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Old 27-01-05, 07:21 PM   #1
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Default Peer-To-Peer News - The Week In Review - January 29th, '05

Quotes Of The Week

"Christians back Hollywood on file sharing." – Nick Farrell

"Conservatives back Hollywood." – John Borland

"We will do our best but our fight will not be successful if the public continues to support [piracy]." – Shafie Apdal

"It's silly and it's unworkable." – Christopher Warren

"We have to encourage people to listen more." – Napster president Brad Duea

"Undermining Betamax is a huge threat to the nation's economy and our technology." – Fred von Lohmann

"Adolf Hitler was more popular than people running against him. Just because you're bigger doesn't mean you're right." – Ted Turner

Getting what you voted for

Conservatives Back Hollywood On File Sharing
John Borland

The Bush administration's top lawyer and the Christian Coalition threw their weight behind the entertainment industry Monday in a closely watched Supreme Court fight over file swapping.

Monday was the deadline for the Recording Industry Association of America (RIAA), the Motion Picture Association of America (MPAA) and their supporters to file their arguments with the nation's top court, in their efforts to reverse previous rulings that imposed only minimal legal restrictions on peer-to-peer software companies.

The entertainment companies have argued strongly in lower courts that Grokster and other file-swapping software companies should be held liable for the widespread copyright infringement of their users. In a lengthy brief, the U.S. Solicitor General's office agreed.

"While P2P technology unquestionably can be employed for a variety of legitimate purposes without giving rise to rampant copyright infringement, the record...suggests that (the file-swapping software companies) have built their particular P2P networks around the 'draw' of massive copyright infringement," the solicitor general's brief read. They "cannot evade liability...merely by pointing to other, legitimate, uses of the technology."

The briefs filed by the record industry and movie studios were not immediately available Monday evening. The two trade organizations were scheduled to conduct a press conference early Tuesday to explain their strategy. File-swapping software companies Grokster and StreamCast Networks and their allies have until the end of February to respond.

Although focused on the issue of file swapping, the Supreme Court case is likely to be one of the most widely watched legal tussles in the technology world this year. Legal observers say the outcome of the case could affect virtually every consumer electronics and computer manufacturer, as well as software and entertainment companies.

At the case's heart is the 20-year-old Supreme Court ruling that made Sony videocassette recorders legal to sell. That decision said that technology that could be used for illegal purposes could still be legal to sell, as long as it had substantial commercial non- infringing uses.

The RIAA and MPAA say they're not trying to overturn that doctrine. But their attorneys have argued that because Grokster and Morpheus parent StreamCast Networks are aware of widespread copyright infringement on their networks, the companies should be held legally liable for that activity.

Two lower courts disagreed, saying that the file-swapping software companies did not have direct control over individual users' actions, or direct knowledge of individual trades.

A handful of diverse organizations joined the entertainment companies in filing with the Supreme Court on Monday, making for some strange bedfellows.

In addition to the solicitor general's office, a group of conservative, family and Christian organizations that are often deeply critical of Hollywood and record label releases joined the chorus against file swapping.

Those groups, which included the Christian Coalition, the Concerned Women for America, Morality in Media and others, wrote that the lower court decisions relieving file-swapping companies of legal liability could lead to a "proliferation of anonymous, decentralized, unfiltered, and untraceable peer-to-peer networks that facilitate crimes against children and that frustrate law enforcement efforts to detect and investigate these crimes."

The Business Software Alliance, the Progress and Freedom Foundation, and a group of law professors also supported the RIAA and MPAA in their arguments.

A separate group of "neutral" parties also filed arguments on various issues surrounding the case.

U.S. Sens. Patrick Leahy, D-Vt, and Orrin Hatch, R-Utah, took issue with the file-swapping companies' attorneys characterization of Congress' role in the recent copyright debates.

A larger group of Internet companies (including CNET Networks, publisher of News.com) wrote that it did not approve of copyright infringement on the file-swapping networks but asked the court to retain the Sony decision since it had led to considerable technological innovation over the years.


Christians back Hollywood

Pact With Babylon For The Good Of The Children
Nick Farrell

FUNDAMENTALIST Christians have joined in the court room battle against file sharing.

According to Cnet, the Christian Coalition, the Concerned Women for America, and Morality in Media have called for the Supreme Court to crack down on file sharing because it could lead to a "proliferation of anonymous, decentralized [sic], unfiltered, and untraceable peer-to-peer networks that facilitate crimes against children and that frustrate law enforcement efforts to detect and investigate these crimes."

At the heart of the case is the Sony videocassette decision which allowed countless numbers of people to copy television programmes onto videos. It removed liability from companies that produced the tapes and established the concept of fair use.

Hollywood has tried for aeons to get this overturned and force everyone to buy copies of films and television programmes. Now it is applying the same arguments it did for the videos and against file-sharing.

It is saying that the file sharing companies should be held responsible for any copying that goes on.

The file sharing companies, evoking the Sony case, say that they can't. They make a perfectly reasonable product that can be used for the good of humanity. If people set up networks that distribute illegal content that is their problem.

So far, the court system has agreed with the file-sharers and now the case is in the Supreme Court. If the file sharers lose, it will be the end of file-sharing completely and some think it could be the end of any technology that could be used to copy music.


MPAA Files New Film-Swapping Suits
John Borland

Hollywood studios filed a second round of lawsuits against online movie-swappers on Wednesday, stepping up legal pressure on the file-trading community.

The Motion Picture Association of America (MPAA) also made available a new free software tool so parents can scan their computers for file- swapping programs and for movie or music files which may be copyrighted.

The group said its lawsuits were targeting people across the United States, but did not say how many people were being sued.

"We cannot allow people to steal our motion pictures and other products online, and we will use all the options we have available to encourage people to obey the law," MPAA Chief Executive Officer Dan Glickman said in a statement. "We had to resort to lawsuits as one option to help make that happen."

After initially letting record labels take the lead, movie studios have launched their own aggressive legal campaigns against online film-trading in recent months, targeting individual computer users as well as Web site and server operators that serve as hubs of file-trading networks.

The group filed its first set of lawsuits against individual computer users in November, and followed up with a worldwide campaign against the operators of BitTorrent, eDonkey and DirectConnect networks.

As a result, some of the most popular Web sites that served as file-trading hubs, such as Suprnova.org and Yourceff.com have gone offline. At least one, LokiTorrent.com, has remained online and is soliciting donations from its visitors to pay for legal fees.

The MPAA's new software, "Parent File Scan," is aimed at identifying file-swapping software applications and multimedia files on a computer, so that--in theory--parents can evaluate whether the files on their computer have been legally acquired and talk with children about the legalities of peer- to-peer activity. Unlike the network-monitoring software often installed in businesses or corporate networks, the MPAA-backed software does not monitor or block downloads.

In practice, the software, developed by the DtecNet Software company in Denmark, casts an extremely wide net.

It searches for and identifies virtually any audio or video file, including popular formats like MP3, Microsoft's Windows Media, the AAC files that Apple Computer's iTunes software often uses, or MPEG video. The software makes no distinction between legally acquired or illegally downloaded files, however--which can total in the thousands.

Parent File Scan also uses a very liberal definition of file-swapping software. In a test on a CNET News.com computer, the software identified Mirc--a client for the Internet Relay Chat network, where files can be swapped, but where tens of thousands of wholly legal conversations happen every day--and Mercora, a streaming Web radio service that uses peer-to-peer technology but does not allow file swapping.

The software is primarily aimed at use by parents, and does not report any information back to the MPAA or any other group, the trade association said.


U.S. Record Industry Files More File-Sharing Suits

A trade group representing the U.S. music industry said on Thursday it has filed lawsuits against 717 more people alleging they used file-sharing networks to illegally trade in copyrighted songs.

To date, the Recording Industry Association of America, representing labels like Warner Music, EMI Group Plc, Sony BMG Music Entertainment and Vivendi Universal's Universal Music Group, has sued over 8,400 individuals in its anti- piracy effort.

Major Hollywood studios and other independent film distributors on Wednesday said they had filed a second wave of copyright lawsuits in a similar effort aimed at piracy.

The Motion Picture Association of America (MPAA), however, did not reveal how many lawsuits it has filed.

Earlier this week, members of both industries rallied to persuade the U.S. Supreme Court to hold Internet file-trading services like Grokster and Morpheus accountable for the millions of copyrighted files traded over their networks.

Lower courts have ruled these and other "peer to peer" services, known as P2P networks, cannot be held liable because, like a videocassette recorder, they make copyright violations possible but can be used for legitimate purposes as well.


Music Exec Defends File-Sharing Lawsuits
Adam Pasick

The global music industry is fighting a determined war on piracy, suing thousands of persistent violators from teachers to managing directors, its trade association said Saturday.

"None of this makes us feel wonderful," John Kennedy, chairman and chief executive of the International Federation of the Phonographic Industry, said.

"For years, we sat back whilst our music was wantonly stolen," he added. "We tried to educate people to raise awareness and then, only as a last resort, did we commence proceedings and even then only against the worst offenders."

He said 7,000 people were sued in 2004 for sharing music illegally online, including one case of a 12-year-old girl.

"Anyone who claims you're going to win the war on piracy is a very foolish person. But if you don't fight the war, it gets worse," he told the music industry annual conference, Midem, in the French Mediterranean coast city of Cannes.

"There will be more (lawsuits) in 2005. We look forward to the day when they won't be necessary."

The music industry blames illicit online file-trading for a dramatic fall-off in sales over the last several years.

Kennedy estimated that 2004 global music sales were roughly flat, with a small drop in physical sales balanced out by a surge in digital sales.

Analysts say the industry's carrot-and-stick approach of legal online music stores like iTunes and Napster along with lawsuits against file-traders has largely checked the growth of peer-to-peer networks like Kazaa that illicitly offer music for free.

The number of songs sold online grew ten-fold in 2004 as more than 230 online music stores were created.

The digital music market was worth about $330 million last year, or about 1 percent of all music sales, a figure that will double in 2005 according to research firm Jupiter.


Malaysia Plans Jail For Disc Pirates
Correspondents in Kuala Lumpur

MALAYSIA'S government is proposing mandatory jail sentences for producers, distributors and vendors of bootleg movies and music compact discs.

A high level meeting to review the 17-year-old Copyright Act will be held next week. It will decide on whether to incorporate the mandatory jail clause and a range of other new penalties, Domestic Trade and Consumer Affairs Minister Shafie Apdal said.

"At the moment, the provisions of the law have not succeeded in reducing this activity," the Star newspaper quoted him as saying.

Although video and software piracy is punishable by a maximum of five years in jail, the punishment is rarely imposed and offenders usually get off with less than a year's jail sentence and fines.

This has led to blatant violation of copyright laws in Malaysia, and a flourishing homegrown industry for duplication of Hollywood movies on video discs (VCDs) and DVDs. Bootleg movies are sold openly in markets and by street vendors for as little as 10 ringgit ($3.40) each.

Mr Shafie said the refurbished Copyright Act will also increase the fine for each pirated VCD or DVD produced or sold, which currently ranges from 2,000 ringgit to 20,000 ringgit. Mr Shafie described the amount as "paltry," but did not say how much he wanted it raised.

"Many do not fear being fined a few hundred thousand ringgit because their profits are in the millions of ringgit," he said. Public apathy, and direct encouragement of piracy by their willingness to buy the discs, is contributing to the problem, he said.

Mr Shafie did not say if buyers of fake VCDs and DVDs would be penalised, but called for a public campaign to create awareness.

"We will do our best but our fight will not be successful if the public continue to support this activity," he said.

Malaysia is one of the 36 countries on a US watch list of serious copyright violators.


Tech Groups File Brief in Grokster Case

Five groups ask the Supreme Court to protect tech vendors from copyright lawsuits.
Grant Gross

Five groups, representing a broad cross section of the technology industry, joined to file legal briefs Monday urging the U.S. Supreme Court to reaffirm a 21-year-old ruling protecting most technology companies from being held liable for their customers' copyright infringement.

The briefs were filed in response to a case, scheduled for oral arguments in March, in which members of the U.S. entertainment industry sued peer-to-peer software vendors for copyright infringement. The Ninth U.S. Circuit Court of Appeals ruled in August that Grokster, Morpheus distributor StreamCast Networks, and a site operated by StreamCast called Musiccity.com were not liable for copyright violations by their users.

One of the two briefs filed Monday came from the Information Technology Association of America (ITAA), NetCoalition, Digital Media Association (DiMA), and the Center for Democracy and Technology (CDT). ITAA is a trade group representing more than 300 technology companies; NetCoalition is a trade group representing Yahoo, Google, and other Web-based businesses; DiMA represents 20 companies that create or distribute digital media; and CDT is a technology-focused civil liberties advocate.

Citing History

Those four groups ask the Supreme Court to uphold its 1984 Sony Betamax ruling, in which technologies with significant noninfringing uses--in that case, a video recorder--were not liable for their users' copyright violations. "Application of this standard ... has promoted the explosion of technological innovation since the mid-1980s, involving everything from the personal computer to digital music players to the rise of the Internet itself," the four groups say in a press release.

However, the groups also asked the Supreme Court to send the case back to the lower court to decide if peer-to-peer (P-to-P) software vendors are liable for copyright infringement using other standards. The lower court should examine whether the P-to-P vendors are actively encouraging users to violate copyright law, whether the vendors profit from the infringement, and whether they have the ability to stop the infringement, the groups say.

Most current P-to-P vendors say they have no control of the files that are traded over decentralized networks.

Separately, the Institute of Electrical and Electronics Engineers-USA (IEEE-USA) also filed a brief Monday, arguing P-to-P vendors should not be held liable for the copyright violations of users unless the vendor has actively induced the user to infringe.

"File-sharing technology serves as the basis for the Internet and should be unrestricted to produce future revolutionary digital products," Andrew Greenberg, vice chairman of IEEE-USA's Intellectual Property Committee, says in a statement. "On the other hand, copyright owners must not be left to the mercy of those who set out to knowingly and intentionally induce third parties to infringe."

The Recording Industry Association of America (RIAA), one of the plaintiffs in the case, declines to comment on the briefs filed Monday. But in November, the RIAA noted that a number of trade groups and recording artists asked the Supreme Court to take the case. Among those groups: Entertainment Software Association, Interactive Entertainment Merchants Association, Association of American Publishers, and the Screen Actors Guild.


NFL, U.S. Government, 40 States Have Knives Out For File-Sharing Networks

Entertainment-industry supporters ask U.S. Supreme Court to hold file-trading services responsible for illegal downloading.
Alyssa Rashbaum

The fight over who's to blame for illegal downloading of songs and movies continued this week as the U.S government, 40 states and groups including the National Football League banded together against services such as Morpheus and Grokster.

The entertainment-industry supporters have asked the U.S. Supreme Court to hold those and other Internet file- trading services responsible for songs and movies illegally downloaded from their networks, according to Reuters. They claimed, in legal briefs which were made public on Tuesday, that the peer-to-peer (P2P) networks are successful because they make illegal downloading attractive to users.

If the Supreme Court agrees with the entertainment industry, networks like Morpheus and Grokster would be vulnerable to copyright-infringement suits.

In the past, rulings from lower courts have said that the P2P networks are not responsible for copyright infringement because while their sites can be used for illegal downloading, they also have valid and legal uses.

The Supreme Court is reportedly scheduled to hear the case in March and hand down a ruling by June.


Luddite Protectionism Threatens Innovation
Grant Gross

P2P United, a trade group representing both Grokster and Morpheus, argues that the entertainment industry would threaten technological innovation if it gets its way in court. If the court rules that the vendors are held liable for the "misuse of a new technology," technologies such as the Internet itself would not have been allowed to exist, said Adam Eisgrau, executive director of P2P United.

"If that was the case, most of the technological products in the twentieth century would not have seen the light of day," Eisgrau said. "We're confident that any argument that, if accepted, would chill technological innovation will be rejected by the Supreme Court."

Usual suspects

Among those signing onto briefs supporting the entertainment industry's side were 40 state attorneys general; senators Patrick Leahy (Democrat) and Orrin Hatch (Republican); three major sports leagues, including the National Football League; the Association of American Publishers; the Independent Film & Television Alliance; and six music publishing groups, including the Songwriters Guild of America.

Also signing onto briefs supporting the RIAA and MPAA were several recording artists, including country artists Brooks and Dunn, Reba McEntire, the Dixie Chicks, pop/rock artists the Eagles, the Barenaked Ladies, Bonnie Raitt, Avril Lavigne, Elvis Costello, and Brian Wilson of the Beach Boys.

Wild misstatement?

Unauthorized file-trading using P-to-P software is causing people in the music industry, including CD store clerks, staff songwriters, roadies, and producers, to lose their jobs, said Rick Carnes, president of the Songwriters Guild of America.

