A little more than a year ago, the creators of Azureus -- a file-sharing program based on the BitTorrent protocol -- launched Vuze, a version that ignored bootlegs in favor of authorized copies of TV shows, movies, games and other programming. The idea was to create a file-sharing environment that content owners would want to participate in, and that would present less risky revenue streams. By focusing the software only on authorized files, Vuze could charge fees for files or sell advertising around them without fear of being sued for profiting from piracy. It soon attracted content from dozens of producers around the globe, including the BBC, PBS and TOKYOPOP, although the major Hollywood studios largely kept their distance.
This month, Vuze did an about-face. Unleashing the software's search engine, it enabled users to find and retrieve content indexed by some of the world's most popular BitTorrent search engines. These include Mininova, an index site in the Netherlands now under legal assault from Dutch anti-piracy authorities. As a result, users don't have to fire up a second file-sharing program to find free, pirated versions of the titles Vuze offers on a pay-per-view basis. They can do it through Vuze's search engine.
CEO Gilles BianRosa acknowledged that the move didn't meet with universal acclaim from the companies providing content on Vuze. Yet he said that the change merely acknowledges the reality of the marketplace, and argued that it would help content owners compete better with online bootleggers.
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Show of hands: how many of you have bought a used CD or DVD stamped "Not for Sale/Promotional Use Only"? Tuesday, a federal judge issued what appears to be the first ringing defense of the promo market, rejecting Universal Music Group's lawsuit against someone who sold promo CDs on eBay. UMG claimed that, as the CD cases clearly stated, the promotional discs were merely "licensed" to their recipients. The license agreement barred the discs from being sold, so when defendant Troy Augusto peddled the CDs, he violated UMG's copyrights (specifically, the company's exclusive right to distribute the works). But U.S. District Judge S. James Otero in Los Angeles held that UMG gave up ownership of the CDs when it mailed them to reviewers, publicists and other industry insiders with no expectation that they would be returned. As a consequence, Otero ruled, Augusto was the rightful owner of the discs, and under the "first sale" doctrine, he was entitled to sell them (provided that he didn't keep a copy). And no, Otero ruled, the fact that the CDs were sent out as gifts doesn't affect the recipients' right to sell them.
It's an important ruling, and not just for used CD buyers. It adds weight to the growing body of case law holding that companies can't stop buyers of copyrighted products from reselling them. Just last month, for example, a federal judge in Washington state rejected a lawsuit by Autodesk against someone selling used copies of AutoCAD software on eBay. And for Augusto, who was represented by lawyers from the EFF and Keker & Van Nest, it should mean a respite from record company litigation. Universal , in fact, was the second of the four major record companies to sue. He had agreed to a consent judgment with EMI in 2004, but when Universal sued last year, he figured it was time to put up a fight in court. Looks like he was right.
Promusicae, the Spanish trade association for the major record companies (e.g., the Madrid version of the RIAA), filed suit in Spain this week against p2p developer Pablo Soto, creator of the Blubster, Piolet and Manolito music file-sharing networks. Soto's networks represented the second generation of p2p, which eliminated the central controls that got the original Napster into legal trouble. He later added a layer of anonymity to sharing, making it harder to identify those who were swapping songs illegally. I can't read Spanish, so I can't even pretend to analyze the legal claims made by the labels. But their press release accuses Soto of developing software with the intent of profiting parasitically from other people's works. It also argues the the networks were created specifically to share songs online:
All the promotional slogans on
Soto’s websites urge users to swap music recordings. Their wording, always in
English, encouraged the user to “enter into the world of free music downloads,
to download music while you chat with your friends” or said that “million users
in the whole world can share their music files and help the online community to
In addition, it notes that Soto's networks "all lack any kind of filter to avoid the exchange of files protected by authors, producers and performers’ intellectual property rights." Those allegations wouldn't take the case very far in the U.S. For starters, it's legal to share songs online if the copyright owners grant permission to do so -- not something the major labels have done, admittedly, but some independent labels and artists have. And it's not necessarily illegal to facilitate unauthorized sharing, particularly if the technology has a legitimate use and its creator can't monitor or control what people do with it. Nor is there any obligation to use filters to block infringements, at least not yet.
In an interview, Soto said, "What they claim is that we are competing with them and we are breaching their IP [intellectual property]." But he insisted that unlike Napster, his programs give him no way to watch what users do. He also noted that numerous independent musicians use Blubster to distribute their songs. "Many of those musicians need to use p2p software because they can't get distribution deals" from the major labels, he said.
The case raises the same set of issues that the RIAA and MPAA litigated here against Grokster and StreamCast (distributor of the Morpheus software), and both here and in Australia against the companies behind the Kazaa software. The labels won those cases with the help of internal company records and testimony showing that the companies planned to encourage and capitalize on piracy. The Supreme Court's ruling in the Grokster case doesn't apply to Spain, though, so the courts there will be following a different legal roadmap.
