Awesome Stuff: Security Hardware For The Masses

from the stay-safe-now dept

Securing your computer and phone are something that is increasingly important, especially in light of all of the stories about privacy intrusions we've been discussing the past few months. For the most part, the average person has tended to rely on software-based security offerings, rather than hardware. While company may invest in hardware solutions, that's always seemed to be a bit too much for the average consumer. However, perhaps that's changing. This week's awesome stuff covers three crowdfunding campaigns, looking to build different types of secure hardware for the mass market.

• First up, we've got the amusingly named, Don't Snoop Me Bro (or DMSB for short). It's a VPN in a box. You hook it up to your network and turn the key (literally, it has a physical key) and it turns on a VPN tunnel via a VPN service routing your data through another country. These guys sent me a prototype to check out, and it looks interesting (though won't work with my network setup). They're still deciding what VPN service provider it will use, and it seems like that's something that could make a difference in terms of overall usefulness. Of course, you can already pay for a VPN service that just runs on your computer (I've got a couple), but the DSMB guys properly note that those aren't always the most user friendly and they only secure the one device, rather than the entire network (of course, they also work outside of your home/office). Still, if you're looking to VPN tunnel your home network, this is an interesting project to check out: The project is seeking $65,000 and has only raised around $5,000 with less than a month to go. Even though it's an IndieGoGo project, they chose the Kickstarter-like option of only getting the funds if it reaches the goal, so it needs to reach that target to get funded. There's still plenty of time, though, so go check it out.
• Another project with a great name is the Tuit mobile security ring. With all the talk of Apple trying to make security easier via their fingerprint ID reader, lots of people have pointed out that it's dangerous to have a security token that can't ever be changed -- such as your fingerprint. Of course, plenty of people like the general ease of use of the fingerprint reader over a pin or password. The tuit project seems to be an interesting attempt to offer a better solution overall, creating a ring that uses NFC (near field communication) to unlock your (Android only, it appears, though there are stretch goals for Windows) phone just by touching it with the ring on your hand. In other words, the theory is that if you're holding your phone, it'll unlock automatically, but no one else can do that, unless they take your ring or hold your hand up to it. It's obviously not perfect security since someone could get the ring in some way, but it does seem like a nice idea in terms of good convenience for the user (since many people don't use any lock screen at all because it's too inconvenient) while still creating some security, especially if the phone is taken from you. Also, as they note, you can still use a password to lock the screen and make it much more complex, since you won't have to type it in so often. These guys have a big hill to climb, as their goal is $100,000 and they've still raised less than $10,000 with about two and a half weeks to go. Not sure if people just aren't that interested, or if they haven't been able to get enough attention for the project.
• Finally, we've got the not so wonderfully named Qi4BOX, which is a USB key that encrypts all your local documents and documents in your Dropbox account. I'd imagine it's really only useful for those who are big time Dropbox users, but it's an interesting approach as a way to try to make the documents you put on Dropbox even more secure, without making it more user-unfriendly. As with all the projects this week, this one still has a ways to go, with about three weeks left. The folks behind it are seeking $30,000 Canadian, but are still only about a quarter of the way there. Perhaps the market for securing Dropbox documents isn't that big.

That's it for this week... stay secure.

Filed Under: awesome stuff, encryption, hardware, nfc, passwords, security, vpns

15 Technologies The Legacy Content Companies Have Sued In The Past 15 Years

from the suing-innovation dept

Many are familiar with the Sony Betamax case, the landmark Supreme Court decision which nearly 30 years ago ruled that selling videocassette recorders to consumers was not copyright infringement.  Not as well known, but equally important, was the case of the Diamond Rio.

Fifteen years after Sony, when the future of the home electronics industry turned on the vote of a single Supreme Court Justice, the recording industry sued to kill MP3 players.  In fact, it was exactly 15 years ago today when recording industry lawyers told a federal court that Diamond Multimedia’s Rio, one of the earliest MP3 players, was illegal and needed to be stopped before it found its way into consumers’ hands.

A federal appellate court finally spiked the industry’s campaign against the Rio, which paved the way for a wave of consumer products which ultimately converged into the modern smartphone.

Unfortunately, neither the Sony decision nor the Diamond Rio case ended the century-long trend of new technology being met with copyright litigation.  On the 15th anniversary of the Rio suit, here are 15 other products/services that have since met with litigation, and how they have fared:

1. ReplayTV

ReplayTV, a DVR and time-shifting service, was launched in 1997 and marketed by SONICblue, a successor to Diamond Multimedia.  In October 2001, the company was sued by TV industry rights-holders over features including commercial-skipping (which was recently given a stamp of approval by multiple federal courts in the DISH Hopper litigation [1] [2]).  Legal costs drove the company into bankruptcy in March 2003.  The purchaser of the technology, Digital Networks North America (DNNA), announced in June 2003 that it was removing some of the contentious features, which prompted the entertainment industry plaintiffs to dismiss litigation against ReplayTV and SONICblue.  ReplayTV.com’s assets were ultimately acquired by DIRECTV.

2. MP3.com

MP3.com, founded in 1997, preceded modern cloud-based file storage services.  The service aimed to permit users, after buying a CD, to listen to that CD at any Internet-connected location.  The recording industry sued MP3.com in January 2000, before the company launched.  A court ruled against MP3.com in September 2000, and the company was ordered to pay nearly $118 million in statutory damages for willful infringement.  As described in a paper by Prof. Michael Carrier, the company ultimately opted to settle for approximately $50 million.  According to an ABC News article, “U.S. District Judge Jed S. Rakoff said it was necessary to send a message to the Internet community to deter copyright infringement.”  In 2003, CNET bought the domain name, but not the technology or music assets, and currently maintains the site.

