Peer-To-Peer News - The Week In Review - August 13th, ’05

[JackSpratts]

"I am committed to ensuring that these [internet service] providers take all necessary actions to incorporate surveillance capabilities into their networks in a timely fashion." – FCC Chairman Kevin Martin


"Today, the studios' corporate parents own or control all six over-the-air networks, as well as 64 cable networks, accounting for almost all the prime-time television audience." – Edward Jay Epstein


"It is an individual's freedom where that person chooses to listen to music. I want to deliver my music wherever my listeners are." – Motoharu Sano


"As parents, we don't want our kid breaking in to the Defense Department or stealing credit card numbers, but downloading iChat and chatting with their friends? They are not hurting anybody. They're just curious." – James Shrawder


"Delaware law does not - indeed the common law cannot - hold fiduciaries liable for a failure to comply with the aspirational ideal of best practices." – William B. Chandler III


"There is absolutely no rule, regulation or law that says that." – Lauren Gelman



















August 13th, 2005




Students Charged With Computer Trespass
Michael Rubinkam

They're being called the Kutztown 13 _ a group of high schoolers charged with felonies for bypassing security with school-issued laptops, downloading forbidden Internet goodies and using monitoring software to spy on district administrators.

The students, their families and outraged supporters say authorities are overreacting, punishing the kids not for any heinous behavior _ no malicious acts are alleged _ but rather because they outsmarted the district's technology workers.

The Kutztown Area School District begs to differ. It says it reported the students to police only after detentions, suspensions and other punishments failed to deter them from breaking school rules governing computer usage.

In Pennsylvania alone, more than a dozen school districts have reported student misuse of computers to police, and in some cases students have been expelled, according to Jeffrey Tucker, a lawyer for the district.

The students "fully knew it was wrong and they kept doing it," Tucker said. "Parents thought we should reward them for being creative. We don't accept that."

A hearing is set for Aug. 24 in Berks County juvenile court, where the 13 have been charged with computer trespass, an offense state law defines as altering computer data, programs or software without permission.

The youths could face a wide range of sanctions, including juvenile detention, probation and community service.

As school districts across the nation struggle to keep networks secure from mischievous students who are often more adept at computers than their elders, technology professionals say the case offers multiple lessons.

School districts often don't secure their computer networks well and students need to be better taught right from wrong on such networks, said Internet expert Jean Armour Polly, author of "Net-mom's Internet Kids & Family Yellow Pages."

"The kids basically stumbled through an open rabbit hole and found Wonderland," Polly, a library technology administrator, said of the Kutztown 13.

The trouble began last fall after the district issued some 600 Apple iBook laptops to every student at the high school about 50 miles northwest of Philadelphia. The computers were loaded with a filtering program that limited Internet access. They also had software that let administrators see what students were viewing on their screens.

But those barriers proved easily surmountable: The administrative password that allowed students to reconfigure computers and obtain unrestricted Internet access was easy to obtain. A shortened version of the school's street address, the password was taped to the backs of the computers.

The password got passed around and students began downloading such forbidden programs as the popular iChat instant-messaging tool.

At least one student viewed pornography. Some students also turned off the remote monitoring function and turned the tables on their elders_ using it to view administrators' own computer screens.

The administrative password on some laptops was subsequently changed but some students got hold of that one, too, and decrypted it with a password-cracking program they found on the Internet.

"This does not surprise me at all," said Pradeep Khosla, dean of Carnegie Mellon University's engineering department and director of the school's cybersecurity program.

IT staff at schools are often poorly trained, making it easy for students with even modest computer skills to get around security, he said.

Fifteen-year-old John Shrawder, one of the Kutztown 13, complained that the charges don't fit the offense. He fears a felony conviction could hurt his college and job prospects.

"There are a lot of adults who go 10 miles over the speed limit or don't come to a complete stop at a stop sign. They know it's not right, but they expect a fine" not a felony offense, he said.

Shrawder's uncle, James Shrawder, has set up a Web site that tells the students' side of the story.

"As parents, we don't want our kid breaking in to the Defense Department or stealing credit card numbers," said the elder Shrawder, a businessman. "But downloading iChat and chatting with their friends? They are not hurting anybody. They're just curious."

The site, http://www.cutusabreak.org , has been visited tens of thousands of times and sells T-shirts and bumper stickers, including one that says: "Arrest me, I know the password!"

The district isn't backing down, however.

It points out that students and parents were required to sign a code of conduct and acceptable use policy, which contained warnings of legal action.

The 13 students charged violated that policy, said Kutztown Police Chief Theodore Cole, insisting the school district had exhausted all options short of expulsion before seeking the charges. Cole said, however, that there is no evidence the students attacked or disabled the school's computer network, altered grades or did anything else that could be deemed malicious.

An association of professional computer educators, The International Society for Technology in Education, believes in a less restrictive approach to computer usage. The more security barriers a district puts in place, the more students will be tempted to break them down, it believes.

"No matter how many ways you can think to protect something, the truth is that someone can hack their way around it," said Leslie Conery, the society's deputy CEO. "The gauntlet is thrown down if you have tighter control."
http://www.washingtonpost.com/wp-dyn...080901045.html





Fighting to defend political freedom. Except yours.

Pentagon Web Site Bans Politics

'America Supports You' Intended to Back U.S. Troops
Robert MacMillan and Mary Specht

The Defense Department has removed messages containing political commentary from a Web site designed for people to show their support for U.S. forces serving in Iraq and Afghanistan.

Most of the postings at America Supports You ( http://americasupportsyou.mil/ ) express love and encouragement -- "The greatest nation in the world is kept that way by men and women like you," reads one message -- without partisan asides.

But among the 60,000-plus messages were at least a few dozen -- found with the site's search function -- that equated troop support with backing the Bush administration's political goals. Still others lambasted Democratic politicians such as John F. Kerry and Edward M. Kennedy, the senators from Massachusetts.

One message said: "I thank you Mr. President for all you have done and standing up to the one's who don't believe in you. My theory is that if they don't like it here; we will pay their way out. Can you put that in the budget?"

Another said: "I show my support verbally in public and by donations to the RNC and reelect George W. Bush campaigns."

Both those messages, visible on the site two weeks ago, are gone.

The decision to remove such messages reflects a policy posted on the site last week warning that political speech will be barred. Last month the Wall Street Journal reported that two antiwar messages had disappeared from the site, but at the time the site had no posted policy on political statements.

Now, "we are not including messages with political commentary -- pro or con," said Allison Barber, deputy assistant defense secretary and creator of the Web site, which opened in November. "Frankly, this a site to support the troops and thankfully, our men and women in the military volunteer to defend our country no matter who is in political office."

Yesterday, though, several messages remained that both support and oppose the Bush administration and the U.S. military presence in Iraq and Afghanistan. For example, one said: "We very much support the troops serving but do not support the administration's handling of the conflicts where they are currently asked to serve. Please, bring them home as soon as possible."

Posting political content on Web site operated and financed by the government may not violate any rules, several experts said, but they warned that it creates an image problem.

The military "should not be seen as promoting a political agenda," said Lawrence M. Noble, head of the Center for Responsive Politics and former general counsel for the Federal Election Commission.
http://www.washingtonpost.com/wp-dyn...080401918.html





DMCA Thugs

Furniture Causes FedEx Fits
Kristen Philipkoski

Most of us have been there. You can just barely afford to pay the rent. But forget about buying furniture -- not if you want to eat, anyway.

Jose Avila recently found himself in just that predicament. Although he has a good job as a software developer, he's locked into two rents after moving to Arizona, and has no extra cash for an Ikea shopping spree. But instead of scouting street corners for a ratty, unwanted couch, Avila got creative and built an apartment full of surprisingly sturdy furniture -- out of FedEx shipping boxes.

Fanciful as his creations may seem, FedEx is not amused. The shipping giant's lawyers have sent Avila letters demanding he take down the site he created to document his project, invoking, among other things, the Digital Millennium Copyright Act, or DMCA.

Avila has outfitted his entire apartment with FedEx box designs, including a bed, a corner desk with wall shelves, a table, two chairs and a couch. Drawing from architecture and drafting classes he took in college, Avila has designed pieces that are surprisingly un-boxy.

He was blindsided by the cease-and-desist letter from the company to which he proclaims long-standing loyalty.

"I was surprised, actually," Avila said. "One thing I’ve always stood behind is I'm pro-FedEx. I ship stuff with FedEx all that time and I feel more comfortable shipping with FedEx because their boxes are stable and sturdy."

And that translates to strong furniture, Avila said. The bed can handle his 5-foot-6-inch, 165-pound frame, even when he jumps up and down on it (an experiment he tried in response to an e-mail asking if the bed could support two people).

Avila said he never intended to make money from the site, or to exploit FedEx in any way. He said he simply wanted to spread the word that "it's OK to be ghetto."

"That's pretty much the motto of the site," he said. "When you're stuck in a bind and you're feeling down, it's not the end of the world."

But that feel-good message seems to be lost on FedEx. The company claims that Avila is infringing on its trademark and its copyright. The day after Avila launched the site in June, FedEx asked him to take it down, claiming he had violated the DMCA.

Lawyers at the Stanford Law School Center for Internet and Society, who are representing Avila, argued the company's claims don't relate to copyright and therefore the DMCA doesn't apply. Rather, the claims refer to trademark infringement and conversion. After talking with his lawyers, Avila put the site back up.

"DMCA only applies to copyrighted works, and they were basically making trademark-related claims, so it was completely outrageous," said Lauren Gelman, associate director of the Stanford center. "This is just an example of how lawyers take advantage of copyright laws to use protecting provisions like those in the DMCA to take down stuff they just don't like."

A FedEx representative did not respond to questions about the claims and whether the company planned to take legal action against Avila.

In a letter sent Aug. 3 to Jennifer Granick, director of the Stanford center and Avila's lawyer, FedEx also claims Avila violated fedex.com's terms of use, which state that "fedex.com is provided solely for the use of current and potential FedEx customers to interact with FedEx and may not be used by any other person or entity, or for any other purpose.”

In her response to FedEx, Granick took issue with that argument.

"Frankly, it's the most interesting of the legal claims," Gelman said. "But in this case I see nothing in the terms of service that would prevent (making furniture from FedEx boxes and displaying them on a website)."

FedEx also said in the Aug. 3 letter that Avila clearly intended to operate a business from his website because he used the .com domain suffix, the "commercial level domain," rather than .net.

"There is absolutely no rule, regulation or law that says that," Gelman replied.
http://www.wired.com/news/culture/0,1284,68492,00.html





EU Opens Probe Into Chinese DVD Imports
AP

The European Union's executive agency opened an investigation Friday into claims that cheap imports of recordable DVDs from China, Hong Kong
and Taiwan have damaged European producers.

The European Commission said it was beginning an antidumping probe following a complaint from the Committee of CD-R manufacturers, which represents more than 60 percent of EU production of such discs.

``It is alleged that the volumes and the prices of the imported product concerned have, among other consequences, had a negative impact on the level of prices charged by the community industry, resulting in substantial adverse effects on the overall performance and the financial situation of the community industry,'' the Commission said in a formal notice published online.

The antidumping probe can last as long as 15 months. EU officials can recommend provisional trade restrictions during the investigation. If confirmed, restrictions can last five years.
http://www.siliconvalley.com/mld/sil...l/12313902.htm





Defying Record Companies, Musicians Try To Join Apple's iTunes In Japan
AP

Japanese musicians under contract with Sony and other labels that haven't joined Apple's iTunes Music Store are starting to defy their recording companies and trying to get their music on the popular download service launched last week in Japan.

At least one artist has already gone against his label to offer his songs on iTunes. And a major agency that manages Japanese musicians said Wednesday it was interested in a possible deal with Apple Computer Inc., regardless of the recording companies' positions.

Online music stores had not taken off in Japan until iTune's arrival last Thursday, which opened with a million songs from 15 Japanese record labels.

In just four days, customers downloaded 1 million songs -- the fastest pace for the service's launch in any of the 20 nations it's become available, including the U.S. Most songs cost 150 yen, or $1.35, to download, and only 10 percent cost 200 yen, or $1.80. The service costs 99 cents in the U.S.

