On November 16th, the House of Representatives will be holding hearings on SOPA, its bill to put in place all sorts of restrictions and regulations on the internet, at the behest of the big Hollywood studios, who have failed to adapt. The bill is nothing short of an attempt to censor the internet, creating -- for the first time ever -- the ability for the US government to flat out censor entire websites. The hearings on the 16th are completely stacked in favor of the bill. The sponsors of the bill can't even stand to have a fair hearing and listen to those who are worried about the unintended consequences of the bill.
That's why a bunch of websites have teamed up to declare November 16th: American Censorship Day. If you run a website, please sign up to participate, to help educate your users to the problems associated with the bill, and to urge them to express their concerns to Congress. Don't let Congress build the Great Firewall of America while you sat back and did nothing.
Harvard Business School professor Josh Lerner (who has done fantastic research in the past on problems with the patent system) appears to have turned his attention to copyright law as well. A new report he has put out shows how the Second Circuit appeals court ruling that said Cablevision's cloud-based DVR was legal provided some amount of certainty in questions concerning copyright law in the cloud, and that resulted in increased venture capital investment in related cloud offerings (pdf) to the tune of between $728 million to $1.3 billion.
Obviously, at first pass, there are questions about the level of causality here, as opposed to just correlation (or just the general development of the cloud market). However, Lerner tries to control for a variety of external variables in attempting to figure out the direct impact here. And, obviously, you can never tease out all the different factors, but he makes a pretty compelling case that this particular ruling had a massive impact in venture capitalists' willingness to invest in the space -- and further cites additional research that shows a pretty clear direct causal relationship between VC investment and innovation and job creation. He further controls for things like broadband penetration, which could also impact these numbers.
The main key here was comparing investments in the cloud space in the US vs. Europe over the same period, because the US had the legal clarification, while Europe did not. Basically, in the US, after the Cablevision ruling, investments in cloud computing rose by 41%. In Europe, it rose 27%. Obviously, much of that increase is just due to the rise of the space, but the greater increase in the US suggests that the ruling really had an impact -- and that impact is pretty massive in terms of investment, and from that innovation and jobs. From there, Lerner does a lot of additional statistical analysis to separate out the direct impact of the Cablevision ruling compared to many other possible factors, and shows a pretty significant impact from the ruling. There's a lot more in the report, with details of the statistical analysis used for those who want to dig into the specifics, which looks pretty rigorous from my standpoint (though, I haven't done hard core stats in about a decade, but at one point in the past I taught stats in college). Either way, Lerner clearly approached the question from a variety of different angles, and they all seemed to suggest similar results, which is pretty compelling.
The key conclusion:
Our findings suggest that decisions around copyright scope can have significant impacts on
investment and innovation. We have tested a number of models and consistently find that the
U.S. Second Circuit Court of Appeals’ decision led to additional incremental investment in U.S.
cloud computing companies compared to the EU experience. As shown in the figure in Appendix
B, estimates of increased VC investment in U.S. cloud computing from our seven models range
from $728 million to approximately $1.3 billion, with an average of $936 million. When paired
with the findings of the enhanced effects of VC investment relative to corporate investment, this
may be the equivalent of $2 to $5 billion in traditional R&D investment.
This is quite important to think about in the context of SOPA/PIPA, where Hollywood and the US Chamber of Commerce are seeking to massively change the legal framework around cloud computing (effectively killing the Cablevision ruling and much, much more). The clear fear here should be that doing so will massively chill innovation, job creation and investment. This is why top venture capitalists are so worried about SOPA/PIPA. It'll seriously chill investment in a key area of the innovation ecosystem. Even worse, this is the part of the industry that's actually helping the entertainment industry move into the 21st century.
Rafe Needleman put together a fascinating roundtable discussion over SOPA and PIPA involving Larry Downes and Mitch Glazier. Downes, you may recall, wrote an excellent article highlighting the myriad problems with SOPA. Glazier on the flip side, once (while he worked for Congress) sneakily changed copyright law without anyone noticing, to screw over musicians. Thankfully, his handiwork was undone after a bunch of musicians noticed and complained... though, by that point he had left to become a high-paid lobbyist for the RIAA -- where he now holds the number two slot. He's there to argue for the record labels, not artists, of course.
