With the imminent death of Google Reader, I've seen a number of people whose opinions I respect quite a bit, say something about how "this shows why paying for software is important," or, alternatively "why free software isn't a good idea." One of many examples of this is Dave Winer's statement: "Next time, please pay a fair price for the services you depend on. Those have a better chance of surviving the bubbles." Mike McDerment, CEO of Freshbooks, pointed me to an article he recently wrote about "why free is bad" when it comes to "key" services. I have a ton of respect for both of these guys, and I understand exactly where they're coming from, but I don't buy it.

Plenty of "paid" services go out of business as well, and often it's because not enough people pay. So they shut down. The end result is the same thing. Obviously, services need revenue to survive, and sometimes "free" + some other business model (freemium, ads, something else) won't bring in enough revenue -- and sometimes "paid" won't bring in enough revenue. Neither business model has a "premium" so to speak on being sure to bring in enough revenue. Each has different benefits and challenges. I've seen tons of services launch with a "pay" model, only to get a dozen or so customers and have to shut down. Similarly, there have been free services that have clearly been successful and made lots of money. And lots of things in between.

As we've said before there's nothing ideologically "pure" about a fee-based business model, as opposed to one supported through other revenue streams. If you charge, you're guaranteed to have fewer users. That can be a good thing, but it can also be a huge challenge. Furthermore, the suggestion that the providers of free services don't care about their users is not definitively true either. I'm sure it's true for some services, but I get treated like crap by plenty of fee-based providers as well. Similarly, free-based providers still need to treat users right, or they go away, and there goes their business model, no matter what it is.

Simple point: just because Google couldn't make a business out of a free RSS reader, it does not mean that business models that have a free component do not work, since, obviously, much of the rest of Google's business is based on offering stuff for free, and monetizing elsewhere. And, similarly, just because you have a paid app, it does not mean that enough people will pay to make a viable business out of it. In both cases, the situations are basically the same: whatever you do, you need to be able to bring in enough revenue, and that usually needs to involve offering a good product with plenty of benefits. The business model discussion that goes on top of that is interesting, but not defining in the way some people seem to want it to be.

Ken White blogs at Popehat. He's a litigator and criminal defense attorney at Brown White & Newhouse LLP in Los Angeles. His views are his alone, not those of his firm.

My prior coverage of the Prenda Law saga is here.

Yesterday, March 14, as Judge Wright was busy issuing a new Order to Show Cause directing Prenda Law clients and affiliated attorneys to appear before him, Prenda Law was busy too.

More specifically, Prenda Law — through Paul Duffy, one of the lawyers Judge Wright has ordered to appear — was busy dismissing cases and filing a "Notice of Allegations" informing other courts of what is going on. Sort of.

A tipster told me that Mr. Duffy had a busy day yesterday. PACER showed it's true. More specifically, Mr. Duffy filed voluntary dismissals of multiple AF Holdings LLC cases in the Northern District of Illinois — here and here and here (in which he stipulated to dismiss the case with prejudice, meaning it can't be re-filed) and here. In one of those cases he filed the notice of dismissal even though AF Holdings had already secured a default against the defendant, leaving nothing but proving damages. I haven't yet counted all the cases in which Duffy filed dismissals yesterday.

In each of those cases — and in a case in the Northern District of California — Duffy also filed a substantially identical document styled a "Notice of Allegations." Here's what they all say:

Plaintiff hereby notifies the Court of allegations of forgery that were made during a hearing in a matter pending before the U.S. District Court for the Central District of California. Ingenuity13 LLC v. John Doe, No. 2:12-cv-08333-OWD-JC (C.D. Cal. Mar. 11, 2013). On March 11, 2013, an individual by the name of Alan Cooper alleged that his signature was forged on two separate agreements assigning the rights of various copyrighted works to Plaintiff, including the assignment at issue in this matter. (See, ECF No. 1-2 at 2.) Plaintiff categorically denies Mr. Cooper’s allegations, which arise nearly two years after certain of the alleged conduct occurred. Mr. Cooper has a pecuniary interest in his allegations by virtue of a lawsuit he filed against Plaintiff. Cooper v. Steele, et al., No. 27-CV-13-3463 (Minn. Dist. Ct., Hennepin Cty., 2013).

Even if Mr. Cooper’s allegations were true—and they are not—Plaintiff’s assignments, including the assignment at issue in the instant action, remain valid. The formal requirements of a copyright assignment are “quite simple”: a writing signed by the assignor. 17 U.S.C. § 204; Effects Associates, Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990) (“The rule is really quite Case: 1:12-cv-03567 Document simple: If the copyright holder agrees to transfer ownership to another party, that party must get the copyright holder to sign a piece of paper saying so. It doesn't have to be the Magna Charta; a one-line pro forma statement will do.”); see also Order, AF Holdings LLC v. Does 1-96, No. 11-cv-3335-JSC (N.D. Cal. Nov. 22, 2011), ECF No. 29 at 5 n.1 (“The written copyright assignment recites that it is between the original copyright owner, Heartbreaker Films, and Plaintiff here, AF Holdings, LLC. . . . As the law requires only that the assignment be signed by the assignor and not the assignee, this inconsistency does not prevent a prima facie showing of copyright ownership.”) (internal citations omitted).

Mr. Cooper’s allegations relate to the assignee, not the assignor. The assignment at issue in this action satisfies the Copyright Act’s formal requirements. It is a writing signed by the assignor. Plaintiff’s rights in the copyrighted work in this action were transferred when the assignor executed the assignment.
Plaintiff is treating Mr. Cooper’s allegations with utmost seriousness and is investigating their substance. Because Mr. Cooper’s allegations relate to the assignment agreement at issue in the instant litigation, Plaintiff respectfully brings the matter to the Court’s attention.

Broken down, here's what Duffy is saying: (1) Cooper's claim is untrue, (2) but we're treating the claim seriously and investigating it, (3) but even if it were true, it doesn't matter, because an assignment only needs a valid signature from the person giving the property, not the person receiving the property.

Many things could be said about that argument. Among them: the first two points are oddly at war with each other, particularly when uttered in such proximity. If AF Holdings knows the allegation is not true, then what precisely is AF Holdings carefully investigating? Doesn't AF Holdings already know whether or not Mr. Cooper consented to be an officer for it and executed documents for it? What is there to investigate, exactly?

Duffy's third point is about a doctrine that lawyers — including, for instance, prosecutors and defense lawyers — call materiality. Most civil or criminal laws prohibiting false statements only extend to material false statements — that is, statements that are the sort that could make a difference in the issue at hand. Duffy seems to be previewing Prenda Law's defense by suggesting that even if Cooper's identify was misappropriated and his signature forged on assignments, that false statement was not material because a copyright assignment only needs a valid signature from the guy giving the copyright, not the guy receiving it.

