Company Caught Downloading Competitor's Software Just Has To Pay The Fee To Buy One License
from the seems-more-reasonable dept
Here's an interesting case highlighted by Eric Goldman, involving two competing software companies. One of the companies, Real View, downloaded an infringing copy of the other company's (20-20 Technologies) software via a file sharing network. It seems this part is not contested. Real View then used the software to learn about what 20-20 was offering, and modified its own software to include some similar features, and then used a different business model which undercut 20-20's business model quite a bit. 20-20 sued for infringement both over the download and over the software. The jury, quite reasonably, said that the new software didn't violate anyone's copyright, as reverse engineering similar features to a competitor is not infringement.However, since the initial download was infringing, the jury did have to rule on the damages there. I'll let Eric summarize this part:
20-20 argued that Real View should pay $38M, which is the amount 20-20 spent to buy a competitor company. Failing that, 20-20 argued that Real View should pay $2M due to "price erosion." Real View said it should pay 20-20's standard license fee of $4,200--although apparently 20-20 wouldn't have licensed the software at all to Real View, making the license fee calculation somewhat hypothetical. Real View also admitted to about making three-quarter million dollars in profits from its own licenses.This seems perfectly reasonable, and it's too bad that the jury seemed to have completely ignored the basics and seems to want to punish Real View for competing legally. Thankfully, the judge saw through that and reduced the jury's award. Of course, as we've seen with the remitittur process in the Jammie Thomas case, that allows 20-20 to "reject" the remitittur and get a new trial -- which appears to be exactly what 20-20 is doing. Again to Eric:
The jury came back with an award of $1.37M. In this ruling, the judge issued a remittitur down to $4,200, holding that Real View only was liable for the license fee for the unauthorized download--everything else wasn't proved or was irrelevant. For example, the court rejects all of 20-20's arguments about Real View's "saved development" costs as speculative. Perhaps more importantly, 20-20's claims of price erosion were irrelevant; any price erosion occurred due to Real View's non-infringing competitive software, not the infringing software download itself, and 20-20 didn't prove the causal link between the two well enough. Similarly, the court says 20-20 can't get any of Real View's profits from the non-infringing competitive software simply because it was facilitated by the illegal download.
This case is interesting because it highlight how copyright owners can easily overclaim damages. Even if one step in the defendants' process involving infringing activity, that doesn't mean that the copyright owner gets to disgorge the defendant of all of its profits. For example, if a defendant impermissibly scrapes a plaintiff's website--making unauthorized copies into RAM while doing so--but the defendant's resulting publication doesn't infringe the plaintiff's copyright, arguably this case would take the defendant's profits off the table, leaving only the potentially meager and overly speculative damages from the illegal download.I agree, but I also think it's interesting because it's rare that we see copyright cases where they argue over actual damages, rather than statutory damages. Copyright holders love to jump straight to statutory damages, because they tend to be so high (and totally out of proportion with actual damages). That's why something like this ruling is interesting, as it suggests (again) that perhaps the payment for downloading music should be the cost of licensing it for personal use -- or around $1. But as with the Jammie Thomas and Joel Tenenbaum trials, juries seem to massively inflate what they'd like to award for damages, even if there's no evidence that the downloads directly caused any real or significant damage.
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Filed Under: actual damages, competition, copyright, license, statutory damages
Companies: 20-20 technologies, real view
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Somebody needs to explain this to a few more courts.
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If I write a book named Harry Blotter and the Deadly Hallows, about a wizard who lives a Hogblorts School of Witchcraft and Wizardry, who is looking for a bunch of things within which a soul was hidden and destroys them to kill an evil wizard named Voldegort...I can't be sued because I reverse engineered the story and came up with better, cooler names?
Really? So you can copy anyone by looking at what they did, then adding their best work into yours and claiming it is your own...and that DOESN'T infringe on copyright? Ok, so why should anyone bother to do their best work then, if it will only be stolen by the next jackass who has no brain, but a good ability to copy? How do the real intellectuals who are creative and groundbreaking ever protect their work?
I don't mean frivolous lawsuits, but this seems quite legit. One company develops something, but then another, whose product sucks, copies everything, claims it is their own, then make money because they market bigger.
If that is capitalism, then why bother trying to save it?
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I don't think you understand what reverse engineering means.
Here's a good place to educate yourself: http://digital-law-online.info/lpdi1.0/treatise25.html
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parody is protected by fair use.
FTFY
and , incidentally if the law had been as you like to believe it is in the 16th century nwe would now not have half of Shakespeare's plays.
IF the law really is as you believe then it needs to be repealed, urgently!
