made; the two have to be on the same local network at the same time. (There are workarounds that let you write the music to disk. Apple keeps defeating them and they keep coming back.) This is much like Internet radio, except it's local and it's a "pull" technology, meaning I have to decide what songs I want rather than listening to what the radio station sends me. This is limited to two computers on the same subnet (typically, same building). This was briefly not true, but Apple closed the loophole.

Third, there's the iTunes Music Store (iTMS), which is Apple's paid service. Here you pay a buck, you get a song. The song is not sharable except to the extent you burn it to CD (which is allowed) or defeat Apple's DRM scheme (which can be done, but is of course illegal). There's no other sharing aspect. You can create what's called an iMix in the iTMS, which shows songs you recommend that fit a category or whatever, but the only way to access those songs is to purchase them from Apple.

In short, while iTunes is a competitor to file sharing systems in that it's another way to download music on the Internet, it's not by the remotest stretch of the imagination any sort of file-sharing system. There might be a claim under Grokster against Apple for selling the iPod, or for distributing iTunes for the simple fact that it plays MP3 files, but otherwise it's architectually like selling CDs, not Kazaa or Grokster.

Don't Stop Grokkin'

Mike Godwin in Reason Online: Don't Stop Grokkin'.

Will Grokster spur more fair use litigation?

Fred von Lohmann of the Electronic Frontier Foundation, whom I profile in Darknet and who did a nice job on yesterday's PBS NewsHour (I was originally slated to appear), has some detailed posts at EFF Deep Links about the possible or likely effects of the Grokster ruling for the tech community.

One of the more interesting posts is about the potential litigation around fair use in cyberspace:

One potential consequence of the MGM v. Grokster ruling may be an uptick in courts deciding fair use cases involving personal, noncommercial activities like "time-shifting" and "space-shifting."

A variety of new digital technologies are advertised and promoted for uses that the technology vendors believe to be fair uses. For example, Time Trax promotes its technology for recording satellite radio, Mercora for recording music from webcasts, and Sling Media for transmitting your TiVo'd TV shows to yourself over the Internet. All maintain that these personal, noncommercial, nontranformative uses of copyrighted works fall within the scope of fair use. No court, however, has ever weighed in on these (or virtually any other) personal digital fair uses.

If these innovators are wrong on the fair use score, however, are they all liable for inducement? To put it another way, the Supreme Court's ruling may put "fair use technology companies" in the position of having to litigate, and win, the fair use question on behalf of their customers in order to resist an inducement charge. That's an expensive burden to foist on these companies. ...

That's certainly of interest to us at Ourmedia.org. Someone at Gnomedex asked for clarity around fair use and digital media, and I pointed him to the fair use guidelines written by IP law firm Fenwick-West. A link to those guidelines is on every page of Ourmedia.

Hollywood's next target: BitTorrent?

Mark Schultz thinks BitTorrent is pretty safe under the inducing infringement standard set down by the Supreme Court in Grokster yesterday. At SCOTUSblog, Prof. Ed Felten says ... maybe. And adds:

So the stage is set for the next phase of the copyright/technology litigation war. The music and movie industries don't want to live in a world where BitTorrent is allowed to exist. The Supreme Court didn't give them enough yesterday to kill BitTorrent. So the industries' goal will be to stretch the Grokster rule, just as they tried to stretch the Sony rule before hitting a sandbar in the Grokster district court. We'll see a careful campaign of litigation against peer-to-peer services, trying to gradually stretch the noose of inducement liability until it fits around BitTorrent's neck. Failing that, we'll see a push to get Congress to codify (the industries' interepretation of) the Grokster rule.

Meantime, Ernie Miller has some insights on all this in his latest post, Kicking the Sony Can Down the Road:

I believe that P2P technologies have all sorts of wonderful non-infringing uses. I believe that P2P technologies will increasingly be used for these non-infringing uses and become embedded in our work and play. We'll all be making phone calls via P2P, playing games, watching TV, sharing our varied creations. I believe that five years from now the idea of living without P2P will be about as attractive as the idea of living without the internet today. ...

He also ends with this: "If we're right, we're going to win five-ten years down the road."

Ten years sounds about right. The next five will be a struggle.

Meantime, Ernest Miller has a new podcast up at IT Conversations, where he chats with the wonderful Denise Howell and Charles Petit about Grokster.

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Grokster ruling a boon for DRM

I'm quoted in this Chicago Tribune story by Eric Gwinn today about the Grokster decision.

Meanwhile, consumers may lose new features for their digital players because the ruling doesn't specifically spell out ways a company could encourage illegal activity.

"When Apple says in an ad, `Rip, Mix, Burn,' is that inducement?" asked Michael Petricone, vice president of technology policy for the Consumer Electronics Association. "You don't know what the legal landscape is; all you know is it's easier to get sued." ...

"Unfortunately, we'll be left to the good will of Hollywood on how we can access the content," said J.D. Lasica, author of "Darknet: Hollywood's War against the Digital Generation."

I spoke with Eric chiefly about the digital rights management that we'll now see increasingly in our digital devices.