There are a number of problems with that argument. Among them: Judge Wright is not only interested in whether Prenda Law made fraudulent representations about who received the assignments. Judge Wright is investigating — and has ordered Prenda Law to explain — whether Prenda Law made fraudulent representations about the true owners of plaintiff entities like AF Holdings. Whether Alan Cooper is a real officer or not is unquestionably material to that. Judge Wright has specifically ordered them to explain:

2) Why they should not be sanctioned for failing to notify the Court of all parties that have a financial interest in the outcome of litigation;

3) Why they should not be sanctioned for defrauding the Court by misrepresenting the nature and relationship of the individuals and entities in subparagraphs a–m above [of the March 14, 2013 Order];

Prenda Law's apparent theory of materiality may be apt in analyzing whether the copyright assignments are valid. But it may not be apt in determining whether any misstatements were material for purposes of civil or criminal fraud allegations directed at the ownership and management of Prenda Law's clients. For instance, as I've discussed before, for purposes of charging defendants with false statements to the government, materiality is defined very broadly to include the sorts of statements that have the capacity to influence the government, whether or not the government is actually misled.

All that said, aside from questions about the exact language of the "Notice of Allegations," Paul Duffy is very likely doing the right thing legally and ethically by dismissing the cases and informing courts of the allegations against Prenda Law. In doing so he is reducing the risk that he will be accused of continuing any alleged fraud on the court after the March 11, 2013 hearing.

With respect to what has already happened, though — my friends, that die is cast, the Rubicon crossed, the ram has touched the wall.

Another day in which Google makes a move that leaves me scratching my head about what it's thinking. It has decided to remove Adblock Plus from the Google Play store arguing that it interferes "with another service or product in an unauthorized manner." Obviously, some will argue that of course Google is doing this to protect its own ad revenue, but it still surprises me. Google's entire premise was built on the idea of building advertising that was non-intrusive and non-annoying such that it created value for people. The whole reason that Adblock exists is to fight back against bad advertising. On top of that, Adblock is a very popular tool, in part because it helps stop annoying advertising. If anything Adblock represents a useful way of exposing information about when and why people find advertising annoying.

As we've argued before, even though things like Adblock directly mean less revenue for us, we don't begrudge anyone for choosing to use it. To us, it's just a sign that we're not doing a good enough job delivering what our community wants in a manner they want it. That's useful. It sometimes puts us in a difficult position, because we have to deal with advertisers who only seem to want banner ads that our audience doesn't like. But we should never take that out on our community, but rather the responsibility is on us to seek out ways to convince advertisers and sponsors to work with us in ways that benefit everyone, rather than intrude or annoy our audience. On that front, we've always found Adblock to be a useful tool.

While Google may not view it totally that way, in the past, Google has generally taken the position that what's best for the user is something that it will support, even if it's not directly the most beneficial thing for Google. Instead, it took the longer term view that doing what's right for the consumer would mean that consumers would stick with them and trust them. But blocking AdBlock goes against that very concept. It's a short term move and one that the EFF (with whom we agree) sees as simply a bad move for Google.

Part of the appeal of the Google Play store is the lack of Apple iOS style walls and gates. Putting up those gates in a way that goes against user's own interests just seems like a bad long term decision.

While it may be a bit late for New Year's resolutions, it's never too late to start counting calories as part of a sensible weight loss (or maintenance) plan. But before embarking on a crusade to cut out all those extra calories, it might be wise to learn more about this unit of energy. For example, scientists are still debating whether all food calories are equivalent from a metabolic perspective -- are calories from fat the same as calories from carbohydrates? The answer still isn't clear, but one thing is for sure: eat fewer calories and you'll lose weight. Here are a few more interesting tidbits about calories.

• Want to learn more about calories? New York University professor Marion Nestle gave a talk in which she discusses what calories are and how they work biologically and politically. [url]
• Bad news: Claims that sex burns 100 to 300 calories are just a myth, according to the New England Journal of Medicine. Apparently, one study found that sex lasted 6 minutes on average and burned only 21 calories. [url]
• Good news: Watching 90 minutes of a horror movie can reportedly burn almost 200 calories because it causes an increase in heart rate. For the greatest calorie-burning workout, watch The Shining. [url]
• How accurate are those calorie counts listed on food labels? Apparently, you could unknowingly be ingesting an extra 550 calories a day. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post.

To get a sense of how old the Goldman Sachs IPO lawsuit-and-maybe-scandal that Joe Nocera and Felix Salmon wrote about this weekend is, consider this: the alleged victim was a company named eToys. With the “e,” and the “Toys,” and the weird capitalization. Also Henry Blodget was the analyst who covered them at Merrill. Different times!

Nocera gives the basic facts and there’s something a little off about them:

The eToys initial public offering [in May 1999] raised $164 million [at $20/share], a nice chunk of change for a two-year-old company. But it wasn’t even close to the $600 million-plus the company could have raised if the offering price had more realistically reflected the intense demand for eToys shares. The firm that underwrote the I.P.O. — and effectively set the $20 price — was Goldman Sachs.

After the Internet bubble burst — and eToys, starved for cash, went out of business [in March 2001] — lawyers representing eToys’ creditors’ committee sued Goldman Sachs over that I.P.O.

The theory of the lawsuit is that Goldman screwed eToys on behalf of investors, pricing the IPO at $20 per share, rather than the $78 justified by demand, as evidenced by the fact that the stock briefly traded at $78 on the first day. An alternative theory is that Goldman screwed investors on behalf of eToys, pricing the IPO at $20 per share, rather than the $0 justified by fundamental value, as evidenced by the fact that the company went out of business 22 months after the IPO. Also it was called eToys, come on.

Are you surprised that investors sued Goldman too? Of course not, right? After all, they lost a lot more money. The surprising thing to me, as a wholly post-internet-bubble capital marketeer, is that the investor suit is not so much about “your prospectus said you would deliver childhood dreams and you instead delivered full-grown bankruptcy” as it is about the laddering and commission kickbacks that Nocera and Salmon describe. (Though: imagine the shareholder lawsuits if it had priced at $75.) Here’s Nocera:

Goldman carefully calculated the first-day gains reaped by its investment clients. After compiling the numbers in something it called a trade-up report, the Goldman sales force would call on clients, show them how much they had made from Goldman’s I.P.O.’s and demand that they reward Goldman with increased business. It was not unusual for Goldman sales representatives to ask that 30 to 50 percent of the first-day profits be returned to Goldman via commissions, according to depositions given in the case.

Let’s stipulate that some of the explicit quid pro quo stuff is bad, as are allegations that some clients conducted wash trades to kick Goldman sufficient commissions. Bad enough that various banks settled various lawsuits over dotcom-era hot-IPO-allocation practices, including Goldman settling with the SEC in 2005 over related “laddering” charges. The dotcom era is mostly in the past and so are those sorts of practices.

Others are not. Nocera cites an email from Bob Steel – then GS head of ECM, now Bob Steel – to Tim Ferguson at Putnam, saying in part “we should be rewarded with additional secondary business for offering access to capital markets product.” This email strikes me as pretty pretty standard even today. As Salmon says:

I’m sure if a determined prosecutor went hunting for similar emails today, she could probably find them. But I don’t know what the point would be. Because there’s nothing illegal about asking buy-side clients to send commission revenue your way — or even about explaining to them how much money you’ve helped them make.

True! There’s nothing illegal about telling your clients that you’re doing a good job for them.¹ Is there anything scandalous? Obviously making money for investor clients by underpricing an IPO is in conflict with raising money for issuer clients by overpricing the IPO. That is the point of IPOs. There is that conflict, and the bank is there to mediate it, and the bank’s incentive to mediate is that it makes money from both sides.²

Salmon explains Goldman’s pitch to eToys:

On the page headlined “IPO Pricing Dynamics”, they explained that the IPO should be priced at a “10-15% discount to the expected fully distributed trading level” — which means not to the opening price, necessarily, but rather to the “trading value 1-3 months after the offering”. After all, this was the dot-com boom: everybody knew that IPOs were games to be played for fun and profit, and that the first-day price was a very bad price-discovery mechanism.

