Last year the Union of Jewish French Students (UEJF) sued Twitter, because a bunch of people in France start tweeting ridiculous anti-semitic tweets as some sort of weird anti-semitic hashtag became popular in France:

Last October, the UEJF sued Twitter after the hashtag "#unBonJuif" (French for "#aGoodJew") became the third most popular trending topic on Twitter in France. With so many tweets indexed under that hashtag, many users took the opportunity to post Holocaust jokes, racially charged statements (e.g. "#aGoodJew is a dead jew"), photos of dustpans filled with dust, and even calls to kill more Jews.

Even though it's a strong defender of free speech, Twitter agreed to remove the tweets in question as offensive. As someone who is Jewish and who is quite offended by anti-semitism, I still think this was the wrong move. Censoring ignorant speech does nothing to fix things. Ignorant speech should be countered with non-ignorant speech. That said, Twitter made its decision and removed the tweets.

Turns out, that wasn't enough. The UEJF demanded the identities of everyone who tweeted such anti-semitic remarks. Twitter refused, but lost in court. Afterwards, it still refused to pass along the info, and so the UEJF has now filed a second lawsuit, seeking $50 million.

“Twitter is playing the indifference card and does not respect the ruling,” Hayoun told AFP. “They have resolved to protect the anonymity of the authors of these tweets and have made themselves accomplices to racists and anti-Semites.”

Either that or they're pushing back against a lynchmob mentality, and protecting at least some precepts of free speech and an expectation of privacy. What's incredible, frankly, is that while Europe is known to have less respect for free speech principles than the US, it tends to have greater respect for privacy rights. Apparently not in this case, however.

Twitter has put out a statement suggesting that the UEJF is much more interested in using this for publicity purposes than anything else:

"We've been in continual discussions with UEJF," a Twitter spokesperson told CNET. "As yesterday's new filing shows, they are sadly more interested in grandstanding than taking the proper international legal path for this data. We are filing our appeal today, and would have filed it sooner if not for UEJF's intentional delay in processing the court's decision."

Even more ridiculous is that it appears that it's not just Twitter being sued, but Twitter CEO Dick Costolo. If this all sounds vaguely familiar, that may be because a decade ago, Yahoo faced a similar ridiculous situation, in which both the company and its CEO were charged as war criminals (no joke!) because Yahoo's non-France websites sold some Nazi memorabilia (they blocked it on Yahoo's French sites). At some point, people bringing these kinds of lawsuits have to realize how counterproductive they are. I'm extremely sympathetic to their offense at the ignorant tweets, but their legal actions take away all of that sympathy.

We were somewhat surprised by Prenda Law, John Steele and Paul Duffy choosing to sue various critics for defamation, and specifically charging Alan Cooper and Paul Godfread with defamation. Cooper, of course, was the home caretaker for some John Steele Properties who discovered that his name was somehow involved in Prenda Law's shell games with (at least) AF Holdings and Ingenuity 13. He eventually sued Prenda claiming that his identity was used without his permission. Following this, as we heard at the big Prenda hearing, Steele started leaving a bunch of voicemails for Cooper, potentially violating ethics rules about directly contacting parties on the other side in a lawsuit. Also, from the voicemails, it seemed clear that the intention was to intimidate Cooper.

As we noted at the time, it would seem that filing these lawsuits would open them all up for significant discovery, which they probably would not like very much. The Prenda and Duffy lawsuits were filed in Illinois, and as we noted, Illinois has a relatively broad anti-SLAPP law. The Steele lawsuit was filed in Florida, though it was quickly dismissed. The two Illinois cases are ongoing, and the two named people sued -- Alan Cooper and his lawyer Paul Godfread -- have now filed their answers to the lawsuit. As is required in such cases, they go through each statement in the original suit, and confirm or deny (mostly deny) the various allegations made. Specifically, they deny making the vast majority of the random comments made on various blog comment systems that the lawsuits accuse them of being a part of.

Following this, they present their defenses, which again all appear to be fairly standard. They don't believe they've done anything illegal, any statements made were true, and thus not defamatory, information about their own lawsuit against Prenda are protected by legal privilege and they argue that it is a SLAPP suit.

They also bring up a whole bunch of counterclaims, and as part of that reveal that the "intimidation" campaign wasn't just limited to Steele calling Cooper, but included Peter Hansmeier's emails with Godfread as well, with the following email revealed to the court, which really highlights Hansmeier's pure hubris.

Dear Mr. Godfread:

My firm has been retained by Livewire Holdings LLC to pursue claims in the U.S. District Court for the District of Minnesota against you and your coconspirators arising from defamation, civil conspiracy and related acts. The alleged acts occurred in e-mail communications and blog posts describing my client as a criminal enterprise. As you know, such statements constitute defamation per se and are, quite frankly, wildly inappropriate. Less-egregious claims have resulted in multi-million dollar judgments, as I trust this one will. The facts of the underlying case are essentially a law school exam hypothetical of every possible variation of libel. Perhaps you can forward my client's complaint to your former professors at William Mitchell. My client is well-aware that you are a major contributor to these blog sites.

The purpose of this e-mail is to inform you of impending litigation so that you preserve all relevant evidence in your possession including, but not limited to, communications between yourself and David Camaratto, Morgan Pietz, Nicholas Ranallo and any other individuals associated directly or indirectly with the sites fightcopyrighttrolls and dietrolldie. Further, any and all other evidence that might be relevant to this matter must, of course, be preserved.

I suspect that you aligned yourself with these defamatory efforts as a marketing strategy. I don't know if these efforts paid off, but I can assure you that making baseless accusations of criminal conduct is not a wise move for a licensed attorney. All of that being said, my client knows that you didn't work alone in these wrongful efforts. If you think we are missing out on more serious actors in your enterprise my client would be willing to consider decreasing your liability in exchange for information about these individuals. Of course, that interest will disappear if someone else comes forward first. Think it over and let me know. If you're willing to take the fall for whole group then you are decidedly a "true believer."

Welcome to the big leagues.

Paul

That sign off line is quite a piece of work, and I'm sure it will go over well in federal court, where it's likely that the judge will have a chance to learn about the case in front of Judge Otis Wright in California. Furthermore, as Ken White points out, that email is most telling for what's not in there:

...please take note of the dog that did not bark in the night. That is, note what the letter does not say. Consider the context. Godfread, on behalf of Cooper, is telling courts that Prenda Law has stolen Cooper's identity, and has filed a lawsuit on that basis. What would you expect in response, if Prenda Law had an answer for that? If I were representing Prenda Law, and had an answer, there is no doubt in my mind I would articulate it. I would say, "As you and Mr. Cooper know, and witnesses will attest, Mr. Cooper was a willing participant in AF Holdings LLC and fully consented to being an officer." Or I might say "You have recklessly and without adequate basis suggested that your client is the Alan Cooper who is an officer of AF Holdings, when even the briefest inquiry would show that AF Holdings is led by the distinguished Alan Cooper of Nevis and St. Kitts." I would say something articulating why Cooper's and Godfread's assertions are false. As I so often say, vagueness in legal threats is the hallmark of thuggery. But Hansmeier says nothing of the sort. He has only adolescent puffed-up threats and insults. What do you think that signifies?

There is one seeming oddity in the response. As we noted Illinois has a decent, though not wonderful, anti-SLAPP law. But rather than rely on that, Cooper and Godfread, instead claim Minnesota's anti-SLAPP law protect them. They're both based in Minnesota, but it's still a little odd. Minnesota's anti-SLAPP law is definitely stronger than Illinois and as White notes, provides "immunity" from such lawsuits.

More importantly, by filing a bunch of counterclaims, Duffy and Prenda cannot easily walk away from this lawsuit, which is probably not the situation that Duffy, Hansmeier, Steele and others really want to be in right now. They've been playing a bullying bluster game all along, and suddenly their bluff is getting called, repeatedly, and they seem to think that if they just keep bullying and bluffing maybe it'll work out in the end. Of course, by the time Judge Wright is done with these guys, these cases in Illinois might not even matter very much...