"I'm the victim of illegal downloading," Carnes said. "I've been robbed, my property has been stolen, and it's still being stolen every day. I'm here to tell you people are getting hurt."

Editor's note: Opinion within the music industry remians divided. Speaking at Europe's Midem 2005 this week, Beggars Group chairman Martin Mills encouraged the industry to embrace P2P, calling the destruction of Napster 1 a "huge mistake", according to Digital Music News.

“P2P won't go,” he said, encouraging the industry to develop new ways to transform file-sharing into a revenue stream. He added that companies are "too obsessed with price per unit economic models" to explore such possibilities.


Fresh Delay Hits EU Software Patent Bill

Hotly-debated plans to allow the patenting of computer-based inventions in the European Union hit a fresh snag on Monday, EU officials said, after concerns by the Polish government.

EU ministers did not adopt the draft law at a regular meeting in Brussels despite an earlier plan to deal with it this week, said a spokesman from Luxembourg, which currently holds the EU's rotating presidency.

The bill has sparked a debate on whether the EU should follow the U.S. model of granting patents to Internet business methods such as online bookseller Amazon's "one-click shopping," or instead restrict patents for computer software.

"There was at one point the intention to put the item on today's agenda. But in the end we could not put it on," a Luxembourg spokesman told Reuters, adding that the EU presidency had not yet chosen a date for future discussions.

Poland, a large EU member whose backing is crucial for the adoption of the proposed rules, told Reuters last week it was not ready to back the legislation amid fears it could open the door to the patenting of pure computer software.

This, critics of the legislation say, would harm small software developers who lack big companies' legal muscle.

Big industry players argue the current situation does not allow them to protect inventions which they have spent years to develop.

Poland's resistance delays the procedure for the second time in two months, which diplomats said may reopen discussions and pave the way for more aggressive lobbying from the Open Source community of independent software developers.


Geez people, contact your representatives!

Patent Directive 'Back On EU Agenda'
Ingrid Marson

Opponents of software patenting fear that the European Computer Implemented Inventions Directive is about to be adopted, but the EC is denying the claim

The Computer Implemented Inventions Directive (CIID) may be ratified next Monday, a move that would give anti-patent campaigners little time to take action.

A minister from Luxembourg and a representative from the European Commission's Industrial Property Unit have said that the CCID -- which opponents say will allow the widespread patenting of software in Europe -- will be adopted at an EU Council Agriculture and Fishery meeting on Monday 24 January, according to a report by the Foundation for a Free Information Infrastructure (FFII).

However, a spokeswoman for the EU Council denied on Friday afternoon that the CCID is on Monday's agenda.

The directive was initially due to be adopted on 21 December, but was removed from the agenda after the Polish undersecretary of science and information said that more time was needed to make a constructive declaration.

According to sources familiar with the situation, EU rules mean that the Directive must appear on the first Council meeting following the Christmas break.

The FFII is now rallying its supporters to campaign against the directive, but is concerned that it has little time.

"The FFII is trying to mobilise its supporters to contact politicians and media to prevent the Council decision and/or get the Parliament's Restart project on track," said the FFII on its Web site. "By its surprise tactic of inserting an A-item in the last minute, the Council/Commission of course makes this difficult."


Sun Grants Global Open Source Community Access to More than 1,600 Patents

Largest Single Grant in Patent History Spurs Software Innovation
Press Release

Sun Microsystems, Inc. today announced the largest single release of patent innovations into the open source community by any organization to date, marking a significant shift in the way Sun positions its intellectual property portfolio. By giving open source developers free access to Sun(TM) OpenSolaris related patents under the Common Development and Distribution License (CDDL), the company is fostering open innovation and establishing a leadership role in the framework of a patent commons that will be recognized across the globe.

"As the largest business contributor to the open source community, Sun has always been an ardent believer in open standards and the open source process going back to the inception of this company," said Scott McNealy, Chairman and CEO, Sun Microsystems, Inc. "The release of more than 1,600 patents associated with the Solaris(TM) OS far eclipses any other vendor's contribution. Today represents a huge milestone for Sun, for the community, for developers and for customers."

Sun's goal in offering access to these patents is to help facilitate innovation and help users get new open source products and technologies to market faster without having to obtain patent licenses from Sun. The new approach underscores Sun's belief that license agreements for software are not as significant as the company who stands behind its products. Sun is also addressing current issues and increased scrutiny in U.S. and international patent law which has increasingly granted overly broad patents on abstract processes.

In removing the emphasis on intellectual-property rights as an inhibitor to innovation, Sun is leveling the playing field in key emerging markets and helping to revive an innovation system that is straining under a record number of patent filings globally. More markets are looking for ways to monetize their knowledge economy and patents are becoming the profit center. With growing attention on locking up intellectual property in countries like China -- which has seen a five-fold increase in the number of patent filings from 1991 to 2001 -- Sun is ensuring that software will be available to open source developers and that progress continues unabated.

"By gaining access to these Solaris OS patents, participants in the open-source community now have a tremendous opportunity to build unique and innovative technologies for a wide range of markets," said Stacey Quandt, Senior Business Analyst, Open Source Practice Leader, Robert Frances Group. "An IP contribution of this magnitude has the potential to deliver exceptional value to developers and strengthens the overall open source community."

Addressing the patent system that is under siege, Sun's pledge of open access reduces the quagmire for developers who previously had to walk through a minefield to avoid infringement and enables them to confidently produce derivative works without fear of reprisal or patent claims.


Sony Admits MP3 Error
Yuri Kageyama

SONY missed out on potential sales from MP3 players and other gadgets because it was overly proprietary about music and entertainment content, the head of the company's video-game unit said.

Ken Kutaragi, president of Sony Computer Entertainment, said he and other Sony employees had been frustrated for years with management's reluctance to introduce products like Apple's iPod, mainly because the Sony had music and movie units that were worried about content rights.

But Sony's divisions were finally beginning to work together and share a common agenda, Mr Kutaragi said at the Foreign Correspondents Club in Tokyo.

"It's just starting," he said. "We are growing up."

Sony officials have rarely publicly said the company's proprietary stance was mistaken.

Mr Kutaragi, who has long been viewed as a candidate to lead Sony, was unusually direct in acknowledging Sony had made an error.

Sony's music players did not initially support MP3 files and only played Sony's own Atrac format.

Sony's technology innovation had been "diluted", Mr Kutaragi said

"We have to concentrate on our original nature - challenging and creating," he said.

Once the powerhouse of global electronics, with success exemplified by its Walkman, Sony has lost some of its glamour lately, losing out in profitability and market share to cheaper Asian rivals.

Mr Kutaragi - known as the "Father of the PlayStation" for making the game machine a pillar of Sony's business - said the new PSP, or PlayStation Portable, handheld will grow into a global platform for enjoying music and movies as well as games.


Sony Says Year's Sales and Profit Will Miss Targets
Todd Zaun

The Sony Corporation warned on Thursday that sales and operating profit would probably fall short of its forecasts because of rapidly declining prices for DVD recorders and video cameras, as well as stiff competition from Apple's popular iPod.

Sony, one of Japan's best-known electronics companies, now expects an operating profit of 110 billion yen ($1.07 billion) for the fiscal year ending March 31, it said, compared with an earlier forecast of 160 billion yen, a decrease of about 30 percent. Sony also trimmed its forecast for revenue for the year to 7.15 trillion yen ($69.6 billion ) from 7.35 trillion yen. The company raised its net income forecast, but only because of tax savings in its United States operation.

"This is quite a disappointment," said John Yang, an electronics industry analyst for Standard & Poor's in Tokyo. "At this point, things aren't looking good for Sony."

Analysts said the forecasts suggested that Sony was having more trouble than it anticipated in turning around its struggling electronics division. The company has trailed rivals like Samsung Electronics; Matsushita Electric, which makes Panasonic goods; and others in introducing hot digital devices like flat-panel televisions and DVD recorders. What's more, analysts say, the weaker-than-expected forecasts show that a three-year, $3 billion revamping at Sony is not helping as much as hoped.

Sony executives blamed unexpectedly steep declines in prices of a variety of electronics products for the lower profit forecasts in its core electronics division, which accounts for 70 percent of overall sales. Sony has had to match industrywide price declines of up to 40 percent on DVD recorders in the last year and decreases of as much as 30 percent on flat-panel televisions, executives said.

"Prices are falling faster than we could have imagined a few years ago," Sony's chief financial officer, Katsumi Ihara, said Thursday. The reason prices have been declining so rapidly is the ready availability of the crucial components of the latest digital products - like flat displays, hard drives and control chips - which makes it easier for new competitors to quickly come up with products of their own, he said.

"The important thing for us is to develop products that customers will recognize as unique and that others can't copy," Mr. Ihara said.

But Sony has at times stumbled in that effort. While the company invented the market for portable music players in 1979 with its Walkman, it was slow to come up with a hard-drive-equipped portable player that could match the iPod. Last year, Sony began selling a similar device, but met with a cool response because it did not play music files stored in the widely used MP3 format. Only last month did Sony announce that it would offer a version that is MP3 compatible.

Mr. Ihara said the company's problems were concentrated in the electronics division. Toward the end of last year, a big box-office take for "Spider-Man 2" lifted profit in Sony's entertainment unit and helped conceal troubles in its consumer electronics and video game businesses. Sony said on Thursday that earnings at its entertainment divisions continued to be in line with its earlier forecasts.

Another reason for the lower forecasts announced Thursday was weaker-than-expected demand for Sony's semiconductors, the company said.

Sony is investing heavily to develop new semiconductors as part of a strategy to make more of the crucial components for digital cameras, flat-panel TV's and other products by itself. Sony's idea is that it must control more of the technology that goes into the latest products if it hopes to be able to create unique products. Sony is also selling semiconductors to other manufacturers.

But by making more semiconductors, Sony is exposing itself to an often volatile business. "The risk is that as Sony becomes more of a chip company, they are more prone to the silicon cycle," said Mr. Yang, of Standard & Poor's.

Sony was long considered one of Japan's most innovative companies, creating the Trinitron TV set as well as the Walkman, but the company has recently trailed nimbler rivals. Sony fell behind Panasonic last year in introducing the DVD and hard-disk recorders that are catching on with consumers.

That Sony has been forced to play catch-up is probably a major reason for its lower profit and sales figures, analysts said.

But for the same reason, the disappointing forecast from Sony does not mean other electronics makers are likely to issue similarly disappointing reports, said Yuki Sugi, a consumer electronics analyst for Lehman Brothers in Tokyo.

"Sony conducted aggressive marketing campaigns in year-end sales, and while this led to increased market share, profitability could have been hurt," Ms. Sugi wrote in a note to clients. "We caution that this does not mean that other consumer electronics companies will also announce weak results."

Despite the expectation of lower sales, Sony raised its forecast for net profit for the year ending March 31 to 150 billion yen from an earlier forecast of 110 billion yen. The new estimate would be a 69 percent increase from 88.5 billion yen last year. Sony said the expected gain came from a decision to use tax credits accrued in its United States operation to reduce its tax bill this year.

To get back on the path to fatter profits, Sony is counting on the PlayStation Portable, or PSP, a hand-held video game and movie player that Sony calls "the Walkman for the 21st century." Ken Kutaragi, president of Sony Computer Entertainment, said Thursday that Sony had already sold 800,000 of the sleek devices since they went on sale last month in Japan. The device, which Mr. Kutaragi said may also soon include phone and other functions, will be offered in the United States later this year.

Sony will double production of PSP's to two million units a month later this year to meet demand, Mr. Kutaragi said.


Lose Some

Loser: Media competition. Merger mania and antitrust wimps have allowed a dangerous giantism to bestride the worlds of media, energy and finance. Our voices calling for competition in the massive-media wilderness go unheeded; only some monopoly scandal or derivatives-driven collapse will awaken the public to the need to "break up the Yankees."

Loser: Privacy. Civil libertarians were fighting the good fight against computer stalkers; insurance, medical and banking intruders; and government snoops who wanted to merge F.B.I. files with credit-card tracking. But after 9/11 and the terrorist threat, plain fear overrode concerns about freedom from surveillance by ubiquitous cameras, digital recorders and computer cookies. Because politicians don't want to appear "soft on security," personal privacy is on the ropes.


Google Rolls Out TV Search Prototype
Stefanie Olsen

Google introduced late Monday a prototype of a service to search TV programming, an anticipated move to broaden its search franchise for broadcast.

As previously reported, the Mountain View, Calif.-based company has been quietly developing Google Video, an engine that lets people search the text of TV shows. Immediately, the service will scour programming from PBS, Fox News, C-SPAN, ABC, and the NBA, among others, making broadcasts searchable the same day.

People can search on a term--such as "Indonesian tsunami"--to find the TV shows in which it was mentioned, a still image of the video and closed-captioning text of that particular segment of the program.

For now, people will not be able to watch the video clip, nor will the Web pages contain the company's signature text advertising. But Google expects to add video playback down the road, after ironing out the complexities of broadcasting rights and business models with various content owners. Jonathan Rosenberg, Google's vice president of product management, also said he could foresee selling commercial-like advertising, among other business models, with the new service.

"We've taken a conservative view of what we can do with other people's content," Rosenberg said. "We're open to possibility of very different ways to monetize this. We'll work out over time what's best for consumers and content providers."

Though in its early stages, the service underscores Google's ambitions to digitize otherwise analog content and make it searchable, similar to Google's recent library project scanning volumes of books. It also foreshadows a heated race with rivals Yahoo and Microsoft to be the de facto service for finding information wherever it resides: TV, the Internet, cell phones or other convergence devices.

Already in response, Yahoo has said it will begin promoting the video search engine it introduced in December by adding a tab from its home page. Also, the company has teamed with TVeyes to begin searching closed-captioning text of Bloomberg and BBC programs. That partnership will add to Yahoo's core capability of searching Internet video, putting Yahoo's service more on a par with Google's.

For now, Google Video will not search for Internet-only video clips, (for example, Jibjab short films), but the company said it plans to add that capability eventually.

"More and more video content is getting on the Web, and they need to be there to index it," said Gary Stein, an analyst at Jupiter Research. "What's most noticeable about this was how cautious it is. They've got the entire program, but they're not showing it."

Google is holding back because Internet distribution is a nascent market for many broadcasters, and securing rights over broadband could be tricky.

For example, if Google and Yahoo want to host and play video from their Web sites, they must clear those digital rights with broadcasters. And broadcasters themselves must secure Internet rights with actors, producers and musicians, as well as clear spectrum signal rights with affiliates. (Yahoo does not host video, but it points visitors to the content.)

Being careful of existing business models is an issue, too. For example, CBS News offers video for free online, while ABC News offers subscription and paid video services for the likes of AOL and SBC Yahoo. CBS may want to boost traffic in order to sell advertising, but ABC may want to promote its subscription services via video search.

Blinkx, for example, recently introduced a video search engine in partnership with Fox News and Sky Broadcasting. Fox agreed to give Blinkx access to hundreds of hours of program archives, as well as allow it to record some live shows for the search engine. Much of the video clips are ad- supported, so that Fox can make new revenue from the search deal.

Terms of Google's relationships with broadcasters were not disclosed, but PBS executives said no money has changed hands. Alex Hofmann, PBS' senior director of digital ventures, said the deal is a learning experience to determine what business opportunities would make sense. It's also a no- brainer, he said, given that Google already refers most of the broadcaster's online traffic of 4 billion annual page views.

"TV search is going to be a large advertising revenue driver in time," said Sean Morgan, CEO of Critical Mention, a corporate broadcast-search tool. "But broadcasters are still wondering if the search engines could cannibalize the TV viewing itself."


Smarter than the average bear

Wireless Deal for California Parks
Matt Richtel

One problem with camping is that it is tough to file your taxes while sitting in a tent in the great outdoors. That is no longer a problem in California.

The state last week announced a deal with SBC Communications to provide wireless Internet access points in 85 state parks. Now park visitors can take laptop computers and other portable devices to connect to the Internet from areas formerly known as "wilderness."

The Internet access - provided through Wi-Fi technology - will be available mostly in central spots in the parks. The first access point became operational in a state park in San Diego last week; the other access points will be in place by May, in time for the summer camping, hiking and e-mailing season.

"If you wanted to, you could file your taxes from the beach," said Clark Keslo, the chief information officer for the state of California. But he added, "I don't recommend it."

Under the deal, SBC will give park visitors free Internet access to California state government Web pages like those giving road closure information. Mr. Kelso said he hoped that park visitors would use the free connections to learn about campgrounds and safety information.

But campers who want to send and receive e-mail messages or reach more than state government Web sites must pay access charges to SBC; the rate is $7.95 for a 24-hour pass, the company said.

