No, The New Agreement To Share Data Between US And UK Law Enforcement Does Not Require Encryption Backdoors

from the sounds-messed-up-but-hardly-changes-anything dept

It's no secret many in the UK government want backdoored encryption. The UK wing of the Five Eyes surveillance conglomerate says the only thing that should be "absolute" is the government's access to communications. The long-gestating "Snooper's Charter" frequently contained language mandating "lawful access," the government's preferred nomenclature for encryption backdoors. And officials have, at various times, made unsupported statements about how no one really needs encryption, so maybe companies should just stop offering it.

What the UK government has in the works now won't mandate backdoors, but it appears to be a way to get its foot in the (back)door with the assistance of the US government. An agreement between the UK and the US -- possibly an offshoot of the Cloud Act -- would mandate the sharing of encrypted communications with UK law enforcement, as Bloomberg reports.

Social media platforms based in the U.S. including Facebook and WhatsApp will be forced to share users’ encrypted messages with British police under a new treaty between the two countries, according to a person familiar with the matter.

The accord, which is set to be signed by next month, will compel social media firms to share information to support investigations into individuals suspected of serious criminal offenses including terrorism and pedophilia, the person said.

The reporting here is borderline atrocious. The article insinuates that this agreement will force Facebook and WhatsApp to turn over decrypted communications or install a backdoor. It won't. The platforms may be compelled to turn over encrypted messages but all UK law enforcement will get is encrypted messages. The reporting here makes it appear as though social media platforms are being compelled to provide plaintext. They aren't.

Sharing information is fine. Social media companies have plenty of information. What they don't have is access to users' encrypted communications, at least in most cases. Signing an accord won't change that. There might be increased sharing of encrypted communications but it doesn't appear this agreement actually requires companies to decrypt communications or create backdoors.

Facebook has already issued a statement saying it opposes any plan that would require the creation of backdoors. It points out the Cloud Act does not mandate backdoors. While it does give the US government permission to engage in extraterritorial searches of US companies' data stores located overseas, it does not demand companies decrypt data or communications for it.

The other factor pointing in the direction of the UK law enforcement beneficiaries ending up with useless garbage is the Cloud Act itself. UK tech lawyer Graham Smith points out the Cloud Act requires agreements like these to be "encryption neutral," meaning neither side can mandate backdoors. Consequently, UK and US government agencies will get what they get when utilizing this new agreement. This means in some cases demands for data and communications will produce incomprehensible text, rather than anything useful.

That said, the UK government dream of encryption backdoors hasn't died. The Bloomberg article quotes UK Home Secretary Priti Patel, who has previously claimed encryption "empowers criminals." This is pretty much the same thing her predecessor, Amber Rudd, said. The less-than-implicit suggestion is that companies providing encrypted communications to users are siding with criminals, rather than the forces of law and order. Any perceived benefits of secure communications apparently pale in comparison to the government's "right" to access the content of communications.

This new accord likely won't (and probably can't) mandate backdoors -- no matter how the Bloomberg article skews it. But an international partnership created solely for the purpose of accessing communications and data applies a lot more pressure than parallel efforts from both sides of the pond.

Filed Under: cloud act, data sharing, encryption, law enforcement, priti patel, uk, us
Companies: bloomberg, whatsapp

The Ultimate Bad Take: Bloomberg's Leonid Bershidsky Thinks A WhatsApp Vulnerability Proves End To End Encryption Is Useless

from the no,-no,-wrong,-wrong dept

Bloomberg has really been on a roll lately with getting security stories hellishly wrong. Last fall it was its big story claiming that there was a supply chain hack that resulted in hacked SupermMicro chips being used by Amazon and Apple. That story has been almost entirely debunked, though Bloomberg still has not retracted the original. Then, just a few weeks ago, it flubbed another story, claiming that the presence (years ago) of telnet in some Huawei equipment was a nefarious backdoor, rather than a now obsolete but previously fairly common setup for lots of equipment for remote diagnostics and access.

The latest is an opinion piece, rather than reporting, but it's still really bad. Following yesterday's big revelation that a big security vulnerability was discovered in WhatsApp, opinion columnist Leonid Bersidsky declared it as evidence that end-to-end encryption is pointless. This is, to put it mildly, a really, really bad take. The whole article is a confused jumble of mostly nonsense, mixed with stuff that was already widely known and irrelevant:

The discovery that hackers could snoop on WhatsApp should alert users of supposedly secure messaging apps to an uncomfortable truth: “End-to-end encryption” sounds nice — but if anyone can get into your phone’s operating system, they will be able to read your messages without having to decrypt them.