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For your analogy to work you'd have to be able to reverse engineer the way Harry Potter books make their readers feel without actually reading the books and then write your own book that make readers feel that way. Like having a boy hero of uncertain past come of age by overcoming a great world crisis (where haven't I heard that before).
You see they didn't have the code, the actually copyrighted part of the software, to work from. The things the software does are not copyrighted because copyrights do not protect ideas the protect specific expressions. So without copying a specific expression there is no copyright infringement.
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Re: Harry Blotter...
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Does this mean that 20/20 stood up in court and claimed that it was cheaper to deploy the pirated version than the legal version, even above and beyond the cost of the licenses? That's a crazy argument to put voice to as a representative of a software company. No wonder they are getting killed in the market and suing...
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Which is precisely why the copyright groups are going for statutory fines. To do otherwise means they have to actually lay claim to how much damage was done through downloading. Meaning nearly nothing. Going to statutory fines is just excessively gouging as no one in file sharing is turning a profit.
The reality is the cost would be a dollar and not worth going to court over. Those musicians that feel different need to take it up with their label who obviously shafted them and convinced them it was a good deal.
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I say accepted because the "copyright industry" has been doing fantasy accounting for so many years that I'm not sure they'd know the real thing if it bit their leg off.
Still, I'm sure it would be far, far less than $1,
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If the RIAA were to assert actual damages, they would say that a person who participates in a download/upload swarm is liable for every other single participant's activity as well as their own. This is what many industry apologists said about Jammie Thomas - that she should pay for everyone who might have downloaded the same songs from her, times whatever the most obscenely punitive multiplier might be. But if the RIAA got more than one person into court, they'd be claiming multiple people responsible for singular acts by individuals over and over again.
...Which is why taking their calculation methods to their logical ends means concluding that the big recording companies would be making more than the GDP of every nation in the world combined.
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It seem kind of insane, after you think "I really would download a car"
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Re: It seem kind of insane, after you think "I really would download a car"
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I would say that you and Mr Goldman are taking the "wishful thinking" train to the wrong station (again).
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How is that even remotely fair as a fine?
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Second, if someone did get the true recipe for Coke syrup, and did distribute it online, the repercussions for the drinks giant could be huge - literally to the point of putting them out of business in many markets. Considering they have 35 billion (yes, with a B) in sales in 2010, and that the company has been around for a very, very long time, and should normally be around for a very, very long time in the future, the potential harm is, well, insane.
Now, as for the 150,000 times figure... no, that would be appropriate. That's why the copyright law has a low and high number, not something arbitrary.
Let's play a game. How much do you think the rights to a million selling album is worth in the US alone? Let's say it generates 10 million dollars in sales in it's first year, and 10 million dollars more in the next 30 years. Now, what would a company pay to license those rights to be able to sell it? A million? 2 million?
What would they pay if they had to share the licence with another company? Half a million?
What would happen if the other company was giving the product away for free, effectively diluting the market? What would they pay for the licence then? $20?
See, what Thomas and others do in proving the content and distribution mechanism for piracy is to lower the value of the license to sell the product, which in turn lowers what the artist can reasonable market that global license for.
So in the case of Thomas, assigning a value of $1 is looking at the wrong thing: What was lost wasn't a single copy of the song, rather what is lost is the value of the distribution rights... and that is certainly more than $1.
Think about it. Don't answer fast, actually take a moment and think. I know, Mike doesn't teach you to think for yourself, but you should try it. Where are the true losses in the music industry? The movie industry? If they cannot license the product because the market is flooded (this is particularly true for secondary / foreign markets), then income is lost.
Think.
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Music industry is down (in dollars) 58% in 10 years.
Yes, tanking.
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Yet grosses are up. This is a bad thing?
Oh, and where did you get your figures from? Are they worldwide or just the US box office? Do they take into account independent cinemas or just the major chains? What about secondary markets and new services that didn't exist 16 years ago? (etc., etc.)
"Music industry is down (in dollars) 58% in 10 years."
No, as is regularly explained to you - the recording industry and the music industry are totally different things.
"Yes, tanking."
In the alternate reality in which you seem to reside, yes. Here in our reality, no.
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If anybody got the real Coke syrup recipe and posted online, first you need to see if it was acquired in an illegal manner, someone could have guessed it through reverse engineering and come up with the true one is that illegal? nope.
Breaking into some office to get that recipe that would be illegal.
There is also the history of how Pepsi started, is rumored that they got their hands on the original recipe, did Coca Cola died?
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Statutory damages are generally used for deterrence and punitive measures, if justice was to be served they would be a percentage of what one earns not some fixed value that punish the poor more than the rich, it should be painful regardless of who you are and how much you make so no a fixed value that doesn't take into account how one would be affected by it has little value as a deterrent to people who would just abuse the law, first the people who can't pay it don't give a damn and second the people who can afford it doesn't feel the pain enough, which leaves a small middle class of people who would be deterred by it.