Glazier makes a bunch of interesting, if slightly incredible, statements during the 40 minute discussion -- starting with his claim that the ProIP Act (from a few years ago, not to be confused with PROTECT IP from this year) allowed for the government to seize "criminal" websites. That's not clear at all. While it is true that the government is relying on the text of ProIP for such seizures -- the text in question was clearly designed to cover the seizure of things like machinery to print DVDs/CDs. There are significant legal questions, currently being heard in court, over whether or not ProIP actually allows the government to seize websites as it has.
Then they get into the meat of things, with Glazier bizarrely and incorrectly claiming that PIPA and SOPA are very similar. That's pretty shocking since the two bills are extremely different in important ways. And while he notes at the beginning that the reasons for this new law were to apply what was in the ProIP bill to foreign sites, he doesn't note that SOPA applies to domestic sites as well (something that SOPA supporters keep ignoring). He also claims that the exceptionally vague and broad definitions found in SOPA as to what constitutes "dedicated to theft of U.S. property" are nothing new or special -- saying the first three come from the DMCA's anti-circumvention provisions (a hugely problematic part of the current DMCA), and the latter two come from recent Supreme Court rulings. That's an interesting take... and one that's not quite true. For example, he claims that the inducement definition comes from the Grokster ruling, but that's not true. The standard in the bill is much broader. Now, it's true that the RIAA has pretended that the definition in the bill is what the Supreme Court said in Grokster, but the Supreme Court laid out some specifics that are not found in the bill.
Then there's a stunning bit of ridiculousness. Downes points out the problems of letting private parties take down entire sites based on a mere portion of a site being infringing, and Glazier claims this is wrong, and that SOPA is only about enforcement -- such that it means that "the remedy is limited" to a "portion" of the site. "So instead of saying, if a portion of the site is illegal, the whole site gets taken down, it's the opposite. A court can say if a portion of a site is illegal, only that portion of the site can come down." Now, that's interesting. It's also not true. What Glazier is referring to is the fact that the under the part involving the Attorney General, a court can order just a portion of the site to be blocked (but only to subdomains, not subdirectories), but the private right of action allows for any copyright, trademark, publicity right or patent holder to completely cut off payment or ads to a site based on an accusation. You don't "cut off payment processors" to just a portion of a site.
But note the disingenuous trick. When challenged on the wider impact of the law, focus on one narrow part of it. Sneaky.
Next up Glazier claims that the going after payment processors and ad providers isn't a secondary liability issue, because there's no secondary liability on those guys. Of course, try telling that to Triton Media, an ad provider who the entertainment industry sued for providing ads on sites they felt were "rogue sites." But, again, Glazier is being disingenuous by looking at the wrong thing. The concern isn't the secondary liability directly on the ad or payment players, but on all of their clients. It's over the fact that any site can have all ways to make money cut off with no court review. That's ridiculous.
Rafe then asks Glazier to explain how much piracy has "cost" the "music industry" and Glazier again is misleading (seems he makes a habit of that). First, he only talks about the recording industry, which has been cut in half, rather than the actual music industry (which continues to grow). But he seems to attribute that entirely to piracy, rather than massive infrastructure and market changes. He notes that the number of major labels has dropped from six to four... but that's because of mergers. Whether there's any connection there to "piracy" seems pretty questionable. Then he notes less investment in artists. Yes, by the major labels. But that leaves out that more and more artists don't need the majors to make money any more (whereas in the past they didn't have much choice). Thankfully, Rafe calls him on some of this -- noting the market changes and that unauthorized listens to songs might not be actual losses.
After Glazier admits that they don't really have good data on how much unauthorized use represents real losses, Larry jumps in and points out that this is a key point -- and that we shouldn't be legislating before we have such data. He notes that SOPA requires the IP Czar to study the issue and come up with some data, but rather reasonably questions why we're shooting first, and asking questions later.
