The Economic Argument For Why Court's Viacom Ruling Makes Sense... And Why Viacom Hates It

from the money-money-money dept

Larry Downes has a different, but important, analysis of the Viacom/YouTube decision, where he looks at it from an economic perspective. Specifically, he looks at it from "the principle of least cost avoidance." The idea is that which solution costs the least from a social perspective: Google trying to prevent infringing videos from appearing on YouTube or Viacom doing the same? And he makes the convincing case that the ruling here makes the most economic sense by a long shot. He compares it to the recent Tiffany/eBay ruling which hits on the same basic principles (noting that eBay is not responsible for others selling counterfeit Tiffany goods). Downes first points out that these platforms, like YouTube and eBay have certainly opened up amazing new markets that have great social benefit -- even if they've also opened up opportunities for infringement. There's no doubt that there's value in both platforms, but the question is does that value outweigh the downsides, and if so, what's the most economically beneficial way to "police" any such infringement:
Given the fact that activities harmful to rights holders are certain to occur, in other words, the least cost avoider principles says that a judge should rule in a way that puts the burden of minimizing the damage on the party who can most efficiently avoid it. In this case, the choice would be between YouTube (preview all content before posting and ensure legal rights have been cleared), Viacom (monitor sites carefully and quickly demand takedown of infringing content) or the users themselves (don't post unauthorized content without expecting to pay damages or possible criminal sanctions).

Here, the right answer economically is Viacom, the rights holder who is directly harmed by the infringing behavior.

That may seem unfair from a moral standpoint. For, after all, Viacom is the direct victim of the users' clearly unlawful behavior and the failure of YouTube, the enabler of the users, to stop it. Why should the victim be held responsible for making sure they are not caused further damage in the future?

But there's a certain economic logic to that decision, though one difficult to quantify (Judge Stanton made no effort to do so; indeed he did not invoke the least cost avoider principle explicitly.) The grant of a copyright or a trademark is the grant of a monopoly on a certain class of information, a grant that itself comes with inherent economic inefficiencies in the service of encouraging overall social value--encouraging investment in creative works.

Part of the cost of having such a valuable monopoly is the cost of policing it, even in new media and new services that the rights holder may not have any particular interest in using itself.
This is, to some extent, just a different way of making the point that having the platform provider monitor all content is so difficult as to make it prohibitively costly from a social standpoint. Viacom is upset because the ruling does, in fact, increase its own cost. But the other choice puts a much greater economic burden on society as a whole, because it would almost certainly make services like YouTube a lot less useful. So if you were to judge this purely on the basis of an economic/social solution that makes society better off, the judge clearly ruled in the best manner.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Peter Friedman (profile), Jun 28th, 2010 @ 7:29am

    This makes perfect sense. A lot of individual copyright holders complain that they should not bear the burden of policing their copyright, but are they really not going to be able to find out pretty easily if there's infringing activity that's doing them genuine economic harm? And if it's not doing them genuine economic harm, would it be better to make YouTube economically unviable?

     

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    Hulser (profile), Jun 28th, 2010 @ 7:36am

    Most cost avoidance

    Why should the victim be held responsible for making sure they are not caused further damage in the future?
    ...
    The grant of a copyright or a trademark is the grant of a monopoly on a certain class of information, a grant that itself comes with inherent economic inefficiencies in the service of encouraging overall social value--encouraging investment in creative works.

    Here's another example of why it's important to distinguish "theft" from "infringement". If IP were really property, then it would not make sense to hold the victim responsible the preventing the damage caused by theft. But because IP is not property, but a limited right granted to a party for the overall benefit to society, it makes perfect sense to view enforcement of that right in the context of the overall benefit (and cost) to society. This issue is only confusing if you mistakenly view IP as property which can be "stolen".


    Also, shouldn't it be the principle of most cost avoidance?

     

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  3.  
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    Anonymous Coward, Jun 28th, 2010 @ 8:02am

    it is absolutely insane to think that a copyright holder can afford the staff required to monitor literally an infinite amount of cyberspace to look for offending materials, and then be forced to take (often expensive) actions to have that content removed.

    essentially, the judge said that ip property is not important, not relevant, and ip laws should be disregarded. this judgement is almost certain to be overturned, and if not, there is almost certain to be new laws passed to fix this obvious legal black hole.

     

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  4.  
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    out_of_the_blue, Jun 28th, 2010 @ 8:10am

    Mistaken on both economics and morality.

    While appearing to agree, Downes actually plants poison premises.

