Here we'll explore the nexus of legal rulings, Capitol Hill
policy-making, technical standards development, and technological
innovation that creates -- and will recreate -- the networked world as we
know it. Among the topics we'll touch on: intellectual property
conflicts, technical architecture and innovation, the evolution of
copyright, private vs. public interests in Net policy-making, lobbying
and the law, and more.
Disclaimer: the opinions expressed in this weblog are those of the authors and not of their respective institutions.
Everything about this project screams 'forward-thinking': it's crowd-funded (via Kickstarter). There is an option for patronage beyond what Kickstarter allows. The project involves multiple artists, all retaining control of their work. The product is multi-faceted (album AND book AND art tour AND maybe more). The experience is multi-layered - even tickets to the shows are exclusively on Kickstarter. The promotion is direct and from the heart - Ms. Palmer is not ashamed to say "fucking" nor is she ashamed to express her love for her fans.
This is the sort of thing you can't buy with astro-turfing. This is the sort of thing that will blaze trails for this century's creative artists. I confess I am not a huge fan of Ms. Palmer's music and her stage acts. But I admire the hell out of what she's doing.
This seems like a bad and backward-thinking way for B&N to go, to me. As we've been discussing this month, dedicated e-readers are going to die, including Nook. Tablets running things like Windows 8 will replace these devices. Of course B&N wants there to be a Nook app for Windows 8. But it also wants one for iPad and Android tablets. Microsoft's money might get them first place in the development line, but it can't possibly buy exclusivity. B&N is also probably being foolish to prioritize a Windows-OS version, in that Windows 8 has such a tiny user-base. A Nook app for either of the other big sellers would likely reach far more of B&N's customers.
The PW piece has a bit of puffery about how they're going to do unspecified other things, and combine assets and blah blah. It includes blather about B&N's physical stores, about which Microsoft cares not one whit, and has not one word about the one truly revolutionary thing to happen in e-books this year: Tom Doherty imprints' decision to dump DRM.
All of which tells me they don't have an actual business model. That's kind of a shame, actually, because I can think of at least two that would be absolutely rocking, given these two companies' expertise and current footprints.
Stross has been careful to state that he had no insider view that Tom Doherty Associates - the publishers who put out the Tor, Forge, and other lines of books - were going to make a big move to drop DRM. But even without that knowledge, Stross put together what he saw as the business case for getting rid of DRM. Long-time readers here will know that I am a big fan of the creators should get paid viewpoint, but that we also share the view put forth by people like Cory Doctorow that the actual business effect of DRM is not to control illegal copying, but rather to hand the manufacturers of ebook readers a stranglehold on everyone and everything.
It's not going to surprise any of my readers that Stross concludes that the only way to break Amazon's stranglehold is to drop DRM. In a DRM-free world, you can buy a book that is readable on a Kindle and on a Nook and on an iPad. Thus, it doesn't matter if you buy that book from Amazon. It may be the case that Amazon offers you a discount, or a frequent-buyer program, or some other incentive. The publishers can't guarantee that Amazon won't be able to dominate the market by virtue of its strong competitive position, wide inventory of products, and other advantages. What they can guarantee is that their readers will no longer be locked into a Kindle.
Although Stross doesn't say this directly, I feel this also opens up a world of other direct-sale opportunities for publishers. I mentioned Emily Books a couple weeks back, who are trying to operate as independents. In a DRM-free world there's no reason that a big-name publisher can't do a deal with Emily Books or any of a thousand other small, high-value, curated ebook outfits. Get DRM-free versions of Emily Books on every device, with a publisher like Tom Doherty Associates lending its marketing and mass distribution expertise and getting a cut of the profits. I can think up at least six more profitable-to-the-publisher ways to build business in a DRM-free work. Stross's piece claims that dropping DRM won't lead to immediate revenue gains, but I think that's true only if you consider going DRM-free as a stand-alone action rather than part of a comprehensive business strategy.
I was also amused to see that Stross also predicts the demise of the dedicated e-reader, given that most people I talk to think I'm nuts when I say that. He's more generous than I was, giving the stand-alone reader "2-3 years possibly, 5 years probably" where I think that by this time next year everyone will be talking about the decline of the device as tablets ascend.
Lastly, I wanted to bring to your attention a fascinating piece that appeared yesterday on PaidContent, '"Why I break DRM on e-books”: A publishing exec speaks out.' In this column, Laura Hazard Owen tells the story of one (obviously anonymous) executive from the publishing industry whom she introduced to the common practice of unlocking a purchased book so it can be read anywhere.
