We've written about Flattr a bunch of times over the past few years, as we find it to be a really interesting experiment in both micropayments and in supporting content creators. If you're unfamiliar with the concept (which was created, in part, by Peter Sunde from The Pirate Bay), each user of Flattr puts some amount of money (total is up to the user) into its account each month, and they can then click on "Flattr" links around the internet. At the end of each month, Flattr tallies up the total amount of content you've "flattr'd" and divides your monthly allotment by that amount. Thus, if you want to give creators $10/month, and then flattr 10 pieces of content, each creator will get $1 (actually, $0.90 after Flattr's 10% cut). If you flattr 20 pieces of content, each one gets $0.50 (er... $0.45). The thing we liked about this is that it gets you past a big part of the mental transaction costs of micropayments: that is, if you have to think about "is this piece of content worth $0.50 or $0.10?" you're already going to lose a bunch of potential customers who don't even want to bother with thinking about it. But, with Flattr, they don't have to think about it for each piece of content. Once they're convinced to take part and fund their account each month, it makes no difference to them how many piece of content they flattr.

As some of you know, we've had a Flattr widget on every one of our posts for the past couple of years. It brings in a small amount of money each month -- maybe between $50 and $100 or so. Of course, part of the issue is that there are some usage hurdles. The service has a small but dedicated user base, but it seemed to stagnate over the years. On top of that, there was a bit of a chicken and egg problem, in that the process of finding content that is Flattr-enabled is still somewhat haphazard -- and then Flattr users need to remember to flattr that content. However, that's now getting much easier as Flattr has announced integration with a number of different services, including (most importantly) Twitter, Instagram and Soundcloud (also: Vimeo, Flickr, github, 500px and app.net). So, now, if you connect your accounts, you can give money simply by favoriting tweets.

And, yes, that means if you want to toss a bit of change our way, you can now do so with a Flattr account by favoriting the tweets on our official Twitter account or my personal Twitter feed as well -- both of which are connected to the Techdirt Flattr account.

Of course, the other hope in all of this is that it will help lead to more people using Flattr in the first place. That's because Flattr users who favorite a tweet of someone who is not using Flattr are still designating those flattrs for that account. That doesn't mean that Flattr is holding money for those accounts (since that could add up!), but simply accumulating flattrs. Thus, if I "favorite" a Twitter account that doesn't use Flattr once a month, and that person finally signs up for Flattr a year later, it would count all 12 of my favorites as if they came that month (thus giving users on other services incentives to sign up sooner rather than later). Flattr is working on automatically notifying people who can "claim" money, but initially they're hoping the community will do that job for them, with an "unclaimed" page that highlights those with the most Flattrs on the various connected networks. Someone call Randall Munroe and let him know he has a whole bunch of unclaimed Flatttrs for the xkcd Twitter account. Ditto Wikipedia and the Torproject. Similarly, someone might want to alert Linus that his Github account is leading the way in unclaimed Github flattrs as well.

There are, also, some obvious social networks that are missing -- though I've been told that Facebook, YouTube and Tumblr are obviously key among them. It sounds like Google+ may be a bit further down the list. All in all, we still love the idea of Flattr, and think that this is a good step as it evolves its business. It still requires getting people to sign up to pay -- and that, of course, will always be a big hurdle -- but making it easier to do something once you have joined seems like a very good thing.

The National Science Foundation, which funds a lot of basic research at American colleges and universities, is facing a budget cut of $283 million this year, eliminating (up to) ~1,000 research grants. It's a shame because over the years many NSF-funded projects have resulted in discoveries that have turned into commercial products with significant benefits to society. Unfortunately, for people outside the scientific community, it's easy to overlook these impacts when trying to decide where to cut spending. Here are a few examples of why basic science deserves some respect.

• Sad fact: Funding for basic science research makes up less than 1% of the federal budget. Even sadder is that cutting the small amount the government spends on basic science will have little impact on short-term fiscal goals, but its negative effects on the economy will be felt for decades to come, potentially costing the U.S. billions of dollars in missed future opportunities. [url]
• Lasers are an example of how a discovery in basic science can eventually lead to a revolutionary invention. The first laser was built in the 1950s, but practical applications for lasers didn't appear until decades later. Today, lasers are a multi-billion dollar industry and are key to many technologies used in manufacturing, communications, medicine, entertainment, and scientific research. [url]
• Cutting funding for basic science research will impact young investigators the most. Actually, brand new tenure-track professors are somewhat insulated because there's always some money set aside for them. It's the just tenured professors that will feel it the most, as they try to compete for grants against the entire population, which includes Nobel laureates, National Academicians, and more well-established researchers. [url]

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

It's been quite a day in terms of news out of DC. We've been talking about copyright/first sale, cybersecurity bills, the CFAA... and now Senator Patrick Leahy, for what feels like the 2,394th time, has introduced a plan to reform ECPA. Like the CFAA, ECPA is an extremely troubling and outdated piece of legislation where Congress tried to deal with "those computer things" back in the 1980s in a manner that just doesn't make any sense today. Mainly it has opened up massive loopholes for the US government to access your data with little to no oversight (for example, the law considers messages on a server for over 180 days to be "abandoned" and thus fair game for law enforcement, as it never considered the idea of cloud storage). Senator Leahy would like to update the law to protect our privacy, such that law enforcement would actually be required to get a warrant.

