Peer-To-Peer News - The Week In Review – May 3rd, '03

[JackSpratts]

“Absent any specific information which identifies infringing activity, a computer system operator cannot be liable for contributory infringement merely because the structure of the system allows for the exchange of copyrighted material.”

Napster, 239 F.3d at 1021 (citing Sony, 464 U.S. at 436, 442-43).

“To justify a judicial remedy Plaintiffs invite this Court to expand existing copyright law beyond its well-drawn boundaries. As the Supreme Court has observed, courts must tread lightly in circumstances such as these.”

- Stephen V. Wilson, United States District Judge, April 2003






Wishing Didn’t Make It So
Jack Spratts

Cultural historians will look back upon the 20th century as an era when a privileged few could for a brief period make huge sums for doing nothing at all. Some of these people were called “Recording Artists” and they made their phenomenal livings by getting paid over and over again for work that had been done in the past, sometimes even decades earlier. By some strange and short-lived technological accident the costs of making copies and distributing them had reached a point where it was cheap enough for corporations to engage in but not so cheap that individuals could do so. It was perfect for capitalism; large companies could dispense near perfect recordings while their customers could only consume.

Copying of course had been a part of the culture for tens of thousands of years - but it had been so hard to do for most of that time it was reserved for an extremely select few. It might take a person an entire life to produce a handful of replicas. Scribes worked by painstaking hand carving each letter or note until after months or years of effort a piece was complete and ready for the approval of a patron; like a Pharaoh, a King or a Pope. Such reproductions, along with the rarified knowledge they contained, existed for the exclusive benefit of the powerful, the rich and the rulers. Common people were left with little else than common knowledge and common art. They passed it along freely to one another, but they had no real access to information and it showed in their miserable living conditions and stunted lives. Still what they had they made the most of, making use of it for survival and amusements.

With Guttenberg and movable type then Edison and vibrating styli it all changed. For the first time not just ideas or written music could be copied but an actual living recital captured and made over and over again. It didn’t take entrepreneurs long to find markets for the new mediums.

So things stood for the better part of a hundred years with technology improving the product but not the equation. No matter how good the recordings became or how easy they were to make, large companies enjoyed an edge over the people they served. This was never more true then when it came to delivering the products to the home. The media giants had become international distributing banks that financed recordings and delivered the copies, while the actual performance was left up to the artists and the “bank’s” chosen agent in charge of production. The pipe became everything; the art a commodity.

Until the arrival of the computer and the Internet.

With the development of both and the addition of small programs that let users see and share the contents inside the machines suddenly anyone anywhere could do the previously impossible; create digital art and instantly get it to any point on the planet for a fraction of the cost of a first class stamp.

At this the balance of power between artist, media company and audience changed forever. After all, if you could make your own music, or at least get your favorite music directly from the artist or another listener and get it easier than you could from a traditional media-owned source, what good were the companies? What purpose did they serve?

That question and its answer were crucial to the survival of the record companies and were very much at the forefront of discussions in the executive suites. The execs knew the answer and they hated it because they were in danger of serving no purpose at all. To change and to change fast they had to act immediately - but time passed and nothing happened. The pressure built. Finally in their haste and fear they made a fatal mistake. They choose to fight a social and technological movement not with a better idea but with the law. Trusting that their friends in Congress would back them up and the courts would rule their way, they put all that they had into attorneys and lobbyists. Hoping, wishing really, that high priced talent and old school connections could do what hand wringing and foot stomping so far had failed to accomplish - make the people stop sharing songs among themselves.

It almost made sense. At first. From their point of view they seemed to be winning. For instance an oddly rancorous judge shut down the first big file sharing system and a Congressional ally proposed a law so draconically undemocratic it actually would’ve allowed companies carte blanche access to the inside of every computer in the world. Anyone alleged to be sharing files the company thought they shouldn’t would have their files destroyed – and possibly even their computers - without the normal checks and balances like due process or warrants - rights even accused murderers have. More bills were proposed, jail sentences threatened and still the sharing continued, until the sharing itself became bigger than the companies, and totally out of their control.

An entirely new way of doing business rose up in front of them and they didn’t fight back with a system of their own. All they did was lay on more lawyers, submit more writs, secure more subpoenas, start more suits, and watch more of their efforts fail. What victories they did achieve were words having no discernable impact on the situation. If what was happening was indeed a revolution any historian could have told them that winning one wasn’t achievable with edicts and fiat. Action was needed, but action was absent.

