LawGeek

The import of the MPAA's flawed piracy study

In the past day, many news agencies and blogs have been reporting on the MPAA's admission to flaws in its key downloading study.  Here's the skinny:

In a 2005 study it commissioned, the Motion Picture Association of America claimed that 44 percent of the industry's domestic losses came from illegal downloading of movies by college students, who often have access to high-bandwidth networks on campus.

then:

But now the MPAA, which represents the U.S. motion picture industry, has told education groups a "human error" in that survey caused it to get the number wrong. It now blames college students for about 15 percent of revenue loss.

and:

The MPAA says that's still significant, and justifies a major effort by colleges and universities to crack down on illegal file-sharing. But Mark Luker, vice president of campus IT group Educause, says it doesn't account for the fact that more than 80 percent of college students live off campus and aren't necessarily using college networks. He says 3 percent is a more reasonable estimate for the percentage of revenue that might be at stake on campus networks.

so:

MPAA said in a statement that no errors had been found in the study besides the percentage of revenue losses that could be attributed to college students, but that it would hire a third party to validate the numbers.

This is, of course, how the problem started.  The MPAA hired its own private firm (here, LEK) to generate a "piracy study." Big surprise that some of the numbers came back overinflated.  When the study came out in 2005, Congressional members and social scientists asked for the data behind the study so that they could put it through peer review (the same rigorous analytical testing that almost all respected academic studies must undergo).

The MPAA refused.  Yet they continue to lobby in DC for tougher copyright laws and stiffer penalties on the basis of secret data and unreviewed studies.  This is not how public policy should be made, and the MPAA knows better.  If there really is a problem with college students downloading movies, then the data should speak for itself. It should be published openly and subject to scrutiny by any and all comers.  There is no need for secrecy, and such secrecy only belies the MPAA's credibility on this issue.

There is room for reasonable debate about the impact of file-sharing on the health of Hollywood.  But until the industry comes clean with their data, that debate will always be tainted by suspicion and uncertainty, and ultimately, unsatisfying to all.

Not The Daily Show on the Value of Internet Content

WGA v. Viacom v. Google

And Viacom wonders why people are skeptical of their arguments in the case.

Permanent Injunction in MGM v. Grokster, Pt. 2

Part two of the trial court's permanent injunction decision in MGM v. Grokster deals with the proper role and scope of the injunction in the case of a defendant that induces others to infringe copyrights. (see here for Part 1 of my analysis re: presumptions and proof of irreparable harm).

The court starts out with a fairly innocuous statement: "The scope of the injunction should be coterminous with the infringement."  Fair enough. But as the court then makes clear, what that scope is exactly is hard to define.  Inducement of copyright infringement in the P2P content is a funny beast.  As the court recognizes, it is a combination of both behavior (promotion/encouragement of illegal acts) as well as the provision or distribution of technology.  When that technology has legitimate non-infringing uses, an injunction banning that technology completely is beyond the scope of the infringement and not coterminous.

So what's a court to do? Well, instead of simply mandating that StreamCast stop all infringement, it sorts through the various options and settles on filtering.  While the court justifies filtering on the premise that it is an option that will not shut down the Morpheus system (an overboard approach) but still addresses the issue of infringement, I also think the court found it to be the most flexible option, leaving it with a feeling that it could easily revisit the issue by raising or lowering the sensitivity and burden of the filtering requirements as needed.

In discussing the scope of the filter, the court quickly dismisses any requirement that it be "perfect" as that would effectively shut down StreamCast and ban distribution of the Morpheus software.  Instead, the court required StreamCast "to reduce Morpheus's infringing capabilities, while preserving its core noninfringing functionality, as effectively as possible." This boils down to two things:

1. Installing a filter as part of future Morpheus software distributed to the public; and
2. Taking steps to encourage legacy users of the old Morpheus software to upgrade to the new filtered versions.

Of course, phrases like "effectively as possible" are bound to be the subject of dispute, but the court did make it clear that it is not expecting StreamCast to go bankrupt trying to filter out every possible work.  It also required the Plaintiffs to submit information about each copyrighted work to be filtered so that StreamCast couldn't be held in contempt for innocently leaving out a song or movie from its list.  Finally, the court ordered the appointment of a special master to help evaluate the "highly technical" aspects of StreamCast's implementation of the filtering program and how effective it should and can be.

One other interesting aspect of the court's decision was its discussion of whether a company distributing a P2P system found to be inducing infringement could ever be free of its intent to induce.  In this decision, the court found that no, it could not.  Once an inducer, always an inducer, or as the court said, "The bell simply cannot be unrung."  This means that tech companies must be extremely careful never to be found to be inducing, else they forever bear that mark in litigation.