Right? eToys knew that it was leaving boatloads of money on the table for investors, and it knew that Pets.com and WebNonsense and the rest of its ilk before it had also left boatloads of money on the table for investors, and that that was why investors would give $164 million to a company called eToys that had – I mean, do I need to even say this? – never made a profit, and never would. That was the trade that eToys made: it let investors have an IPO pop, and in exchange they let eToys have an IPO.

The thing about this tradeoff is that it’s totally transparent. An IPO prices, and then it trades. You can look on Google Finance – back then it was probably AltaVista Finance but you know what I mean – and actually see where it’s trading. You can ask a bank for a list of their IPOs, and then see how they traded. If Bank X’s deals all left tons of money on the table and Bank Y’s didn’t, you might consider using Bank Y. Bank Y might even consider advertising this fact to you – just as Bank X is out advertising it to investor clients.

Now perhaps “totally transparent” overstates it a bit. The banks are masters of data-cutting, so they’ll focus you on the deals they want you to focus on (“joint books deals since 1998 excluding online pet product retailers”³). The “fully distributed trading level” blather is an example of that: 300% one-day pops look bad, so you focus clients elsewhere.

And investors have some advantages in their tug of war with issuers. They’re repeat players, for one thing, and they think about capital markets all day, so they have more incentive and ability to pay attention to which banks are systematically underpricing or overpricing deals. Also money: as Felix Salmon points out, Goldman likely made a lot more from investors kicking back 30-50% of their first-day eToys pop in commissions than it did on eToys paying its 7% fees. Even assuming explicit wash-trade kickbacks are gone, investors might still have the upper hand: at Goldman, for instance, 2012 equity underwriting revenues were a little under $1bn, and total investment banking advisory revenues were a little under $5bn, while equities division revenues – market making, commissions, and prime brokerage – were over $8bn.⁴ The more the trading side runs the place, the more its clients will tend to win out against issuers.

Nonetheless the right model is “constant tension,” not “one-sided screwing of issuers by investors.” One way to tell: if the issuers constantly got screwed, there’d be demand for things like direct auction IPOs that bypass investment banks. There is not. Issuers know that the model of banks currying favor with investors gets them better capital markets access, even if their stocks are the currency used to curry favor.

Another way to tell: if the issuers constantly got screwed, and the investors constantly made out like bandits, you’d see a lot of eToys-type lawsuits brought by issuers, and very few Facebook-type lawsuits brought by investors. That is not the case. There are more investor lawsuits over the Facebook IPO than there are issuer lawsuits over any IPOs.⁵ That suggests that the issuers are doing okay.

Rigging the I.P.O. Game [NYT / Joe Nocera]
Where banks really make money on IPOs [Reuters / Felix Salmon]

1. Also, like: you’re the head of equity sales or whatever at a bank, and you go meet Putnam, and you ask yourself: what do I tell them about why they should give us more business? I submit to you that things like “our guys have taken you out to some great dinners,” “we reply to your Bloombergs promptly,” and “our research is nicely formatted” are all considerably less impactful than “we bring you IPOs that you make a lot of money on.” Capital markets deals really are a big part of the service that big banks offer their investor clients.

2. Thus eToys’s contention that Goldman owed it a fiduciary duty as underwriter is sort of nuts. Nocera:

As for the litigation itself, Goldman has argued that, contrary to popular belief, underwriters do not have a fiduciary duty to the companies they are underwriting. In recent years, this argument has held sway in the New York court system, although it has yet to be argued before the Court of Appeals.

What popular beliefs about underwriter fiduciary duties in IPOs do you think exist? And what could those duties be? If a bank’s duty was to maximize price on every IPO then it would screw investors over and over again and they’d get sick of it and lowball the banks’ next deals. Given that banks and issuers know more about their stock than investors, you’d end up with a market-for-lemons problem, and issuers as a class would be worse off. The point of the bank is to curry favor with investors – sometimes by leaving a little bit of money on the table for them – in order to help sell the next deal. That’s why you go to a bank: because they have a good relationship with investors. How do you think they got that relationship?

3. I once reviewed a fee run with a little footnote accurately describing it as “excluding REITs,” which would be fine (REITs are weird and many data runs exclude them), except that we were showing it to a REIT. I can’t quite remember, but I want to believe I had it changed.

4. IBD page 60, equities page 62, of the 10-K.

5. Are there? I totally made that up. Seems like it might be true though. Or at least defensible rhetorical exaggeration.

Other posts from Dealbreaker:

• New Hostess Owners’ Infallible Business Plan: Zach Galifianakis And Healthy Twinkies
• The Less-Colorful Eliot Spitzer Strikes Again
• Decline In Awkward Conversations Due To Layoffs Offset By Increase In Awkward Conversations Due To Job Interviews

Well here's a surprising (and important) bit of late-Friday-breaking news. A federal court has ruled that national security letters (NSLs) are unconstitutional, and banned their use. For years we've covered the use and abuse of NSLs, which basically allow law enforcement to demand (with almost no oversight) information from service providers, and which include a total gag order, entirely blocking people from talking about the letters. These NSLs are used all the time, and pretty much every time anyone looks into the use of NSLs, there's an admission that they're abused, but little has been done to fix that. Until now.

We wrote about this particular case last year, when the DOJ took the extraordinary step of suing a telco for daring to question whether or not NSLs were legal, claiming that its failure to hand over the info violated the law. The court disagreed.

The Court finds that, as written, the statute impermissibly attempts to circumscribe a court's ability to review the necessity of nondisclosure orders. As noted above, while not a "classic" prior restraint or content-based speech restriction, the NSL nondisclosure provisions significantly infringe on speech regarding controversial government powers. As such, the Court can only sustain nondisclosure based on a searching standard of review, a standard incompatible with the deference mandated by Sections 3511(b) and (c). As written, the statute expressly limits a court's powers to modify or set aside a nondisclosure order to situations where there is "no reason to believe" that disclosure "may" lead to an enumerated harm; and if a specified official has certified that such a ham "may" occur, that determination is "conclusive." The statute's intent -- to circumscribe a court's ability to modify or set aside nondisclosure NSLS unless the essentially insurmountable standard "no reason to believe" that a harm "may" result is satisfied -- is incompatible with the court's duty to searchingly test restrictions on speech. See, e. John Doe, Inc. v. Mukasey, 549 F.3d at 883 ("The fiat of a governmental official, though senior in rank and doubtless honorable in the execution of official duties, cannot displace the judicial obligation to enforce constitutional requirements. 'Under no circumstances should the Judiciary become the handmaiden of the Executive.'

The remedy is to bar the government from issuing any NSLs or enforcing the nondisclosure gag order in any issued NSLs... but, knowing that the government is going to appeal, it has given a window for that to happen. So, we've got a long way to go before we see what happens here, but make no mistake, this is a huge ruling pushing back on a massive abuse of power by the government.