3. MP3tunes

In 2005, Michael Robertson, the founder of MP3.com, again attempted to launch a music service – MP3tunes – which operated personal online storage lockers and a music search engine.  In November 2007, stemming from disagreements over a takedown notice issued to MP3tunes, EMI filed suit for copyright infringement against MP3tunes and Robertson.  In 2011, after four years of litigation, MP3tunes filed for bankruptcy.

4. iCraveTV

iCraveTV was a Canadian website, which launched in 1999, and offered online streaming of Canadian and American over-the-air TV broadcasts.  In February 2000, a U.S. court issued a preliminary injunction against iCraveTV, prohibiting it from operating in the U.S.  Before Canadian courts had the opportunity to consider the issues, that same month iCraveTV discontinued operating in return for plaintiffs’ agreement to withdraw all actions against it.

5. ClearPlay

ClearPlay is a parental control DVD player that allows content filtering, skipping, and muting of DVD films.  This feature allowed parents to design a customized filter for each movie, by choosing whether to skip varying degrees of violence, sexual content, and profanity.  Movie studios sued ClearPlay for copyright infringement in 2002, alleging that by editing out content, ClearPlay was creating unauthorized derivative works.  Before the case was resolved in the courts, Congress intervened and passed the Family Entertainment and Copyright Act (FECA), which immunized ClearPlay’s product from copyright liability.  (The narrow nature of FECA was such that it did not immunize another company, CleanFlicks, which re-sold edited copies of movies; a Colorado court ruled against CleanFlicks in 2006.)

6. Search Engines

Although widely embraced today as a valuable tool for navigating the Internet, at one time search engine indexing was alleged by rights holders to constitute copyright infringement.  For example, an adult entertainment magazine and subscription-only website called Perfect 10 sued Amazon, Google, and others for copyright infringement in November 2004 in California district court, for links to allegedly infringing sites, and for “thumbnail”-sized previews of images.

In another case filed the same year, a plaintiff Blake Field sued search provider Google for indexing poems published on his website, seeking $2.5 million dollars.  This claim was rejected by a trial court in 2006.

Several months later, however, the trial court ruled in the Perfect 10 case, holding that while hyperlinks to infringing sites were not likely to be found to be infringing, Google’s thumbnail images were likely to be found to be infringing.  In May 2007, the Ninth Circuit Court of Appeals overturned this, finding for the defendants on all counts.  The court held that Google was not liable for contributory or vicarious infringement, and that the thumbnails were not infringing, as they constituted fair use under a theory of transformativeness, and also failed to demonstrate market harm.

7. Veoh

Veoh, an Internet television company, debuted its beta service in March 2006 and launched out of beta in February 2007.  In June 2006, Veoh was sued in a California district court by IO Group, a producer of adult entertainment films.  Veoh prevailed on summary judgment, as it was protected by the DMCA’s safe harbors.  In September 2007, UMG Recordings sued Veoh and its investors in a different California district court.  In September 2009, a federal court again ruled in favor of Veoh, stating that Veoh was appropriately complying with the DMCA and thus not liable, which the 9th Circuit upheld in December 2011.  Years of litigation took their toll, however, and Veoh filed for bankruptcy in February 2010, and its assets are now part of a company called Qlipso.

8. Vimeo

Vimeo, a video-sharing website, was founded in 2004.  Last month, a New York federal judge refused to dismiss a copyright case against Vimeo that had been filed in 2009, unconvinced by Vimeo’s argument that it was protected from liability under the DMCA safe harbors.  The case is expected to proceed to trial.

9. YouTube

YouTube, a video-sharing website, was created in 2005, and bought by Google in 2006.  In March 2007, Viacom and some other rights holders sued YouTube in New York federal court.  Google’s motion for summary judgement seeking dismissal was granted in June 2010, as the court found they were shielded under the DMCA safe harbors.  In April 2012, the Second Circuit was not entirely convinced that the case did not need to go to trial, and remanded it back to the district court.  In April 2013, the district judge again granted summary judgment in favor of YouTube.  In July 2013, Viacom again appealed the case back up to the Second Circuit.  The litigation is expected to continue into 2014.

10. Cablevision

In March 2006, Cablevision announced plans to launch a service that would allow subscribers to record programming on a remote DVR, rather than subscribers needing a set-top DVR in their own home.  TV networks sued Cablevision on a theory of direct infringement, rather than alleging secondary liability through the customers’ actions, and in March 2007, the New York district court found that the Cablevision remote DVR would directly infringe plaintiffs’ copyrights.  In August 2008, the Second Circuit reversed the district court and found for Cablevision, holding (1) that the copies weren’t sufficiently fixed to be copies under the Copyright Act, (2) that consumers are the ones making records, not Cablevision, and (3) that playing a copy was a private performance, rather than an infringing public performance, since each copy could only be played by the subscriber who recorded it.

11. Zediva

Zediva was a service, launched in March 2011, which allowed customers to virtually rent a DVD which was played on a remote DVD player, and then streamed to the customer online.  The film industry sued Zediva, and was granted a preliminary injunction in August 2011 which prevented the service from operating.  In October 2011, the MPAA announced a settlement with Zediva, in which Zediva agreed to permanently shutter its service and pay $1.8 million.

12. ReDigi

ReDigi is an online marketplace for pre-owned digital music and also a cloud storage service, that currently only accepts music purchased from iTunes.  ReDigi launched in October 2011, and was sued by Capitol Records in January 2012.  In February 2012, the court did not grant a permanent injunction against ReDigi, but in March 2013, it partially granted Capitol Records’ summary judgment motion, deferring to Congress on the issue of digital first sale.  Rob Pegoraro wrote in April on DisCo how this ruling is “another example of trying to fit a digital case into an analog frame, at the cost of denting some logic along the way.”