SBC said that it had also equipped a handful of parks in Michigan with Wi-Fi connections. SBC said it did not yet have plans to build Internet access points beyond the central campgrounds, but in the future might consider placing connections in the farther reaches of the parks.

Mr. Kelso said the state government would be watching to see how much visitors used the Wi-Fi connections. "If there's demand, you need to respond to it," he said.


Satellite TV Snubbing Microsoft
John Borland

With the era of high-definition television drawing closer, Microsoft's bid to provide one of the market's core video technology standards is having trouble getting into orbit.

In recent weeks, announcements have come from major satellite television companies including DirecTV that they will be using a rival technology, developed through traditional standards organizations, instead of Microsoft's competing video format, for their upcoming high-definition services.

Even Voom, the satellite HDTV company Microsoft earlier touted as a supporter, recently said it would use the rival MPEG-4 AVC video format, or "codec," beginning early in 2005.

The satellite companies' moves, triggered by an increasing need for greater bandwidth, by no means count Microsoft out in other potentially larger markets such as cable television and online video. But the decisions by DirecTV and others show that the familiarity of the MPEG standard could be a difficult hurdle to clear.

"They really needed to start looking at some advanced video formats, because they needed that efficiency," Yankee Group analyst Adi Kashar said. "But some of the telephone companies seem to be making the opposite choice."

Indeed, the satellite television companies have been among the first large media companies to settle as a group on which technology they will use as they begin to offer high-definition video. But cable television, telephone, Internet video and other companies are all ultimately moving toward replacing today's familiar video with a supercrisp digital successor, offering potentially high stakes for companies that can provide the technological foundations.

Microsoft is one of those companies, and it has veered sharply away from its traditional practices in hopes of capturing a piece of that market. Its Windows Media technology, like the MPEG AVC video standard, allows companies to shrink massive high-definition video files into smaller packages, so that more video can be sent over the same amount of wireless or broadband bandwidth.

In 2003, Microsoft submitted its Windows Media 9 video format to the Society of Motion Picture and Television Engineers standard-setting organization for ratification as a high-definition video standard. In anticipation of that, two separate DVD groups have included Microsoft's technology as part of their next-generation disc standards.

The overture to standards bodies was aimed in large part at reassuring broadcasters and large media companies, which are used to working with standard, instead of proprietary, formats.

But for now, a growing and influential portion of the satellite industry seems set on MPEG 4.

Voom, a relatively small player, announced late last year that it would use MPEG 4 for its broadcasts beginning in mid-2005. Echostar Communications said at the recent Consumer Electronics Show in Las Vegas that it would make a push into high-definition video with its Dish Network beginning this fall, also using MPEG 4. (Cablevision, Voom's parent, said late Thursday that it would sell Voom's Rainbow 1 satellite and some other assets to Echostar for $200 million. It plans to continue service through an unspecified transition period. Echostar said it is assessing how to use the satellite to augment its Dish service.)

The News Corp.-owned DirecTV announced at the same show that it was moving to MPEG 4, providing a demonstration of the technology over a satellite transmission. The company said it would ultimately replace the high-definition set-top boxes previously purchased by its customers, but it has not said whether it would pay part or all of those costs.

A low-orbit silver lining for Microsoft has come from Sirius Satellite Radio, which said earlier this month that it would use the company's video technology for its just-announced video service.

The picture looks somewhat different on the ground, although it remains fuzzy. Cable companies have yet to indicate which direction they're going, but at least one phone company--giant SBC Communications--is already working closely with Microsoft to develop video services over its high-speed Internet lines. That could tip the scales toward company's video codec, but an SBC representative said the phone company was still deciding between Microsoft and MPEG.

Microsoft also has deals with BellSouth, Telecom Italia and a handful of other telecommunications providers around the world. But these deals largely focus on the ability to deliver video using Internet technology rather than the underlying video format. A smaller number of companies, including U.S. Digital Television, have said they would use the VC-1 video format.

Analysts say it will be easier for firms that don't have any historic investment or stake in the MPEG standards to adopt Microsoft's technology over time.

"Telephone companies going into the business of offering video seem to be very interested" in Microsoft's tools, said Forrester Research analyst Josh Bernoff.

Microsoft itself says the process is still barely under way, with its VC-1 technology still in the last stages of reaching official-standard status. Company executives say media and communications firms will increasingly want to do more than simply broadcast video--offering video on demand, or shows that can be watched just a few times or transferred to portable devices, for example.

The company also predicts that set-top box makers will begin building support for both formats into their products, giving media companies more flexibility to use both, or even to switch between the two for different applications.

"Our hope is that as time moves on, not just the satellite companies, but everyone, will begin looking at the future business models that VC-1 and Windows Media provide," said Jordi Ribas, director of technical strategy for Microsoft's Windows Digital Media Division. "We do not think they are closed doors."


Microsoft Won't Appeal EU Ruling on Sanctions
Quentin Webb

Microsoft Corp. said on Monday it would not appeal a European Union court order to immediately implement antitrust sanctions, but it remained optimistic of eventually prevailing in its main case.

In December, the software giant lost a bid to delay sanctions imposed by the EU's executive Commission, but it is continuing with a separate, main appeal against the Commission's decision that it abused the near monopoly of its Windows operating system.

"Microsoft has decided to forego its right to appeal the Court of First Instance's ... ruling of December 22, 2004," it said in a statement.

"Rather than seeking to suspend the Commission's remedies, Microsoft's focus now is on working constructively with the Commission on their full and prompt implementation." The sanctions compel the world's largest software maker to introduce a stripped-down version of its computer operating system without its Windows Media Player music and video software.

The Commission found Microsoft bundled Media Player with Windows to usurp rival programs such as RealNetworks Inc.'s RealPlayer and Apple Computer Inc.'s QuickTime.

Microsoft said a European edition of Windows without Media Player would be available "in the coming weeks" and it had made specifications available to rival makers of server software -- a second key Commission order.

But Microsoft said it would continue to appeal the Commission's landmark ruling from March 2004, when the EU's competition watchdog also levied a record 497 million euro ($649.7 million) fine.

"We remain very optimistic as we move forward in this process, and are encouraged that the December court order noted that a number of Microsoft's arguments could provide a basis for overturning the EC's decision," Microsoft said in a statement.

Commission spokesman Jonathan Todd had no comment on Microsoft's statement.

The Redmond, Washington-based firm said it expected to learn later this year when the EU Court of First Instance would hold a hearing on the main appeal.


Expert: Flaw Still Dogs Windows Patch
By Matt Hines

Antivirus specialist GeCad Net is warning that it has found a problem with Microsoft's most recent software patch for Windows.

The Bucharest, Romania-based security service provider said that a critical patch issued by Microsoft in its MS05-001 bulletin earlier this month fails to resolve all of the security issues surrounding the HTML Help ActiveX control in Windows. Microsoft distributed the fix, along with additional security updates, to address the threat of attackers placing and executing malicious programs such as spyware on affected computers.

GeCad, which sold its antivirus software business to Microsoft in 2003, said that the patch has not addressed at least one so-called attack vector, or weakness, that could allow an exploit of the HTML Help ActiveX control vulnerability.

A Microsoft representative said Monday that the Redmond, Wash.-based company is already working to close the loophole reported by GeCad, and emphasized that the January patch had fixed the original reported problem.


Library Collections Find Home Online
Martha Irvine

It's a stately old building with looming columns, worn marble stairways and arched doorways - dedicated in 1900 "to the conservation, advancement and dissemination of American Heritage."

But while the Wisconsin Historical Society contains one of the largest American history archives anywhere, fewer people have visited in recent years - 40 percent fewer than in 1987 - as more of them, including students at the nearby University of Wisconsin, turn to the Internet as their basic research tool.

So the historical society and many other institutions with large collections are doing something they see as means of survival: They're going digital - creating and uploading images of many items in their collections for all the World Wide Web to see.

"History belongs to everybody; it shouldn't be locked away in dark rooms," says Michael Edmonds, deputy administrator of the Wisconsin Historical Society's library- archives division. "It should be on everybody's laptops at Starbucks."

The movement to "digitize" collections received a lot of attention last month when popular search engine Google announced a deal with several university libraries to put their books - or snippets of those books - online. Users would have greatest access to books with content that's not limited by copyright constraints.

But even before Google began scanning books, many libraries, archives and museums had already been quietly digitizing their most popular and rarest of collections and, increasingly, creating Web sites that put those collections in context.

It's a trend that Edmonds calls "revolutionary" - and necessary.

"Our future depends on us being able to turn our collections inside out - to show people what we have," he says.

Starting in 1999 with a $100,000 gift from a retired Wisconsin professor, staff members at his institution have been using some of their limited funds to scan thousands of digital images of rare older books and archived letters.

One result has been a Web site called American Journeys, which details eyewitness accounts of early exploration in this country and includes such rare maps as the first published drawing of the entire Mississippi River, done by French explorers in the late 1600s.

By many accounts, the site has been a success. While the society's building, which contains about 30 miles of library and archives shelves, attracts about 50,000 visitors a year, American Journeys and other online content taken from those shelves is already drawing more than 85,000 unique Internet visitors annually.

In other words, nearly two-thirds of the people now using the Wisconsin collections are viewing them online.

Archivists across the country are seeing similar results.

"The best thing about it is that we're able to get materials into the hands of people who would never have gotten them," says Lee Ann Potter, head of education and volunteer programs at the National Archives & Records Administration in Washington.

She recalls an e-mail from a man living near the Arctic Circle in Alaska. While surfing the National Archives site, he was excited to find an image of the $7.2 million check that the United States used to buy his state from the emperor of Russia in 1868 - just one of millions of images that can be found through a Web search.

Internet surfers can also view a digital image of Leonardo da Vinci's "The Mona Lisa" at the Louvre Museum's site and - within a matter of moments - check out Henri Mattise's "Woman with the Hat," which is included in the San Francisco Museum of Modern Art's online collection.

Lesser-known museums - from the Hockey Hall of Fame to the American Academy of Ophthalmology's Museum of Vision - have online collections, too, as do many universities.

The Duke University Libraries Web site, for instance, includes old sheet music from the 1800s and an extensive collection of ancient Egyptian hieroglyphics written on papyrus.

There are challenges to maintaining these digital archives, though. Steven Hensen, who helps oversee Duke's rare book and special collections, notes that even books in the poorest condition can survive for decades, if not longer. "We're not at all sure of this with digital material," he says.

There's also the fact that, generally, only a small portion of many archived collections are available online.

The National Archives site, for instance, includes such popular items as the Declaration of Independence and the Emancipation Proclamation. But most of the 8 billion textual documents the federal institution houses are not available online.

Some archivists envision the day when Internet surfers will be able to request to see a particular document - having it "scanned on demand," perhaps for a fee.

But, for now, many librarians are focusing on helping Web surfers find archive images online and understand their significance.

David Bertuca at the Buffalo Arts and Sciences Libraries at the University of Buffalo is one who regularly gathers reliable links on particular topics, including the 100th anniversary of the paper that introduced the world to Albert Einstein's theory of relativity. Among other things, the page links to images of Einstein's handwritten journals at the Jewish National & University Library in Israel.

To Bertuca, compiling such pages is only logical. "It's what librarians do," he says.


A victim of circumstance

Fallen U.S. Porn King Goldstein Rebuilds with Bagels
John Zawadzinski

He spent a lifetime peddling smut and once had an $11 million fortune, but after losing everything and becoming just another homeless

New Yorker, Al Goldstein is now happy pushing bagels instead of porn.

Goldstein, a founding father of America's porn industry, now hustles bagels and white fish at a New York-based deli and catering establishment.

"I've always loved food more than sex, so this is really my first love," said Goldstein, 69, now a cold-calling salesman for New York City Bagels. "I've gone from broads to bagels."

Goldstein has good reason to feel good about his new career, however mundane, after becoming homeless last year when the porn empire he began building in 1968 collapsed.

The former owner of Milky Way Productions, home of Screw magazine and the now defunct X-rated cult show "Midnight Blue," went bankrupt over a year ago after amassing an $11 million fortune. Screw once sold over 140,000 copies weekly and was a cash cow thanks to ads for call girls and prostitutes before it fell victim to Internet porn and sagging circulation.

"The Internet made pornography available for free and I couldn't compete," said Goldstein, who now lives on Staten Island, with his fifth wife, Christine, 28.

Those he befriended in the porn business, a billion-dollar industry he helped pioneer, turned their backs to him. Even his own son, Jordan, a Harvard graduate who works for a New York- based law firm, refuses to speak to him.

"My life has turned to crap," Goldstein said. "To go from a being a millionaire and then living in a homeless shelter and being rejecting by 98 percent of your friends is horrendous, but I'm a survivor."

Passion For Bagels

Goldstein was hired late last year as a greeter at New York's 2nd Avenue Deli, paid $10 an hour to welcome customers and show them to their tables. He held the position for a few months but was fired when it was discovered he was sleeping in the restaurant.

Now he works at New York City Bagels on commission, cold calling customers to generate corporate accounts.

"Al is very passionate about the work and he brings a lot to the table," said Glenn Teyf, one of the owners of New York City Bagels, who hired Goldstein more than a month ago on a referral. "Al Goldstein by far has increased our business."

Goldstein's current occupation and lifestyle are worlds apart from where he once was. He lost his $2.5 million Pompano Beach, Florida, mansion and his townhouse on New York's East 61st Street, which were both sold to pay of his debts.

As a result, he was reduced to sleeping at his in-laws' house and homeless shelters. He slept in Central Park and last year was arrested for allegedly shoplifting books from the Barnes and Noble near Lincoln Center.

Gone are the chauffeur, his collection of wine, the Cuban cigars and the parties at New York's legendary Plato's Retreat and Studio 54. He now travels to and from Manhattan via the Staten Island Ferry, shops at thrift stores and is perfectly content with staying home and watching the History Channel and Court TV.

"I don't live in yesterday and I don't live in tomorrow. I live in today," he said. "Just when you think you're done, life becomes different."

Cook The Hawk

Goldstein's fall from grace brought a fresh round of press coverage, including a New Yorker article that called him one of New York's two most famous homeless citizens -- the other being the famed hawk Pale Male whose nest was destroyed by a Fifth Avenue apartment building co-op board.

Always good for a lively quote, the former porn king told the New Yorker, "If the hawk can't cut it, if it can't carry its own weight, cook the damn thing."

"There are thousands of homeless people around, sleeping in hallways, and nobody cares. But one hawk living on Fifth Avenue gets all the publicity," he said.

Despite his hardships, Goldstein is thankful for those who have stuck by him and supported him including his lawyer Charles C. DeStefano, who met Goldstein five years ago and began representing him on a pro-bono basis during his trial for harassing a former secretary as well as an ex-wife.

Like Pale Male, who was allowed to nest again on Fifth Avenue after protests by bird lovers and residents including actress Mary Tyler Moore, Goldstein is no longer homeless.

He now lives in a Staten Island apartment after magician Penn Jillette, of the duo Penn and Teller, helped him out financially to get him back on his feet.

"I think Al's had an epiphany and is on an upswing," DeStefano said. "He is such a resilient character. He's bounced back like a rubber ball."

Goldstein, who works at New York City Bagels five days a week, is enthusiastic about his latest venture and the potential for him to make big bucks on commission.

"I'm in a business that to me, is more dynamic than pornography," he said. "I could do many things, but people who typecast me as just a pornographer, they're just stupid."


So there

Bragging Rights To The World's First MP3 Player
Eliot Van Buskirk

Ask even seasoned MP3 buffs about the first MP3 player, and they're almost certain to name the Diamond Multimedia Rio PMP300.

If they really know their stuff, they'll even tell you it came out in late 1998. They're wrong either way, although you shouldn't be too harsh on them. Their mistake is understandable.

Say it with me: "MPMan."

The Diamond Rio's false status as "the first MP3 player" is practically cemented in technology lore, so before it's too late, I want to set the record straight. The world's first mass-produced hardware MP3 player was Saehan's MPMan, sold in Asia starting in the late spring of 1998. It was released in the United States as the Eiger Labs MPMan F10/F20 (two variants of the same device) in the summer of1998, a few months before the Rio.

Most tech-savvy types wrongly think Diamond's device was first because, like nearly every other major development in digital music, the Rio brought with it a spectacular flurry of legal wrangling and the attendant media exposure. (Back in those days, you were nobody in the digital-music business unless the labels had sued you.)