Last year, around NCAA Tournament time, I wrote a piece about how the NCAA was going backwards on streaming the games. Once free streams were locked up behind subscription charges, reducing the pool of eyeballs that could be watching the advertising that actually makes the NCAA and their broadcast partners the real money in this whole situation. It's been something of a disappointment for me, being a sports fan, to see how far the leagues are going to lock up their content rather than expose it to more revenue-generating viewers via the internet. Seriously, can't I just watch the game?

Well, add another wrinkle into the mix for this year's NCAA Tournament. Gone is the $4.99 subscription fee, but before you begin jumping up and down for joy, they've now added cable subscription requirements for any game that isn't on CBS.

Things have changed a bit this time around to stream March Madness online. Last year, the NCAA charged a small fee for access to all of the games. This time around, any of the games that are broadcast on CBS are free for anyone to stream online. The games that are broadcast on TBS, TNT or truTV, the collection of Turner Broadcasting-owned channels, will require a cable subscription authentication.

While this may not strike some of you as wholly unreasonable, it's actually worse for several reasons. First, it's another step backwards from the way things are trending. Cable cords are being cut in favor of the evermore common micro-transactions that occur for online content. I didn't think last year (and still don't) that such a transaction made sense for the Tournament, because it naturally limits viewers for advertising purposes, but at least it was in keeping with the modern trend of viewership. For the NCAA to instead embrace a log in system to stream games that is trending downward in use is downright stupid.

Worse yet, it isn't as if all cable customers can get in either. At least that's the conclusion I came to yesterday when I grudgingly tried to log in from work to watch the games (sorry, boss) and found that my cable provider, 3rd largest provider in the 3rd largest market in America, wasn't listed in the log in options. This may be simply a result of RCN not having a deal worked out with either the NCAA or the cable channels in question, but as the end viewer I don't care about such things. RCN is the only provider for my building and the NCAA's system results in my not being able to watch the games and generate ad revenue for them and their broadcast partners.

Or, rather, I can't watch the games on their sites. I can certainly find them streaming elsewhere, where the ads aren't targeted to my region (or country) and fall outside of the NCAA's control regardless. The NCAA could do this freaky free streaming too, if they wanted. I saw them do it not 3 years ago. So why are they going backwards?

The food industry has a growing number of problems, ranging from food labeling to determining what ingredients are actually considered safe to eat. One of the oldest issues people have brought up about food is whether or not to eat meat. It's a serious question, but the answers aren't so easy for the multi-billion dollar meat industry. Someday, meat producers may need to change their ways, and here are just a few dramatic suggestions.

• PETA president Ingrid Newkirk asserts that there's no such thing as a free lunch humane meat. This is obviously an extreme position (or an exercise in semantics), but there should be other ways of raising "humane meat" without resorting to eating only roadkill, right? [url]
• Animal 57 is an urban legend that commercial fast food meat is grown in tanks of water. However, the concept of lab-grown meat might not be so far-fetched. [url]
• The "Blind Chicken Solution" proposes that farmers raise congenitally-blind chickens as a more humane food source (assuming that blind chickens are actually less traumatized than sighted chickens when raised in crowded conditions). The "Headless Chicken Solution" goes the extra step of creating a Matrix-style farm of brainless birds that feel no pain whatsoever. As long as these chickens never realize that "there is no spoon" -- then we'll presumably be okay with this. [url]

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

Kudos to Microsoft for joining companies like Google and Twitter in releasing transparency reports about government/law enforcement requests for information. On Thursday, Microsoft released data on law enforcement requests from 2012. The report covers requests for pretty much all of Microsoft's key online services, including Hotmail/Outlook, SkyDrive, XBox Live, Office 365 and even Skype. Microsoft has actually gone a step further than others in some areas, such as separating out which law enforcement requests involved sharing "customer content" data (such as images or email subject lines) vs. those that shared "non-content" data (such as identifying information).

Because of this distinction, Microsoft points out how rarely it ends up giving law enforcement customer content, noting it happened in only 2.1% of cases (1,558 requests). Nearly all of those requests came from the US government. The only non-US requests that resulted in the sharing of customer content were 14 disclosures given to Brazil, Ireland, Canada and New Zealand.

As for non-content information (i.e., identifying info), Microsoft disclosed that information 56,388 times (excluding Skype, which reported its data separately due to differences in the way they recorded data -- something that is being standardized). The top countries getting such info were the US, UK, Turkey, Germany and France. Turkey seems a bit surprising there. As for Skype, the top requests were from the UK, US, Germany, France and Taiwan. Microsoft also delivered no information at all 18% of the time, either because the company rejected the request or because no info was found, though they apparently don't break down the difference there.

Like Google, Microsoft also revealed how many National Security Letters it received, using a format nearly identical to the way Google released its data not too long ago: It's good to see Microsoft following in the footsteps of Google and Twitter in providing this kind of transparency. Hopefully we'll see even more companies follow as well.

Mr. Burns: Since the beginning of time, man has yearned to destroy the sun. I shall do the next best thing: block it out.
Mr. Bloomberg: Yes. The people must be protected from the sun’s harmful UV radiation!
Mr. Burns: Umm, sure, whatever. [Activates Sun Blocker]
Mr. Bloomberg: Excellent.

I fully believe that Bloomberg would ration sun time if he could — or at the very least force everybody to wear sunscreen. Like your mother, he simply thinks that he knows what is better for you and what you should be allowed to do. And he’s willing to use any means necessary, fair or unfair, legal or illegal, to make you do what he thinks you should be doing.

The latest: since he can’t force stores to display horrific images with the purchase of cigarettes, he now wants to prohibit stores from displaying cigarettes at all.

Will the courts smack him down again?

The WSJ Law Blog has a very interesting analysis of the possible legality of Bloomberg’s (a former smoker) latest attack on cigarettes. Here’s the actual law that Bloomberg is proposing:

A retail dealer shall not display or permit the display of any cigarettes or cigarette packaging in a manner that allows a person to view such cigarettes or cigarette packaging prior to purchase at any place of business operated by such dealer.

You’re allowed to buy them, but not look at them… because looking at them will remind you that you are LIVING IN A FREE COUNTRY and can do what you want.

But this paternalistic restriction might be legal, or at least not as illegal as Bloomberg’s attempt to force cigarette sellers to have posters of lung cancer:

Enacted in 1965, the Federal Cigarette Labeling and Advertising Act required that cigarette ads and packages contain those now-ubiquitous health warnings. But it also offered tobacco companies assurance that they wouldn’t have to comply with a whole other set of local labeling laws.

Federal courts concluded that New York City’s poster law failed to conform with the national standard.

But in 2009 Congress amended the statute to give cities and states more leeway to impose tobacco restrictions. Local governments still couldn’t regulate the “content” of tobacco advertising or promotion. But they could say where and when cigarettes may be sold.

Great, so saying “smokes can only be sold out of a trashcan in the alley out back after you put your money into a rat’s ass” might be legal.

You know, law is better when people are just honest about what they want. If Bloomberg wants to ban the purchase of cigarettes in the city, he should just say that. Pass a bill (does he even have to pass these bills? Is the New York City Council even awake?) outlawing smoking and argue it to a court. Go ahead, let’s fight this battle between personal freedom and public health out in the open, and let the courts (or, you know, the people) decide.

But trying to slowly erode the rights and freedoms of New Yorkers is for the birds. Bloomberg is hoping that everybody will wake up one day and just not want to smoke (or have soda, or eat salty food). But like your mother found out, nagging people to death doesn’t change their desires. It just makes people more creative about doing what they want behind their mothers’ backs.

