EFFector       Vol. 17, No. 3       February 3, 2004

A Publication of the Electronic Frontier Foundation     ISSN 1062-9424

In the 278th Issue of EFFector:


Action Alert: The Public Domain Needs Your Help!

Creative works are supposed to end up in the public domain, where anyone can use them without fearing lawsuits from copyright holders. This freedom makes it possible for Shakespeare to be the world's most performed playwright, and it allowed Disney to create films like "Sleeping Beauty" and "Snow White." However, some powerful copyright holders have stopped works from entering the public domain by repeatedly lobbying Congress to extend the length of copyright terms. This abuse of the law locks people out of their cultural heritage and puts an unfair tax on creativity.

Join the growing chorus of creators, archivists, bloggers, librarians, teachers, and citizens demanding that Congress restore balance to U.S. copyright law by supporting the Public Domain Enhancement Act (PDEA). If passed, PDEA would require a small registration fee - as low as $1 - in order to retain copyright in a work. This would allow unexploited works to enter the public domain while removing ambiguity about a work's copyright status. PDEA already has 8 co-sponsors in Congress, but it needs many more. Let your representative know that this balanced, practical approach to copyright reform is crucial to the spread of knowledge and culture.

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EFF Defends Freedom to Innovate in Grokster Appeal

Pasadena, CA - A federal appeals court today heard arguments in an entertainment industry appeal of MGM Studios v. Grokster, a case that will test the strength of the Supreme Court's famous "Betamax" decision in the digital arena.

"This case will decide whether innovators need to ask permission from Hollywood before they provide consumers with exciting new tools," said EFF Senior Staff Attorney Fred von Lohmann, who argued on behalf of Streamcast, distributor of the Morpheus software.

In April 2003, StreamCast and fellow P2P software distributor Grokster won a landmark victory against 28 entertainment companies when a federal court declared that the software distributors are not liable for copyright infringement by software users when the software had significant non-infringing uses.

In ruling that filesharing software deserves the same protection granted to the VCR or photocopier, the court relied on the 1984 Supreme Court decision determining that Sony could not be held responsible for copyright infringement by people who use Betamax VCRs.

EFF represents StreamCast along with co-counsel Charles Baker of the Austin, TX, firm of Munsch, Hardt, Kopf & Harr, and StreamCast in-house General Counsel Matthew A. Neco. Mike Page argued on behalf of co-defendant Grokster.

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EFF Privacy Advisory: "US VISIT" - Passport to Database Nation?

The U.S. Department of Homeland Security (DHS) has introduced a new border control program that sets a dangerous precedent: the creation of an essentially permanent database of biometrically identifying records. The program, called "US VISIT," effectively treats every non-U.S. citizen to cross the border as a criminal suspect.

How does US VISIT work? Upon entry into the U.S. by air or sea, each foreign citizen is photographed, fingerprinted and checked for a match with criminal, terrorist and immigration "watch lists." Whether or not an individual is deemed to have done anything illegal, the information gathered during this process is then placed in a government dossier that will be kept on file for 75-80 years.

"Not only does US VISIT ignore the rights of foreign citizens, it's precisely the sort of program that federal law enforcement has repeatedly pushed for U.S. citizens," said EFF Washington Policy Liaison Lisa Dean. "If US VISIT is successful, the next step could be a national ID system, or 'internal passport,' based on biometric identifiers."

"The government's privacy impact assessment report on US-VISIT makes it clear that the current version of the program is only its first phase, and that the information it collects will be widely shared with any government or law enforcement bodies that have a use for it," added EFF Senior Attorney Lee Tien. "This is the perfect recipe for mission creep."

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Recording Industry Cuts Corners in Filesharing Crusade

EFF, Public Citizen and ACLU Say "File Lawsuits Properly"

Washington, D.C. - EFF, Public Citizen and the ACLU on Monday asked federal courts to require the recording industry to follow procedures designed to protect the privacy and due process rights of Internet users in its latest round of lawsuits against alleged music filesharers.

In "friend-of-the-court" briefs filed in Washington, D.C., and New York, the groups argue that in lawsuits against more than 500 alleged copyright infringers, the industry failed to present sufficient evidence to compel disclosure of the alleged infringers' identities and failed to ensure that they were notified that their identities were being sought.