Um. Duh? The whole point of end-to-end encryption is that it protects messages in transit and not at rest. That's the whole "end-to-end" bit. At the ends it's decrypted. You can also encrypt content on a device -- this is what the FBI is so annoyed about regarding Apple's iPhone encryption -- but to argue that end-to-end encryption is pointless because it doesn't do what it's not supposed to do in the first place is crazy.

It gets worse:

“End-to-end encryption” is a marketing device used by companies such as Facebook to lull consumers wary about cyber-surveillance into a false sense of security.

It is true that some people confuse "end-to-end encryption" with perfect security, which it is not. But it is simply wrong (laughably so) to say that it's merely a "marketing device." In actuality, end-to-end encryption is a hugely important part of what keeps your data protected when you communicate online. It provides real security for the conditions it's designed to provide security for -- and not other conditions, such as the one the hack takes advantage of.

Bershidsky complaining about on-device malware reading your WhatsApp messages as being evidence that end-to-end encryption is pointless is like arguing that you should never wear seatbelts because they won't protect you if you drive off a cliff. Seatbelts protect you in lots of common scenarios, but might not protect you in extreme scenarios like driving off a cliff. And end-to-end encryption protects you in lots of messaging scenarios, but won't protect you if someone can install something directly on your device.

The tug of war between tech firms touting end-to-end encryption as a way to avoid government snooping and state agencies protesting its use is a smokescreen. Government and private hackers are working feverishly on new methods to deploy malware with operating system-wide privileges.

It's not a "smokescreen." It's dealing with one type of attack. It's bizarre to suggest that end-to-end encryption is useless because there are some advanced ways that people can get around it, ignoring all the other ways that it helps protect most people. End-to-end encryption does much more to protect tons of people, and saying that we can ignore it just because it doesn't stop all attacks is really dangerous.

Bloomberg should be ashamed to be publishing such dangerous nonsense. It is the equivalent of anti-vax nonsense, telling people not to protect themselves.

Filed Under: at rest, cybersecurity, encryption, end to end encryption, in transit, leonid bersidsky, vulnerabilities
Companies: bloomberg, facebook, whatsapp

Obsolete Hot News Doctrine Back In The News As Bloomberg Is Sued For Reporting Too Quickly

from the oh-come-on dept

It's been a few years since we've really talked about the Hot News doctrine, which was a mostly obsolete and, frankly, bizarre attempt to turn the idea of publishing a similar news story too quickly after the original reporters broke the story into a form of "misappropriation." It stems from the International News Service v. Associated Press case from a century ago (literally: 1918), in which the AP argued that even though there is no copyright in facts, having INS release a similar story too quickly to AP's articles was a form of "misappropriation" of its "hot news." Incredibly, the court agreed. However, multiple later cases, plus the entire rewriting of copyright law in 1976 had most people believing that the entire concept of "hot news" was obsolete and effectively dead.

Indeed, in 2003, Judge Richard Posner suggested that the entire concept "can be jettisoned" and he later committed to that in some of his rulings. However, around 2010, a variety of hot news cases popped up, and yet basically all of them have been losers (the one exception I can think of being a default judgment where the defendant didn't even show up).

Still, over the last few years it felt as though we were back to the general feeling that "hot news" was a dead letter. Except... DC news organization Capitol Forum is now suing Bloomberg under the Hot News doctrine, in yet another attempt to revive the silly concept. The complaint makes a valiant effort, but one that seems likely to fall way short. The lawsuit also argues copyright infringement, and we'll get to that in a second, but the attempt at crying "hot news" seems particularly week:

In addition to violating Capitol Forum’s copyright protection, Bloomberg’s conduct also violates Capitol Forum’s proprietary rights under the common law tort of “hot news” misappropriation. This doctrine prohibits free riding by competitors. It prohibits a direct competitor from acquiring and republishing time-sensitive news and analysis generated by its competitor and intended only for its competitor’s subscribers and authorized recipients.

The timeliness of business and financial news reporting is essential to Capitol Forum’s subscribers. Bloomberg competes directly with Capitol Forum for subscriptions by end-users, and Capitol Forum and Bloomberg’s products are marketed and sold to the same customer base. Bloomberg’s conduct in this regard necessarily diverts business opportunities from Capitol Forum.