Exec, as she dubs her story protagonist, admits to being influenced by Stross's writing. Exec realized that s/he had no control over the ability to do perfectly legal things with purchased ebooks. Exec isn't sharing the cracked books with anyone, let alone putting them out for general downloading. Exec just wants to be able to read the stuff, and has figured out that the sole purpose of DRM is to control the consumer. Sadly, even though Exec admits to a decision to break every DRMed ebook from now on it doesn't appear that Exec will do anything to change stupid corporate policies that put the DRM there in the first place.
Still, admitting you have a problem is the first step to recovery, right? Maybe we should set up a 12-step program for all the members of the Cartel who are addicted to DRM.
To review: academics who publish provide free material and free labor to big publishers like Elsevier who take this free material and package it into things like journals that are then sold at great expense to places like libraries. And by "great expense" I mean tens of thousands of dollars per journal per year. More on that below.
Often, to be published requires not just giving up your time and energy but also all kinds of rights on your own writing. Some academic publishers will, for example, forbid authors from having copies of their own papers on their own Web sites. Sometimes you're not allowed to submit the entire body of your writing to a scientific indexing service, just an abstract. Both of these hurt authors by making their work harder to find and read, but bring more revenue to the publishers who charge for things like reprints, access to their walled "digital libraries," and so on.
In his column, Naughton reviews the costs, power structures, and "intrinsic absurdity" of the academic publishing racket, pointing out among other things that at least one estimate of the free labor provided for peer reviewing states its value at over UKP 165,000,000. He notes that Tim Gowers' petition is but one of many gaining traction and that even some research-funding bodies are beginning to require that people who accept their funding agree to publication that isn't behind a paywall.
About that "pay" bit... Boingboing recently highlighted a letter from Harvard Library's Faculty Advisory Council. In it, the Council expresses the view that the costs of these journals will soon put the library out of business. Remember those tens of thousands I mentioned? They add up really fast, particularly when you want to run a world-class research library for a multi-disciplinary faculty. Harvard (or MIT or Boston University or Tufts, just to name four world-class institutions close to where I sit) doesn't just have to keep in the high-prestige journals in biology. They also need the journals in mathematics, physics, chemistry, astronomy, computer science, mechanical engineering, and on and on and on. They don't have the option to leave out some.
The result, at least in the case of Harvard, is an annual cost just for journals of USD 3,750,000. That doesn't count access fees, reprint fees, and other costs. And the memorandum points out that the rate of increase in these costs far exceeds other measures such as the rise in tuition costs, inflation, and so on. In plain English, the publishers are gouging ever harder.
So, where does that leave us? Libraries are grumbling, funders are disquieted, and individual faculty members are happy to sign petitions of protest. But none of this addresses what I see as the key issue: faculty give these journals this much power because they rest entire careers on them. You get tenure based on your academic publications. You submit your publications list when you apply for grants and funding. Look at any academic C.V. and you'll see that it's structured so that the big name journals in which the person has published are listed promptly. It's one of the first things that gets looked at when someone applies for an academic job.
Until that changes, nothing is going to change. I'm sorry to be so consistently negative but "publish or perish" is still the law of the ivory tower.
A quick follow-up to yesterday's long discourse on why Twitter's IPA is doomed. Part of the analysis of why is my differing opinion on how good engineers think. Today I direct your attention to "Why I joined Microsoft" by James Whittaker. He's been at MS, left for Google, and has now gone back. In the blog he explains why, including his view that MS is where he can "find work [to] be passionate about." Oh, and it "has the right collection of IP, product segment leadership and technical assets to be a disruptor." That is the calculus of a senior developer who's been in several environments and has his choice of where to work next. If you want to fashion an intellectual property agreement that is going to change the game, you need to understand the people whom you expect to sign that agreement.
Start by reading the agreement as posted to Github. There's a lot of discussion around it, and the specific language will likely change, but the basic agreement is very short and readable. It is intended to replace the default blanket assignment that is used in most industries. In the default you give the company everything, and they can do anything with it. Your name still appears on the patent, but you assign all rights to your employer - usually as a consideration of employment, meaning you can't work (at tech, bio, pharma, or any other IP-using company) unless you agree to this.