The lawsuit seemed a little odd, given that Soto's networks are small potatoes compared to BitTorrent and other third-generation p2p applications. Soto suggested that the labels were running out of options for deterring piracy in Spain. The record companies' efforts to identify individual infringers on p2p networks have been blocked by the courts, as have their claims against sites to bootlegged songs.
UPDATE: I got a bit more insight into the complaint from Beatriz
Sanchez-Eguibar, director of legal services for Promusicae. Although
there's no concept of "contributory infringement" in Spanish law, she
said, the complaint against Soto accuses him of infringing copyrights
by making software available to people who used it to make unauthorized
copies of songs. It also accuses him of unfair competition because his
profits came at the expense of the labels' works. Soto has about three
weeks to reply to the complaint, and hearings on the case could be
wrapped up within a year. As for the links sites, Sanchez-Eguibar said
that some had been temporarily sidelined, but the cases had yet to be
decided. And in regard to lawsuits against individual infringers, she
said Spanish law recently was changed to make it easier for Promusicae
to force ISPs to disclose the identities of customers whose accounts
may have been used for piracy. "A new door has opened," Sanchez-Eguibar
said, although the labels have yet to walk through it.
In response to John Mitchell's request (see his comment below), I asked Sanchez-Eguibar to send me a copy of the complaint, but she said it was confidential. So all I can offer on that front is jpegs of five pages supplied by Soto's publicist. I have no reason to doubt their authenticity, but I can't vouch for how complete they are. Here you go (click on the images to get a full-size view):
SpiralFrog, the ad-supported music-downloading service, announced Tuesday morning that it has signed a distribution deal with EMI, the country's fourth largest major record company (out of four). The news comes nearly two years after the company signed its first (and only other) major label deal, with market leader Universal Music Group. Ahh, remember when EMI used to be the first in line to support new business models online? At any rate, the deal brings an odd assortment of notable acts to SpiralFrog's roster of free downloads, including Coldplay, Norah Jones, Keith Urban, Frank Sinatra and David Bowie. Company chairman Joe Mohen has said he expects SpiralFrog to line up the remaining majors by the end of the year. Until it does, its service remains intriguing but incomplete, with a growing user base despite some handicaps that will be hard to overcome (e.g., it doesn't work with iPods).
The Center for Democracy and Technology weighed in today on the delicate subject of privacy and digital watermarks, recommending a series of best practices for protecting consumers against the unauthorized use of personal information. It's a tricky issue because watermarks -- unique digital identifiers that can't be detected with the naked eye -- are emerging as an anti-piracy tool, in which case the whole point is to identify the source of an infringing file. Nevertheless, as the 17-page report (download here) notes, even watermarks used for such purposes are subject to abuses that could invade innocent consumers' privacy or, worse, expose them to lawsuits for infringements they did not commit. And as the use of watermarks in online and digital media spreads, the threats proliferate. As the report puts it:
Perhaps the most frequently raised privacy concern is the idea that watermarks could enable increased monitoring, recording, or disclosure of an individualâs media purchases or usage. The fear, in other words, is that watermarking could compromise an individualâs ability to use and enjoy lawfully acquired media on a private, anonymous basis. Particular media usage choices could be sensitive if exposed, or could contribute to the creation of profiles of individualsâ overall media purchase and consumption habits, which might be used in ways that the individuals do not expect or understand. Other possible privacy concerns include the risk that watermarks could contain personal information that could be exposed to third parties, and the risk that errors in or manipulation of watermark data could paint a false picture of an individualâs behavior and perhaps lead to adverse consequences, including potential legal liability.
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The Justice Department put out a press release late last night touting the conspiracy conviction of 25-year-old Barry Gitarts of Brooklyn, a member of an online music and software bootlegging group known as aPC (aka the aPOCALYPSE pRODUCTION cREW or the Apocalypse Crew). The jury verdict was notable to the RIAA because it was the first federal criminal trial of a defendant accused primarily of online music piracy. That's not what got my attention, however.
Gitarts was actually the 15th member of the group to be convicted. The other 14 pleaded guilty to crimes related to the activities of the aPC, which once was one of the release groups that sat atop the online piracy pyramid. More interesting, all but one of these defendants were identified and charged months after the former leader of the aPC, then 21-year-old Mark Shumaker, pleaded guilty to federal charges of criminal copyright infringement stemming from a series of raids in December 2001.
