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Just when you thought it might be safe to go back into the water …. the DMCA anticircumvention sharks have started circling again.

Last week I blogged about how it is becoming more and more apparent, to the content industry as well as to consumers, that Digital Rights Management (DRM), enshrined in law through the DMCA’s anticircumvention provision, is a dead-end business model as well as a drag on innovation. See Signs of a Move Towards Balance? (Part 2 of 2).

But not everyone has gotten the message, in particular not the Motion Picture Association of America, which today filed a lawsuit against Real Networks, charging it with violating the DMCA by distributing RealDVD.¬† The RealDVD software lets consumers copy DVDs to their personal computers.¬† It doesn’t permit unlimited copying, but rather uses its own form of DRM to lock the copy to be playable on only a single PC; additional PCs require additional licenses.

What we’re seeing here is another example of the dynamic described in B2B, where the industry uses the Copy Control Association (CCA) licensing scheme to squelch innovations that they don’t like: innovations like RealDVD that (horrors!) make DVDs more friendly¬† for consumers.

Real Networks, for its part, has filed its own suit, asking court to rule that RealDVD is in compliance with the CCA license.¬†¬† That’s not unreasonable: at first blush, RealDVD seems a lot like the Kaleidescape case described in chapter 6 of B2B, where the content industry huffed and puffed, but where the court found there was no license violation.¬† Yet, that was a different court.

Regardless of who wins in court, the fact is that this continues the DMCA’s track record as a dead weight hanging over the head of innovation.¬† Decisions that should be made on the basis of technology and consumer choice are instead being made by courts struggling to interpret a law that was a bad idea when it appeared in 1998 and has revealed itself to be a worse and worse idea every year.

Hal, Ken, and Harry are on Emily Rooney’s Greater Boston tonight at 7pm, on WGBH in Boston (Channel 2, the local PBS affiliate). We’re probably going to be the final segment, airing about 7:20.

Here’s a link to the recording of our segment.

There’s plenty of reason to be angry at Congress today, but the House, at least, has gotten one right. It passed a bill, H.R. 6146, with a very simple text, once you get past the preamble and definitions:

Notwithstanding any other provision of Federal or State law, a domestic court shall not recognize or enforce a foreign judgment concerning defamation unless the domestic court determines that the foreign judgment is consistent with the first amendment to the Constitution of the United States.

This is aimed at fighting back against libel tourism, which is a product of the Internet and the globalized economy. In Blown to Bits we tell the tale of a lawsuit successfully undertaken in Australia against a magazine published in the U.S., because of an article allegedly slandering an Australian businessman, Joseph Gutnick. Australia decided that the magazine was “published in” Australia because Barrons sent the bits there — that is, you could sit in Australia at your web browser, click a few links, and the story would appear on your screen. Australia follows U.K. conventions about defamation, which are much friendlier to the plaintiff than those in the U.S. First Amendment rights to free speech are so strong in the U.S. that you have to do a lot to say something about someone for which that person could collect damages.

So the bill essentially says that even if someone wins a libel suit against you in his own country, the U.S. courts won’t help him collect the damages, unless his country has the same free speech standards as the U.S. (which few places do).

This bill doesn’t solve the problem by any means. If you’re an American guilty of libel in Saudi Arabia, maybe U.S. courts won’t enforce the Saudi court’s judgment, but you probably don’t want to plan your next vacation for Riyadh, or you’ll get arrested. More seriously, if the defendant is a corporation — Dow Jones, say, which publishes Barrons — this law can’t prevent the plaintiff’s government from seizing its assets in that country, or imprisoning its employees.

Still, it’s a start, as the New York Times correctly editorializes today.

In a piece we published in May, we noted:

[Geolocation] data would be a goldmine for advertisers targeting their ads at cell phones — they would love to know not only who you are, but where you are. And it would be a boon for shoppers, too — imagine being able to ask, when Nordstrom’s doesn’t have your favorite stockings in your size, if any nearby store has them in stock.

But to do that, you’d have to have enough information about what you were looking for to type in the identifying information, or else spend time Web browsing, a clumsy process on a cell phone. Not very realistic as we described it.

