Network World Highlights BSA's Dirty Extortion Tricks

from the how-is-this-legal dept

We've highlighted how the BSA uses completely bogus stats to push its agenda, but an even bigger issue is how the company uses incredibly underhanded tactics to effectively extort companies into paying massive sums, even if they've legally purchased their software. A few years ago, the Associated Press started calling out some of the BSA's nastier tricks, but it's not like it made a difference. Stories of such tactics continue to pop up. Over at Network World, James Gaskin has devoted an entire column to highlighting underhanded tricks by the BSA, which it uses to bully small companies into paying thousands of dollars:

I'm concerned about how the BSA bullies small companies that lose paperwork, or are victimized by angry employees who destroy the single piece of evidence the BSA considers acceptable. What evidence is that? Want to guess? If you guess wrong, you pay a fine.

Is the original software packaging enough? Pay a fine. The Certificate of Authenticity on the computer? Pay a fine. The original disks holding the software? Pay a fine.

He also highlights how badly the deck is stacked against small companies, and how there are almost no legal rulings on these sorts of things, because the BSA and its biggest members (such as Microsoft, Adobe and Autodesk) know that it's cheaper for companies to settle rather than fight in court. As you read through the article, it just gets more and more ridiculous. Here's just a sampling:

Adobe, another BSA founding member, has started a program to audit companies for font abuse. Yes, fonts. Each font includes a copyright and you need a license. If someone sends you a Word document with a licensed font, and that font gets used by anyone in your company, it becomes a federal case. Literally.

One of the BSA tricks Scott really hates is its unbundling tactic. Say you have a copy of Microsoft Office you can't prove is yours. Perhaps the shipping clerk stole the invoice as he left your company to call the BSA and get a reward (it happens all the time). The BSA comes, and charges you not for one piece of software, Office, but individually for each application within Office, like Word, Excel, PowerPoint, etc. Each one brings a fine for illegal use.

As Glaskin notes, none of this makes using unauthorized software right (especially these days, when there are so many legitimate alternatives), but the BSA's tactics are much worse. It's difficult to see how these sorts of things are allowed -- but as we've seen, various industry associations seem to get pretty much free reign in bullying whomever they want.

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Anti-File Sharing Propaganda Back To Focusing On That Horrible Malware You'll Get

from the unprotected-file-sharing-is-bad dept

The thing that you sort of need to admire about the copyright maximalist lobby is that they attack the problem from so many different directions on such a constant basis. It's almost impossible to keep up -- though, you do begin to notice some patterns. A particularly popular move is to alternate between the moral argument against copyright infringement (stealing! bad!) and the idea that file sharing is going to destroy your computer (we're just looking out for your safety!). It looks like the industry is back on that latter kick, as two recent stories indicate.

First, the BSA has its widely debunked "piracy" numbers -- but it's now getting news for focusing instead on how you're going to get malware if you file share. Since it can't actually back up its bogus numbers, instead it's hoping that most people don't know that correlation doesn't mean a causal relationship -- but at least we know that most of our readers know better. The report notes that there's a correlation between higher piracy rates and higher malware infections, but seems to totally ignore exceptions to that rule (the US) or delve into other variables that may explain either the piracy rate (already questionable) or the malware rate (education levels? poverty? shared computers? etc.). Even more amusing, they claim (with no actual evidence) that those who get malware have to spend more to repair their computers than it would have cost to get the legitimate software in the first place. I have no doubt that there are risks for those who file share, but this report does nothing to show the actual risks and is yet another in a long line of weak propaganda from the BSA, that despite being called on it for years, never seems to do anything to back up its reports with facts.

Then, we have the story of the MPAA apparently sending a bunch of anti-piracy comic books to New Zealand, home of one of many different fights on how to change copyright law. The comic book, like the BSA report, involves plenty of ridiculous and unsubstantiated claims about how file sharing will unleash nasty malware and viruses all over your computers -- but drawn in nice comic book form. Can we send those kids who got the MPAA comic book a copy of the Tales from The Public Domain comic books as well? There are free digital downloads for anyone who wants to hand them out in exchange for the bogus MPAA ones....

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The Propaganda The Copyright Industry Teaches Our Children

from the omission,-overstatement,-conflation dept

Last week, I spent some time highlighting some of the more ridiculous claims found in the RIAA's "classroom materials" which it hopes teachers will use to brainwash students. In the comments, someone pointed out that Tarleton Gillespie wrote up a paper last year examining such "educational materials" from the RIAA, MPAA, BSA, ASCAP and others, and found them to be quite lacking. Rather than actually teaching the ins and outs of copyright, most were focused on normative statements of a world those industries want to exist, as well as seriously questionable descriptions of what copyright is supposed to do and how those industries work. None of the materials seem to recognize that technology has also changed the production, promotion and distribution of new works, and none seem to recognize that content creation can come from those outside of the big corporate entities who paid for these materials in the first place. Again, it's worth asking: why does any educational institution or education professional use such obviously biased (and at times misleading) educational materials?

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BSA Jumps Onto The Three Strikes Bandwagon

from the with-some-weasel-words dept

So, this was really weird. I was having an instant messenger chat with a colleague here about the various "three strikes" proposals that have been popping up around the world, and he asked me whether or not the BSA had taken a stance on the issue. I noted not remembering hearing anything from them on it, and assumed that it was because the BSA mainly focuses on business users, for which a three strikes policy is not really an issue, and that the BSA would hopefully realize that cutting people off from the internet would almost certainly hurt the software industry a lot more than help it. But, literally 10 seconds after I sent that last text, I flipped over to my RSS reader and up popped an article about how the BSA has come out in favor of a three strikes plan. Freaky.