13. DISH Hopper

The DISH Hopper is a set-top DVR box with several features, including “AutoHop,” the Hopper’s commercial skipping feature.  DisCo recently covered the status of ongoing copyright litigation against DISH’s Hopper, which was sued in 2012 in district courts in New York and California, and has prevailed so far against all motions that have been filed to attempt to prevent DISH from offering the service to customers.

14. Aereo

Aereo is a technology company that allows subscribers to view streams of over-the-air television on computers, tablets, and mobile devices.  In September, DisCo covered the status of copyright litigation between television networks and Aereo in New York, where they were sued in March 2012, and Massachusetts, where they were sued in July 2013.  (That post also covered ongoing litigation of television networks against another service, called FilmOn X, in California and Washington, D.C.)  Just yesterday, Aereo was also sued in Utah.

15. TVEyes

TVEyes is a media monitoring company and search engine for broadcast TV and radio, whose clients include the Pentagon, the UN, Congress, and the NY Times.  The service was sued by Fox News in July 2013 for copyright infringement and misappropriation.  In September 2013, TVEyes responded asking the court to dismiss some of the claims.

Reposted with permission from The Disruptive Competition Project

Filed Under: content companies, dvrs, innovation, lawsuits, mp3s, search, technology

Awesome Stuff: Open Standards And Open Safety

from the openness-is-good dept

For this week's awesome stuff, we're going to highlight two projects that seek to bring out into the open things that are being held in secret for no good reason at all.

• Public Safety Codes of the World. We've written many times about Carl Malamud and his work with Public.Resource.org to buy up various "standards" that have been incorporated into US laws, and then making them freely available to the public, under the belief that the law should never be locked up and subject to copyright protections. Tragically, many standards are written by industry bodies, who then try to support themselves by selling (at exorbitant prices) copies of the details of those standards. But when politicians then write those standards into the law, it seems quite reasonable that the details of the standards really should be free. This is expensive work, since it involves buying up lots of standards and (all too frequently) fending off legal attacks. Given that, Malamud is seeking at least $100,000 to continue Public.Resource's work. The key goal behind this particular effort is to take many of the standards they've already scanned and turn them into HTML to make them much more accessible and usable. This is a good cause that you should support. Malamud has been doing tremendous work for years. So far the campaign has only raised about 20% of its $100,000 goal. That's unfortunate, since, as the project description makes clear, the more they can get, the more they can do with that money. If you have a couple of spare dollars around, please think about supporting this.
• Next up is a really interesting project from Underground Meats, where they're looking to Open Source their Food Safety Model. I had seen a couple friends back this, but didn't really look into the details until later. Basically, this is a small meat processing facility that is trying to become a USDA-certified meat processor. Apparently, the process is incredibly cumbersome and convoluted (welcome to having to deal with government bureaucracy). There is, of course, good intent behind some of this: the process to make sure that your meat production is safe should require some effort. But, at the same time, as we've seen for years, many companies have used massive bureaucratic regulatory schemes as an effective way to keep out small and innovative competitors, because the barrier to entry is so high. Here, no one is complaining about the need for a detailed food safety and sanitary practice plan, known as a HACCP (Hazard Analysis and Critical Control Points) as part of the process -- but they are annoyed that every company going through this process needs to start from scratch, rather than learning from and building on those who have already gone through the process. Most big companies who have gone through the HACCP process then lock it up, claiming that they're covered by copyright.
  
  That's where this project comes in. The folks at Underground Meats are looking to not just "open source" their HACCP, but public domain it, by putting using a CC0 license to effectively dedicate the work to the public domain so others can make use of it. This is a cool approach, showing where copyright can impact things way beyond basic content creation. If lots of small companies in regulated industries could use the lead of others, without cost, to get through the various regulatory hurdles, we'd likely see a lot more innovative and upstart competition in overly regulated industries. It would be cool to see others follow this lead. This project has about a week to go and is around 90% funded, so it seems likely that it will just nudge its way over the finish line before it's all over.

I wish I had a third crowdfunding project highlighting opening up safety standards, but this is all I can find so far. It's a start.

Filed Under: awesome stuff, carl malamud, copyright, laws, open source, open standards, public domain, safety

Luddites Are Almost Always Wrong: Technology Rarely Destroys Jobs

from the it-might-change-markets dept

Two years ago, I wrote a long post about the "paradox of job creation" about politicians trying to take credit for creating jobs. As I noted, there's something of a paradox, because job creation often involves what looks like job destruction in the first place -- before people realize that those jobs can be shifted in a different direction. Case in point: in the 1940s, AT&T employed approximately 350,000 people as phone operators. AT&T had rapidly begun moving to automatic switched telephony systems a bit earlier, but it took until the late 1940s, until those really became common enough to move away from people having to pick up the phone and ask a human operator to connect them.

In the short-term tech-kills-jobs view, you could easily see this new "technology" as killing jobs. Indeed, it's reported that there are somewhere around 18,000 telephone operators in the US today. But... there are also about 100,000 call center operators and 290,000 telemarketers (and of course, in a globalized world, many of those jobs have moved overseas). But, more importantly, moving from having a human operator connect you to an automatic switched network was just an early step in leading to tremendous follow-on innovations that created all kinds of new jobs and economic growth. Automatic switched phone networks created all kinds of new business opportunities and convenience, but also eventually enabled easy access to the internet. And the internet has since created millions of new jobs (including mine!).

