'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.