If all of this sounds familiar, you wouldn't be wrong. We've been discussing it forever. Leahy keeps introducing bills and they never seem to turn into law. Law enforcement has been his main antagonist on this, though the DOJ (somewhat surprisingly) appeared to concede today that ECPA needs significant reform, even calling out the 180 day issue explicitly in testimony before the Judiciary Committee:

Many have noted—and we agree—that some of the lines drawn by the SCA that may have made sense in the past have failed to keep up with the development of technology, and the ways in which individuals and companies use, and increasingly rely on, electronic and stored communications. We agree, for example, that there is no principled basis to treat email less than 180 days old differently than email more than 180 days old. Similarly, it makes sense that the statute not accord lesser protection to opened emails than it gives to emails that are unopened.

That said, the DOJ is likely to push back on significant parts of any ECPA reform effort, to make sure it still has the ability to trawl through as much data as possible. Much of the testimony seems to warn of a parade of horribles that could occur if (*gasp*!) it has to get warrants for everything.

A bunch of groups are teaming up this week to call for a week of action against CISPA just as Congress is gearing up, yet again, to push through this cybersecurity bill based on a lot of FUD, with little to back it up. To be clear, there are a lot of challenges around online (can we dump the stupid "cyber" prefix?) security out there, and it's clear that there is plenty of malicious and government-sponsored hacking and attacks. But we need to put this all in perspective. First off, there is already tremendous incentive to combat these attacks, and there are existing methods to do so. Second, no one has given a reasonable response to explain how something like CISPA will do anything at all to help prevent such attacks in the future. Third, while these attacks may be economically damaging, there is little evidence of them creating real physical harm to date. That's not to say it's not possible in the future, but stories of airplanes falling from the sky are quite exaggerated. Fourth, and most importantly, no one has explained why we all need to sacrifice our own privacy for these vague and undefined benefits.

A bunch of groups are fighting this, and now is the time to take part. EFF and Fight for the Future have put together a simple page to help you take action. As they point out there are three key objectionable parts to CISPA:

• Eviscerating existing privacy laws by giving overly broad legal immunity to companies who share users' private information, including the content of communications, with the government.
• Authorizing companies to disclose users' data directly to the NSA, a military agency that operates secretly and without public accountability.
• Broad definitions that allow users' sensitive personal information to be used for a range of purposes, including for "national security," not just computer and network security.

None of these are even remotely necessary to allow for effectively combating online attacks, but all certainly would be quite handy in helping the government snoop on the activities of citizens (and non-citizens) without much oversight. Considering how often we've seen other laws passed in a flurry of FUD around other "threats" later turn out to be abused by government officials for the sake of snooping, rather than any legitimate reason, we should be very concerned about these efforts here.

One of the reasons that we're so concerned about the weak proposals introduced in Congress concerning mobile phone unlocking is that they all seek to add yet another layer of duct tape to outdated copyright law. As we've pointed out for years, every time technology bumps up against copyright, rather than fix the problem, Congress tries to rush in with some duct tape narrowly focused on just that issue. It creates a huge mess of a law and does little to nothing to fix the actual problem.

Kyle Wiens has an excellent opinion piece over at Wired that points out that the focus shouldn't be on unlocking mobile phones, but on our rights to unlock everything we own. This is what ownership is supposed to be about -- and it's that right of ownership that copyright maximalists, and companies abusing copyright law, have been seeking to strip from the public over and over again.

We really don’t own our stuff anymore (at least not fully); the manufacturers do. Because modifying modern objects requires access to information: code, service manuals, error codes, and diagnostic tools. Modern cars are part horsepower, part high-powered computer. Microwave ovens are a combination of plastic and microcode. Silicon permeates and powers almost everything we own.

This is a property rights issue, and current copyright law gets it backwards, turning regular people — like students, researchers, and small business owners — into criminals. Fortune 500 telecom manufacturer Avaya, for example, is known for suing service companies, accusing them of violating copyright for simply using a password to log in to their phone systems. That’s right: typing in a password is considered “reproducing copyrighted material.”

This is a big and important issue, and the fight over mobile phone unlocking is just one symptom of a broken system that is in desperate need of fixing. And yet, as we noted, this issue isn't even touched in the Copyright Office's call for copyright reform.

As Wiens points out, this is not what copyright law is supposed to to.

It hasn’t always been that way. Copyright laws were originally designed to protect creativity and promote innovation. But now, they are doing exactly the opposite: They’re being used to keep independent shops from fixing new cars. They’re making it almost impossible for farmers to maintain their equipment. And, as we’ve seen in the past few weeks, they’re preventing regular people from unlocking their own cellphones.

If we really believe in true property rights, there should never be a question about the legality of unlocking a product you legally purchased.

We didn't think that the Supreme Court would grant cert to hear the appeal in Jammie Thomas' case and now it's been confirmed. As we've said for a while, neither Jammie Thomas's case nor Joel Tenenbaum's case,were ideal cases to take to trial, and both people mounted questionable defenses, which massively harmed their credibility. There are serious issues that could have and should have been covered in these kinds of cases, including the Constitutionality of certain levels of statutory damages. However, the way they went about this case made sure that it was doomed from the start. And, unfortunately, now it's just more bad precedent out there.

An interesting bit of information was uncovered and pointed out by Baldaur Regis and an AC in the comments of Mike's post detailing the not-so-crafty work of an industry shill who posted three comments as three different people from the same IP address.

The original Wall Street Journal article quoted Kathy Wolfe, a filmmaker and head of Wolfe Video, who said she spent a surprising amount of money battling piracy.