The conversation then shifts to the DNS blocking aspect of the debate, a point on which Glazier really shows how to spin with the best of them, claiming that the (significantly worse) SOPA bill was a reaction to the tech industry's concerns with PIPA. That is, in Glazierworld, the much broader remedies in SOPA, which aren't limited to just DNS, are because his industry and the folks who wrote the bill heard the tech guys saying, "DNS blocking is bad," and with SOPA are saying, "okay, well, we give you broad latitude to block something else, if you'd like -- such as IP addresses directly." That this actually makes the problem even worse, and fragments the internet even further, apparently does not occur to Glazier. This is why we shouldn't let non-engineers write laws that impact technology, by the way. Downes properly points out how ridiculous this is, in that it leaves the court to decide if anyone is doing the required blocking in a "reasonable" manner -- and as we've learned from the Great Firewall, when you have such ambiguity, service providers have every incentive to over-block. That's what the RIAA/MPAA are hoping for, of course, but it should horrify anyone who understands how innovation works.
Glazier then makes sure to bring up the industry's favorite comparison: child porn, claiming that DNS blocks are common to block child porn. Of course, that's not quite true, and the CDT v. Pappert case highlighted how we, in the US, do not set up systems for over-blocking, even in cases of child porn. When Rafe challenges him on using "child porn" as an example, Glazier goes all patriotic, talking up the importance of the rule of law and whether or not we believe the rule of law should apply on the internet.
That, of course, is hogwash. Of course the rule of law applies on the internet. No one's arguing that. What we're arguing is that in their desperate attempts to bring back a mythical world that the record labels think existed twenty years ago, they're seeking to massively change the rule of law such that it hinders all sorts of important innovations that everyone agrees should be perfectly legal. The RIAA and their pals at the MPAA are massively overreacting, as they have a long history of doing. The "rule of law" argument was used against the VCR and the mp3 player -- both of which these industries declared should be illegal, because "the rule of law" must apply. So now they're overreacting to the entire internet. Perhaps we should recognize their long history of crying wolf, and maybe, just maybe, not believe them this time.
Downes points out the ridiculous of the private right of action notices... and we learn the SOPA defenders key line in response to that. Glazier says that since payment providers and ad networks have a financial incentive to keep making money from customers, they're unlikely to cut customers off. Apparently Glazier hasn't paid attention to the DMCA. Under the DMCA, service providers also have incentive to keep their users and customers. Yet, to avoid any liability or even the threat of being dragged into court, their first move is to simply take things down. You can bet that will happen here. Of course, this is emblematic of how the RIAA/MPAA folks view these types of issues. They think that as long as cash is being made, service providers will want to continue. But they underestimate the hassle and the fear of being dragged into litigation. To avoid any sort of liability, the ad providers and the payment processors are very likely to simply cut off sites that are accused -- especially if they're accused multiple times. Why bother with the hassle and the risk?
Towards the end of the interview, Glazier falsely claims that the tech industry was either at or invited to the table to negotiate on SOPA. This is false. Yes, the Chamber of Commerce and the MPAA found a few "friendly" (but misguided) tech companies like Monster Cable (who claims that eBay, Craigslist, Costco and Sears are all "rogue" sites) and GoDaddy (who itself could fit under the definition of a "rogue site" in the bill), so they could pretend tech was at the table. But, considering that some of the largest tech industry groups -- CEA, CCIA and NetCoalition were asking for a seat at a table for a while, and were denied, Glazier is, once again, being entirely disingenuous with his claims.
On the whole, Glazier's defense of SOPA isn't too surprising, but it's really misleading, and it's important to see how they mislead, because otherwise people may get fooled into believing the bill is not as disastrous as it really is. Throughout the interview, Mitch continued to talk about going after foreign sites, never acknowledging how SOPA isn't just about foreign sites, and even PIPA puts liability on domestic sites. If it's really true that just a few foreign sites are "the problem," (and they've yet to establish how real "the problem" is), then why craft such broad laws with vague definitions that will surely have unintended consequences... unless the plan all along is to stretch the boundaries of such a law?