    Economics: "harmful to rights holders are certain to occur" -- No, loss of *potential* sales is *not* actually harmful. "Rights-holders" are simply greedy, and regard themselves as the acme of civilization, when they're *merely* entertainers. If patents were enforced the way and for length of time that they want copyright to be, we'd all be using candles.

    Morality: "Viacom is the direct victim of the users' clearly unlawful behavior" -- Not "clearly": there's no income to the poster from posting on YouTube, and it may well be "fair use", besides that as above, "victim" is sheerly by absence of more income. Viacom wants others to expend resources for its benefit, and that is clearly immoral.

    Copyright -- at least previously -- confers nothing but the right to file *civil* suit against those thought to be infringing. The "rights-holders" are now trying to get gov'ts to *actively* enforce a granted "right" to sell fantasies by minimizing everyone else's actual civil rights.

    Downes looks like a neocon taking a very narrow economic view of society, promoting an exalted view of this small group of privileged "rights-holders".

     

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  5.  
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    Chronno S. Trigger (profile), Jun 28th, 2010 @ 8:18am

    Re:

    I don't ask people to guard my house without paying them, why would Google guard Viacom's property (as imagined as it is) without payment?

    "essentially, the judge said that ip property is not important, not relevant, and ip laws should be disregarded."

    That's not what the judge said, even though it is the truth. Viacom can still protect it's own videos, they just have to do it themselves.

     

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  6.  
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    Hulser (profile), Jun 28th, 2010 @ 8:19am

    Re:

    it is absolutely insane to think that a copyright holder can afford the staff required to monitor literally an infinite amount of cyberspace to look for offending materials, and then be forced to take (often expensive) actions to have that content removed.

    It's far less "insane" than requiring the service provider to pay for a staff to monitor an infinite amount of cyberspace to look for offending materials. Who better to determine if something infringes than the rights holder? A common TechDirt story is how the rights holders don't even know what is infringing. If they can't even determine this, how can the service provider be reasonably expected to do so?

     

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  7.  
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    Anonymous Coward, Jun 28th, 2010 @ 8:21am

    Have you actually tried filing a copyright infringement report with YouTube? At the moment it's easy. In some cases far too easy.

     

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  8.  
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    Richard (profile), Jun 28th, 2010 @ 8:28am

    Re:

    it is absolutely insane to think that a copyright holder can afford the staff required to monitor literally an infinite amount of cyberspace to look for offending materials, and then be forced to take (often expensive) actions to have that content removed.


    So what you are saying is that the cost of policing copyright exceeds the return that you can make from that copyright - and so you wish the rest of society to pay more than your (so called) property is actually worth to defend it for you. That truly would be insane.

     

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  9.  
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    RD, Jun 28th, 2010 @ 8:32am

    Re:

    "it is absolutely insane to think that a copyright holder can afford the staff required to monitor literally an infinite amount of cyberspace to look for offending materials, and then be forced to take (often expensive) actions to have that content removed."

    Spoken like a true alarmist: deceitful, specious, wrong. The law is clear (as you yourself ALWAYS point out and uphold as the standard to bear): the burden is on the copyright holder. Otherwise, dont put you stuff out under copyright and claim its privileges. You cant have it both ways.

    "essentially, the judge said that ip property is not important, not relevant, and ip laws should be disregarded. this judgement is almost certain to be overturned, and if not, there is almost certain to be new laws passed to fix this obvious legal black hole."

    Bullshit specious again. The ruling says no such thing, the judge is only stating what YOU YOURSELF always say: the law is the law and must be followed. You are completely being a hypocrite here, and have totally undermined any effort you have made to date to counter these points with your alarmist, chicken-little-meets-glen-beck rhetoric.

     

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  10.  
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    Anonymous Coward, Jun 28th, 2010 @ 8:51am

    "it is absolutely insane to think that a copyright holder can afford the staff required to monitor literally an infinite amount of cyberspace to look for offending materials, and then be forced to take (often expensive) actions to have that content removed."

    Expensive? It doesn't cost anything to file a complaint with YouTube and they respond right away. The new system they have in place works very well in reporting possible infringing material. I made a music video using some of the footage from the upcoming Star Wars games. As soon as it was done uploading it was marked as having possible 3rd part content from Viacom and EA games. They let the video remain online until the copyright holders asks them to remove it. YouTube doesn't know if I have permission to use the material and some copyright holders allow unauthorized content to remain online. I made two music videos to an anime movie called Nausicaa. The studio removed one of them but allowed the other to remain.