This free riding on Capitol Forum’s reports impairs Plaintiff’s incentive to provide that reporting as an exclusive service to its existing subscribers and to potential new clients. To the extent that Plaintiff is deprived of the intended exclusivity of its reports as a result of its being made available by Bloomberg, such conduct by Bloomberg reduces the value of the reports to Capitol Forum’s subscribers. It has already caused Capitol Forum subscribers to cancel their subscriptions because they can obtain the same Capitol Forum news and analysis from Bloomberg’s First Word service. If left undisturbed, Bloomberg’s conduct inevitably will, among other things, adversely affect Capitol Forum’s willingness to continue to make substantial investments in generating and distributing such reports

This argument may have been successful in the 1920s, but given all of the precedent against this kind of thing between now and then, it seems like quite a stretch to think that courts will be willing to bring back Hot News -- especially given the 1976 Copyright Act, which more or less pre-empts any state law attempts to create copyright-like regulations.

So what about the copyright claims in the lawsuit? That may come down to specifics, but from Capitol Forum's own description of what is happening, it seems like a difficult case to make:

On numerous occasions, Bloomberg has impermissibly solicited and obtained Plaintiff’s proprietary reports, has copied and quoted the most creative and original aspects of the reports, has published its own summary or abstract of the content of the reports in the form a “news alert,” and has distributed these “news alerts” to its own subscribers on its “First Word” news service. While Bloomberg cites Capitol Forum as the source of its summaries and abstracts, it does not undertake creative or journalistic efforts of its own to transform Plaintiff’s work into something new or different from Capitol Forum’s original report. Other than including a current market price or a reference to a past article, Bloomberg does not add any of its own analysis or contribute any meaningful reporting to Plaintiff’s work. Bloomberg’s “news alerts” simply extract the key information from Plaintiff’s reports, and repackage Capitol Forum’s work in a bullet-point form for a quick read. The purpose of Capitol Forum’s reports and Bloomberg’s “news alerts” are precisely the same: to inform their subscribers of Capitol Forum’s copyrighted and proprietary reporting. Bloomberg’s conduct constitutes direct infringement of Plaintiff’s exclusive right under the Copyright Act to reproduce, use, and control its copyrighted works.

The filing, notably, provides no actual examples of the copying. And from this description, it certainly sounds quite possible that Bloomberg is not infringing at all. Quoting other sources is likely to be fair use, and repackaging their work "in bullet-point form for a quick read" could certainly be seen as transformative in a fair use analysis. Indeed, Capitol Forum flat out admits above that Bloomberg has "published its own summary of the content, which again suggests fair use and not infringement. The whole thing seems to be a situation of Capitol News trying to plead a hot news claim under copyright law (which isn't going to fly at all). Of course, specific examples might result in a different analysis, but if the infringement argument was strong, you'd think the actual complaint would demonstrate it much more clearly (including identifying actual examples of the copyright-covered content being copied).

There are two other elements in the filing that seem worth commenting on. First, in an attempt to claim that this infringement is "willful" Capitol Forum points to an important fair use case (also filed against Bloomberg) in which the 2nd Circuit ruled that Bloomberg reposting an entire earnings call was fair use (i.e., a win for Bloomberg). However, Capitol Forum is pointing to Bloomberg's filings in that case saying that there the company "conceded that the fair use exception does not apply when the copyrighted material is based on an analysis—and is not just reporting 'facts.'" That... seems unlikely to be a fair or accurate statement of Bloomberg's position. There are many cases in which fair use applies to analysis and not just facts.

There's also this:

Bloomberg’s knowledge is also demonstrated by Bloomberg BNA’s copyright guideline, which states that it is a copyright violation to summarize a Bloomberg article.

And the simple response there is that Bloomberg BNA's internal guidelines are (a) legally meaningless and (b) bullshit. That's not an accurate statement regarding copyright law. It is not a copyright violation to summarize anyone's articles.

The other interesting element of the filing is the claim of vicarious infringement, in that Capitol Forum argues that a Bloomberg employee, Joshua Fineman, induced a Capitol Forum subscriber to pass along its news alerts.