But Sony Corp.'s music division, Sony Music Entertainment, has not signed up to join Apple's service. The companies say they're in talks but there's been no agreement.

Apple and Sony have emerged as major rivals in the portable music player business. Apple's iPod music player, which stores music on a hard drive, has hurt Sony, which is pushing its own Network Walkman, some of which have hard drives.

But wayward artists could just start averting the issue and opt to offer their music to iTunes.

Rock musician Motoharu Sano, who has a recording contract with Sony, is making some of his songs available on iTunes, according to his official Web page.

``It is an individual's freedom where that person chooses to listen to music. I want to deliver my music wherever my listeners are,'' Sano was quoted as saying by Japan's top business daily Nihon Keizai Shimbun Wednesday.

Amuse Inc., an agent for some of Japan's most popular artists, is also thinking about joining iTunes. The company, which pushes musicians signed not only with Sony but also others, had initially decided against signing with iTunes.

``But we are considering joining in the future,'' Amuse spokeswoman Kyoko Ijichi said Wednesday. ``We want to do what users want.''

Eddy Cue, Apple vice president of applications, acknowledged earlier this week that more work is needed to sign additional record companies for the Japanese service.

Tokyo-based recording company Victor Entertainment spokesman Yoshiaki Aoki said Wednesday talks are still continuing with Apple, but stressed he is interested in a deal.

Still, iTunes' popularity in Japan has been stunning. The publicity campaign, including a rare personal appearance by Chief Executive Steve Jobs, has grabbed media attention here.

Before iTunes' arrival, Japan's top music download service, which is backed by Sony and includes Sony recording artists, averaged about 450,000 downloads a month.

Apple has sold 21.8 million iPods worldwide since it went on sale in October 2001, and more than 500 million songs through its iTunes Music Store.
http://www.siliconvalley.com/mld/sil...l/12348399.htm





Google Balances Privacy, Reach
Elinor Mills

Google CEO Eric Schmidt doesn't reveal much about himself on his home page.

But spending 30 minutes on the Google search engine lets one discover that Schmidt, 50, was worth an estimated $1.5 billion last year. Earlier this year, he pulled in almost $90 million from sales of Google stock and made at least another $50 million selling shares in the past two months as the stock leaped to more than $300 a share.

He and his wife Wendy live in the affluent town of Atherton, Calif., where, at a $10,000-a-plate political fund-raiser five years ago, presidential candidate Al Gore and his wife Tipper danced as Elton John belted out "Bennie and the Jets."

Schmidt has also roamed the desert at the Burning Man art festival in Nevada, and is an avid amateur pilot.

That such detailed personal information is so readily available on public Web sites makes most people uncomfortable. But it's nothing compared with the information Google collects and doesn't make public.

What Google knows about you

• Gmail -- The e-mail service offers two gigabytes of free storage and scans the content of messages to serve up context-related ads.

• Cookies -- Google uses cookies, which are commonly used to link individual users with activities.

• Desktop Search -- Google's Desktop Search lets users easily search files stored on their computer.

• Web Accelerator -- The application speeds Web surfing by storing cached copies of Web pages you've visited; those page requests can include personal information.
Assuming Schmidt uses his company's services, someone with access to Google's databases could find out what he writes in his e-mails and to whom he sends them, where he shops online or even what restaurants he's located via online maps. Like so many other Google users, his virtual life has been meticulously recorded.

The fear, of course, is that hackers, zealous government investigators, or even a Google insider who falls short of the company's ethics standards could abuse that information. Google, some worry, is amassing a tempting record of personal information, and the onus is on the Mountain View, Calif., company to keep that information under wraps.

Privacy advocates say information collected at Yahoo, Microsoft's MSN, Amazon.com's A-9 and other search and e- commerce companies poses similar risks. Indeed, many of those companies' business plans tend to mimic what Google is trying to do, and some are less careful with the data they collect. But Google, which has more than a 50 percent share of the U.S. search engine market, according to the latest data from WebSideStory, has become a lightning rod for privacy concerns because of its high profile and its unmatched impact on the Internet community.

"Google is poised to trump Microsoft in its potential to invade privacy, and it's very hard for many consumers to get it because the Google brand name has so much trust," said Chris Hoofnagle of the Electronic Privacy Information Center. "But if you step back and look at the suite of products and how they are used, you realize Google can have a lot of personal information about individuals' Internet habits--e-mail, saving search history, images, personal information from (social network site) Orkut--it represents a significant threat to privacy."

Kevin Bankston, staff attorney at the Electronic Frontier Foundation, said Google is amassing data that could create some of the most detailed individual profiles ever devised.

"Your search history shows your associations, beliefs, perhaps your medical problems. The things you Google for define you," Bankston said.

The Google record
As is typical for search engines, Google retains log files that record search terms used, Web sites visited and the Internet Protocol address and browser type of the computer for every single search conducted through its Web site.

In addition, search engines are collecting personally identifiable information in order to offer certain services. For instance, Gmail asks for name and e-mail address. By comparison, Yahoo's registration also asks for address, phone number, birth date, gender and occupation and may ask for home address and Social Security number for financial services.

"It's data that's practically a printout of what's going on in your brain: What you are thinking of buying, who you talk to, what you talk about."
--Kevin Bankston, staff attorney, Electronic Frontier Foundation
If search history, e-mail and registration information were combined, a company could see intimate details about a person's health, sex life, religion, financial status and buying preferences.

It's "data that's practically a printout of what's going on in your brain: What you are thinking of buying, who you talk to, what you talk about," Bankston said. "It is an unprecedented amount of personal information, and these third parties (such as Google) have carte blanche control over that information."

Google uses the log information to analyze traffic in order to prevent people from rigging search results, for blocking denial-of-service attacks and to improve search services, said Nicole Wong, associate general counsel at Google.

Personally identifiable information that is required for consumers to register for and log in to Google services is not shared with any outside companies or used for marketing, according to Google's privacy policy, except with the consent of the user, or if outside "trusted" parties
http://news.com.com/Google+balances+...3-5787483.html





Google's Chief Is Googled, to the Company's Displeasure
Saul Hansell

Google says its mission is "to organize the world's information and make it universally accessible and useful." But it does not appear to take kindly to those who use its search engine to organize and publish information about its own executives.

CNETNews.com, a technology news Web site, said last week that Google had told it that the company would not answer any questions from CNET's reporters until July 2006. The move came after CNET published an article last month that discussed how the Google search engine can uncover personal information and that raised questions about what information Google collects about its users.

The article, by Elinor Mills, a CNET staff writer, gave several examples of information about Google's chief executive, Eric E. Schmidt, that could be gleaned from the search engine. These included that his shares in the company were worth $1.5 billion, that he lived in Atherton, Calif., that he was the host of a $10,000-a-plate fund-raiser for Al Gore's presidential campaign and that he was a pilot.

After the article appeared, David Krane, Google's director of public relations, called CNET editors to complain, said Jai Singh, the editor in chief of CNETNews.com. "They were unhappy about the fact we used Schmidt's private information in our story," Mr. Singh said. "Our view is what we published was all public information, and we actually used their own product to find it."

He said Mr. Krane called back to say that Google would not speak to any reporter from CNET for a year.

In an instant-message interview, Mr. Krane said, "You can put us down for a 'no comment.' "

When asked if Google had any objection to the reprinting of the information about Mr. Schmidt in this article, Mr. Krane replied that it did not.

Mr. Singh, who has worked in technology news for more than two decades, said he could not recall a similar situation. "Sometimes a company is ticked off and won't talk to a reporter for a bit," he said, "but I've never seen a company not talk to a whole news organization."





The Rise Of The Digital Thugs
Timothy L. O'Brien

Early last year, the corporate stalker made his move. He sent more than a dozen menacing e-mail messages to Daniel I. Videtto, the president of MicroPatent, a patent and trademarking firm, threatening to derail its operations unless he was paid $17 million.

In a pair of missives fired off on Feb. 3, 2004, the stalker said that he had thousands of proprietary MicroPatent documents, confidential customer data, computer passwords and e-mail addresses. Using an alias of "Brian Ryan" and signing off as "Wounded Grizzly," he warned that if Videtto ignored his demands, the information would "end up in e-mail boxes worldwide."

He also threatened to stymie the online operations of MicroPatent's clients by sending "salvo after salvo" of Internet attacks against them, stuffing their computers so full of MicroPatent data that they would shut down. Another message about two weeks later warned that if he did not get the money in three days, "the war will expand."

Unbeknownst to the stalker, MicroPatent had been quietly trying to track him for years, though without success. He
was able to mask his online identity so deftly that he routinely avoided capture, despite the involvement of federal investigators.

But in late 2003 the company upped the ante. It retained private investigators and deployed a former psychological profiler for the Central Intelligence Agency to put a face on the stalker. The manhunt, according to court documents and investigators, led last year to a suburban home in Hyattsville, Md., its basement stocked with parts for makeshift hand grenades and ingredients for ricin, one of the most potent and lethal biological toxins. Last March, on the same day that they raided his home, the authorities arrested the stalker as he sat in his car composing e-mail messages he planned to send wirelessly to Videtto. The stalker has since pleaded guilty to charges of extortion and possession of toxic materials.

What happened to MicroPatent is happening to other companies. Law enforcement authorities and computer security specialists warn that new breeds of white-collar criminals are on the prowl: corporate stalkers who are either computer-savvy extortionists, looking to shake down companies for large bribes, or malicious competitors who are trying to gain an upper hand in the marketplace.

"It's definitely a growing issue and problem, and it's something we think will definitely increase in both the numbers and severity," said Frank Harrill, an agent with the FBI who specializes in computer crimes and who has investigated corporate stalkers and online extortionists. The reason, he said, is that "the Internet is ceasing to be a means for communication and commerce and is becoming the means for communication and commerce."

Though the number of corporate stalkers appears to be growing--along with the number of payoffs to online extortionists--quantifying the dimensions of the threat is difficult. Last fall, a researcher at Carnegie Mellon University in Pittsburgh published a study of online extortion involving small and medium-size businesses, saying that the Internet's global reach had produced "a profound change in the nature of crime, as the existence of information systems and networks now makes criminal acts possible that were not before, both in increased scope and ease."

Threat of cyberextortion growing
The study also concluded that while the threat of cyberextortion was real and mounting, data and research about the subject were scant. That is because most businesses, particularly blue-chip companies, are concerned about negative publicity from computer security breaches and do not want to report digital bullying and intrusions to law enforcement officials.

"Cyberextortion was the main threat I identified that I thought corporations were overlooking," said Gregory M. Bednarski, the author of the Carnegie Mellon study, who now works at PricewaterhouseCoopers as a computer security consultant. "Unfortunately, I think that's still the issue--most companies are still not taking cyberextortion seriously enough. They just don't see themselves as vulnerable."

MicroPatent, based in East Haven, Conn., realized firsthand how vulnerable its data was. The company was also an exception in the world of cyberextortion victims: it chose not only to fight back and to contact the authorities, but it also assembled its own team of specialists familiar with the strategies and weaponry of cybercriminals.

Even so, MicroPatent's stalker, using hijacked Internet accounts and pirated wireless networks, was remarkably elusive. "What this means is that the criminals are getting smarter," said Scott K. Larson, a former FBI agent and a managing director of Stroz Friedberg, a private investigation firm that helped hunt down MicroPatent's stalker. "There's an arms race going on in cyberspace and in cybercrimes."

MicroPatent, a business that court papers describe as one of the world's largest commercial depositories of online patent data, first came under attack four years ago. Someone penetrated the company's databases and began transmitting phony e-mail messages to its customers. The messages were what are known as "spoofs," online communications--embroidered with pilfered company logos or names and e-mail addresses of MicroPatent employees--that are meant to trick recipients into believing that the messages were authorized.

The spoofs, according to court papers and investigators, contained derogatory comments about MicroPatent in the subject lines or text. Some included sexually explicit attachments, such as sex-toy patents that a computer hacker had culled from the company's online files.

MicroPatent and its parent company, the Thomson Corporation, did not respond to several phone calls seeking comment. But others with direct knowledge of the hunt for the company's stalker said MicroPatent, which had grown rapidly through acquisitions, had a computer network containing stretches of online turf that were once used by acquirees but were abandoned after the takeovers.