Earlier today, we broke the story that the head of the US Copyright Office, Maria Pallante is proposing major copyright reforms, including reducing the term to life plus 50 with the ability to proactively renew for another 20 years. While this was a move in the right direction (though not far enough), there were plenty of other proposals that were worrisome. Some more details are starting to come out.

First, I'm at a Santa Clara University conference all about the DMCA (fun stuff!) today, and Rob Kasunic from the Copyright Office mentioned that Pallante's talk at Columbia a couple weeks ago, where most of this information comes from, was merely a "shorter" version of her larger proposal. And that's impressive since her talk covered a lot of different areas concerning copyright. Now, the Association of Research Libraries has posted the notes of an attendees at that lecture, Greg Cram, from the NY Public Library. He points out that these are just his own notes, and may not be totally accurate. However, there are some details. First, the reduction in copyright term is basically what we discussed:

Term of 50 years, renewable for an additional 20

—The Supreme Court decision in Golan v. Holder is last word on whether life plus 70 years is constitutional

—However, the term of copyright protection could be modified to 50 years after the death of the author, renewable for another 20 years

—This would put the burden on the copyright owner to renew copyright term at the end of 50 years after death

—Modeled after § 108(h), something the Copyright Office is very fond of

—This proposal would be acceptable under various international treaties, including the Berne Convention

This is a small step in the right direction, which is surprising, since pretty much all steps have gone in the other direction, in favor of maximalism. However, there is plenty to be worried about. Here are a few such points:

Stronger Enforcement —The new law must respect the integrity of the internet, including free speech —There needs to be, however, a mix of legislative and voluntary efforts to combat infringement online —On solution may be to increase criminal penalties for streaming, or at least bring them in line with the penalties for distribution through downloads

In other words... perhaps we trade off shorter terms for more criminal prosecutions for "streaming," even as there are serious questions about why basic streaming should be illegal and with so much evidence that greater enforcement does little to help copyright holders' bottom line. That's a problem.

The Digital Millennium Copyright Act —The Internet has evolved since DMCA passage in 1998 —Congress should review the § 512 safe harbors —Congress also needs to review § 1201 rulemaking, especially in light of the White House response to a petition on unlocking mobile phones

This is the part that worries me. The entertainment industry has been really itching to ditch the DMCA's safe harbor provisions that protect service providers from liability for the actions of their users. If that's the trade-off for shorter copyright terms, it's not worth it. The safe harbor provisions of the DMCA are a huge part of why the internet has been able to develop so many wonderful services.

The § 1201 rulemaking, however, is the issue concerning anti-circumvention, which should absolutely be re-examined, as it's created a huge mess for all sorts of legitimate uses. But, again, re-opening the safe harbors provision should be a non-starter. Nothing good can come from that.

Incidental Copies —Not all copies are the same —Perhaps there could be discrete exceptions for certain incidental copies —For more information on this issue, see the Copyright Offices 2001 study on the Digital Millennium Copyright Act

Depending on where this falls out, this could be pretty important. Hollywood has often tried to argue that "incidental" copies should be seen as infringing, and cases like the Cablevision case have raised some issues around that.

Public Performance Right for Sound Recordings —Copyright Office is a “strong supporter” of a public performance right for sound recordings —Disparities between terrestrial radio and internet radio royalty rates are hampering new business models

This is an old battle that's been fought for years and years, and is basically a tax on broadcasters for the benefit of the RIAA. It's silly since it's obvious that the record labels directly value radio airplay, because they pay for it via payola. Arguing that radio stations should have to pay back for the "right" to promote a musician seems kind of silly.

Statutory Damages —Review registration requirements —Look at statutory damages from all angles —Statutory damages are important part of copyright act and should be retained —Need to provide guidance to courts about how statutory damages should be applied

This one could be good, since the statutory damages are so out of whack with reality. However, again, just watch as Hollywood -- with its ridiculous belief that "more punishment" will suddenly get people to buy again -- argues that these rates need to go up not down.

Other Exceptions/Limitations —The libraries and archives exception in § 108 should be updated —Update exceptions for the blind and print disabled in § 121 for the digital world —Explore new exception for higher education institutions —Personal space-shifting

These are important, but are really reflections of problems of a system that has automatic copyright applied to nearly everything and not nearly enough recognition of individual rights. The solutions here are useful, but are basically just patching up evidence of why overreaching copyright law is fundamentally broken. On that issue, however, she apparently believes that more compulsory licensing can be a solution:

Opt-Out v. Opt-In —Extended collective licensing could potentially solve many problems

Of course, this ignores just how screwed up the collective licensing process often becomes, with the focus just being on constantly raising rates, often squeezing out other business models. On top of that, the distribution challenge means a lot of wasted overhead and an all too frequent situation in which big name artists end up getting the money that should go to smaller artists, since they're harder to find and to track.

Small Claims —The Copyright Office is studying this issue —Small claims may be a way for rights holders to enforce rights when federal litigation may be too expensive —The Copyright Office could, potentially, take a lead role in administering small claims

We discussed this recently, and how it could actually have widespread impact, leading to more infringement lawsuits being filed. This needs to be watched carefully.

There's also the issue of giving herself a lot more power:

Finally, Congress should expand the role of the Copyright Office. The Office could help to resolve questions of law or fact through advisory opinions. The Office could also help to establish best practices on a number of topics, including searching for copyright owners. If an extended collective licensing scheme is devised by Congress, then the Office could provide transparency to that system.

Basically, they want to make the Copyright Office a bigger deal, like the FCC or something. This has a whole host of risks, especially when the Copyright Office has a big revolving door with the entertainment industry.

Once again, this is going to be a very big deal when the full details of these suggestions are put forth -- and we should be quite worried about a number of the ideas above that could make things significantly worse, rather than better.

This one is from a few weeks back, but it's worth catching up on. In an age when pretty much everyone has a camera in their pocket via their telephone, it's fairly crazy to try to enforce "no photography" rules -- especially in places where they don't make any sense. And, yet, for reasons that are not at all clear, United Airlines apparently has the following "no photography" rule for passengers on their airplanes: But, of course, who would actually pay attention to something like that? Tons of people take photographs on airplanes. I've done it plenty of times. Yet, on one United flight a few weeks ago, apparently a flight attendant was being extra vigilant and running around the airplane demanding everyone stop taking photographs, even falsely claiming that it violated FAA regulations (it doesn't). One of admonished passengers was a travel writer and a frequent United Airlines flyer, Matthew Klint, who blogs regularly (and positively) about the airline. He took the following photo: The reason was that this was the first time he'd been on a plane with this configuration, and he intended to blog about it, as he's done many times in the past. The flight attendant ordered him to stop, and he did so immediately. But then he decided to just let the flight attendant know why he had taken the picture, and that led to a ridiculous chain of events ending with him getting tossed off the flight.

Naturally, the FA's warning bothered me and I felt the need to explain myself. I signaled for her to come back and asked her to hang my coat. I then said this verbatim—

"I want you to understand why I was taking pictures. I hope you didn't think I was a terrorist. Here is my business card [offering her one]. I write about United Airlines on an almost-daily basis and the folks at United in Chicago are even aware of my blog."

She took my jacket but refused to take my business card saying, "No, that's okay," then saying, "I did not know that" after I explained my reason for taking pictures. I again emphasize, I took no more pictures.