For example, commencing around December 2016, and continuing through December 2017, Joshua Fineman of Bloomberg’s First Word news service induced one of Capitol Forum’s subscribers, a West Coast hedge fund, to provide him with Capitol Forum reports in exchange for providing the hedge fund with market information that it did not possess. This arrangement continued until Capitol Forum learned of its subscriber’s actions and demanded that they stop. The hedge fund informed Mr. Fineman that it would no longer agree to trade information with him. In response, Mr. Fineman acknowledged that their actions were illegal and stated that he would not put the hedge fund in that position again. Despite this recognition of illegality, Mr. Fineman continues his infringing activities with respect to other Capitol Forum subscribers. Mr. Fineman continues to induce and encourage other Capitol Forum subscribers to directly infringe Capitol Forum’s copyright protections by soliciting those subscribers to send Capitol Forum copyrighted articles to him.

As such, Mr. Fineman and Bloomberg have induced, caused, encouraged, and materially contributed to the direct infringement by Capitol Forum’s subscribers. Mr. Fineman and Bloomberg are aware that the Capitol Forum material is copyrighted and that Capitol Forum subscribers who transmit these reports violate Plaintiff’s copyright by sending them to Bloomberg.

It is possible that this part of the filing might create a bit more of a headache for Bloomberg. Even if the practice of forwarding such emails is not just standard across industry, but practically second nature to almost everyone, it might still be seen as infringing. Still, it does seem like Capitol Forum's bigger issue, then, would be with the subscribers who are infringing on their works directly by distributing its alerts, but (not surprisingly) the company probably is less interested in suing its own customers -- especially when they likely have smaller pockets that Bloomberg.

No matter what, this will be an interesting case to follow, but hopefully not one that gets very far, especially in its attempt to revive "Hot News."

Filed Under: breaking news, copyright, hot news
Companies: bloomberg, capitol forum

Detailed And Thorough Debunking Of Bloomberg's Sketchy Story About Supply Chain Hack

from the bloomberg-has-some-'splaining-to-do dept

Last week we noted that the general consensus at this point is that Bloomberg screwed up its story about a supposed supply chain hack, in which it was claimed that Chinese spies hacked Supermicro chips that were destined for Apple and Amazon. Basically everyone is loudly denying the story, and many are raising questions about it. In our comments, some of you still seemed to want to believe the article, and argued (without any evidence) that the US and UK governments, along with Amazon and Apple, were flat out lying about all of this. I pointed out a few times that that's not how things work. Also untrue is the idea that many floated that the US government was forcing Apple and Amazon to lie. That also is not how things work (for those who don't believe this, please check your First Amendment case history).

Anyway, over at Serve the Home, Patrick Kennedy has one of the most thorough and comprehensive debunkings of the Bloomberg story, detailing how incredibly implausible the story is. Kennedy's write-up is very detailed, including lots of pictures and detailed drawings of how networks are set up. Here's just a little snippet as an example:

The next inaccuracy to this paragraph is the line describing BMCs as “giving them access to the most sensitive code even on machines that have crashed or are turned off.” That is not how this technology works.

Baseboard management controllers or BMCs are active on crashed or turned off servers. They allow one to, for example, power cycle servers remotely. If you read our piece Explaining the Baseboard Management Controller or BMC in Servers BMCs are superchips. They replace a physical administrator working on a server in a data center for most tasks other than physical service (e.g. changing failed hard drives.)

At the same time, the sensitive data on a system is in the main server complex, not the BMC. When the BMC is powered on, hard drives, solid state drives, the server’s CPU (for decrypting data) and memory are not turned on. If you read our embedded systems reviews, such as the Supermicro A2SDi-16C-HLN4F 16-core Intel Atom C3955 mITX Motherboard Review, we actually publish power figures for when a system is on versus when the BMC only is active. In that review, the BMC powered on utilizes 4.9W of power. SSDs each have idle power consumption generally above 1W and hard drives use considerably more even at idle. The point here is that when the server’s BMC is turned on, and the server is powered off, it is trivially easy to measure that the attached storage is not powered on and accessible.

When a server is powered off it is not possible to access a server’s “most sensitive code.” OS boot devices are powered off. Local storage is powered off for the main server. Further encrypted sensitive code pushed from network storage is not accessible, and a BMC would not authenticate.

This line from the Bloomberg is technically inaccurate because a powered off server’s storage with its sensitive code has no power and cannot be accessed.

There is much, much more in the piece, and it is well worth reading if you still think Bloomberg was on to something with its story.

So far, Bloomberg has stood by its story, even though it increasingly seems clear that its reporters -- Michael Riley and Jordan Robertson -- were in over their heads. It is possible that something questionable happened, but it almost certainly did not happen the way they described it. The fact that Bloomberg has refused to recognize any of these concerns is incredibly damning for Bloomberg's reputation.