Last year, Kathy Wolfe, who owns a small independent U.S. film-distribution company, Wolfe Video, found more than 903,000 links to unauthorized versions of her films, which she sells around the world for $3.99 per download. She estimates that she lost over $3 million in revenue in 2012 as a result of stolen content from her top 15 titles. On top of that, she spends over $30,000 a year—about half her profit—just to send out takedown notices for her titles.

$30,000 is a lot to spend fighting anything, much less something as nebulous as piracy. The fact that it was "half" of her profits was even more surprising, leading this AC to point out an easy way she could double her money.

Wait. You mean she could double her profit by just doing *nothing* ? That's actually a riot.

While it isn't quite as simple as that, there is some truth to that assertion. This piqued my curiosity. If someone was spending half their profits having links taken down, they must have seen something that justified this expenditure. A business doesn't just throw half their profits in a hole unless that same hole is throwing money back. I assumed there must be a corresponding sales increase, and a noticeable one at that. So I emailed Kathy Wolfe to get some details on her anti-piracy efforts.

I'm Tim Cushing and I write for techdirt.com. I was wondering if you might be able to answer a couple of questions about your ongoing fight against piracy. What really got my attention was the fact that you're spending nearly $30,000/yr. sending takedown notices. (via WSJ and Digital Music News)

While I understand your interest in preventing your films from being distributed in this fashion, I'm having trouble believing that this expense is generating a worthwhile return on investment. I was wondering if you could shed some light on that area.

Are you seeing a positive return in terms of sales increases?

Is it enough of an increase to offset the $30,000/yr. in expenses?

If it ISN'T generating the additional sales needed to justify the expense, what is the rationale for continuing this effort?

Thanks in advance for any information you can provide. I'm looking to put together an article addressing the expense of your anti-piracy efforts, so if there's anything you'd rather withhold (exact sales figures, etc.), I can understand. What I'd really like to hear before I write this post is your take on this very expensive anti-piracy venture, especially any benefits you've seen, financial or otherwise, since you began this pursuit.

Her first response was blunt and anything but informative.

Hi Timothy,

I would be happy to discuss with you. Basically, without the take down effort I would be out of business. I have over 100 films to protect.

Kathy

On one hand, she said she'd be happy to discuss this. On the other hand, the middle sentence sounded like the conclusions had already been drawn and the door three-quarters shut. I sent an email back pressing for more details.

Thanks for responding.

What I'm actually wondering is whether this effort has any correlating effect on sales. I imagine the discussion shifts into "rhetorical" at this point. You're spending $30,000/yr. on this. If you dialed it back and spent $15,000, do you feel sales would drop to half their previous level?

What had you noticed before you decided to pursue these anti-piracy efforts? As you say, without issuing takedowns you would be out of business, so there was obviously a very noticeable sales drop. Did you start with a smaller effort and see no improvement and then decide to scale up? Or did you put as much as you could (financially) into this effort from the beginning?

Again, I'm very curious as to whether there's a noticeable increase in sales. To ditch the takedowns altogether would put you out of business according to you, but would scaling it back reduce your sales? Have you ever scaled back efforts temporarily and observed any increases or decreases in sales?

At this point, Kathy became suspicious and asked me to explain who I was and what I was going to do with the information (pretty much exactly in those words). So, I explained myself again, breaking it down further.

What I'm trying to do is get your perspective on this issue. You obviously feel that spending $30,000/yr. on anti-piracy efforts is a worthwhile investment.I'm assuming you have put together some data over the years that shows that this expenditure is paying off.

I'm putting together an article dealing with anti-piracy efforts. I'd like to have your input before I write this post because I'd actually like to hear your view from the inside. All I can do at the moment is speculate. I've rarely seen anyone come out and quote an exact figure on anti-piracy expenditures, so this potentially makes for a very interesting article. We all hear that major studios spend "millions" fighting piracy, but numbers are rarely provided as to what effect those efforts are having on sales. If anything is provided, it's an equally vague aggregate.

I don't have any interest in tearing down your efforts. You're the rights holder and you're doing what seems best for your business. But as a business owner, I have to believe that you've adjusted this plan over the years in order to see the highest return on your investment -- and those are the numbers I'm interested in.

I'm also curious as to how you arrived at the "$3 million lost" in 2012 via piracy (as quoted in the Digital Music News article about your efforts), but that's of secondary interest.

So, if you think I'm after this information to belittle, demean or otherwise harm you, nothing could be further from the truth. As I said, I'm on the outside and can only speculate on the rationale and sales fluctuations driving this business decision.

Once again, thank you for your time.

That was eleven days ago. I fired off a quick message to bring me back to the top of her inbox, but received no response. That's a shame, because I'd like to believe that, as a business owner, she's weighed the cost of her efforts against the return on that investment. But she seems unwilling to discuss anything other than the amount she pays out ($30,000) and the amount she's "lost" to piracy ($3 million).

First things first, Kathy Wolfe and Wolfe Video has been around for 28 years, long enough to have witnessed large-scale changes in film making and distribution. Staying in this business as an indie filmmaker, who deals almost exclusively with a limited market, is impressive.

Also impressive is the fact that Wolfe Video isn't limiting itself to just a few large outlets. Wolfe is distributing her films through pay-per-view markets such as Comcast, as well as other major internet players such as Netflix, Amazon, Hulu and, just last year, Wolfe Video's own platform, Wolfe On Demand, which allows customers to rent or buy directly from Wolfe. Wolfe on Demand is a worldwide service, allowing these films to reach otherwise underserved audiences around the globe.