Just a few minutes later, he was told that the captain was ordering him off the plane. Klint eventually was able to speak to the captain who insisted that he had disobeyed the flight attendant, when he makes it clear he had not. It became a he-said/she-said debate and the airline, of course, won.

After the story started to get some attention, United reached out to Klint and claimed they were launching an "extensive internal investigation."

Klint is, quite reasonably, pissed off about the flight attendant lying about his actions. And he feels United needs to earn back his trust (and he notes they have not offered any sort of apology). However, it seems the bigger issue is the whole "no photography" rule. It's likely this was a rule that's supposed to protect the "privacy" of fellow passengers, but it's clearly one that was being misapplied by this flight attendant, who apparently stopped quite a few people from taking such pictures.

Yet, in an age where everyone has a cameraphone, the idea of stopping photographs in a settling like that isn't just silly, it's counterproductive and can be used (as in this case) to escalate a perfectly benign situation into a complete mess.

Brian Krebs is a phenomenal online security reporter who's been deeply involved in many stories concerning underground hacking issues, from spam to credit carding and many other such issues. As someone who explores that world, he's been subject to various attacks, including regular DDoS attacks on his website (he now works with a company that helps protect against such attacks). However, things got taken to another level yesterday. First, that anti-DDoS company, Prolexic, received a forged letter, pretending to come from the FBI, asking it to stop hosting the site. Then, something much bigger happened. As Krebs was getting ready for a small dinner party at his house, he walked out his front door and discovered a bunch of police officers with guns pointed at him. He'd been "swatted," -- the term for tricking a SWAT team into raiding a house based on bogus info.

"As soon as I open the front door, I hear this guy yelling at me, behind a squad car, pointing a pistol at me saying: 'Don't move. Put your hands up,'" Krebs, who is a long-time friend and colleague, told me. "The first thing I said was: 'You've got to be kidding me.'"

In all, there were at least a dozen officers with pistols, shotguns, and assault rifles pointed at him. They had police dogs circling his house and cruisers had sealed off a nearby street. Krebs, who was dressed in just gym shorts and a T-shirt, complied. Wisely.

"Two different guys were barking orders at me," he continued. "I finally said: 'Which way should I go?'" One officer told Krebs to lie on the ground, but before he could comply the other cop ordered Krebs to walk backwards. Eventually, "they put the cuffs on me and took me up the street. I was freezing the whole time."

Someone had made a call to the police, pretending to be Krebs, and claiming that "he was hiding in a closet after Russian thieves had broken into his home and shot his wife." And the police sent the SWAT team.

Why? Krebs suspects it was a response to a an article he had just posted, which highlighted a Russian website that was used to get easy and cheap access to credit reports (one interesting tidbit, is that he suggests that people are abusing the federally mandated free AnnualCreditReport.com site, which was supposed to reduce identify fraud, but may actually be enabling much more of it). Krebs figures that the people behind that site weren't too happy about the exposure, and tried to send him a message.

Of course, if law enforcement officials weren't so eager to rush in with a SWAT team, such issues might have been avoided as well. In fact, Krebs notes that he warned his local police agency of the possibility of such a thing happening about six months ago, but apparently no one bothered to check on that bit of info until later.

After about five minutes in custody, Krebs explained that he was the victim of a monstrous crime known as swatting. One of the officers asked if Krebs was the person who had filed a report a few months earlier. When Krebs replied yes, the officers did a quick search of his home. With preparations for a dinner party clearly on display, it quickly became apparent that Krebs' home was not a crime scene and that the call was part of a fiendish plot. An officer told him later that they had tried calling him before he opened his front door but no one had answered the phone.

As Krebs notes, these are situations where it makes little sense for local law enforcement to rush into these things where they may not understand what's going on.

Often local police are left to investigate, even when the perpetrators may be half a world away. He wants that to change. "Your local police department, the ones that are responding to these distress calls, they don't have the bandwidth," he said. "This is an area where federal law enforcement needs to be coordinating investigations. I'd like to see some sort of recognition or statement from federal law enforcement that this is something they're actively investigating."

Of course, I'm not sure how well that would have worked in this case, since the caller suggested it was a local crime issue. Still, hopefully Krebs' situation raises some questions about the eagerness to send in the SWAT team, though given just how common bogus SWAT team raids have become, it seems doubtful that yet another example of a bogus raid will lead to any real change.

A year and a half ago, two documentary filmmakers, Dave Kellett & Fred Schroeder, used Kickstarter to raise $109,025 for their film, Stripped, all about the comics industry -- covering both old time newspaper comic artists and the new generation of web comic artists (and the ongoing transition between the past and the future). Some were a bit surprised that the two popped back up on Kickstarter recently seeking to raise (at least) another $33,560, despite the original campaign and the fact that they say the movie is done:

So here's the great news: The movie is essentially *done*. It's filmed, edited, scored, and test-screened. Even the final sound mix, color correction, and closed captioning have already been budgeted for, thanks to the support of comics creators and fans.

In fact, the film looks really quite awesome. The bits with the "old guard," bitching about how, without newspapers, they can't make money, juxtaposed with the new guard (including the awesome quote: "get with the times, old man!") talking about how much opportunity there is, really fit well with the sort of business model discussions we have around here all the time. So, if the film is all ready, why go back to the well? Copyright law, apparently. They note that many of the artists and copyright holders were extremely cool and signed off on using their works and clips and whatnot for free. But not all:

We're using over 500 separate, copyrighted works in the film (400+ images, dozens of new and existing songs, and dozens of historical clips from TV, film, and newsreels). In all cases, we're seeking the global right to use footage/music/images in the documentary, in perpetuity, in all current and future mediums the film might show in. In 98% of these cases, the copyright holders have been amazingly generous, and given permission without fees, and with huge kindness.

But, then there's the 2% who are playing Scrooge, and saying "pay me, pay me, pay me." Total bill? $51,805 to get all the clips they want. They set a lower $33,560 tier to get what they consider the "essential" clips into the film, but are hoping for all of the clips to be licensed. They even made a handy dandy chart showing exactly how much everyone wanted: But, what about fair use? Well, a few years back, I wrote about a panel discussion I attended with some documentary filmmakers, entirely about fair use, in which they more or less said that you can rely on fair use if you want, but you're basically screwed if you do, because no partners will touch the film. You can't get E&O (errors & omissions) insurance without a crazy long list of every single clip and the details of it being licensed, and without E&O insurance, no one will distribute or show the film. Basically, fair use is useless for documentary filmmakers in many cases. Yes, folks like the Center for Social Media at American University have put together a Documentary Filmmakers Statement of Best Practices in Fair Use, hoping that this will calm the fears of insurance providers and third parties, so long as the filmmakers stick to the listed "best practices," but it's still a scary world out there.

In this case, the filmmakers go through a lengthy and detailed explanation for why they don't want to rely on fair use, and most of it details the basic chilling effects we're used to: you can't be sure until a court decides, a trial is lengthy and expensive (and a distraction from everything else), if they lose, the expense from statutory damages will be massive, etc. You can read the whole statement, but here's an abbreviated version, highlighting the key points that specifically have to do with copyright and fair use:

Ultimately, it comes down to three reasons: Potential lawsuits, how those potential lawsuits limit who sees the film, and cost.... We're hoping to distribute this film globally, not just in the U.S. So even if U.S. Fair Use would allow usage in the States, we'd still need to get clearance from the copyright holders elsewhere, country by country, in places where the Fair Use/Fair Lending laws differ.... we'd need to de-encrypt it from a DVD…which is illegal under the DMCA....

