ACT - Protecting Small Business Innovation

What happens to the art when the artist can’t make a living from his or her work?

Why do we choose the products we choose, when there are so many alternatives?  I watched the ITIF Forum: “Info-Communism:” A Progressive Path Forward or a Political and Intellectual Dead End? On ustream ustream today  ITIF and Jonathan Zuck, the president of ACT, raised this very fundamental question.   

Although the discussion that followed by the panel was interesting, I am not sure that the panelists ever really answered Jonathan’s question. 

It seems like an important one.  Certainly it is relevant for anyone who hopes to make a living off of their photos, poems, or code.   It is in fact a critical question for everyone who enjoys the products of these creative entrepreneurs.   

On today’s panel,  the discussion centered on intellectual and political movements that seek to level the playing field by opening up access to art to all, without fee, the creations of the few who toil to innovate.  By name alone, these movements--“free culture,” “openness movement,” and “extreme Net Neutrality”--sound inviting.  Who would be opposed to a level playing field?  Why would anyone want to pay more to enjoy what they could have for free?

There are lots of examples of how we share more in real time today than was ever possible before.  We trade quotes and pictures and lyrics with people we have never met before from all corners of the globe.  Sites like Flickr flickr show the amateur photographer in all of us what it means to aspire to great beauty.  This is all wonderful to be sure.  Free – looks like it works fine.  But, there is a rub.

Certainly these same folks that enjoy such art would likely think they are paying the artist a compliment if they share this shot with others.  They probably don’t spend much time pondering the fair use exception carved out by the Supreme Court in its 1984 decision in Sony Corporation of America v. Universal City Studios, Inc. 464 U.S. 417 (1984) when they use the pictures they downloaded as their wall photo.   But what of the photographer who hopes to make a living off of the sale of his or her work? 

There are, to be sure, some areas of grey in the current understanding of what fair use means in the digital economy.  Everyone understands what it means to give someone credit for work well done and talents well used – and even this simple courtesy is often overlooked.    

At one level there may be a qualitative difference between similar things:  one may have more artistry; be more elegant; or, more clearly capture the essence of efficiency.  Should the author, poet or developer who labored and honed his or her skills to create this artistry not be rewarded for the hours of training?

The real debate, however, probably has less to do with defining boundaries in the currently foggy areas of fair use, or imposing norms of civility and kindness, and more to do with human nature of striving for excellence and wanting to be rewarded for the effort.  How do you encourage investment and creativity?  

Jonathan’s question highlighted that people tend to gravitate towards the work of professionals.  In other words, people seem to like that work best.  Viewers gravitate to the music, movies and art of professionals so it behooves us to allow those professionals who simply work harder and for longer on their craft to enjoy the fruits of that labor. 

Jonathan raised the example of the “Hope” poster.  His point was that while there is a lot of debate over fair use surrounding that poster, he finds himself asking why when there were over 100,000 photos of Obama that could have been used for free up on Flickr, why did that person choose a professional image?   Jonathan suggested, and rightly so, that the user of this shot sought to profit from HIS art, shouldn’t the inspiration for that art profit as well?

What happens to the art when the artist can’t make a living from his or her work?  After all Free is great – until it isn’t.

 

Thoughts on the CrunchPad Saga

Earlier this week, influential tech blogger and aspiring cool product entrepreneur Michael Arrington announced that the eagerly anticipated CrunchPad was stillborn.  Popular Mechanics prematurely heralded the planned low-cost tablet computer as one of the 10 Most Brilliant Products of 2009.  While we will have to wait for more information to know the real story behind the dispute behind Arrington's company TechCrunch and its partner in the venture, Fusion Garage, there are some interesting issues raised by what Arrington has so far revealed.  [Note: although Fusion Garage has removed much of the content from its website, for the time being, a cache of Fusion Garage's blog/PR announcements can be found here].

Arrington claims that because TechCrunch and Fusion Garage jointly own the intellectual property behind the CrunchPad, "it's legally impossible for [Fusion Garage] to simply build and sell the device without [TechCrunch's] agreement."  Now, we don't know what agreements there were between these two companies, but joint ownership of intellectual property would not by itself keep any joint owner from using that property.  The US Patent Office, for example says the following about joint ownership (emphasis added):

Patents may be owned jointly by two or more persons as in the case of a patent granted to joint inventors, or in the case of the assignment of a part interest in a patent. Any joint owner of a patent, no matter how small the part interest, may make, use, offer for sale and sell and import the invention for his or her own profit provided they do not infringe another’s patent rights, without regard to the other owners, and may sell the interest or any part of it, or grant licenses to others, without regard to the other joint owner, unless the joint owners have made a contract governing their relation to each other. It is accordingly dangerous to assign a part interest without a definite agreement between the parties as to the extent of their respective rights and their obligations to each other if the above result is to be avoided.