Although some online commenters say Shumaker wasn't part of aPC at the time of the raid, the feds focused on his activities in that group when they announced his conviction. In other words, anyone with a clue at aPC should have found something else to do with his or her free time. Instead, the group remained active until the following April, when FBI agents swept in and seized servers, logs and other incriminating evidence of the group's activities. The fact that more than a dozen aPC members have joined Shumaker among the ranks of felons is a sign of the insularity of the warez scene and its participants' sense of invulnerability, founded in part on their anonymity (scene members often know nothing about one another except the names they use online). Most members of the scene don't get caught, it's true, just as most file-sharers don't wind up on the receiving end of an RIAA lawsuit. Still, given the heads-up provided by Shumaker's arrest and conviction, you'd think the aPC would at least have changed its name.
The APC logo above was created by an artist who goes by the initials rnz.
The original Napster didn't invent the MP3 format, but it did more than any other software company to popularize it. That, of course, was its undoing. Now, almost seven years after Napster went under, the company that bought the its name in a bankruptcy auction is making its first foray into selling MP3s. It's late to the party, but at least it's making a big entrance -- the new Napster has more than 6 million MP3s for sale, the largest collection of any online retailer (excluding those with dubious licenses). Like Amazon.com, it has MP3s from all the major record companies. But Napster Chief Operating Officer Christopher Allen says his company's selection is about three times the size of Amazon's because of the extensive offerings from indie labels and artists.
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The entertainment industry has been pressuring colleges directly and indirectly to teach students the do's and don'ts of copyrights, hoping such lessons will help abate online piracy. But at USC's Entertainment Technology Center, students often are the ones giving lessons to Hollywood and the high-tech world about the right way to deliver movies and TV shows to consumers who are increasingly mobile and digital.
The ETC, a 15-year-old branch of the university's School of Cinematic Arts, was established as a forum for tech companies and studios to collaborate -- a good example being the center's work on digital cinema. A more recent project is the Anytime/Anywhere Content Lab, a place for ETC staff to put a variety of cutting edge (or even bleeding edge) entertainment equipment and services together to see how they work. Or don't, as the case may be.
David Wertheimer, the ETC's executive director and a former digital guru at Paramount, said that while studios focus on their product, the lab concentrates on the user. The hope, he said, is that its work will show studios and tech companies how to "meet in the middle and provide new kinds of products" that appeal to the next generation of consumers. In addition to interviewing USC students on campus every week about their media consumption habits and attitudes, the ETC brings about 20 students into the lab to talk to its board and try out some of the gear it has assembled. It's not a scientific sampling, but the ETC does try to draw
specimens participants from a
range of backgrounds and fields of study.
The lab takes up a portion of the ETC's office, which is planted in an
between the USC campus and the 110. The current configuration includes
a home theater, a conference area and a room for testing and
experimentation (i.e., a place to answer questions like "Can I make it
do this?"). The centerpiece, though, is an 18' x 20' demo room with
flat-panel screens hung on the walls at eye level. Below the screens sit black metal boxes of various shapes and sizes --
amplifiers, disc players, computers, hard drives, iPods, cell phones,
networking gear and the like. It's a bit like an
electronics retailer's showroom, designed to make it easy for the staff
subtract and connect things. "It could end up looking like NORAD and be
totally stressful to people," Wertheimer cracked. The intended vibe,
though, is more like the living room you wish you had at home. If you
were me, that is.
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It's not unusual for chief executives to have rich severance packages, or to have some extra compensation promised if they lose their post in a corporate takeover. Nevertheless, you have to admire Napster Chairman and CEO Chris Gorog's new deal with the company. Under the severance clause in his previous employment contract, Gorog had been entitled to a cash payment of 165% of his base salary of $625,000 (a little more than $1 million, for those of you unable to use the calculator in your cell phone), plus immediate vesting of his stock options and free health insurance for 18 months. The payout was the same if he were fired without cause or he left in the wake of a buyout. The latter's relevant because Napster put itself on the block in September 2006, hiring an investment bank to evaluate suitors. The new deal keeps Gorog's base pay at $625,000, but ups the cash portion of the severance package to 240% of his base salary ($1.5 million) if there's no takeover in the works. If a takeover should happen and Gorog should leave within 12 months thereafter, the cash portion jumps to 299% (about $1.9 million), plus a cash bonus "equal to the average of the three prior cash bonuses" he received. Not bad for a company that has never reported a quarterly profit from its online music business, and whose stock price has been stuck in the single digits for more than four years. The stock peaked near $25 in April 2002; today's close was $1.53.
The judge in Capitol v. Thomas -- the first of the RIAA's lawsuits against individual file-sharers to go to trial, it resulted in a $222,000 judgment against a single mother in Minnesota -- threw the verdict into doubt today. Defendant Jammie Thomas had moved for a new trial on the grounds that the award was excessive and unconstitutional. In response, U.S. District Judge Michael J. Davis issued an order calling for a hearing on a different issue: whether he erred in instructing the jury that simply making a song available for others to download violated copyrights. He gave that instruction at the request of the labels' attorney, Richard Gabriel, who has since left the case to take a seat on the Colorado Court of Appeals.
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