Filed Under: bmc, china, chips, hack, jordan robertson, journalism, michael riley, reporting, supply chain
Companies: amazon, apple, bloomberg, supermicro

Apple Demands Retraction Of Bloomberg's Big 'Chip Infiltration' Story; Bloomberg Has Some Explaining To Do

from the not-looking-good dept

A few weeks ago, Bloomberg published a giant story claiming that Chinese spies did a somewhat daring supply chain hack on American big tech firms. The gist of the story was that servers from Super Micro had hidden chips that somehow were then used by Apple and Amazon (not to mention the US government), that allowed someone in China to access certain data. The story was a blockbuster that got everyone talking. But, almost as soon as it came out, a bunch of people started raising questions about the story. While the Bloomberg reporters claimed over a dozen sources, both Apple and Amazon came out with incredibly strong denials. Way stronger than is common in these situations. And while I know some cynical people insist that companies will lie about this stuff all the time, that is not actually true. Some companies may misrepresent things, or try to play down stories, but outright fabrication is not at all common (and the consequences of a company doing it would be severe). And here, both Amazon and Apple's denials were so clear, so specific and so adamant that it raised serious questions about the reporting.

Since there was so much confusion over it all, we held off on writing about it, figuring more information would come out in the days and weeks after the initial story. And so far, nearly all of the "additional info" has only served to raise significantly more questions about Bloomberg's reporting. Various government and intelligence agencies all claimed they had no evidence to support these claims. Again, some will argue that they are lying, and (again) while those agencies may have a history of misrepresenting things, the denials here were clear and unequivocal. The UK's National Cyber Security Centre (a part of GCHQ) said they completely supported Apple and Amazon that no such attack occurred. The US Department of Homeland Security said the same thing. Dan Coats, the US Director of National Intelligence said the US intelligence community has seen no evidence of such an attack, which certainly undermines the Bloomberg story. Some of the folks quoted in the Bloomberg article even questioned the accuracy of the article with one going so far as to say the article that he is named in... "didn't make sense."

Also, as reporter Nicole Perlroth noted, one of the reporters on the Bloomberg story -- Michael Riley -- had also done a story back in 2014 making bold claims that the NSA had exploited the Heartbleed bug, and multiple other reports ripped that story to shreds, with multiple people denying it and no one else confirming it.

Now, with this story, Apple has done something it's never done before: asked Bloomberg for a retraction of the article. That's a pretty big move -- and Bloomberg says it still stands by its reporting (as it did with the Heartbleed story).

However, at this point, Bloomberg has whittled away whatever benefit of the doubt there was left and set fire to the scraps. It's difficult to believe that Bloomberg's story was accurate, and the company and its reporters owe everyone an explanation -- or at least some additional evidence to support the reporting. I don't doubt that there is a kernel of truth in the story -- but given the vehement and thorough response from everyone, it certainly seems likely that the reporters on the Bloomberg piece misunderstood something big, leading to misreporting of things in a way that leads to a very inaccurate picture of what's going on. Bloomberg should, at the very least, appoint someone else to go through the work put in by reporters Michael Riley and Jordan Robertson, and explore whether or not the story really is accurate, and why it is that basically everyone is saying it's not.

Reporters can, and do, make mistakes. How they respond to such mistakes is the real marker of the ethics they and the organizations they work for hold. Considering Bloomberg stood by that Heartbleed story, perhaps we shouldn't expect such a reckoning at the publication -- but, at the very least, it's going to lead plenty of people to write off Bloomberg as a credible source on issues like these, and that's unfortunate, given that there are some really big and important stories having to do with computer security right now. Having one major publication show itself to be untrustworthy in its coverage would be very bad.

Filed Under: espionage, hacked chips, jordan robertson, michael riley, security, supply chain, surveillance
Companies: amazon, apple, bloomberg, super micro

Bloomberg Latest To Kill Comments Because Really, Who Gives A Damn About Localized User Communities?

from the I-can't-hear-you dept

We've been noting how the trend du jour among news outlets has been to not only kill off your community comments section, but to proudly proclaim you're doing so because you really value conversation. It's of course understandable that many writers and editors don't feel motivated to wade into the often heated comment section to interact with their audience. It's also understandable if a company doesn't want to spend the money to pay someone to moderate comments. But if you do decide to reduce your community's ability to engage, do us all a favor and don't pretend it's because you really adore talking to your audience.