There are Fair Use lawsuits still working their way through the courts, having started in 2006. So at some point you have to ask yourself: Do you want to live in court? In the chance we end up being legally in the wrong about a claim of "Fair Usage" for this or that bit of footage, the statutory damages on copyright infringement could be pretty devastating to a little indie film like this. Even the legal fees to defend one court case (from among 500 separate pieces of copyrighted work, remember) could be a huge financial hit.

Even if we were absolutely sure of our Fair Use rights, absolutely sure of our ability to win in court, and absolutely sure that we'd be willing to devote a few years and tens of thousands toward defending that in court…we'd still have to get other stake-holders to accept that same liability. Distributors, networks, broadcasters, "Errors & Omissions Insurance" underwriters -- they'd all need to be willing to take on that same risk that our Fair Use was legally sound. That could be a deal-killer: You could end up with a completed film that wouldn't be shown or broadcast anywhere.

But the biggest one, for us, is... [we] want to be artists, not litigants. We want to make a film that celebrates the art of cartooning, not fight off a Fair Use lawsuit in court.

That said, they do name two other, non-copyright (directly) reasons for this, with the key one being that they want to ask for permission out of respect for the artists. That's a perfectly legitimate argument, but given that so many others donated the license for free, it still seems a little bit ridiculous for others to hold out, even if it is their legal right (fair use, notwithstanding). The other issue is that some of the works just aren't available or aren't available in high definition, without going to someone's private collection. And, obviously, they're not going to share that content without granting permission. That's a bit more understandable, but in the end, fair use is supposed to be about making these kinds of works available, and it's shame that, instead, it's just about taking money away from the artists who created this awesome looking film, and handing it over to (mostly) giant corporations, even though the film is mostly celebrating and promoting those other works.

For a long time now, the idea of an overhaul of copyright law in the US has mostly been seen as a pipedream. However, it appears that the Register of Copyright, Maria Pallante, may actually be angling for a major bit of copyright reform. Coming up next Wednesday, she's going to be testifying before the House Judiciary Committee on her supposed "Call for Updates to U.S. Copyright Law." Apparently, on March 4th, she gave a talk at Columbia University which has remained amazingly under the radar until now, in which she proposed a long list of possible copyright reforms, which are likely to headline the hearings next week. It's fairly impressive, given how much attention copyright law has been getting lately, that she could present a surprising call for massive changes to the law, and not have a single person report on it immediately after the event ended. However, that is the case.

Having spoken to a few people who were either there or who spoke to people who were there, it appears that Pallante is proposing changes touching on nearly every part of copyright law, and as you might expect, it's a very mixed bag, though I'll withhold final judgment until we see the full details. However, the big one would be a change in copyright term length, to effectively "roll back" the Sonny Bono Copyright Term Extension Act with one caveat. That is, she's proposing switching us back to a life plus fifty year copyright, but with the ability to renew for that additional 20 years for the tiny percentage of works that makes sense for. While, in the grand scheme of things, life + 50 is still ridiculously too long for copyright, this would be the first major reduction in copyright terms in the history of the US. That's notable.

There are a number of other issues that she apparently is suggesting, including expanding collective licensing, "reforming" the DMCA exemptions process that has generated so much controversy lately over phone unlocking, a change to the DMCA's safe harbors, some sort of effort around dealing with the orphan works issue (something the Copyright Office has been trying for for a while), and a "review" of statutory damages. This could get very interesting -- though it's unclear if it will be interesting in a good way or bad way. Once you open up the law, you have to realize that things could go in either direction. At the very least, a lot of lobbyists on all sides of copyright are about to be very busy for quite some time.

As we get more details, we'll be writing more about this, I'm sure. And, of course, we'll do our best to cover the hearing on Wednesday.

The nationwide Six Strikes Copyright Alert System continues to roll out with many of the details still shrouded in secrecy. The few aspects of the system that can be guaranteed are negative: open WiFi could become a thing of the past and non-infringers are likely to be swept up in the CAS net.

Then there's the problematic system itself, one that places the burden of proof entirely on the end user. In addition, the punishment (in some cases, the loss of internet service) seems to greatly outweigh the crime. As Andrew Bridges points out in his interview with ReadWrite, the ridiculousness of this punishment becomes apparent when you move the discussion out of the copyright arena.

Say you send out one of those mailers for a subscription to Time Magazine. And you check the box that says bill me later. Let's say that they start sending you Time Magazine, and after 2 or 3 issues they send you the bill, and you never pay. But in the meantime you have 6 or 8 issues before they cut you off for not paying. My proposal is let's adopt Six Strikes and knock somebody off the postal system. You don't pay for it, you don't get to use the postal service any longer. Or let's say somebody blows through a toll plaza 6 times, does that mean you don't ever use the highways anymore?

Now, some might argue that this is no different than, say, revoking a driver's license after certain number of DUIs. I'd argue it's closer to punishing a boiler-room scammer with loss of telephone privileges. It's one thing to limit one specific activity (driving/driving drunk) as a deterrent. (After all, the person with multiple DUIs can still walk places, use public transportation and drink to his heart's content.) It's quite another to block off an entire form of communication simply because the infringement was committed via an internet connection.

This urge to sever infringers from their internet connections (or slow the connection to nearly-unusable speeds) stems from the copyright industries' paranoia about all things internet-related. One needs look no further than the MPAA's knee jerk reaction to Google's plan to provide 1gb up/down internet to Kansas City. From its limited viewpoint, the only thing anyone does with a fast internet connection is commit high speed infringement.

This paranoia goes hand-in-hand with the industries' general panic over every new technology that threatens their control over distribution.

The function of copyright law as it has evolved is indeed to disrupt innovation and to disrupt new technologies that threaten the interest of copyright holders. Frankly all copyright legislation has been in reaction to new technologies that are developed. And copyright law has sought as its purpose, interfering with, limiting, pampering and indeed disrupting innovation of technology, business plans, even disruption of consumer choice.

Bridges refers to the Six Strikes plan as "Soft SOPA." Even though SOPA itself was killed off, certain aspects still remain and are being incorporated into other legislation and "voluntary" initiatives like the Copyright Alert System.

Even though SOPA failed, SOPA is now in some respects the law of the land. Because we now have Soft SOPA. We have the government putting pressure on advertising networks and putting pressure on payment processors, unofficially, to take the same measures that SOPA was going to require them to [do]. But now it's a sort of 'if you know what's good for you, could you pretty please, wink-wink' method.

There are payment processors notifying companies that they are no longer willing to process payments for them. It's happening. It happened with three of my clients... [W]e have advertisers blacklisting certain sites, and telling sites. 'We're not going to place advertising on your site because people tell us you're not a good site.' So that's happening. And it's being done as "Oh it's just a private decision."

In the long run, it appears the RIAA, MPAA and various others have still managed to push their agenda through. The only difference is the lack of an official government mandate. Instead, we're seeing something a bit shadier -- SOPA's directives presented as "cooperation" between the copyright industry and private companies.