So why did the Recording Industry Association of America single out Diamond as the first defendant in its doomed battle against digital music rather than targeting Saehan-Eiger Labs, which was the actual "patient zero?" It's simple: California-based Diamond Multimedia was far easier for the record labels to sue than the MPMan's Korean manufacturer. If the RIAA had wanted to sue Saehan instead, it would have had to find a U.S.-based office or subsidiary of the company, win the case in court, and then try to convince a Korean court to enforce the ruling. What a hassle.

What went wrong?

If the RIAA had gone global and sued Saehan instead, perhaps Eiger Labs would be as recognizable today as the Rio brand is. Or maybe Saehan should have established an office in America, where it could be properly sued or feted for its new device.

It would have been a drastic measure, but as things stand today, Eiger Labs remains largely anonymous.

Even the blink tag-laden EigerLabs.com, which used to proudly display the words "World's first MP3 player," seems to have finally bitten the digital dust. (There's nothing at the site, although the domain is registered until Oct. 6, 2005.)

So if Saehan-Eiger Labs produced the world's first flash-based MP3 player, you might be wondering who earned that distinction for hard- drive players like Apple Computer's iPod.

This thing felt like a brick when clipped to my hip back in 1999, but it held an unprecedented volume of music.

The world's first "iPod"

Credit for this goes to Compaq's Systems Research Center and the Palo Alto Advanced Development group--essentially a bunch of engineers from Compaq's laptop division who realized that hard drives could replace flash memory in MP3 players and enable them to hold far more music. When I reviewed the MP3 player these groups created (the Hango/Remote Solutions Personal Jukebox PJB-100), I was blown away by the then unheard of 6GB capacity, crystal-clear sound and ample display, compared with the skimpy 32MB devices I'd seen previously, such as the MPMan and Rio.

Here comes the irony: In 1998, Compaq's engineers made the first hard drive-based MP3 player and licensed it to a Korean company, Hango, that didn't do much with it. In 2001, the first iPod came out. In 2002, Hewlett-Packard acquired Compaq. In 2004, HP made a deal with Apple to distribute HP-branded iPods.

I know I'm reducing the situation, but it wouldn't be too much of a stretch to assert that the entity now known as HP beat Apple in the race to make a high-capacity portable music player by three years--an eternity in the world of MP3 players--and still somehow lost.

I promise that the next MP3 Insider column will be a bit more forward-looking, but I just had to make it clear, once and for all:

First MP3 player in the world: the Saehan-Eiger Labs F10/F20. First hard-drive-based MP3 player in the world: the Hango/Remote Solutions Portable Jukebox PJB-100.

Thank you.



Last month

Coming To Your Home Soon Free Television Shows Via The Internet
Tony Paterson

A German television development company is planning to launch free viewing on the internet with the help of a revolutionary Web service that aims to give viewers access to any programme they want from almost anywhere in the world.

The project is called Cybersky, a pun on the name of its German inventor, Guido Ciburski, a television software engineer who runs a small TV technology company in the Rhineland town of Koblenz.

Cybersky, scheduled to start in a month or so, aims to do for television what already applies to music and video, which can be downloaded free from the internet. The concept has alarmed Germany’s established TV companies, and is likely to concern other broadcasters around the world. Media analysts are expecting a new round of legal action similar to the high-level intensity of opposition to the Napster operation.

Mr Ciburski, 40, had the idea while trying to use the internet to watch live coverage of the 2002 Olympic Games opening ceremony in Salt Lake City, in the United States. He found there were so many like-minded surfers that the server was permanently jammed.

Feeling disgruntled, he and his friends switched on their conventional TV sets and waited for the next sports broadcast. "All we got on our computer screens was ‘server busy’," Mr Ciburski told The Independent.

"I just thought, ‘How can anyone expect to watch major events like the Olympics on the Web when so many people are downloading at the same time’?"

Now Mr Ciburski claims to have solved the problem. At the end of January, his company, TC Unterhaltungselektronic, will unveil its Cybersky TV web service which will, he says, enable broadband users to distribute video programmes free, and exchange them with others. Viewers will need little more than a television connected to a computer. The computer will be set up to upload a chosen television programme on to the internet, where other viewers will be able to download and broadcast it on their own sets almost instantaneously.

Mr Ciburski has refused to divulge how he developed the technology: "That would be giving away the vital secret," he said. "All I can say is that without broadband it would have been difficult."

In practice, cyberspace should allow fans of programmes such as The Office to go on holiday in Hawaii and still get the show fed live into their hotel bedside laptop with only a five-to 10-second delay. Mr Ciburski says he circumvented the overload problems that have affected video- streaming applications by developing software that relies on what is called "peer-to-peer networking" technology. He adds: "Instead of using our own servers to distribute programmes, we will be giving the job to the computers of Cybersky’s subscribers."

As the system gains more users, the pathways for distribution should multiply. As soon as one subscriber uploads a programme on site, it becomes immediately available to other participants. As a result, the more subscribers Cybersky attracts, the greater the choice of programmes available. Mr Ciburski estimates that as many as 30 million viewers could end up online.

"That is about average for a file-sharing programme. Anyone with a webcam will be able to broadcast."

Although Cybersky is yet to go online, it appears to have seriously worried pay-TV channels such as Germany’s Premiere, because of its ability to circumvent the subscription system. Premiere has already complained that Cybersky’s website disclaimer, which insists that pay-TV material can be broadcast only with the permission of the network involved, is not enough.

Cybersky’s response to charges that it will be illegally broadcasting copyrighted programmes without permission is that its peer-to-peer system does not technically amount to distribution, so it is legitimate.

The company is bracing itself for a legal battle with Germany’s main TV networks. "We have no other option," Mr Ciburski said. "We are not going to drop the project, because someone else is bound to come along and do it instead."

His company is used to going to court to defend its innovations. Six years ago Mr Ciburski and his partner, Petra Sauerbachs, developed a device called the "telly fairy" which enabled viewers to skip irritating TV advertising. Germany’s broadcasters sued but a five-year legal battle ended in victory for both inventors last summer.

This week (subscription required)


Hollywood Lines Up Support For Net Song-Swap Case

The entertainment industry has rounded up dozens of allies to persuade the US Supreme Court to hold internet file-trading services responsible when users copy songs and movies without permission.

The US government, 40 states and territories, and outside groups from the National Football League to the Christian Coalition of America asked the Supreme Court on Monday to hold services like Grokster and Morpheus accountable for the millions of copyrighted files traded over their networks.

Lower courts have ruled that Grokster, Morpheus and other "peer to peer" services, known as P2P networks, cannot be held liable because, like a videocassette recorder, they make copyright violations possible but can be used for legitimate purposes as well.

In legal briefs released on Tuesday, entertainment- industry supporters said the services profit from their users' desire to get music and movies for free and thus should be held liable so they can be sued for copyright infringement.

"Respondents have built their particular P2P networks around the 'draw' of massive copyright infringement," said a brief prepared by the Justice Department, the Copyright Office and the Patent and Trademark Office.

Other heavyweights in the entertainment industry's corner include Theodore Olson, who until July represented the government in Supreme Court cases.

Entertainment-industry officials at a Tuesday press conference said they were not concerned about a ruling against them by the Ninth Circuit Court of Appeals because other courts have held the file-trading services Aimster and Napster liable for copyright infringement.

The Supreme Court is scheduled to hear the case in March, with a ruling due by June.

The head of a peer-to-peer trade group that includes Grokster and Morpheus said the entertainment industry's stance could discourage innovation.

Just as pornography loomed large in the early days of the internet, copyright infringement is now playing a disproportionately large role because peer-to-peer technology has yet to mature, said Adam Eisgrau, executive director of the P2P United trade group.

"If the standard for a technology in its relative infancy is whether at that instant it is used more for ill than for good, then we will almost never foster the development of breakthrough technologies," Eisgrau said.

Grokster and Morpheus don't have to file their legal arguments until February 28.


Cory Doctorow (the EFF) Interview, Pts. 1 & 2

ePostcards From The Edge

EFF Outreach Co-ordinator. Published Author. eBook Pioneer. Cory Doctorow is all of those things and more. Ewan cathces up with him and in the first part of his interview, he talks about eBooks, publishing online, and how this new market for authors is developing.

Those of you who've had even a passing interest of legal issues and copyrights on the Internet will recognise the name of The Electronic Frontier Foundation (EFF). Working for them is Cory Doctorow, a noted commentator for electronic civil liberties, technical policies and standards, and he's one of the most well know public faces of the EFF. He's also causing a lot of people to pay attention to his career as a Sci-Fi novelist as he sits on the bleeding edge of eBooks. Ewan caught up with him after a talk at Edinburgh University.

It's easy to find out what Cory's doing now, but what are his roots? "I dropped out of four Universities in two years. The last drop-out was when I went to work for a CD-ROM house in New York. The bottom fell out of that market, and I went through some hoops doing commercial programming and some tech services. I was CIO of a film company, then an ad agency, and eventually co- founded a company, doing an Open Source Peer to Peer(P2P) file transfer program. Once the lawsuits started hitting sites like Napster and Audio Galaxy, our financiers freaked out. We sought good legal advice from the EFF, and when I left the company, I went to the EFF and been there ever since."

"All my experiences have come together in the public speaking role I have with the EFF. We're the guys who made sure you could have cryptographic technology in your browser, and made sure your email couldn't be intercepted without legal permission, to name two things."

As well as the EFF, Cory's an honest to god, been published, got a book out, writer, aren't you? "I sure am. My first book was a non-fiction title, written alongside Karl Schroeder. It was called The Complete Idiot's Guide To Publishing Science Fiction. At that point I was doing a lot of short stories, and that book gave me the confidence to go out and do my first full length novel, Down and Out In The Magic Kingdom. I've made the short list for the Nebula Award last year for a short story called 0wnz0red and this year for my novel Down and Out in the Magic Kingdom, and I just won for the Locus award for the best first novel, as well as the Sunburtst Award for best Canadian Book for my short story collection, A Place So Foreign and Eight More" So it'd be fair to say that the novels are a part of your livelihood and not just a little hobby? "Yeah, sure."

Cory's novels are tailor made for those of us living on the technological edge of the 21st century. His third novel (Someone Comes To Town, Someone Leaves Town) is an urban fantasy based around wireless community networking in Toronto. And only a tech-head would understand the work in progress title of usr/bin/god. The former will be out in Feb, 2005, the latter in 2006.

"I'm also looking at a joint project with Charlie Stross about the first multi million dollar heist in a Massively Multiplayer Online Roleplaying Game." So watch out pocket Kingdom fans. "I'm still doing short stories. The next set are all named after famous science fiction novels as a nose thumbing to Ray Bradbury for claiming Michael Moore was stealing Fahrenheit 9/11 from Farenheit 451. For a champion of free expression to go around calling people crooks for riffing on his titles is madness. So I've just finished two short stories, called "Anda's (Ender's) Game" and "I Robot."

eBooks, Sales and the New Frontier

With all the EFF talk of P2P networks and file sharing, Cory must hear the argument "how would you feel about your novels freely circulating on the internet?" What they fail to realise is Cory's personal website carries the full text of his novels and most of his short story collection as plain text files. "ASCII is the new PDF, that's what I say to them. Hundreds of thousands of copies of my books are in circulation. Half a million downloads of the novels from just my website, plus all the emailed copies, the copies on the P2P networks... it's out there, and yes, it does lend a moral authority to the day job."

So the simple question to Cory is why? Settle down folks, because one thing Cory is good at is going on at great depth on subjects he believes in. And the future of eBooks is one of those subjects. "There are answers that cover the short, medium and long term. Everyone needs to realise that the thing the internet is good at is copying files, especially text files, between different locations. It is not a bug that needs cured, it doesn't need fixed, it's what makes the internet work. More people are reading more words from more screens everyday. It's not going to be long before the majority of text people read is in a digital format."

"If I am going to be a writer, earning a living in the era of digital text, I need to understand where the opportunities are. They won't disappear, they'll just be different, and need to be recognised. In the last days of Vaudeville Theatre, they sued Marconi because radio was killing Vaudeville, where you had to pay to go into a relatively small room to listen to music and voice. But it didn't kill music, the outcome was a thousand times more music, making a thousand times more money, reaching a thousand times more people. But in the short term, there was panic. If digital text will result in hundreds more authors, with hundreds more novels, I need to be in the middle of eBooks. I need to be heavily engaged. All those people downloading my text is good news."

Cory is prone to littering his beliefs with clear examples that easily relate to modern legal problems and practices. the overriding idea is that things change, and every time there is a change the old companies rarely adapt in time, and try to use the law against the innovators. The digital age, with everyone carrying a computer in their pocket, has already started.

"There are people already sharing eBooks out there," Cory continues, "and they do it simply because they love books. You don't buy a second copy of a book, cut the spine off, lay each page on a scanner, run that .tif through an OCR (Optical Character Reader), hand edit the resulting output for errors and then post it online if you don't love the book. it can up to 80 hours to turn a printed novel into an eBook. I figure if someone out there is willing to put in 80 hours of work promoting my book, then I'd prefer they do it in a way that gives a better return to me."

"And it is promotion. My publisher, Tor Books, have some modern methods that allow them to make a profit on as little as 3,000 copies of a hardcover novel. The traditional methods would need a print run of 50,000 paperbacks. That means Tor can afford to have tons of first novelists every year on much shorter runs. But then the marketing effort is diluted to cover all those authors. It's not possible to make a good living from being a mid-tier author, just selling in the bookshops. I need to promote myself, with all the tools I have."

"is it any different to loaning a book to someone? There was a book in the US (Secrets of the Ya Ya Sisterhood) that had almost zero promotion and no marketing from the publishers. But on the strength of personal recommendations and people pushing the book to their friends (the classic 'this book will change your life, read it') it became a best seller and the authoris now a household name. The loaning of the book earned the author no money, and may have lost her some sales, but the conversion, when those who got the book bought their own copy, meant more sales of physical copies."

"if I want to enable my readers push copies to their friends, and they're in circles like Slashdot, Wired, Boing Boing, who never meet face to face, just online, well i need to give it to them in a suitable format so they can do whatever they need to do with it. SMS, MMS, Email, FTP, Cut and Paste, P2P, all are valid."

"Put simply, I want to treat my readers as partners and not crooks. There is no future in calling your most active promoters crooks."

"Finally, in the short term it's really obvious. People need to hear about my book, and if they've found out about it and buy it, I make money. The net cost of eBook distribution from my website is approaching zero. With half a million downloads of Down and Out In The Magic Kingdom, it doesn't matter if my conversion rate is a tiny percentage, it's still doing incredibly well in physical sales. The first print run of 10,000 was sold out in months, and so was the second print run. The hardcover was twice the size of a normal run, and it's on it's second run as we speak. The numbers are modest on the scale of the Internet, but that gives you an idea of what the stakes are in science fiction publication. To raise the stakes, you need to go outside the traditional realm. If I rely on just the bookstore sales, I won't make a living. Putting it online does not put my livelihood at risk, you make a living finding new ways to do business."

Phew. Remember all this has come from a single word question, 'why.' It's hard to put over the enthusiasm Cory shows when talking. None of the above appeared rehearsed, it just poured out of him like liquid gold, stutters, pauses, moments of reflection. But one stream of consciousness. When people say eBooks are going to kill publishing, Cory really does makes it sound like they're the Vaudeville acts he mentioned earlier. I wanted to know what his publishers thought of all this. After all, most publishers would want every single right for themselves.

"Tor sat down and said 'the future of text is digital. We don't know what it'll look like or what the market opportunities are going to be. The stakes with Cory are very low, so why not take the risk?' So my editor (who I met online through the GEnie BBS system, many years ago) thought it was definitely the right time when I broached the subject with him. There was no question that I was the right author. The potential upside of the deal was very promising."

"What Tor and I have found now is that we get advanced notice of everything happening in eBook publishing. When people do research, or write new software, or see the interaction of 14 years olds with eBooks, they can use dummy text (lorem ipsum) which is great for testing but not reading. They can look at a Project Gutenberg text - but all that happens then is they get a 14 year olds reaction to Chaucer. Or they can grab a modern text, designed to be put into new formats and eBook readers. I posted the text as .txt, MS-Word and HTML, under the Creative Commons licence. When someone converts to another format, they post it back on my site. You want a list of every eBook format out there? It's on my site. Students the world over email me and say they used that as the almost definitive list. There's even an Apple Newton version!"

Has it been a success though, I ask. "I don't know," replies Cory. "I don't have another first novel that wasn't pushed electronically to compare it to. But the book itself is doing very well. Looking at other publishers, a good example is Baen Books , who do a lot of multi volume series of books. From experience, they know how much volume 13 should sell based on the sales of boook 12. So when volume 13 comes out, they bundled a CD-Rom with eBook versions of the first 12 books. They also hosted these eBooks online for free. When this happens, the sales of volume 13 were beyond expectation, and volumes 1 through 12 see a bump in sales as well."