We've been pointing out for a while just how incredibly out of touch the US Chamber of Commerce is these days. The giant lobbying firm (not to be confused with the US Department of Commerce -- a government agency), has consistently been taking a position that is anti-innovation, anti-growth and anti-jobs. It does this by supporting protectionist policies for just a few large companies who pay it a ton. It never supports innovative upstarts. Over the past few years, that's meant that it's been losing the true innovators, the companies who actually create jobs and contribute to economic growth today. Apple dumped the US CoC two years ago over its anti-science position on climate change. Yahoo recently refused to renew its membership out of disgust over the Chamber's position on PROTECT IP/SOPA. And now there are reports saying that both Google and the Consumer Electronics Association are considering dropping out of the Chamber over its support of PROTECT IP/SOPA. Kind of silly to call yourself the "US Chamber of Commerce" when all of the companies in industries that actually involve innovation are dropping your for your anti-innovation position, isn't it?
As pointed out by Harold Feld, it seems pretty messed up that our news media is going absolutely nuts over the story of the potential "Bieber baby," but has all but ignored the story of how the lack of clarity in the proposed SOPA law might mean Justin Bieber would go to jail for his performances of other people's works on YouTube -- something Bieber himself has spoken out against. Let's take a look. A basic Google News search on "bieber baby" turns up... 3,770 news stories:
And then let's do a search on "bieber sopa." For that... we get... a grand total of 15 news stories (including one from Techdirt):
Which story is actually more important? The one in which the government makes massive regulatory changes to the internet that will create felons out of ordinary people? Or the story about a baby that a pop star may or may not have fathered?
It's been unfortunate that the mainstream press hasn't really spent much time digging into the actual details of the text of the E-PARASITE/SOPA bill, and just how awful it is. At best, some of them have done a "well, the tech industry is worried about it" kind of piece, without actually looking at the details. Thankfully, some in the press really are digging in. James Temple, at the SF Chronicle, has an excellent and detailed piece about how SOPA would do more to "stop online innovation" than it would ever do to stop online "piracy." Just a snippet:
There are lots of concerns here, including the amount of discretion it hands to the attorney general. But another big worry is that blocking the domain name for one infringing site (say, latviablogging.com/counterfeitrolexes) could prevent access to thousands of innocent ones also hosted under that domain (like latviablogging.com/motherscookierecipes).
"It is inevitable that there will be bad behavior on any site that has thousands and thousands of dedicated subsections," said Dane Jasper, CEO of Santa Rosa Internet service provider Sonic.net. Cutting off the entire site's traffic and funds amounts to an "Internet death penalty" without a trial, he said.
It also highlights the ridiculous broad drafting and confusing language in the bill -- something SOPA/E-PARASITE defenders still refuse to admit. The worst of the worst is in the definition of what constitutes "dedicated to the theft of U.S. property." The dreadful drafting is going to lead to massive lawsuits:
This section of the bill appears to apply to both U.S.-based sites and foreign ones, or even a portion of a site, if it's "dedicated to theft of U.S. property." One of the key definitions of that is if a site "is taking, or has taken, deliberate actions to avoid confirming a high probability" of infringement. Public Knowledge, a Washington, D.C., public interest group, helpfully boiled down that clumsy legalese to: "lacking sufficient zeal to prevent copyright infringement."
In other words, it would place the responsibility for detecting and policing infringement onto the site itself, rather than content owners, as required under the DMCA.
"There's really not much question that this bill is designed to do an end run around the DMCA," said Corynne McSherry, intellectual property director at the Electronic Frontier Foundation, a digital rights group in San Francisco. "What has been affirmed by court after court is that service providers do not have to affirmatively police infringement. That's a good thing because it's a terrible burden to put on a service provider."
The thing that gets me is that if defenders of this bill were intellectually honest, they'd just admit that they were, in fact, trying to change the DMCA, and have a conversation on that point. So far, only Rep. Bob Goodlatte has been intellectually honest enough to admit that's the case. However, others in our comments and on other sites keep insisting that the bill is "narrowly drafted" just to impact the worst of the worst. Anyone who reads the plain (if convoluted) text of the bill knows that's simply not true. A "narrowly drafted" bill does not impact pretty much every internet property, like SOPA does.