Guess I should have known better than to assume the BSA was smarter than the RIAA on this issue. As the article at Ars explains, the BSA tries to put in a bunch of caveats about due process and judicial oversight, but spends a bunch of time in its statement explaining how ISPs can get around all that due process and judicial oversight by simply putting three strikes into their contractual language -- meaning that they can just decide on their own to cut users off. Good luck with that.

More troubling, however, is that when questioned about the new statement by Ars Technica, the BSA said it was necessary because "last year our industry lost over $50 billion (USD) worldwide." Hmm. It's really quite troubling that the BSA still stands by these numbers when they've been debunked so thoroughly over and over again. They count the "retail value" of every piece of software as being "lost," which is clearly a lie. Five years ago, the research company that runs these studies for the BSA, IDG, flat out said that the BSA was wrong in claiming that "the retail value" of the software is the same as "losses." So why does the BSA continue to get away with claiming it?

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Yes, People Dislike The RIAA Because Of Its Actions, Not Because Everyone Hates Music Business People

from the that's-a-new-one dept

We mentioned the debate going on between copyright lawyers Ben Sheffner (supporting the entertainment industry's sue 'em all strategy) and William Patry (explaining why they're abusing copyright law, rather than focusing on business solutions), and Sheffner's response struck me as being wrong on a large number of points. In it, he argues that people's general hatred for the RIAA has little to do with its legal strategy, but that people just hate the music business:

I think a lot of this negative opinion was due not to specific alleged misdeeds, but to the very nature of the business and its product. Music is about fun, escapism, pleasure. The fact that music is also a business, populated with accountants, lawyers, enforcers, and other not-so-fun people, is quite jarring. It's natural that people react negatively when confronted with the harsh reality that it's about more than "the music" -- it's about making a buck.

I find this incredibly unpersuasive. It's not the fact that the music industry "makes a buck" that pisses people off, but the manner in which it does so. Sure, people have hated the industry since before Napster came around (though, I'd argue that Sheffner's not paying much attention if he doesn't realize how much greater it's become -- we're talking an order of magnitude). But, the reason was actually a precursor to what's happening today: which is that the industry was run by people who looked to screw over everyone. The history of the music business is not pretty. Sure, some people may not like "the business side," but the issue most people have is not that it's a business, but the way the business has been run. It was always designed to rip off both the artists and consumers at every turn. The folks who have run the music business for years have always looked at things as a zero sum game, rather than a market that can be expanded. So they squeezed everyone. It's just that the internet made it that much more blatant.

Sheffner then tries to back up this argument with another claim that is entirely unpersuasive:

The contrast with the public's attitude toward the software industry is instructive. The Business Software Alliance, the industry's equivalent of the RIAA, is very aggressive in its enforcement efforts, famously offering bounties for ratting out software pirates.... But my sense (admittedly anecdotal) is that most people have little problem with the BSA acting to enforce its members' copyrights; it's certainly a far less unpopular organization than the RIAA. (Can you imagine the outcry if the RIAA offered rewards for turning in your friends who "share" music without paying for it?) Why the difference? My hypothesis is that people have no trouble accepting that software is a serious business, and that owners of software copyrights, who spend millions developing their programs, have every right to stop people from copying them for free.

First, perhaps it's because Sheffner hasn't spent much time around the software industry, but the hatred of the BSA runs incredibly deep as well. And, yes, people find their marketing schemes to be totally ridiculous as publicity stunts. The BSA is also regularly mocked (not just by us, but by the mainstream press) for its annual rollout of BS stats on piracy, that falsely count every copy as a lost sale, and then double, triple and quadruple count "ripple effects" on the economy, but never account for how the savings from not buying overpriced software also "ripple" through the economy.

Furthermore, the rather obvious reason why it's a smaller group of people up in arms about the BSA's tactics is that the average person rarely buys software. Most people buy a computer pre-loaded with software, and then maybe download a few applications. But actually going out and getting new software occurs a lot less often than the average person gets new music.

The RIAA's tactics have received more attention because it's a larger community that interfaces with them on a regular basis. It's got nothing to do with some mystical feeling that floats around music.

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Could The RIAA Stop Piracy By Coming Up With A More Compelling Story?

from the maybe-that-and-a-memory-eraser-ray dept

GregSJ points us to an analysis of a recent paper on "the rhetoric of copyright policy." The original paper is actually called Meh. The Irrelevance of Copyright in the Public Mind. The original is a worthwhile read (as is the analysis), but the basic point is that people continue to ignore copyright law because they simply don't "believe" the story of "harm" that the copyright holders are spinning. This actually echoes Rep. Robert Wexler's recent remarks to the World Copyright Summit, where it's all about "the story."

The paper argues that some of the fault is with the media who has portrayed these battles over copyright "as a land grab that benefited only copyright holders." Hmm. Perhaps that's because it's, I don't know... true? Also, it's worth pointing out that it isn't completely true that the media portrays the copyright battles in this manner. The media has often been quite supportive of copyright expansionist policies -- after all, many of the media's current business models rely somewhat on copyright as well.