"What little empirical evidence is out there points to eBooks and free downloading increases sales on a net basis."

Smartphones and the Networks

Just after moving to London, Cory switched over to the P900 and had a merry old time actually getting a contract. (read it on Boing Boing, Cory's Blog) Now he's settled in with it, what does he think of it?

"It's a great phone, but I'm scared to do anything with it." For a man toting the fastest PowerBook ever made, and completely in touch with the electronic world, this surprises me. "I'm largely scared of doing any of the advanced things on my phone mainly due to the cost. And by the cost I mean the ridiculous per megabyte data pricing everyone in Europe seems to have. In the States I had a simple data phone, nothing fancy. But with it I had a $50 a month unlimited data plan. A true unlimited plan, not an unlimited plan until you reach 10mb of Wap Data. Because it was flat rate, it meant that I could take risks and chances with services. I would play with the phone and see just what is possible, because I knew I would never get stuck with on of those bills where you go 'Shit! How did I spend £100 looking up the football scores?!?' So that's scared me off."

Surely flat rate pricing would lose the networks money? "Not necessarily. Back in the old days of AOL (America Online) they had a 'price per minute' to dial up AOL. But they didn't have enough modems available because people were spending too much time online. So they raised the cost to encourage people to use the service a bit less. But it didn’t work very well, as most users still held to the same patterns of usage. With the added problem now that they were losing more users than before at a faster rate, and the high per minute cost wasn't attracting new customers. The bottom line was they now had even less money to spend on new modems and phone lines."

"So they tried something radical and introduced flat rate 'all you can eat' pricing. While the long-term users still stuck to the same patterns as before, AOL attracted a huge number of new customers who were risk averse. But now they knew what their monthly bill would be, they could go online, experiment, and not be scared. AOL made more money on a flat rate than per minute billing. This is something we see more and more as the mental barrier of 'take a chance' is pulled down."

"In the mobile world, there is an enormous amount of risk aversion in the customers, and this is because of the per kilobyte pricing of data services. There are virtually no freeware applications out there (or if they are they're hard to find), and the networks are so expensive even someone like me is afraid to use them. I do nothing with the P900. It's a pain in the ass carrying my Mac Powerbook around with me, but I can usually find Wi Fi if I really need it. It's not worth taking the risk of being billed an enormous amount of money if I can do it for free with my laptop simply by waiting five minutes."

"Until there is flat rate data pricing in Europe for data, you will find a huge number of people with smartphones that make no use of them, or ever find out the cool things it can do."

Cory's Solution

My old Warrant Officer had a simple rule. It's no good just stating a problem to me, if you come to me I want to hear a solution as well. Does Cory have a solution beyond "give us flat rate data pricing?"

He does, and it goes something like this. More competition.

"If I had a non-profit grant (and I mean a big one), then I would start work on a Co-operative Mobile Phone Company. We'd start in London and offer one thing. Flat Rate SMS. As long as you pay your monthly Co-operative Fee, you can send SMS for free. And we wouldn't need to build transmitter towers over the city, we use what's already there. We've got a GSM license along with the grant, and now we'd write some Open Source Software that Co-op members could flash onto software-defined Wi-Fi points with open firmware. So people could get the update to their Wi-Fi box on a Broadband connection. Wi-Fi powered handsets could then use these Wi-Fi Hot Spots as they wander round London. Software on the handsets would check for Hot Spots as you go about your business. When it finds one, bang, all your SMS messages are sent, and you pick up any SMS's waiting for you. It's not instantaneous, but it would wok. And people would want to use it because they would know exactly what they are paying every month."

"Then the networks see competitive pressure unlike anything they’ve seen before. Their only choice, much like AOL's competitors, would be to offer a similar service. Once we get that ubiquity, we can offer GPRS data over the same access points, when you're in range. Then move onto Voice over IP for long distance calls. As we get build more and more services, we turn those mobile services into internet services. And we move on and repeat the exercise in other cities."

I Want My Phone To Do This...

Even in this short time with Cory, it's obvious that once you get him onto a subject, he's able to talk a lot of common sense on ideas that initially seem way out there (after all, a wireless network community taking on Vodafone?). So I turn to the P900 he's scared to use and wonder if there's anything about the phone he'd change.

"I want it to always show me the time, even when the keylock is on. When I press a button I want the screen to light up and show me the time. I don’t want to press another button to unlock it, then see the time, then relock the keypad."

"I want an on the phone billing ticker, showing me exactly what something has cost me, what my monthly bill is. With all the technology in my hand at with the networks this shouldn't be difficult."

"I'd like to be able to use long distance calling cards to be integrated into the contacts and dialing software. If I input the Calling Card phone number in a dialog, and the magic pin code I scratch off the card, then the phone should be able to intercept any "dial this number" and route it through the Calling Card.

"Finally they really need to work on the handwriting recognition system [CIC Jot]. I made an entry in my calendar for this meeting today and copied down your phone number. So I look this up when I had some trouble finding the place, highlight the text, and tapped edit to cut and paste it so I can dial it. But when I tapped, it thought I was trying to enter a dot and overwrites your phone number. And guess what. Undo doesn't work!!! They need to work on the hotspots on the screen and make sure anything is reversible.

Cory, it's been a lovely interview, and I'm sure our readers will think the same. Thank you.
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Why Punish The Technology?
Charles Cooper

"Grokster and StreamCast are simply digital-age versions of the record sellers or dance-hall operators that, when facing liability for failing to supervise or control the infringement from which they directly profit, seek to evade that liability by leaving the dirty work to others."
Hard words, but entertainment lawyers are paid to be nasty. So it was that a brief they filed with the Supreme Court this week predictably portrayed the file-swapping companies as the antithesis of all that is holy and right. The legal paperwork was submitted in advance of a critical March court date when they will again try to get the court to shut down digital file swapping.

But in its zeal to put the likes of Grokster and StreamCast Networks out of business, the entertainment industry's challenge might lead to a change in the law that renders potentially important technologies stillborn. More about that in a moment.

Ever since Napster first popularized Internet file swapping in the late 1990s, Hollywood and the music studios have viewed peer-to-peer technology as a license to steal. The content industry won its famous battle against Napster (which closed its doors in 2001). Victory was declared, but digital file swappers easily found other peer-to-peer sites.

If a ban on P2P technology had existed in the late 1990s, the MP3 player industry would never have come into being.The industry pressed its legal attack, but a decision by California's 9th Circuit Court of Appeals last August unexpectedly upheld the validity of P2P file-sharing services. The court found that providers of online file-swapping technology could not be held liable for aiding copyright infringement, in a decision that contained shades of the Sony-Betamax decision two decades earlier.

The entertainment industry was livid. How could the law allow companies that damned well knew they were facilitating illegal file swapping to stay in business? That's where the Betamax precedent comes into play.

In 1984, the Supreme Court determined that Sony was not liable for copyright infringement just because its Betamax video tape recorder might be used by people engaged in infringing activities. The content industry has been itching to knock down this decision ever since. Now it has another chance.

Here's the problem: The law can be a blunt instrument. What's to avert an overly broad ruling that inadvertently prevents a future technology from ever coming into being? Most of the songs that ran on the early crop of MP3 players came from illegal music downloads. If technology that flourished because of customers' illegal activity had been banned in the late 1990s, the MP3 player industry would not exist today.

Truth be told, I've had a tough time trying to decide who to support in this cat fight. I roll my eyes whenever senior executives at Grokster and StreamCast claim they don't know how their technology gets used. They'd have a better chance convincing me there are huge stockpiles of WMD hiding in Laura Bush's armoire than to insist on pleading ignorance.

I still can't bring myself to root for the control freaks in Hollywood. The power brokers who run the show are so focused on the piracy rate part of the story they keep missing the bigger revenue growth rate takeaway.

So they make up a cock-and-bull story that Grokster and StreamCast exert the same kind of centralized control as a Napster. In fact, Napster got shut down because it owned and operated servers that facilitated illegal file swapping.

Truth be told, I've had a tough time trying to decide who to support in this cat fight.Why punish the technology because some people use it for unlawful means? Speaking as a consumer (and occasional file downloader--legally, of course!), it should be as easy to use content legally as it is illegally. Case in point: the flourishing business that grew up around online music stores.

The entertainment studios took forever to bless the concept. That opened the door for Apple Computer CEO Steve Jobs, who moved on his hunch about how the future was being reshaped. Apple developed an easy-to-use online music site, and that's why it boasts millions of music customers today. (Heads should be rolling at places like Sony, EMI and Universal.)

Ever since Napster got closed down, the content industry's strategy for dealing with the peer-to-peer challenge can be summed up in three words: Sue the bastards. Everyone of sane mind can agree there's a need to address digital piracy. But how about trying something more nuanced than a sledgehammer approach?


Strangling P2P

Cambridge Firm Raises $5.6m For R&D
David Manners

CacheLogic, the two year-old Cambridge start-up, has raised another $5.6m to expand its R&D and marketing operations in the peer-to-peer Internet datacomms industry.

"Peer-to-peer traffic [data traffic which goes from one Internet user to another where the data is not stored on a central server] is taking between 60 and 80 per cent of total Internet traffic by volume, causing major bandwidth problems for ISPs," Nick Farka, marketing manager for CacheLogic, told EW.

The main problems caused for Internet service providers are the very large files commonly transferred - typically music and video - and the symmetrical nature of peer-to-peer traffic with both parties uploading and downloading large files. This does not sit well with the asymmetric nature of much of the broadband network based on ADSL and cable.

Peer-to-peer transactions are substantially adding to the bandwidth requirements and costs of ISPs without adding to their revenues. CacheLogic has a product called Cacheswitch which identifies peer-to-peer transactions, and a product called Cachepliance which reduces the transit bandwidth 50 per cent and the upstream bandwidth up to 80 per cent.

CacheLogic used its first investment of $2m from Pentech Ventures and Cambridge Gateway to get initial products manufactured and into trials, and to find its first customers. The products are manufactured in Cambridge.

CacheLogic's funding, which comes in a round led by 3i, but including Pentech and Cambridge Gateway, will allow the firm to expand its R&D personnel and its sales and marketing team.

The big opportunity for peer-to-peer will come from its move to big corporate usage.


Legal P2P Radio Gets Cash Boost
Steve Malone

The P2P internet radio company Mercora has landed $5 million worth of venture capital funding. The company says it plans to use the money to expand its team and range of services.

Using the Mercora software, anyone can be a radio station. All music, legally gathered, is available for broadcast using the company's servers and peer-to-peer technologies. Broadcast restrictions are fairly limited and include things like not being allowed to broadcast a 'programme guide' in advance, play requests within one hour of receiving it or interfere with the digital recording (Mercora uses data on the file to assess royalty payments) and generally stay within the law.

The company is allowed to facilitate the broadcasting of copyright music in accordance with the US Digital Millenium Copyright Act (DMCA) and pays the appropriate royalties to the RIAA through its collection arm SoundExchange.

Since its launch in 2003, Mercora IM Radio, the company says it has amassed 300,000 registered users and over 15 million user contributed tracks. It intends to create revenue streams through advertising and paid-for services, although the core radio function will remain free.


Fake Commercial Spots Spread Quickly on the Internet
Nat Ives

EVEN as the British unit of Volkswagen prepared yesterday to confront the creators of a fake Volkswagen commercial circulating online, executives there said they were worried that the incident would not be the last. Rather, they said, it may set the table for more hoaxes and brand confusion.

"The difficulty is, of course, that the general public may not know who is behind what they see on the Internet," said Paul Buckett, the head of press and public relations at Volkswagen Group U.K. in London. "And in the future it may not be easy to take legal action to defend ourselves. That's not just for Volkswagen, of course, but for any company or individual."

Viral marketing, in which low-profile ads spread quickly online as people share them, has become an intriguing strategy for many marketers trying to look beyond traditional 30-second television commercials.

But marketers are not the only ones taking the viral approach. Because the Web and cheap video technology keep making it easier for anyone with some knowledge and equipment to produce spots that look almost like real commercials, brand managers may find their carefully calibrated marketing messages increasingly being tweaked, teased, spoiled or entirely undermined.

Consumers, on the other hand, can now wonder whether each supposed hoax is an authorized, but deniable, below-the-radar marketing ploy.

The hoax at hand has set off a particularly sharp bout of distress since its appearance last week, because it looks almost exactly like a real commercial for the Volkswagen Polo, a model sold outside the United States, except that it portrays the Polo driver as a suicide bomber.

In the commercial, the driver pulls up to a busy outdoor cafe, exposes explosives strapped to his chest and pushes a detonator. His car, however, contains the explosion without cracking a window. The spot ends with the Volkswagen logo and the actual Polo ad theme: "Small but tough."

The spot was sent to the London office of DDB Worldwide, a Volkswagen roster agency, by two people known as Lee and Dan. "We had no part in disseminating it," said Annouchka Behrmann, public relations director at DDB London, part of the DDB Worldwide division of the Omnicom Group. "We think it's absolutely disgusting."

Mr. Buckett said yesterday that his company was about to deliver Lee and Dan a letter demanding the source material, an admission that they created the ad without authorization, a public apology in language to be worked out with the automaker and a public promise to neither infringe on Volkswagen's trademarks nor create or distribute any more Volkswagen work.

The letter then warns that Volkswagen will sue if it does not receive a response by tomorrow.

Harry Cymbler at Hot Cherry P.R. in London, which represents Lee and Dan, said they would not comment, declining to elaborate or provide their last names. In a quotation published in The New York Post last week, Dan apologized and exonerated Volkswagen.

Lee and Dan, whose motives in creating the spot remain unclear, are among a growing number of people who are creating unsolicited, often unwelcome advertising for companies that have their own agencies and plans. Volkswagen executives said that they thought Lee and Dan sent the mock Polo commercial to DDB on a speculative basis, seeking work on the account.

Then there are volunteer advertisers motivated by product evangelism, like George Masters, a Web design and graphics instructor in Irvine, Calif., who created an unauthorized 60-second animated spot for the iPod Mini music player partly for the challenge and partly out of enthusiasm for the product.

Mr. Masters said that Apple had not asked him to remove his ad, which has circulated online, from his Web site at www.gomotron.com. "I'll still continue to make Apple ads as I find time," he said.

Given that others, from enthusiasts to self-promoters to corporate critics, are likely to keep making unsolicited ads as well, Mr. Masters said, some of the work will hurt brands and some will help them. "Companies just need to find smart ways of dealing with this new word-of-mouth, homegrown advertising," he said.

Other commercials on the Internet have already gained occasional notoriety in Europe, most notably a spot that appeared last year, apparently promoting the Ford Sportka.

Using special effects, the spot shows a housecat as it lazily approaches a Sportka parked in a driveway, hops on the roof to investigate and peeks inside when the sunroof spontaneously opens. The cat is killed when the sunroof closes.

The British operation of Ford Motor and its agency, Ogilvy & Mather Worldwide, denied any involvement, but failed to totally squelch speculation that the spot was deliberately leaked.

"Some advertisers see this as a way of deliberately making their brands a little more edgy," said Richard Leishman, managing director at Bore Me in London, which operates a Web site (www.boreme.com) where visitors can watch viral videos, including the Polo and Sportka spots. "A lot of brands benefit and do it deliberately. There are others who probably don't want that."

At the same time, many others are using the viral approach for a wide range of reasons, Mr. Leishman said. "You may get rogue agencies who are keen to get some public relations who produce something that purports to be something that it is not," he said. And when the Internet is the medium, he added, the spread of such material is nearly impossible to control.


They're Off to See the Wizards
Katie Hafner

IT was just past noon on a recent weekday at the Apple Store here, and the Genius Bar was buzzing.

At one end of the 40-foot maple counter, a cherub-faced Genius in a black T-shirt spoke soothingly to a middle-aged customer whose iPod kept erasing songs. After a few minutes of probing, the Genius announced his diagnosis: the firmware needed updating. Then he showed the man how to do it.

At the other end of the bar, another amiable Genius - Apple's term for its in-store technical support staff - greeted a couple who had arrived with an ailing PowerBook. "Hey, what's going on?" he said, and got down to work.

In an age when human help of any kind is hard to come by, the eight or nine Geniuses on duty at any given time here are a welcome anomaly.

In fact, go to any of the 102 Apple-owned retail stores in the world and - if you are willing to wait - you will be treated to what is an increasingly rare service: free face-to-face technical support.

The walk-up assistance has existed since the first Apple Store opened in 2001, in Washington. Over the years, as the concept gained momentum, the bars have become what Ron Johnson, Apple's senior vice president for retailing, calls the soul of the stores.

"It's the part of the store that people connect to emotionally more than any other," Mr. Johnson said.