Two years ago, we wrote about how even President Obama had falsely argued that ATMs had diminished teller jobs and that automated check-ins at airports had hurt airline employees. The data said otherwise:

At the dawn of the self-service banking age in 1985, for example, the United States had 60,000 automated teller machines and 485,000 bank tellers. In 2002, the United States had 352,000 ATMs--and 527,000 bank tellers. ATMs notwithstanding, banks do a lot more than they used to and have a lot more branches than they used to.

Professor James Bessen has now written a similar piece for Slate, pointing out how the history of predicting job destruction from technology has almost always been totally incorrect:

At least since Karl Marx, people have been predicting that technology would create mass unemployment. However, these predictions were consistently wrong because they ignored the offsetting benefits of automation. For example, during the 19th century, machines took over tasks performed by weavers, eliminating 98 percent of the labor needed to weave a yard of cloth. But this mechanization also brought a benefit: It sharply reduced the price of cloth, so people consumed much more. Greater demand for cloth meant that the number of textile jobs quadrupled despite the automation.

Something similar is happening in quite a few occupations today. Because ATMs perform many teller transactions, fewer tellers are needed to operate a bank branch. But because it costs less to operate a branch office, banks dramatically increased the number of branches in order to reach a bigger market. More bank branches means more tellers, despite fewer tellers per branch.

Bessen does note that the type of work and skills may change -- tellers are more focused on more complex transactions rather than simple ones, just like call center employees have to help customers with problems, rather than just connect person A to person B. But is that such a bad thing?

Of course, for all this to work right, as Bessen notes, the technology has to generate much greater value to the economy. It's that value that gets disbursed more widely, creating new opportunities for jobs and economic growth. I'm almost surprised that Bessen -- who has done some of the most important research on the negative impact of patent trolling -- doesn't take the next step and point out that one way to make sure that the benefits of innovation do not get spread out over the economy is to lock them up, so that only one party receives all the benefits -- which is what something like a patent will do. We get economic growth because you can't contain the offshoot benefits of innovation. These are sometimes called externalities or spillover effects, but they're really the very fuel that improves the economy and overall opportunity -- and attempts to lock them up can often lead to those benefits not being able to spread as widely, limiting the opportunity and the potential for job growth.

Filed Under: jobs, luddites, technology

Awesome Stuff: Rethinking The Backpack

from the carry-your-gear dept

As someone who is "on the go" all too frequently, I've been trying to perfect the idea of "my office is in my backpack" for a while (always getting closer and closer but not quite there...). For a while, however, I never put any thought into the backpack itself. I survived on a series of free backpacks picked up at various conferences, which came in varying sizes and levels of quality. A few years back I finally started asking around for ideas on good bags, and got a few recommendations for Swiss Army backpacks. On a whim I stopped by a local drug store and was surprised to see they had a bunch of Swiss Army backpacks on clearance (discounted, discounted again, then half off), and ended up with the bag I've now used for a few years now for less than $30. It's huge and it's great. It's durable, it's comfortable, well organized and it carries a ton of stuff. But there's a downside too: it's huge (yes, I know I cited that as a positive as well). I once almost got thrown off a bus in a foreign country because of the size of the backpack (don't ask). Lately I've been also using a smaller bag (yes, another free conference one) which can suffice for shorter trips, but I'm keeping my eye on what else is out there. Apparently, some other folks are thinking about the modern backpack as well, so here are a few crowdfunding projects concerning backpacks for this week's awesome stuff.

• First up is the Minaal ProTravel Carry-on backpack. Basically, some intrepid travelers designed the sort of backpack/carry-on bag that they've always wanted. It looks really nice if you do a lot of traveling. Well thought out if you're using it as both a bag for electronics gear and for clothes and stuff. Also, let's you hide the straps quickly and make it look more business-like in settings where a backpack might feel inappropriate. Also, their video (and campaign page) is fairly entertaining. Two lines from the campaign page that made me chuckle: "Pullers are suitable for right-handed & left-handed people. Ambidextrous people, no dice. We don't like your type around here" and "Other info you may be interested to know: the phone pocket is soft-lined. The cards and phone sit slightly lower than shown. There are around 4,000 species of frog known to man." Good to know. Of course, nice bags don't come cheap. This one will set you back $229 via Kickstarter, though they claim it will eventually retail at over $300. Plenty of people think it's worth it, however, as the campaign zoomed quickly past its $30,000 goal and is around $140,000 as I type, with nearly three weeks to go.
• Next up is a bag that is targeting the very same market, and amazingly launched on the very same day, with the very same campaign time frame and the very same target market, but which has received a lot less attention, though, frankly, the SOOT Electropack seems like a more compelling offering (to me, at least). The key to understanding the SOOT is that it's modular. The full deal is basically two separate bags (a basic backpack and a separate messenger bag) that can each be used separately, or which combine easily into a megabag. They're also highlighting the fact that they're selling it with a 10,000mAh battery that slips into a small pocket to keep your devices charged. While I can be somewhat obsessive about battery power as well, this part isn't as interesting, since there are so many third party external battery packs out there (and I prefer ones that can also charge laptops). That said, the modular nature of the SOOT is a pretty cool selling feature -- especially if you find a bag that's really big to be both a positive and a negative, depending on the situation. Again, even though it seems like a better option than the Minaal (which does look pretty damn nice as well) it just hasn't received as much attention. It's still just slightly under the $30,000 goal, though it'll certainly pass it before long. The bags aren't cheap, but they're less expensive than the Minaal (the combined version, without the battery pack, runs $179), and you can buy the separate pieces if you don't want the full combined bag.
• There are a few other "bags" on various crowdfunding sites right now, but none struck me as really unique or different from stuff that's already widely on the market. And then I came across the Pad Pouch backpack. Let me say upfront, that I don't think I'm the target market here, and I don't get it at all. It appears to be a backpack with a giant clear see-through pouch on the front where you can put a tablet to, um, express yourself? I think? It feels like it's targeted at younger folks (students, mainly), but it looks kind of a bit dorky in its current version -- but, again, perhaps actual students see it differently. I also find it somewhat amusing that they hype up their patent pending status (Kickstarter campaigns that play up their patents always set off alarm bells in my head), but then talk about how you can use this to put "free, copyrighted images from the internet" on your "shirt" this way (bonus question for copyright law professors to add to their next exam: would that be a copyright violation to display an image you found on the internet on your tablet while "wearing" the tablet?). Perhaps I'm not actually the only one confused by all of this, as it hasn't yet found too many backers (only 11 as I type this), though it's only seeking a $5,000 target, so perhaps people will show up and buy it in the month or so left on this project. The folks who made this do get points for originality, though. Haven't seen anything quite like this before.