Those digital back alleys offered access to the entire MicroPatent network to people with old passwords. Once inside, they could inhabit the network undetected--in much the same way that anyone with a key to one abandoned house on a block of abandoned houses can live in a populous city without anyone knowing he is there. And MicroPatent's stalker was lurking on one of its network's nether zones.

By 2003, MicroPatent had become so frustrated with its unknown stalker that it reached out to the FBI for help. But with its resources spread thin, the FBI could not pin down the stalker's identity, his motivations or how he managed to trespass on MicroPatent's electronic turf. A year later, MicroPatent hired Stroz Friedburg and secured the services of Eric D. Shaw, a clinical psychologist who had once profiled terrorists and foreign potentates for the CIA.

The first order of business, investigators said, was to narrow the field of MicroPatent's potential stalkers and to try to isolate the perpetrator. "You need to take the temperature of the person on the other side and determine how seriously you need to take them," said Beryl Howell, who supervised the MicroPatent investigation for Stroz Friedburg. "Is it a youngster or is it someone who's angry? Is it someone who's fooling around or someone who's much more serious?"

Investigators said their examination of the stalker's communications indicated that he was much more than a hacker on a joy ride. That would be consistent with what law enforcement authorities and computer security specialists describe as the recent evolution of computer crime: from an unstructured digital underground of adolescent hackers and script-kiddies to what Bednarski describes in his study as "information merchants" representing "a structured threat that comes from profit-oriented and highly secretive professionals."

Profiting from corporate espionage
Stealing and selling data has become so lucrative, analysts say, that corporate espionage, identity theft and software piracy have mushroomed as profit centers for criminal groups. Analysts say cyberextortion is the newest addition to the digital Mafia's bag of tricks.

"Generally speaking, it's pretty clear it's on the upswing, but it's hard to gauge how big of an upswing because in a lot of cases it seems companies are paying the money," said Robert Richardson, editorial director of the Computer Security Institute, an organization in San Francisco that trains computer security professionals. "There's definitely a group of virus writers and hackers in Russia and in the Eastern European bloc that the Russian mob has tapped into."

Richardson is a co-author of an annual computer-security study that his organization publishes with the FBI. The latest version said that while corporate and institutional computer break-ins increased slightly last year from 2003, average financial losses stemming from those intrusions decreased substantially in all but two categories: unauthorized access to data and theft of proprietary information.

Among 639 of the survey's respondents, the average loss from unauthorized data access grew to $303,234 in 2004 from $51,545 in 2003; average losses from information theft rose to $355,552 from $168,529. The respondents suffered total losses in the two categories of about $62 million last year. While many cyberextortionists and cyberstalkers may be members of overseas crime groups, several recent prosecutions suggest that they can also be operating solo and hail from much less exotic climes--like the office building just down the street.

Episodes are multiplying
In March, a federal judge in San Francisco sentenced a Southern California businessman, Mark Erfurt, to five months in prison, followed by three and a half years of home detention and supervised release, for hacking into the databases of a competitor, the Manufacturing Electronic Sales Corporation, and disrupting its business.

In June, the FBI in Los Angeles arrested Richard Brewer, a former Web administrator for a trade show company, accusing him of disabling his employer's Web site and threatening further damage unless he was paid off. And last month in New York, the Westchester County district attorney's office charged a Tarrytown businessman, Gerald Martin, with hacking into a competitor's computer network in order to ruin its business by tampering with its phone system.

Small-fry stuff, some of this, except that even local law enforcement officials say the episodes are multiplying. "We have 590,000 people in our county, but we're seeing lots of examples of lax or lackadaisical computer security," said Sgt. Mike Nevil, head of the computer crimes unit of the Ocean County, N.J., prosecutor's office. "We've seen lots of examples of people going onto a competitor's computer network and clearing out whatever information they can get."

For its part, MicroPatent initially believed that its problems were the work of a competitor. It sued one company that it suspected but later dropped that lawsuit. After Howell's team joined the fray in late 2003, MicroPatent and its consultants began to isolate the stalker, using a small list of candidates distilled from earlier investigative work.

Shaw's analysis of e-mail messages led them to believe that they were tracking a technologically sophisticated man, older than 30, with a history of work problems and personal conflicts, who was compulsively obsessed with details and who might own weapons. The stalker was extremely angry and "holding a grudge," Shaw recalled. "People like that can be very dangerous. He referred to himself as a soldier behind enemy lines."

Within a few weeks, Shaw's analysis led the investigative team to focus on Myron Tereshchuk, a 43-year-old Maryland entrepreneur who ran his own patent business and had once been rebuffed by MicroPatent when he applied to the company for a job. And Tereshchuk was indeed their man. Members of Howell's investigative team all said that Shaw's profiling was a breakthrough in the pursuit, but that without the subsequent involvement of local and federal law enforcement officials, Tereshchuk would not have been captured.

"It's about grinding out a lot of data; it's not about intuition--though years of working clinically with patients is certainly important," Shaw said. "The Myron case involved a fair amount of case management because we needed to keep him talking, we needed to keep him engaged, so we could set him up for an arrest."

Indeed, the detective work that led to his arrest offers a revealing glimpse into how the new cat-and-mouse game is played in cyberspace--especially when the cloak of secrecy offered by newfangled wireless devices makes digital criminals so hard to track.

In early 2004, private investigators began corresponding with the stalker, sending spoofed e-mail back to him in the "voice" of a MicroPatent lawyer. At the same time, federal authorities began physically tracking Tereshchuk's comings and goings in the real world. By February, the stalker had also become an active e-mail correspondent with Videtto, the MicroPatent president.

It was then that the stalker made a series of mistakes. Among them, he began to brag. In an e-mail message titled "Fire them all," he informed Videtto that he had found valuable MicroPatent documents by going "Dumpster diving to the Dumpster and recycle bins located in a parking lot on Shawnee Road" in Alexandria, Va., where the company maintained a branch office. That allowed investigators to zero in on his location, further buttressing the notion that Tereshchuk, who lived nearby, was the author of the scheme.

In the same message, the stalker wrote angrily that staff members at the United States Patent and Trademark Office in northern Virginia had snubbed him and given preferential treatment to MicroPatent employees. Several years earlier, a patent office worker accused Tereshchuk of threatening to bomb the agency.

A computer forensics expert embedded a Web bug, a kind of digital tracking device, in one of the e-mail messages that Videtto sent to the stalker. But the stalker screened his e-mail with decoding devices that included a hex editor--software that allows users to preview the contents of incoming files--and he uncovered the bug. "Was it a script to capture my IP address?" the stalker wrote tauntingly to Videtto after finding the Web bug, referring to his Internet Protocol address. "I'll look at it later with a hex editor."

A clumsy mistake
Investigators said the failed bug worried them because they thought it might scare off the stalker, but by this point Tereshchuk had already demanded his $17 million extortion payment. He also clumsily revealed his identity by demanding that the money be sent to the person accused of threatening to bomb the patent office.

And he kept sending e-mail messages telling Videtto that he had MicroPatent's customer lists, patent applications, customer credit card numbers and the Social Security numbers of some employees, as well as the employees' birth dates, home addresses and the names of their spouses and children.

The stalker also threatened to flood the computer networks of MicroPatent clients with information pilfered from the company, overwhelming the customers' ability to process the data and thereby shuttering their online operations--a surreptitious digital attack known as distributed denial of service, or DDoS. Such assaults, analysts and law enforcement officials say, have become a trademark of cyberextortionists.

Federal prosecutors in Los Angeles are currently investigating a group of possible cyberextortionists linked to a television retailer indicted there last August. The retailer was accused of disrupting competitors' online operations, and prosecutors have called suspects in that case the "DDoS Mafia."

"DDoS attacks are still one of the primary ways of extorting a company, and we're seeing a lot of that," said Larry D. Johnson, special agent in charge of the United States Secret Service's criminal division. "I think the bad guys know that if the extortion amounts are relatively low a company will simply pay to make them go away."

Tereshchuk's apparent ability to start a DDoS attack attested to what investigators describe as his unusual technological dexterity, despite evidence of his psychological instability. It also explained how he was able to evade detection for years, and his methods for pulling off that feat surfaced after the FBI began following him.

Using wireless computing gear stashed in an old, blue Pontiac, and fishing for access from an antenna mounted on his car's dashboard, Tereshchuk cruised Virginia and Maryland neighborhoods. As he did so, federal court documents say, he lifted Yahoo and America Online accounts and passwords from unwitting homeowners and businesspeople with wireless Internet connections.

The documents also say he then hijacked the accounts and routed e-mail messages to MicroPatent from them; he used wireless home networks he had commandeered to hack into MicroPatent's computer network and occasionally made use of online accounts at the University of Maryland's student computer lab, which he had also anonymously penetrated.

Digital traps
By late February of last year, however, the FBI had laid digital traps for Tereshchuk inside the student lab, which was near his home. As investigators began to close in on him, his e-mail messages to Videtto became more frantic. A note sent on Feb. 28 told Videtto that if he forked over the $17 million then "everything gets deactivated, sanitized, and life will go on for everybody."

In his last e-mail message, sent several days later, he dropped his guard completely: "I am overwhelmed with the amount of information that can be used for embarrassment," he wrote. "When Myron gets compensated, things start to get deactivated."

On March 10, 2004, federal agents swarmed Tereshchuk's home, where they found the hand-grenade components and ricin ingredients. The agents arrested him in his car the same day, in the midst of writing his new crop of e-mail messages to Videtto.

Late last year, Tereshchuk was sentenced to five years in prison after pleading guilty to a criminal extortion charge filed by the United States attorney's office in Alexandria. Earlier this year he pleaded guilty to criminal possession of explosives and biological weapons, charges that the United States attorney's office in Baltimore had filed against him. Possessing illegal toxins carries a maximum term of life in prison. Tereshchuk is expected to be sentenced this fall.
http://news.com.com/The+rise+of+the+...3-5822417.html





Surveillance

Critics Slam Net Wiretapping Rule
Ryan Singel

An FCC ruling that internet telephony services must provide the same built-in wiretapping capabilities as conventional phone companies has civil libertarians feeling burned.

"I think a legal challenge is highly likely at this point," said John Morris, an attorney with the Center for Democracy and Technology.

The FCC announced (.pdf) last week that some voice over internet protocol, or VOIP, companies are substantial replacements for old- fashioned telephone service, and must equip their systems to respond to federal wiretap orders.

The services will have 18 months to comply with the order, which also applies to cable-modem companies and other broadband providers.

While the full text of the ruling has yet to be released, critics say the announcement marks a significant expansion of the Communications Assistance for Law Enforcement Act, or CALEA, which drew a line between "information services" and phone networks.

"The essential compromise of CALEA was hands off the internet, and that promise has been broken," said Electronic Frontier Foundation attorney Kurt Opsahl.

The FBI already has the necessary capabilities to conduct surveillance of internet activities, and the FCC's order runs contrary to Congress' intent when it passed the law, said Opsahl.

Enacted in 1994, CALEA required land line and cellular providers to build their networks to accommodate a variety of wiretaps, and established exacting technical standards regarding what information about a phone call or voice message had to be provided to law enforcement when subpoenaed.

After a protracted campaign by online civil liberties groups, Congress exempted "information services" -- like electronic publishing and online messaging -- from the rules, partly for fear the regulations could stifle innovation.

The Justice Department's request last year to expand CALEA to some internet services stirred vigorous opposition from online civil liberties groups, VOIP providers and technology companies like Sun Microsystems.

"Even if you make (the) argument that underlying broadband service is a non-information service, no one would dispute that VOIP or e-mail or IM are applications, and they are excluded from CALEA," said Morris.

The ruling only covers VOIP services like Vonage that let customers dial from their computers to the traditional phone network.

Some observers, such as Lauren Weinstein, co-founder of People for Internet Responsibility, see logic in the FCC's discrimination between those systems and computer-to-computer services, like the voice chat available through instant-messaging software or Skype's free peer-to-peer service.

"The reasoning from the FCC is that if law enforcement needs to tap a phone, they don't want to be worried if it is a conventional phone or an IP-based phone calling a traditional phone," Weinstein said.