The latest war on comments comes courtesy of the folks over at Bloomberg. You may have noticed that the Bloomberg media empire recently went through a bit of a consolidation and redesign under the leadership of former Verge editor-in-chief Josh Topolsky. Buried among the vertigo-inducing fonts and amusing new 404 warning, is, you'll note, a very obvious lack of user comments. This is, to hear Topolsky tell it, because comments don't actually reflect your community:

"I've looked at the analytics on the commenting community versus overall audience. You’re really talking about less than one percent of the overall audience that’s engaged in commenting, even if it looks like a very active community,” he says. “In the grand scheme of the audience, it doesn't represent the readership."

In other words, because most users can't be bothered to comment, we're going to eliminate a major artery for input for those users who do choose to closely participate with the authors and website. No worry, says Topolsky -- just because Bloomberg no longer gives a damn what you say to its authors regarding individual pieces, that doesn't mean the website isn't listening to its userbase when it comes to quirky color and font schemes:

"Nothing about the new Bloomberg is set in stone; Topolsky says the entire process is iterative, and that includes the comments. The digital team will be monitoring reader behavior across desktop and mobile to see how they’re reacting to and interacting with the new site. For example, on launch day, they experimented with header height so see what readers like better. On mobile, where they’re working to “find the right balance between design and imagery and text,” Topolsky plans to experiment with different formats — more text versus more color versus a grid — to figure out what draws readers in."

While at least Topolsky seems open to the idea of comments returning, he still misses the point: watching analytics to judge responses to design changes isn't the same as actually allowing a conversation with your audience. If you actually do value your readership, you wouldn't be outsourcing their conversations to the feral and intellectually-stunted Facebook mind pool. As some Techdirt regulars have noticed, local comments encourage local community, and despite all the hand-wringing about trolls out of control, studies have recently shown it only takes treating commenters like real people (and a little moderating) to dramatically raise the discourse bar. This is your audience and your community, not a raging cacophony of encroaching cybernetic hyenas in need of a good napalming.

I still think the lowly comment section is getting a bad rap during this latest site redesign phase (led by folks like ReCode and Vox), and it's leading to a continued droll homogenization of not only website design, but of participatory news conversation itself.

Filed Under: comments, community
Companies: bloomberg

Court Ruling Notes That For-Profit, Full Copy Of Audio, Without Commentary Can Also Be Fair Use, In Specific Circumstances

from the nice-to-see dept

Back in 2011, we were worried about the implications of a lawsuit between the Swatch Group and Bloomberg, concerning the recording and distribution of an earnings call by Swatch. In short, Swatch claimed a copyright on its own earnings call. Bloomberg, which obtained a copy of the recording done by someone else, made that recording available to its customers. Not only did this have interesting fair use questions, it also opened up the possibility that bizarre copyright claims could be used as an alternative to wiretapping laws to block perfectly legitimate recordings of phone calls.

Thankfully, the 2nd Circuit appeals court has issued a clear ruling noting that this use is fair use -- and that's true even though Bloomberg (1) used the whole thing (2) did so for commercial reasons and (3) did not add any commentary. This is important, because we regularly hear from copyright maximalist types who assume that if you do any of the above, it automatically loses the ability to be considered fair use. Here, however, the court clearly shows why that's not true, which should set a useful precedent for other fair use cases (at least within the 2nd circuit), especially when it comes in the context of "reporting."

The Court makes a few very useful statements in explaining why all of this is fair use. Take, for example, the issue of it being "commercial" in nature. While that may make it a higher bar to prove fair use, it clearly does not preclude fair use:

It is undisputed here that Bloomberg is a commercial enterprise and that Bloomberg Professional is a subscription service available to paying users. At the same time, we have recognized that “[a]lmost all newspapers, books and magazines are published by commercial enterprises that seek a profit,” Consumers Union of U.S., Inc. v. Gen. Signal Corp., 724 F.2d 1044, 1049 (2d Cir. 1983), and have discounted this consideration where “the link between [the defendant]’s commercial gain and its copying is . . . attenuated” such that it would be misleading to characterize the use as “commercial exploitation.” Am. Geophysical Union, 60 F.3d at 922. Here, Swatch does not contest that Bloomberg Professional is a multifaceted research service, of which disseminating sound recordings of earnings calls is but one small part. Moreover, it would strain credulity to suggest that providing access to Swatch Group’s earnings call more than trivially affected the value of that service. So while we will not ignore the commercial nature of Bloomberg’s use, we assign it somewhat reduced weight.