That's it for this week. Of course, there are lots of backpacks on the market already, outside of crowdfunding campaigns. I'd be curious to hear about what other sorts of backpacks people like using these days.

Filed Under: awesome stuff, backpacks, innovation, office in a bag

The Second Century Of The Federal Trade Commission

from the rethinking-the-ftc dept

You may not know much about the most important agency in Washington when it comes to regulating new technologies. Founded 99 years ago today, the Federal Trade Commission has become, for better or worse, the Federal Technology Commission.

The FTC oversees nearly every company in America. It polices competition by enforcing the antitrust laws. It tries to protect consumers by punishing deception and practices it deems “unfair.” It’s the general enforcer of corporate promises. It's the de facto regulator of the media, from traditional advertising to Internet search and social networks. It handles novel problems of privacy, data security, online child protection, and patent claims, among others. Even Net neutrality may soon wind up in the FTC's jurisdiction if the Federal Communications Commission’s rules are struck down in court.

But how should the FTC regulate technology? What’s the right mix of the certainty businesses need and the flexibility technological progress demands?

There are essentially three models: regulatory, discretionary and evolutionary.

The epitome of traditional regulatory model is the FTC's chief rival: the FCC. The 1996 Telecom Act runs nearly 47,000 words — 65 times longer than the Sherman Act of 1890, the primary antitrust law enforced by the FTC. The FCC writes tech-specific before technology has even developed. Virginia Postrel described the mentality best in The Future and Its Enemies:

Technocrats are “for the future,” but only if someone is in charge of making it turn out according to plan. They greet every new idea with a “yes, but,” followed by legislation, regulation, and litigation.... By design, technocrats pick winners, establish standards, and impose a single set of values on the future.

The less technocratic alternative is the evolutionary model: build flexible law that evolves alongside technology. Learn from, and adapt to, the ever-changing technological and business environments.

On antitrust, that's essentially what the FTC (along with the Department of Justice) does today. Judicial decisions are firmly grounded in economics, and this feeds back into the agencies' enforcement actions. Antitrust law has become nearly synonymous with antitrust economics: both courts and agencies weigh the perils of both under- and over-enforcement in the face of unavoidable uncertainty about the future.

But much of what the FTC does falls into the discretionary model, unmoored from both sound economics and judicial oversight. The discretionary and evolutionary models share a similar legal basis and so are often confused, but they're profoundly different: The discretionary model harms technological progress and undermines the rule of law, while the evolutionary model promotes both.

For the most part, the FTC enforces laws on a case-by-case basis. Those laws are general, short and vague. The FTC Act is about nineteen times shorter than the 1996 Telecom Act and hasn't really changed since 1934. Its key provision would fit in a Tweet: "Unfair methods of competition... and unfair or deceptive acts or practices... are hereby declared unlawful." The antitrust laws are similarly general, prohibiting "restraint of trade" and conduct "the effect of which is to substantially lessen competition."

The FTC has never explained what its "unfair methods of competition" authority covers that antitrust doesn't. Commissioner Joshua Wright recently proposed limiting principles, but FTC Chairman Edith Ramirez appears reluctant to relinquish any discretion. Contrary to popular belief, the FTC does have general rulemaking power but has simply decided it's too hard to use. Instead, the Commission writes formal rules only in narrow areas where Congress has given it streamlined rulemaking power, such as credit reporting and online child protection.

Congress imposed procedural safeguards on the FTC's general rulemaking authority in the mid-1970s after the FTC ran amuck with its unfairness authority. But the agency kept trying to regulate everything from children's advertising to funeral home parlors. The Washington Post dubbed the FTC the "national nanny." An outraged, overwhelmingly Democratic Congress briefly shuttered the agency. The FTC survived only because, in 1980, it offered limiting principles and embraced the evolutionary model:

The present understanding of the unfairness standard is the result of an evolutionary process. The statute was deliberately framed in general terms... [and the] task of identifying unfair trade practices was therefore assigned to the Commission, subject to judicial review, in the expectation that the underlying criteria would evolve and develop over time.

But it hasn't quite worked out that way. Consumer protection law, unlike antitrust law, has increasingly been shaped primarily by the FTC's discretion, not evolution through judicial review or dialogue with economic scholarship. In the last decade, the FTC has begun using its unfairness authority to address cutting-edge issues like data security. The FTC has even begun pushing the legal boundaries of its authority over deception by extending it beyond traditional advertising claims to online FAQs and the like.