Wolfe Video seems to have explored a variety of markets and seems interested in making the most of the web's positive aspects. Now the question turns to the anti-piracy efforts. Does exchanging half your profit for DMCA takedown notices really make sense?

Wolfe feels this is effort is necessary to protect her business, as can be seen in her first reply to my emails. But is this outlay recovered with increased sales? That's a harder question to answer without any data to examine, but there are a few inferences we can draw. Despite her massive anti-piracy expenditures (and wealth of distribution options), her business is suffering.

"It's changed us," Wolfe said, while pointing to drastic company chops and cutbacks. That includes the trimming of 11 employees, a 50 percent reduction in Wolfe's marketing budget, and a major impact on new projects. Wolfe has even stopped paying herself a salary.

There are three possibilities here:

1. $30,000 is what's needed to sustain Wolfe Video at its current pace. Not great, but better than going out of business. This assumes the deterrent efforts generate enough sales to keep Wolfe Video (barely) in the black. If this theory is correct, one would expect $50,000 worth of deterrent to increase income by a comparable amount.

2. $30,000 is not enough, but it's all Wolfe can afford. If so, then Wolfe Video is on the way out. Escalating the amount spent would likely not generate enough revenue to offset the expense, or at best, keep the company barely in the black and decrease profitability.

3. $30,000 isn't showing any noticeable impact, one way or another.

Of the three possibilities, the third seems most likely. This may seem like a broadsided slam against Wolfe's efforts, but she does make a few statements that lead me to believe this effort is mainly "faith-based" and hasn't been measured in terms of correlation to increased sales.

One of the indications is Wolfe's estimate of income lost to piracy. She states Wolfe Video lost nearly $3 million last year because of file sharing. How does she arrive at this number? I can't say for sure, but multiplying 903,000 links by $3.99/movie (Wolfe's quoted price per download) gives us $3,602,970. Perhaps realizing that not every link equates to a lost sale, the number was revised down a bit to the nearest round number. (Only most links equate to lost sales, apparently...)

Another indication is her blunt response to my first inquiry: "Basically, without the take down effort I would be out of business." This sounds like someone who has already decided that piracy can only be fought, and only with a ton of time, effort and money. What this doesn't sound like, however, is someone who's considered taking a more targeted approach, or backing off completely and measuring any corresponding sales fluctuations.

Then there's this quote (from a pro-SOPA editorial Wolfe wrote for the Huffington Post) which describes the futility of her efforts, while simultaneously making the claim that she's "forced" to send out thousands of DMCA notices.

As a distributor, I've been forced to devote resources to searching for and removing pirated copies of our films online (by sending DMCA notices). It is a time-consuming and expensive process. On one recent weekend, we removed over 300 links to a newly released title from a U.S. based cyber locker (each link can represent 1000s of downloads). The next day another 180 new links for the same film appeared on the same cyber locker. We found another 100 links to the film on a gay movie blog (a site which features free download links for more than 2,000 titles). This is just in the U.S., where sites are required under current law to take down links when they receive infringement notices. Multiplying that problem by a factor of 10 would not begin to cover the volume available via offshore sites, which are currently out of the reach of U.S. law.

The implication seems to be that if she doesn't keep emptying this ocean with her $30,000/year teacup, no one (or hardly anyone) will purchase her company's films and support her business. This can't possibly be true. Piracy is an option for nearly everyone connected to the internet, and yet musicians, filmmakers, video game developers, etc. are all selling their output every day.

Removing links may generate a few sales, but certainly not enough to offset an effort of this magnitude. Some file sharers will never purchase anything, and if they can't pirate a Wolfe film, they'll simply find something else to download. Others will purchase something after an illicit "preview." Taking away the link they might have utilized simply sends them looking for other links... or other movies. Generally speaking, a failed search for a "free" movie rarely results in the sale of the same movie.

Wolfe Video is doing the right thing by diversifying its distribution across multiple services and, even better, by running its own in-house digital rental/download platform. These efforts will do more to increase sales (and profits) than $30,000 worth of takedown notices. It's hard not to view illegal downloads as "lost sales," but entertaining that notion results in deterrence efforts that far outweigh the benefits.

The fact is that removing illegal options won't generate sales. Removing a negative ("lost sale via illegal download") doesn't create a positive ("gained[?] sale"). It simply levels off at $0. Positive efforts will tilt that scale back towards the creators. Negative efforts max out at $0, at best.

As I stated in my email to Kathy Wolfe, I have no desire to paint her as someone who tilts at windmills to the tune of $30,000/year. She strongly feels this effort needs to be made in order to protect a business she's run for over 25 years. I can completely understand that. My concern is that this effort is over-funded and a long, hard look should be taken at any connection between the takedown effort and corresponding sales fluctuations.

Could the same be accomplished at half the price? How about $10,000 per year? Or $0? I think some experimentation is called for. Back all enforcement efforts off for a few months and watch for any signs of a sales decline. If the drop is precipitous, scale the efforts up and see if the numbers respond. But rather than intensify the efforts, slowly escalate until you find a balance between deterrence and sales that works out best financially.

Kathy Wolfe has obviously worked hard to keep Wolfe Films running for more than a quarter-decade quarter-century. She deserves a salary and I hate to see that money flowing into an effort that's not paying off.