Despite "massive piracy", Hollywood has best summer in history

Hollywood/MPAA representatives are constantly complaining about how online piracy is destroying their business.  Yet, the numbers belie these assertions.  Just today, the BBC reports (First $4bn summer for US cinema) record-breaking revenues, despite P2P/Bittorrent downloads being at an all-time high:

First $4bn summer for US cinema

Summer box office takings in North America have broken the $4bn barrier for the first time. High school comedy Superbad led the charge, topping the chart for a second week with takings of $18m. Mr Bean's Holiday, Rowan Atkinson's latest outing as the goofy character, made its debut at four behind The Bourne Ultimatum and Rush Hour 3.

Action thriller War and The Nanny Diaries starring Scarlett Johansson were also new entries. The Simpsons Movie. Stardust, Hairspray and The Invasion complete the top 10 line-up.

Box office analysts Media By Numbers say the $4bn figure outclasses summer ticket sales of $3.95bn (£1.95bn) set in 2004.

Their estimates suggest that this summer's box office returns will stand at $4.15bn (£2.05bn) by the time the season officially ends on 3 September.

But they added that actual summer ticket sales are expected to be about 606m, only the sixth-best in modern times.

The best season in recent times was in 2002, when 653.4m cinema tickets were sold.

"Whether it be sequels, originals, comedies or action movies, this particular mix of films brought in audiences in a record-breaking way," said Paul Dergarabedian, Media By Numbers president, referring to the summer's cinematic offerings.

So what does this mean?

First, it doesn't mean that online downloading isn't affecting the movie industry; it is.  But how much of an effect is an open question.  With record profits, perhaps the movie industry has found a way to co-exist with P2P.  Perhaps there is no need to arrest movie-going teenagers on their birthdays for recording 20 seconds of a film or mandating crippling technological restrictions on innovation.

Anyway, I guess all I'm saying is that it would be nice to see these statistics quoted as often as I see statistics about "piracy" quoted in the media and in Congress.

Perfect 10 loses another copyright battle

This time to Visa and Mastercard over secondary liability for providing financial services to allegedly infringing websites.  Opinion is here.  Haven't had a chance to read it over in detail, but it's a 2-1 split with Kozinski dissenting ""for the most part."

OECD report shows IP industries exaggerate cost of piracy by 3x

Every year, groups like the MPAA and their international cohorts run to Congress and other governmental bodies to complain about the cost of so-called "piracy" to their industries.

However, these reports are usually extremely biased, lack peer review, and are built on poor economic assumptions.  For instance, they will often assume that every single bootlegged or downloaded copy of one of their films is a "lost sale" that costs them the full price of a DVD or theater ticket.

Yet many of these bootlegs or downloads are acquired by people who won't or can't pay the full price charged.  (Think of a poor worker in Vietnam who earns the equivalent of $40 per month and is expected to pay $29.99 for the latest release of Superman II on DVD.) Thus, they don't actually constitute a lost sale because there was never the potential for any sale in the first place. That's not to say there aren't some lost sales due to downloading or bootlegging, but IMO it hurts the IP Owners arguments to exaggerate the numbers so much.

Recently, the Financial Times reported on an OECD study on some of these losses and found out that are approximately three times smaller than industry groups estimate:

International trade losses due to product counterfeiting and piracy are much lower than estimated by business lobby groups, according to the most detailed global study to date.

Trade losses in 2005 were “up to $200bn”, according to the executive summary of a report by the Organisation for Economic Co-operation and Development, obtained by the Financial Times.

This compares with the business estimates for international trade losses, ranging upwards from $600bn.

The report, due for endorsement by the OECD board later this month, could prove embarrassing for international business lobbies, which have used the higher estimates to lift intellectual property rights up the global political agenda and to demand crackdowns in China and elsewhere.

Dick Dale explains why major record labels screw over artists

(Thanks Chris!)

Prof. Lichtman makes his case against YouTube

Soon-to-be UCLA Law Professor Doug Lichtman has come out of the academic closet to join Viacom's legal team in their quest to punishtake on YouTube.  As part of making his case, he's published an Op/Ed in the LA Times laying out his reasons for joining the media giant's Jihadcampaign:

LAST WEEK, I joined a team of attorneys suing Google over the YouTube video-sharing website it owns. The decision to join the fight was a tough one for me because, like many people, I am excited by the promise of user-generated video. I like the idea of a website that helps aspiring producers and amateur filmmakers distribute their work to the public. That said, YouTube has been, throughout its existence, a haven for copyright infringement.

...

And Google, knowing all this and benefiting from the attention the unauthorized videos bring, has refused to take even simple steps that would reduce the infringement without meaningfully interfering with the service's legitimate use. That is what led me to join Viacom Inc.'s legal team.

This is all well and good, and while I usually have high respect for Doug, this approach to Internet Governance seems incredible dangerous to me.  Basically, his theory is that anyone who refuses to reduce potential harm on the Internet should be liable for all the harm that occurs as a result.  But that goes exactly against the nature of the Internet.