But, he added, the real question is whether the final order requires companies like Skype to build in wiretapping capabilities only for the calls that reach the publicly switched telephone network, or for all calls placed by users.

Kevin Werbach, assistant professor of legal studies and business ethics at the University of Pennsylvania's Wharton School, thinks the distinction between the two isn't intellectually clear.

"The FCC is starting with a laudable impulse," said Werbach. "I don't doubt that law enforcement needs to do its job in a world that's changing. But the problem is that going down the road they are going forces them to distinguish between bits flowing over the network and that's just ultimately impossible."

Werbach believes Friday's order is unnecessary, because VOIP companies have been working to cooperate with law enforcement voluntarily.

Justice Department spokesman Bryan Sierra praised the decision.

"We are pleased that the commission has taken this important first step in affirming the application of CALEA to these modern forms of communications technology, and we look forward to the commission's prompt action on the remaining issues raised in our petition," Sierra said. "As communications technologies develop, we must ensure that such progress does not come at the expense of our nation's safety and security."

The issue is likely not to be settled even when the FCC releases the full text of the order. Congress could move to overrule the commission, and the EFF's Opsahl expects VOIP providers will challenge the potentially expensive requirements in court.
http://www.wired.com/news/privacy/0,1848,68483,00.html





FCC Schizo On DSL, Wiretapping
Declan McCullagh

The Federal Communications Commission has become weirdly schizophrenic. In a pair of decisions on Friday, the commissioners voted to veer in two radically different directions: deregulating DSL lines while simultaneously imposing onerous wiretapping requirements on broadband providers.

Let's first look at the FCC's more justifiable action, which says that companies providing high-speed Internet access over telephone wires no longer must share their lines with rivals.

Until now, companies like Verizon and SBC have been forced to offer competitors like EarthLink access to their networks at government-mandated rates. Friday's 4-0 vote, spurred along by a recent Supreme Court ruling, starts a one-year process of weaning the independent DSL providers and requiring them to negotiate new contracts.

As a result, liberal groups are yowling. Andrew Jay Schwartzman of the Media Access Project warned: "It means higher prices, less competition and disincentives for those entrepreneurs who have used the Internet as a platform for innovation and economic growth." Public Knowledge said it was "disappointed" that DSL is being deregulated.

Those arguments in favor of a Soviet-style regulatory regime might make sense if the Bells enjoyed a monopoly on better-than-dial-up Net access, but that's not the case. The bulk of fast connections are cable modems, not DSL, and satellite and long-distance wireless links are increasingly attractive alternatives.

Immutable laws of economics
Economists have long realized that the best way to ensure a healthy marketplace is not by adding more government regulations but by relaxing them--thus permitting Verizon, SBC and so on to reap the benefits of upgrading copper networks.

Russell Roberts, who teaches economics at George Mason University, offers this analogy: "Let's say I'm Southwest Airlines and I'm going to commission an airplane from Boeing that lets passengers stack more carry-ons in the overhead compartments. I want to order 100 of these planes. But I'm told that if I'm not using them at all times, United can borrow them. That affects my willingness to invest in an uncertain future."

The same economic principles apply to telecommunications companies: If they have secure property rights over their wires, they'll be more likely to invest.

This is what happened after the FCC voted in February 2003 to immunize fiber links from rules mandating sharing with rivals. It ushered in Verizon's Fios fiber service--and a broadband speed war between Verizon and cable operators that's great for consumers.

The benefits of DSL deregulation also promise to be huge. Jerry Ellig, a research fellow at an academic think tank called the Mercatus Center, says: "At a minimum that would create consumer benefits worth about $4.5 billion a year. That refers both to price reductions and the value received for new customers who only get broadband because of the decision."

FCC Chairman Kevin Martin seems to agree. He said on Friday: "Perpetuating the application of outdated regulations on only one set of Internet access providers inhibits infrastructure investment, innovation and competition generally."

Chairman Martin's double standard
So why doesn't Martin extend that logic to outdated eavesdropping regulations? In a second vote on Friday, the FCC extended onerous wiretapping rules designed for copper-wire telephone networks to the Internet. (The rules come from the 1994 Communications Assistance for Law Enforcement Act, or CALEA.)

The text of the FCC's CALEA order is not yet public, but early signs are worrisome. The FCC's two-page summary says that voice over Internet Protocol (VoIP) providers like Vonage that mimic traditional phone service must rewire their networks to be easily wiretappable.

It also proposes--and this is the worrisome part--to levy the same requirement on "facilities-based broadband Internet access service providers," which seems to cover any company or school offering any type of cable modem, DSL, satellite or wireless service. They'll have 18 months to comply or be fined.

"I am committed to ensuring that these providers take all necessary actions to incorporate surveillance capabilities into their networks in a timely fashion," Martin warned, bluntly. The FCC will work "closely with industry representatives, equipment manufacturers and law enforcement officials to address and overcome any challenges that stand in the way of effective lawful electronic surveillance."

What Martin didn't mention is that CALEA was never designed to apply to the Internet. In a column last year, I described how Congress never intended the law to cover online services or Internet service providers. (In fact, the FCC's schizophrenia required it to rule that DSL providers were an "information" service while also being a "telecommunications" service at the same time.)

The dictionary defines schizophrenia as "inappropriate actions" and "mental fragmentation." Unless the final CALEA rules differ from the summary, that seems to be a workable description of the unfortunate malady that's infected the FCC.
http://news.com.com/FCC+schizo+on+DS...3-5821077.html





Can you see me now?

Terror Threat Sharpens Focus On Urban Spy Cameras
Mike Dorning

The striking images of London subway bombers captured by the city's extensive video surveillance system, and a rising sense that similar attacks could happen in the United States, is stirring renewed interest in expanding police camera surveillance of America's public places.

In the aftermath of the London bombings, Sen. Hillary Clinton, D-N.Y., a liberal with a strongly pragmatic bent, called for installing more cameras to monitor passengers in the New York City subway system.

Washington Mayor Anthony Williams, whose post-Sept. 11 efforts to build a video surveillance system for downtown areas were curtailed by resistance from the D.C. City Council and some members of Congress, cited the attacks to press for broader use of cameras.

Meanwhile, Chicago, with the largest public video surveillance system in the country, is proceeding with plans to expand its 2,000-camera network and is beginning to encourage businesses to provide the city live feeds from their surveillance cameras.

The London bombings showcased the capabilities of a modern, digital video surveillance system. After both the July 7 and July 21 attacks, authorities quickly produced relatively high-resolution images of the bombers that figured prominently in fast-moving investigations.

But to critics, whose reservations are based primarily on privacy concerns, the London attacks also highlighted the limitations of camera surveillance. London has one of the world's largest surveillance systems -- the average person there is photographed by 300 cameras in the course of a day, according to an often-cited 1999 calculation by two British academics -- yet that did not prevent terrorist bombings in the heart of the city.

``It's very difficult to make a case that the cameras are a deterrent to the most determined terrorists, those who intend to give up their life,'' said Brian Jenkins, a terrorism expert and senior adviser to the president of RAND Corp.

But, he added, not every terrorist is willing to become a suicide bomber. And even with suicide bombers, camera surveillance can help with the hunt for the terrorist cells that provide them crucial logistical support. Clues captured on video can help rapidly trace a bomber's movements, possibly putting authorities on the trail of a previously undiscovered cell.

``How did they come in? How were they dressed? What were they carrying? What did they look like?'' Jenkins said, citing details cameras can reveal.

Even before the attacks on Sept. 11, 2001, technological advances were driving a rapid expansion in camera surveillance.

Modern digital cameras provide better-quality images. They are smaller and can be made less obvious. And they cost less, so authorities can buy more.

Cheaper computer capacity, more sophisticated software, fiber optic cable and wireless broadband all combine to allow easier monitoring at remote locations, more extensive storage of images and rapid retrieval of crucial video.

And while often still primitive, emerging technologies offer even greater promise. Chicago is installing gunshot detection equipment on cameras to automatically alert authorities and point the camera in the direction of the sound.

New Jersey Transit has a pilot project in one station to use computer analysis of video to alert authorities to suspicious behavior, such as someone leaving a package behind. Authorities also are experimenting with facial recognition software, though existing versions are of limited use in scanning crowds for suspected terrorists.

While advocates of camera surveillance argue that people have no legitimate expectation of privacy in a public place, civil libertarians raise concerns about possible abuses.

Critics contend that pervasive surveillance that can secretly store images of people creates a new potential for abuse, such as intimidation of political dissenters or blackmail of people caught stealing a kiss from the wrong person or entering a gay club.

``You've essentially imbued the police with Superman's powers,'' said Barry Steinhardt, director of the Technology & Liberty Program at the American Civil Liberties Union. ``You have the problem that police officers who have access to this data inevitably abuse it.''

There have been documented cases of operators abusing cameras for voyeuristic spying. During the 2004 Republican National Convention, a police helicopter that was supposed to be monitoring protesters instead trained its infrared camera on a couple engaged in a romantic encounter on a darkened high-rise apartment balcony. The resulting video was obtained by a local television station.

And there have been plenty of examples of abuses of less-powerful technologies. A Washington, D.C., police lieutenant was discovered using photos taken during police surveillance of gay nightclubs for a ``fairy-shaking'' scam in which he blackmailed men who showed evidence of a married life, such as child seats in their cars.

At a minimum, there should be tight legal controls on camera systems monitoring the public, Steinhardt argues.

``We've got to put some chains on these surveillance monsters,'' he said.

Evidence is mixed on how effective cameras have been in deterring run-of-the-mill criminals, much less terrorists who have dedicated their lives to a religious or political cause. A 2002 report by the British Home Office, which examined 22 separate studies of video monitoring systems in the United States and Britain, found that the cameras ``had little or no effect on crime in public transport and city centre settings'' but did appear to reduce crime in parking lots.

However, cameras do appear to have had an impact as part of a broader campaign that succeeded in pushing IRA attacks out of central London in the 1990s, said Jenkins, who co-authored a case study examining the British authorities' response.

In addition to the video surveillance system, London authorities added uniformed and undercover police patrols, provided extensive security training to transit staff and waged an intensive campaign to encourage the public to immediately report suspicious items.

The effort included regular tests in which covert inspectors would leave suspicious items to gauge the response. At the peak of the IRA threat, the testers would see a response within minutes, Jenkins said.

The IRA moved its attacks to other, more remote targets. Similar security efforts might simply shift terrorist attacks to other targets.

But that can be a significant achievement, Jenkins said, because it is better to push attacks out of the most crowded areas. Likewise, a bomb detonated in a subway tunnel has its explosive force channeled up and down the train, producing maximum casualties. Above ground, most of the force travels above into the air.

``Do we want to chase them out of the subways and into the streets? Probably yes,'' Jenkins said.
http://www.siliconvalley.com/mld/sil...l/12350080.htm





Consortium to Pool Radio-Tag Patents
Barnaby J. Feder

A consortium of companies that make radio-based identification tags, scanners and related software said yesterday that they planned to pool their patents in a venture that would provide one-stop licensing and royalty management.

The effort to stimulate adoption of what is known as radio frequency identification, or RFID, will be closely modeled on licensing organizations that have aided the growth of the DVD industry and the development of products that use the MPEG-2 standard for encoding audio and video programming, said Stan Drobac, vice president for RFID strategy and planning at Avery Dennison, one of the 20 founding members of the group.

"It's a model that's known to work," Mr. Drobac said, "and it has been approved in the past by the Justice Department."

RFID supporters are expecting the technology to supplant bar codes eventually because it allows goods to be identified without the need for them to be scanned item by item. Wal-Mart and the Defense Department are among those pushing for the technology's adoption.

The most conspicuous vendor missing from the consortium's member list is Intermec Technologies, a subsidiary of Unova; it claims its 145 RFID patents cover many crucial applications of the technology.

Intermec is already embroiled in RFID patent litigation with Symbol Technologies. An Intermec spokesman said yesterday that the company had not been asked to join the consortium.

The group plans to incorporate this fall and hire a specialist to evaluate who owns the most important patents and the potential royalty structure for its members. It is unlikely to begin offering licenses before next year.