At the heart of the discretionary model is the FTC's ability to operate without any real constraints. The Commission hasn't develop a predictable set of legal doctrines because that's what courts do — and the FTC has managed to strong-arm dozens of companies into settling out of court. What the FTC calls its "common law of consent decrees" is really just a series of unadjudicated assertions. That approach is just as top-down and technocratic as the FCC's regulatory model, but with little due process and none of the constraints of detailed authorizing legislation, as Commissioner Wright recently warned. That's the kind of "flexibility" prosecutors love but that businesses hate, especially those trying to innovate.

How did this happen? For much the same reason companies routinely settle questionable patent claims: settling is cheaper than litigating. Normal plaintiffs have to make a threshold legal showing before courts will compel discovery. But there's no check on the FTC's investigative process, which can cost a company millions — until it agrees to settle. And once it does... the FTC takes a Roman approach to deterrence. As an EPA official put it on candid camera last year: "They'd go into a little Turkish town somewhere, they'd find the first five guys they saw, and they would crucify them." Bad PR can be far more damaging to a company than litigation.

The FTC might be right in any particular case, but overall, what evolves isn't "law." It's merely a list of assertions as to what the Commission thinks companies should and shouldn't do — crucifixes along the road to wherever the FTC wants technology to go.

We've asked the courts to curtail the FTC's discretion, but modern administrative law and civil procedure make legal challenges difficult. And unfortunately current and recent FTC leadership has shown little interest in limiting the agency's discretion. Last year, for example, the current and former chairman voted to revoke the agency's 2003 Policy Statement on disgorgement of wrongful gains in competition cases. And despite unusually broad academic agreement on its basic principles, Commissioner Wright's proposed Policy Statement on Unfair Methods of Competition has stalled.

So it seems only Congress can force reform. Small legislative reforms could help, like setting minimum pleading requirements or subjecting FTC settlements to judicial review. But a grand rewrite of the FTC Act is politically unlikely and probably unwise. Instead, Congress should insist, as it did in 1980, that the FTC return to an evolutionary model — this time, for real. With enough pressure, the agency itself just might evolve.

What would a more evolutionary-minded FTC look like? Most importantly, it would litigate more and cajole less. Where the courts don't develop law, the FTC would try to fill the void. Internal administrative adjudication won't help, since the FTC always — literally always — wins. (That's what happens when the same entity is both prosecutor and judge.) Nor will it help to produce more of the kinds of reports the FTC has issued in recent years. Instead of asserting what companies should do, the FTC needs to offer more guidance on what it thinks its legal authority means. And the Commission can't just ignore or revoke those limiting principles when they become inconvenient.

More economic analysis would certainly help, as it has in antitrust cases. While the Commission is free to disregard staff recommendations, it tends not to. So a more significant and better-defined role for economics, and thus the agency's Bureau of Economics, could provide some degree of internal constraint. That's a second-best to the external constraint the courts are supposed to provide. But it could at least raise of undertaking enforcement actions simply because three Commissioners — or a few staff lawyers — think they're helping consumers by crucifying a particular company.

One easy place to start would be holding a comprehensive workshop on data security and then issuing guidelines. The FTC has settled nearly fifty data security cases but has provided scant guidance, even though data breaches and the identity thefts they cause are far and away the top subject of consumer complaints. The goal wouldn't be to prescribe what, specifically, companies should do but how they should understand their evolving legal duty. For example, at what point does an industry practice become sufficiently widespread to constitute "reasonable" data security?

More ambitiously, the FTC could use its unique power to enforce voluntary commitments to kickstart new paradigms of regulation. That could include codes of conduct developed by industry or multistakeholder groups as well as novel, data-driven alternative models of self-regulation. For example, Uber, Lyft and other app-based personal transportation services could create a self-regulatory program based on actual, real-time data about safety and customer satisfaction. The FTC could enforce such a model — if Congress finally makes common carriers subject to the FTC Act. The same could work for online education, AirBnB and countless other disruptive alternatives to traditional industries and the regulators they've captured.

Finally, the FTC could do more of what it does best: competition advocacy — like trying to remove anticompetitive local government obstacles to broadband deployment. The FTC has earned praise for defending Uber from regulatory barriers taxicab commissions want to protect incumbents. That's the kind of thing a Federal Technology Commission ought to do: stand up for new technology, instead of trying to make "it turn out according to plan."

Berin Szoka (@BerinSzoka) is President of TechFreedom. Geoffrey A. Manne (@GeoffManne) is Executive Director of the International Center for Law & Economics and Lecturer in Law at Lewis & Clark Law School.

Filed Under: ftc, innovation, regulation

Posturing Over Patent Reform Shows How Young Companies Innovate While Old Companies Litigate

from the same-as-it-always-was dept

It's hardly a surprise, but the latest draft bill, put forth by Rep. Bob Goodlatte, head of the House Judiciary Committee, has many really good things included, but is unfortunately weak in other areas. While it does include changes like requiring disclosures for those who sue over patent infringement (to get past the problem of shell companies), and a few other useful reforms, it really misses out on some big useful changes. For example, it doesn't include a provision that will make it easier to invalidate bad patents, which would be a huge step forward.

Of course, as you might expect, there's something of a "split" within the tech sector over whether or not there's support for Goodlatte's latest bill. On the one hand, you've got over 200 startups asking for that accelerated review process for questionable patents. At the same time, you've got a coalition of about 100 more stodgy old line businesses (some of whom are in the tech world) arguing that such a review would "undermine many valid patents." Frankly, that's hogwash, as we'll discuss in a bit.

