Should Creative Commons Drop Its NonCommercial & NoDerivatives License Options?

from the a-good-question dept

While we're big fans of Creative Commons in general, for many years, we've raised questions about some of the licenses/clauses -- with the NonCommercial one being of particular concern. Almost four years ago, we worried about the very blurry line between what was commercial and what was non-commercial, and how trying to separate them out in a license could lead to serious problems. Two years ago, Nina Paley also argued about significant problems with the NonCommercial licenses, and how they actually hurt Creative Commons itself in the long run by creating branding confusion. In particular, many people think that all CC licenses bar commercial use, even though that's not the case at all.

Given that, it's interesting to see a suggestion over at the website for Students for Free Culture to take this a bit further and suggest that as Creative Commons is exploring its next round of licenses, it's time to get rid of both the NonCommercial clause and the NoDerivatives clause, arguing that they both run counter to the nature of free or open culture:

The two proprietary clauses remaining in the CC license set are NonCommercial (NC) and NoDerivatives (ND), and it is time Creative Commons stopped supporting them, too. Neither of them provide better protection against misappropriation than free culture licenses. The ND clause survives on the idea that rightsholders would not otherwise be able protect their reputation or preserve the integrity of their work, but all these fears about allowing derivatives are either permitted by fair use anyway or already protected by free licenses. The NC clause is vague and survives entirely on two even more misinformed ideas. First is rightsholders’ fear of giving up their copy monopolies on commercial use, but what would be considered commercial use is necessarily ambiguous. Is distributing the file on a website which profits from ads a commercial use? Where is the line drawn between commercial and non-commercial use? In the end, it really isn’t. It does not increase the potential profit from work and it does not provide any better protection than than Copyleft does (using the ShareAlike clause on its own, which is a free culture license).

The second idea is the misconception that NC is anti-property or anti-privatization. This comes from the name NonCommercial which implies a Good Thing (non-profit), but it’s function is counter-intuitive and completely antithetical to free culture (it retains a commercial monopoly on the work). That is what it comes down to. The NC clause is actually the closest to traditional “all rights reserved” copyright because it treats creative and intellectual expressions as private property. Maintaining commercial monopolies on cultural works only enables middlemen to continue enforcing outdated business models and the restrictions they depend on. We can only evolve beyond that if we abandon commercial monopolies, eliminating the possibility of middlemen amassing control over vast pools of our culture.

Most importantly, though, is that both clauses do not actually contribute to a shared commons. They oppose it. The fact that the ND clause prevents cultural participants from building upon works should be a clear reason to eliminate it from the Creative Commons license set. The ND clause is already the least popular, and discouraging remixing is obviously contrary to a free culture. The NonCommercial clause, on the other hand, is even more problematic because it is not so obvious in its proprietary nature. While it has always been a popular clause, it’s use has been in slow and steady decline.

Of course, as they note, the NonCommercial clause is still used pretty frequently -- though often without much thought given to why. The site suggests that perhaps those clauses could actually be rebranded or moved out of Creative Commons directly, to keep CC more focused on true open culture efforts.

It's an interesting proposal all around, and we're already seeing a fair bit of buzz about it. It will be worth watching to see if it really gets any traction.

Filed Under: creative commons, culture, derivatives, free culture, noderivatives, noncommercial, open culture

Lobbyists Forge Letters To Pretend There's A 'Grassroots' Interest In Derivatives Reform

from the that's-called-scamming dept

This story actually comes from back in November, but I just found out about it due to a recent Planet Money episode all about the regulatory scramble to rewrite our banking rules. The whole podcast is interesting, but there's a bit in the middle about one of the tactics used by lobbyists to influence the rules: they totally forged letters from individuals and small businesses to make it seem like there was "grassroots" support for a particular position on derivatives reform.

We've seen similar things before, where various DC lobbying groups make "deals" with various groups to put their name on letters. A few years ago there was a disturbing quote from someone who did this for a living who explained how it works:

"You go down the Latino people, the deaf people, the farmers, and choose them.... You say, 'I can't use this one--I already used them last time...' We had their letterhead. We'd just write the letter. We'd fax it to them and tell them, 'You're in favor of this.'"

Except, in this latest case, the subcontractor of the subcontractor of the lobbying firm didn't even do that last part. They just forged the letters entirely -- including from a small Burger King franchise and a circuit court judge who was not happy about her name being used this way. It appears the only way this was actually noticed was because a Bloomberg reporter was lazily scanning the letters to the CFTC (the Commodity Futures Trading Commission) and was surprised to see what looked like very out-of-place letters. Everything else was from big banks and big financial institutions. Letters from a Burger King franchise seemed odd. So the reporter called... and the franchise had no idea what the CFTC was, let alone why its name was on a letter pushing the CFTC in a particular direction about derivatives reform.

And yet, these kinds of letters do influence regulatory decisions -- which is a big part of the problem.

The Planet Money podcast discusses how these regulators need lobbyists to actually understand what they're regulating. And, it's absolutely true that the regulators don't really understand the issues at all, while those in the industry do understand what kind of impact regulatory changes will have. But, really, that's an argument for taking a rather light regulatory touch on these issues, since the regulations are going to be driven by lobbyists who understand the issue better than the regulators. Thus, the end result is almost always going to be in the favor of big players in the industry who can afford lobbyists (whether they do underhanded things like forge letters or just do more aboveboard lobbying). This is the concern that many folks have.