Mr. Drobac said that even if Intermec and some others remained outside the consortium, the group's existence would make the patent landscape substantially simpler. There are more than 3,000 RFID patents, said Erik Michielsen, a RFID analyst in New York for ABI Research.
http://www.nytimes.com/2005/08/10/te...gy/10tags.html

[JackSpratts]

Welcome To Online Piracy
Anubha Sawhney

There's a ripple across the Internet that's slowly but surely turning into a roar. It started with an article that Jeff Howe posted on Wired mapping the modus operandi of pirate networks.

The story so far... File piracy doesn't start with casual consumers. The number of files on the WWW actually ripped from CDs, DVDs and videogames bought in stores is minuscule. Piracy doesn't start with peer-to-peer networks like Kazaa either. They're way too slow. Instead, it's run by a hard-core subculture of people that are driven to obtain status as the best, fastest pirates, and to get credits that enable them to receive goods others have pirated.

They put the files up on 'topsites' where pirates with secret access codes grab them. A 'topsite' is one of 30 or so underground, secretive servers where virtually all the unlicensed music, movies and video games available on the Net originate. Thik of it like this: If Internet piracy is a pyramid, the topsites would be right at the peak.

Kaun banega topsite star? The topsites are exclusive clubs whose members compete for status by getting earlier, better content. The main goal is not to seed the common man's P2P net, but to build status and share files within a small group. Somebody on the fringe of the group can grab a file and redistribute it to a less exclusive club, as a way of building status within that lesser club. Then somebody on the fringe of that club can redistribute it again; and so on. And so the file diffuses outward from its source, into larger and less exclusive clubs, until eventually everybody can get it.

Ever since Jeff Howe's article on modus operandi of pirate networks was published, blogs across the Net have been calling it everything from frustrating to fascinating.

Here's a sample: "While an entertaining article for those lower on the chain of the Internet, it makes the ones a little bit higher in the hierarchy cringe a bit. It makes the movie bootleggers stand with their mouth wide open that such information would be released to the general public. It explains about there being 'Double Agents' in these topsites. Guess what?

Now every major topsite knows that there are security holes in their network, and they start being a little more careful about who gets access and go back and check over the people who already have access."

Another not-so-worried blogger says: "That article couldn't teach the most die-hard script-kiddy adolescent geek how to pirate software nor the most astute reader how to gain access to any of the so-called 'topsites'. If I taught you how to jump off the roof of your house, that doesn't mean you know how to fly."

Fastest finger first: What puts some people at the top of this pyramid, and others at the bottom? It's not so much that the people at the bottom are incapable of injecting content into the system; it's just that the people at the top get their hands on content earlier.

Content trickles down to the P2P nets at the bottom of the pyramid, often arriving there before the content is available by other means to ordinary members of the public. Once a song or movie is widely available, there's no reason for a user to inject it into the system.

From Howe's mouth: In response to the millions of posts discussing his article, Jeff Howe says, "We could debate whether taking the topsites out would stem the flow of content. It's true that all the content would eventually appear at some level of this network, but then, without the motivation to get it before it 'streets', the pyramid would have never come into existence, and the topsites are usually the only ones with the connections at studios, at cinemas, at labels, et al to accomplish this. But it's a moot point.

The topsites are difficult, maybe impossible to infiltrate. The larger point is the same: illicit distribution of copyrighted goods will continue unabated, at least until the larger dynamics of the entertainment industry change."
http://timesofindia.indiatimes.com/a...ow/1193518.cms





Another Way Past Windows Antipiracy Found
Joris Evers

Microsoft's efforts to fight counterfeiting have hit another snag with the posting of a new method claimed to get around a Windows piracy check.

The check is meant to prevent people with pirated copies of the operating system from downloading additional software from Microsoft. By changing a setting in a Microsoft validation tool called "GenuineCheck.exe," it's possible to generate a code that will validate the Windows software on a machine as genuine even if it is pirated, according to a Web site publicized on Thursday in a posting to the popular Full Disclosure security mailing list.

Microsoft would not confirm that the method works, but the software maker is investigating the issue, a company representative said. "It is not a surprise for us that those who never intended to pay for software would try to find some way to circumvent Windows Genuine Advantage," the representative said.

Microsoft last week made the Windows piracy check mandatory for all customers who want to download add-ons for Windows XP and 2000. The effort, dubbed Windows Genuine Advantage, requires users to verify that they have a legitimate copy of the operating system before they can get files from Microsoft's download Web sites.

Tricking the check
For the software maker, the news could be another episode of people finding a way to get around WGA. Last week, several Web sites said it was possible to bypass the piracy lock by several means, including pasting a JavaScript string into the Web browser. Earlier this year, during WGA's pilot phase, a security researcher outlined another way to trick the check.

The GenuineCheck.exe tool is meant to provide an alternative way for people to prove that their copy of Windows is an official Microsoft version. The primary WGA checking mechanism uses ActiveX, which is not supported in all Web browsers. The popular open-source Firefox Web browser, for example, does not support ActiveX.

"To make the validation experience as user-friendly as possible, Microsoft engineered a process that enables customers to validate their systems easily, and unfortunately, unscrupulous users are able to exploit that," the Microsoft representative said.

According to the Thursday posting, all a PC user apparently has to do to have GenuineCheck.exe generate a valid code on a machine with pirated Windows XP is to run it in Windows 2000 compatibility mode. This is done by downloading the tool, right- clicking on the file and selecting "properties." Then select the "compatibility" tab in the menu and change the compatibility mode.

If the method actually works, it may be short-lived. "Microsoft will be updating the validation system from time to time and plans to address these issues," the Microsoft representative said.

WGA is a stepped-up effort by Microsoft to increase the number of Windows users that are actually paying Microsoft for its software. At the moment, the company estimates that roughly a third of Windows copies worldwide are not legitimate.
http://news.com.com/Another+way+past...3-5821113.html



Jerry Garcia: The Man, the Myth, the Area Rug
Seth Schiesel

One of the icons of modern American culture now resides in a nondescript warehouse about 30 miles north of here, in a windowless, climate-controlled, heavily-alarmed room built like a bomb shelter that is called simply the Vault.

There, in towering rows of 13,000 audiotapes, 3,000 videotapes and about 250,000 feet of traditional 16-millimeter film lives the recorded history of the Grateful Dead, one of the seminal American rock bands.

The Grateful Dead ceased to exist on Aug. 9, 1995, when the band's lead guitarist and most recognizable figure, Jerry Garcia, died at age 53 of a heart attack at a drug treatment center. Yet 10 years later, the man and the band remain alive for millions of fans, and the once notoriously ad hoc Grateful Dead business operation has become a model for a music industry struggling with the Internet and digital democracy.

"When I first got into the record business I learned that it wasn't cool to be into the Grateful Dead," said Christopher Sabec, 40, a lawyer who said he saw the band more than 250 times and is now chief executive of the Jerry Garcia Estate L.L.C., controlled by Mr. Garcia's heirs. "But if you look at where the music business has been forced to go by technology, now it's not about selling records. It's about live shows and inspiring a fan base to be absolutely loyal. Hello? Who did that first? The Grateful Dead."

The Jerry Garcia company and Grateful Dead Productions are separate businesses each generating millions of dollars of revenue a year. Just how many millions is not publicly known. But consumers still buy more than a million J. Garcia-brand neckties each year, and Cherry Garcia is often the top-selling brand of Ben & Jerry's ice cream, each pint generating royalties for the Garcia heirs.

The band's four surviving members - the drummers Mickey Hart and Bill Kreutzmann, the bassist Phil Lesh and the guitarist Bob Weir - have toured occasionally as the Dead, though not this year. They control the Grateful Dead's licensing business, which oversees thousands of products sold around the world, like gas tank caps, incense burners, golf club covers and sandals. (The Garcia company receives a share of the proceeds.)

But for cultural and practical matters, the heart of the Grateful Dead's legacy resides in the 10,000 cubic feet of space in Novato, north of San Francisco. The Vault feeds a continuing business based on regular releases of old concert recordings on iTunes, on the band's Web sites and in stores, feeding old Deadheads and creating new fans.

Physically, there is only one key to the Vault, and only two people know where to find it. David Lemieux, 34, the band's archivist, is one of them. Jeffrey Norman, one of the band's engineers, is the other.

"This is it, the key to the Vault," Mr. Lemieux said, holding up the gleaming shard of metal, a sliver that to some Deadheads may be more sacred than a splinter from the True Cross.

One major way the band and the Garcia company have kept the flame alive is by regularly releasing audio and video recordings of old concerts that have been restored with the latest digital techniques. Two years ago, for instance, the band released a DVD of its performance that closed San Francisco's legendary Winterland Ballroom on Dec. 31, 1978.

"There is just no way we could have done the Winterland release without the current technology," Mr. Lemieux said in his memorabilia-plastered office.

For fans used to fuzzy old cassettes, the new releases are a revelation.

"Many of us Deadheads are experiencing a renaissance now in our appreciation for the band because such high-quality recordings are available," said Amir Bar-Lev, 33, a filmmaker from New York who said he saw the band more than 100 times. "Ten years ago I was listening to 20th-generation tapes kicking around the floor of my car. Now, thanks to all of the technology, I can hear the band in all its glory."

Mr. Weir, the guitarist, said in a telephone interview on Friday from West Virginia, where he was on tour with his band RatDog, that although Mr. Garcia sometimes resented his own celebrity, he would have been pleased that his music endured. "I'm glad people can still enjoy it," he said.

He continued: "I am a big fan of Duke Ellington and I never saw him live. I'm a big fan of John Coltrane and I never saw him live. I don't want to put us on that level, but we don't play all of this music casually or callously, and of course Jerry would appreciate people being able to experience it."

More broadly, the Grateful Dead's emphasis on touring over selling records presaged the music industry's current predicament over file-sharing on the Internet.

The Grateful Dead was the first major band to allow fans to freely make and trade recordings of its live performances in the belief that spreading the music that way would ensure long-term success. That formula was later adopted almost wholesale by other successful bands, including Phish, and fans still avidly trade live Grateful Dead recordings online.

Even though there are now high-quality recordings for sale, created using the official sound-mixing boards used at concerts, fans are still free to trade recordings made in the crowd. The band used to offer a special section of seating for amateur tapers.

"They wanted to create a space for themselves and their fans to gather and play, and that didn't sit well in the offices of the record business," said Mr. Sabec, who is perhaps best known in the music industry for discovering and managing the 1990's teen-pop group Hanson. "Now I find myself sitting in meetings where other bands are using the Dead as a model."

In the years immediately after Mr. Garcia's death, Grateful Dead merchandising brought in more than $50 million in annual gross revenue. That figure may have declined a bit since then, and the band's licensing activities are now separate from the Garcia estate's business affairs, but both entities continue to thrive.

In addition to ties and ice cream, the Garcia company has expanded into rugs and wine. An artist as well as a musician, Mr. Garcia signed his work "J. Garcia."

"I'm not trying to turn the J. Garcia brand into something you find at Target, but I am trying to broaden it," Mr. Sabec said. "There are J. Garcia carpets that my mother would be happy to have in her house, and she's not a Deadhead. If you were to position it only for people who were fans of Jerry's music, it would be a much smaller market than what we're going for."

Yet even as the Garcia company has expanded its ambitions, the band's business wing, Grateful Dead Productions, has in some ways pared down its operations in recent years, like many United States companies.

For a few years after Mr. Garcia's death, as the technology bubble expanded (Aug. 9, 1995, was also the day Netscape stock went public, signaling the coming dot-com boom), the band pursued a vision of creating a business tentatively called Bandwagon, which would function as a one-stop merchandising and online distribution operation for a variety of musical acts. In addition, the band came close to creating what would have amounted to a countercultural theme park in San Francisco.

"The whole Bandwagon thing was a function of the dot-com mania, especially spectacularly in the Bay Area," said Dennis McNally, the band's longtime publicist and historian. "There was also an idea of creating a performance space and museum called Terrapin Station, which we figured we needed $50 million to do. And in the context of the dot-com revolution, that seemed perfectly doable."

In the end, the band balked at potentially having to cede final control of the projects to outside investors. And as the dot-com bubble burst, the band went in the opposite direction. It laid off dozens of longtime employees, closing its own warehouse and largely outsourcing the logistics of the memorabilia business.