This is still business as usual for the industry and their support system within the US government. As was pointed out here (both before and after SOPA's defeat), the legal authority to shut down foreign sites the RIAA/MPAA sought when pushing this bill seemed redundant. ICE and the DOJ were already shuttering foreign sites without the aid of this supposedly essential anti-piracy legislation.

What's happening now is a continuation of that process. The content industries already have the DOJ/ICE working for them. Now, they're hoping that a blend of "voluntary" alert systems and heavy-handed "suggestions" will finish the job. And whoever gets mangled in the machinery is simply the price of "doing business." After all, it won't affect anyone but the sites and users knocked offline.

We've written a few times about the sad case of Veoh. Veoh was a YouTube-like site, funded by Hollywood insiders like Michael Eisner, but who got sued by Universal Music Group, claiming copyright infringement (using more or less the same theories used by Viacom against YouTube). Technically, Veoh sued first (filing for declaratory judgment after receiving a threat letter from UMG, but UMG quickly followed with its own lawsuit). UMG played dirty, not just suing the company but directly suing its investors as well. This was a pure intimidation technique, designed to scare major investors into either pulling investment or ordering the company to change course, even if what they were doing was legal. While the court dismissed the charges against the investors (and scolded UMG in the process), the intimidation might have worked. In the middle of all of this, Veoh shut down, because it ran out of money, mainly due to the lawsuit. It sold off its assets to another party, and somehow scraped together a little money to keep the lawsuit, and just the lawsuit, going.

Since then, there have been a series of rulings that have repeatedly found Veoh to be legal and protected under the DMCA's safe harbor. The district court found in Veoh's favor, as did the 9th Circuit appeals court. Yesterday, the appeals court ruled again on the issue, with a superseding opinion that, once again, says that Veoh was legal. Even though it's still dead. The ruling not only reiterates the importance of DMCA's safe harbor protections for user-generated sites like Veoh, but also shows how that still applies even given the 2nd Circuit's slightly weaker view of the DMCA safe harbors.

The court goes through a nicely detailed explanation for why Universal Music's interpretation of the DMCA doesn't make any sense at all and would not only create internal conflict within the law, but also make the safe harbors effectively meaningless. Specifically, Universal Music tries, ridiculously, to argue that DMCA safe harbors aren't supposed to apply to any service that makes files accessible to the public. As the court points out, if that were the case, the law would be silly, since copyright holders would never learn about that infringement anyway, since the works wouldn't be available for them to find. The court points out it's ridiculous to think that DMCA safe harbors were only meant to apply to backup services.

We do not find persuasive UMG’s effort to reconcile the internal contradictions its reading of the statute creates by positing that Congress must have meant § 512(c) to protect only “web hosting” services. Web hosts “host” websites on their servers, thereby “mak[ing] storage resources available to website operators.” The thrust of UMG’s argument seems to be that web hosts do not undertake the sorts of accessibility-facilitating functions that Veoh does, and thus the services they perform “fit within the ordinary meaning of ‘storage,’” and thereby “harmoniz[e]” with the notice and takedown procedures. UMG’s theory fails to account for the reality that web hosts, like Veoh, also store user-submitted materials in order to make those materials accessible to other Internet users. The reason one has a website is so that others may view it. As amici note, these access activities define web hosting – if the web host only stored information for a single user, it would be more aptly described as an online back-up service.

The court also rejects a theory -- popular among some of our maximalist commenters -- that the DMCA was only intended for purely "web hosting" companies, rather than being broadly applied across various online services such as user-generated service providers. As the court noted, if Congress wanted to limit the safe harbors in that manner, it would have said so: "Had Congress intended to include such a limitation, it would have said so expressly and unambiguously."

The next damaging part for Universal Music: Veoh was really good at taking down videos when it received DMCA notices. UMG tried to argue that Veoh had knowledge of infringing works on its site that it didn't remove. This argument is the crux of the YouTube/Viacom case as well: is "actual knowledge" from DMCA notices, or what kind of knowledge creates "red flag" awareness. The DMCA can be read in self-contradictory ways at points. For example, it says that a provider only has to takedown content if it receives a DMCA notice that follows somewhat strict procedures. But, then, also talks about if there's "red flag" awareness. Take both literally, and you could, for example, wonder what happens if someone sends an improperly structured DMCA notice (say, missing certain elements), but indicates infringing works, nonetheless. Is that "red flag" knowledge? Here, as in the YouTube case, though, UMG relies on a much broader definition of red flag knowledge, in which it kind does a "but they must have known!" sort of thing. It's basic argument: there was music on Veoh, and Veoh had to know that was infringing. The court is not buying it. First of all, just because there's music, it doesn't mean it's infringing.

As an initial matter, contrary to UMG’s contentions, there are many music videos that could in fact legally appear on Veoh. “Among the types of videos subject to copyright protection but lawfully available on Veoh’s system were videos with music created by users and videos that Veoh provided pursuant to arrangements it reached with major copyright holders, such as SonyBMG.” Further, Congress’ express intention that the DMCA “facilitate making available quickly and conveniently via the Internet . . . movies, music, software, and literary works” – precisely the service Veoh provides – makes us skeptical that UMG’s narrow interpretation of § 512(c) is plausible. S. Rep. No. 105-190, at 8. Finally, if merely hosting material that falls within a category of content capable of copyright protection, with the general knowledge that one’s services could be used to share unauthorized copies of copyrighted material, was sufficient to impute knowledge to service providers, the § 512(c) safe harbor would be rendered a dead letter: § 512(c) applies only to claims of copyright infringement, yet the fact that a service provider’s website could contain copyrightable material would remove the service provider from § 512(c) eligibility.

Later on, the court makes a key point that we've reiterated over and over again -- every time copyright holders and maximalists insist that service providers need to become copyright cops -- that the service can't become copyright cops because they have no idea if stuff is actually authorized or not:

Copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.

That message is something that the various lawyers representing MPAA and RIAA affiliated companies should be forced to write on a blackboard over and over again until the point is driven home.

Of course, in the YouTube case, with the original district court ruling, there were similarly strong statements, but the 2nd circuit walked it back somewhat, suggesting that a different standard need apply to "red flag" knowledge. Here the court points out that, even if that's true, Universal Music would need to show a lot more to prove any red flag knowledge.

Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge. See Viacom Int’l v. YouTube.... Even viewing the evidence in the light most favorable to UMG as we must here, however, we agree with the district court there is no evidence that Veoh acted in such a manner. Rather, the evidence demonstrates that Veoh promptly removed infringing material when it became aware of specific instances of infringement. Although the parties agree, in retrospect, that at times there was infringing material available on Veoh’s services, the DMCA recognizes that service providers who do not locate and remove infringing materials they do not specifically know of should not suffer the loss of safe harbor protection.

The ruling goes on in this nature. It's definitely a good ruling that lays out, yet again, why the DMCA safe harbors protect internet companies, and blasts holes in the silly theories of some of the big legacy players that have tried to wipe out those safe harbors. It does send one small issue back to the lower court -- an exploration of whether or not Veoh is due certain fees (excluding attorneys fees). This is more of a procedural issue than anything else.

So, once again, Veoh has proven that internet services like it are protected by the DMCA from being blamed for users infringing. And yet, the fact that it had to effectively shut down and just sell off its assets, is a reminder of just how much the big copyright players can stifle and kill off innovative services via copyright law, even when they have no case.