A Legal Look at Bloomberg’s Latest Anti-Cigarette Push [WSJ Law Blog]

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Almost exactly a year ago we wrote about how Brazil's performance rights organization, ECAD (which is the trade association for the Brazilian equivalents of ASCAP, BMI and SESAC), was trying to shake down anyone who embedded a YouTube video, even though ECAD already had an agreement with YouTube. Basically, they were trying to collect twice for the same thing. Around that time, it also was revealed that ECAD's directors were under investigation for providing no information on how it collects or distributes revenue... and then granting its directors huge bonuses.

Now, it appears those were the least of ECAD's problems, because (as reader Ninja passes along), ECAD and the six music licensing agencies that make up its members have been convicted of being an illegal cartel engaged in price fixing, and told to pay $38 million in fines. The fine is clear that they cannot use money collected for artists to pay this fine.

The details sound like a classic case of price fixing. The leadership of the different organizations would get together in a room and agree to set rates. Investigators even found the pricing tables shared among the organizations. It also didn't help matters that ECAD had not allowed another organization to join ECAD in 30 years. That spoke to it being a bit of a cartel. ECAD claims it's going to appeal the decision, but having direct pricing tables shared among different organizations is a tough thing to overcome.

ECAD has also been given six months to basically reorganize its entire performance rights/collections set up so that it's not illegal, leaving some to wonder how the entire industry may change. This is one of the reasons why we're less than enthusiastic about efforts that seek to expand the power of organizations like this. Over and over again we see such collections efforts abused, such that artists aren't actually being helped, but harmed.

Another day, another story having to with Prenda Law (the hits just keep on coming). Found via FightCopyrightTrolls, we discover some research done by lawyer Graham Syfert, who has taken on Prenda/John Steele in a number of cases, including the infamous Florida case that was tossed out for fraud on the court following an Abbott & Costello-worthy transcript involving John Steele, Mark Lutz, and a variety of guest appearances from others on Team Prenda (despite Prenda claiming to both have nothing to do with the case... and with hiring the lawyers for the case, who were all trying to get off the case).

Apparently getting curious about the whole shell within a shell within a shell setup of Livewire/AF Holdings/Ingenuity 13, Syfert began wondering about just what copyrighted works were actually at the center of those lawsuits. As you may recall, Prenda, used to represent actual porn studios, but at some point shifted to a variety of shell corporations, which it's now accused of running itself (a big no no). But then what copyright was it using? Well, Syfert looked at the details of the lawsuits, and then looked around, and basically found that the "movies" in question never appear to be distributed in any way, except via BitTorrent, all seeded by the same user. Hmmmm....

So, four out of the Five Fan Favorites that Ingenuity 13 wishes to protect are shared by sharkmp4. (Other hash values referenced in complaints do not result in any valid torrent). One wonders if the "Five Fan Favorites" copy registered with the copyright office includes all of these sharkmp4 videos. Would that be proof that Prenda Law is seeding its own works and then suing? The honeypot. The venus fly trap. The pitcher plant? Or is sharkmp4 just another pirate?

Syfert digs a bit deeper and digs up a bit more info on this "sharkmp4" character:

Now of course, this all begs the question: Who is sharkmp4? Well, the IP address associated with this user can be determined by a technically skilled individual who could load up all the torrents, join the torrent swarms and then find the common seed. However, there is no reason to do this, because it will come back with a Mullvad VPN on an IP in Germany owned by Leaseweb and get you nowhere.

Well, almost nowhere. Because back at FightCopyrightTrolls, they add a little piece to the puzzle.

I want to point out to one coincidence that Graham did not mention (probably he did not know): a person who we strongly believe was John Steele had been commenting on this blog via Mullvad VPN (links at the bottom). Although it does not prove anything per se — a single exit IP address is shared by many VPN users — the fact that Mullvad VPN was allegedly used to seed certain pornographic movies is interesting.

Obviously, not conclusive proof of anything, but enough to leave you scratching your head and wondering. It's not like Mullvad is one of the more popular VPNs either. And, of course if John Steele, or a representative of the copyright holder themselves is uploading and distributing the file in the first place (and that's the only place where it's released), there's a reasonable argument to be made that any downloads are not infringing, since it's clearly an authorized copy. At this point, Steele and Team Prenda are likely in enough hot water, but it seems like a court that wants to dig even deeper into the whole thing might uncover some more... interesting things during discovery.

We've seen a number of questionable fair use rulings lately, so it's always nice to see a good one. The musical play Jersey Boys was apparently sued (or, more specifically, its producers, Dodger Productiongs, were) a while back by SOFA Entertainment, who holds the copyrights on The Ed Sullivan Show. Someone from SOFA went to see Jersey Boys and flipped out when they saw a 7-second clip of the Ed Sullivan Show being used at one point. The clip includes Ed Sullivan introducing the band on the show, and, in the play, the band then plays while a narrator explains how this was a key moment in the band's history. A district court ruled that this was obviously fair use and slapped attorneys fees on SOFA entertainment, and now a 9th Circuit appeals court has upheld the ruling with a short and sweet ruling that reminds people how important fair use is -- and mildly berates the lawyers for SOFA for bothering to bring such a case in the first place. First, the court notes that copyright law can be abused, and how fair use is an important way to prevent that abuse:

[Copyright grants] authors a a "special reward" in the form of a limited monopoly over their works. However, an overzealous monopolist can use his copyright to stamp out the very creativity that the Act seeks to ignite.

It's nice, of course, to see the court acknowledge both that copyright is, in fact, a monopoly, and that overzealous use of it can "stamp out the very creativity that the Act seeks to ignite." Too many refuse to even admit this rather important point.

It then goes through the typical four factor analysis for fair use, and comes to the easy conclusion that this is fair use, as all four factors come out in favor. At one point, it even notes that the clip itself could even have copyright protection separate from the rest of the program.

Sullivan simply identifies the group that is about to perform and the section of his audience to whom the Four Seasons would appeal. It is doubtful that the clip on its own qualifies for copyright protection, much less as a qualitatively significant segment of the overall episode.

The court correctly finds it ridiculous that SOFA argued that Sullivan's "trademark gesticulation and style" are covered by copyright:

SOFA contorts the Supreme Court's use of the phrase "distinctive expression" in Harper & Row, Publishers, Inc. v. Nation Enterprises, to give the false impression that Mr. Sullivan's "trademark gesticulation and style" is copyrightable. Copyright only attaches to an original work fixed in a tangible medium of expression, never in the underlying ideas or facts. The Court used the words "distinctive expression" to explain that defendant had copied sections of President Ford's memoirs that contained Mr. Ford's writing, as opposed to the events he was discussing.

Certainly movement and intonation are elements in an original performance, but SOFA's argument is not limited to Sullivan's performance in the clip. It is Sullivan's charismatic personality that SOFA seeks to protect. Charisma, however, is not copyrightable.

The court also mocks the idea that the play somehow is a substitution for the clip:

Jersey Boys is not a substitute for The Ed Sullivan Show. The clip is seven seconds long and only appears once in the play. Dodger does not reproduce Jersey Boys on videotape or DVD, which would allow for repeated viewing of the clip. Dodger's use of the clip advances its own original creation without any reasonable threat to SOFA's business model.

In the end, a total, complete, clear cut fair use case.

Dodger's use of the clip did not harm SOFA's copyright in The Ed Sullivan Show, and society's enjoyment of Dodger's creative endeavor is enhanced with its inclusion. This case is a good example of why the "fair use" doctrine exists.

In fact, it's such a good example, that the court supports making SOFA pay attorneys fees, in part because the lawyers should have immediately recognized that this was fair use (due to their involvement in previous copyright lawsuits) -- and thus, the case seemed only designed to cause trouble for the production:

> Moreover, we agree with the district court that "lawsuits of this nature . . . have a chilling effect on creativity insofar as they discourage the fair use of existing works in the creation of new ones." The fair use doctrine is an integral part of copyright law precisely because it gives authors "breathing space within the confines of copyright" to build upon their predecessors' works.