"Once again, the RIAA is trying to cut corners in its crusade against filesharers and deny Internet users the legal protections that are available in all other types of legal cases," said EFF Legal Director Cindy Cohn. "All of those accused should receive notice and have a chance to refute accusations of filesharing before the recording industry compels their Internet Service Providers to reveal their identities."

The recording industry also failed to protect the basic due process rights of Internet users when it lumped together lawsuits against 100 individuals into each of several court filings. These individuals have no evident connection to one another, live in different jurisdictions, and allegedly shared different music files using different types of file-sharing software.

"Our legal system normally guarantees each person accused of wrongdoing the right to an individual, fair, and just hearing," said Public Citizen attorney Paul Levy. "The recording industry should have to follow the same legal standards as everyone else and file each case in a court local to the alleged filesharer."

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MacArthur Foundation Awards EFF $600,000 to Represent the Public Interest in Global Standards on Digital Television

Chicago, IL - The John D. and Catherine T. MacArthur Foundation has awarded a $600,000 grant to EFF to represent the public interest at meetings of the Digital Video Broadcasting Project in Europe where global standards on digital television and other digital data services will be set.

"There are a number of influential members of the entertainment industry that use industry standard setting meetings - such as the Digital Video Broadcasting Project in Europe - as opportunities to mandate technological features that control digital media, such as devices for digital television that limit the user's ability to copy programming for personal use or to skip commercials," said Jonathan F. Fanton, President of the MacArthur Foundation. "By participating in such meetings, the Electronic Frontier Foundation is working to protect the rights of the user and ensure that future uses of technology are not restricted by the industry."

"We're so pleased that the MacArthur Foundation is supporting our work in this important area," said EFF Executive Director Shari Steele. "It's imperative that the public interest be represented in these standards meetings, and thanks to the Foundation, we'll be able to make sure that the public's voice is heard."

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Guest Op-ed: "Suing Your Customers: A Winning Business Strategy?"

By G. Richard Shell

The recording industry has a pricing problem. People do not want to pay $15-20 for a compact disc when they can download the same music for free over the Internet. The industry's solution appears as novel as the technology that is giving it such headaches: launch hundreds of lawsuits against otherwise law-abiding consumers who download music.

After all, the music industry has invested billions of dollars in its product and thought it had iron-clad intellectual property protection for these investments - copyrights in recorded songs issued by the United States government. But having a strong legal claim on the merits is only one factor in legal strategy success. Indeed, this factor is often the least important one from a business point of view. Other key strategic considerations include the public legitimacy of an industry's legal attack (i.e. how the move will play in the court of public opinion), the vulnerability of an industry's strategic position in its market, the resources it has available to sustain a legal war, and the access an industry has to important legal decision makers such as regulators and legislators who can make new rules in the industry's favor.

The recording industry balanced these factors well in its initial legal strategy - suing online distribution companies such as Napster. Napster was a direct threat with no legitimacy of its own. Its only appeal was whimsy: Average citizens thought its creator, Shawn Fanning, had a neat, new technology. But they also recognized that Fanning was selling the key to somebody else's candy store. Nobody formed a "Free Fanning" committee to bail him out of legal trouble.

The recording industry, however, has gone one step too far with its latest legal move. Suing your customers is not a winning business strategy. Industries have a completely different strategic relationship with customers than they do with rivals. And this sort of strategy does not play well in the court of public opinion.

But it's hardly the first time an industry has tried to solve strategic problems using litigation against its customers. And the strategy is no more likely to work today for the recording industry than it did 100 years ago, when the leading automobile manufacturers in 1903 tried to put down the threat of cheap, mass-produced cars by suing consumers who bought Henry Ford's automobiles. Napster founder Shawn Fanning may have little else in common with Henry Ford, but both men sparked a wave of innovation that transformed their worlds. And both brought down the wrath of incumbent industry associations which tried to stop their new technologies with litigation. The story of Henry Ford's eight-year legal battle with the "Association of Licensed Automobile Manufacturers" is a cautionary tale for today's Recording Industry Association of America.