A Japanese company has an application for Google’s new phone that does something similar to what we had in mind, but much more practical and more widely useful. You see the stockings in the store, whip out your phone, and point the camera at the bar code on the package. The camera doesn’t actually photograph the bar code; it reads it, and then gives you back a list of nearby stores with the same item, and what they are charging for it.

Brilliant. If I were running a fancy department store with high ceilings and high overhead, I’d be shaking in my shoes at the prospect of people using my nice premises for shopping, and discount stores for buying.

More on retail applications of bar code scanning by cell phone in this article by Erik Hermansen.

Signs of a Move Towards Balance? (Part 1 of 2) reported on the mistrial in the Jammie Thomas case, with the court coming to appreciate the overreaching of prosecutions for music sharing, rejecting the RIAA position that simply “making music available” should be punishable as unauthorized distribution, and Judge Davis recommending that Congress reconsider the egregious statutory damage penalties for copyright infringement.

Last week’s other optimistic signal was the continued erosion of DRM-protection as a means of music distribution.¬† Digital Rights Management (DRM), remember, is the technological band-aid that prompted the 1998 Digital Millennium Copyright Act (DMCA), the law that we rail against in B2B as an anticompetitive drain on innovation. We argued in the book that DRM hurts consumers and competitiveness, and we took approving note of some alternative distribution models for music that were coming to market just as we were completing our manuscript, such as the availability of DRM-free music from Amazon.

Two days ago, MySpace joined the DRM-free music distribution party with what may turn out to be the most significant of all the new models: MySpace music. MySpace users can now select from hundreds of thousands of non-DRM tracks to stream to their computers. The service is free to MySpace users, supported by advertising. You must be connected to the net to use the service. If you want a copy to listen to off-line, you’ll have to buy it from Amazon or iTunes.

Actually, I bet people have already using stream recorders to save he tracks for offline use. But in any case, having to be connected to the Internet isn’t a big deal any more. The reality is that MySpace users now have the “universal jukebox”, as we described it in B2B, that Napster presented in 2000 and 2001. The appeal will be just as great, and this time it’s legal. Of course, where MySpace goes, can Facebook be far behind? And who knows what other budding social networks? We’re finally coming to the end of the hallucination that DRM is the key to the Internet content economy. Today it’s free music tracks, but video will follow: it’s only a matter of storage and bandwidth, and the inexorable pace of Moore’s Law. Are you listening, MPAA?

As if on cue, but surely unrelated, Walmart yesterday announced the death of a third large DRM music service and the consequent stranding of consumers. This follows on the heels, as we previously reported, of Microsoft (April 23, 2008, MSN Music RIP) and Yahoo! (July 26, 2008, Yahoo joins the ‚Äústrand our DRM customers‚Äù game). As of October 9, the hapless purchasers of music tracks from Walmart.com Digital Music, will no longer be able to move “their” music to new machines, compliments of Walmart ceasing to support its license server.

So DRM-based music distribution continues to die: consumers don’t want to buy it, providers don’t want to support it, and there are wildly better alternatives emerging. But it’s still the same old story with Congress continuing to not get the message, and continuing to grasp on to DMCA anticircumvention and even starker penalties for copyright infringement. Our solons still live in fear of some 1990’s bogeyman story of entertainment industry imminent collapse that never was true and becomes more transparently a fairy-tale every day.

As we wrote in B2B:

If the content industry moves to better business models and the DRM battles subside, the DMCA’s anticircumvention provisions may continue to be anti-consumer, anti-competitive blots on the digital landscape. Unless repealed from the legal code, they would remain as battlefield relics of a war that was settled by peaceful means—unexploded ordnance that a litigious business could still use in ways unrelated to the law’s original intent.

Let’s give all those Congressman MySpace accounts, so they can learn what a dying system they’re trying to shore up.

If you have a WiFi at home and in your office, you can carry your computer back and forth and the radio transmitter and receiver in the computer will connect to whichever network is available at the moment. Same if you take your laptop to Starbucks.