    In an interview with site AnimeNewsNetwork, FUNimation Entertainment copyright specialist Evan Flournay said they generally see AMVs as a sort of free advertising. "The basic thinking going into fan videos is thus: if it whets the audience's appetite, we'll leave it alone. But if it sates the audience's appetite, it needs to come down. Does that make sense?" he says.

     

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  11.  
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    Anonymous Coward, Jun 28th, 2010 @ 8:52am

    Re:

    it is absolutely insane to think that a platform provider can afford the staff required to monitor a near infinite amount of potentially infringing materials, and then be forced to take (expensive) actions to have that content correctly identified and removed.

    essentially, the judge said that the limited monopoly granted on the content owners ip should be monitored by the party that stands to gain the most from the monopoly. i.e. the content owner.

    this judgement is very reasonable and sound, and will no doubt result in massive lobbying on the part of the content owners to have it overturned.

     

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  12.  
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    Dark Helmet (profile), Jun 28th, 2010 @ 9:09am

    This thread...

    Is the best example of troll feeding I've seen in quite some time....

     

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  13.  
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    Hulser (profile), Jun 28th, 2010 @ 9:18am

    Re: This thread...

    Ah, but is it troll feeding if the original poster was actually serious? Sometimes it's hard to tell if the ridiculous statements by IP maximalists are intentional or not.

     

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  14.  
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    TtfnJohn (profile), Jun 28th, 2010 @ 9:34am

    Re:

    Good morning, TAM

    You know, I could have guessed exactly how you'd reply. Almost down the the exact works.

    "essentially, the judge said that ip property is not important, not relevant, and ip laws should be disregarded. this judgement is almost certain to be overturned, and if not, there is almost certain to be new laws passed to fix this obvious legal black hole."

    The judge said no such thing. Oh, and didn't your grammar teacher tell you it's bad form to say things like ...intellectual property property is not...whether or not you use slang?

    Simply the judge referred directly back to the law as written and as centuries of precedence have pointed out that it's up to the rights holder to bring action in when they suspect infringement and not up to anyone else. The one trying to create a black hole appears, not to surprisingly to be you. Let's not bother mentioning a back door attempt to criminalize a civil issue (ip infringement, regardless of what I think of ip itself).

    "it is absolutely insane to think that a copyright holder can afford the staff required to monitor literally an infinite amount of cyberspace to look for offending materials, and then be forced to take (often expensive) actions to have that content removed."

    I think you may be starting to get it. Backwards but perhaps I see a small light coming on. It's just as insane to expect the like of YouTube, Ebay, MySpace, Craigs List or others to as well and that includes the printed classifieds in every newspaper in existence. In fact, it's insane to expect anyone to.

    Instead of wasting time policing rights holders need to find ways to use that infinite space to their advantage rather than trying, impossibly, to contain the infinite in a finite box.

     

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  15.  
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    Anonymous Coward, Jun 28th, 2010 @ 9:36am

    Re:

    tried filling in 10,000 of them a day? its hard, in some cases too hard.

     

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  16.  
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    Anonymous Coward, Jun 28th, 2010 @ 9:39am

    Re: Re:

    so what you are saying is that viacom needs to hire its own private police force, and assign an officer to each major web property (millions of sites) to make sure their material isnt stolen?

    then they have to raise the price of their products to pay for all this stuff, which in turn makes more of you want to steal it rather than pay for it.

    a stunning, nasty defeat for rights holders, and something that is likely financially unsupportable by the content producers.

     

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  17.  
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    Dom S, Jun 28th, 2010 @ 10:08am

    Re: Re: Re:

    What is being said here is that rights holders et al need to police THEIR OWN works. (not use public services or private content hosting companies to do it for them)

    or even better, embrace the modern age and UTILISE the services provided by youtube etc (by acknowledging the value to them of FREE ADVERTISING and more)

    no suggestions of them having to increase their cost-base to do either of these, just to be a bit more intelligent in their approach towards possible rights infringements and not waste resources on lawsuits, which as this one has shown, are a waste of time and (more importantly to them) money.
    for me, the unnecessary lawsuit approach appears as negative advertising so they're shooting themselves in the foot and are increasingly unlikely to get me to pay for anything anyway.

    Ultimately, they need to figure it out for themselves. if it takes wasting money on pointless lawsuits for them to finally get there, so be it.

     

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  18.  
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    PaulT (profile), Jun 28th, 2010 @ 10:13am

    Re: Re: Re:

    The alternative is that Google has to police all of the content that's uploaded to make sure it's not infringing (again, not stolen, moron) - a task that Viacom itself has proven impossible. If the *owner* of copyrighted material can't differentiate, what chance does a 3rd party have?