While some groups representing content creators feel they need to hold their nose and stay lockstep with folks like the RIAA and MPAA in support of such obviously bad proposals as E-PARASITE/SOPA, at least some musicians groups are intellectually honest enough to admit that this is a bad, bad bill for creators. The Future of Music Coalition, whom no one can ever claim as being "anti-IP," "pro-piracy" or (most ridiculous of all) "anti-artist," has come out with a thoughtful rejection of E-PARASITE/SOPA. The group notes that while it quite frequently agrees with the RIAA/A2IM/AFM and other such groups, on this bill it simply cannot go along. The bill is that bad:
We at FMC want to see the growth of a legitimate digital music marketplace that rewards creators and fans. We support efforts to protect rightsholders online and encourage fans to participate in platforms where creators get paid. We genuinely hope that if Congress gets involved that they find a way to support creativity without compromising free expression and innovation. In its current form, SOPA is not that bill.
As FMC notes, it hopes that musicians understand the real impact of such a bill, and after spending some time going through the details, they find some parts quite problematic:
SOPA’s definitions around “infringing” sites and services are seemingly broad enough to include sites that have perfectly legitimate uses. For example: some of us here at FMC are musicians and producers. We regularly use services like Dropbox, etc. to send files back-and-forth to collaborators. Under this bill, such services — and those yet to be invented — could be subject to blocking or other penalties. Unlike the Senate bill with its more tailored definition, SOPA could target any foreign site or service that “facilitates” infringement. That net seems too wide for comfort.
And, then, of course there's the serious concerns over DNS blocking, and not just over the technological aspects, but what signal it will provide to other countries, who will feel much more open to start blocking access to US sites:
Another concern with SOPA is that it impacts an underlying feature of the internet — the Domain Name Server system (DNS). Think of DNS as a global phonebook for the web, where a site’s numerical address is converted to words and letters. Instead of typing in a string of numbers like 69.65.119.60, DNS servers let users type in easier-to-remember names, like futureofmusic.org. If a site appeared on a government blacklist, these servers would be instructed to no longer “resolve” the address. Keep in mind that it is incredibly easy for an infringing site to switch domain names — the underlying content is still there. Additionally, a user could also simply type in the numerical IP address and go straight to the site. Worse, by switching to a domain name server in another country, those in the US seeking that material could end up surfing in some of the most parasitic and dangerous backwaters of the internet (and bringing back what they catch). The authors of the bill seem to recognize how easy it is to get around DNS redirects, so they’ve also authorized the attorney general to go after anyone who provides a product or service to do so. But we start blocking access to foreign sites, will other countries take that as a green light to start blocking access to ours? Is it a good idea to open this can of worms at a critical time for global information openness and security?
And, finally, the FMC recognizes that the DMCA's safe harbors are extremely important, and worries that this bill undermines them:
An important part of the DMCA are its “safe harbors,” which protects online service providers from liability for third-party content uploaded to their sites, provided they quickly remove or disable access to material upon receiving notification from rightsholders. Recent court cases have hinged on whether a site or service had “specific knowledge of infringement.” If not, a site may be within its safe harbors. There is concern that the language in SOPA could force a site or service to monitor activity, out of fear that they would otherwise be “avoiding confirming” non-infringement. Under such an obligation, we may never see the next amazing platform for user-generated expression (and creator compensation).
Definitely a big issue. It's great to see the folks at FMC, who are one of the few groups out there who truly look out for the best interests of artists (unlike groups that claim to, but who are really looking out for the best interests of middlemen), speak up about this bill. Contrary to what you'll hear, supporting E-PARASITE/SOPA won't help artists. It may help the gatekeepers... but those gatekeepers have a history of hindering, not helping artists. What the bill will do is hinder the ability of important new platforms and services to come forth -- and it's those new platforms and services that will help drive the new business models that make money for artists in the future.
Stripped of their obfuscations, SOPA and Protect IP suggest increasing desperation by media companies. A bill that was to target only the "worst of the worst" foreign Web sites committing blatant and systemic copyright and trademark infringement has morphed inexplicably into an unrestricted hunting license for media companies to harass anyone--foreign or domestic--who questions their timetable for digital transformation.