For the first few years, there was general mayhem around the Genius Bars. Customers would stand four or five deep, broken gadgets in hand, waiting to speak to an expert. Now there is an online system for scheduling free, same-day appointments. And for $100 a year, customers can schedule appointments up to a week in advance with the expert of their choice.

But there can still be long waits. Just after Christmas, for instance, at the Apple Store in SoHo in New York, by 10 a.m. the earliest appointment that could be had was at 4 p.m. People left and came back, or sat for hours, reading, talking on their cellphones or milling about the store.

The San Francisco store, like all the others, has instituted a pager system for those who show up when all the experts are busy, like the man on this day who lugged his iMac to the bar, hoisted over his shoulder like a recalcitrant child. He took a pager and joined a dozen or so others waiting for help.

The concept of a bar came to Mr. Johnson one night when he was thinking about the kind of environment Apple wanted to create in its stores. He said he was inspired by Four Seasons, the Ritz-Carlton and other hotels where service is paramount.

"We believed you had to bring the people dimension back into retail," said Mr. Johnson, who joined Apple five years ago after 15 years at Target. "We thought, What about giving tech support that's as welcoming as the bar at the Ritz?"

Tim Bajarin, principal analyst at Creative Strategies, a high-tech consulting firm in Campbell, Calif., said Apple's strategy was sound. "It's all part of a sales process," he said. "They have these guys who are extremely articulate answering customers' questions, which is key not only to the sales process, but the support afterwards."

Other computer retail stores have technical support counters, too. A few, like CompUSA and Best Buy, even have traveling teams of tech support staff who make house calls. But those services are not free.

Further, Mr. Bajarin said, the wider spectrum of problems encountered at other stores dilutes the quality of service.

"A Best Buy could be handling not just H-P, but Gateway and Epson and whatever else they have in the store," he said. "These guys running the Genius Bars are extremely well trained around a single platform."

Hiring those Geniuses - the label was Mr. Johnson's idea, too - is not difficult. He said that when the company advertises for an opening, an average of 50 people apply within 24 hours. For the most part, the applicants already have extensive technical knowledge. Apple provides eight weeks of training, four weeks at the company's headquarters in Cupertino, Calif., and another four weeks at the store.

Mr. Johnson said an initial concern was that the people hired would be geeky, lacking the social skills for a job that calls for continuous interaction with strangers. But he soon found that more often than not, the employees were well-socialized young people who happened to know a lot about computers.

Each employee has an area of expertise - digital photography, say, or the Windows operating system. And they aren't too proud to call on colleagues for help.

"I borrow others' brain cells all the time," said Diana Souverbielle, an employee in the San Francisco store, who confessed to knowing "just enough about Windows to get in trouble."

David Marcantonio, 25, who diagnosed the firmware problem, is the resident iPod expert at the San Francisco store. Mr. Marcantonio, who studied criminology in college and has been fluent in most things Apple since age 14, stands out from his co-workers because his T-shirt reads iPod Genius.

"It's a bull's-eye," Mr. Marcantonio said of the shirt. Half of the customers at the Genius Bar these days have iPod-related problems.

Sometimes the public misunderstands the purpose of the Genius Bar, mistaking it for a think tank or an intellectual sounding board. David Isom, 29, who decided to defer a legal career in favor of a stint at the bar, said a man came in recently to discuss an idea he had for a solar-powered subway system. "He had technical questions, and he wanted to pitch it to us," Mr. Isom said. "I know nothing about solar power."

Indeed, they are humble experts. When confronted by a thorny problem on the fringe of their expertise, they might conduct a Google search to consult sources that are "not necessarily endorsed by Apple," Mr. Isom said.

And the experience of one customer whose keyboard had a sticky "e," which was cured by Ms. Souverbielle's mere touch, suggests that the experts might even have healing powers. Ms. Souverbielle declared that it was merely a coincidence.

Invariably in their 20's and 30's, and predominantly male, Apple's experts do keep lofty company. Behind each bar is a screen with a rotating display of quotations from half a dozen better-known intellectual luminaries, like Leonardo da Vinci ("The noblest pleasure is the joy of understanding") and Michelangelo ("If people knew how hard I had to work to gain my mastery, it wouldn't seem wonderful at all").

But could Michelangelo have executed a clean startup from an external drive on a PowerBook G4?

Could Leonardo have restored the video on Joe Montana's iBook?

That task was performed by Chris Tichenor, a 24-year-old Genius in San Francisco. No matter that the concierge mistakenly entered Mr. Montana, the famous quarterback, into the appointment queue as Steve Young, Mr. Montana's successor on the San Francisco 49ers. "He didn't seem to mind," Mr. Tichenor said.

By Mr. Johnson's estimate, each of the company's 500 experts handles some 200 customers a week, taking as long as is needed to solve each problem.

The stores in general and the Genius Bars in particular have been credited with creating a halo effect for Apple. The iPod owners who own PC's and go to the unrelentingly chic stores for an expert's help are often seduced by Apple's self-conscious hipness.

Paula Mauro, who lives in New York and recently spent several hours at the Genius Bar in the SoHo store, got that message when getting help with iPod-to-PC communication. As she sat at the bar with her 10-year-old son, William, who aspires to Macintosh ownership, it became evident to her that synching an iPod to a Macintosh computer is relatively seamless, while her three-year-old PC posed no end of technical challenges.

"The next computer I buy is going to be a Mac," she said.

The Geniuses are patient even when people show up with problems that only a technophobe could create. Mr. Isom said people have come to him with an iPod that they insisted was dead - until Mr. Isom showed them that they had pushed the Hold switch, which inactivates the iPod's buttons, mainly so that it cannot be turned on or off inadvertently.

If a problem can be solved on the spot, the Genius may disappear into the back and re-emerge with a piece of equipment restored to health. Broken iPods are often replaced at no cost, Mr. Marcantonio said, because if the warranty applies, the easiest thing to do is to hand the customer a new one.

In some ways, this has little to do with keen technical knowledge and a lot to do with astute customer service.

The experience of Cecilia Joyce, a marathon runner who claims to be unable to live without her iPod, is a recent case in point. Ms. Joyce's iPod is packed with music like Boy George's rendition of "The Girl From Ipanema," which inspires her to run longer, sometimes even faster.

When her iPod's battery stopped holding a charge, Ms. Joyce went straight to the Genius Bar in San Francisco. She apologized to Mr. Marcantonio for having bought the device at a different Apple Store. Unfazed by this mundane detail, and without further ado, he gave Ms. Joyce a new iPod.

Were it not for the Genius Bar, Ms. Joyce might have gone an untenable two weeks without a device, the amount of time it could have taken to send it to be repaired or replaced.

Soon after the elated Ms. Joyce left, Mr. Marcantonio glanced down at his computer to see what troubled device was coming next. "Oh, it's an iPod Shuffle - this is going to be interesting," he said, delighted by his first encounter with the tiny new flash-based iPod.

Mr. Marcantonio picked up the white plastic stick and gave its miniature controls a quick poke.

Unlike the clerk in the Monty Python dead parrot skit, who refuses to concede that the bird he sold to a customer was in fact deceased, Mr. Marcantonio knows a dead iPod Shuffle when he sees one. The solution: give the customer a new one.




iPods Act as D.J.'s at Clubs Where Patrons Call the Tunes
Ashlee Vance

WHOSE iPod is this?" yelled the manager. "Is this the Pogues?"

Bar managers do not typically ask their clientele about the songs pumping out of the bar's music system. They tend to have intimate knowledge of the jukebox, or leave music questions to the D.J. But that is changing in some bars, where customers who bring their own iPods have started to take control of the tunes.

Nic Nepo, the manager inquiring about the folk-punk band the Pogues, oversees an iPod night every Tuesday at his bar, the Tonic Room, in the Lincoln Park neighborhood. On a typical night, about 10 people bring their iPods loaded with a special playlist for the occasion. They sign up, wait for their turn and then plug into the Tonic Room's sound system. They have 15 minutes to wow other customers or simply soothe their own souls.

"I've been having a bad week," said Julianna Holowka, an iPod night regular. "I'm feeling entirely self-indulgent, so I'm just playing what I want to hear."

The New York club APT, in the West Village, lays claim to having held the first iPod night almost three years ago when DJ Andrew Andrew kicked off what it calls an iParty. (DJ Andrew Andrew is two men named Andrew who decline to reveal their last names.) In Chicago, the Tonic Room is one of at least four bars that hold the events. The 21st Amendment in San Francisco has the Bay Area's best-known iPod night.

DJ Andrew Andrew places relatively tight controls on APT's iPod night, held every Tuesday and attended by 50 to 75 people. Customers take a number, just as they would at a delicatessen, and look to a Now Serving sign for their moment. They then pick seven minutes' worth of music from two iPods provided by DJ Andrew Andrew, each holding 1,000 songs. Only APT regulars who have proven good taste can play songs from their own iPods.

"Once a month or so, someone will be taken aback that you have to use our iPods," said one of the Andrews in a telephone interview. "But APT has a really strong musical identity, and we want to make sure there is a certain type of music playing."

A more relaxed atmosphere permeates the Get Me High Lounge in Chicago's Bucktown neighborhood. Two regulars, Rob Tarpey and Edmund Gomez, arrive every Wednesday night and play songs off their iPods until the bartender or another customer asks to have a turn. The iPods are passed across the bar and placed in a standard dock.

"This gives a couple of iPod dorks like us a chance to listen to the music you jam to at home in a really comfortable setting," Mr. Gomez said. "I look forward to this every week."

The bartender, Joshua Tilden, appreciates the night as well. "It's my favorite night to work," he said. "I like hearing other peoples' taste in music."

The recording industry hasn't reacted negatively to the iPod nights, even though the format sidesteps traditional methods of playing music at bars and clubs.

Mr. Nepo said that the license from the American Society of Composers, Authors and Publishers that establishments use to cover the music played by D.J.'s should also cover iPod owners acting as D.J.'s for a night.

Becoming a temporary D.J. can be as nerve-racking as it is gratifying. Customers huddled in the Tonic Room's dark red confines agonized over which songs to play. The music departed from typical jukebox fare, with one customer showing off his collection of recorded Phish concerts and another playing TV theme songs. One iPod user accidentally cut off Guns N' Roses' "Sweet Child o' Mine" midsong to an outpouring of jeers, while another participant had patrons gyrating to the Doors' "Peace Frog."

"It's a rush to have people dancing to your music," said Amanda MacDonald, a law school student at Northwestern. "They should have this everywhere."

Most of the iPod fanatics interviewed seemed certain that iPod nights were a trend that would catch on in a big way, enabling a customer to rise, for a moment, to the status of star D.J., or use music as a way to strike up a conversation or a flirtation.

One customer at the Tonic Room asked if the bar would ever charge for the evening. "We don't want to have people pay to play their own music," Mr. Nepo said. "That would be terrible."


Ted Turner Calls Fox a 'Propaganda Voice'
Ken Ritter

CNN founder Ted Turner has called the Fox television network a "propaganda voice" of the Bush administration and compared Fox News Channel's popularity to Adolf Hitler's rise in Germany before World War II.

Turner, in a speech Tuesday to the National Association of Television Programming Executives, also targeted "gigantic companies whose agenda goes beyond broadcasting" for timidity in challenging the Bush White House.

"There's one network, Fox, that's a propaganda voice for them," the cable news pioneer said. "It's certainly legal. But it does pose problems for our democracy when the news is 'dumbed-down.'"

Fox News in New York issued a statement saying, "Ted is understandably bitter having lost his ratings, his network and now his mind - we wish him well."

Turner, 66, stepped down as vice chairman of AOL Time Warner in May 2003.

During a question-and-answer session moderated by former CNN anchorman Bernard Shaw, Turner called it "not necessarily a bad thing" that Fox ratings top CNN and other cable news networks.

"Adolf Hitler was more popular in Germany in the early '30s than ... people that were running against him," Turner said in remarks videotaped by conference administrators. "So just because you're bigger doesn't mean you're right."

Convention spokeswoman Michelle Mikoljak said the association had no comment about Turner's comments.

Turner heads an Atlanta-based philanthropic and business empire.


Microsoft Plans Restrictions on Fixes
Allison Linn

Microsoft Corp. plans to severely curtail the ways in which people running pirated copies of its dominant Windows operating system can receive software updates, including security fixes.

The new authentication system, announced Tuesday and due to arrive by midyear, will still allow people with pirated copies of Windows to obtain security fixes, but their options will be limited. The move allows Microsoft to use one of its sharpest weapons - access to security patches that can prevent viruses, worms and other crippling attacks - to thwart a costly and meddlesome piracy problem.

But some security experts said the crackdown also could increase Internet security problems in general, if there is a spike in unsecured computers open to attack, which then could be used to attack others.

David Lazar, a director of the effort, said Microsoft would monitor that potential problem closely. But the company actually considers its authentication requirement one possible way to boost Internet security - countering the idea it may increase threats. That's because pirated copies of Windows could contain viruses or other security threats, he said.

Over the next few months, the software behemoth will begin to more broadly adopt the program, called Windows Genuine Advantage, that urges users to provide proof their Windows copy is authentic before receiving some software updates.

By mid-2005, the program will become mandatory for Windows users to get virtually all updates, including security fixes available through the company's Windows Update Web site. But users who have pirated copies of Windows will be able to continue to get security fixes if they sign up to automatically receive security updates.

Russ Cooper, a senior scientist with Cybertrust Inc., said completely cutting off access to security fixes for pirated machines could cause a spike in malicious, Internet-based attacks. He lauded Microsoft for mitigating that problem by continuing to allow all users to get the automatic updates, regardless of whether they're running pirated versions.

Still, Cooper said he expected Microsoft to eventually cut off that security update avenue for pirated copies. He said the company may feel it has few other options as it tries to stop the millions of users who are running pirated copes of Windows.

The operating system is one of the company's major cash cows, and the move comes as Microsoft is moving aggressively into emerging markets where piracy is thought to be more common.

"The reality is that shareholders of Microsoft would like to see them get all the money they are owed," Cooper said.

Microsoft said the company has no current plans to require users running automatic updates to provide proof that their copies of Windows are genuine.

Lazar said piracy has cost the Redmond-based company "billions of dollars over the past 10 years," but he would not be more specific.

"Our desire is to enhance the value of genuine Windows, to create a differentiation (and) to add more value in the form of greater security and reliability," Lazar said.

Customers who visit the manual Windows Update site will be asked to prove that their copies of Windows are legitimate by allowing Microsoft's system to automatically run a check, or by providing a product identification number. Users who have lost that number will be asked three basic questions, and if they are deemed to be acting in good faith they will be given a free replacement key.

The company also said it will begin providing discounted versions of Windows to users in China, Norway and the Czech Republic who discover they have a counterfeit version of Windows XP.

Rob Enderle, principal analyst with the Enderle Group, is expecting the more stringent authentication system to be successful, as Internet attacks become ever more sophisticated and users with pirated copies of Windows become helpless to stop them.

"It will create an environment where the pirated machines, if they're connected to the Internet, won't really work," he said.


Is Piracy Pushing Linux Sales?

More PCs run the alternative OS, but many will end up with a pirated version of Windows, report says.
Robert McMillan,

Linux may be shipping on a growing number of PCs sold in the emerging markets of Asia, Latin America, and Eastern Europe. But about 80 percent of PCs shipped with the open source operating system this year will eventually run pirated versions of Windows, industry research firm Gartner estimates.

The high price of Windows may be driving vendors in countries like China and Russia to ship Linux on as many as 40 percent of their PCs, but many of these systems will not ultimately run the free operating system, Gartner says in a recent report.

In fact, this high percentage of Linux sales is being driven by the availability of cheap pirated copies of Windows rather than a desire to run Linux.

Cutting Costs

"The widespread availability of pirated versions of Windows at a fraction of the cost of a legal copy stimulates the growth of Linux on PCs in emerging markets," writes Gartner Analyst Annette Jump in a report titled "Linux Has a Fight on Its Hands in Emerging PC Markets."

With the cost of the Windows operating system remaining "relatively constant," even as PC hardware components costs have dropped over the last 10 years, PC vendors in the emerging markets are increasingly being driven to Linux in order to maintain their profit margins, Jump reports.

The cost of Windows in the Asia-Pacific region, for example, has increased from 6 percent of the total price of a professional desktop PC in 1996 to 15 percent in 2004, the report says.

Linux will ship on 5 percent of the 185 million PCs that are expected to be sold this year, but it will be particularly popular in the Asia/Pacific, Eastern Europe, and Latin American regions, Gartner predicts. The open source operating system will be included with 9.8 percent of PCs shipped in Asia/Pacific, 11.2 percent in Eastern Europe, and 12.1 percent in Latin America.