For a few years now, we've been following the Kirtsaeng case, in which a student was sued by publisher John Wiley & Sons for buying cheap (legal) textbooks abroad, and then reselling them in the US for profit. Wiley claimed this was copyright infringement, while the student, Sudap Kirtsaeng, argued that the first sale doctrine applied. First sale gives you the right to resell, say, a book that you legally bought without having to get permission from the copyright holder. Under copyright law, it says that the first sale doctrine applies to any product "legally made under this title." Wiley argued that goods made abroad were not legally made under US law since they were made abroad (even though, obviously, it wanted the rest of copyright law to apply to it once those works came to the US). We were guardedly optimistic after the oral hearings at the Supreme Court, in which the Justices explored the "parade of horribles" that might happen if Wiley won. And while what happens at oral arguments frequently doesn't seem to have any bearing on the eventual situation, in this case, the Supreme Court has ruled in favor of Kirtsaeng, saying that it is silly to interpret the first sale doctrine the way Wiley does, and that there is no evidence that such "geographical restrictions" make sense, or that Congress intended such a result.

In our view, §109(a)’s language, its context, and the common-law history of the “first sale” doctrine, taken together, favor a non-geographical interpretation. We also doubt that Congress would have intended to create the practical copyright-related harms with which a geographical interpretation would threaten ordinary scholarly, artistic, commercial, and consumer activities.... We consequently conclude that Kirtsaeng’s nongeographical reading is the better reading of the Act.

To get technical, the key issue in the dispute was that two different sections of copyright law could be read to conflict. Section 109 defines the First Sale doctrine while Section 602 defines importation of works. Kirtsaeng focused on 109, while Wiley insisted that 602 is more important. The Supreme Court -- by a six to three margin -- side strongly with Kirtsaeng. The majority was written by Justice Breyer, who is consistently good on intellectual property issues, while the dissent was led by Ginsburg, who is consistently bad on copyright issues (Scalia and Kennedy sided with Ginsburg). Thankfully the "good" side won out today.

The language of §109(a) read literally favors Kirtsaeng’s nongeographical interpretation, namely, that “lawfully made under this title” means made “in accordance with” or “in compliance with” the Copyright Act. The language of §109(a) says nothing about geography. The word “under” can mean “[i]n accordance with.” 18 Oxford English Dictionary 950 (2d ed. 1989). See also Black’s Law Dictionary 1525 (6th ed. 1990) (“according to”). And a nongeographical interpretation provides each word of the five-word phrase with a distinct purpose. The first two words of the phrase, “lawfully made,” suggest an effort to distinguish those copies that were made lawfully from those that were not, and the last three words, “under this title,” set forth the standard of “lawful[ness].” Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word-by-word linguistic sense.

The geographical interpretation, however, bristles with linguistic difficulties. It gives the word “lawfully” little, if any, linguistic work to do. (How could a book be unlawfully “made under this title”?) It imports geography into a statutory provision that says nothing explicitly about it. And it is far more complex than may at first appear.

To read the clause geographically, Wiley, like the Second Circuit and the Solicitor General, must first emphasize the word “under.” Indeed, Wiley reads “under this title” to mean “in conformance with the Copyright Act where the Copyright Act is applicable.” Brief for Respondent 15. Wiley must then take a second step, arguing that the Act “is applicable” only in the United States. Ibid. And the Solicitor General must do the same. See Brief for United States 6 (“A copy is ‘lawfully made under this title’ if Title 17 governs the copy’s creation and the copy is made in compliance with Title 17’s requirements”). See also post, at 7 (GINSBURG, J., dissenting) (“under” describes something “governed or regulated by another”).

One difficulty is that neither “under” nor any other word in the phrase means “where.” See, e.g., 18 Oxford English Dictionary, supra, at 947–952 (definition of “under”). It might mean “subject to,” see post, at 6, but as this Court has repeatedly acknowledged, the word evades a uniform, consistent meaning. See Kucana v. Holder, 558 U. S. 233, 245 (2010) (“‘under’ is chameleon”); Ardestani v. INS, 502 U. S. 129, 135 (1991) (“under” has “many dictionary definitions” and “must draw its meaning from its context”).

A far more serious difficulty arises out of the uncertainty and complexity surrounding the second step’s effort to read the necessary geographical limitation into the word “applicable” (or the equivalent). Where, precisely, is the Copyright Act “applicable”? The Act does not instantly protect an American copyright holder from unauthorized piracy taking place abroad. But that fact does not mean the Act is inapplicable to copies made abroad. As a matter of ordinary English, one can say that a statute imposing, say, a tariff upon “any rhododendron grown in Nepal” applies to all Nepalese rhododendrons. And, similarly, one can say that the American Copyright Act is applicable to all pirated copies, including those printed overseas. Indeed, the Act itself makes clear that (in the Solicitor General’s language) foreign-printed pirated copies are “subject to” the Act.

The ruling goes on to lay out historical and logical reasons why first sale should apply. It's a good read. It looks like Breyer relied, in part, on the American Library Association's concern for how a ruling against First Sale would cause serious harm to libraries, which would have to somehow figure out ways to get permission on any book they had that was printed outside the US. He similarly cites concerns of used book dealers and the tech industry that this would get in the way of all sorts of reasonable transactions.

Technology companies tell us that “automobiles, microwaves, calculators, mobile phones, tablets, and personal computers” contain copyrightable software programs or packaging. Many of these items are made abroad with the American copyright holder’s permission and then sold and imported (with that permission) to the United States. A geographical interpretation would prevent the resale of, say, a car, without the permission of the holder of each copyright on each piece of copyrighted automobile software. Yet there is no reason to believe that foreign auto manufacturers regularly obtain this kind of permission from their software component suppliers, and Wiley did not indicate to the contrary when asked. Without that permission a foreign car owner could not sell his or her used car.