Furthermore, the court argues that by awarding attorneys fees, this will hopefully help others with fair use claims to stand up for them in court:

When a fee award encourages a defendant to litigate a meritorious fair use claim against an unreasonable claim of infringement, the policies of the Copyright Act are served. Therefore, we conclude that the district court's award of attorney fees to Dodger was justified.

This is interesting, as we normally see talk about how fees should act as a deterrent against some behavior, but in this case, the court points out that such an award can actually have proactive benefits in encouraging more people to litigate fair use claims.

Ah, transparency. The Sunlight Foundation put together Politwoops last year to highlight tweets that elected officials deleted. Mostly it's innocuous stuff, but sometimes some real gems come through. For example, the account of Rep. Mike Rogers, who is the main Representative behind CISPA, retweeted but then deleted a MapLight tweet about how the House Intelligence Committee, which Rogers chairs, "received 15 times more from pro-CISPA groups than anti-CISPA orgs." You can see MapLight's data here. Of course, we've said from the beginning that much of this "cybersecurity" stuff is really about money, and that tweet just highlighted that plenty of that money is flowing directly into Congress. Obviously, that doesn't look too good for Rep. Rogers (or whatever poor staffer runs his Twitter feed), and it took someone all of 23 minutes to realize that Rogers was more or less promoting the fact that his side had received 15x more in lobbying dollars -- and that probably doesn't look too good. Still, for those who believe in transparency, it was a nice admission, albeit a brief one.

Update: Oh, and it gets better. Rogers has been using the hashtag #CISPAalert in a bunch of his tweets in support of CISPA. But that hashtag was set up by the EFF, and every tweet that uses that hashtag helps fund the EFF in its fight against CISPA.

Rogers (R-Mich.)'s official Twitter account has, since Wednesday, been using the hashtag #CISPAalert to address criticism of his Cyber Intelligence Security Protection Act (CISPA). Activists are wrong, he says. CISPA wouldn't allow government "monitoring anyone’s email or personal information."

But the congressman—or whoever runs his Twitter account—doesn't seem to have gotten the memo. A domain name registrar called Namecheap is running a promotion: offering a dollar to Internet activists at the Electronic Frontier Foundation for each tweet with that hashtag. The EFF is actively campaigning against CISPA, calling it a “privacy-invading cybersecurity spying bill.”

I'm sure once CISPA is in place, Rogers will figure out this Twitter stuff.

With the possibility of comprehensive copyright reform in the US in the air, we warned that lobbyists from all sides were about to be very, very busy on Capitol Hill, and it has already begun. We've heard from very reliable sources that the MPAA has basically been blanketing Congress with the attached document, visiting as many offices as possible and leaving it behind as their talking points on why copyright is just freaking awesome.

Of course, since this is the MPAA, the document is all sorts of misleading. Let's dig in a bit, shall we?

From the printing press, to motion pictures, to recorded sound, to the Internet, for its entire history, copyright law has evolved and developed in response to new developments in technology and the marketplace.

Well, that's one way to look at. Another would be, from the player piano, to radio, to TV, to the photocopier, to cable TV, to the VCR, to the MP3 player, to the DVR, to internet video, the entertainment industry has flipped out and used copyright law to try to block the development of new technology and marketplaces, often against their own best interests. Given that, you'd think that we'd know by now to take the entertainment industry's claims about copyright law and new technologies with a rather large grain of salt.

The result is that today the U.S. copyright system is a cornerstone of a vibrant creative economy that is unparalleled in the world – adding $631 billion and over 7.5 million direct and indirect jobs in 2010 [Department of Commerce, IP and the U.S. Economy study], and making the United States a world leader in creativity, technological innovation and economic growth.

It wouldn't be the MPAA if it didn't come chock full of bogus stats. First up, the Commerce Department report -- also known as the grocery store report, because it counts all 2.5 million employees of grocery stores as being the single largest employer in the "IP intensive industry." Because, you know, without strong IP laws, that checkout bagger wouldn't have a job. Of course, this highlights why the whole Commerce Department report is useless. It first broadly defines "IP intensive industries" in ways that are simply not credible (see above: Stores, Grocery), and then, ridiculously, suggests that all of the jobs in those industries exist because of existing IP laws, despite no proof of any causal link.

When you look specifically at "copyright," you see they lump in all sorts of stuff that would be made without copyright -- including advertising, public relations, scientific services, performing arts companies, newspaper reporting, "internet sites" and computer system design. Yes, some of those probably involve the use of copyright, but how much? The MPAA doesn't care, it counts them all for its team.

Second, note the claim that these are "direct and indirect jobs"? This is a standard trick of the MPAA. For years they go around citing "2.1 million jobs" implying that's how many the movie industry employs. Except, it's not. The actual number is 374,000. So they started adding in a hell of a lot of "indirect jobs," taking credit for the florists and hairdressers and food delivery folks and all of that. As if "copyright" had anything to do with any of that.

As for the US being "the leader" in this arena, as recently noted, many of the biggest entertainment companies are actually foreign owned, meaning that a significant portion of any profits is likely flowing out of the US.

MPAA member companies welcome a continuation of the ongoing discussion of the importance of copyright. We welcome a discussion based on facts, experience, and rational analysis.

Coming right after the bogus numbers and claims, that's a pretty rich statement.

And we are confident that such a discussion will result in a renewed affirmation of the benefits to all of a copyright law that encourages and rewards creativity and breakthrough innovation, promotes distribution and enjoyment of America’s most beloved stories and characters, and takes a firm stand against the criminals who would rob us of those.

I'm still waiting to see where copyright rewarded breakthrough innovation. I can give you a long list of where it hindered it. It's also not at all clear that today's copyright "encourages and rewards creativity." It clearly rewards some aspect of creativity, but as we've seen a decline in respect, and an increase in infringement, we've also seen a massive increase in content created. That, at the very least, suggests that there are other incentives at play. Furthermore, we reported on a recent study showing musicians making approximately 6% of their revenue from efforts that directly involve the sale of copyrighted works -- suggesting that there are numerous ways of "rewarding creativity" that have little to do with copyright. In fact, a strong argument can be made that with a focus on copyright, you end up with many fewer creators rewarded. But when you focus on other methods of supporting artists, the numbers go way up.

Also, really, if we're going to be talking about a discussion based on "facts" and "rational analysis," we really could do without the bogus and misleading use of words like "criminals" and "rob" for actions that are most frequently civil law issues, at best, and are potentially about infringement, not stealing. It's the little things like this that determine whether the debate will be an honest one or pure propaganda.

Copyright Empowers Creativity, Innovation and the Dissemination of Knowledge
The promise of the opportunity to make a living doing what they love is what gives a creator incentive to transform his or her new ideas into reality and to take that new creation to the public. Creators deserve to be secure in the knowledge that they have a fair chance to earn a wage from their work and investment -- the works that contribute both to our shared culture and our national economy. The Constitution itself recognizes that the public’s interest in creativity and the dissemination of knowledge is best served by the incentives that result from recognizing authors’ and creators’ rights. If our creative sector is to remain the envy of the world, the law must ensure these public-interest purposes of copyright are not undercut.

The promise of the opportunity to make a living gives creators an incentive to create and distribute their works. But just one incentive. And there's fairly strong evidence that it's actually fairly far down the list of incentives that lead to the creation and distribution of creative content. We have a pretty big wide internet filled with content that was created for no direct remuneration. For many, many people, the incentive to create is not because of money, but because they can't not create.

Second, this entire paragraph assumes -- wholly without support -- that copyright is the only way to make money from creation. That's ridiculous, and easily shown to be false (as noted above with the 6% number). Lots and lots of people make money via their content without ever needing to make use of the power to exclude granted to them under copyright.