The company then is free to use the patents however it wishes. You may recall that this was the topic of some outrage about a month ago, when Andy Baio complained bitterly in a WIRED piece about how Yahoo was using patents (not his, keep in mind, but he was upset anyway). This freedom is restricted under Twitter's proposed IPA, which specifically limits companies' ability to use assigned patents to what the IPA calls "Defensive Purposes."
In theory, a company with this agreement in place could use patents to defend itself, but not to initiate patent-enforcement action. That's a nice theory, but there are two problems I see with it. The first, and smaller problem, is that the way the language of the IPA currently stands, it permits IPA-covered patents to be asserted
against an Entity that has filed, maintained, or voluntarily participated in a patent infringement lawsuit against another in the past ten years
Which is to say, everybody. Really, if you can name a going tech/bio/pharma concern that hasn't been involved in patent litigation in the past 10 years I'll be shocked. It's probably not 100%, but it's certainly 80% and all the big players are in those 80%. So unless the IPA's language is changed, its effect will be nil.
But leave that aside for the moment, and consider what it means to be a publicly traded corporation. It means you are legally bound to do whatever increases shareholder value. Voluntarily disarming yourself in this way leaves you at a competitive disadvantage against other players in your marketplace who are free to infringe your patents, so long as they don't sue. Can you imagine trying to go before your biggest shareholders and say "Well, yes, I'm going to allow our competitors to continue infringing all these patents even though we think we have a good legal case."
You'd be fired in a heartbeat, and with very good justification. You'd be lucky if you didn't find yourself on the wrong end of a shareholder lawsuit. Private companies can get something of a pass on this kind of thing as they don't have the same legal obligations to shareholders. In addition, private companies can be much more easily molded to the personalities of the founders and controlling early stakeholders. But big public companies? The Apples, IBMs, HPs, GEs, Genzymes, Motorolas, Honeywells, etc? They're all going to continue to use patents offensively to protect their markets and products. I hear Google used to be a not-evil place, too.
The IPA is not an inherently bad idea. I applaud Messinger and Twitter for thinking innovatively and trying to get something new started. But I think that the press are being vastly overoptimistic about the likelihood of success here; for example, see Joe Brockmeier's piece.
He lists four reasons why companies should adopt the IPA, which come down to hoping a lot. #1 is that developers will prefer to work at an IPA-using company. I'm sorry but 99.999% of developers don't think about patents and certainly don't think about them during the hiring process. Developers go where the work is interesting and the pay is good. Developers go where they get to do stuff that's fun and looks good on their resumes.
Number 2 is that companies won't need incentive plans to convince developers to file patents. I take it from this that Brockmeier has never filed a patent. The process is BORING and TEDIOUS in the extreme, involving hours of meetings with lawyers who don't understand your work and who insist you do all sorts of annoying arcana. Incentive programs exist because companies realize that developers hate this stuff, but hey for five thousand bucks they can get a really cool new toy so sure, they'll put up with the annoyance. The future use of whatever comes out the lawyer's pen is not even part of the consideration.
Number 3 - it could reduce the number of trolls, but frankly trolls are an overblown annoyance. They're a pack of fleas on the ass of the bull that is rampaging in the tech china shop. The bull is composed of those very same big names (IBM, Apple, HP, Microsoft, etc) aided and abetted by a thoroughly broken patent system. I think Mark Cuban gets overheated at times, but I definitely understand his visceral desire to burn down the entire broken edifice that is software patenting right now. Patent trolls are a symptom, not the disease.
Number 4 - the IPA can be a poison pill. Which is to say that if you're someone like AOL or Yahoo and your company is collapsing then you can't even scrape a bit of value out of what little you have left. Boy, that's attractive! I'm about to default on my mortgage, so I'll set my car on fire, too! Seriously, who thinks like that?
The press needs to take a much more realistic look at this proposal and talk about the ways in which it can be made more workable. For example, I'm personally a fan of patent pools, in which companies contribute mutual value, take mutual value and have financial incentives to avoid hostile legal actions. IPA-like agreements and additional steps like compulsory licensing could play a big part in creating an environment where nobody gets everything, but everyone gets enough to be satisfied, without having to disarm themselves.