Breyer dismisses the idea, presented by Wiley, that because this "parade of horribles" hasn't happened yet, it won't happen in the future if the ruling had gone the other way. The ruling notes that this is still somewhat unsettled law, but that large parts of the economy clearly rely on the first sale doctrine, and upsetting that apple cart could have dramatic impact. It also rejects other spurious arguments, including a favorite of copyright maximalists, that the first sale doctrine on such works prevents copyright holders from doing differential pricing. The court rightfully questions what this has to do with copyright:

Wiley and the dissent claim that a nongeographical interpretation will make it difficult, perhaps impossible, for publishers (and other copyright holders) to divide foreign and domestic markets. We concede that is so. A publisher may find it more difficult to charge different prices for the same book in different geographic markets. But we do not see how these facts help Wiley, for we can find no basic principle of copyright law that suggests that publishers are especially entitled to such rights.

[....] the Constitution’s language nowhere suggests that its limited exclusive right should include a right to divide markets or a concomitant right to charge different purchasers different prices for the same book, say to increase or to maximize gain. Neither, to our knowledge, did any Founder make any such suggestion.We have found no precedent suggesting a legal preference for interpretations of copyright statutes that would provide for market divisions.

To the contrary, Congress enacted a copyright law that (through the “first sale” doctrine) limits copyright holders’ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid market divisions.

The dissent obsesses over this issue of differential pricing, despite it having little to do with copyrights and simple serves to reinforce the idea -- as seen in previous copyright rulings, including Eldred -- that Justice Ginsburg seems to have a bit of a blindspot in copyright cases, such that anything that helps copyright maximalists is automatically seen as "good."

But, perhaps more importantly, Justice Ginsburg repeatedly cites various international trade agreements in arguing that her position is the correct one. With this ruling decided as is, copyright maximalists will no doubt seek to have Congress change the law in their favor -- especially now that comprehensive copyright reform is back on the table. But, as a part of that, you can absolutely expect to see this issue pop up in various international trade agreements as well. Copyright maximalists will seek to force Congress' hand in suggesting that first sale rights do not transfer over for goods made in foreign countries. This is something that we're all going to have to pay close attention to in the coming years.

A guest post from Peter Richman, a lawyer working in the motion picture industry in Los Angeles.

After last year's Stop Online Privacy Act (SOPA) debacle, Hollywood quietly retreated from the copyright debate to nurse its wounds and rethink strategy. Now, with recent activity at the Motion Picture Association of America (MPAA) and the introduction of the Copyright Alert System (CAS), the industry is poised to re-enter the conversation with a fresh plan. As MPAA Chairman Chris Dodd recently admitted to the National Press Club, "I'm looking for a new approach." But in the wake of SOPA, with opposition from Silicon Valley and little traction in D.C., is there anywhere left to look? As it turns out, Dodd's answers may be waiting in the unlikeliest of places -- Hollywood's own backyard.

Don't let the party line fool you -- if there's one thing the film and television industry can't live without, it's copyright infringement. Ask any assistant. Piracy in Hollywood is not just a quiet expectation, it's a stated requirement, and oftentimes a formal part of job training. When I started as a studio assistant, one of the first lessons I learned was how to rip an encrypted DVD. But it's not just the studios. From agencies to management firms to offices all over town, the volume of infringing material that trades hands on a daily basis makes Hollywood look like a Chinese flea market.

Let's take an example. An agent wants to introduce her new director client to the town. How best to make the introduction? Burn 40 copies of the client's debut feature and send them out to producers. Now one of the producers watches the film and sees potential for a big-budget remake. How does he pitch the project to financiers? Burn another dozen copies and send them out. Now one of the financiers watches the film and wants to gauge the opinion of a younger demographic. So he burns a few copies and sends them to his daughters at college. And just like that, 3 executives (and their assistants) have committed over 50 acts of copyright infringement.

Now multiply that by the daily routine of buying, selling, and trading movies, TV shows, books, and comics, and piracy in Hollywood starts to look less like a dirty secret and more like a cultural norm. But beyond the illegality and hypocrisy of the situation lies a much more salient point which is its sheer, bottom-line necessity. Because the truth is, there's no better alternative, and not even a close second. The quick pace of the industry requires a constant flow of content and infringement is the way to get it done. In Hollywood, piracy isn't a matter of legal rights; it's just business.

So where does that leave industry policy? While it's safe to assume the MPAA doesn't endorse the casual infringement that courses through the industry, the organization is working hard to distance itself from SOPA's one-size-fits-all approach to IP protection. From Dodd's consistent rhetoric of cooperation to the recent appointment of Diane Strahan as COO, the MPAA has made a clear push to partner with the technology industry in the distribution and protection of digital content. Some may question whether these efforts are genuine -- is Strahan's background with UltraViolet and digital rights management the right type of experience for the job? Nevertheless, assuming the best, while it's certainly refreshing to see the industry operate under a banner of collaboration, the real question is whether these efforts are sufficient to craft a new, comprehensive copyright regime.

Let's take a step back. In the larger scheme of finding Dodd's "new approach," there's one inescapable reality -- intellectual property protection is a matter of law. Business strategies and technological advances shape the means of consuming and distributing content, but without a legal foundation for support, they'll continue to operate on shaky ground. Because as we've seen, whenever a new wall goes up, a new tunnel isn't far behind. And there's the elephant in the room of the MPAA's newfound belief in tech-centric partnerships -- what happens when those tunnels are exposed? When the CAS is subverted? When Ultraviolet is hacked? How will the MPAA respond when the new salvos break and we're left with the same copyright legislation still woefully unsuited to the times?