As for creators deserving a "fair chance to earn a wage from their work and investment," that's absolutely true, but what does that have to do with copyright? After all, under the "old" system that the MPAA used, the vast, vast, vast, vast, vast majority of people who wanted to become filmmakers had no chance at all to earn a wage from their work, because the only way to make a movie was to have one of the MPAA gatekeepers grant you permission. The fact is that most people who want to earn a living making content have failed at it. This has always been the nature of the content business -- and it's a point that the MPAA and other copyright maximalists never want to admit. Also, considering that thanks to the infamous practice of Hollywood accounting, we're told that most films lose money, then, it seems that the existing system isn't working to the level that the MPAA claims is necessary.

Finally, the Constitution says no such thing. It makes no claim that the public's interest is "best served" by copyright. All it does is allow Congress to create monopoly privileges such as copyright if it believes those serve the public. That's it.

Take Digital Rights Management technology, for example. Without the protection of effective DRMs, the business incentive to develop new and innovative distribution models, like UltraViolet, across multiple devices and platforms is lost. The technological and legal protections provided by current law allow content to be portable, enabling consumer flexibility on how to access it. Under current copyright law, the choice and cost curves are both bending in the consumer’s direction.

Try to hold back the laughter here. After all, we're having a discussion based on "facts, experience and rational analysis." And, yes, the MPAA is trying to argue that DRM itself is a form of innovation, and they're highlighting Ultraviolet, a crappy DRM system that no one wants, that tries to enable a tiny portion of the benefits that everyone else on the internet figured out how to get for themselves a decade earlier. That's not innovation. No one needed UltraViolet DRM to distribute content "across multiple devices and platforms."

Limiting what consumers can do is never innovation. It's about trying to limit the impact of actual innovation.

Copyright Benefits Consumers by Promoting Free Markets and Competition
Copyright as it is reflected in both the Constitution and in current law recognizes that the public benefits from a competitive environment in which clearly-defined property rights enable the market to drive the creation and dissemination of creative woks. These rights foster competition because they incentivize creators to take risks. They encourage economic development and economic diversity. That’s good for the consumer and good for the economy.

Yet another trope. As was aptly discussed in Derek Khanna's report for the Republican Study Committee, copyright is the antithesis of promoting a free market. The problem, here, is that the MPAA is pretending that any monopoly makes sense as "property" to create a market. But any competent economist will tell you that's hogwash. We can create all sorts of artificial monopolies to create markets to prove how ridiculous this is. For example, how about we put a pricing mechanism and the ability to exclude people from accessing air to breathe? We've now created "property rights" and a "market" for air -- and I'd imagine it would be quite a lucrative one, given the demand.

And, of course, that would create "a competitive environment" that would "foster competition" by "incentivizing air creators to take risks."

But, of course, most sensible people would recognize that creating such an exclusionary right for something that is abundant is not a form of a free market, but rather is a massive inefficiency in a functioning free market.

The MPAA can argue, perhaps with (or perhaps not) reasonable support, that a system of artificial limited scarcity is a better net result, but it's not a free market by any means. They really should stop pretending it is one, because it really takes away from their point. They should be arguing the facts: that copyright is basically a mercantilist system of monopolies, emerging from the mercantilist era of protectionism. They can then make the argument for why that works better than an actual free market, and that would be an interesting debate. But pretending that the exact opposite of a free market is a free market is just silly.

Enforcement of existing copyright laws is also essential to ensure that illegitimate websites that profit from the illegal sale of content do not have an economic advantage over the innovative platforms that our companies develop to deliver high-quality content to consumers. Undermining copyright law would serve as a disincentive for future technological development and would harm consumers.

As has been shown time and time again, infringement is generally a leading indicator of innovation. The reason that there are so-called "illegitimate websites" that are succeeding is based on one factor alone: the industry's own failure to provide convenient services that consumers want. So they seek other convenient services. If the industry focused on providing more value (as they grudgingly do over time) they'd easily compete with and beat those illegitimate sites and many more people would pay. That is, enforcement has been shown to do very little in terms of encouraging technological development. Infringement, on the other hand, has had a major role in driving many key innovations that are incredibly consumer friendly.

Look, for example, at the music industry. The labels fought any digital distribution for years, as newer, more innovative and increasingly convenient "unauthorized" offerings showed up. Left to their own devices, the labels created two of the worst music distribution services imaginable, MusicNet and PressPlay, which no one bothered to use. It was only when pushed by competition from better online offerings that the industry finally allowed innovation to happen, leading to increasingly innovative solutions, including things like Spotify today, which owes its history to things like Napster.

If not for such infringement, consumers would still be living in the dark ages, with the labels trying to keep any serious digital distribution from happening at all.

Copyright Supports an Internet that Works For Everyone
There are those who would place the value of the Internet at odds with copyright. We reject that false choice. Freedom of expression is at the bedrock of both the Internet and the creative community. In considering policies surrounding the Internet, we need to recognize what the Supreme Court has stated repeatedly – that copyright is itself an “engine of free expression.” Not only does copyright itself promote creativity, but creative content has plays an important role in helping to promote the growth of the Internet. As we look at policy affecting the Internet, we must advance policies to promote an Internet that reflects the values that have been fundamental to us for hundreds of years, including freedom of expression, property rights, and protection of the rights of individuals. Good policy stays true to these values, resisting efforts that would pit one against another and recognizing instead that these values are mutually reinforcing.

I don't think that copyright is at odds with the value of the internet. It seems to me that it's the MPAA setting up a strawman here. However, certain aspects and uses of copyright almost certainly do go against the values of the internet, which can be seen in the way people use the internet to inadvertently infringe all the time. Just look around at how many YouTube videos say "no copyright intended" while clearly infringing on someone's copyright.

As for "the engine of free expression," just because the Supreme Court says something, does not make it a reality. If we look at the last 100 years of history, and look at how much "expression" was created because of copyright, and compare it to how much "expression" was created because of technology (or, hell, limit it to just the internet), the technology/internet will win by a long shot.

The internet is, at its core, a tool for expression. That is undeniable. And, if we're going to talk about "property rights" and "protection of the rights of individuals" it needs to start with our rights to express ourselves, along with our rights to own what we legally posses. Copyright has gone against those rights in so many ways. It stops us from actually owning the music we thought we'd "purchased." It stops us from modifying our phones or video game consoles. It stops us from shifting a movie we purchased on DVD to our computer. So, sure, if we're going to protect "property rights" and the "rights of individuals" let's actually do that.

The reality, of course, is that's not what the MPAA is asking for at all. They want to to protect copyrights, not actual property rights. And they want to protect the exclusionary privileges of the large copyright holders, not the rights of individuals. However, if they're going to claim that they want to support free expression, property rights and protection of the rights of individuals, then I agree. I just doubt they'll agree with what that really means.

Copyright Provides Creators with Modern Protections
Copyright law evolves over time. The last major overhaul of copyright law was the result of decades of Congressional work, much of it focused on fashioning a law that would be flexible enough to accommodate future technological change. But technology and the marketplace often evolve faster than the law. Fortunately, copyright law also provides the space for the private sector to collaborate to develop more immediate solutions. Content creators and intermediaries can and do engage in meaningful conversations about how to protect a secure, legitimate online environment for both creators and audiences. Any discussion of copyright law must include recognition of the critically important role that voluntary agreements play in ensuring the content and tech industries can both remain nimble in a rapidly-changing world.

The whole basis for this point is misleading. The role of any system of copyright should not be about protections, but about what creates the greatest overall benefit. The overall incentives should be aligned. The public wants great creativity, and creators want to create. So let's focus on what leads to that result, rather than jumping to the conclusion that "protection" is the key. Protectionism is often a way of limiting markets, rather than helping them grow to their full potential. So, why aren't we looking at what will incentivize the most innovation and creativity, rather than what will do the best job of protecting and locking things up?