Still, even if it is true, the paper argues that the RIAA/MPAA/BSA just needs to come up with a good story (which doesn't need to be true!) to convince people of the harm of unauthorized downloading. As a part of that, they suggest that copyright maximalists have to become trustworthy. Try to read the following without cracking up (I couldn't):

To be successful, copyright holders and legislators must consider the construction of ethos and credibility. This is done not only through the reputation that one gains, but also through the discourse itself. Legislators and copyright holders must portray themselves as trustworthy. More specifically, the recording industry must appear to be treating artists and fans fairly, and legislators must appear to be acting in the public interest.... Legislators and copyright holders must maintain a stance that encourages the public to obey copyright laws. When legislators consider altering copyright terms, the public domain is necessarily affected, and great consideration must be given to how the public will react to the proposed action. When the public sees little incentive to honor the ostensibly limited protection granted under copyright law, copyright law will increasingly become unenforceable. However, if the public is provided with compelling reasons why term limits are in the public interest, they may be more likely to support these terms. Likewise, copyright holders must make more compelling arguments concerning why the public should obey copyright law. If the people have a compelling narrative to follow, they will do so--whether it is true or not. The challenge, then, is not to craft better law; the challenge is to craft better rhetoric.

The problem, of course, is that this doesn't pass the laugh test. It's pretty difficult to find anyone who believes that the copyright holders and legislators are doing anything in the public interest. And, I guess if it were possible to come up with rhetoric that made the opposite case, then perhaps people would change their actions. I just question how they could come up with such a story when all of the evidence points to the contrary.

Beyond that, let's face it, the RIAA actually has controlled the "story" for ages. It has convinced people it represents artists' interests, even though it does not. It's convinced people that potential copyright infringement is "stealing" or "piracy" when it's quite a different beast altogether. They've convinced people that copyright is the only way to make money off of content. The problem is that when anyone scratches the surface, they realize quite quickly, that none of this makes any sense at all.

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Is The BSA Purposely Promoting Open Source Alternatives?

from the just-wondering dept

The BSA's actions often seem so short-sighted that it makes you wonder if the organization is actually working against the interests of its membership on purpose. We've detailed in the past how the BSA loves to trot out bogus stats to support its claims about software piracy rates and the supposed "damage" it does to the economy -- but a bigger issue is the practice of BSA software audits. A year and a half ago, the Associated Press exposed the BSA's auditing practices as being highly questionable, bordering on what many would consider to be outright extortion. The organization targets lots of small companies and has no mercy. So even if it was a simple misunderstanding over what a hugely complex software license allowed, the BSA still demands money. And the most stunning part? The BSA keeps the money. According to the AP piece, the BSA (unlike some other organizations) does not distribute the money it gets from fining companies for software licensing violations.

But the bigger issue is that these practices, which are productivity killers for companies, and make many small businesses feel like their software vendors are treating them like criminals, are driving companies to look for alternatives from providers who won't accuse them of infringement at the drop of a hat, and send in a bunch of auditors. Especially in the middle of an economic downturn, treating customers as if they're criminals isn't a very good strategy.

So, what is the BSA doing? Yes, that's right, it's pumping up its software audit program, sending 1,000 audit letters to companies in London, officially demanding they detail their software usage -- while unofficially acting as a tremendous advertisement for open source software, where providers don't treat their customers as if they were criminals.

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BSA's Canadian Piracy Numbers Based On Hunches, Not Actual Surveys

from the bogus-stats-as-always dept

For years, we've been raising questions about the incredibly bogus stats the BSA puts out every year. There are so many problems with them it's incredible that the group continues to release them each year... and much worse that the press and politicians quote them as if they're factual. However, Michael Geist has discovered that they're even worse than originally thought. In digging deeper into the questionable claims of the report by The Conference Board of Canada that was basically a cut and paste from various industry groups, Geist noticed that the report relied on some BSA data. So he asked for more info on how the BSA determined the "piracy" rate of software in Canada. How many people were surveyed? What was the methodology?

In response, Geist found out that no one in Canada was surveyed, and BSA (and IDC who created the report) simply made an educated guess, assuming the piracy rates weren't all that different than they were in past years. Yet this hunch, based on no actual data, is being used as a definitive source of piracy numbers in Canada? Even more noteworthy, both the BSA and The Conference Board report use these numbers to support the silly claim that Canada is somehow one of the worst offenders when it comes to supporting "piracy." But what was the reason for not surveying companies in Canada?

"Countries that are included in the survey portion are chosen to represent the more volatile economies. IDC has found from past research that low piracy countries, generally mature markets, have stable software loads by segment, with yearly variations driven more by segment dynamics (e.g. consumer shipment versus business shipments of PCs) than by load-by-load segment."

So... just to get this straight. IDC doesn't bother to survey Canadians about software piracy, because it considers Canada to be a "low piracy" country. So it just makes up the number... and then the BSA, other lobbyists, research groups, the press and politicians (including the US Trade Representative) use these made up numbers to support the claims that Canada is a high piracy country. Doesn't that seem like fraud?

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BSA Releases BS Numbers Yet Again, Then Says Don't Pay Attention To The Numbers

from the funny-stuff dept

Well, it's the middle of May, and that means (like clockwork) the Business Software Alliance (BSA) and IDC have come out with their annual bogus numbers about software "piracy." They do this every year, despite the fact that their numbers have been totally and completely debunked for years. Last year, they were kind enough to call to discuss my concerns, but stood by the idea that every unauthorized copy can be reasonably counted as a lost sale.

This year, they didn't bother to call.

Instead, it looks like they sought out other publications to pre-publish an attack on anyone who would criticize the numbers. This is pretty funny stuff, actually. They release the totally bogus numbers year after year (even though even the mainstream press has started questioning the ridiculousness of it), and then rather than actually responding to the criticism and perhaps trying to come up with more reasonable numbers, they slam those of us who point out that the BSA is flat out trying to mislead people into believing the "problem" of unauthorized copies is a much bigger issue than it really is.

