Why Does An Unpatentable 'Abstract Idea' Become Patentable If You Add 'On The Internet'?

from the good-question dept

Back in 2009, we wrote about a case involving a company called Ultramercial, which held a broad and ridiculous patent (7,346,545) that effectively covered the process of watching an ad before you could download content (seriously). Ultramercial sued Hulu, YouTube and WildTangent over this. The case went back and forth with an initial ruling that rejected the patent, by noting that it was just an "abstract idea" and abstract ideas are not patentable. As that court ruling noted:

At the core of the '545 patent is the basic idea that one can use advertisement as an exchange or currency. An Internet user can pay for copyrighted media by sitting through a sponsored message instead of paying money to download the media. This core principle, similar to the core of the Bilski patent, is an abstract idea. Indeed, public television channels have used the same basic idea for years to provide free (or offset the cost of) media to their viewers. At its heart, therefore, the patent does no more than disclose an abstract idea.

Tragically, CAFC, the appeals court that handles patent matters and has a long history of expanding patent law, reversed the lower court's ruling and deemed the patent valid. While it didn't put it in these words specifically, it certainly appeared that the court was saying that any abstract idea can still be patentable if you just make it happen "on the internet."

In that ruling, the court discusses the fact that "abstract ideas" are not patentable, and notes that it used to use its machine-or-transformation test to determine if something was or was not an abstract idea. However, after the Supreme Court ruled in the Bilski case that this test might not always be appropriate, while failing to say what test would be appropriate, it's left CAFC with the freedom to make up totally arbitrary rules. And in this case, the arbitrary rule was effectively "we don't apply the machine-or-transformation test to 'information age' inventions." Why? Because if the inventions aren't physical, the machine or transformation test no longer applies:

While machine-or-transformation logic served well as a tool to evaluate the subject matter of Industrial Age processes, that test has far less application to the inventions of the Information Age.... Technology without anchors in physical structures and mechanical steps simply defy easy classification under the machine-or-transformation categories.

Shorter version: what would be considered unpatentable abstract ideas in the offline world suddenly become patentable if you add "on the internet" to them.

That doesn't sound right to lots of people, and thankfully WildTangent is appealing the case and hoping the Supreme Court will hear it. As the petition to the Supreme Court notes, the question presented is:

Whether, or in what circumstances, a patent's general and indeterminate references to "over the Internet" or at "an Internet website" are sufficient to transform an unpatentable abstract idea into a patentable process for purposes of 35 U.S.C.

Along with the petition, there were also two interesting filings in support, urging the Supreme Court to hear the case. One from Redhat, CCIA and EFF, which goes into great detail about how such broad patentability would seriously harm the open source world, and a strongly worded brief from Google and Verizon (yes, together) about how such a ruling would do serious harm to innovation by allowing all sorts of abstract ideas to be locked up via patent. Hopefully the Supreme Court is willing to listen -- and will push back (yet again) on a bad CAFC ruling.

Filed Under: abstract ideas, ads, cafc, downloads, software patents, supreme court
Companies: ccia, eff, google, hulu, ultramercial, verizon, wildtangent, youtube

Schrödinger's Download: Whether Or Not An iTunes Music Sale Is A 'Sale' Depends On Who's Suing

from the that-cat-is-dead dept

Steve Worona has a great post pointing out how the record labels have clear cognitive dissonance (the ability to hold two totally conflicting ideas in your head at the same time -- and argue for both of them) when it comes to the question of whether or not an iTunes purchase represents a "sale." He puts forth three examples of such cognitive dissonance in the legal context, with the final one being taken from two recent legal cases involving major record labels:

Example 1, the case of the kettle. As summarized by the Manhattan Institute for Policy Research, “Readers who’ve been to law school may remember the chestnut known as the ‘Case of the Kettle’. A man is charged with borrowing a kettle and breaking it. His reply is that, first, he never borrowed it; second, it was already broken when he borrowed it; third, it was intact when he returned it.”

Example 2, the case of the dog. Paraphrasing from a 1978 Wall Street Journal article about well-known Texas defense attorney Richard “Racehorse” Haynes: You say my dog bit you, but I don’t own a dog, and he doesn’t bite, and you kicked him first.

Example 3, digital downloads. Two recent court cases hinge on how the sale of an MP3 download compares to the sale of a conventional physical recording, known as a “phonorecord” in Copyright-speak. In one case, the singer Eminem demanded that Universal Music Group calculate his royalties for downloads based on the higher rate for licensed material instead of the lower rate for phonorecord sales. UMG refused, arguing that the sale of an MP3 download was the same as a phonorecord sale. In the second case, EMI filed suit against ReDigi, a company that allows purchasers of MP3 downloads to resell those files under Copyright law’s “first sale” doctrine. EMI argued that the MP3 files were not phonorecords and thus not subject to first sale.