As for flexibility -- we agree that any law needs flexibility to adapt to changes in technology, but it's laughable to think that's true today, given how often we've seen the MPAA flip out about changes in technology, and run screaming to Congress that the law isn't working for them. 15 new anti-piracy laws in the past 30 years? That's not a flexible system. A flexible system is one that doesn't insist that every bit of content must automatically be put under a copyright regime. A flexible system is one that doesn't mean a generation never got to see new works enter the public domain. A flexible system is one that doesn't tell people that downloading 24 songs may make them liable for over a million dollars. That's a broken system.

Copyright Provides for Incentives and Accountability
The public interest in the creation of and dissemination of creative and innovative products cannot be served in an environment in which some are free to build businesses based on the infringement of the rights of others. As infringement grows more widespread, sound copyright policy must recognize that the solution to such problems is in society’s broad interest. Any review of copyright must focus on whether the system as a whole provides for meaningful accountability on the part of those who infringe the rights of others, and whether there are adequate incentives for cooperation and accountability among other stakeholders.

A meaningful system recognizes that infringement is not the problem -- a failure to serve the public with what they want is the problem. A meaningful system recognizes that spending time, resources and efforts on stopping the unstoppable -- especially when it has little long term impact on the bottom line -- is not a sound or reasonable policy. The public's interest is being served all the time -- in large parts by innovation that is often driven by these services that the MPAA hates so much.

And, again, this is the same MPAA that argued that the public's interest would be harmed by the VCR. And by TV. And by the DVR. And by YouTube. So it is hard to take these claims seriously.

Hopefully, most of the folks in Congress receiving this particular document will do some research on what's being said, and will realize that the MPAA's position is not one to take seriously. It is not one based on facts, experience or rational analysis. It is, instead, based on self-interest of a small sector of the economy -- a few large movie studios with a history of exploiting content creators for their own benefit. If we're going to have a real discussion on copyright reform, it has to be based on actual facts, not MPAA-style theatrics.

Techdirt has been pointing out for years that more patents is not the same thing as more innovation, even though many around the world would have us believe otherwise. It seems the message is finally getting through: here's a remarkable statement from India on the subject of innovation and small- and medium-sized companies, made at a TRIPS Council meeting:

there is no direct correlation between IP and Innovation even for the Small and Medium Industries. The technological progress even in the developed world had been achieved not through IP protection but through focussed governmental interventions like compulsory licenses, cross licensing, government funding, and competition policy. It is unfortunate that some of the technologically developed countries would like to showcase the positive effect of IP on innovation, when historically these countries including the proponents of this Agenda Item have reached this stage of technological development by focussing solely on the development of their own domestic industry without caring for the intellectuals property rights of the foreigners or the right holders. After achieving a high level of development, they are now attempting to perpetuate their hold on their technologies by making a push towards a TRIPS plus regime.

The last part is a clear dig at the US, which began as a pirate nation, but is now trying to impose the highest level of protection for intellectual monopolies on countries that are still at an early stage of their development, through the many bilateral treaties it has signed with them, as well as things like ACTA and TPP. The statement from India goes on:

Their agenda is not to create an environment where developing countries progress technologically, but to block their progress through the stringent IP regime. It is therefore essential that the flexibilities provided by the TRIPS Agreement need to be secured at any cost, if the people in the developing countries are to enjoy the benefits of innovations.

That is, far from acting as a spur to innovation in countries like India, intellectual monopolies prevent small- and medium-sized companies there from progressing to the point where they are able to compete in global markets with the Western enterprises that are pushing for stricter enforcement of patents and trademarks. This is why emerging countries would do well to think twice before signing up to restrictive FTAs and wide-ranging agreements like TPP that are specifically designed to keep them at a lower level of technological development.

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In part one of this series, we looked at a study that suggested that file sharing (mainly via Megaupload) likely harmed the sale and rental of digital movies. In part two, we looked at a study that suggested that file sharing of music (across many sites) likely helped the sale of digital music. So is one right and the other one wrong? Not necessarily. It's possible both are correct. Unlike some other studies we've seen, the methodologies used by both studies appear to be fundamentally sound, without any obvious problems. As with just about any study, both studies correctly note that there is the possibility of unknown or unexplained variables impacting the data. However, both run through a series of tests to try to eliminate a number of possible outside variables, and both come out with results that suggest their initial arguments are robust.

So, let's try to look at why the two studies might both be right -- and what that might actually mean. First off, there's the obvious difference: the first study was about movies, and the second study was about music. While there are obvious similarities between the two, there are also significant differences, which may also lead to differences in consumption. Movies, for example, tend to involve more initial commitment, since it takes a lot more time to watch a movie. Music can be consumed much more easily. But, for music that people like, they're much more likely to listen to it over and over again, whereas most people will view a movie only once. Even for movies that people absolutely love, they're likely to consume it many fewer times than corresponding music that people love. And, on top of that, movies come together as a whole package. Music, for the past few decades, was packaged as a bundle of songs, in the form of an album. However, the rise of digital distribution for music has often broken apart that bundle, such that people focus on the single unit of the song, rather than the album.

In those differences are the seeds of why these two studies could both make sense. The recording industry, obviously, points to the massive decline in overall revenue from recorded music sales. That is indisputable. But, much of that can be explained by the breakup of the album into single song sales. When you're no longer forced to purchase 10 songs you don't care about just to get to the 2 you do, it shouldn't be any surprise that overall sales revenue may decrease. At the same time, because people can then spread their interest across more artists, something like file sharing can still increase digital distribution sales, because they sample via unauthorized sites, and then purchase a few songs from those they like best. The file sharing acts as a way to figure out where they want to spend their money, but because they can spend less to get more, overall sales dropped off. The market is much more efficient.

Movies, on the other hand, are somewhat different. There isn't a great unbundling happening there. And, often, consuming movies is done for a different reason and in a different manner than consuming music. Watching a movie is a way to "kill" an evening. Need something to do? "Let's watch a movie." As such, you'd expect movie watching behavior to remain more consistent, as people have the same "void" to fill at a regular interval. And, while alternatives (such as surfing the internet or playing video games) may fill that void, some percentage of the people will prefer movies -- and if one source of movies goes away, they will look for others, and some percentage of those are likely to switch to a pay service.

There's one other factor that may impact all of this as well, as hinted at in the post about the first study: the level of development of legal services. For years, we've seen one thing that is almost certainly true: when there are no legal services available, the amount of unauthorized use increases. Unauthorized use is almost always an indicator of an under-served audience. And, if you look the development of online music and movie offerings, authorized music services tend to be a lot further along in creating compelling, user-friendly offerings that people find to be "better than piracy." There are some movie services that are getting there, but movie services are more likely to be encumbered with DRM and annoying restrictions (e.g. "watch the whole thing in 24 hours or you lose it!").

If anything, this final point is the most compelling explanation to me for the different results in the two studies -- and why I'm less confident that the results of the first study will hold up in the long term, unless Hollywood finally allows the creation of more user-friendly online movie services (i.e., lower prices and less restrictions, which is where the music services have all gone). In the music world, more and more people are making the gradual shift to authorized services, because they really do provide a good overall experience. The file sharing that goes on tends to be complementary to all of this because it is one way that people can further sample and figure out what they like, which they can then support within an authorized context (especially since music people like is played repeatedly).

With movies, on the other hand, you have less of a need to "sample," since the product is often watched just once. And there, convenience becomes king. People will flock to the most convenient offering (convenience being a combination of a variety of factors, which may differ per each individual, but generally include elements of ease of use, pricing, overall selection of movies, ability to view in multiple places, ability to watch at different times, etc.) For many, Megaupload represented the most convenient offering, and after that went away, other services, sometimes pay services, represented the "next best option." But, those other services are still at risk of newer more convenient services re-emerging and taking back those movie-watchers.