In 1903, when Henry Ford launched the Ford Motor Company, his third attempt at making cars, automobiles were high-priced, custom-made playthings for the rich. What's more, the major manufacturers had figured out a way to keep it that way. They had acquired a strategic property right very much like the recording industry's copyrights on recorded songs. It was called the Selden Patent and it gave its owners the exclusive right to sell a very basic invention: self-propelled vehicles powered by internal combustion engines. Many people in the car business thought this patent was an outrage - much as some online retailers today are angry that Amazon.com received a patent on its "One-Click" checkout system. But the U.S. Patent Office had issued the Selden Patent and a group of powerful incumbents had purchased it and formed an association to enforce it. Litigation, then as now, was very expensive - especially for start-up companies with limited working capital. Nearly every car company fell into line to pay royalties to the Association for the privilege of making and selling cars.

Except Henry Ford. The association did not want another competitor in Detroit and it did not like his idea of driving prices down to where average people could afford a car. So it refused to license him. For Ford, it was either exit the industry or fight the Selden Patent in court. He decided to raise a legal war chest and fight the incumbents. The litigation lasted from 1903 until 1911 and along the way, the association launched hundreds of lawsuits against Ford's customers to scare them away from his showrooms for buying "unlicensed vehicles."

Most ordinary people of Ford's era had been content to stand by and watch the automobile makers slug it out over the Selden Patent. It was just an industry cat fight. But when the big "money men" started suing ordinary people who were just trying to buy a cheap car, public sympathy shifted against the incumbents. People rallied to Ford's side against the bullies. Editorials weighed in against the industry's heavy-handed lawsuits, and Ford helped his own case by purchasing litigation insurance for his customers. By the time the patent litigation was over - Ford won on appeal in 1911 when the court ruled that the Selden Patent covered only cars made with a special type of engine nobody was using anymore - Ford was a hero, and the largest car manufacturer in America.

What can the Recording Industry Association of America take from Henry Ford's story? First, you will never win your market by suing your customers. Quite the opposite: you will rally ordinary people to your opponents and alienate a generation of buyers. Exactly what has the industry gained by suing, among others, a 12 year-old girl in New York for downloading songs? A raft of bad publicity, a reputation for being a bully, and a new litigation insurance scheme devised by peer-to-peer software companies who can now cloak themselves in Robin-Hood green.

Worse still, the RIAA's wholesale use of the Digital Millenium Copyright Act to obtain the names of telephone company customers for its lawsuit program has sparked a legislative reaction based on privacy concerns. Republican Senator Sam Brownback of Kansas recently introduced a new bill in the Senate to require judicial review of subpoenas such as those used by the recording industry to fuel its downloading cases. When Kansas Republicans start lining up with liberal Democrats against your industry, you've got a whole new kind of legal strategy problem.

Second, no legal rule is strong enough to overcome a radical technical innovation. Courts can delay progress but they cannot stop it. Unlike the automobile cartel that tried to stop Henry Ford, the recording industry's copyrights are perfectly valid. But so are the speed limits on the interstate highway system. The fact that cars are designed to go faster than those speed limits explains why most people do so, regardless of the law. The Internet is designed to transfer data at zero marginal cost, so people want to download all kinds of things, including songs. Ultimately, no copyrights can stop that.

Third, innovation always drives the prices of yesterday's technology into the dirt. The way to respond to the demise of the commercial CD is not to sue Internet users. It is to figure out new ways to make money on music. Maybe concert ticket prices will have to rise. Perhaps groups should be giving more live performances on the Web for premium prices. Innovative companies are beginning to sprout up all over the place with new ideas that incorporate digital music - such as selling customized CDs with mixes of a consumer's favorite songs, video clips, and messages for friends. An Indian company called Saregama India is already doing this with music from old Hindi films and classical Indian artists. The U.S. music industry should be leading the way toward such new concepts, not lashing out at its customers like the angry, injured giant that chased Jack down his bean stalk.

As Henry Ford once summed it up, lawsuits against new technologies provide "opportunities for little minds...to usurp the gains of genuine inventors...and under the smug protest of righteousness, work a hold-up game in the most approved fashion." What the recording industry needs now are new business models, not outdated legal strategies.

Reprinted with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.


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