Now, the band has only about 10 employees, including Mr. Lemieux at the Vault.

Although the theme park never came to be, on Sunday in San Francisco, the city unveiled the newly renamed Jerry Garcia Amphitheater in John McLaren Park, near the blue-collar Excelsior District where Mr. Garcia grew up before moving to the better-known Haight-Ashbury neighborhood.

Backstage at the event, Mr. Garcia's older brother, Tiff, seemed to share his sibling's somewhat ambivalent attitude toward the marketing of celebrity.

"They're trying to do an Elvis on him, with all of the garments and merchandise and different items," he said. "But I'm not surprised. He meant so much to so many people, and I'm proud of the fact that one individual could draw so much attention."
http://www.nytimes.com/2005/08/09/na... tner=homepage





Big Pay Packages May Fade After Ruling on Ex-President of Disney
Jonathan D. Glater

Directors of the Walt Disney Company may have dodged a bullet, but battles over executive compensation - and especially supersize severance agreements - are here to stay.

After yesterday's ruling that Disney directors did not violate duties to shareholders when they allowed the hiring, firing and payment of $140 million in severance to Michael S. Ovitz, the company's onetime president, the relief in corporate boardrooms was palpable.

But the outcome may well end up less important than that Mr. Ovitz received so much money (and so much publicity) as he left Disney, and that shareholders were so incensed that they sued the board over it.

"The Disney case will have an impact" no matter what the verdict, said Ira T. Kay, an executive compensation consultant in the New York offices of Watson Wyatt Worldwide. "The very fact that it went to trial had a significant impact on the types of conversations in general on compensation committees, and in particular about severance plans."

In the Disney case, shareholders argued that the board should not have permitted the payment to Mr. Ovitz, and they sought to recover more than $200 million on behalf of the company. That legal effort is part of an evolution in thinking about both executive compensation and corporate governance, said David A. Fine, a lawyer at Ropes & Gray in Boston.

"Executive compensation arrangements are clearly getting much more attention these days" from regulators, shareholders, investor advisers and the courts, Mr. Fine said. "The Disney decision was just a piece in that puzzle."

A number of seemingly outsize severance payments have come under a harsh spotlight in recent months. The most recent was the $32 million paid to Stephen S. Crawford last month after just three months as co-president of Morgan Stanley; Mr. Ovitz worked at Disney for 14 months for his $140 million.

The ruling, however, does take some of the heat off corporate boards. If the judge had found that Disney directors violated their duties to shareholders, it is possible that their liability insurance would not have covered them, putting their personal assets at risk. That prospect quite naturally terrified many directors.

"It's a comforting ruling for corporate boards," said Daniel J. Kramer, a lawyer at Paul, Weiss, Rifkind, Wharton & Garrison in New York. "It confirms what most sober corporate lawyers thought the law was, and it dispels some of the fears that had been expressed previously about where the law might be headed, in terms of director liability."

Nevertheless, Chancellor William B. Chandler III, who presided, was critical of the conduct of the Disney board.

"Many lessons of what not to do can be learned from defendants' conduct here," he wrote in his opinion.

The board at Disney, the judge wrote, was "stacked" with friends of its chief executive, Michael D. Eisner, who himself suffered various "lapses" in the hiring of Mr. Ovitz. But neither those lapses nor the errors of the board amounted to breaches of duties to shareholders, the judge concluded; executives and board members acted in what they believed was the best interest of the company.

In his ruling, Judge Chandler also noted that ideas of the role of directors changed significantly after scandals at Enron, WorldCom and elsewhere. It would be unfair to apply today's standards to past conduct, he wrote.

"This court strongly encourages directors and officer to employ best practices," he wrote, "as those practices are understood at the time a corporate decision is taken."

He continued that "Delaware law does not - indeed the common law cannot - hold fiduciaries liable for a failure to comply with the aspirational ideal of best practices."

The judge's language may pave the way for future lawsuits like the Disney matter, as shareholders challenge recent conduct that could be weighed against current ideas of best practices for directors.

"As you see more and more of these golden handshakes, you're seeing institutional investors becoming more outraged and more active," said Stuart Grant, a securities lawyer for plaintiffs at Grant & Eisenhofer in Wilmington, Del., referring to the rich severance payments.

It will take time for executive compensation to reflect changing ideas of what is appropriate pay and severance, if such changes are going to occur, said Mr. Kay of Watson Wyatt, because no single company will be able to reset what has come to be the norm.

"If the market for severance is going to correct, it's going to be a multiyear, relatively slow process," Mr. Kay said. Several companies will have to reduce the severance packages they have paid, and few companies will be willing to risk offending desirable executives by taking such a step, he said. "It's going to take a few companies being more conservative."

But board members have good reason to adopt a more conservative stance in compensation matters and avoid second-guessing, said Charles M. Elson, head of the John L. Weinberg Center for Corporate Governance at the University of Delaware's Lerner College of Business and Economics.

Although the judge ultimately found that the Disney board did not breach its duties, he discussed a tough standard for the diligence required of board members, Mr. Elson said. The standard has been clarified, and directors at other times and at other companies could be held accountable under it.

"It means that you can't just make a decision with a devil-may-care attitude," Mr. Elson said, adding, "it has altered director behavior forever."
http://www.nytimes.com/2005/08/10/bu...3M7v4AB7F5+eFg





Amazon.com Preps Digital Music Service
John Borland

Ecommerce giant Amazon.com appears to be preparing a digital music service to compete with Apple Computer's iTunes at last, according to a job listing posted on a popular industry blog.

The ad, posted on Paidcontent.org (and since removed), sought a "content acquisition manager" for the company's "forthcoming digital music service."

The company has not publicly said that it intends to launch a full-fledged digital music offering. However, several music industry executives confirmed on Thursday that the company has been actively discussing plans to enter the market for several months, including proposals for a subscription- based service.

Given the substantial reach of Amazon's online retail store, a new digital music component could gain traction more quickly than those of earlier rivals. But there is no guarantee. Analysts point out that other large brands, such as Sony, Microsoft and Yahoo, all have faced slow starts in the business.

"It takes a certain dedication and focus on that part of the business to make it profitable, and to make it compelling," said GartnerG2 analyst Mike McGuire. "We've seen earlier that having a big brand and being powerful in other media or online businesses doesn't guarantee online music success."

Amazon.com has provided perhaps the biggest question mark in the digital music business for some time. Many in the music industry expected it to follow Apple's lead into the digital download business quickly.

However, the company has bided its time, allowing Apple to dominate the download market, and a handful of companies including RealNetworks, Napster and Yahoo to blaze a slower trail with their subscription models.

Amazon has long offered free downloads drawn from new releases, but these have served largely as promotions for the full CDs.

An Amazon spokesperson could not immediately be reached for comment.
http://news.com.com/Amazon.com+preps...3-5819046.html





'Massive' Identity Theft Ring Uncovered
Ingrid Marson

The FBI is reportedly investigating a criminal operation that involves the theft of confidential data from thousands of machines infected with spyware

A security firm claims to have uncovered a huge identity-theft ring that appears to be using a spyware program to steal confidential information from computers.

Sunbelt Software said the operation, which is being investigated by the FBI and Secret Service, is gathering personal data from "thousands of machines" using keylogging software. The data collected includes credit card details, social security numbers, usernames, passwords, IM chat sessions and search terms. Some of the data gathered is then saved in a file hosted on a US-based server that has an offshore-registered domain, said Sunbelt president Alex Eckelberry.

"The types of data in this file are pretty sickening to watch," Eckelberry said in a blog posting from Saturday. "In a number of cases, we were so disturbed by what we saw that we contacted individuals who were in direct jeopardy of losing a considerable amount of money."

According to Sunbelt Software, criminals have obtained access to a considerable amount of bank information, including details about one company bank account containing over $350,000 (£197,000) and another account that has "readily accessible" funds of over $11,000.

The operation appears to be linked to CoolWebSearch (CWS), a malicious program that hijacks Web searches and disables security settings in the Internet Explorer browser. Patrick Jordan, a Sunbelt employee, discovered the identity theft ring while researching a CWS variant.

"During the course of infecting a machine, he [Jordan] discovered that a) the machine he was testing became a spam zombie and b) he noticed a call back to a remote server. He traced back the remote server and found an incredibly sophisticated criminal identity theft ring," said Eckelberry. "We are still trying to ascertain whether or not this is directly related to CWS."

An FBI spokesperson was unable to confirm whether or not an investigation was taking place. Sunbelt was unavailable for further comment in time for this article.

This is the latest attempt by a criminal gang to use spyware for financial gain. In March this year the UK's National Hi-Tech Crime Unit foiled an attempt to steal £220m from the Japanese bank Sumitomo Mitsui. Keyloggers were used to relay passwords and access information to the criminals who intended to transfer the funds electronically. A man in Israel was arrested after allegedly trying to transfer £13.9m of the funds.
http://uk.news.yahoo.com/050808/152/fp4w3.html





In Hollywood, All Players but No Power
David Carr

A DECADE or so ago, a small, discrete number of individuals could go out for breakfast, typically at the Hotel Bel-Air, and pretty much decide what a majority of Americans would watch in the years ahead.

The boomer generation of moguls had names that peppered power rankings in Entertainment Weekly and Vanity Fair. They became brands of their own - Eisner, Ovitz, Semel, Diller, Katzenberg, Geffen and Guber - writ large on the wide screen they ruled.

Now they are going, gone or changing the subject. Mr. Eisner, who took Disney from a sleepy also-ran to a behemoth, is out. DreamWorks SKG, the creative love child of Jeffrey Katzenberg, David Geffen and Steven Spielberg, is likely to be sold to NBC Universal. Terry Semel and Barry Diller both made graceful lateral moves into digital realms. Peter Guber is still making movies at Mandalay, but perhaps because he is no longer running a studio, found time to serve as a juror in the shoplifting trial of Winona Ryder.

Change, even of the tectonic variety, overtakes all industries. But these moguls were hunting bigger game: they and the rest of us thought they would run not only the Hollywood studios but also the giant media companies, like Viacom, Time Warner and Sony, that owned the studios.

They shipped billions of dollars in revenue and hundreds of millions in profit to their parent companies, but, with the notable exception of Mr. Eisner, they did not have much to show for it in return. Instead of using the leverage of cash flow and profit to take over their owners, they were leaned on year after year to come up with still more. They created a new version of Hollywood, but failed to master the corporate intrigues that would let them rule not just the studio lot, but also the business world beyond.

IN conversations - none of them for the record - several studio directors managed to sound both defensive and arrogant. Worn out by the expectations of their owners and tired of being banged on by their audiences, they sounded less like masters of the universe than prisoners of the current paradigm.

"In the same way that audiences have lost their taste for film, filmmakers have lost their passion," said David Thomson, author of "The Whole Equation: A History of Hollywood," adding: "It is not surprising that some of the moguls are giving up as well. They are as depressed and tired of the business as the rest of us."

So if this generation of creative moguls didn't turn Hollywood into the center of the universe, what is their legacy? There were some great films - "Schindler's List" and "Terms of Endearment" come immediately to mind as studio achievements that will endure when the archeologists dig in - but mainly they created a world that is now governed by the wants and needs of 17-year-old boys on any given Saturday night.

The bygone moguls institutionalized the tent pole, movies meant to be an event and not just entertainment. Now, weekend box office figures, once an obscure industry metric, have become a matter of public moment. And sequelization, whether of a lame TV series or a blockbuster, has become the primary business.

The math problems they helped create, the opening grosses and DVD revenue, are being left to a different generation, and a different kind of leader. Brad Grey, now head of Paramount, managed talent and made television. He works for Tom Freston, who rose to prominence at MTV. Michael Lynton, who runs Sony, had a stint at Disney earlier in his career, but has spent much of his life working in publishing and at AOL. Barry Meyer, the chief executive of Warner Brothers, came up in television, as did Bob Iger, the new honcho at Disney, and Peter Chernin at 20th Century Fox is the consummate corporate executive who came up through the ranks. It is a long walk from the current vanguard to the Eisner-Ovitz-Diller crowd, with their cowboy tactics and outsize ways.