In those cases, both studies "make sense," but the lessons they suggest may be somewhat different than the lessons put forth by the supporters of the studies. The authors and supporters of the MPAA study suggest that this proves that shutting down unauthorized sites is a reasonable goal. I think that may be looking too narrowly at the results, and discounting how much people are focused on the "most convenient" solution. An even better solution is to provide more convenient offerings, which would win over customers from unauthorized sites even if they aren't taken down.

Finally, I wanted to respond to the IFPI, which appeared to completely freak out about the European Commission study, claiming it was flawed:

IFPI believes the JRC study is flawed and misleading. The findings seem disconnected from commercial reality, are based on a limited view of the market and are contradicted by a large volume of alternative third party research that confirms the negative impact of piracy on the legitimate music business.

The IFPI seems to be responding based on emotion, rather than fact, and possibly a misunderstanding of the data. The data directly supports the commercial reality, which is that digital music sales have been regularly increasing, which the IFPI itself records quite clearly. The decrease in overall recording industry revenue (the IFPI is misleading in talking about "the legitimate music business" because they really only mean the portion that is recorded music sales), comes from the decline in the sale of physical music: CDs. And the study only looked directly at digital distribution, not the impact on CD sales. The other studies that the IFPI refer to look at the connection between file sharing and CD sales, showing a general decline there, but much of that may just be from people shifting from physical (inefficient and wasteful) distribution to digital (efficient) distribution, in which case you'd expect a decline in overall sales, not because of "piracy" but because of less inefficient bundling and physical manufacturing and distribution costs.

The IFPI also repeats the BPI's misreading of the "Kantar Worldpanel" data. That is, they highlight that many people who fileshare don't buy anything, but then leave out the people who neither fileshare nor buy any music, thus setting up an apples and oranges comparison. They also cite the debunked HADOPI study, despite the fact that reports have already explained how the impact observed in that study likely had more to do with the introduction of new iPhones rather than HADOPI's three strikes policies.

But, really, the most ridiculous argument in the IFPI response is at the end:

The fundamental problem of the music market place remains as true as ever: why pay for music when you can get it illegally free?

The fact that they still believe this to be true is the real problem with the legacy industry in one simple sentence. They still think the only way to compete is on price. That's clearly not true, as seen by the IFPI's own data, which consistently shows that massive numbers of people buy all the time, even when they can get it quite easily for free from unauthorized sources. As noted above, it's really about convenience -- which is a result of a combination of factors, of which price is merely one. Creating more authorized services that provide greater convenience than unauthorized sites is the most effective way to fight back. If the IFPI actually focused on providing more value, rather than freaking out every time piracy was detected, we'd be talking about what an amazing time it was for music today, rather than having this same silly debate all over again.

In the end, despite the IFPI's whining, these two studies do add valuable data to the debate. And while they may appear to conflict, I don't think they really do. The results both make sense in context, and viewed from a wider angle they suggest, still, that the best way to respond to unauthorized file sharing is to make authorized service more convenient.

In the first part of this three part series, we talked about some research that suggested that the shutdown of Megaupload directly resulted in an increase in the sale and rental of digital movies. The study's authors used that to suggest that this proves that unauthorized download sites displace actual sales, and that there is likely a positive economic impact on copyright holders when properties like Megaupload are shutdown. However, as noted, another study that came out just after that one seemed to suggest something very different.

The second study, put out by the European Council, also is rather compelling, but argues something almost entirely contradictory: that there is no sign that infringement leads to a decrease in sales. In fact, it shows a very slight increase in sales. The researchers here were looking at a different market, however. They looked at digital music, and the impact of infringing downloads on authorized streams and downloads. The research found little impact:

Our results suggest that Internet users do not view illegal downloading as a substitute to legal digital music. Although positive and significant, our estimated elasticities are essentially zero: a 10% increase in clicks on illegal downloading websites leads to a 0.2% increase in clicks on legal purchases websites. Online music streaming services are found to have a somewhat larger (but still small) effect on the purchases of digital sound recordings, suggesting complementarities between these two modes of music consumption. According to our results, a 10% increase in clicks on legal streaming websites lead to up to a 0.7% increase in clicks on legal digital purchases websites. We find important cross country differences in these effects.

Going a bit further, they note:

Perhaps surprisingly, our results present no evidence of digital music sales displacement. While we find important cross country differences in the effects of downloading on music purchases, our findings suggest a rather small complementarity between these two music consumption channels. It seems that the majority of the music that is consumed illegally by the individuals in our sample would not have been purchased if illegal downloading websites were not available to them. The complementarity effect of online streaming is found to be somewhat larger, suggesting a stimulating effect of this activity on the sales of digital music.

Taken at face value, our findings indicate that digital music piracy does not displace legal music purchases in digital format. This means that although there is trespassing of private property rights (copyrights), there is unlikely to be much harm done on digital music revenues.

There are some significant similarities between the two different studies. Both go through the previous research into this issue and tend to cite almost all of the same papers (which is a good sign) to show what's been done before, and what the limitations are of that research. Both also focus on the question of online impact. That is, previous research has tended to focus on the impact on other modes of consumption: i.e., does downloading increase or decrease DVD purchasing, CD purchasing or movie theater sales. Both of these reports, however, look strictly at unauthorized downloading/streaming as compared to authorized downloading/streaming.

The specific methodologies differ somewhat, however. The MPAA paper compares overall sales/rentals vs. Megaupload penetration. The EC paper looks at direct clickstream traffic data as provided by Nielsen NetView, which collects direct data on exactly what sites people visit. The EC researchers, Luis Agular and Bertin Martens, then classified visits to different "music consumption" sites to see if they could isolate some sort of relationship between unauthorized streams and downloads and authorized ones. As with the MPAA study, there are some potential limitations there (mainly in sussing out the details of what people are actually doing on any particular page -- especially when some pages, such as Amazon.com, could result in other activity that is not music related), but the researchers do a good job trying to control for these limitations.

Also, it's good to see that in some cases the underlying data between the two studies agrees. Both, for example, show much greater usage of sites that have many unauthorized uses in Spain, for example. Unfortunately, other than Spain, France and Germany, the selection countries studied in the two reports is mostly different, so it's difficult to confirm other points between the two.

The EC study confirms another point that should be settled by now: those who use unauthorized sites are the biggest fans, by far.

The figures show that legal consumers (individuals that never clicked on an illegal music website during 2011) are, on average, active 2.5 months a year, while downloaders are active almost 6 months a year. Most interestingly, downloaders are also more active than legals both in terms of legal downloading (10% more clicks) and legal streaming (40% more clicks), as shown by their mean values of clicks. A positive relationship between legal and illegal consumption of digital music therefore emerges from this simple comparison of means. Comparing streamers and non- streamers (individuals that never clicked on a streaming music website during 2011) leads to similar conclusions. The figures show that streamers click more than twice as much on legal downloading websites, while their clicks on illegal downloading websites is 90% higher than for non-streamers. Again, this simple comparison of means shows a positive relationship between the different consumption channels and in particular between streaming and legal purchases.

Of course, as many will (rightfully) point out, this is just correlation data, which is useful, but not enough to prove any causal relationship. So the researchers go further. They use a number of variables try to separate out which users are most interested in music itself, by looking at whether they visit other music-related websites, such as music lyrics or music news sites, as well as other types of "music consumption" sites like video websites. Again, the data suggests a clear causal relationship.

Our results suggest that illegal downloading and legal streaming have both a positive and significant effect on legal purchases of digital music.

As you can see in the report, they continue to slice and dice the data a few different ways to test for other potential variables that might be creating this situation, and each time they fail to find any evidence of it. Instead, they see the same thing: engaging in unauthorized downloading appears to lead to more digital purchases, and the same for authorized streaming.

In the third piece in this series, we'll see if we can reconcile what appear to be very different findings in these two studies, as well as respond to the entertainment industry's freak out about this second study.