It's really not difficult to see how this all breaks down. As we've explained for years, the general rule of thumb in the tech industry is that when you're young you innovate, and when you're old you litigate (with patents). Entrepreneurs and startups generally don't think or worry too much about patents. They're kind of a distraction more than anything else. The focus is actually on building an awesome product and disrupting the legacy players. It's only the bigger old stodgy companies who freak out at the possibility of being disrupted, and who suddenly start suing the upstarts (and, well, any competitor they can find) when they realize that it's more difficult for them to keep pace with the startups, and that it's more cost effective to shut down innovation from others, rather than compete.

Given that, it's not difficult to pick randomly from signatories of the two letters and figure out who signed onto which list. Automattic, FindTheBest, StackExchange, TechStars and FireBase? Yeah, they're on the innovators letter. 3M, Adobe, IBM, Microsoft? Yup. On the old stodgy companies letter, arguing against accelerated review of patents. And yet, laughingly, they claim to be the "innovators." Yes, maybe decades ago, but all those companies are now way behind the true innovators of today. Also, it's telling that pharmaceutical giant Eli Lilly is on that letter as well. The big pharma companies were the ones who spent most of the last decade stifling any kind of patent reform, which was being fought for by many of the same tech companies that are now trying to block new patent reform. The innovators got old and now they're trying to stifle competition, rather than innovate. It's sad. Looking down that list, it's difficult to find any that you could legitimately call innovative today, even if some were in the past.

Furthermore, the claims made in that letter (which apparently was written by the BSA under the new leadership of the White House's former IP czar), that this would somehow undermine valid patents doesn't pass the laugh test. As Matt Levy over at Patent Progress notes, the arguments in the letter make no sense at all:

Suppose a company has an innovative product and asserts a related patent against a competitor. If the competitor requests [an accelerated] review of the patent and wins, the original company still has an innovative product; the difference is that now it might have a competitor in the marketplace.

That’s actually a good thing. Now we have two companies with innovative products instead of just one. And the competitor is allowed to keep making its product, which might be even better than the original company’s.

But a company with a patent, even an invalid one, can stop an innovative product from coming to market or add significantly to the product’s cost. That’s because fighting patent infringement is incredibly expensive.

Nothing in an accelerated review process could possibly harm actual innovation. The only thing it does is ensure that old, stodgy, slow companies will have to keep pace with more entrepreneurial entities, and compete by continuing to innovate. That's a good thing, but you can see why those legacy players are scared. They know they can't keep up any more.

Filed Under: bob goodlatte, innovation, patent reform, patent review, patents

All It Takes Is Two Words To Wipe Away One Of The Pillars Of Free Speech Online

from the don't-let-it-happen dept

We've written a few times about the efforts of most states' attorneys general to seriously hinder innovation online by effectively gutting Section 230 of the Communications Decency Act, by saying that it doesn't apply to state crime laws. As we've discussed, the change may look simple -- it merely adds two words to Section 230: "or state" -- but the impact would be tremendous. As Derek Khanna has recently pointed out in two separate articles, Section 230 can quite reasonably be credited with enabling much of the internet innovation we all enjoy today, and the inclusion of just those two tiny words could bring a lot of internet innovation to a screeching halt.

And, even worse, those two little words could have a massive impact on free speech online.

A quick explanation may be helpful. The basic idea behind Section 230 is that it provides safe harbors to internet services, noting that they are not liable for things their users do online (with intellectual property infringement exempted). It is most often used in defamation cases, but applies in other situations as well. The concept is important even if it's a simple one: we don't blame the tool provider when the tool is abused. We don't blame AT&T when a phone is used in a crime, just like we don't blame Ford because one of its cars was used in a drive-by shooting. Unfortunately, on the internet, some people just love to blame the service providers for breaking laws, rather than the actual users. What Section 230 does is make it quite easy to do a course correction on such lawsuits, allowing the service provider to dump the lawsuit quickly, and effectively tell the suing party: "hey, focus on who actually broke the law, not us."

Why is that so important? Because if service providers are potentially liable for the actions of their users, they're a lot less willing to provide platforms and services that the public can use. The liability risks become too high, too fast. Even the cost of defending bogus litigation can wipe out a small company. What Section 230 does is let companies being sued get rid of those lawsuits much more quickly and cheaply than they'd otherwise be able to. And that, in turn, is essential for enabling free speech online. Because service providers can build their platforms and services to allow for free speech, safe and secure in the knowledge that if someone abuses those speech privileges, the site owners won't be held liable. Without Section 230, for example, it would be very, very risky for sites like this one to have a comments section. Or any newspaper or blog site. Or Twitter. Or Facebook. Or YouTube. These tools that have become essential to enabling public speech likely wouldn't be around.

And nearly every state's attorneys general wants to kill it off.

Why? So that they can grandstand against websites they don't like online, because some of their users do bad things. Rather than using those sites as a tool to find the people doing bad things, it gets a lot more press attention for the various attorneys general to just go after the company itself. The end result, though, would be many fewer online services, much less internet innovation and a massive dampening of free speech online.

Because of two little words.

Section 230 has been an astounding success in enabling tremendous new platforms that have, in turn, encouraged all kinds of valuable expression. We shouldn't wipe that out with two little words designed to help some politicians blame companies for the things their users do.

Update: A few people have reasonably complained that we didn't fully explain the change in the law, so we'll add in the details here. Sorry about that. Basically, as the law stands, it exempts federal criminal activities from the bill, which isn't a huge issue, because it's rare that activities by users on a site reach the level of federal criminal law in a manner that would turn focus on the site itself. What the states AGs want to do is exempt state laws as well, which would be a much bigger deal. The law, after the change, would read as follows, with the bolded portion being the two new words:

Nothing in this section shall be construed to impair the enforcement of section 223 or 231 of this title, chapter 71 (relating to obscenity) or 110 (relating to sexual exploitation of children) of Title 18, or any other Federal or State criminal statute.