Meanwhile, Michael Geist digs into the numbers that the BSA has provided, and notes that even if you believe the numbers, they don't seem to support the BSA's own position that countries need to implement the WIPO Copyright Treaty to decrease the unauthorized use of software. So, we've got bogus data that doesn't even support the BSA's own position.

Why does anyone actually take anything the BSA says seriously?

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BSA Tries To Exploit Somali Piracy News In PR Campaign Against Software Sharing

from the great-moments-in-dumb-marketing-campaigns dept

We already wrote about how ridiculous it is to compare Somali high seas pirates with music, movie and software fans downloading an unauthorized copy of something off the internet -- and even the press is starting to question the wisdom of calling unauthorized file sharing "piracy." Yet, that hasn't stopped the BSA, masters of misleading through questionable stats from ramping up a marketing campaign that purposely tries to compare software file sharers with Somali pirates. As Gordon Haff at News.com notes:

"This has got to be one of the most tone-deaf and cynically opportunistic PR pitches I've seen for quite some time. It's one thing to figuratively equate piracy with making digital copies of software, music, movies, or books. We can debate endlessly whether such actions are truly stealing or not. But that's not the point. It's that to literally and deliberately equate the two in the wake of pirates taking a ship's crew hostage and the US Navy subsequently killing three of the attackers...Well, words fail me."

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Software Audits In India Block Companies From Backing Up Their Data, Claiming It's Infringement

from the yikes dept

Gautam John writes in with a couple of posts concerning software audit "raids" done in India (also common in the US). The first explains how unfair the process is, noting how it's basically court-sanctioned extortion. Outside groups get to basically stop your business for a whole day, harming your reputation among both employees and clients (even if you haven't done anything wrong) and then can squeeze you to pay up. The Associated Press did a big expose on how the BSA, in particular, has a history of using underhanded means to squeeze many small businesses to pay up -- even noting that the BSA keeps the money, rather than distributing it to firms. The most egregious part, though, was where the "auditors" refused to allow the company to back up its data, saying that the data might be created with unauthorized software, and thus, backing up the data would be infringing.

The BSA quickly responded, asking the blog owner to post its detailed response, where it defends the raids. Unfortunately, its defense is incredibly weak. It starts off -- as does pretty much every BSA story -- with it claiming that "independent studies" show how much damage to the wider economy unauthorized file sharing does. That's not accurate at all. We've picked apart the numbers before, showing how the BSA numbers are totally bogus (and, while it's a third party that came up with the numbers, it's entirely paid for by the BSA). A big part of the problem is that the industry only looks at the downside to the economy, and doesn't include any factor to recognize that companies that use unauthorized software also help the economy. Perhaps the downsides outweigh the upsides... but totally ignoring all upsides and then double, triple and quadruple counting the downsides via "ripple effects" does not make for a credible study.

However, the BSA then goes on to defend the practice of not allowing companies to back up their data, by basically saying "hey, that's the law." But, of course, that only supports the original poster's complaint that this is effectively "court sponsored extortion." It does nothing to explain what's illegal about backing up your data (which is not covered by the copyright of the software companies).

Of course, in the end, all these sorts of tactics do is push people to explore open source alternatives, not just because they're cheaper (sometimes free, though, not always), but because they don't have to put up with legal bullying and extortion-like tactics.

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A Detailed Explanation Of How The BSA Misleads With Piracy Stats

from the and-on-and-on-it-goes dept

A couple months ago, when the Business Software Alliance (BSA) released its latest stats on "piracy," it's VP of anti-piracy, Neil MacBride, gave me a call to discuss my earlier complaints about the organizations methodology. Needless to say, we did not see eye-to-eye, and the phone call did little to resolve our differences. I'm still hopeful that eventually the BSA will recognize that it's doing more damage to its own position by publishing obviously bogus numbers. So, with the organization releasing another bogus stat today, it's time to explain why it's wrong and misleading.

Today's report is an attempt to get the government involved in protecting BSA member companies' business model, by claiming that the US is losing out on $1.7 billion in tax revenue due to "pirated" software. And, of course, it comes with a lovely quote from Mr. MacBride: "The most tragic aspect is that the lost revenues to tech companies and local governments could be supporting thousands of good jobs and much-needed social services in our communities." And the BSA is even so kind as to quantify what that (not really) lost tax revenue could do: "For example, the lost tax revenues to state and local governments -- an estimated $1.7 billion -- would have been enough to build 100 middle schools or 10,831 affordable housing units; hire 24,395 experienced police officers; or purchase 6,335 propane-powered transit buses to reduce greenhouse gas emissions."

Except that this is almost entirely incorrect and it's relatively easy to show why:

1. The report counts every unauthorized piece of software as a lost sale. You have to dig through separate PDFs to find this info, but when you finally get to the methodology it states:

   The software losses are based on the piracy rate and equal the value of software installed not paid for.