In what seems like a pretty cut and dry case, Reuters editor Matthew Keys has been indicted for letting some hackers into the content management system of his former employer, Tribune, after he was fired. Barring a case of mistaken identity (and if that defence were raised, things would get interesting) it doesn't look good for Keys, as the indictment includes some damning IRC chat logs:

According to a federal indictment first obtained by the Huffington Post, Keys used a chat site to pass information to Anonymous. Using the name AESCracked, Keys handed over the login credentials and told hackers to "go fuck some shit up", the indictment says.

The hacker accessed at least one Los Angeles Times story and altered it, the charges say.

On the one hand, when compared what happened with Aaron Swartz, this is a step in the right direction. We're not talking about someone with positive intentions who walked the line between hacking and innovation, but someone who acted with obvious malice. But on the other hand, this highlights the big problem with federal hacking laws. The damage amounted to little more than inconvenience for a system administrator, making this essentially a case of small-scale vandalism—but because it involves computers, it's elevated to a federal crime. This really makes no sense. Computers and the internet are present in every part of life today, and computer crime can happen at every scale. In this case, it was the sort of reckless but small act of spite that would result in a much less serious punishment if it didn't happen online, and if it didn't allow the government to place Anonymous in the villain role of another story.

The case against Keys looks strong, and I'm guessing it will end with some sort of deal for a lesser punishment—possibly in exchange for information about other hackers. The real penalty will be the damage done to his career by this breach of trust (which further highlights the pointlessness of trying to put him in jail), but the biggest takeaway is that federal computer crime laws are in serious need of reform. Elevating the severity of simple crimes because they involve what is now one of the most common tools in the world is a senseless imbalance of justice, and makes it much harder to identify and combat serious crime online.

The UK is famous for its tabloid newspapers and their particular brand of journalism. Here's a fine example from the Daily Express, under the headline "EU attempts to brainwash children with 'sinister Soviet-style propaganda'":

European Parliament chiefs are considering setting up a site to target young children with a "playful" presentation of their working methods and democratic principles.

The Daily Express story is mainly built around a few quotations from the politician Paul Nuttall. He belongs to the UK Independence Party, whose policy in a nutshell is as follows:

the rescue of the British people depends on withdrawal from the EU to regain our self-governing democracy

So it's no surprise that Nuttall has a slightly jaundiced view of anything the European Parliament does. Here are a few of of his comments in the article:

this exercise in funding kiddie propaganda really is cash for EU trash.

...

Our children need to be protected from this type of political propaganda because they are vulnerable and easily manipulated.

…

Political propaganda on vulnerable kids is a form of child abuse.

What's fascinating here is his choice of words: "kiddie propaganda", "vulnerable and easily manipulated", "a form of child abuse". Whether consciously or not, clear parallels are being drawn here with pornography and even child pornography ("kiddie propaganda") through the use of phrases that are familiar from those fields.

It's also striking that the image chosen by the Daily Express to illustrate the story is the classic perplexed child staring at a screen whose contents we cannot see -- the implication being that there is something bad there, but that we are powerless to protect the innocence of the young viewer. That, too, is something of a cliché in articles about pornography, and it's disconcerting to see it being wheeled out here for an article about promoting democratic principles.

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Over the last few years, Techdirt has been reporting on a steady stream of victories for open access. Along the way publishers have tried various counter-attacks, which all proved dismal failures. But there are signs that they have changed tack, and come up with a more subtle -- and increasingly successful -- approach.

Here, for example, is a fascinating analysis by Mike Taylor of what he calls "The progressive erosion of the RCUK open access policy". The RCUK is Research Councils UK, the umbrella group for the UK's seven Research Councils that hand out grants to academics. A year ago, RCUK released its draft policy on open access. As Taylor says:

it was excellent. It did not accept non-commercial clauses (on either Gold or Green OA), and allowed Green-OA embargoes of no more that six months (with a twelve-month exception for two humanities councils). "It is anticipated that the revised policy will be adopted in summer 2012"

A crucial issue here is the distinction between "Gold" open access, which takes place through journals, and "Green" open access, which uses online repositories. Here's how Wikipedia defines the two terms:

Green OA Self Archiving Authors publish in any journal and then self-archive a version of the article for free public use in their institutional repository, in a central repository (such as PubMed Central), or on some other OA website. What is deposited is the peer-reviewed postprint -- either the author's refereed, revised final draft or the publisher's version of record. Green OA journal publishers endorse immediate OA self-archiving by their authors.

and

Gold OA Publishing Authors publish in an open access journal that provides immediate OA to all of its articles on the publisher's website. (Hybrid open access journals provide Gold OA only for those individual articles for which their authors (or their author's institution or funder) pay an OA publishing fee.)

As Taylor noted above, the original RCUK policy did not accept non-commercial clauses for either kind, limited Green OA embargoes to six months (Gold OA would have no embargoes), and would start in summer 2012. Here's what happened afterwards:

July 2012: actual policy released. Weakened to allow publishers to impose non-commercial clauses on Green OA. (They didn't tell anyone they'd made this change, as far as I ever saw. I discovered it for myself.) "The policy applies to all research papers whose work was funded by RCUK being submitted for publication from 1 April 2013"

November 2012: RCUK announce that they will only fund APCs ["author processing charges" -- fees paid by authors' academic institutions so that articles can be released free of charge] for 45% of articles as Gold OA.

January 2013: RCUK announce that they "will not enforce" embargo periods.

February 2013: In response to House of Lords enquiry, RCUK clarifies "that it will gradually phase in its open access policy over a five year implementation phase". BIS [UK Government's Department for Business, Innovation & Skills] and RCUK both endorse embargo-period "decision tree" that allows embargoes of up to two years.

As Taylor puts it bluntly:

At every single step of the way, the RCUK policy has been weakened. From being the best and most progressive in the world, it's now considerably weaker than policies already in action elsewhere in the world, and hardly represents an increment on their 2006 policy.

And he asks:

Can anyone doubt that the nobbling of a truly progressive policy was the result of lobbying by a truly regressive publishing industry? It's been a tragedy to watch this policy erode away from something dramatic to almost nothing. Once more, it's publishers versus everyone else.

This seems to be the publishers' new strategy against open access: not to fight it directly, but to use constant lobbying to inflict a kind of death by a thousand cuts -- slicing off a provision here, lengthening an embargo there, pushing implementation further and further into the future -- until the final result is almost no different from the status quo.

Disturbingly, there are signs this has may be happening in the US, too. As Michael Eisen points out on his blog, the recent statement from the White House on public access to publicly-funded research has one retrogressive element that may presage worse to come:

When the NIH policy was announced, people like me who believe that publicly funded works should be immediately freely available looked at the 12 month embargo period as a kind of opening bid -- a concession to publishers that was necessary to get the policy off the ground, but which would ultimately disappear.

But now the White House has taken the 12 months embargo period and reified it. Year long delays are no longer an experiment by one agency. They are, in effect, the law of the land.

Moreover:

Clearly the publishers got what they wanted out of the White House. And do you really think it’s going to stop there? They have established their ability to corrupt policy making, and will continue to exploit it. I predict that as these policies are implemented in different agencies, that they will be heavily tilted towards what the publishers want. There will be no central archives – just links out to publishers websites. And there will be pressure to increase -- not decrease -- embargo periods.

Just as they have already done in the UK.

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