Back when they were at the height of their powers, the boomer moguls operated from the golden gut, greenlighting projects with the wave of a hand. But the days when company heads would offer notes on dialogue have been supplanted by a heads-up from the marketing guys about product placement and plot points that might help ancillary revenue. The tent pole, which Mr. Spielberg all but erected with "Jaws" and "E.T.," creating huge movies that preoccupied the cultural conversation, has grown into a thicket, a forest of big-budget projects that makes it problematic for any one, no matter how expensively marketed, to stick out.

That is part of the reason that DreamWorks is on the block. With a roster of eight or so movies a year, the demi-studio does not have the muscle to fight its way into theaters. Warner Brothers, Universal, Paramount and Sony are able to negotiate space because they pull up to the door with a dump truck full of movies. And those big bets need to be hedged. With "The Island," a recent DreamWorks film that cost $120 million and tanked to the tune of a $12 million opening weekend, there was not another big film on the way to fill in the money pit.

Mr. Katzenberg will remain as a significant force in the industry as head of the publicly held animation unit, and Mr. Spielberg will make as many movies as he wants for as long as he wants, but in general, the mini-major experiment is over. All the talk of a new, high-tech studio and a major new music company came to naught.

"Much has been written about the disappointment at the box office this year and various arguments have been made about technology and home entertainment," said Jeremy Zimmer, a board member of the United Talent Agency. "But I think that the audience is reacting to the lack of quality movies. They have been disappointed too many times when they have made the decision to leave their house and go see a movie, and whoever is running the studios is going to have to figure out how to rebuild that relationship."

The people who built the current version of Hollywood did so by coming up with movies that people felt compelled to see - not as a matter of marketing, but as a matter of taste. What was once magic, creating other worlds in darkened rooms, has become just one more revenue stream. The movies have been commoditized to even more lucrative ends, and the men who made it so will shift in their seats as the credits roll.
http://www.nytimes.com/2005/08/08/bu...ia/08carr.html





Nielsen, Long a Gauge of Popularity, Fights to Preserve Its Own
Lorne Manly and Raymond Hernandez

As it does every Father's Day, Real Men Cook, a charity devoted to encouraging African-American men to stay involved with their families, held its annual street fair this June in about a dozen cities across the country.

Amid the grills and stoves serving up delicacies, corporate sponsors like State Farm Insurance and Volvo were on hand, seeking to entice new customers. And in eight of the cities, handing out pens, balloons and T-shirts from its booth, was a company that does not sell anything to the public - Nielsen Media Research, the television ratings arbiter.

Nielsen's sudden interest in Real Men Cook - along with the $100,000 it says it spent to help sponsor the Father's Day event - underscores the efforts the company has undertaken to remake its image after an industry dispute turned into a public contretemps with racial and ethnic overtones.

The fight - centering on whether Nielsen's new local ratings system severely undercounted minority viewers and ultimately hindered the developments of shows geared at those audiences - has given the company a crash course in Washington and street politics.

Since the early spring of 2004, the company has spent more than $4 million to hire some of the nation's premier lobbyists to counter a savvy campaign conducted by Rupert Murdoch's News Corporation, a team of longtime Clinton strategists hired by the media conglomerate, and a coalition of black and Hispanic community leaders. Before 2004, Nielsen had not spent a dime on lobbying. Nielsen has also sprinkled more than $200,000 among minority organizations like the National Urban League, the National Council of La Raza, the Rainbow/PUSH Coalition and the Dragon Boat Festival in San Francisco, according to Nielsen officials.

The lobbying and outreach efforts represent a remarkable departure for Nielsen, a company not particularly known for its responsiveness to complaints and which prefers to settle disagreements with television network and advertising clients in private.

But Nielsen executives say they had no choice. "It's pretty rare for a business issue to turn into a long-term political attack by one of your clients," said Susan D. Whiting, president and chief executive of Nielsen.

Nielsen has experienced some success in the public relations wars, picking up the support of prominent black leaders, including the Rev. Jesse Jackson, and working out reconciliations with former adversaries like Univision Communications, the Spanish-language broadcaster.

But Nielsen still faces a battle in Washington, where lawmakers are considering measures that would complicate its business.

Nielsen's wake-up call came in the early spring of 2004. The company, a division of the Dutch company VNU, was in the early stages of introducing a new way to measure local television audiences, and the system had just arrived in New York.

The technology, called local people meters, replaced set-top boxes and paper diaries, and offered advertisers and TV networks something they had never had before: detailed local demographic data every day of the year about who was watching which shows and in what numbers.

But the test results in New York alarmed executives at News Corporation. The Fox and UPN affiliates that the company owns suddenly found themselves staring at seemingly inexplicable drop-offs in viewing, particularly double-digit percentage declines among minority audiences. Those two station groups carry shows that attract significant minority audiences.

With television advertising revenue in local markets nearing $22.5 billion a year, any ratings decline would wreak havoc on the station groups' bottom lines as local people meters reached the country's largest markets.

The News Corporation asked Nielsen to postpone the official start of the service in New York and to fine-tune the technology. Nielsen declined, arguing that while certain programs may have lost minority viewers, the meters more accurately measured actual viewing choices than before, and those viewers had just migrated elsewhere, mainly to cable networks.

But the News Corporation and its allies - whose ranks have grown to include corporations like the Tribune Company - said that explanation did not answer a more fundamental question: Why were the people meters failing to register the viewing preferences of many black and Hispanic homes?

Nielsen executives said these omissions had nothing to do with race or ethnicity, but occurred in homes with the greatest number of people and TV sets, where viewers fail to key in their preferences.

Nielsen soon found itself overwhelmed by public criticism. A newly formed coalition called Don't Count Us Out appeared in the spring of 2004, attacking Nielsen in print and television ads, at news conferences and demonstrations, and in phone calls and e-mail messages. The Rev. Al Sharpton berated Ms. Whiting in her office.

"There was so much controversy in the local press in New York, it was beginning to impact our business," said Ms. Whiting, citing in particular articles in The New York Post, a Murdoch paper. While Nielsen's customers are the advertisers, their agencies and the broadcast and cable networks, the company needs viewers who agree to be monitored, and the buzz saw of negative publicity could endanger the company's recruitment of Nielsen families.

Nielsen turned to a coterie of experienced lobbyists and media strategists, including those with ties to Democrats and minority leaders around the country, according to Nielsen and those it hired.

One of the first people Nielsen approached, according to company officials, was Bill Lynch, a veteran political operative in New York City Democratic circles who was once a senior political adviser to the city's first black mayor, David N. Dinkins.

In 2004 alone, Nielsen paid nearly $1.35 million - about half of the $2.8 million total it spent that year - to Mr. Lynch's firm, Bill Lynch Associates, according to federal filings.

Mr. Lynch did not return phone calls, but Ms. Whiting called him "an invaluable resource" who introduced Nielsen executives to elected officials and helped them decide which black and Hispanic leaders they needed to approach. Mr. Lynch phoned one of his closest associates, Representative Charles B. Rangel, a Manhattan Democrat and one of New York's most prominent black politicians. Mr. Lynch asked him to meet with Ms. Whiting, Mr. Rangel said.

He did, and ultimately - along with Ms. Whiting - announced the creation of an independent task force that would look into ways of assuring the accurate counting of African-American and Latino viewers.

"They've done a whole lot of things to show that their intentions are sincere," Mr. Rangel said.

Nielsen's counteroffensive did not stop there. The company also turned to Wexler & Walker Public Policy Associates, a lobbying firm in Washington that coordinated the campaign in the capital, where the Nielsen critics originally found receptive hearings from Democrats and, as the battle has shifted to the legislative front, from leading Republicans.

In one victory for Nielsen detractors, Senator Conrad Burns, Republican of Montana, recently introduced the FAIR (Fairness, Accuracy, Inclusivity and Responsiveness in Ratings) Act, which would require that any new services offered by ratings companies -namely Nielsen - be accredited by the Media Ratings Council, a relatively weak industry oversight organization, before they can be put in place.

In 2004, Nielsen paid Wexler & Walker $260,000.

Nielsen also took its campaign to California, where it hired Joseph R. Cerrell of Cerrell Associates in Los Angeles to handle its media and lobbying campaign there. In turn, Mr. Cerrell hired several consultants, including Karen Waters, the daughter of Representative Maxine Waters, one of Los Angeles's most prominent black Democratic leaders, who people on both sides say is a Nielsen defender.

Nielsen critics have privately questioned whether the hiring of Karen Waters was intended to please the congresswoman. Mr. Cerrell dismissed that notion, saying he had hired her for her strong ties in the black community. "The mother was already on Nielsen's side before I got involved," said Mr. Cerrell.

Neither the congresswoman nor her daughter returned phone calls seeking comment.

Nielsen's allies have also sought to play to wariness among minorities toward Mr. Murdoch, whose News Corporation owns the Fox News Channel, a cable news network that appeals to conservative audiences. "It's interesting that News Corporation is taking an interest in protecting minorities," said Mr. Jackson. "It's not their reputation."

Gary Ginsberg, a News Corporation spokesman, disputed that contention, saying: "News Corporation has been a consistent supporter of minority opportunity in hiring, programming and philanthropy."

The advice Nielsen collected appears to have paid off, in some cases. Mr. Jackson noted approvingly that Nielsen had made efforts to reach out to blacks and Hispanics - including the sponsorship of a workshop on its new ratings system at a recent Rainbow/PUSH convention in Chicago. Nielsen, whose monopoly status has frustrated its television and advertising clients for decades, has become increasingly vigorous in finding out what concerns clients may have. Last Thursday, Ms. Whiting was in Chicago for the first meeting of a new group of eight of the biggest advertisers in the country.

Despite Nielsen's moves, the sniping shows no signs of abating. Nielsen has accused Don't Count Us Out of being little more than a front organization for News Corporation. The founders of the coalition deny that.

Tom Herwitz, president of station operations for the Fox television stations group, said Nielsen's local people meter system posed a potential barrier to the success of shows geared in part to minority audiences, like UPN's forthcoming "Everybody Hates Chris," produced by Chris Rock.

"One of the biggest obstacles to 'Everybody Hates Chris' becoming the breakout television show of the year is the fact that 40 percent of its core audience isn't being measured by Nielsen in these top markets," said Mr. Herwitz, noting that the News Corporation owns nine UPN affiliates in cities like Los Angeles, New York and Chicago.

Mr. Herwitz said Nielsen should find better uses for its money than a media and lobbying campaign. "The reason they have to spend so much money is that they are so wrong on the facts," he said. "If they had spent the money fixing the problem, then all their other problems would have gone away."
http://www.nytimes.com/2005/08/08/bu...08nielsen.html





Hollywood's Profits, Demystified

The real El Dorado is TV.
Edward Jay Epstein

Multiple-Choice Quiz

Is Hollywood's biggest money-maker:


a) Movies?
b) DVDs?
c) Television?

The best-kept secret in Hollywood, especially from Wall Street, is that the movie studios' biggest profit center is not theatrical movies, or even DVD sales; it is TV licensing. If the details of the profits remain clouded to outsiders, it is no accident. The studios purposely blur together their three principal revenue sources—the box office, video sales, and television licensing—into a single portmanteau category called "studio entertainment" in their quarterly and annual reports. Keeping audiences in the dark may be a time-honored Hollywood tradition, but this breakdown can be demystified by consulting the studios' internal numbers, which they furnish to the Motion Picture Association on a confidential basis.

Last year, the six major studios—Disney, Fox, Warner Bros., Paramount, Universal, Sony, and their subsidiaries—had total revenues of $7.4 billion from world box-office sales, $20.9 billion from world video sales, and $17.7 billion from world television licensing. Revenues, however, are what companies record, not what they earn. And, in the case of Hollywood, the revenues from movies, DVDs, and TV yield very different earnings.