   That's a huge, and obviously incorrect assumption. Many of the folks using the software likely would not have paid for it otherwise, or would have used cheaper or open source options instead.
2. The report makes no effort to count the positive impact of unauthorized use of software in leading to future software sales. This is something that even Microsoft has admitted has helped the company grow over time. But according to the BSA's report, this doesn't matter.
3. The report also proudly notes: "Software piracy also has ripple effects in local communities." However, "ripple effects" are easily disproved as double or triple counting the same dollar. Using ripple effects like that inflates the final number by two or three times. In the link here, Tim Lee explains this (in reference to an MPAA study done by IPI, but it applies here to the BSA study done by IDC as well):

   If a foreigner gives me $1, and I turn around and buy an apple from you for a dollar, and then you turn around and buy an orange from another friend for a dollar, we haven't thereby increased our national wealth by $3. At the beginning of the sequence, we have an apple and an orange. At the end, we have an apple, an orange, and a dollar. Difference: one dollar. No matter how many times that dollar changes hands, there's still only one dollar that wasn't there before.
   
   Yet in IPI-land, when a movie studio makes $10 selling a DVD to a Canadian, and then gives $7 to the company that manufactured the DVD and $2 to the guy who shipped it to Canada, society has benefited by $10+$7+$2=$19. Yet some simple math shows that this is nonsense: the studio is $1 richer, the trucker is $2, and the manufacturer is $7. Shockingly enough, that adds up to $10. What each participant cares about is his profits, not his revenues.

   This is a huge fallacy that the BSA an IDC refuse to acknowledge. When I discussed it with them in May, they insisted that they only wanted to talk about piracy rates, not the loss number. I wonder why...
4. Next, if they're going to count ripple effects in one direction, it's only fair to also count them in the other direction. That is, they complain that:

   Lost revenue to technology companies also puts a strain on their ability to invest in new jobs and new technologies. For example, the $11.4 billion in piracy losses to software vendors and service providers in the eight states would have been enough to fund more than 54,000 tech industry jobs.

   But what they don't acknowledge is the ripple effects in the other direction. That is, if (going by their assumption, remember) every company that uses an unauthorized copy of software had to pay for it, that would represent $11.4 billion in money that all of those other companies could not use to fund jobs at those companies. What about all of those jobs?
5. The BSA/IDC stat on lost tax revenue also miscounts on the point above, since it includes the lost income tax revenue from those 54,000 lost jobs, but does not count the equivalent income tax revenue from those other jobs. In fact, in the fine print, the report notes:

   "Employment losses are calculated from revenue losses, and only apply to employment in the IT industry, not IT professionals in end-user organizations. Tax revenue losses are calculated from revenue losses (VAT and corporate income tax) and employment losses (income and social taxes)."

   In other words, the income tax losses only count one side of the equation and totally ignore the lost income tax revenue from the lost jobs on the other side of the equation. Oops.
6. It seems likely that the eventual tax benefits of the unauthorized use of software is most likely to greatly outweigh the lost tax revenue elsewhere. That's because the use of software within industries is a productivity tool that increases overall productivity and output, which would increase taxes beyond just the income taxes of the employees. The study, of course, ignores this point.
7. Worst of all, the report seems to assume that direct software sales are the only business model for the software industry, ignoring plenty of evidence from companies that have adopted business models that embrace free software -- generating billions of dollars for the economy (and in taxes). And that's what this really comes down to. It's a business model issue. If others started adopting these business models as well, there wouldn't be any "losses" at all.

Oh, and just for good measure, the report also falsely claims that: "What many don't realize or don't think about is that when you purchase software, you are actually purchasing a license to use it, not the actual software." That's not exactly true and goes directly against a recent court ruling that said the opposite and goes through a detailed explanation for why a piece of sold software is a sale with restrictions, rather than a license, using previous court precedents.

Most of these points have been made to the BSA and IDC in the past, and both organizations chose not to address them. The fact that they're continuing to use these obviously false numbers and methodology to now push for the government to prop up an obsolete business model should be seen as troubling not just for the dishonesty of it, but for the negative impact it will have on the software industry and our economy as a whole.

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BSA Releases Latest Stats; Stands By Same Old Story

from the we've-heard-this-before,-haven't-we dept

Every year around this time, the Business Software Alliance (BSA) comes out with a report, put together for the BSA by IDC, about software "piracy" statistics. Every year, since 2004 I call them out on how misleading many of the stats are (or, more specifically, I jokingly refer to the BSA as Bogus Stats as Always). At times, even IDC, who puts the report together for the BSA, has admitted that the BSA has tended to misrepresent the results -- and yet IDC keeps putting together the report every year. The good news, honestly, is that over the past few years, we've seen a changing trend in the coverage of the reports on these numbers, in that more people are calling the BSA out for using the numbers in a misleading way. The BSA, to its credit, has at least tried to be more conscious of how it presents and explains its numbers... sometimes.

Perhaps because of this, in advance of the release of the latest report today, the BSA reached out to me (and I'm sure plenty of others as well) to talk about the report and address any concerns. I spent half an hour on the phone this afternoon with Neil MacBride, the BSA's VP of Anti-Piracy and General Counsel. With him was Marcel Warmerdam an associate VP from IDC. I really appreciate the two spending the time to discuss the latest study with me -- as (this should come as no surprise) we didn't agree on very much.

The report itself seems pretty similar to what's come out in previous years. IDC does a rather credible job in determining the rate of unauthorized use throughout the world. The report this year highlights the fact that the rate of unauthorized use appears to be falling in many countries while rising in a few rapidly developing ones (Brazil, Russia, India and China). This is no surprise, as it's pretty much what anyone watching this market knows happens. I have no problem with the reporting on the rate of unauthorized usage.