    The solution, as ever, is for Viacom to stop pretending it's the 20th century and bring its business in line with the realities of the modern marketplace, just as every industry has needed to for hundreds of years.

    There's a great promotional tool out there they could use to help them market and sell their goods at minimal cost to themselves. It's called YouTube.

     

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  19.  
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    Anonymous Coward, Jun 28th, 2010 @ 10:29am

    Re: Re: Re:

    Copyright infringement isn't theft. Rookie mistake!

     

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  20.  
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    Anonymous Coward, Jun 28th, 2010 @ 10:31am

    Re: Re:

    I don't understand why we can't just shut the internet off. I mean, if it's too hard . . . .

     

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  21.  
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    Chronno S. Trigger (profile), Jun 28th, 2010 @ 11:04am

    Re: Re: Re:

    If my dog escapes from the yard I don't expect every person to grab every dog they see on the off chance it's mine. I go out and look for it myself. It's harder for me, but its right.

    Viacom knows what it's stuff is. Google does not. There is no possible way for Google to tell what is Viacom's and they don't want, what is Viacom's and they do, what is fair use, and what isn't even related to Viacom in any way shape or form. You say it's too hard for Viacom to police it's own work, I say it's impossible for anyone else.

     

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  22.  
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    Chronno S. Trigger (profile), Jun 28th, 2010 @ 11:05am

    Re: Re:

    Then, in that case, you take the path of least resistance. If it's impossible for Google, and it's too hard for you, then embrace it and use it. Much easier for everyone.

     

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  23.  
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    Richard (profile), Jun 28th, 2010 @ 11:20am

    Re: Re: Re:

    something that is likely financially unsupportable by the content producers.

    If it is financially unsupportable by the content producers then it is financially unsupportable full stop - so it should not be supported.

     

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  24.  
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    Richard (profile), Jun 28th, 2010 @ 11:24am

    Re: Re: Re:

    so what you are saying is that viacom needs to hire its own private police force, and assign an officer to each major web property (millions of sites) to make sure their material isnt stolen?

    No if you look that is not what is being asked,. All that is being asked is that Viacom should "inform the police" when their rights are infringed.

    If you car is stolen of your house is burgled you do expect to have to bother to dial 999 (911 in US) don't you?

     

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  25.  
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    Anonymous Coward, Jun 28th, 2010 @ 12:31pm

    Re: Re: Re: Re:

    "No if you look that is not what is being asked,. All that is being asked is that Viacom should "inform the police" when their rights are infringed. " - and how do they do that? they do that by actively seeking out violators using their own in house police force.

    how many pages currently in google? this ruling effectively means that media companies (each and individually) will be required to either accept widespread piracy and misuse of their content, or search each of those pages on a regular basis (and all new pages added) to try to stop unapproved usage.

    for content creators, this leaves them with few economically viable options, and very likely lowers the long term value of the assets they create.

     

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  26.  
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    Anonymous Coward, Jun 28th, 2010 @ 12:50pm

    Re: Re:

    tried sifting through 24 hours of video uploaded every minutes? its hard, in nearly all cases its impossible.

     

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  27.  
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    Anonymous Coward, Jun 28th, 2010 @ 12:53pm

    Re: Re: Re: Re: Re:

    Yes. Welcome to the future. Content is now cheap. I blame the internet.

     

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  28.  
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    Anonymous Coward, Jun 28th, 2010 @ 12:54pm

    Re: Re: Re:

    Maybe we should reform copyright?

     

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  29.  
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    Richard (profile), Jun 28th, 2010 @ 1:11pm

    Re: Re: Re: Re: Re:

    how many pages currently in google? this ruling effectively means that media companies (each and individually) will be required to either accept widespread piracy and misuse of their content, or search each of those pages on a regular basis (and all new pages added) to try to stop unapproved usage.

    As opposed to the situation in the 1980's where they would have had to spy on every single home to ensure no-one was taping their music. Very sensibly at the time they decided not to bother - and they didn't have the nerve to ask the government to do it for them.

    The fact is that the cost to the nation as a whole of enforcing these rights now greatly exceeds their value. (and your argument implicitly admits this). In these circumstances enforcement makes no sense

    They need to remember the Serenity Prayer:

    God, grant me the serenity
    To accept the things I cannot change;
    Courage to change the things I can;
    And wisdom to know the difference.

    http://en.wikipedia.org/wiki/Serenity_Prayer

     

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  30.  
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    Richard (profile), Jun 28th, 2010 @ 1:13pm

    Re: Re: Re:

    tried sifting through 24 hours of video uploaded every minutes? its hard, in nearly all cases its impossible.