Enter the Hollywood pirates. This is where industry infringement can move the needle by highlighting the absolute kookiness of our copyright laws. The MPAA professes to support our current policy in the name of the agents, executives, and filmmakers who undermine that policy every single day. So what gives? Does the MPAA ignore its industry's behavior and retreat to the comfort of the status quo? Or does it stick with its new message, swallow the bitter pill, and truly commit to a new approach?

The answer comes down to leadership, and if Chris Dodd's words are anything to go by, I'm inclined to hope for the latter. In every speech, press release, and policy paper, the MPAA makes sure to stress one common point -- job creation. The film and television industry creates jobs -- not just in Los Angeles and New York, but across all 50 states. Those jobs are what the MPAA says it's fighting for, and when the industry says stop pirating, those jobs and a respect for their craft are a reason many of us listen. There are a host of issues wrapped up in the copyright debate -- creative, business, legal, technological -- but when the dust settles, the industry spends nearly $15 million a year on lobbying to protect its own interests and that means the jobs of its constituents.

So when a core requirement of those very jobs is to pirate copyright material, it is incumbent on the MPAA leadership to take a close look at the industry it represents and figure out why. If Dodd takes that look, he'll see the reality on the ground -- that there are scenarios where an owner can't control all uses of her work. That speed, or convenience, or necessity may take priority over a legal claim. In short, that content "in the wild" can take on a life of its own.

And sometimes that's a good thing.

Piracy facilitates business in this industry - and that means jobs. Obviously, the physical copying of Hollywood mailrooms is a far cry from the digital and international piracy truly threatening the studios, but the takeaway remains the same -- copyright is complicated, content is malleable, and any honest attempt to institute a new intellectual property regime needs to be flexible enough to accommodate the times. It may mean carve-outs and exceptions, it may mean years of research, and it may mean a renewed commitment to the legislative process. No matter the path, it means that as Dodd continues looking for a new approach, instead of starting on Capitol Hill or in Silicon Valley, Hollywood might be the place to look after all.

Last week, we had talked about some concerns about how various cybersecurity provisions would allow those hit by malicious hackers to "hack back" or, as some call it, engage in an "active defense." There were significant concerns about this, but as Marvin Ammori briefly mentioned in last week's favorites post, Rep. Louis Gohmert seems to not only think hacking back is a good idea, but that it should be explicitly allowed under the CFAA (Computer Fraud and Abuse Act). You can see his explicit statements to this effect below during last week's House Judiciary Committee hearing on the CFAA. It appears he heard a story about someone installing some malware on a hacker's computer to get a photograph of them, and has decided "that's a good thing, that helps you get at the bad guys," without ever thinking of the very, very long list of dangerous consequences of allowing such things: In case the video embed is not working above, I created a short highlight that just covers the ~5 minute exchange involving Gohmert.

Here's the basic transcript. The really crazy part is where Gohmert says he doesn't care as long as the hack back is "destroying that hacker's computer."

Rep. Gohmert: It's my understanding that under 18 USC 1030 that it is a criminal violation of law to do anything that helps take control of another computer, even for a moment. Is that your understanding?

Orin Kerr: It depends exactly what you mean by "taking control." If "taking control" includes gaining access to the computer, assuming a network your not supposed to take control of, then yes, that would clearly be prohibited by the statute.

Rep. Gohmert: For example, my understanding is that there was a recent example where someone had inserted malware on their own computer, such that when their computer was hacked and the data downloaded, it took the malware into the hacker's computer, such that when it was activated, it allowed the person whose computer was hacked to get a picture of the person looking at the screen. So they had the person who did the hacking, and actually did damage to all the data in the computer. Now, some of us would think 'that's terrific, that helps you get at the bad guys.' But my understanding is that since that allowed the hackee to momentarily take over the computer and destroy information in that computer and to see who was using that computer, then actually that person would have been in violation of 18 USC 1030. So I'm wondering if one of the potential helps or solutions for us would be to amend 18 USC 1030 to make an exception such that if the malware or software that allows someone to take over a computer is taking over a hacker's computer, that it's not a violation. Perhaps it would be like for what we do for assaultive offenses, you have a self-defense. If this is a part of a self-defense protection system, then it would be a defense that you violated 1030. Anybody see any problems with helping people by amending our criminal code to allow such exceptions or have any suggestions along these lines?

Orin Kerr: Mr. Gohmert, that's a great question that is very much debated in computer security circles. Because, from what I hear there is a lot of this "hacking back" as they refer to it. But at least under current law, it is mostly illegal to do that.... The real difficulty is in the details. In what circumstances do you allow someone to counterhack, how broadly are they allowed to counterhack, how far can they go? The difficulty, I think, is that once you open that door as a matter of law, it's something that can be difficult to cabin. So I think if there is such an exception, it should be quite a narrow one to avoid it from becoming the sort of exception that swallows the rule.

Rep. Gohmert: Well, I'm not sure that I would care if it destroyed a hacker's computer completely. As long as it was confined to that hacker. Are you saying we need to afford the hacker protection so we don't hurt him too bad?

Orin Kerr: (brief confounded look on his face) Uh... no. The difficulty is that you don't know who the hacker is. So it might be that you think the hacker is one person, but their routing communications... Let's say, you think you're being hacked by a French company, or even a company in the United States...

Rep. Gohmert: Oh and it might be the United States Government! And we don't want to hurt them if they're snooping on our people. Is that...?

Orin Kerr: No.