In the U.S., Linux will ship on 0.8 percent of PCs this year, the research firm predicts.

Windows Light

Despite the fact that Windows will ultimately be run on the majority of emerging market desktops, even in those that ship with Linux, Microsoft's recent decision to begin pilot tests of a slimmed-down version of Windows XP, called Windows XP Starter Edition, is a sign that the company wants to cut down Linux's growth, according to Jump.

"Microsoft's plan to release a Windows XP Starter Edition in several countries in Asia/Pacific is a sign that the company has recognized the issue and is planning to fight for OS share in new PCs," Jump writes.

"It is likely that Microsoft would prefer the initial OS on a new PC to be Windows rather than Linux, even if piracy were to continue," she writes.

Microsoft's pilot program will see XP Starter Edition shipping in Malaysia, Indonesia, and Thailand next month. Early next year, the product will start shipping in Russia and India.

Microsoft has promoted the software as a low-cost option for first-time PC users, but analysts have criticized the software for not meeting the most basic needs of users. XP Starter Edition does not include support for home networking, sharing printers, or multiuser accounts.


Ex-Microsoft Worker Pleads Guilty to Software Theft

A former Microsoft Corp. employee pleaded guilty on Wednesday to selling the world's largest software maker's products for more than $7 million for personal profit, federal prosecutors said.

Finn Contini, 36, admitted to ordering software through Microsoft's internal systems under the pretense it was for internal use and using the money to buy real estate, cars and jewelry, the U.S. Attorney's office said.

After similar incidents involving employees selling Microsoft's high-end software for personal gain, the company cracked down on criminal theft in late 2003.

The Redmond, Washington, company hired investigators and made changes to its internal ordering system in order to prevent future incidents.

Contini, an assistant at Microsoft, resigned in February.

Two other individuals who worked with Contini are scheduled for plea hearings later this month.


EU Raises Possibility of New Fines for Microsoft

The European Commission held out the possibility on Friday that Microsoft Corp. may face fines up to 5 percent of its average daily turnover unless it complies soon with an EU antitrust decision.

Last month Microsoft lost a months-long bid to suspend sanctions for breaking the law and said it would offer a stripped-down version of Windows and share some protocols with rival makers of servers by early February.

"We obviously expect the remedies to be complied with within a matter of weeks -- measured from last December -- rather than months," spokesman Jonathan Todd said on Friday.

Asked what the Commission can do if the software giant fails to comply, Todd said:

"The ... regulation allows the Commission to decide to impose penalty payments up to 5 percent of Microsoft's average daily turnover."

He also said Microsoft must refrain from contractual terms that would make the unbundled version less attractive.

The Commission decided 10 months ago that Microsoft abused its virtual monopoly of the Windows operating system and has already fined it 497 million euros ($647.9 million).

Microsoft has paid the 497 million euros fine.


UN Body Promotes Open Source In Education
Ingrid Marson

An official UN report has praised the high quality and reliability of free and open source software

A UN-funded body has produced a guide that encourages the use of Linux in educational institutions.

The International Open Source Network (IOSN), which is part of the UN's development programme, published the guide to free and open source software in education last week. The FOSS Education Primer explains the advantages of using open source software and gives information on server and desktop software that can be used in education.

The guide says the advantages of open source software include lower costs; the opportunity for students to learn about programming by examining and modifying the source code; and better reliability than proprietary software.

"The development methodology of FOSS [free / open source software] tends to assure high quality of the software," says the guide. "Bugs are removed with the help of large numbers of developers, and the resulting software is more reliable. This is especially true of the more mature FOSS for servers."

The guide -- which can be seen here -- has been released under the Creative Commons Attribution License, which allows other organisations to copy and distribute the work. Last year the IOSN released a guide to using Linux on the desktop for novice PC users.

The UK government is also encouraging the use of open source software in education. At last week's BETT trade show Ruth Kelly, the secretary of state for education and skills, said in her keynote speech that open source software can be useful in education. "We believe that high quality and well supported open source solutions have a valuable role to play in education," said Kelly.

At the same show SchoolLINUX.com, a company which develops Linux tools for schools, was inundated with requests for its open source desktop operating system for schools.


Music's Future on Show at Industry Confab
Jamey Keaten

It's a bit disorienting: slip on a set of headphones, turn up the volume and, while you move about the room, the music stays put - as if coming out of five speakers stuck on a wall.

Software engineers in Germany who developed the widely used MP3 audio file format have taken the technology to a higher level with a next-generation format that delivers cinema-like multichannel audio.

The headsets dazzled attendees at the Midem music conference in this French Riviera town, where goateed singers, sharply dressed executives and software designers in tennis shoes have been meeting this week to map out how music reaches ears in the future.

Tech gizmos are but a small part of the conference, now in its 39th year and typically devoted to the tough negotiations that go into record deals.

But technology is an increasing part of the business, especially as consumers show an unquenchable appetite for on-demand and on-the- go music.

The cutting-edge, but disorienting, Surround- sound headphones won't be commercially available for some time. But music fans can hear the new MP3 Surround technology, developed by Germany's Fraunhofer Institute, on personal computers provided they have special 5.1-channel sound cards and multiple speakers.

A free test version of the software, which encodes and plays audio in the new multi-channel format, is available for download.

The MP3 Surround Evaluation Software 1.0 is backwards compatible, so it will also play the regular stereo MP3 files already sitting on tens of millions of computers worldwide.

"We simulate a virtual room so that you get the impression of listening to Surround sound even if you have only stereo headphones," said Fraunhofer's Oliver Baum.

Among other high-tech offerings, China's Zhejiang Huahong Optronics Group showed off a flash-memory portable video player tentatively called the MTV Player, which is to go on sale in China in March - though no export date has been set. The palm-sized gadget has 2 gigabytes of storage space and could be just the thing for consumers willing to see dazzling dancers on a 2-inch screen.

Music videos are just the start.

"The plan is for people to download movies from their computers or from the Web," said company president Wang Yuan Long.

China was making its first big splash at the conference this year, hoping to strike deals for Western music that young Chinese crave and assuage concerns that Beijing has not done enough against the black market in pirated CDs.

The undercurrent of the six-day show, which kicked off with a concert featuring big- name stars including Anastacia and Jennifer Lopez, has been the rebounding fortunes of recording companies.

After a four-year slump, global sales of recorded music increased last year largely through the success of fee-charging online services and the expansion of portable music devices like Apple Computer Inc.'s iPod.

Now, music industry honchos hope gadget makers, software powerhouses like Microsoft and cell phone companies will help deliver tunes to a fee-paying public.

Perhaps the biggest debate is how listeners will receive their music. With digitized music increasingly delivered through the Internet or mobile phone, the CD could one day go the way of the 8-track.

Apple's a-la-carte offering through its popular iTunes portal lets users pay to download songs to their iPods - but only iPods, not competing MP3 players.

Microsoft Corp. is fighting back with its PlaysForSure certification program, which helps consumers quickly recognize that a particular portable player supports files encoded in its Windows Media format.

When it comes to on-the-go music gadgetry, mobile phone companies like Vodafone Group PLC, Orange PLC, T-Mobile Ltd. in Europe or Verizon Communications Inc., Cingular Wireless and Sprint Corp. in the United States could also become serious players.

Mobile operators offer downloads of songs directly into handsets, though the fees have typically been higher than the per-track prices for portable music players such as the iPod.

Motorola Inc. will soon let people play on its cell phones the songs they buy through Apple's iTunes Music Store. Music fans in Japan already enjoy an over-the-cellular- network service offered by KDDI.

Online music distributor Napster, meantime, is pushing a new subscription service that will offer music lovers unlimited access to a catalog of 1 million songs transferrable to portable players - until their subscriptions lapse, that is. The songs are "rented", encoded with Microsoft copy-protection software.

Whatever strategy ultimately becomes dominant, the competition to deliver show tunes, jazz riffs, operatic arias or hip-hip rhymes to the music lover continues to inject hope into the embattled music business.

As Napster president Brad Duea said, "We have to encourage people to listen more."


Wireless Headphones Possible with Aura’s NFC LibertyLink LL888
Christian Harris

Aura Communications has announced the first samples of its LibertyLink LL888 system-on-chip, for enabling high-quality wireless voice and stereo audio. The chip provides wireless stereo headphone capability for MP3 players, portable DVD players and audio-capable mobile phones - or indeed virtually any portable product where digital audio performance must be coupled with long battery life and low cost. The technology was previewed in ‘real life’ earlier his year by Creative Technology, whose wireless-enabled Zen Micro MP3 player is based on the LibertyLink LL888 chip.

The most interesting feature of the LibertyLink LL888 is that it uses a patented form of Near Field Communication (NFC) rather than conventional radio frequency technology (such as Bluetooth) to enable digital audio wireless performance. NFC is a short-range wireless connectivity standard that uses magnetic field induction to enable communication between devices when they’re touched together, or brought within a few centimetres of each other.

Jointly developed by Philips and Sony, the standard specifies a way for the devices to establish a peer-to-peer (P2P) network to exchange data. After the P2P network has been configured, another wireless communication technology, such as Bluetooth or Wi-Fi, can be used for longer range communication or for transferring larger amounts of data.

Unlike Bluetooth, which radiates in the crowded frequency band at 2.4GHz, Aura’s technology is more private and secure as it operates at 13.5MHz - it completely avoids the interference of the 2.4GHz band. Aura Communications claims that the chip’s magnetic signals creates a ‘secure communication bubble that surrounds the user and is uniquely owned by each user for reliable and private communications.

The chip is currently scheduled for production quantity availability by the second quarter of 2005, with pricing set on an individual customer basis, but expected to be under $5 (US) in OEM quantities.


Videotape to DVD, Made Easy
David Pogue

WHOEVER said "technology marches on" must have been kidding. Technology doesn't march; it sprints, dashes and zooms.

That relentless pace renders our storage media obsolete with appalling speed:5¼-inch floppies, Zip disks or whatever. And with the debut of each new storage format, millions of important files, photos, music and video have to be rescued from the last one.

At the moment, the most urgent conversion concerns videotape, whose signal begins to deteriorate in as little as 15 years. Rescuing tapes by copying them to fresh ones isn't an option, because you lose half the picture quality with each generation. You could play them into a computer for editing and DVD burning, but that's a months-long project. You could pay a company to transfer them to DVD, if you can stomach the cost and the possibility that something might happen to your precious tapes in the mail.

There is, fortunately, a safe, automated and relatively inexpensive solution to this problem: the combo VHS-DVD recorder. It looks like a VCR, but it can play or record both VHS tapes and blank DVD discs, and copy from one to the other, in either direction. Pressing a couple of buttons begins the process of copying a VHS tape to a DVD, with very little quality loss. (You can't duplicate copy-protected tapes or DVD's, of course; only tapes and discs you've recorded yourself.)

And if your movies are on some other format, like 8-millimeter cassettes, you can plug the old camcorder into the back of this machine, hit Play, and walk away as the video is transferred to a DVD.

(Of course, now you have to worry about the longevity of recordable DVD's. Fortunately, a DVD's movie files are stored as digital signals, not analog, so you won't lose any quality when you copy them onto whatever video format is popular in 2025. Video contact lenses, perhaps?)

As a bonus, a combo VCR-DVD player-recorder can eliminate one machine stacked under the TV, one remote control and, in most cases, one set of cables to your TV. (None of this makes it simple, however. All of these machines are far more complex than, say, a stand-alone DVD player.)

I sampled four of these combo boxes: the Panasonic DMR-E75V, the RCA DRC8300N, GoVideo's VR2940, and the JVC DR-MV1S. (Who makes up these model names, anyway - drunken Scrabble players?) All are available online for $285 to $350. As it turns out, shopping for a combo recorder is an exercise in compromise. Here are some of the trade-offs you have to look forward to.

JACKS Each recorder has a dazzling array of jacks on the front and back panels, for ease in connecting to your other home-entertainment gear. For example, each has so-called component video outputs for a superior picture on recent TV sets. JVC and GoVideo even included a front-panel FireWire input, which lets you dump footage from a digital camcorder directly onto a DVD.

Unfortunately, the GoVideo deck lacks an S-video input, a high-quality connection to many camcorder models. And a note to videophiles: The RCA, JVC and GoVideo decks can play both VCR and DVD signals through the same set of component video cables, so you don't have to switch TV inputs to get the best quality. DISC FORMAT Thanks to a foolhardy war between electronics companies, there are two incompatible formats for blank DVD's, confusingly called DVD-R and DVD+R. Recorded discs of either type will play in most recent DVD players, but you have to be careful to buy the right kind of blanks for your recorder, and many stores carry only one type.

The RCA and GoVideo decks require DVD+R (and their more expensive, erase-and-reuse variant, DVD+RW). The Panasonic and JVC players take DVD-R discs (and the erasable DVD-RW). A disc of either format must be "finalized" (a 2- to 15-minute electronic shrink-wrapping) before it will play in other DVD players.

As a bonus, the Panasonic and JVC models also accept a third format called DVD-RAM, which doesn't play in most everyday DVD players. But if you just leave it in your recorder, you can use it pretty much like a hard drive, adding and deleting recordings at will, slicing out commercials, watching the beginning of a show whose ending is still being recorded, and so on.

Frankly, understanding the differences between all of these formats makes most people's brains hurt. At the outset, you might want to consider just buying straight-ahead, ordinary blanks (either DVD-R or DVD+R) and treating them as burn-once-and-forget-it DVD's.

COPY QUALITY The quality of the copy depends on the speed setting you choose. The one- and two-hour DVD settings, for example, are nearly indistinguishable from the original VHS tape. Remember, of course, that VHS quality isn't so great to begin with. The four- to eight-hour modes look pretty terrible. The JVC and Panasonic decks also offer in-between settings that maximize quality based on the length of the recording, as long as you know the length ahead of time.

VCR FEATURES Only the JVC and Panasonic models offer VCR Plus+, the shortcut system that programs your recorder to record a show when you copy its code out of the newspaper TV listings. This feature applies to recordings made on either a tape or a disc, so a better name might be VCR Plus+ Plus DVD Plus+.

REMOTE CONTROL None of the remotes are fully illuminated, although the JVC's primary playback controls glow. Most require you to press a DVD or a VCR button before pressing Play, Pause or whatever; only the RCA is smart enough to play whatever is in the machine (a disc or a tape) - or, if one of each is inside, to ask which you want. The buttons on GoVideo's remote are especially poorly designed; they're all alike, all tiny, all the time.

DVD FEATURES All four of these decks work fine as DVD players, but the GoVideo's AutoPlay feature can skip all the ads, movie trailers, FBI warnings and so on at the beginning of a DVD movie, and just start playing the movie itself. DVDelicious!

Speaking of smart, the JVC, Panasonic and RCA decks offer a 30-second skip button that works on both discs and tapes; the JVC and RCA also offer a 7-second replay button that's great for catching mumbled dialogue.

CHAPTER MARKERS Each deck creates a new "chapter" of your DVD for each new recording you copy to it. But within a long recording, the Panasonic, RCA and JVC models just put a chapter marker every few minutes.

The GoVideo offers two more sophisticated features. One, an option called YesVideo, produces a handsome main menu featuring thumbnail images of the chapter breaks - an infinite improvement over the invisible markers of its rivals. (GoVideo's ads imply that these breaks are intelligently placed at scene breaks, but usually they're just spaced at regular intervals.) Better yet, if you pop the finished disc into a Windows PC, you can print out a DVD jewel-case insert depicting those thumbnail images, so you can see what's on the disc without having to put it into a player. Very cool.

YesVideo is available only if there's just one recording on a disc. Even without this feature, though, GoVideo still lets you place chapter markers manually during playback, complete with thumbnail images.

SUPPORT GoVideo should take pride in the fact that it prominently displays its toll-free tech-support number right on the box, part of what it calls its "widely heralded White Glove Customer Care."

It should be ashamed, however, of the fact that White Glove Customer Care turns out to be keeping you on hold for an hour, waiting for an agent - until a recording tells you that everyone's busy and hangs up on you. I never did get through.

Panasonic's player has a jaw-dropping list of features, including an amazing one-minute full-tape rewind speed, picture-in-picture, and so on - but its manual reads like a bad translation of the Japanese income-tax form. (Writing sample: "The title is irretrievably erased when you use this procedure and cannot be retrieved.")

On the other hand, RCA's manual offers standard high-school English-class writing - which means that, among electronics manuals, it's practically Shakespeare.