What about the lack of "transformation" as well as the lack of "commentary"? The Court explains why that doesn't preclude fair use, given the context.

In the context of news reporting and analogous activities, moreover, the need to convey information to the public accurately may in some instances make it desirable and consonant with copyright law for a defendant to faithfully reproduce an original work rather than transform it. In such cases, courts often find transformation by emphasizing the altered purpose or context of the work, as evidenced by surrounding commentary or criticism. See, e.g., Bill Graham Archives, 448 F.3d at 609–610; Nunez v. Caribbean Int'l News Corp., 235 F.3d 18, 22–23 (1st Cir. 2000). Here, Bloomberg provided no additional commentary or analysis of Swatch Group’s earnings call. But by disseminating not just a written transcript or article but an actual sound recording, Bloomberg was able to convey with precision not only what Swatch Group’s executives said, but also how they said it. This latter type of information may be just as valuable to investors and analysts as the former, since a speaker’s demeanor, tone, and cadence can often elucidate his or her true beliefs far beyond what a stale transcript or summary can show. As courts have long recognized in the context of witness testimony, “’a cold transcript contains only the dead body of the evidence, without its spirit,’” and “cannot reveal . . . ‘[the speaker’s] hesitation, his doubts, his variations of language, his confidence or precipitancy, his calmness or consideration.’”....

There is also an interesting discussion on whether or not the work was "published." Generally, it's much harder to win a fair use claim if the work was "unpublished" and Swatch insists this "work" was unpublished. The court agrees that it's unpublished, but also notes that Swatch invited over 300 analysts to the call and over 100 attended, so the fact that the recording wasn't "published" carries a lot less weight. In fact, the Court explicitly notes that something unpublished can certainly still be fair use -- and in fact, the law is fairly clear that if a work is unpublished, that doesn't preclude a fair use finding.

On the "amount and substantiality" of the work, the Court notes obviously that the entire work is being used, but again that does not preclude fair use. In fact, the Court notes, as the district court did, that this factor comes out somewhat "neutral" and is clearly outweighed by the wider benefit and good reasons to post the whole thing.

It is undisputed here that Bloomberg used the entire work. The district court acknowledged that “this generally weighs against fair use,” but found that the public interest in the information contained in the recording “is better served by the dissemination of that information in its entirety, including the incidents of oral speech that do not translate onto the page but color the purely factual content.”

[....] For the reasons already explained in our discussion of the first fair use factor, we agree with the district court that Bloomberg’s use of the entire recording was reasonable in light of its purpose of disseminating important financial information to American investors and analysts. The recording has independent informational value over and above the value of a written transcript or article, regardless of how many Bloomberg subscribers took advantage of that value in this instance. Like the district court, we accordingly weigh this factor in neither party’s favor.

Swatch also tried to claim that, on the fourth factor -- the impact on the commercial market -- the fact that it didn't try to sell the recording shouldn't matter, since it's the potential market that matters. The court is not persuaded, noting the risk of such a ruling would be creating a ridiculous rule.

While the loss of a potential yet untapped market can be cognizable under the fourth fair use factor, the potential market here is defined so narrowly that it begins to partake of circular reasoning. As Professor Nimmer has observed, “it is a given in every fair use case that plaintiff suffers a loss of a potential market if that potential is defined as the theoretical market for licensing the very use at bar.” 4 Nimmer on Copyright § 13.05[A][4]. To guard against this “vice of circular reasoning,” our case law limits our consideration to a use’s “impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets.” Am. Geophysical Union, 60 F.3d at 930–31. The hypothesized market for audio recordings of earnings calls convened by foreign companies that are exempt from Regulation FD cannot meet this standard.

All in all, a nice clear win for fair use even when the full work is used for commercial reasons.

Filed Under: commercial use, copyright, fair use, full copy, publication
Companies: bloomberg, swatch, swatch group

If You're Hiring A 'Head Of Digital Innovation' You're Doing It Wrong

from the sorry-bloomberg dept

Way back in 2006, we wrote about how silly it was that all of these old school media companies were suddenly hiring "chief digital officers" or "chief internet officers" -- and how that was a sign that they were in trouble. That's because "digital" or "internet" is not a separate silo. Companies that are going to succeed today on the internet need to get to the point where the internet simply infuses everything they do -- such that they don't even need to be thinking about it as a "separate thing." It's just part of what they do. Many of the companies who went down that route discovered that pretty quickly. Those top "digital" people often had no real power or no real authority, and with the companies hiring them, it made others believe that they didn't need to be thinking about the internet, because "someone else has got it covered."