Where things get problematic, however, is when the report starts to look at the impact of such things. The report itself shifts back and forth between "retail value of the software" and "losses" as if they are one and the same. By now, it should be quite clear that they are not the same. My second problem is that the report also ties these faux "losses" to a separate IDC report claiming that a drop in unauthorized usage of software would increase jobs, increase revenue in the IT sector and increase taxes. That's inaccurate for a variety of reasons, specifically in that it double-counts the impact of certain things and also only counts the "ripple effects" in one direction.

I raised these questions to both Neil and Marcel, and the summary of the call as Marcel noted at the end is that we'll have to agree to disagree. We didn't discuss the ripple effects issue, because that's actually from a different study than the one released today (though, the one today does reference that report to back up its claims -- which is why I brought it up). However, Neil and Marcel defended the "losses" claim by pointing out that plenty of companies out there (they kept pointing to large companies) would go out and buy the software if they had no other option. Indeed. And, I would probably go out and buy lunch at Pizza Hut if I had no other options, but we don't count it as a "loss" for Pizza Hut when I go eat at McDonalds instead. The fact is that there are other options -- even if some of them break the license agreements. My point is that this is a business model issue that the industry needs to deal with by giving businesses positive reasons to pay, rather than threatening to whack them with a legal stick.

However, what became clear in talking to Neil was that the BSA really does seem to believe that the majority of these unlicensed uses really would be paid for -- which seems like a highly questionable claim. We also very much disagreed over calling unauthorized use of software "theft" (he says it is, and tossed out the old favorite about how it's no different than taking a CD or a pack of chewing gum out of a store). He specifically said "software is a tangible good." The problem is that this is simply not true. I'm sure plenty of software companies and the BSA itself would like it to be a tangible good -- but it is not, and no amount of pretending makes it so.

In the end, Neil suggested that maybe this is a "generational" thing (I guess I'm the young whippersnapper), which I don't think is accurate either. I think it's really more of a business model thing. The companies that make up the BSA have relied on a particular business model for many, many years. That business model depends on government-granted monopolies that allow them to create artificial scarcity. They like that business model and don't want it to go away. However, the market is shifting, and it's shifting due to companies recognizing the fundamental characteristics of software being infinite, which allows them to implement other business models that don't rely on artificial scarcity. We're seeing it all the time, even among some companies who are members of the BSA. IBM, for example, has learned that its real money-maker is in services, and free software helps build that market. Red Hat has shown a similar business model on a smaller scale. And Google, which is a software company (even if people don't realize it), has shown an entirely different model to make its software extremely profitable in a way that "piracy" is of no concern.

The more the BSA talks up fundamentally flawed "losses" the more difficult it makes it for many of its members to recognize that the market is changing, and they need to change their business models with it. The less these companies focused on made up "losses" and the more they focused on creating business models where there are good reasons for companies to pay money, the more they'd realize that unauthorized use isn't the problem at all. With the BSA reports on losses, though, too many of these companies are taught to think that the problem is elsewhere (those darn pirates), rather than in how they view the market themselves. And, that, fundamentally, is dangerous for the BSA's own members. So, I very much appreciate both Neil and Marcel for reaching out and taking the time to talk with me, and responding to my criticisms -- and I hope to continue the conversation with them. But, they did little to change my feelings about the BSA report and its misleading nature.

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The Case For And Against Software And Business Model Patents

from the and-the-battle-begins dept

Things have been busy, so I haven't been able to add to my ongoing series of posts on intellectual property until now. I've also been working on a post for the series that is a bit involved, which has taken extra time. However, just as I'm working on finishing that up, the various friend of the court briefs on the Bilski case were due, which is a perfect opportunity to discuss the question of business model and software patents. Back in February, we mentioned that the Bilski case was a big deal, as it gave the appeals court that handles patent issues (CAFC) a chance to admit it made a mistake in allowing patents on software and business models. Some of the various individuals and groups who filed briefs have written about them, but Dennis Crouch over at Patently-O has an excellent summary and many of the amici briefs available for download.

As you might imagine, with 30 different amici briefs filed, they represent a wide variety of opinions, with some companies like Accenture and American Express in favor of allowing these patents, and others like IBM and SAP explaining why these patents don't make much sense. Red Hat (expectedly) explained how software patents harm open source development (and how open source shows that patents aren't necessary for software innovation). The group End Software Patents highlighted some ridiculous lawsuits resulting from software patents (and even noted that CAFC's own website violates some software patents). The EFF focused in a bit more on the very specifics of the argument at hand and suggested a three-step litmus test to determine whether an invention is actually technological.

So How Come Software And Business Models Are Patentable In The First Place?

For many years people simply assumed that software and business models weren't patentable. It was pretty well established that patents needed to be tied to a real, tangible technology -- even if there didn't need to be a working model. The courts had recognized for many years that a "process" could be patentable, and that was codified in the law in 1952 by the patent act written by Giles Rich. Rich later went on to serve on CAFC interpreting the very law he had a major hand in writing, almost always in favor of extending what could be patented.

In 1981 the Supreme Court ruled in the Diamond v. Diehr case, saying that the patent office shouldn't dismiss a patent application just because it's software, noting that if it was tied to a technology, then the entire combination of technology and software could be patentable. It made it clear, however, that algorithms, by themselves, were not patentable. That's somewhat problematic, as it assumes a concrete world where the technology and the algorithms aren't mixed together. Following this, most decisions on patents were left to CAFC, who went through a series of cases trying to refine and hone in on what was and was not patentable when it came to software. This went on until 1998 when CAFC decided the State Street case, which basically said both software and business models are patentable -- and that they've always been patentable, quoting a phrase first used in a Congressional report in 1952 that "anything under the sun made by man" is patentable. This statement has all sorts of problems, of course, because when you get into intangible goods and algorithms and business models, it's not always clear if that's something "made by man" or merely an explanation of something that was already there. Either way, the State Street decision opened the floodgates.