The Internet is not some kind of top-down hierarchy where ISPs and entities like Google have absolute control over every bit and byte that flows through the system. Nor would we want it to be.  Think about the problems we have from a free-speech perspective with top-down media channels like broadcast television and the rest of mainstream media.  Think about the problems we have with entities like the FCC, who control and regulate our spectrum without real accountability.  Think about the recent debates over Network Neutrality and the importance of allowing the free flow of information online.

All of the freedoms we enjoy on the Internet in terms of diversity, autonomy, independence, and free speech are premised on the idea that our actions and publications are not controlled and subject to pre-approval by major corporations, governments, and providers.  The fact that I can post this message, send any email I want, or upload a video to YouTube without anyone's permission is an essential part of Internet freedom. Yet this is exactly what Lichtman's rule of law will attack.  Under his rule, Google/YouTube will be legally required to control/pre-approve all video before it goes live on the Internet.

Now, sure, online copyright infringement is a problem.  But every time you give people freedom, some will abuse it.  The remedy, however, is not to take away our freedom and give power and control over our actions and free speech rights to others, especially corporations where we have no say in their policies.  That subjects our voice to their whims and biases, not to mention their economic and political interests.  Instead, we must uphold the principles that made the Internet what it is today -- the freedom to communication and share information directly between individuals at low cost, without approval, censorship, or prejudice.

So if not Doug's solution, then what? To me, a real solution would be one where both copyright and freedom prosper. There are many options, but one such solution I like is licensing.  If Viacom and the other content companies are willing to strike deals with YouTube, they can insert advertisements on the video pages where users upload their content and actually pay the artists who help create the content they own.  This will also reduce enforcement costs.  They can also send DMCA take-down notices to remove any content they do not like. YouTube has been quick to respond to all such notices, including the 100,000 Viacom sent just a few weeks ago.  Such an approach would allow YouTube and its user base to continue posting without approval and still provide compensation to artists and some degree of control over the use of their content.  It's not a perfect solution, but it is a far better one than taking freedom away from the Internet's users.  (Note: It's unclear whether Viacom has made such a licensing offer to Google or not and it may be that Google is simply refusing to pay a reasonable sum for the license, but even if this were the case, Viacom hasn't come forward to publicize their position prominently and advocate this solution as their main meme.)

It's easy to see the Viacom v. YouTube battle like Doug does -- good versus evil; copyright creators vs. copyright infringers.  But the truth is vastly more complicated and the "big picture" which he alludes to includes far more at stake than even he discloses.  The battle over YouTube is not just a battle over copyright; it is a battle over who controls content distribution on the Internet: users or corporations.  So before you pick a side like Doug has, make sure you've decided which online world you want to live in.

Update: A kind reader pointed out that this post could come off as an ad hominem attack on Doug.  It's not meant to be one at all, so I've stricken some of the more inflammatory language above.  I respect Doug very much and think very highly of his work (I even assign his articles in my classes).  And to be clear, I don't think Doug's OpEd represents some kind of cyber-extremism; on the contrary, what he proposes is far less radical than those of the IP maximalists we've seen in recent years.  That said, I think he and I have very different views of what the proper balance should be when it comes to regulating web services and innovation online and my points above still stand regarding the dangers of his approach.

Viacom Demands YouTube Pull 400,000 Ex-TV Viewers

Via, of course, America's Finest News Source:

NEW YORK—In a cease-and-desist letter sent to Google's attorneys last week, media conglomerate Viacom demanded that YouTube immediately pull 400,000 ex-TV viewers from its industry-leading video-sharing site.

"These viewers clearly belong to Viacom and its related entertainment subsidiaries," stated the letter, which called the co-opted viewership "the result of an investment of  hundreds of millions of dollars by our company." "Should YouTube fail to adequately address this blatant infringement, Viacom will not hesitate to assert its ownership rights to its intellectual property."

The letter threatened further legal action if all the 400,000 viewers in question are not removed from their desks and returned to their couches by the end of the week.

RIAA stepping up college complaints about P2P; MSU forces recipients to watch RIAA propaganda

The Associated Press reports that the RIAA has dramatically increased the number of file-sharing complaints it is sending to college campuses. This is not very surprising, given that everything else they are doing (including filing over 20,000 individual lawsuits) is failing to stem the tide.

What's perhaps more interesting is how the college administrators are reacting.  One administrator at Michigan State appears to be taking a Clockwork Orange-style approach to the problem:

Hall meets personally with students caught twice and forces them to watch an eight-minute anti-piracy DVD produced by the RIAA. A third-time offender can be suspended for a semester.

The article doesn't say, but I'd be curious how well this "forced education" approach is working.  Of course, it may just cause the student who get busted to go underground and get their music via wifi networks and iPod parties instead of P2P.