I'm kind of surprised that any company is still thinking that way, but apparently Bloomberg has just hired a former GE exec to be its "head of global digital innovation." Bloomberg has been, somewhat notoriously, going through some turmoil lately in its news division, and setting up a separate silo to focus on "digital" seems like the exact wrong strategy, yet again. The company either is digital or it's not... and having to hire someone to focus on digital innovation suggests... it's not.

Filed Under: digital innovation, media
Companies: bloomberg

When Even Bloomberg Is Saying The TPP Is A Dangerous 'Corporatist Power Grab' That Everyone Should Avoid...

from the put-it-out-of-it's-misery dept

For years now, we've been arguing about the dangers of the TPP agreement, how it's nothing more than the USTR teaming up with giant legacy companies to create a secretive massive corporatist, crony capitalist attack on the public, on innovation and on the economy. As the agreement moves closer to completion, it appears that others are noticing the same thing. Incredibly, while the NY Times has columnists endorsing the agreement, Bloomberg News, a publication that sometimes seems so beholden to promoting blind corporate power over all else that it recently censored itself to avoid losing business deals, now has a columnist flat out calling the TPP an ugly secretive "corporatist power grab" that pretty much all countries should avoid.

U.S. lawmakers and civil-liberties groups have complained for some time about the opacity surrounding the treaty’s terms. Mild grousing turned into outrage last month after WikiLeaks did what Barack Obama’s White House refuses to: share portions of the document with the public. The draft of the intellectual-property rights chapter by Julian Assange’s outfit validated the worst fears -- that TPP is a corporatist power grab. Rather than heed the outcry, the U.S. doubled down on secrecy, refusing to disclose more details.

From there, columnist William Pesek explained that most of the more advanced economies in Asia know that it's a bad idea to be involved in the TPP, and that's why they're staying away:

Hasn’t the U.S. wondered why so many of East Asia’s most promising democracies have so far avoided the treaty? The popular excuse for why Indonesia, the Philippines, South Korea, Taiwan and Thailand aren’t yet among the 12 TPP economies is that they aren’t ready or are trapped by their own timidity. A better explanation is that their leaders realize that truly transparent and accountable governments, to borrow Kerry’s own words, shouldn’t be leading their people into the unknown.

The article goes on to mock the USTR's arguments that it knows what it's doing better than the public and that you peons shouldn't worry about the TPP at all. Pesek points out that the secrecy in all of this from the Obama administration is more along the lines of what you'd expect from a "closed Communist Party state" and the only reason to negotiate like that is "to circumvent the legislative process."

Here's a general tip to the good folks at the USTR: when Bloomberg News, of all places, is calling the trade agreement you're working on "a corporatist power grab," comparing the secrecy to "closed Communist Party states," telling every other country to back out, and decrying the general lack of democracy in the agreement... perhaps it's time to rethink your strategy.

Filed Under: corporatist power grab, crony capitalism, tpp, trade agreement, ustr
Companies: bloomberg

Bloomberg News Pays Reporters More If They Move Markets

from the financial-meltdown dept

It's become quite common to pay online writers more if their stories cause surges in traffic for the site. It has recently emerged that Bloomberg News has taken this idea much further, as reported by Business Insider:

Bloomberg News has an unusual practice of paying some of its reporters explicitly for publishing "market-moving" stories.

…

We asked Bloomberg about the practice. A company spokesperson acknowledged it.

"It isn't news unless it's true. At Bloomberg News, the most important news is actionable. That means we strive to be first to report surprises in markets that change behavior and we put a premium on reporting that reveals the biggest changes in relative value across all assets."

The Business Insider post points out a danger of this approach:

Most of the people we spoke to, especially traders, were startled to hear about this practice, worrying that it might create an incentive for Bloomberg reporters to "push" or stretch stories with the specific aim of moving markets.

There's also the risk that an extremely volatile situation could go into meltdown as market movements are amplified by Bloomberg writers reporting on the effects of their previous stories, leading to a kind of journalistic positive feedback loop. This wouldn't be so problematic were it not for the fact that these movements can result in major losses and gains for some of the participants. It's easy to imagine companies or even some countries being massively affected by this, which raises the question whether it is ethical for Bloomberg News to encourage such risky behavior by its journalists.

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Filed Under: journalism, markets, moving markets
Companies: bloomberg