In a New York Times piece, David Streitfeld notes that Amazon has already announced plans to "push down" e-book prices. Of course, the problem isn't what happens in the short term, it's what happens over the longer term. There continue to be two diametrically opposed opinions on this. On the one hand, we have the old-school notion that says monopolists will raise prices no matter what - the view argued by those who didn't settle with DOJ. I continue to find this ironic after Apple's history of holding the line on music prices against publishers who wanted to charge far more. On the other hand, we see independent authors like Konrath who argue that sales are extremely sensitive to pricing and monopolist price-jacking will just cause people to switch back to physical books.
There is already a potentially significant price gap in the (retail) costs of e-books and physical books. To the degree that a consumer has a choice - that is, already owns the e-book device - the price gap has to matter. For consumers who aren't already locked into a device, the gap has to be factored against the cost of buying a new device.
A possible third way could come from small e-booksellers, according to a Time Techland piece by Keith Wagstaff this week. Under the two very photogenic ladies from Emily Books the column points out that for all the hand-wringing over the potential power Amazon will have, nobody at the big publishers is actually doing anything about it. Hopping into bed with Apple isn't precisely a great move, but nobody at the big houses seems to have a better idea.
Emily's idea is to offer a high-touch hands-on approach, giving readers a better idea of the quality of what they're getting. It's a simple model, and one that has been replicated with all kinds of specialty brands and products in all kinds of industries. But it's nearly impossible to do with e-books because the publishers are so afraid that they won't let anyone sell their e-books without massive, complicated, and expensive DRM.
Wagstaff devotes more than half his column to excoriating the idiocy that is DRM, a story that I'm sure most Copyfight readers know by now. He ends by saying:
DRM requirements are going to have to go. It’s probably going to happen eventually; if I were a publisher, I’d get ahead of the curve and embrace a more diverse marketplace sooner rather than later.
Oh, would that the big publishers were so willing to dip even a tiny toe into the 21st century.
The point these two are making is that antitrust regulators are looking at the wrong thing. Sure, agency pricing set up by collusion would be illegal, but it's not half so anti-competitive as the kinds of platform locks that DRM and other restrictions the DOJ is giving a pass to. Carmody points out that Apple also employs a variety of anti-competitive measures to lock customers in. And, as I'm getting sick of saying and you are probably getting sick of hearing, every bit of lock-in is going to end up harming the marketplace and harming readers particularly.
Yeah, I get that e-books have lots of advantages. I'd like to get some. But not at this cost - and I don't mean whatever Amazon decides to charge.
I feel compelled to repeat before I light into this that my personal belief is that the current construction of copyright law in the US is far too tilted in favor of maximalism, by which I mean putting the rights of copyright holders above other considerations such as scholarship and the general welfare. It was obvious to me that SCOTUS would see how Eldred should be decided, and how continuing to extend at whim the term of copyright violated the originalist language of "for a limited time." As the man said, I may have been (on the) the losing side. Still not convinced it was the wrong one.
What I am convinced of is that Eldred remains the current settled law of the land, and that officials such as Maria Pallante, the Register of Copyrights, have a duty to follow and uphold the law until such time as it's changed. Let's not forget this all started with Masnick hyperventilating about how her statements in favor of copyright maximalism made her incompetent to do her job.
Now let's look at Masnick's current long screed. Without delving into too much detail what he seems to be harping on is the distinction between 'purpose' and 'method.' He still asserts that the purpose of copyright is contained it its preamble language, and that the methods should serve that purpose and that's what everyone else should believe, too, or they're wrong and he's right. This is a less well-written version of the Breyer test and I really do recommend that you, and Masnick, go reread that opinion. Breyer's writing on IP matters is not always good enough or clear enough, but in this case I think he makes the argument cogently and persuasively. But as we reread, let's keep in mind Breyer was writing a minority opinion. Breyer's side didn't win that case (Golan v Holder) and thus it is not the law of the land.
Masnick seems to think he can bolster his argument with a "bunch of quotes" (his words) that support his view. Dear Mike Masnick, I can personally guarantee you that every losing side in every SCOTUS case came equipped with more than a few "quotes." They had amicus briefs, and detailed citations of precedential cases that they believed supported their side. Having a bunch of quotes doesn't make you right and the other guy wrong.
With very little due respect to Chief Justice Roberts, the job of a judge - particularly a Supreme Court justice - is a hell of a lot more than just calling balls and strikes. It's weighing meanings, and examining evidence that supports potentially contradictory interpretations and deciding which one is right. Precedents exist, but may not apply. Or someone else may read that precedent differently than you read it. If you read a dissenting opinion in a Supreme Court case you may find language that says, in effect, "those other five guys are wrong." Justice Scalia is known for taking his colleagues to task in his minority opinions for, in his view, being wrong. He does this in great detail, with extensive citations and as much weight of authority as he can bring to bear. But that doesn't make him right - the majority opinion remains the majority opinion and thus the governing interpretation of our laws.