Nothing can change the fact that Hollywood's way of life is transforming once again. The only unknown is time--will a profitable future for digital content arrive in a few years or will it take another decade? SOPA only seeks to delay the inevitable, at the cost of wasteful litigation and overzealous law enforcement.
The article is relatively long, but is still worth reading in its entirety, clearly quoting problematic sections of the law, and highlighting where and how it will likely be abused. I'd love for the small group of E-PARASITE defenders in our comments, such as the guy who claims to have worked on the bill and who still (incorrectly) thinks that it only applies to "foreign" sites, to see if they can actually defend against what Downes wrote (without resorting to insults), and actually respond to our concerns directly. Because, so far, every time we've raised key issues, we've been lied to and insulted, rather than having anyone address these issues. It's really quite amazing.
In the meantime, one other point that Downes raises, which is absolutely true, is that this bill shows the downside to Silicon Valley's general position of ignoring what's going on in DC. That has to change, and if one "good" thing comes out of this bill, perhaps it's that it's so insanely bad that it'll jolt people awake in Silicon Valley, and get them to recognize that they need to speak up.
As the fight over the E-PARASITE/SOPA bill continues, it's worth taking a step back, and conducting a short thought exercise:
What would the movie business be like today, if the MPAA had succeeded in banning the VCR?
Remember, in the Betamax case, the studios sought to kill off the VCR, leading to the famous quote from MPAA boss Jack Valenti:
I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.
And, Valenti and the MPAA came very close to convincing the courts, who only granted immunity for those offerings with substantial non-infringing uses by the narrowest of margins (though court initially decided to side with the MPAA before changing its mind). Unfortunately, while SOPA seeks to couch its broad upending of the legal and technical frameworks of much of the internet in the claim that this is "just" about "stopping pirate sites," twenty years ago, this case was about "just" stopping this "pirate technology."
But what happened after that? Once the court finally declared VCRs legal, suddenly the movie industry exploded. With this new method of video distribution, the entire movie business was reinvented in a good way. It meant no longer just viewing in the theaters. An entire new category soon took over: home movie viewing (and renting). Before long, the home video market actually overtook the theater. And, these days, ironically, what do you hear the MPAA whining about the most? That online sharing is decimating the home video market. Of course, if the MPAA had had its way 20 years ago, we wouldn't even have a home video market.
So the thought exercise of where the movie industry would be today, if the VCR had been declared dedicated to infringing purposes twenty years ago, seems particularly relevant. That's doubly true, seeing as the E-PARASITE bill effectively looks to overturn the court's Betamax decision, and open up the floodgates for the MPAA (and others) to cut off all funding from any new technology it believes is "dedicated to the theft of US property" under the exceedingly broad definitions in the bill.
Take a moment, and consider where the movie business would be today, if the VCR never existed. And think about just how wrong the MPAA was then to freak out about a technology that later saved it. And consider that perhaps we should wait before changing the law to allow the MPAA to kill off the next "VCR" in the digital age.
Want to know just how desperate the folks at the MPAA are getting in their attempt to turn back the clock and outlaw all sorts of innovation? They're reaching the absolute bottom of the barrel, touting the fact that firefighers have come out in favor of PROTECT IP/E-PARASITE. What the hell do firefighters have to do with understanding detailed concepts like free speech, censorship, prior restraint, third party internet liability, and related topics? If you said absolutely, positively, nothing at all, you'd be correct. So, why are firefighters suddenly in favor of the censorship of the internet in America? It's not hard to guess, given how DC lobbying works these days:
"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.'"
Yup. What are the chances that the International Association of Fire Fighters has received large checks from those associated with the movie business? But, more seriously, who does the MPAA actually think it's fooling? Is Congress so stupid that it can't figure out for itself that firefighters have no clue what this debate is about? Otherwise, why would they be supporting censorship in America? Read the letter below, and wager a guess how much was actually written by a firefighter, rather than a lobbyist for Hollywood?