What's being discussed here, of course, are two cases that we've covered. The Eminem case involved whether or not an iTunes purchase counted as a "sale" like a CD, where there was a very low royalty rate (probably around 15%), or as a "license" like for a movie, where the royalty rate was more like 50%. Universal argued stringently, and continues to argue in a series of follow-up cases, that an iTunes purchase is just like a CD purchase, and the much lower rates apply. However, in the ReDigi case -- where the company is trying to argue that if an iTunes purchase is just like a sale, then clearly the "first sale doctrine" applies and those files can be resold -- EMI, which is in the process of being acquired by Universal, argues that an iTunes sale is a license, and thus there's no first sale.

Worona sums it up beautifully:

Putting these two arguments together, we see the music industry imagining transactions where what’s sold is a phonorecord but what’s purchased isn’t.

To me this seems like the Schrödinger's Cat of copyright law. According to the record labels, if we're talking about it from the seller's perspective, it's a sale. But the second you flip the equation and look at it from the buyer's perspective, it's a license. The cat is simultaneously dead and alive. Either the major labels are full of it... or they're breaking new ground in quantum physics. I'll assume it's the former, rather than the latter.

Filed Under: cognitive dissonance, downloads, licenses, sales

No, The Supreme Court Did Not Legalize Downloading

from the wtf? dept

First things first: I've appeared on The Alyona Show on RTTV a few times in the past, and have always enjoyed it. I don't know much about Russia Today, the operation behind RTTV, though some have argued that it's a propaganda arm for the Russian government. My general position on these things is that if people want to interview me about the subjects that I'm interested in, I'm happy to talk to anyone. I've done interviews for NPR and the CBC as well, and I've given a talk for execs at the BBC, all of which are also government supported media.

However, to be a credible news source... you have to at least be able to get the basics right. On Monday of this week, we wrote about the Supreme Court's decision to let stand a Second Circuit appeals court ruling, saying that a download did not require extra royalties for also being a public performance. It's basically a licensing dispute over what licenses need to be paid if you're offering downloadable music. Interesting, but not a huge deal.

So I was a bit shocked to see a headline declare that the Supreme Court legalizes downloading music, because that's simply not true. I clicked through... and it's from RTTV, who apparently understood this story so little that almost nothing in the headline or opening sentence is accurate. On the assumption that perhaps they'll change or pull this down, here's a screenshot: First up, the Supreme Court didn't do anything other than refuse to hear the appeal of ASCAP, allowing the Second Circuit case to stand. So it didn't legalize anything. Nothing in the Supreme Court's decision not to hear the appeal indicates a change to any law, let alone something as crazy as "legalizing downloading music." Second, the opening sentence is also completely bogus. Downloading music is already an infringement of federal copyright law. Nothing in this case would change that one way or the other. All it concerned was whether or not services that offer downloads have to pay a separate "performance" license to ASCAP for the downloads. Nothing in this is about legalizing (or illegalizing) downloads. Services already pay licensing rights to distribute a copy of a file. The question is whether or not they had to pay even more, if downloading also constituted a "public performance," which is covered by a different right under copyright law.

No matter what your position is on copyright law, or this particular case, making totally ridiculous claims, like the Supreme Court legalized downloads, is flat out ridiculous, and suggests not only did someone not understand the case at hand, but didn't even bother to read the most basic information about the case.

Filed Under: copyright, downloads, facts, journalism, streaming
Companies: russia today

US Supreme Court Lets Stand Ruling That Says Music Downloads Are Not Public Performances

from the thank-goodness-for-little-things dept

Ah, ASCAP. The music collection group that keeps getting more and more desperate, seems to have finally and completely lost its quixotic attempt to claim that a music download represented a "public performance," which required a separate license, beyond the mechanical reproduction license. The group had been in a legal fight with Yahoo and Rhapsody over whether or not those companies had to pay extra to songwriters (whom ASCAP represents) in addition to the money they were already paying to license songs from the record labels for downloads. The district court sided with ASCAP and presented a bizarre formula involving a percentage of all revenue (such that Yahoo would have to pay some of its search revenue to ASCAP for no clear reason). Thankfully, an appeals court overturned the ruling, noting that a download is not a public performance, and that the bizarre calculation rate didn't make much sense. ASCAP (of course) appealed to the Supreme Court, which has declined to hear the case, meaning that the appeals court ruling stands. This isn't a definitive rejection of "download = public performance," as technically, it's just the law in the Second Circuit. In theory, some other Circuit could rule otherwise, and create a circuit split for the Supremes to look at. But, that's probably unlikely, and it's most likely that this ruling effectively makes it clear across the country that a download is not a public performance. As it should be, because it's not.