Under US Copyright law, the rights are a little different: a joint "copyright owner has the right to commercially exploit the copyright, provided that the other copyright owners get an equal share of the proceeds."  Stanford University Libraries, Copyright Ownership: Who Owns What?, Copyright FAQs. 

Therefore, unless there were some agreement between TechCrunch and Fusion Garage that requires both parties to agree on how their joint intellectual property is to be used or licensed, there is no restraint put on either party.  If Arrington sues Fusion Garage, as he has threatened, I will be interested to see the complaint - perhaps there was such an agreement.

Another issue raised is that by sending an email with the following message to Fusion Garage CEO Chandra Rathakrishnan, an unnamed investor may have provided some of the evidence needed to pierce the corporate veil to make the investor liable if a court ultimately finds Fusion Garage wronged Arrington or TechCrunch in this dispute:

"We still acknowledge that Arrington and TechCrunch bring some value to your business endeavor…If he agrees to our terms, we would have Arrington assume the role of visionary/evangelist/marketing head and Fusion Garage would acquire the rights to use the Crunchpad brand and name. Personally, I don’t think the name is all that important but you seem to be somewhat attached to the name."

If this dispute ends up in court, the email to Fusion Garage would probably have been disclosed in discovery anyway, but Rathakrishnan unnecessarily highlighted the investor's direct involvement with the dispute by forwarding it to Arrington.  The limited liability provided by the corporate form is not absolute - investors who have sufficient ownership and control a corporation to such an extent that a court finds the corporation is a "mere instrumentality" of the investors may be liable for the corporation's acts.  See, e.g., Institute of Veterinary Pathology, Inc. v. California Health Laboratories, Inc., 116 Cal.App.3d 111, 119 (1981); Standard Wire & Cable Co. v. AmeriTrust Corp., 697 F. Supp. 368, 374 (C. D. Cal. 1988).

Both issues should serve to remind entrepreneurs (and investors) to be careful about ownership of IP and to be careful about corporate control and the dangers of discussing sensitive issues over email.

In any event, I personally hope that TechCrunch and Fusion Garage resolve the situation, release an innovative product, and make scads of money. 

IP and Guilty Pleasures Collide, Part Deux

This is a follow-up to my post last week about IP rights and the "for me, but not for thee" attitude we often see when assertion of rights makes an appearance in pop culture. Last time it was a contestant on "Project Runway" having to change course after being informed that some pre-printed t-shirts she'd planned to use were trademarked. I'll try to refrain from making this an annoying multi-part series, but here's another example of IP irony:

Celebrity gossip website TMZ.com is poking fun at singer-songwriter-musician Taylor Swift for joining on to a BMI copyright infringement lawsuit that apparently goes after bars that haven't paid proper licensing fees for the music played in the establishment and during karoke. Someone like Taylor Swift couldn't possibly need the couple of bucks a month that would come in from such fees, TMZ intones.

Or maybe it's more about the principle of the matter. And maybe that's why the bottom of the post on TMZ has a fun little symbol of a "c" with a circle around it. And why their own Terms of Use page says, "This Site and all materials incorporated by TMZ.com on this Site ("Material") are protected by copyrights, patents, trade secrets or other proprietary rights ("Copyrights") ...TMZ.com respects the intellectual property rights of others and asks users of this Site to do the same."

Washington Post's Rob Pegoraro Overreaching in Attack on Creators

Although Rob Pegoraro's Sunday article, "Copyright overreach goes on world tour," was about a coordinated effort among several countries to establish common copyright rules, the unmistakable position conveyed was that creators and copyright owners should not have any right to protect the investments into their products.  His disdain for copyright owners is remarkable.  Most critics of the DMCA and the copyright community at least acknowledge that creators play a valuable role in providing the entertainment content that sells new technologies.  But Pegoraro's article seems more like the blog of a frustrated pirate than a serious piece on how to balance copyright protections and consumer interests.