Which is to say, you can't just pick a few quotes that support your opinion and then say, "See, this means the law says what I think it says." Well, apparently if you're Mike Masnick you can. But I'm still going to laugh at you for doing it.
Over a year ago, I pointed out that a potentially big story was being missed: people were migrating off file-sharing networks because of a change to always-on, high-speed, mobile Internet use that meant people would rather have their media streamed to them wherever they were, rather than held as bits on a single disk. Having media in the cloud was worth more than downloading, legal or illegal.
But never mind all that interesting new stuff, the RIAA has its own version of history and it's going to stick to that version no matter what. In a blog entry posted last week, Joshua Friedlander, the Cartel's VP of "Strategic Data Analysis," trumpets their success at smashing sharing networks. He's not just relying on marketing "research" like last time, he's relying on a truly dreadful paper put out by an actual (Wellesley) college professor.
To highlight just one critical flaw, I call your attention to the methods used, which involve looking at results data (the change in purchases from iTunes) and then inferring what caused those changes. Rather than doing something like asking people "why are you buying more music" or investigating things like public awareness, Professor Danaher simply assumes the counterfactual. If sales went up, it must be because of Factor A. Shame on him for bad experimental design, and double shame on Friedlander for citing this paper as if it was actual published work. It's not, it's a "working paper" which means it hasn't been subjected to the kind of peer review that would highlight methodological flaws. Two words, Professor Danaher: confounding factors.
Friedlander also points to "Nielsen Netview data" (which I could not find the source for) in order to tell us that "the vast majority of those who used Limewire in September 2010 did not use it in September 2011." Could that possibly be because Limewire was shut down in October of 2010? So, a year after a service was shut down, 90% of people had stopped using it. That's a remarkable achievement; next, do a survey on how many people are renting DVDs from Blockbuster.
Also shocking is that if you mention Limewire, and then ask people whether they use other sharing sites, they tend to say "no." Could that be because people are not stupid? Seriously, I'm more surprised that 35% of people who used to use Limewire would admit to migrating to another file-sharing network. Brazen is as brazen does, but no, officer I promise never to speed again. Honest!
First, the practical response. Dearauthor.com has a very nice (if lengthy) guide to "What happens next?" It's complicated, in part because some of the publishers accepted a settlement and some rejected it. So what happens with your e-books (both as an author and as a reader) depends on who the publisher is. Also bear in mind that the settlement doesn't yet have the official court stamp of approval, which could take as much as 60 days to get.
For example, it's quite likely that those publishers that signed the consent agreement will quickly negotiate new agreements with Amazon, which still has a dominant position in the e-book market. Because of the terms of the agreement, books will appear in Amazon's Marketplace at variable prices. There will be an ability to discount, to manage prices, and I suspect Amazon will not pass up the opportunity to promote its (re)acquisitions, possibly with sales and offers. If you were holding off on buying some e-books because of pricing in the past few months now is an excellent time to start scanning for bargains. Assuming, of course, that your preferred books are published by certain publishers and are on your locked-in platform. But I digress.
Dearauthor seems to think that the prices on physical books are due for another rise, and that the entire concept of a mass-market edition is at risk. I generally agree, but don't think it will happen this year, for reasons I think will become apparent as 2012 unfolds, particularly the end-of-year shopping/gifting season.
To wit: I believe that the dedicated e-book reader may well have plateaued already. In 2013 I think we'll start to see the dedicated e-reader go the way of the point-and-shoot camera as tablet computers start to become less pricey and expand their reach and function in accordance with some version of Moore's Law. Just as peoples' mobile phones took over every function that a point-and-shoot had, tablets will do everything that e-readers do. Yes, phones and tablets cost more, but people want mobile devices for other reasons and once you have those devices you don't want or need a second single-purpose device. In the mass consumer electronics market, special-purpose hardware tends to lose badly to general-purpose hardware. Your set-top box is a DVR (and maybe a DVD/Blue-Ray player too). Your home movie camera is called "iPhone" or "Droid." Et cetera.