Yes, there are problems with a light regulatory touch. But the assumption that we need heavy regulations ignores how bad people are at regulating most industries, and how much regulatory capture there is in the rulemaking. The end results of aggressive regulation, driven by lobbyists, can often be worse than no regulation at all.

Filed Under: derivatives, forgery, lobbyists, regulations

A Week After Feds Approve Movie Derivatives Market, Congress Bans It

from the so-much-for-that dept

Over the last few years, a few companies have been trying to set up financial markets for buying and selling movie derivatives. Effectively, it was a way to financially bet on the performance of certain movies -- whether long or short. There are all sorts of markets like this, and it's difficult to come up with any reason not to allow them -- but, of course, the MPAA cobbled together a bunch of complaints, including the idea that this would encourage more file sharing, as short sellers attempted to undermine the performance of a movie. So, it seemed like good news last week when regulators from the Commodity Futures Trading Commission voted to approve one of these operations, the Trend Exchange, from Veriana.

But it appears that victory was very short-lived, as Congress banned such offerings in the middle of the night last night. Basically, the MPAA was able to shove this issue into the Wall Street Reform bill which has widespread support, and politicians who didn't want to hold it up any more refused to take that provision out (which would have involved a fight).

Apparently Hollywood is so afraid of free markets that it has to oppose them every chance it gets.

Filed Under: congress, derivatives, markets, movies, trading

Andy Grove: Patents Are Like Mortgage Backed Securities

from the and-innovation-will-suffer dept

Intel co-founder and former CEO Andy Grove gave quite a speech this weekend at the National Inventors Hall of Fame, where he explained how patents are looking increasingly similar to the sort of financial derivatives that have brought down today's economy:

The true value of an invention is its usefulness to the public. Patents themselves have become products. They're instruments of investment traded on a separate market, often by speculators motivated by the highest financial return on their investment....

The patent product brings financial derivatives to mind. Derivatives have a complex relationship with an underlying asset. While there's nothing wrong with them in principle, their unfettered use has damaged the financial services industry and possibly the entire economy.

Do these patent instruments put us on a similar road? I fear our patent system increasingly serves those who invest in the patent products... It may be time to use Jefferson's principle as a test and ask if we meet it.

It's an interesting comparison and one that does seem apt the more you think about it. In separating out the "security" from the underlying asset, we tend to distort things. It was that distortion that resulted in the financial crisis, as it enabled those who wanted to sell risky things to obscure the actual risks and pretend that their securities were safer than they were. With patents, the system has been distorted to present the patent itself as being valuable, rather than the ability to execute and implement an idea in a manner that the market appreciates. It's definitely an area that could stand further thought and scrutiny.

Filed Under: andy grove, derivatives, patents

Leverage, Derivatives And Dog Food: How Wall St. Screwed Up

from the and-what-comes-next dept

Following my post on the makings of the financial crisis, some folks noted that I didn't really discuss the issues of leverage and derivatives, and how they ended up screwing up Wall Street something fierce -- as, instead, I focused much more simply on the issue of "risk" and sort of swept those details under the rug. I'd been intending to tackle the subject this week, but it looks like Andy Kessler has already done the job for me, with an excellent description of how Wall Street went from helping people trade stocks into a bunch of cowboy hedge fund traders who didn't even realize what they were trading, but knew they were making tons of money -- so they kept borrowing to do more of it. They got suckered by their own dog food and ate until they became seriously overstuffed.

Still, those profits weren't enough. Their customers were making great money buying Wall Street's derivatives. But why should banks and pension funds and hedge funds have all the fun? What a perfect use for all that capital on their huge balance sheets and cheap financing from low interest rates. Wall Street, en masse, started buying all these high yielding derivatives for their own account. They ate their own dog food, if you will.

It was the easy trade. Borrow at 3 percent and make 6 percent or 8 percent or 10 percent. They liked it so much, they levered up. Meaning instead of just borrowing a dollar for every two dollars of assets they owned (which by the way, thanks to the 50-percent margin requirement, is the amount of leverage that you and I are allowed to buy stocks from these same firms), they borrowed 20 to 1, 30 to 1, and even 50 to 1, if they could get away with it. And man, it was a lucrative trade. So why not?

I'll tell you why not. Because all of a sudden, Wall Street is no longer a business of traders or stock brokers or investment bankers, it's a giant hedge fund. And they have no idea what they are doing. None. I ran a hedge fund for a lot of years and learned rather quickly that if a trade was too good, if everyone was doing the same trade, then I should absolutely turn around and run for the hills. But no one on Wall Street did. The spreadsheets flashed green. Risk was a four-letter word best not said in polite company. Wall Streeters became hedge fund cowboys and loved the spoils, until a tiny little downturn in housing sent everyone rushing to get out of the pool at the same time.

It's a good read. Kessler and I agree that a new sort of Wall Street will come out of this -- and that's for the best. Money will flow again, but there will be new opportunities for banks to get back to basics.

Filed Under: derivatives, hedge funds, leverage