How can Mr. Pegoraro be considered a legitimate voice in this debate with statements like:

"Want a program to copy a DVD to your iPod?  You can't pick that up in a shop, thanks to the 1998 vintage Digital Millennium Copyright Act.  The DMCA bans that software, along with other tools that might help you use movie downloads, e-books and other "protected" files in ways not specifically allowed by their vendors."

Seriously Mr. Pegoraro, we are well past this point.  Vendors...also known as the creators of way cool music, movies, video games, software, and books... have the constitutional right to determine the uses of their works.   Feel free to join us in discussing licensing, fair use, and DMCA exemptions instead of misleading your readers into thinking the DMCA and rightful protection of intellectual property is somehow a barrier to innovation and new technologies.

"Hey, Pot... It's the Kettle."

This news story from last week just about speaks for itself, and little commentary is needed. (And no, it's not a leftover from April 1.) It feels like something that should be on SNL's "Really?!?!?! With Seth & Amy." I mean, China... Really?!

Chinese Group Says Google Violating Copyrights

A Strange Thing Happened on the Way to the Class Action Settlement...

The Google book search settlement seemed all but wrapped up in a bow, that is, until hundreds of objections were filed with the Court, the House Judiciary Committee held a hearing on September 10 examining the antitrust, privacy and copyright issues implicated by the deal, and then the Department of Justice filed a comment on September 18 urging the Court to reject the settlement.

In my opinion, the Court simply couldn't ignore the significant concerns raised about the deal and wouldn't approve the settlement without changes.  Apparently, neither Google nor the Authors Guild were confident about their chances because on September 22, they asked the Court to cancel the October 7 hearing to potentially finalize the deal. 

But, this delay is just that... a delay.  These parties have invested a lot of time and money.  It has the potential to be a huge commercial success and an enormous benefit to society in terms of access to information.  So there is still momentum to finalize a deal. 

Reaching a final agreement will be difficult.  There are many stakeholders who need to be at the table and many obstacles that need to be addressed, like orphan works.  Sure it is frustrating when the law seems to get in the way of rapid technological progress.  But, it isn't okay to privately negotiate around the rules to the exclusive benefit of a few.   We all have a stake in this deal, and we ought to do it right.

Red Flag Alert: Google Book Search Settlement Faces Mounting Concerns

The Google Book Settlement "makes a mockery" of the Constitution, and should be opposed- so says Marybeth Peters, Register of Copyrights.  Paul Misener from Amazon says Google will have a monopoly and "exclusive license".  And Professor Randal C. Picker says "imagine if a company came before Congress to ask for a deal like this- it would be inconceivable".

As a former counsel for the House Judiciary Committee, I'm used to pretty harsh rhetoric, but even I was a little shocked with the Register's strong language.  Ultimately though, I have to agree that this deal certainly is an end-run around copyright law and will effectively give Google an exclusive license over all orphan works.

This deal gives Google the right to copy, distribute, and sell books which still have copyright protection but for which the owner can't be found.  These are commonly known as "orphan" works.  However, Article I, Section 8 of the Constitution gives to authors exclusive rights to their works.  In other words, people who want to use those works must get permission from the author first.  It doesn't say "except for orphan works, or books written on the 4th Sunday of April in a leap year".  This deal turns that basic legal foundation on its head by allowing Google to capitalize on the use of orphan works without permission.  Ultimately, Congress will have to find a resolution to the orphan works problem, but this settlement undercuts more than a century of U.S. jurisprudence.

But the deal goes beyond just orphan works. In fact, all literary works are included in the deal unless the rights holder- known or unknown- opts out.  Which leads to the point Mr. Misener made during his testimony.  This is an exclusive license.  Google makes a big deal about authors or rights holders being able to "opt out" and make other deals.  However, as Mr. Misener effectively explained, orphan works can't opt out because the rights holder can't be found.  Clearly this gives Google a major advantage over any other competitor. 

Today the Department of Justice is expected to file its concerns with the Court reviewing the proposed settlement agreement.  No doubt they will focus on the anti-trust issues and how the settlement could impact competition and consumers.  But, it is hard to imagine that the court will be able to accept the settlement without changes given the mounting number of red flags being raised.  Yes, there needs to be flexibility in the law to deal with rapid changes in technology.  However, is it worth the risk to competition, copyrights, consumer access, and privacy to allow private parties to negotiate around the law in a deal so big it implicates nearly all of us?  Even EFF is opposed to the deal. Serious Red Flags!