Suddenly there was a massive rush to the patent office to apply for both business model and software patents. Researchers, for example noted that from 1995 (before the lower court ruled on State Street) to 2001 (two years after the Supreme Court refused to hear State Street) the number of business method patents grew by nearly 3,000% (yes, 3,000%). Things became even worse because there were so many fewer software and business method patents prior to this case, patent examiners had much less "prior art" to go on. Typically, examiners use things like earlier patents as well as journal articles to determine prior art. But, there weren't patents on earlier software and business models and not many journal articles either. So plenty of bad patents got through. The patent system itself became overwhelmed, and the incentive structure started encouraging examiners to approve patents when it doubt. And that's how we got to some of the mess we're in today.

The Case For Software and Business Model Patents

Let's start with the case being made in favor of such patents. Again, with so many amici, there are a ton of different opinions offered here (and they certainly don't all agree with each other). But the simplest argument being made is reflected in the BSA's opening argument which is the same core defense of the patent system overall. It goes like this: patents are supposed to promote the progress, and we want progress promoted, so of course software and business models should be patentable. This argument, obviously, ignores the question (and all of the evidence) suggesting that patents don't actually promote the progress, but we'll leave that aside for now. Related to this, companies like American Express and Accenture trot out the claim that patents have tremendous beneficial impacts on the economy (again, without proof).

From there, a few of the briefs jump off into claims about how our modern economy is different than in the past. Rather than tangible goods and manufacturing, we're now a society of services and intangible goods, leading to the claim that if patents were helpful in those old days, they should also be extended to this new economy. Regulatory Data Corp. takes this point a step further by claiming in its second argument that "applied economics" is a part of "the useful arts" that are supposed to be protected under patent law. RDC, by the way, also has a bit of fun at the beginning of its brief talking about how its software stops terrorists, hinting at the idea that without patents, the terrorists would win. Many of these briefs also argue on the precedent of prior cases and the idea that creating a specific "exemption" from patentability is a bad thing and would do more harm than good.

Effectively, the arguments are:

• Innovation is good, patents encourage innovation, therefore, of course patents should apply to software and business models.
• The world we live in is different than it was in the past. When patents were first conceived of, everything was mechanical and tangible, but the world is different now. This argument, effectively suggests that intangible things (software, business models) don't have any different characteristics than tangible things (which is absolutely incorrect, but it sounds good).
• Courts have held (and the law has been changed to reflect) that processes can be patented, even if ideas cannot be. Software and business models are processes, not ideas.
• Anything under the sun made by man can be patented, and software and business models are made by man.
• Drawing dotted lines about what is and what is not patentable decreases the flexibility of the system and makes it ineffective (which I believe is the strongest argument made in these briefs).

The Case Against Software and Business Model Patents

For folks who read Techdirt and work in the software industry, I'm sure the basics won't come as much of a surprise. The arguments revolve around the fact that you're not supposed to be able to patent an idea -- and then making it clear that software and business models by themselves are really just ideas. They need to be tied to some sort of tangible technology to actually be considered patentable. Microsoft, Dell, Symantec, IBM, SAP and others all make that point. The EFF takes things a bit further to suggest its test for whether or not something is "technological." The EFF also highlights how much harm patents on purely non-technological material may cause -- noting that it limits the normal delivery of important information. The ACLU picks up on this as well, suggesting in its brief that software and business model patents fundamentally run the risk of violating one's First Amendment rights and argues that First Amendment rights should trump patent rights.

Effectively, the arguments are:

• You cannot patent an idea, and business models and software are really ideas, not technology or processes.
• There needs to be some actual technology for it to be patentable
• There is real economic harm being caused by these types of patents
• Software and business models, due to being intangible, work differently than tangible goods, and therefore do not need patent protection for innovation -- and, in fact, such protection can harm them.
• The fact that these patents can get in the way of the Freedom of Speech should be a concern

There are many more arguments made within the briefs, and you can dig into them if you'd like -- but I believe that's a decent summary of both sides.

So Should The Court Get Rid Of Software And Business Model Patents?

To be honest, this question is a lot trickier than it sounds at first, and my answer may surprise some people. Part of the issue is how you look at the question being discussed -- and on this I agree with some (though definitely not all) of what Stanford professor Mark Lemley wrote in his brief. While I disagree with the claims in his brief that a loss of these patents would decrease innovation, he does make an important point: the real problem isn't in what's being patented, it's in patents that shouldn't be granted getting approved in the first place. Furthermore, if the court cuts out all software and business models, people will just rewrite their patents in a manner to make it appear as though their business models and software really have a "technology" component. In other words, the real net effect may be meaningless.

He then argues that it doesn't make sense to create a special "exemption" for software and business models. This is the same sort of thing that many others arguing in favor of software and business method patents claim. It's effectively a "why should we carve out a special exemption for these things?" And they're right. We shouldn't carve out a special exemption -- but not for the reasons they think. Carving out an exemption implies that these types of things really do deserve patent protection, except for the fact that they're software or business models. It's granting the premise that they're patentable. That's a problem.

The real issues is that most software and business model patents shouldn't be granted at all in the first place, but not because they're software or business models, but because they don't meet the criteria of what deserves a patent. They are often neither new nor non-obvious to those skilled in the art -- and patents on them most certainly do not promote progress. So there doesn't need to be a special exemption because they already shouldn't qualify for patents.