But most importantly, those things are decided by society, not by congress, you can try and say copyright infringement is a crime however if the majority of people don't see it, you have no support and little to no chances of changing social behavior through enforcement of unpopular laws, and trying to enforce can only generate anger and it grows everyday a little bit more, I once thought copyright was ok, ten years later I believe it should end and more and more people are starting to feel the same, it could take another 20 years but if you keep that up, copyright will end once the children becomes the legislators of the future.
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Doesn't matter - see the whole Wolverine case. The only way the guy got a copy of the unfinished movies was that someone had to steal it, plain and simple. He gets 1 year in jail, and Mike writes sob stories about how it's unfair.
More importantly, face the fact: Just like piracy of anything else, it's the result that matters, not the method used to get there. Once the information is "out there", there is no way to drag it all back in.
" someone could have guessed it through reverse engineering and come up with the true one is that illegal? nope."
People have tried for 100 years or so, and they keep failing. There is a whole lot more to Coke than most realize.
"It is a win for society and it is a win for everybody who needs to use that resources to make money, it expand the market and it creates markets, "
It's fine, but when it's based on taking someone else's work and giving it away for nothing, it's a basic failure.
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Except it wasn't. I won't waste my time explaining definitions of words to you again, nor berating you for your lack of facts or imagination - I'm tired of it.
"Mike writes sob stories about how it's unfair."
No, he didn't. He wrote stories about how the studio could have handled it better, how there was unlikely to be real damage from such an unfinished print of the film, and how the movie ended up being far *more* successful than expected following the leak. He wrote stories about how the studio could use the leak to increase their profits, not exactly a "sob story". Unless you count him writing about how jailing the guy won't achieve a damn thing a "sob story".
Could you link to the fictional version of Techdirt you seem to be reading? It has to be another site, since you regularly attack people for claims they didn't make, and often the exact opposite of what they truly claimed. It would be interesting to compare these stories with the ones that exist on this site.
"Once the information is "out there", there is no way to drag it all back in."
Yet Wolverine was a box office hit, even though it had been "pirated" so many times. In fact, every film that's been a box office success in the last 30 years has also been heavily pirated in some way. It's almost as if there's other factors involved than the ones you want to scapegoat when a product fails...
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Paul, this isn't your typical "rip a DVD" thing. Break and enter, obtaining a "copy" by theft. You can play all the word games you want, this was theft, plain and simple.
"he didn't. He wrote stories about how the studio could have handled it better, how there was unlikely to be real damage from such an unfinished print of the film, and how the movie ended up being far *more* successful than expected following the leak."
Yup, basically, he said it was unfair for the guy to go to jail, because he did such a good thing in promoting the movie. Glad we agree.
"Yet Wolverine was a box office hit, even though it had been "pirated" so many times. In fact, every film that's been a box office success in the last 30 years has also been heavily pirated in some way."
Oddly, I provided a story to Mike this week (which he seems to have ignored... or perhaps he is on holiday time auto pilot) that shows there is no correlation between box office and number of times pirated. In fact, in the top 10 pirated movies for 2011, one of them had a very small box office and was pirated more than many of the top grossing movies.
" It's almost as if there's other factors involved than the ones you want to scapegoat when a product fails"
Nobody is scapegoating piracy and ignoring other factors. It's just ONE factor of many. But it is a factor. You need to give it up and accept it as the truth. It doesn't take away from many other factors... but one thing is clear: Movie ticket sales are at a 16 year low, continuing a trend that started when the economy was booming - at the same time that piracy is booming. It isn't hard to see the potential relationship between the two.
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You are very entertaining! Thanks for posting here, keep it up.
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"Let's say it generates"
"what would a company pay"
"What would they pay"
"What would happen"
"What would they pay"
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This line write here, I call it the hypothetical divide. It's where you transition smoothly from posing hypothetical questions with no factual answers other than the ones you made up on the spot to pretending the numbers you made up on the spot are the facts. You then go on to state your assumptions as if they were certainties you've already proved:
"is to lower the value of the license to sell the product"
"and that is certainly more than $1."
So yes, we should all take a moment to think and observe that you've actually demonstrated nothing. You made large number of assumptions, posted absolutely no evidence that any of them are true, and simply proceeded with your conclusion as if they were true. I know the industries you're white-knighting don't teach you to back up your assumptions with valid evidence but you should try it. What are the true losses in the music or movie industry? Not your made up example 'losses' that aren't real or their made up example losses that aren't real. You have to show that actual income is lost or at least provide evidence demonstrating that there's a high probability that income was lost before declaring that 'income is lost.' Before you try to claim otherwise, no, the existence of infringement proves no such thing a priori.