E-book readers will not be immune, and their demise will shake up the market significantly. If Apple continues to be this hostile, what will be the fate of a "Kindle app" for iPad? Will Apple even allow such an app in the store? Disruption of this sort always hurts consumer adoption, as does a failure to converge to a single standard. A slowdown in consumer adoption of e-readers may well delay the demise of the mass-market paperback, at least for a year.
To close out the Dearauthor piece, I think they hit the nail on the head where they say
[P]ublishers have sustained a big public relations blow. People who never read an ebook or haven’t followed this issue closely now are exposed to this idea that publishers stand accused of engaging in price fixing
Fulton makes a couple good points, the first of which is that Amazon's behavior in arousing the book publishers' ire is remarkably akin to what Apple itself did with its iTunes store pricing. Jobs wanted a certain price for songs and he got that price. The music publishers fumed and fought and flailed but 99 cents it stayed. His other point is that the publishers (and Apple) who are fighting the suit may be in position to counter at least the prima facie evidence of collusion that the government seems to be making its case on. Whether that's a wise move is still debatable. Making yourself look bad in front of customers is rarely a winning strategy.
Finally, In delightful counterpoint to Jon Sargent, we get US DOJ (acting) Antitrust Chief Sharis Pozen claiming that the point of the settlement is to "[open] up the competitive marketplace and the competitive landscape." So now both sides claim they're all about open competition - isn't that wonderful? And that brings me to John Scalzi's Whatever column published yesterday in response to the public drama. As he points out, all of the players here are in it for their own (and their shareholders') pocketbooks.
You, and me, and those who read or might read e-books are here solely for the purpose of giving these companies money. That's what they're in business for. Statements about the public interest, or open competition are just part of the PR maneuvering game. Corporate strategies have everything to do with profit and nothing to do with "good" or "evil." Really.
A couple months ago, Nest found itself on the wrong end of a patent-infringement lawsuit from Honeywell, over so-called smart thermostats. At the time, I thought that Nest would probably choose to settle rather than get dragged into a possible protracted bit of litigation against a much-bigger company. Honeywell makes tens of thousands of products and smart thermostats are a tiny fraction of their business. For Nest, though, they're the showcase - the whole point.
This morning, Kate Brinks (the official Press Contact for Nest) was kind enough to send me a copy of Nest's just-filed response. It's dressed up in polite language, but what it amounts to is Nest calling "BS" on Honeywell, and filing its own counter-claims. In order to lead this fight it has brought on board one Chip Lutton who hasn't even had time to update his LinkedIn profile there. See, he's left Apple and joined Nest as Chief Counsel. This is very good news for Nest, I think, as Lutton has been helping steer Apple's worldwide patent war and knows a thing or two about how big companies do the patent dance.
So, what do Lutton and Nest have to say in response to Honeywell's charges of patent and design infringement? It's the usual - Honeywell are stifling competition, their patents are "hopelessly invalid" where they are "not worthy of a patent". The deep deep irony of someone from Apple complaining that someone else is asserting crap patents is apparently not a factor in drafting press releases like these. In summary: Nest are going to challenge the patents' validity, push for re-examination, and hope that the judge finds that they have sufficient grounds to proceed. If the judge thinks they have even a reasonable chance then it's likely they won't be hit with an injunction and can go on building their business.
If Honeywell is able to convince a judge otherwise it's possible Nest could be cut off from its sole source of revenue, which would make its investors even less happy. My guess is that Lutton's first job is to make sure that doesn't happen. Whether this leads to serious negotiations or to a courtroom date afterward is something we probably won't know for many months.
Quick recap: the DOJ has been hinting about filing this thing for at least a month. The core charge is that five big publishers colluded with Apple to fix prices via an agency model for e-books. According to the WSJ piece, the civil suit alleges that the publishers banded together by phone and email to break Amazon's back over its "wretched $9.99 price point."
The new news is that three of the five would rather smoke than fight, agreeing to a settlement that will let Amazon resume discounting e-books. They may also have to pay "tens of millions of dollars in restitution " to consumers who were ripped off by the illegally priced e-books, settling a separate suit brought by a group of states. Apple and two of the publishers didn't like DOJ's terms and will do the "see you in court" routine.
The first part of that routine is, of course, trying one's case in the press. DOJ tries to make its case look as strong as possible, and the defendants respond by denying guilt and making charges about government interfering in good ole American business. If that's what Sargent wants to do he needs a better writer - maybe he knows a few?