Over the last couple of weeks, we've seen a bunch of folks on all sides of the debates about file sharing point us to two studies that have come out, one of which supporters of greater copyright enforcement insist prove their point, and another which seems to show (yet again) that file sharing has little impact on buying habits. I wanted to take the time to look through both studies before writing about them, and since they came out so close together, we might as well do one post looking at both. As I started to write up a single post about it all, it got really, really long. So I'm breaking it into three separate posts. One about the first study, which argues that file sharing hurts sales, one that looks at the second study, which argues that file sharing does not hurt sales (and may actually increase sales), and then a third post, which tries to reconcile the findings of the two studies, while also responding to some of the criticism.

The first study is called Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales and is by Brett Danaher and Michael Smith. Smith, especially, has a long history of producing reports that copyright maximalists love. For example, both he and Danaher were responsible for a study last year claiming that the Hadopi 3 strikes program had increased iTunes sales. Unfortunately, a quick review of that report raised serious questions about the basis for those claims, as an alternative hypothesis (related to the sale of new iPhones) showed much more compelling data. I see his name on a lot of research sent around by the maximalists. It's worth noting, as well, that the study was effectively funded by the MPAA, since it was a project of a program run by Smith and funded by the MPAA. Oddly, the paper fails to disclose this tidbit.

This new study seeks to answer a question we've been asking over and over again: do any of these enforcement efforts actually increase sales? There has been evidence that greater enforcement has a small, but temporary, impact on decreasing infringement, but there was not that much data concerning actual sales. In fact, we've pointed to data (contradicting Smith's other report) that suggested Hadopi had done little, if anything, to increase sales. However, the data here has been limited, in part because there are so many other variables at play, so it's difficult to separate out the actual impact. Smith and Danaher try to use data from various studios to look at the impact on movie sales following the Megaupload shutdown.

To try to determine the impact of the shutdown of Megaupload, Danaher and Smith basically compare movie sales before and after the shutdown date in a few different countries that had very different Megaupload usage. For example, they (using Google Adwords data) suggest that Megaupload had 2% penetration in the US, but 17% in Spain. Then they look at what the impact was in terms of digital movie sales and rentals compared across the different countries, and whether or not there were more sales in countries that had more Megaupload usage. They use this to argue that the key difference is Megaupload usage. The end result is that countries that had more Megaupload penetration saw a greater increase in digital movie sales and rentals following the shutdown than the countries that had lower Megaupload penetration. As they note:

This difference is both statistically and economically significant. Our findings indicate that digital movie revenues for two studios were 6-10% higher over the 18 weeks following the shutdown (across 12 countries) than they would have been if not for the shutdown.

This chart highlights the basics: As you can see, the countries that had higher Megaupload penetration (Mexico, Belgium, France and Spain) all also showed distinctly more sales relative to the other countries, which had relatively lower Megaupload penetration. There's a similar chart for rental data as well, in which you see a similar pattern, though not nearly as strong a correlation.

While I've seen some criticism online of these findings, I actually think the basic research and methodology is fairly solid. Those who have jumped up and said "correlation is not causation" are ignoring the various methods that the researchers used to isolate the shutdown. However, I'm not sure that the conclusions are quite as meaningful as some have suggested. First off, we've seen very similar data when it came to decreases in file sharing after enforcement increases -- but the impact has always been shown to be temporary, until people settle in on a new method for infringement. It would make sense that some users of such a service, who don't want to go hunting for a new free option, will switch to an authorized service if it's available. But if they become aware of other services, they might also switch back. The amount of time the impact lasts will be a key thing to watch.

Of course, the other key thing that is left out of the picture in this study is the role of authorized services in all of this. Part of the reason for the growth of infringement on Megaupload in the first place was the dearth of compelling, simple, non-annoying, authorized services. The industry has, finally, been trying to increase those, and so it could be that people who couldn't find any legit services before looked around again after the shutdown and found newer, better services. While the authors of the report say the findings suggest that Megaupload usage decreases sales, a possible alternative explanation would be that the slow pace with which the industry rolled out authorized services was equally, if not more, responsible. Either way, this report is a useful contribution in understanding the impact.

In our next post, we'll explore the second study that came out even more recently, which appears to come to a very different conclusion.

Having taken a break from visiting the docket for the big Prenda showdown in California, I'd missed the latest interesting update in the case. As you may recall, Judge Otis Wright has ordered all of Team Prenda back to his court room on April 2nd, for what should be an entertaining hearing. Part of that order was a very explicit order to Brett Gibbs to serve everyone by the very next day, and to file proof of such service as of Monday of this week. Ken over at Popehat has the news on the proof of service explanation filed from Gibbs' lawyers, who appear to have (smartly) done everything they possibly could to serve everyone listed as carefully as possible.

Ken notes one interesting tidbit is that the lawyer, who showed up in court representing John Steele, Paul Hansmeier, and Paul Duffy, told Gibbs' lawyer, Andrew Waxler, that she was "unable to accept service" for those individuals. Ken's response:

Normally, if you were trying to avoid a federal judge's wrath, you'd be a little more cooperative than that. The refusal suggests to me that (1) they are trying to preserve their frankly specious lack-of-personal-jurisdiction argument, and/or (2) Steele, Hansmeier, Duffy, and the paralegal aren't cooperating with their counsel. You can stand on ceremony and insist on formal service, but all I can say is if Judge Wright were that mad at me, I'd want the proof of service to reflect that I happily accepted service to make things easier.

Another interesting question: how do you serve the "Alan Cooper of AF Holdings LLC" since most people are pretty sure that no such person exists? Well, here's how:

Service on "Alan Cooper, of AF Holdings LLC." The only "Alan Cooper" that we are aware of appeared in Court on March 11th. I understand that he claims that he is not affiliated with AF Holdings. We further understand that Mr. Steele may contend otherwise. In any event, since we know of no other Alan Cooper than the person that appeared in Court, I reached an agreement with his attorney, Paul Godfread, that I can serve "Alan Cooper" via email only care of Mr. Godfread's email address.... Pursuant to that agreement, we served Mr. Cooper c/o Mr. Godfread on March 15th. Mr. Godfread did acknowledge receipt of the email when he wrote back with the following remarks: "Please note that I do not represent Alan Cooper of AF Holdings. I only represent Alan Cooper of Isle, MN. I do not accept service on behalf of Alan Cooper of AF Holdings. I not agree to accept service on behalf of Alan Cooper of AF Holdings. Please also note that the most recent order specifically does not order my client, Alan Cooper of Isle, MN to appear."

Got that? So they serve the real Alan Cooper, who says he's not the fake Alan Cooper, and the judge has already made it clear that the real Alan Cooper need not appear. Steele may argue that these Alan Coopers are one and the same, but that's going to be quite a mountain to climb, convincing anyone that this Alan Cooper was actually a representative of AF Holdings.

As for the others? They served John Steele at his last known Florida residence (though I've heard he's moved elsewhere) as well as at a variety of different email addresses, though some of them bounced. They served Paul Hansemeir similarly, and after a number of bounced emails, did receive at least some sort of confirmation that a somewhat generic email address was "Paul's email address." As for Paul Duffy, they sent the letter to his last known address and email address -- which did not bounce. Paralegal Angela Van Den Hemel was similarly served, though somehow (it is not clear how) notified them that the email address they used is "no longer active." Mark Lutz -- whose name was remarkably absent during the first big Prenda trial (and who, unlike the others, appears to never have even replied to the original order) was also served similarly -- but they also left voice mails for him to get him to confirm his address. Lutz never returned the calls or acknowledged the emails, but not all of the emails bounced (same deal as with Peter Hansmeier).

For the companies, they just served the relevant principles: Duffy for Prenda Law and Steele Hansmeier, Lutz for Livewire, AF Holdings and Ingenuity 13.

At this point, it will be difficult for anyone to claim they were not properly served, but I wouldn't be surprised to see them try.

Either way, given their reactions to date, I'm curious how many people are actually going to show up in court on April 2nd.