This makes a huge difference because the state AGs are much more likely to use various laws to target sites for the actions of their users -- and in fact have made it a habit to threaten sites who are clearly protected by Section 230, because it makes headlines. In recent years, we've seen AGs accuse sites like Google, Craigslist, Topix and more of breaking laws, when it was really their users doing so.

Filed Under: free speech, innovation, secondary liability, section 230

Awesome Stuff: 3D Printing And Scanning Keeps Advancing

from the on-and-on-and-on dept

Welcome back for another week of awesome stuff, our weekly post on interesting crowdfunding projects. First off, just last week, awesome stuff was about reclaiming classic culture, and I expressed disappointment that only two campaigns could be found having to do with public domain materials. I should have waited a week because a new project launched which is a great companion to last week's Musopen's Chopin project. This time it's a project to record and release Bach music as well. Check it out.

But on to this week's offerings. It really was just a little less than four months ago that we had an awesome stuff post about 3D printing, marveling at how quickly the space had advanced (and gotten cheaper). And it seems like in just that short period of time there's been some continued movement in the 3D printing and 3D scanning world. There are so many 3D printing and 3D scanning projects going on right now, so let's point out a few.

• First up is the somewhat astounding Structure Sensor device, designed to turn your mobile device into a full 3D scanner. The video is slick, but if the device can do what it shows it's really quite impressive. From simple scanning of rooms or items and turning them immediately into 3D models to playing augmented reality game that really takes advantage of where you are, something like this seems to have a ton of potential, all hooked up to your mobile device. Watch the video and get inspired. Apparently there is tremendous demand for this sort of thing. The project only launched a few days ago and already is well past half a million dollars with over a month to go. This looks like another massive Kickstarter success story.
• As you'll see below, there are a ton of 3D printers out there, each one emphasizing different features. It can get a little difficult to stand out from the crowd. However, the Peachy 3D Printer and Scanner caught my attention. First off, it's $100. Yes. $100. The current "floor" for low end 3D printers has been around $400, so if this guy can really do $100 3D printers, that's very interesting. But perhaps even more interesting is that when you watch the video, you realize that he's not building yet another 3D printer by riffing off the way everyone else tries to do it, but he really rethought how a 3D printer could be built. It doesn't look like most other 3D printers, and doesn't appear to really work in the same way as other 3D printers. The fact that he built his first prototype almost entirely with "objects around the house" is kind of crazy. That said, it's pretty clear that this project is very early. The output quality of the Peachy Printer is clearly much, much lower than most other 3D printers on the market. So there's an element of "you get what you pay for" going on here. But, still, it's inspiring to see this attempt to just rethink how a 3D printer could work (and how it could be pretty cheap). With this project, people are really betting on a dream. The project is still very much in the early stages, and needs a lot of refinement. His expected delivery date isn't until next summer, and as pretty much everyone who's ever backed a Kickstarter project knows, projects always run late. Either way, the project has already raised about a third of its $50,000 (CAD) goal, with a month to go, so it will likely reach its target.
• Next up, we've got the 3Dsimo, which is a 3D printer "pen." You may remember the 3Doodler, which was one of the most successful projects on Kickstarter from earlier this year (raising $2.3 million). The 3Dsimo looks like a fairly similar offering, though it seems to be getting almost no attention at all. These extruder pens are a little different than a true "3D printer" but I'm expecting the market for these to develop separately as well, as people realize how handy it can be to "freehand" create a 3D object. As mentioned, this project seems to have received almost no attention. Unlike the 3Doodler which shot through its goal in almost no time at all, the 3Dsimo opened its campaign a week ago and only has six backers. It's a long way away from reaching its goal. Remember, running a crowdfunding project requires more than just putting it up and hoping people come.
• There are so many other 3D printers and scanners currently in the midst of crowdfunding projects. So rather than doing the typical "deep dive," I figured I'd do some quick hits on a bunch of them:
  • Zim: a dual head WiFi 3D printer, that has a really nice compact design, with a focus on being easy to use. Priced at the lower end (different models, all well under $1,000). You can remote control it from your smartphone, which is cool, complete with a camera so you can see how the printing is going even if you're not there.
  • Phoenix 3D Printer: a more traditional 3D printer, hitting that "sweet spot" on the low end of $400. This one looks like a ton of other 3D printers, but they claim that the software is a lot nicer, though it's a bit tough to tell.
  • Lionhead 3D printer and scanner. These guys also talk up their software, and the printer is definitely a higher end printer, with 3 or 8 print heads, designed for ease of use and to look nice... but with a much higher price point. This is definitely more in the tradition of premium 3D printers.
  • gMax 3D Printer. A traditional looking 3D printer, priced slightly over $1,000, the focus here is on being able to print big things. So if you think you'll be needing to print larger items, this one may be worth checking out.
  • ZEUS, which they claim is the "first" 3D printer/copy machine, but since some of the other projects in this very list do that too, this claim is a bit suspect. This is also a premium priced offering, between $2,000 and $2,500. The device itself is nicely designed, complete with a 7-inch touch screen. Of all the 3D printers, this one has more of a "consumer ready" feel, but not exactly a consumer-ready price.
  • On the 3D scanner side, I'll point to both the Dimbody and the Rubicon, which offer fairly similar products, though at first glance they're much more limited than the Structure Sensor above.

And... that's it for this extra long awesome stuff. Maybe in a few months we'll revisit the 3D printing and scanning space again to see just how rapidly it continues to innovate, advance and change.

Filed Under: 3d printing, 3d scanning, awesome stuff