See his blog post on tor.com (Tor is owned by Macmillan). In this triumph of illogic he claims that switching to the agency model would "make less money on our e book business." Say what? You jump prices 30% overnight and make less money? Either you're not fit to run a business or something very fishy is going on. Trust me, if I'm hurting trying to sell a product for $9.99 and tomorrow you let me sell it for $12.99 and prevent anyone from discounting it back down? I'm going to make more money.
Unless, somehow, you think the 30% price jump is going to kill your customers' willingness to buy that product, in which case you are a frakking moron for jumping the price in the first place.
Moving on, we then get the claim that "We made the change to support an open and competitive market." Would someone like to tell me how a price-fixed, guaranteed-no-discounting market is more "open" or "competitive" than one that lets prices vary? Oh, never mind. This is code for "we found a way to force people to buy our stuff at the price we wanted and from the people we want you to buy from, who are not Amazon."
The best part is the personal story: "I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement." Dude, if you're deciding the entire future of your business at dark-o'clock when you can't sleep then you need to take a big step back, and maybe step down. The corporate cowboy routine may play well if you're Mark Cuban or Donald Trump, but (even though your company is privately held) there are people who depend on a management team making responsible, well thought-out decisions. Preferably not at four in the morning.
This is more technical than my usual pieces; please bear with me and remember I'm still not a lawyer, just doing my best.
The decision last month in Mayo v Prometheus was either good or bad, depending on which side you stand for. Organizations such as the (generally liberal) ACLU, the (generally libertarian) Cato Institute, and the (generally non-politically aligned) AMA were all pleased by the ruling in Mayo's favor. Biotech/pharma companies were dismayed. But there's a third group, nominally neutral in this particular dispute, who have to deal with its consequences: the patent examiners who have to decide what they should and should not allow as patents and the applicants (and their attorneys) who have to construct patent applications, draw defensible claims, and secure the patents that the SCOTUS decision should enable.
To the dismay of this third group the majority decision, written by Justice Breyer, is causing more confusion than clarity, as has happened with several recent SCOTUS patent decisions. Greg Aharonian's PATNEWS published a letter this month from an anonymous group of examiners in the USPTO's "biotech Art Groups" - the people responsible for making judgments of patent applications in light of this decision. And they are not happy people.
It seems that Breyer's opinion confuses 35 U.S.C. 101 and 35 U.S.C. 103. That's two key sections of US patent law covering the requirements for an invention to be patentable. See the Wikipedia entry for a mostly non-legalese discussion. The actual (sparse) legal language can be found at sites such as Cornell's Legal Information Institute.
Taken as a whole, a non-patenting outsider doesn't care about these distinctions. Either something is or is not covered by a patent and it doesn't matter why unless you plan to challenge the patent somehow. But the people who are involved in practicing the law care a great deal about these distinctions. An invention may be rejected on 101 grounds or, separately, on 103 grounds. Challenges to patents, or to specific patent claims, can be brought under different sections of the law, and there are different requirements in each of these cases
And let's not forget that none of these things is free. Patent examiners always have more work to do than they can handle; if they reject wrongly and have to re-examine then they've taken away time that could have been used to examine another patent, which harms them and the long queue of waiting applicants. Patent applicants have to pay lawyers, court costs, their own time, etc., none of which are cheap. Getting 101/103 wrong can cost a lot of money, so it really matters if Breyer's opinion has messed this up.
Specifically, the patent examiners say:
[T]he decision never says what the natural laws are in the claims or how the claims are simply an application of the natural laws. The starting material and product are not naturally occurring. How are we to justify saying something is or isn't simply an application of a natural law?
The point of novelty in the patents (Applicants' discovery) seems to be that a therapeutic amount of the drug is one that produces an amount of the metabolite in claim 1 in the blood within the range recited in claim 1. [...] Determining this indicator (metabolite range) may or may not be an invention. But that determination is better treated under 103.
We don't know what the PTO can do with this decision, because no examiner thinks like the Supremes.
The 101/103 distinction revolves around what is eligible to be patented with 101 criteria supposed to govern novelty and usefulness versus 103 criteria governing (non)obviousness. That is, even if you've come up with something new and useful, if the invention was obvious you still may not be able to get a patent on it. What Breyer's opinion seems to be doing is stating that Prometheus's patent is invalid in part because of the use of "natural laws" (which might be read as a 101 objection) and in part because the result (of reading the metabolite level) is obvious - to a person skilled in the art, remember.