Think.
P.S.
"That's why the copyright law has a low and high number, not something arbitrary."
Copyright law's low and high numbers are arbitrary unless you can produce some formula by which they were determined the only other option is that they were arbitrarily established at the whim of the authors of the law.
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Flat - GET IT?? har har!
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The rights are worth nothing, it is an imaginary construct created with the statute of Anne. Lets call copyright what it is, it is an anti-right, an attempt to control free speech. The content industry's entire business model is built on the heels of that. The fear governments have of the free flow of information has been around for a very long time. The invention of the printing press allowed for the dissemination of massive quantities of knowledge, and had to be controlled.
Looking at it from that perspective I now understand why so many in the government want SOPA.
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Another thing whats your address? I want to send you a "Troll Harder" tee shirt.
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I think treble damages would be about right. $12,600. At least that would make the infringing company pay SOME penalty for their actions.
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Which is an anti-competitive practice - for which the first company shouold be prosecuted.
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Reverse engineering means figuring out HOW something is done, not what it is. From the Coke example, it would mean something like using mass spectrometry to figure out the recipe from a bottle of Coke. All they did was taste some, see that it has a certain flavor, then duplicated the flavor (or in this case flavors=features).
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Since the court determined that reverse engineering wasn't illegal in this case, it really doesn't matter how Real View got it's copy.
But since Real View did get their copy of the software illegally, that issue has to be resolved. It seems to be all other factors about what they did with the software afterwards are irrelevant to that specific case. Those other issues may still warrant cases of their own, but it wouldn't matter if the software was obtained legally or not.
So the fine should simply be put on the illegal download, IMO.
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Is there only 1 case of infringement here?
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I really hate reading stuff like this. Might as well say "If a defendant impermissibly views a plaintiff's website--making unauthorized copies on their retinas while doing so".
The idea that RAM constitutes infringement shows such a complete lack of understanding of what infringement is and how technology works that it leaves me baffled.
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Actual damages for download
But each unauthorized download does not represent a lost sale. Statisticians have claimed that, on average, for each of seven unauthorized downloads there would have been a single purchased download. So arguably the actual damages for download of a typical mp3 would be 5 cents, not 99 cents.
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Of course the issue is that police aren't involved (and that's not a bad thing) and the cost of bringing these 'pirates' to court are certainly more than the actual damages.
So there would be little to no incentive for the rights holders to take casual downloaders to court if they couldn't swing those huge fines around. How else is it going to be worth their while?
Of course what they should really be doing is listening to their customers and what they want, but that's probably wishful thinking.
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A dozen people too stupid to get out of jury duty: Would you take their advice on anything? Geez.
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[soapbox]
I get annoyed with people saying this kind of thing.
I have been summoned for jury duty twice, once I wasn't chosen and the other I served on a malpractice lawsuit. I am most certainly smart enough to have gotten out it if I wanted too, but I didn't, because I feel like it's my civic responsibility. It's like voting, if you don't vote, then I really don't give a shit about your opinions concerning our elected officials.
[/soapbox]
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I've pretty much decided �I think� more-or-less, probably, that the next time I get summoned for jury duty, I'm going to refuse to submit to the administrative search at the courthouse door.
Maybe you think it's your civic responsibility to play charades. I don't.
When you read the opinions on administrative searches, the judges all say, �Oh, you consented. You didn't have to get on that airplane. You didn't have to get on that train. You didn't have to go into that stadium. You didn't have to go into that building. You consented to that search.�
Well, I don't feel like consenting to search at the courthouse door anymore. Not if the judge is ordering me to enter that building. Then it's no different than if the judge is ordering me to �consent� to an �administrative� search.
It's not like the judges pay attention to the jury's advice these days, anyhow.
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That does provide an interesting situation, doesn't it.
It's been awhile (2007, I think) since I had jury duty. I wasn't searched at all on entry - just a simple pass through a metal detector to make sure I wasn't carrying weapons.
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You fail to consider that the amount the jury awards is for more than simply what a download would have cost. There are several factors that go into determining the award. For example, if the infringement was willful, part of the award is meant to punish the defendant's intentional wrongdoing. If you want to say something intelligent about jury awards, you should do some basic research on what factors are considered in coming up with those numbers. Simply saying that it should be about $1, the cost of a download, shows you haven't done any research on the issue.
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Response to: average_joe on Dec 30th, 2011 @ 7:36am
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Re: Response to: average_joe on Dec 30th, 2011 @ 7:36am
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So... that means you have, right? Would you kindly show us your research on the issue, then?
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