Filed Under: downloads, public performance
Companies: ascap, rhapsody, yahoo

Fox Responds To 'Piracy Surge' By Answering A Different Question

from the you-didn't-answer-the-question dept

Exactly as we predicted, when the Fox Network hid its TV shows online behind various paywalls and delays, the rate of infringement on those shows shot way up. Eriq Gardner, over at THResq spoke to a Communications VP at Fox to get his response about all those people going to unauthorized means to get their content, and in true "Communications VP" fashion, Scott Grogin deftly ignores the key question and focuses on a secondary claim from the original TorrentFreak article, the suggestion that these delays were about getting people to watch TV live:

The TorrentFreak blog post is a little over the top. The story indicates that we 'took this drastic step in the hope of getting more people to watch shows live and thus make more revenue.' Nothing could be further from the truth.

Authenticating viewers is not about making sure they only watch live...in fact, quite the opposite—we support a 'TV Everywhere' proposition and are working with our distribution partners to benefit our businesses. It's about receiving fair value so we can continue to produce this expensive and high quality programming. We are pursuing a strategy where the 90+ million households who pay to watch our programming via cable/satellite/telco will ultimately receive maximum benefit. They can watch live, via DVR, on VOD, online, or through one of the various tablet apps that allow in-home viewing.

We are actively in negotiations with all cable/satellite/telco providers regarding authentication of their customers. We hope to announce several more agreements before the start of the new television season in mid-September.

The issue of watching "live" or not is really a side matter, and was perhaps a bit of hyperbole from TorrentFreak. What those guys clearly meant was that this is a weak effort by Fox to keep people watching via TV or via a big cable/satellite provider. And, I'm sorry, but this line is pure bull:

We are pursuing a strategy where the 90+ million households who pay to watch our programming via cable/satellite/telco will ultimately receive maximum benefit.

Anyone who claims that to offer maximum benefit to one set of people, you have to take away features from others isn't being particularly honest. To offer maximum benefit, you offer maximum benefit. Could Fox offer new additional features to such subscribers? Sure. That would be interesting and perhaps a good strategy. But taking the content away, when it's so readily available via unauthorized means doesn't help provide maximum benefit to subscribers at all. It drives more people to unauthorized means of access (where Fox gets no money at all), and actually takes away value from those subscribers. That's because one reason why people watch hit shows right away is so they can discuss them with friends. Fox has now made it more difficult to discuss with friends because it's that much harder to watch its shows.

Filed Under: downloads, fox, piracy, television
Companies: fox, news corp.

Of Course: New Fox Delay Means More Unauthorized Downloads Of Fox Shows

from the this-isn't-rocket-science dept

Back in July, when the Fox Network announced plans to block or delay many of its popular shows from going online, we predicted this would increase the number of unauthorized downloads. This just seemed stupid. People want to access it online and they will access it online. Why not offer it to them in an easy and convenient manner that can be monetized. Of course, when others pointed out the same thing, the geniuses at the MPAA threw a hissy fit about how even admitting that Fox's stupid business decision might increase unauthorized file sharing was the equivalent of praising "stealing."

So, um, I wonder how the MPAA's brilliant strategists will respond to the news that, in the first week of Fox's delays alone, unauthorized downloads of some of its most popular shows increased massive amounts, doubling or tripling what they were before. In fact, that article notes that many of the people viewing it through unauthorized means left comments about how they tried to watch via legal channels, but couldn't.

So I'm wondering how the folks at the MPAA might explain this. Are they going to throw another tantrum and blame "reality" for supporting file sharing? Or will someone there finally buy a clue and recognize that not providing consumers what they want is a bad business decision. I guess that would require someone at the MPAA to actually have experience in business -- but they all seem to be lawyers or political flunkies.

Filed Under: consumers, culture, downloads, fox, tv
Companies: fox, hulu, mpaa, news corp.