Why doesn’t your cell phone work that way? If you have a contract with T-Mobile and it works fine in your apartment, you may go to Starbucks and find you have no reception, even though everyone else there is happily chatting away on their phones. If they have Verizon and Verizon has a good signal at the Starbucks, they may not be able to use their phones if they come visit you at your home. The only recourse under these circumstances is to cancel one contract and take out another — hardly something to be done so you can make a call from Starbucks — or even more absurdly, to carry two phones. Why can’t someone make a phone that just latches onto whatever cellular service is available locally, and works out the billing in some seamless way?

Because of the way the radio spectrum is split up among the cell phone companies. It’s a regulatory, not a technical problem.

And Google is out to fix it. The company has filed a patent on technology that would work in the obviously right way, and it has asked the FCC to change the way the spectrum is allocated to make the necessary blocks of spectrum available.

This story is very much along the lines of Chapter 8, where we plead for deregulation that would stimulate innovation and vastly greater efficiencies in the way the spectrum is used. What we have is lockdown of the spectrum by a few incumbent stakeholders, who will, no doubt, raise all kinds of bogus technical claims about the problems with Google’s proposal in order to protect them from competition.

Verizon and AT&T have announced that they will not track their customers’ Internet wanderings without their explicit request. The key is that the default is no tracking; only if the customer affirmatively “opts in” to tracking will it occur.

ISPs were getting some heat from Congress because of privacy concerns, so the move by these ISPs surely is enlightenment prompted by anticipation of a mandate. Nonetheless, it’s not a small matter. The data on what we do on the Internet is an extremely valuable commodity, and these companies might have put up a stronger fight for their right to collect it. Comcast, will you please adopt the same posture?

The Washington Post story on this makes several important points. The opt-in provision is likely to result in a very low level of participation in tracking, unless customers who are being tracked have a perceptibly better experience than those who do not. Still, with millions of users, a lot of data can be collected even if participation is low in percentage terms.

Nothing in the announcement by these service providers limits what individual web services can do to collect data about you by storing cookies on your computer. That mechanism aids the targeting of advertising toward your particular interests. And while informed consent and education about privacy should be major goals for the industry, it is worth remembering that the explosion of the Internet as a service to noncommercial users is largely funded by advertising revenue. Though one should always be skeptical about sky-is-falling statements by trade group representatives, there is some truth to this claim:

“If Congress required ‘opt in’ today, Congress would be back in tomorrow writing an Internet bailout bill,” said Mike Zaneis, vice president of public policy for the¬†Interactive Advertising Bureau, a trade group. “Every advertising platform and business model would be put at risk.”

This week saw two significant developments in the world of copyright and digital information described in Blown to Bits chapter 6, “Balance Toppled.” They signal that things just might be starting to move back towards balance.

On September 24, Judge Davis set aside the jury’s October 2007 verdict in the Jammie Thomas case.¬† That’s the case discussed in B2B of the Minnesota single mother who who was fined $222,000, $9250 per song, for sharing 24 songs on the Kazaa network, the case that became the recording industry’s “we told you so” for why people accused of file sharing by the RIAA should settle even if they are innocent, because the stakes in losing can be so high.¬† As we described in the book, Thomas’s penalty demonstrates the egregiousness of the statutory damages for copyright infringement when applied to the Internet.

Last June, as I noted in this blog, trial Judge Thomas asked whether he had made a legal error in instructing the jury that simply making music available from a computer counts as unauthorized distribution under copyright law, even if no actual distribution takes place.  (See “Sending a Message”: Revisited.)

Now Judge Davis has decided that this was indeed an error, and has granted Thomas’s motion for a new trial.¬† This is a blow to the RIAA’s lawsuit strategy: Not only does it erase the current scariest example of damages, but it’s another court that has rejected the “making available” theory: to convict someone for music-sharing copyright infringement, they will have to demonstrate that actual distribution took place, not merely that files were available on the accused infringer’s computer.

Perhaps even more notable is Judge Davis’s plea to Congress to reconsider the law about statutory damages.¬† As he writes in his opinion:

“The Court would be remiss if it did not take this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer to peer network cases…. The defendant is an individual, a consumer. She is not a business. She sought no profit from her acts…..[I]t would be a farce to say that a single mother‚Äôs acts of using Kazaa are the equivalent, for example, to the acts of global financial firms illegally infringing on copyrights in order to profit in the securities market……. [T]he damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs.”