But if natural law applications fail for obviousness reasons then... um, what's the point of having 101 and 103 be separate? The examiner writing above seems to be making the point that the Supreme Court majority is written as if by a layperson who doesn't care about the 101/103 distinctions, but has to be treated as law of the land by patent examiners who care very much about this.
No wonder they're tearing their hair out.
(Excerpts and quotes above taken from PATNEWS by kind permission of Greg Aharonian of Internet Patent News Service and publisher of PATNEWS. The newsletter itself has no online site, but you can subscribe at http://bustpatents.com/)
Yesterday, the Second Circuit handed down its decision, which is something of a mixed bag. The trial court had pretty completely sided with YouTube, in a way that felt like a complete victory for safe harbor. The Circuit decision is more mixed: in part they upheld, in part they overturned, and at least one key question has been remanded back down for further argument.
As I see it there are three key elements here: Does safe harbor apply? Who is responsible for finding infringing content? What must be done when infringement is claimed? YouTube clearly won on points one and two and the third will need to be further argued.
As Post points out, the Circuit's finding is that a safe harbor site such as YouTube is protected from all infringment claims, including contributory infringement, inducement, and so-called "vicarious" infringement. In addition, the Circuit clearly assigns the responsibility on the claimant, not the hosting entity, to determine specific infringement by content. The Cartel's theories about pre-filtering and keyword matching fall. Takedown notices may still be subject to abuse or over-use, but the responsibility for generating notices is still there, an important victory for YouTube.
The issues on which YouTube lost, and which are now remanded down for further argument, deal with what steps it (and similar safe harbor-protected) entities must take when made aware of infringement allegations. The Circuit clearly ruled out what's being called a "willful blindness" defense - that is, YouTube can't shield itself from knowing about infringing content. And, it must "act expeditiously" to remove or prevent access to content that is claimed to infringe. There's also an unresolved question of what the Circuit called "substantial influence" and some question about syndication of allegedly infringing content. These issues will now be re-argued at the lower court.
Matters of fact-finding, such as the Circuit required to be resolved, will vary from case to case. What is important here, I think is that the Circuit has affirmed the overall structure of safe harbor policy, clearly rejected attempts to drag in other sorts of copyright-infringing activities, and begun to articulate what may become a recognized standard for what actions a safe harbor-protected entity has to take. That's not a complete vindication of either side, but the scales I see are definitely tipped in YouTube's favor.
Let's start with a couple things we agree on: Maria Pallante, the Register of Copyrights, is a copyright maximalist. As you can see from her public background, she's worked for organizations like the National Writer's Union and the Guggenheim Museum that consistently hold a maximalist, and author-centric view of copyright. It's also clear that she believes the purpose of copyright is to help people make money, and that exceptions to copyright monopolies should be narrowly drawn.
Why this is surprising, or why it causes Techcrunch's Mike Masnick positively to foam at the mouth is beyond me. Masnick notes that in two recent talks she's taken a retrograde and maximalist position, and then goes on to rant that this means she "doesn't understand her job" and that holding such views should be "grounds for termination."
Beg pardon? Since when has the Copyright Office been any bastion of progressive viewpoints, or even vaguely friendly to "the copyleft agenda" - whatever that might be.
Masnick's major point seems to be that he thinks the purpose of copyright is to promote some nebulous social value. If the head of the Copyright Office seems to think the purpose of copyrights is to make money for the rights-holder that's kind of disappointing and unenlightened, but hardly a shock. Masnick seems to be referring to what I've been calling "The Breyer Test", but hasn't noticed that Breyer was writing a minority opinion.
It's an opinion I happen to agree with, but it's still the minority opinion. What Pallante is reflecting is the majority opinion, which is to say the settled law of the land. So we have a high government official saying she agrees with the law of the land, and this is cause for ranting... how? I dunno, Techdirt is a better (or at least more popular) blog than Copyfight, so maybe I should write more rants and less reasoned posts.
It's also Facebook's way of saying "let's negotiate" - they're showing that they can bring weight to the table, which puts them in a better position to make the whole thing go away. Neither company can really afford this: Facebook does not want its multi-billion-dollar IPO disrupted and Yahoo can't afford to pay for a protracted patent struggle. Cross-licensing these 20 patents (and probably whatever else they've got lying around) would strengthen both companies' positions.
I also expect Facebook to throw Yahoo a bone, like paying their legal costs for this.