AC/DC Says Their Songs Will Never Be Available For Download; Rest Of Internet Laughs

from the that's-not-how-it-works dept

Capitalist Lion Tamer points us to the news that the band members of AC/DC are standing firm in saying that they will never allow authorized versions of their music to be sold online for download. The logic here seems to be entirely lacking. The band claims that it's because they want people to listen to the whole albums, not just tracks, but if that's the case then they should just release the whole album as a single track. The fact is that anyone who has their albums can choose to listen however they want. And any time one of their songs is played on the radio, only one song is heard -- yet you don't hear them talk about boycotting radio. But, of course, the bigger issue is that it's silly to not offer an authorized way for people to pay you for your music, when the alternative that plenty of people will choose, instead, is to simply download unauthorized versions where the band has no say at all.

Filed Under: ac/dc, downloads, music

Band Complains About Massive Downloads Destroying Sales; Researchers Can't Find Any Downloads

from the how-do-you-spell-publicity-stunt? dept

We've mentioned before the Recording Industry astroturfing site in Canada, called "Balanced Copyright for Canada," which is about anything but setting up a "balanced" copyright system in Canada. However, apparently, there was a recent "debate" on that group's Facebook page about some poor Canadian band (who I'm not going to bother naming, for reasons that should become obvious), who put out a press release claiming that it had "gone platinum," if unauthorized downloads were counted. The band claimed that its album had been downloaded over 100,000 times, and complained about people "stealing" from them.

Of course, one curious participant in the debate, Wayne Borean, began to question this press release. He went out and searched the various torrent search engines/trackers, and even searched Google with the filetype:torrent search and came up with no results. In other words, it's not just unlikely that the band's work has been shared 100,000 unauthorized times, it's unlikely that it's being shared at all. TorrentFreak jumped into the fray, and noticed very few Twitter followers, and almost no YouTube views on the band's channel, and also began suspecting stuff. After pressing the band's manager for "proof," TorrentFreak discovered that it came from an search form that returns fake results.

Thus, it does not appear that the band purposely mislead people, but it appears that they don't seem to realize that you can do searches on pretty much any made up thing on certain sites and it will tell you there are tons of results. Of course, since this info has been presented, the band claims that "the music thieves are after us now." Or, they're not. Which might actually be a bigger problem for the band.

Filed Under: copyright, downloads, infringement, propaganda

BPI Effectively Admits That Digital Economy Act Was Useless

from the reading-between-the-lines dept

Every time I come across BPI, the UK's version of the RIAA, I'm amazed at how single-minded its focus seems to be. There's little interest in improving profitability for record labels. There's little interest in creating better music. There's little interest in smart new business models. It's only about "piracy" and how evil it is. What's funny is I saw the BPI's Geoff Taylor on a panel a couple years ago, and he was one of the people who would say two sentences in a row that would contradict each other. It was always something along the lines of: "We should stop 'going to war' with our customers... but first we have to stop piracy!"

This past year was a banner year for BPI. The UK market has bucked the trend in pretty much every other part of the world and has seen recorded music sales growing, while its overall music industry (if you count how much money musicians actually make -- beyond just recorded music sales) has been growing for quite some time. Even with all of that, BPI was able to push through the incredibly draconian Digital Economy Act in the UK via questionable means.

So BPI should be thrilled, right? In the midst of a recession, and a massive decline in recorded music sales everywhere else in the world, it was able to buck that trend even before it got this new law passed.

But no, to BPI, absolutely everything is about "piracy." It's put out a new report whining that "piracy" is still increasing and saying it's all Google's fault. Of course, this isn't a surprise as BPI has been trying to set Google up for a lawsuit.

Of course, by my reading of this new study, BPI is effectively admitting that the Digital Economy Act was useless. The industry was already growing before it, so the main reason behind it was to help slow down the dreaded "piracy." And it failed in doing that. So, shouldn't BPI now support a repeal of the Digital Economy Act?

Filed Under: blame, copyright, downloads, piracy, uk
Companies: bpi, google

Oh Look, Digital Downloads Aren't Saving The Music Industry

from the who-could-have-possibly-predicted-that... dept

About a year and a half ago, I gave a presentation at a music industry event, where one of the points I tried to make was that those who were betting on digital sales as a savior were making a fool's bet. However, many in the industry have been infatuated with this idea, even if the evidence always suggested that digital sales would only ever make up a small fraction of what CD sales used to bring in. Earlier this year, we warned that the growth rate was slowing, and now as we hit the end of the year, it's confirmed that while there's still some growth, it's slowed down dramatically. Betting on digital sales as the key business model for music is, and is going to remain, a mistake. There are lots of other opportunities to make money, but you have to think beyond just selling music.

Filed Under: downloads, music, sales