Amen.

See Signs of a Move Towards Balance? (Part 2 of 2)

After yesterday’s anguished report on surveillance of children, let’s try something today that at least starts off on a lighter note.

A report out of New Zealand says that of all the time people spend online while in the office (and for many people, that is most of their office time), about a quarter of it is spent doing personal business. And more than three-quarters of all emails sent from office computers are personal.

Ah, I hear you cry, but it makes me so much more efficient that I get more done than I used to.

Maybe.

And someone in the story points out that it’s better for the business if we do our banking online from our desk than if we take half an hour to walk to the bank.

Maybe.

In any case, these reports cause the corporate efficiency experts to do the lost-time calculations, the vast cost to business of this wasted time. If only we could get our employees to focus on their work, we’d be more competitive.

And it is exactly these considerations that drive companies to install on office computer tools like the ones we discussed yesterday for children — software that monitors what web sites employees are going to, and perhaps blocks certain external connections. (There are other reasons as well. Not a good thing if you email your friend Mary in Oklahoma the spreadsheet you meant to email Mary in accounting.)

The cultural issues are going to take some time to sort out, but once put in place they tend to be hard to move. So read your corporate privacy policy. As we note on page 57, Harvard’s employee privacy policy is surprisingly Orwellian, though I am confident that it’s never used the way it’s written:

Employees must have no expectation or right of privacy in anything they create, store, send, or receive on Harvard’s computers, networks, or telecommunications systems. …. Electronic files, e-mail, data files, images, software, and voice mail may be accessed at any time by management or by other authorized personnel for any business purpose. Access may be requested and arranged through the system(s) user, however, this is not required.

I was pretty shaken by the end of the first day of the Internet Safety Technical Task Force yesterday. I had a meeting right afterwards, which I entered by yelping a primal scream.

All day yesterday, company after company gave presentations on how their products would help keep little Johnnie safe from predators and away from pornography. (You can check the conference program for the names of these businesses and hot links to their products. I should hasten to add that while I didn’t like much of what I was hearing, the meeting was run flawlessly — civil and lively and punctual too. Congratulations for a superb job by John Palfrey and the Berkman Center staff.) Some of the businesses offering solutions then answered the question of what we should do when Johnnie, frustrated with his overbearing parents, goes down the street to Libertarian Libby’s home, where the computer has no spyware: If we didn’t either keep Johnnie out of Libby’s house, or walk down the street ourselves and sell the same product to Libby’s parents, well, we were bad parents.

I tried to make the point that it is developmentally unhealthy to surveil your kids constantly, and safety was not the only value at stake. Growing up and learning trust and self-reliance are important too. Absolutely, was the answer. When your cell phone rings half a continent away because our product just caught Johnnie typing “boobs” into his Web browser, that creates a great opportunity for parent and child to sit down for a heart-to-heart.

I rather think that kids growing up in a 1984 childhood will expect to live in a 1984 adult world, with Big Brother watching over them constantly.

In any case, I am given to understand that there actually isn’t any evidence that predation on children is on the increase, in spite of the Internet horror stories, some of which we repeat in Blown to Bits. (One company actually reported that after monitoring tens of thousands of children, they had reported exactly 3 potential predators to the police.) Moreover, children who are victims are statistically likely to have other issues, and to come from families whose parents (if they have any) wouldn’t spend their nights worrying about their children’s safety. Child predation is a problem, but there are worse problems at which societal resources should be directed (for example, brutal child pornography is on the rise, I understand). Where we seem headed with Internet safety seems mad.

Several of the companies reported that the would retain the information they collected “forever.”

The fundamental problem with the agenda the states’ Attorneys General laid out is that it is premised on a moral and perhaps legal presumption that parents have an absolute right to know everything that their minor (under 18) children are saying and hearing. If society worked that way, it would never make any progress, as the prejudices and taboos of the parents would be handed on perfectly from one generation to the next. That isn’t social conservatism; that’s the preservation of human ignorance.