MAKING A CHOICE The GoVideo is the least expensive deck ($285 at shopping.com), its DVD preview-skipping feature is almost irresistible, and that YesVideo chapter thumbnail thing is a worthy exclusive. Its reliability is worrisome, though. My review unit froze several times during testing, and after a few days refused to burn any more DVD's. A replacement unit occasionally stopped burning discs until it was unplugged and plugged in again, earning it the household nickname Don'tGoVideo.(GoVideo's buyer reviews online are similarly discouraging.) The RCA ($346) and Panasonic ($342) are fine machines, but they can't touch the JVC ($312) for good looks, price or genuinely useful features. For example, only the JVC has two tuners, so that it can record two things at once (one on tape, one on DVD). And only JVC offers an infrared blaster (when you send in your registration card), which changes the channel on your cable or satellite box for a scheduled recording. VCR Plus+, a full complement of jacks and the glowing remote only sweeten the deal.

In any case, the arrival of the combo VCR-DVD recorder is a welcome moment in format-turnover history. Now all we need is an equally automated machine that rescues our vinyl records, Apple II floppies and 8-track tapes.


Napster Eyes Movie Downloads
Jo Best

Digital-music service Napster is considering remaking itself to offer movie downloads too.

Speaking at the Midem music conference in Cannes this week, Napster CEO Chris Gorog said the company is considering offering movies alongside its current catalog of some 1 million music tracks.

"We are currently considering moving into video, particularly to tap the younger video game generation," the Financial Times quoted him as saying. "I do think that while there are huge players in the delivery of movies like Sky, there could be a role for Napster."

Online movie distribution has already taken off to a small degree in the United States, with Movielink and CinemaNow selling films via the Web from $2.99 upwards.

Movielink is backed by major cinemas, including MGM Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros., while CinemaNow has big-name partners including Disney and Microsoft.

However, use of legal movie download sites has paled in comparison to illegal film distribution--and the movie industry has ratcheted up its antipiracy efforts accordingly. The Motion Picture Association of America has filed lawsuits against pirates and is cracking down on distribution networks such as eDonkey and BitTorrent.

Nevertheless, analysts are predicting legal film downloads could be a winner. Since the advent of broadband, film downloads have surged considerably; one in four people online have now downloaded a film, according to the MPAA. Such statistics have encouraged Napster and others to eye the market.

In other news, Napster has announced it will be opening a German song shop within the year.


No-Cost Skype Strikes Chord With Businesses
Marguerite Reardon

The Internet telephony software Skype has found its way into the business world, as corporate road warriors and remote workers use it to reduce long-distance and cell phone costs.

Over the past year and a half, Skype's popularity has exploded. Currently, there are about 23 million users signed up for the service, which allows no-cost phone calls over the Internet, according to the company. By 2008 that number is expected to jump to between 140 million and 245 million, says market research firm Evalueserve.

Most of today's Skype adherents use it for personal calls, but a growing number of them are also using it to make calls for work. As more business customers start using the software, Skype's subscriber numbers could grow even higher.

"I realized while I was traveling overseas how difficult it is for my remote staff and traveling sales people to communicate with each other," said Don LeBeau, CEO of Aruba Wireless Networks, a maker of Wi-Fi networking gear. "Skype has been a great tool for helping us increase communication. Not to mention it saves us money."

In October, LeBeau sent a memo to his top executives at Aruba urging them and the people who report to them to start using Skype. Today, many of Aruba's 170 employees use it to communicate with colleagues on the road or in any of the dozen or so offices in the United States, Europe and Japan. Aruba has even placed a button on its home page to allow prospective customers to contact the company via Skype.

Aruba isn't the only company that has discovered Skype. Employees at Ruhrpumpen, an industrial pump manufacturer in Tulsa, Oklahoma, started using Skype last summer to communicate with co-workers and business partners in Asia, Central America and Europe. The company has even put a directory with Skype contacts on its Intranet Web site. About 70 people out of the 1,000 that work for the company are registered Skype users.

"One of our business partners introduced it to us," said Tom Wallbank, an IT manager at Ruhrpumpen. "Now, I use it a few times a week to talk to our guys in Mexico and Germany. And I'm not even one of the heavy users."

Skype executives have already recognized there is opportunity in the business market. As a result, they plan to introduce a new set of business offerings later this year. The idea is to create a package similar to the free Skype, but with extra features, such as videoconferencing, user groupings and company directories, that business customers would be willing to pay for.

"The Skype for Business offering will address ways to better serve the business community and targeted toward individuals and workgroups, not CIOs for enterprise wide deployments," said Niklas Zennstrom, CEO and co-founder of Skype during a keynote address at the Internet Telephony Expo in October 2004.

Skype's newfound business users say they're very interested to see what the company has to offer. But selling a service to these companies for a fee won't be a slam dunk.

"We will definitely check out their new offering when it comes out," Wallbank said. "Of course, we'll have to compare it to what others offer. Nothing really beats free."


No chat for you!

NTC Orders Cable Operators To Close Chat Rooms
Clarissa Batino

THE NATIONAL Telecommunications Commission (NTC) has ordered cable operators to shut down all chat rooms in reaction to complaints that some of these had become sex channels.

The NTC order, dated Jan. 20, immediately called for the suspension of all chat rooms until a new set of guidelines is approved.

Recently, police detained a businessman for allegedly operating a cybersex facility in Las Pi¤as City.

NTC chair Ronald Solis said he would meet this week with operators such as the Philippine Cable Television Association and the Federation of International Cable TV Associations of the Philippines to draft guidelines aimed at preventing abuses on cable chat channels.

Cable operators turn idle channels into chat rooms or community billboards.

Solis said some chat room operators were not regulating the use of profane language or explicit messages in their facilities. Some messages openly solicit sex, he added.

Police Monday also said it discovered what could be indications of money laundering based on confiscated evidence from the office of Aloysious M. Galvez, owner of Orgasmic Studios in Pilar Village, Las Pi¤as City, which was raided Friday.

Supt. Michel Filar, of the Criminal Investigation and Detection Group- National Capital Region (CIDG-NCR), said transaction records between Orgasmic Studios Inc. and several local and foreign banks were discovered after the raid by the CIDG-NCR and local police.

Filart, however, refused to give details.

"We are now coordinating with members of the Anti-Money Laundering Act Council (AMLAC) in connection with our investigation of Galvez's activities," he said.

The Amlac also promised to help if violations of the electronic commerce law are included in the "predicate offenses," Filart added.

Police also said Galvez's outfit reportedly maintained links with several web page networks based in the United States.

"The internal protocol address was found to be linked to several US web pages featuring internet photography," Filart said.

He added that a big telecommunications company gave the police full support by providing them information needed in carrying out the raid at Orgasmic Studios located at Daisy and Lead Streets, Pilar Village. The outfit allegedly had 14 studios providing Internet sex.

Galvez, now detained at the Las Pi¤as City jail, is facing charges of violating Republic Act No. 9028, also known as the Anti-Trafficking of Persons Act.

Filart said that Galvez's lucrative business had been operating for more than a year.

The women, allegedly hired for cybersex, earned as high as P200,000 a month, police said.


Orphaned Copyrights Suit Appealed

The good folks at Stanford Center for Internet and Society has helped file the appeal of Kahle v. Ashcroft.

This suit is about "orphan works", or works that are so out of print that often the publisher can not be found, but under the new copyright laws, these works are still under copyright.

This suit seeks to affirm that libraries in the digital world can have out-of-print works on their shelves, just as we had on the shelves of the libraries we grew up with.

Lets hope sanity prevails and we protect our libraries.


Hollywood: P2P is Not About Technology
Roy Mark

The entertainment industry urged the U.S. Supreme Court Monday afternoon not to give the companies developing peer-to-peer (P2P) music file swapping software a "perpetual free pass" to engage in "mind-boggling" copyright infringement.

In a 67-page brief filed in advance of the March 29 Supreme Court oral arguments in MGM vs. Grokster, attorneys for the music and movie studios claim Grokster exploits "this massive infringement for profit, and petitioners are suffering extreme harms as a consequence."

Hollywood wants the high court to reverse a district court ruling and a Ninth Circuit Court of Appeals in San Francisco decision that say file- swapping companies such as Grokster, Morpheus and Kazaa are not liable for the infringement of their users.

The Supreme Court in December agreed to hear the case that challenges the court's landmark 1984 Sony Betamax decision. In the two lower court decisions, judges exonerated Grokster and its parent company, StreamCast, of secondary copyright liability based on the Betamax decision.

The judges used the Betamax standard established by the Supreme Court, which states that the use of new technology to infringe copyrights did not justify an outright ban on that technology as long as the technology had other, legal uses.

"Although the [P2P] technology can be used for lawful exchanges of digital files, that is not how Grokster and StreamCast use it," the entertainment industry's brief states. "They run businesses that abuse the technology. At least 90 percent of the material on their services is infringing, and that infringement occurs millions of times each day.

"The services are breeding grounds for copyright infringement of unprecedented magnitude -- infringement that would not occur if Grokster and StreamCast did not make it possible," the brief continues.

The U.S. Solicitor General, the Progress and Freedom Foundation (PFF), the Business Software Alliance and the Christian Coalition of America supported the music and movie industries by filing friends of the court briefs. Grokster has until Feb. 28 to file its brief in the case.

At Tuesday's press conference in Washington, Hollywood representatives repeatedly stressed that case does not pit technology against the entertainment industry.

"These people are not engaging in technological innovation," Dan Glickman, president and CEO of the Motion Picture Association of America, stated.

Donald B. Verrilli, the lead attorney for the MPAA, added, "They are abusing the technology. When you set out to run a business built on copyright violations, you're on the hook."

In its brief to the court, the PFF wrote, "The Ninth Circuit focused totally on the need to avoid any inhibition on technology, and in so doing it lost sight of the equally important consumer interest in promoting content."

James V. DeLong, the PFF counsel of record in the brief, wrote that consumers have two basic interests in the case: avoiding technological inhibitions and providing incentives to the creative community to foster the production of content.

"These are complementary, not conflicting, because each is necessary to the other," DeLong wrote. "Technological devices are useless without content, and content is pointless without means of delivery. But they must be reconciled, because each, taken to the limit of its logic, can do serious harm to the other."

DeLong contends in his brief that the Ninth Circuit was mistaken in application of the Betamax case.

"No one in this case argues that P2P as a technology should be banned. The issue, rather, is the business practices which the file-sharing companies are wrapping around this technology," he wrote. "This can and should be the subject of judicial inquiry, and condemned when they create business models that can fairly be classified as deliberately dependent on infringement."

MGM vs. Grokster began more than two years ago in Los Angeles. U.S. District Court Judge Stephen Wilson ruled in favor of Grokster, saying the file sharing companies cannot control how people use their software if the product has legitimate applications.

"Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are, used to infringe copyrights," Judge Wilson wrote in his decision.

Wilson also made a distinction between the original Napster and its successors. In Napster's case, an index of material available for file-swapping was maintained on a central server. Grokster does not use central servers. In that situation, the court said, Grokster had no control over the actions of its customers.

Hollywood appealed the decision but got the same results from the Ninth Circuit.

"The technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech, as well as reducing the centralized control of that distribution," Judge Sidney R. Thomas wrote in his opinion.

The three-judge panel acknowledged that copyright violations do occur on the decentralized P2P networks, but the companies owning and distributing the enabling software cannot be held liable for the infringements.


She’ll do it if she can

Judge Demands Trial Web Blackout
Kevin Meade and Cath Hart

A SUPREME Court judge has called for the internet to be purged of any material likely to prejudice a trial, to prevent jurors conducting their own investigations into cases they are sitting on.

Justice Virginia Bell, of the NSW Supreme Court, told a conference in Darwin of Supreme and Federal court judges from across the country yesterday that the ready availability of archived press reports on the internet could jeopardise the trial of an accused person.

But her call was branded "silly and unworkable" by the media union, while the internet industry said it would be impossible to police offshore sites.

Justice Bell recommended that to prevent jurors from researching cases online, Crown prosecutors in any pending case should "carry out searches on the internet and, in the event that prejudicial material is identified . . . request any Australian-based website to remove it until the trial is completed".

She said prejudicial material relating to the trial of a prominent business identity had been removed from the website Crikey.com.au at the request of the NSW Supreme Court's public information officer.

Justice Bell said publication of material that had a real and definite tendency to prejudice a trial amounted to contempt of court. "The difficulty arises with material published on the internet by individuals and interest groups who may be difficult to trace or, in widely publicised cases, by the publication of prejudicial material on the internet by persons outside the jurisdiction."

A NSW study which examined 41 trials held between 1997 and 2000 found that in three cases jurors admitted to having carried out internet searches despite being instructed not to by judges.

Queensland and NSW have introduced legislation making it an offence for jurors to conduct investigations on the internet, punishable by a maximum of two years' jail.

Justice Bell said the potential for the internet to threaten the integrity of jury trials was highlighted by the promotion of CrimeNet, a national police site which published criminal histories.

After concerns were raised about CrimeNet, the site was modified so anyone searching its criminal records database must now open an account and furnish credit card details.

A subscriber must agree "not to search for details of any person whilst I am a juror in a trial of that person, in a jurisdiction that prohibits such information".

Media Entertainment and Arts Alliance federal secretary Christopher Warren said it was an attempt at censorship which highlighted a "disturbing trend" in judges' decisions.

"It's silly and it's unworkable, we've already seen in the Gutnick case how dangerous that can be for Australia," Mr Warren said. The 2002 Gutnick v Dow Jones case in the High Court established that, in law, internet articles are published where they are read.

Courts could already compel Australian ISPs to remove material from websites in Australia, Peter Coroneos, chief executive of the Internet Industry Association said. "The problem is much more difficult if someone puts up a website in Argentina," Mr Coroneos said.


'Betamax Principle' Central to Supreme Court P2P Case
Jay Lyman

Electronic Frontier Foundation (EFF) staff attorney Fred von Lohmann noted that the primary issue is the longstanding court stance that technology, even if it is assisting in illegal copying, is not itself a source of liability.

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As the controversy over peer-to-peer (P2P) networks goes before the U.S. Supreme Court, the recording and film industries are enlisting celebrities to help make the case that network operators should be held liable for the illegal file sharing that occurs over their networks. The tech industry, meanwhile, fears that an adverse ruling might stifle innovation.

The latest court briefs filed on behalf of those fighting P2P networks Grokster and Morpheus include support from singers Don Henley, Sheryl Crow and Avril Lavigne, as well as entertainment giants such as the National Football League. The recording and movie industries -- which brought suit against the popular file-sharing services -- are joined by 40 state attorneys general and the U.S. government in calling for the P2Ps to be held liable for unlicensed downloads.

Electronic Frontier Foundation (EFF) staff attorney Fred von Lohmann noted that the primary issue is the longstanding court stance that technology, even if it is assisting in illegal copying or pirating, is not itself a source of liability. That stance derives from the 1984 Betamax case. While more recent court rulings have found that users of technology can be held liable for copyright infringement, the providers of that technology have not been.

Supreme P2P

The Supreme Court is now considering the case that the entertainment industry has brought against two of the largest P2P operators.

While the court strategy against the original song-swapping service, Napster, was largely successful, the entertainment groups have had more difficulty holding modern file-sharing services accountable, largely because they rely on distributed server systems instead of a central server, as the original Napster did.

Lower court rulings have consistently upheld the Betamax rule, holding that there are legitimate uses for P2P file sharing and that even though the technology may be used to infringe copyrights or licenses, the creators of the technology may not be held responsible for infringement.

The Supreme Court is expected to take up the case in March, with a ruling expected in June.

Betamax Basis
EFF's von Lohmann said the most recent briefs filed on behalf of the entertainment groups are largely an attack on precedent.

"The briefs they've filed all frontally attack the Betamax principle," he said. "To win, they're going to have to convince the court to change the course of 20 years. The court said no 20 years ago."

Von Lohmann added that the same entertainment groups have historically tried to challenge VCRs, dual-cassette decks, digital video recorders and other technologies that threatened their business models.

"They want the ability to control technologies that impact their business," he said. "We can't afford to allow the entertainment industry to be in charge of our technology in our country."

Tech Fear
Despite a legal attack on individual users accused of unlicensed, illegal downloads and the entertainment groups' pursuit of P2P companies, the technology has enjoyed strong use and growth among Internet users, according to analysts.

As for the technology industry's view on the P2P fight, von Lohmann said there is apprehension that a change to the Betamax rule would be costly.

"There's a very real fear in the technology industry," he said. "Undermining Betamax is a huge threat to the nation's economy and our technology."

Until next week,

- js.


Current Week In Review.

Recent WiRs -

January 22nd, January 15th , January 8th, January 1st

Jack Spratt's Week In Review is published every Friday. Please submit letters, articles, and press releases in plain text English to jackspratts (at) lycos (dot) com. Include contact info. Submission deadlines are Wednesdays @ 1700 UTC.

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