Rep. Gohmert: I don't understand why you're wanting to be protective of the hacker.

Orin Kerr: The difficulty is first, identifying who is the hacker. You don't know when someone's intruding into your network who's behind it. So all you'll know is that there's an IP address that seems to go back to a specific computer. But you won't know who it is who's behind the attack. That's the difficulty.

First off, kudos to Orin Kerr for keeping a (mostly) straight face through that exchange. There are many amazing things about this particular exchange, but the fact that Rep. Gohmert is one of the people in charge of how the CFAA gets reformed, and doesn't understand these very basic concepts, is immensely troubling. Among the headsmackers in that exchange: the idea that hackers are bad -- and not just partially bad, but apparently obviously and totally bad, like out of a movie. Also: that they're somehow easy to identify and that a freebie on hackbacks wouldn't be abused in amazing ways. Further, as Kerr pretty clearly points out that you can't automatically track back and (without saying so directly, but clearly implying) that hackers likely would shield their identity or fake someone else's identity, Gohmert still doesn't get it and somehow thinks that Kerr is saying we don't want to allow hackbacks on US government snooping (which, again, Gohmert seems to have no problem with). Yikes. Please do not let people like this near laws that have anything to do with computers. To me, this level of misunderstanding is worse than the whole "series of tubes" garbage from a few years back by Senator Stevens.

I'm sorry, but it seems that if you can't understand that there isn't some magic list that says "these hackers are bad, and therefore we should destroy their computers," I don't think you should have any role in making laws around this topic.

Perhaps the timing is a coincidence, but following the absolutely disastrous SimCity launch, in which EA's focus on DRM seemed to get in the way of actually making a product that works, it's been announced that CEO John Riccitiello is stepping down at the end of the month. This is clearly not a planned succession situation, because the company's former CEO, Larry Probst, who ran EA from 1991 until 2007 when he handed it over to Riccitiello is taking over as interim CEO as they search for a real replacement. Perhaps they should look for someone who recognizes that providing a good product that people want to support is a better goal than "stopping piracy." Just a suggestion.

Of course, they may also have bigger issues to deal with. Rich Kulawiec was the first of a few of you to submit the news that researchers have demonstrated a pretty big security vulnerability in EA's Origin platform (the company's Steam competitor), which can be used to exploit local vulnerabilities on the computers of about 40 million Origin users. If you'd like to see the hack in action, there's a nice video. You can read the details directly, if you'd like, which comes complete with some graphics explaining how the security vulnerability, found in the URI handling of Origin, can be exploited: You get the feeling that March 2013 is a month that EA would prefer to forget ever existed.

We've written a few times about the case of Andrew Auernheimer, perhaps better known as weev. While he has a bit of a reputation as an online troll, and self-admitted jerk, his case is yet another example of how ridiculously broken the CFAA (Computer Fraud and Abuse Act) remains. In this case, what he did was expose a pretty blatant security hole in AT&T's servers, that allowed anyone to go in and find the emails of any AT&T iPad owner, merely by incrementing the user ID. This isn't a malicious "hack." It's barely a "hack" at all. This isn't "breaking in." This is just exploring a totally broken system. To call attention to this, weev collected information on a bunch of famous folks who had iPads and alerted the press. This is what security folks do all the time. And for his troubles in helping AT&T discover and close a pretty bad security hole, he's been sentenced to 41 months in prison plus he has to pay $73,000 to AT&T. One hopes AT&T will use it to hire half a decent security person or something.

The sentencing, by the way, was near the top of the "guidelines" the judge had, for those who insisted that the courts in other CFAA cases, such as Aaron Swartz's might be lenient.

Plenty of people -- especially in the security community, are realizing what a ridiculous ruling this is and how dangerous it is. As people are starting to point out, while he may be a jerk, that doesn't mean he's a criminal. The prosecution used chat logs in which Auernheimer and a friend, Daniel Spitler, discussed the effort, and the fact that they talked about harming AT&T's reputation and promoting themselves as security experts. I don't see how that leads to any criminal activity though. AT&T's reputation should be tarnished for having crap security. And why wouldn't some researchers talk about using the discovery of a really bad privacy hole by a major corporation to boost their own credentials. Pretty much anyone in their shoes would reasonably think the same thing.

Prosecutors, of course, played up Auernheimer's history of being a jerk, but that alone has little to do with his actions here:

"His entire adult life has been dedicated to taking advantage of others, using his computer expertise to violate others' privacy, to embarrass others, to build his reputation on the backs of those less skilled than he," wrote U.S. Attorney Paul Fishman, who went on to note the "atypical recalcitrance by the defendant to conform to the laws regarding unauthorized computer access."

While that may be true, none of that, by itself, is illegal. And the actions that exposed a glaring hole put in place by bad programmers at AT&T shouldn't be either.

Last week we wrote about the important news that Mexico is asking to join what began as a bilateral trade agreement between the US and Europe, with the suggestion that Canada might follow suit. Now, via @FFII, we learn that even before Mexico's announcement, the US has been encouraging other countries to join:

Turkish Foreign Minister Ahmet Davutoglu said Wednesday US Secretary of State John Kerry wanted Turkey to be included in Transatlantic Free-Trade Area (TAFTA).

Davutoglu said they would follow closely the process of Turkey's inclusion in TAFTA.

As with Mexico's application, it would seem that the European Union doesn't get any choice in the matter. But what's really interesting here is that it confirms the impression that the US is keen to build out TAFTA to include many more countries, including some far from the Atlantic that originally defined it. The big question is now: who's next on the list?

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