As anyone who has worked in business or in software knows, both business models and software evolve constantly over time. They are not static at all, but highly dynamic -- often driven by changes in the market. It is that market that forces the innovation to occur, and doing anything to limit the ability for anyone to change or modify their model or software only hinders that innovation. So, there shouldn't be a special "exemption" for these goods -- it should just be recognized that they are unlikely to qualify for patent protection in the first place.

So while I agree that software and business models should not be patentable, the Bilski case worries me somewhat. If the court does effectively create an "exemption" for software and business models, it's setting a dangerous precedent that could be revoked (or gamed). It also could make things worse for all other kinds of patents. Instead, there should be straightforward rules that apply to all patents that determine whether or not an invention meets the basic criteria of being new and non-obvious and whether or not a patent is necessary to promote the progress of that space. With that sort of recognition in place, you don't need a special exemption at all. It would just make it clear that software and business methods would almost never qualify for patent protection in the first place, while also raising questions about the patentability of many other things as well.

So, in the end, I don't think that software and business models deserve patent coverage -- but I worry that the results of the Bilski case could lead to many more problems for the entire patent system by suggesting that software and business methods get "special treatment." In the end, it seems unlikely that the courts are going to see it this way at all, so a decision in Bilski severely limiting software and business method patents may be a short-term solution, but it would really just be a band-aid on a much bigger problem.

---

Links to other posts in the series:

• On The Constitutional Reasons Behind Copyright And Patents
• Patents, Copyrights And Trademarks, Oh My!
• If Intellectual Property Is Neither Intellectual, Nor Property, What Is It?
• What Kind Of Progress Are We Promoting?
• Why Do Patents Tend To Cause More Harm Than Good?
• The Case For And Against Software And Business Model Patents

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Sony BMG Caught Pirating Software

from the funny-how-that-works dept

Wouldn't you know it? The organizations who scream the loudest about how unauthorized copies are "theft" and how "piracy" is destroying their industries are just as likely to get caught making unauthorized copies themselves. In the past, for example, we've pointed out that the MPAA was using software in an unauthorized manner, and also that it had made unauthorized copies of a movie, against the demands of the movie's producer. Now, we find out (via Slashdot) that Sony BMG has been caught in a BSA raid with a ton of unauthorized software -- potentially up to 47% of the software at the offices. Now, I tend to think that BSA raids are highly questionable, but if it's true that Sony BMG is using unauthorized software, the company has some explaining to do. It's one of the major labels and has been a huge supporter of the RIAA's "anti-piracy" campaign. For a company so adamantly against piracy, it seems rather telling that it can't live up to its own standards. Considering the RIAA has been pushing for Congress to increase the statutory fines for copyright infringement, perhaps Sony would like to set a good example and pay at the high end of the range?

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How Reliable Are Industry Announced Piracy Statistics?

from the depends-on-your-definition-of-reliable dept

Eric Goldman sent in a link to a recent research paper that aimed to look at the reliability of industry-released reports on piracy. That sounded interesting, as we've spent plenty of posts picking apart why almost all of their released numbers are bogus. In particular, we've pointed out how incredibly bogus the BSA's statistics are. So, it was somewhat surprising to have the study say that the BSA's were the most reliable, when compared to other groups like the RIAA and MPAA. If anything, though, that really just suggested that the RIAA's and MPAA's stats were even more bogus (remember, things actually got so bad for the MPAA that it had to admit how bogus its own stats were). That actually seems likely, as the BSA is the most upfront about the methodology used.

However, reading through the actual report, it does little to vindicate the piracy numbers that the industry reports always trumpet. That's because the report actually focuses on the rate of unauthorized use, rather than the cost or impact of that unauthorized use -- which is the key point to come out of these reports. The rate of unauthorized use is fairly meaningless, so it doesn't matter that much who is the most accurate. It's the impact that matters. While reports used to do silly things like count every unauthorized copy as a lost sale, most have stopped that, and now use a multiplier. Some have started using a questionable ripple effect that counts the same loss multiple times and ignores the "ripple effects" in the other direction that benefit the industry. So, yes, perhaps the BSA is the best of a bad bunch, but even if the rate of unauthorized use is somewhat accurate, that has little bearing on the actual impact of those unauthorized copies.

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How Pursuing Software Piracy Hurts Proprietary Software Firms

from the highlights-the-alternatives dept

While organizations like the BSA and the SIIA play silly games and announce bogus numbers about the "costs" of software piracy, it's nice to see the whole thing beginning to backfire. We've already pointed to the backlash against the BSA for its activities, and now we're seeing how these kinds of crackdowns are doing exactly the opposite of what BSA/SIIA members would want: they're looking for open source alternatives. Following the ongoing "international crackdown" on software piracy, it appears that the Vietnamese government is the latest to start promoting open source alternatives. Of course, for proprietary software makers, this should be seen as worse than piracy. After all, as Microsoft and others have long admitted, you're much better off if someone is using an unauthorized version of your software, than if they're using the competition (especially if that competition is free). If they're using an unauthorized version of your software, then at least there's a chance that they'll either buy it at a later date or convince others to buy it. However, by putting such a big effort into cracking down on software piracy, all the industry has done is highlight why people are better off going with free alternatives. This is a key point we've tried to highlight in the past. The issue isn't piracy at all, but the fact that the competition will eventually learn to embrace "free." Focusing on "piracy" only helps accelerate that process.

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