Google Book Settlement: Voices of Concern Growing Louder

This Thursday, September 10, the House Judiciary Committee will hold a hearing on "Competition and Commerce in Digital Books."  As a former House Judiciary counsel, I know that this hearing is an indication of the growing number of voices raising concerns about the Google book search settlement.  As I stated in an earlier blog on this issue, this deal implicates contract rights, copyright, antitrust and constitutional concerns.  

Since the deal was announced, there have been significant red flags raised: ) the Department of Justice opened an antitrust investigation in to the proposed agreement in July;  2) a coalition to challenge the deal has been formed, with Microsoft, Amazon, Yahoo, the Internet Archive, and some libraries, and 3) individual authors are concerned about compensation, rights and control.

The United States District Court for the Southern District of New York is set to conduct a hearing on October 7 to review and possibly approve the deal.  But, the legal and competition issues are significant.  I expect the Court will take seriously the concerns raised in the hearing, the DOJ investigation, and the many briefs filed. 

Still,  this is a story of a big market player taking and using the property of others without permission.  Private business negotiations are good and should be encouraged.  But in this case, one has to wonder, does this deal just reward the bully on the block while leaving out those who played by the rules? It just doesn't sit well given the huge stakes for everyone. 

Is 6.44% of GDP "Useful" Enough?

Yesterday, Tom Bell posted a piece on the Technology Liberation Front blog entitled, "Unconstitutional Copyrights?".  Mr. Bell provided a passage from his upcoming book, Intellectual Privilege: A Libertarian View of Copyright, in which he argues that copyright protection for songs, novels, movies, paintings and sculptures, is unconstitutional because these are merely expressive arts and not "useful arts". 

Bells logical analysis is as follows: The Constitution requires copyright protection when it promotes the progress of science and useful arts.  The first copyright law, enacted in 1790, provided protection for only maps, charts, and books.  Because music, plays, and paintings were not included in the 1790 Act, they must not have been deemed "useful" and therefore specifically excluded from copyright protection. 

But, Mr. Bell provides no evidence of any debate over whether to grant these arts protection.  He simply concludes that they weren't deemed "useful" based on their not being included.  Having worked on drafting legislation for several years for the House Judiciary Committee, I can tell you that not including something into the coverage of legislation does NOT mean it was specifically excluded.  More often than not, it simply means that not enough information was available or there wasn't a perceived need at the time.

Given the recent report by the International Intellectual Property Alliance (IIPA), which concluded that the core copyright industries accounted for 5.6 million jobs and $889 billion in contributions to the gross domestic product between 2003-2007, I doubt the founding fathers would have determined these arts not to be "useful" beyond just diversionary enjoyment.

Even opponents of stronger copyright protection claim that industries that use fair use exemptions and other limitations in copyright law contribute even more to the economy that the copyright creators themselves.

To treat these industries as providing merely something to entertain audiences is to ignore the research, innovation, technological advances, and jobs involved in each.  These industries reinvest profits into researching  and developing new technologies- scientific technologies.  And, these very innovations are often used by scientists, doctors, engineers, and governments to improve their ability to do their jobs.  I argue that this more than satisfies the Constitution's requirement that copyrights DO PROMOTE the progress of both science and useful arts.

I'm certain the authors of the Constitution would agree.

Cablevision Lawsuit Didn't Stop Innovation

Yesterday the Supreme Court declined to hear the television and movie producers' appeal from a Second Circuit decision which held that Cablevision's new Remote Server DVR did not violate copyright law.

This case is a complex copyright case and it is easy to get lost in the weeds.  However, I think there is value in looking at the big picture here.

The lawsuit didn't stop innovation and the court decisions in Cablevision's favor didn't somehow open the door for innovation to occur.

The innovation of a new technology service was already created when the content providers sued.  And, although the parties chose to pursue legal remedies, there is no doubt that the Remote Server DVR would eventually be offered to consumers.  It was just a matter of when and would Cablevision need to negotiate licensing fees with the copyright owners.

The Supreme Court's decision has its supporters and critics.  But what is important here is that the system worked.  Innovation is flourishing.  Copyright owners who make the content, on which technology thrives, legitimately sought to protect their interests.  Real issues of copyright law were debated. The courts determined where to strike the balance.  And consumers will experience new ways of enjoying media.  Yeah!