    In these circumstances intelligent people have the sense not to try.

     

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  31.  
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    Anonymous Coward, Jun 28th, 2010 @ 3:04pm

    Re: Re: Re: Re: Re:

    Since you are so keen to criticize, I challenge you to stop for a moment think about a possible method for Google to be able to identify content that is infringing.

    Of course I'm pretty sure you'll dismiss this and say "That's Google's problem", but I'll give you a few tips to get you started anyway:

    The method must work in EVERY possible instance, no matter how screwed up it is. In fact, the method must take into account possible mangling or obfuscation the uploaders may use to try to hide it's nature.

    This, of course, rules out pattern matching, so you are going to have to use some sort of image/audio recognition algorithms, most of which are probabilistic (based on personal experience) and prone to (massive and humiliating) failure (brick walls clocked at 200mph come to mind...).

    But this would also assume that Viacom provided Google with the material that could possible be infringed, or that Google somehow must know what material is infringing for these algorithms to be able to work.

    Your only resource, I think, is to implement some sort of artificial intelligence and train it to identify what files infringe. My advice is open up the EMACS psychotherapist and have a chat with it to get you started on AI's and then build up from there.

    Now, notice that the method must scale, meaning that you can't afford to take an hour to process 10 minutes of video since there are already about a gazzilion files on queue waiting to e processed. So this pretty much tosses the AI solution out the window (most AI's I've seen guzzle up CPU cycles like there's no tomorrow).

    So basically, you're screwed. There is no way to algorithmically identify what files infringe or not. The only way is to have a human go through every file, or bog down the system to the point of uselessness. You could always try the magic eight-ball method...you'd probably have more luck there (statistically guaranteed to get it right 50% of the time, unless you are a moron).

    These are my thoughts. If you have any better ideas, by all means, shoot.

     

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  32.  
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    Anonymous Coward, Jun 28th, 2010 @ 4:16pm

    It must be hell watching every video on YouTube to see if your content was in there. What a shame they never implemented a search feature on YouTube.

     

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  33.  
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    Anonymous Coward, Jun 28th, 2010 @ 6:56pm

    Re: Re:

    If you think your copyright is being infringed 10000 times a day, perhaps you should be rethinking your blind reliance on an irrelevant and oudated law.

     

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  34.  
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    Hephaestus (profile), Jun 29th, 2010 @ 7:43am

    Re:

    This one line says it all

    "Part of the cost of having such a valuable monopoly is the cost of policing it"

    It is something the IP maximalists have forgotten. You want copyright to last forever minus a day, you are going to have to police it for forever minus a day.

     

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  35.  
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    MovieLover, Jun 30th, 2010 @ 6:36am

    Money Talks BS Walks

    There is also another economic principle that should be used, an old New York saying: money talks, BS walks. Viacom claims they lose boatloads of money to “theft” by YouTube posters of “their” content. We have no idea of the actual “cost,” if any to Viacom. There are somewhere near 100 studies and papers concluding that P2P infringement: (a) costs content owners billions of dollars, (b) has no negative impact, or (c) increases revenues to content owners. Take your pick. Even the US General Accountability Office, looking at these studies, said it was “difficult, if not impossible to quantify … the net effect on the economy as a whole.” The effect, one way or another, of YouTube postings is even less apparent.

    But how much can it cost Viacom to have a couple of people monitoring YouTube and pushing out eForm notices? A couple of hundred thousand? Viacom probably has spent ten times more in the lawsuit. Let them put their money where their mouth is. We shouldn’t even be having this discussion if Viacom, a $17.3 billion company, does not see the cost-benefit of spending an infinitesimal fraction of those revenues on policing their content.

    Yes copyright infringement is wrong. But we’re not debating that. We’re debating who pays for policing it. While I dislike the shoplifting analogy, it does fit here. Is the bus company responsible to search every passenger leaving the mall to make sure they have a sales receipt for every product they are carrying? After all, the bus is a potential getaway vehicle! Of course not, the store owners pay for security. They make the cost-benefit determination as to how much they should spend on security vs. “shrinkage.”

    Viacom has made clear by its actions they don’t think they lose much money to YouTube posters. Sure spend a few million on lawyers and lobbyists to see if we can force everyone else to pay to protect our “property.”

     

    reply to this | link to this | view in thread ]


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