Once upon a time—before the TV and VCR—studios earned virtually all their profits from a single source: the theater's box office. Nowadays, in the new Hollywood, the world box office is a money loser: In 2004, the studios lost an estimated $2.22 billion on the $7.4 billion they took in from the box office. This sad reality is not a result of the high cost of making movies, inefficiencies, or of any sort of studio accounting legerdemain. The simple fact is that the studios pay more to alert potential audiences via advertising and to get movie prints into theaters than they get back from those who buy tickets. Consider, for example, Warner Bros.' movie The Negotiator, with Samuel L. Jackson and Kevin Spacey. It was efficiently produced for $43.5 million, scored a world box office of $88 million, and appeared to be a modest success. In fact, Warner Bros. collected only $36.74 million from its theatrical release after it had paid check-conversion and other collection costs, the theaters had taken their cut, and the MPA had deducted its fee. Meanwhile, to corral that audience, Warner Bros.' advertising bill was $40.28 million, and its bill for prints, trailers, dubbing, customs, and shipping was another $12.32 million. So, after the movie finished its theater run, without even considering the cost of making the movie, Warner Bros. had lost $13 million. Why? For every dollar Warner Bros. got back from the box office, it shelled out about $1.40 in expenses, which was about average, if not slightly above par, for studio movies.

This might seem equivalent to the joke about a manufacturer who says, "We lose on every item but make it up on volume," except that Hollywood has another way of making up the loss—the so-called back end, which includes home video (now mainly DVD) and TV licensing.

Home video is both more complex and more profitable. With the advent of the DVD, home video has become a vast retail business, with studios selling both new and past titles, as well as television programming such as The Sopranos, Friends, or Chappelle's Show, at wholesale prices that can go as low as $5 a DVD. Studios, which have meticulously analyzed these costs, estimate that manufacturing, shipping, and returns costs average 12.4 percent; marketing, advertising, and returns costs average 18.5 percent; and residuals paid to guilds and unions for their members and pension plans come to 2.65 percent. So, about two-thirds of video revenues are gross profits (which participants, such as stars, producers, and directors, may share in once the movie breaks even). In 2004, the studios' estimated video gross profit was $13.95 billion.

But the studios' real El Dorado is television. What makes television licensing, both at home and abroad, especially profitable for the studios is that virtually all the expenses required to market a television program, including tapes and advertising, are borne by the licensee. The studios only have to pay the residuals to the guilds and unions, which varies between movies and TV and average roughly 10 percent. The studios get to keep the other 90 percent. In 2004, this amounted to slightly more than $15.9 billion, making it the studios' single-richest source of profits.

This El Dorado comes from many tiers of the television industry. In 2004, studios made $3.9 billion from licensing their films, shorts, and TV series to the American broadcast networks—all of which are now owned by the corporate parents of the studios, creating a cozy, not to say incestuous, relationship. Another $4 billion came from licensing studio films to pay-per-view TV. All the studios have an "output" arrangement with pay-per-view TV channels to sell them an entire slate of films at fixed prices. Warner Bros., for example, sells all its films to its corporate sibling HBO, and Paramount sells all its films to its corporate sibling Showtime. Overseas, almost all the main pay-per-view TV outlets are owned or controlled by the studios' corporate parents. Finally, $9.8 billion comes from so-called library sales, through which the studios license their movies and TV programs over and over again to cable networks, local stations, and foreign broadcasters. Fifty-nine percent of this immense $17.7 billion of revenue from television licensing comes from America, which is not surprising, considering that on an average day fewer than 2 percent of Americans go to movie theaters, while more than 90 percent watch something at home on TV. And without these profits from TV, no Hollywood studio could survive.

Even though the television profit center is often overshadowed by the public's fascination with box-office results, it accounts for the direction Hollywood is taking in three significant ways. First, it explains the relentless marriages between the principal outlets for profitable entertainment—TV networks—and the Hollywood studios, which have been television's primary content-providers since 1970. After Rupert Murdoch was unable to buy a network and boldly created his own Fox network, Michael Eisner bought both ABC and ESPN for Disney in 1995 —a coup that changed not only Disney but the landscape of the entire entertainment economy. The other entertainment giants quickly followed suit. Today, the studios' corporate parents own or control all six over-the-air networks, as well as 64 cable networks, accounting for almost all the prime-time television audience. (Viacom, even after it is divided into two separate units, will be controlled by a single corporate parent—Sumner Redstone's National Amusement Inc.)

Second, it explains why so many of Hollywood's new leaders hail from TV. Robert Iger, Eisner's replacement as CEO at Disney, was president of ABC television; Sir Howard Stringer, the first non-Japanese chairman of Sony, was president of CBS television; Jeff Bewkes, the head of Time Warner's new Entertainment & Networks Group (which includes Warner Bros. and New Line), was president of HBO; Tom Freston, the new co-president of Viacom, was president of MTV; Peter Chernin, the president of the Fox Entertainment Group, was head of Fox Broadcasting; and Brad Grey, the new head of Paramount, was a television producer. Their ascensions simply confirmed that what used to be a business centered in movie houses has been transformed into a business centered around the TV in the home.

Finally, it explains why so-called studioless studios find it difficult to survive in Hollywood. The big six studios, with vast libraries of movies and TV programs, can count on this income flow no matter what happens at the box office or video stores. For example, even though Sony has a batch of movies this summer, its profitability is assured by the licensing fees flowing in from its library of more than 40,000 hours of movies and TV episodes. No such luck for the independent studios. With no comparable libraries, or, for that matter, corporate sibling alliances to ease their access, they need a constant quota of hits to keep their heads above water. Consider DreamWorks SKG, run by three of the most successful and creative executives in Hollywood's history—Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Despite its clout, DreamWorks was not able to produce anywhere near enough hits to prevent it from burning through most of its capital. Though it is currently profitable, DreamWorks is attempting to become part of a larger media conglomerate by selling itself to NBC Universal.The problem for these wannabe studios is that without a juicy slice of the $17.7 billion television pie, they cannot compete with the studios that have this rich cushion to fall back on.

The union between Hollywood and TV has paid off handsomely. The 2004 MPA Consolidated Sales Report—another confidential document— shows that the six studios' revenues from television licensing went from $6.8 billion in 1994 to $17.7 billion in 2004—a nearly $11 billion increase. And this does not include the fortunes that studios now earn from selling TV series on DVD. Unfortunately, Hollywood's movies are coming to play an ever-smaller part in the big picture.
http://slate.com/id/2124078/





From open…

Open-Source Audio Growing On P2P
John Borland

CacheLogic, a network management company that monitors traffic being sent over its ISP clients' systems, has a new study out with interesting observations about file formats being traded through peer to peer networks.

Among them is that while MP3 files still account for the bulk of audio swaps (about 68 percent), the open-source Ogg Vorbis format now accounts for 12 percent of music trading. This use is coming primarily in Asia, and primarily using the BitTorrent technology, the company said.

In terms of volume, video files far outstripped music, a natural result given their much larger size. About 61 percent of peer to peer data traffic was dedicated to video, while 11 percent was audio. The remaining "other" category accounts for games, documents, and other less-popular files.

The company also said that the eDonkey network now carries more video traffic than BitTorrent, a reversal of last year's observations.
http://news.com.com/2061-10802_3-5827071.html





To closed. These guys are in charge of copyrights. It explains a few things.

U.S. Copyright Office poll: IE-only OK?
Paul Festa

Signaling a new addition to the list of browser-specific Web sites, the U.S. Copyright Office solicited opinions on a planned Internet Explorer-only zone.

The office, a division of the Library of Congress, invited comments through Aug. 22 on an upcoming Web service for prospective copyright owners that may launch with support for only limited browsers.

"At this point in the process of developing the Copyright Office's system for online preregistration, it is not entirely clear whether the system will be compatible with Web browsers other than Microsoft Internet Explorer versions 5.1 and higher," the office said in its notice. "In order to ensure that preregistration can be implemented in a smoothly functioning and timely manner, the office now seeks comments that will assist it in determining whether any eligible parties will be prevented from preregistering a claim due to browser requirements of the preregistration system."

The Copyright Office's request for comments goes to the heart of the battle over Web market share and Web standards. Web standards advocates have long argued that inconsistencies in the way browser makers implement standards--that is, W3C (World Wide Web Consortium) recommendations--force Web developers to write different pages for individual browsers. Another concern is that Web page and application developers have to perform quality assurance testing multiple times for different browsers.

The Copyright Office site in question is a preregistration system for unpublished, commercial works-in-progress. Scheduled to launch Oct. 24, the system would let a film studio preregister a movie, for example, so that the studio could prosecute copyright violations that resulted from scenes or copies prematurely distributed over the Net before the work was complete.

In its request for comments, the office made clear that it plans to support other browsers in the future. In an interview, an attorney with the office said that the sticking point was Siebel software that guaranteed compatibility with only selected browsers--including both IE and Netscape 7.02, a browser with negligible market share--in the current Siebel 7.7 software.

The Copyright Office said it planned to upgrade to Siebel 7.8, which supports Netscape 7.2, Firefox 1.0.3 and Mozilla 1.7.7, but not in time for the Oct. 24 launch.

Neither the Copyright Office nor Siebel said they planned to support other browsers like Opera or Apple Computer's Safari.

Siebel defended its selective support of Web browsers.

"We're running a business, and testing is extremely costly," said Stacey Schneider, director of technology product marketing. "We optimize against what our customers demand. For Siebel 7.8, it became clear, especially for the government sector, that there's demand for Mozilla. But there are hundreds of vendors out there with their own browsers. And not many applications support many more than what we do."

The Copyright Office said original comments and five copies should be mailed to Copyright GC/ I&R, P.O. Box 70400, Southwest Station, Washington, D.C. 20024-0400.
http://news.com.com/U.S.+Copyright+O...3-5827627.html





Oddball Science Helps "Locked In" People Communicate

University of South Florida psychologist Emanuel Donchin and his students are perfecting ways to help people who are paralyzed yet fully conscious - with intact cognitive systems - communicate via a brain computer interface (BCI). Although the patient is unable to communicate, the electrical activity in their brains is normal. Through the BCI it becomes possible for users to “type” on a “virtual keyboard” using their brain waves.

The BCI, says Donchin, can help patients who suffer from amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) - a rare progressive neurological disorder that ultimately leads to a complete paralysis of voluntary muscles in all parts of the body; cerebral palsy; or patients “locked in” following a brain stem stroke.

“In essence, we are trying to provide the brain with new channels for communication and control by capturing and analyzing the electrical or electroencephalographic (EEG) activity produced in the brain,” he explained. “Our goal is to restore communication functions.”

To create an assistive “mental prosthesis,” Donchin’s extensive work is focused on capturing and reporting unique brain activity that occurs upon the visual observation of a rare or “oddball” event. According to Donchin, the “oddball paradigm” relies on a response to deviant stimuli embedded in a series of standard stimuli, such as letters, symbols and commands flashing randomly on a keyboard-like screen. By analyzing the electrical activity as event-related brain potential (ERP) generated by the oddball event, the user in Donchin’s studies focuses attention on the character to be communicated as elements of the display are flashed on the screen.

“The chosen character is the one eliciting a ‘P300,’” said Donchin. “Thus, by detecting which rows and columns in the display elicit a P300 the computer can determine the character the patient is trying to ‘type.’”

In collaboration with the Wadsworth Institute at SUNY-Albany, Donchin’s group has conducted numerous studies with healthy and disabled volunteers who, wearing electrodes on their scalp attaching them to the BCI, were placed in front of an electronic screen display of 26 letters of the alphabet and other symbols and commands in a six-by-six row and columns flashing in random sequence. Test subjects were able to “operate” a virtual keyboard when their EEG reactions to oddball events in the random flashing were analyzed. Researchers found greater electrical response in the rarely presented, or oddball, stimuli and the spike in the subjects’ EEG at time of the oddball event created a means of communication.

“Ideally, the subject can spell out a message by successively choosing among the 26 letters,” explained Donchin. “We are examining the operating characteristics of this communication channel and analyzing the speed with which there was an EEG focus on the letter of interest.”

Test subjects were able to communicate their choice of a letter at the rate of about one character every 26 seconds.

“This is, of course, a slow rate of communication,” said Donchin. “But, considering there is no other channel of communication, even this slow rate is welcome.”

Since coming to USF, Donchin with his student Eric Sellers tested more than 15 ALS patients and have established that, in general, the system works although many adjustments in the procedure are required to allow the use of the BCI in patients’ homes.
http://www.newswise.com/articles/view/513597/?sc=swtn

















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