By the end of last week even that ill-advised strategy had stopped producing results, insignificant as they were. As if to say to the companies, “Move along”, a federal judge in California, in the belly of the media beast, acknowledged for principal what millions were practicing: Peer-to-Peer programs are legal. Legal to make, legal to own…and legal to use. The non-infringing uses offset the possible infringing ones. Like VCRs that make copies, cassette recorders that make copies, or Xerox machines that, well, make copies, the total benefits in all these things out weigh the potential harm.

Astonishment reigned in Hollywood. Like an edgy drunk cut-off and hit with cold water, Black Friday jolted the industry. It shouldn’t have, they should’ve seen this coming. Well groomed spokespeople came forth professing shock and outrage and even a few meisters tried pushing a positive spin, like the RIAA’s soon to be gone chief lobbyist Hilary Rosen who stated, “We are pleased with the court's affirmation that individual users are accountable.” Uh huh. Whether she said it with a straight face I can't say, I’d only seen the line in print.

The ruling, the Thing That Counts, is simple and short but it’s impact will be felt for generations.


Therefore, for the reasons stated, the Court HEREBY GRANTS the following Motions:

1) Defendant Grokster, Ltd.’s Motion for Summary Judgment;

2) Defendant StreamCast Networks, Inc.’s Motion for Partial Summary Judgment Re: Contributory Infringement; and

3) Defendant StreamCast Networks, Inc.’s Motion for Partial Summary Judgment Re: Vicarious Infringement.


As one can plainly see nothing in that ruling is in any way good for a dinosaurian media oligarchy entering the age of mammalian cooperation. But it’s the best possible news for anyone at all concerned about a balance of power between one’s culture and those who would try to co-opt it.

Peer-to-Peers are legal. We’ve always known this, now the establishment knows this too.

Let’s share.







Enjoy,

Jack.








Current Week In Review.








Peer-to-Peer Networks Win in Court - Judge dismisses music industry suit against Grokster, StreamCast
Scarlet Pruitt

In an enormous blow to the music and motion picture industries, a Los Angeles federal judge has dismissed a lawsuit against file-sharing services Grokster and StreamCast Networks, saying that they cannot be held culpable for illegal file trading done over their networks.

Friday's ruling, made by U.S. District Court Judge Stephen Wilson, represents an almost complete turnaround from previous victories the record and motion picture industries have enjoyed in cases involving illegal peer-to-peer file trading.

In his opinion, Wilson ruled that the peer-to-peer networks have substantial non-infringing uses in addition to infringing uses that cannot be dismissed.

"It is undisputed that there are substantial non-infringing uses for defendants' software," Wilson wrote, such as distributing movie trailers, free songs, and other noncopyright works.

The ruling is certainly a blow to the entertainment industry but is only a first-round victory for the file-sharing services, said Mike McGuire, research director at GartnerG2, the business strategy research arm of Gartner.

The ruling could lead to a change in the mindset of executives at recording companies, GartnerG2's McGuire said.

"There are some people in the entertainment industry who are not afraid of [peer-to-peer] technology and are looking at ways to use it as a cool distribution model. They might now see their stock rise within their companies and will increasingly now be looked at to come up with ways to create legitimate music services using P-to-P," he said.
http://www.pcworld.com/news/article/0,aid,110444,00.asp

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Movie, Music Giants Win One, Lose One
Alex Goldman and Roy Mark

No sooner had the Recording Industry Association of America (RIAA) put up headlines on its site touting a major legal victory in its ongoing legal war against file sharing, it had to reverse course and put up a new headline admitting -- for the first time in quite awhile -- to a rare courtroom defeat.

On Thursday, the RIAA won its latest round in a dispute with Verizon over revealing the names of subscribers who the RIAA suspects of illegally downloading copyrighted songs. A day later, a Los Angeles federal judge dismissed a suit brought by the RIAA and a number of major media companies against popular peer-to-peer networks Grokster and Morpheus.

Of the two decisions, the Los Angeles verdict was the most startling. The RIAA had already prevailed against Verizon and the Thursday decision reinforced the verdict, surprising no one. While the case is expected to eventually land in the Supreme Court, the case involves not whether file swapping is legal, but, rather, an ISP's responsibilities under the Digital Millennium Copyright Act (DMCA).

The Hollywood forces of music and movies were equally expected to win in the suit against Grokster and Morpheus. After all, the same groups had forced Napster off the Web.

But U.S. District Court Judge Stephen Wilson said Grokster and Morpheus can not control how people use their software, which could also have legitimate applications. The court cited the landmark Sony Betamax case of 1984, where the Hollywood studies tried to outlaw VCRs but ran into a Supreme Court ruling that said use of new technology to infringe copyrights did not justify an outright ban on that technology.

"Grokster and Streamcast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights," Judge Wilson wrote, noting that Friday's ruling only affected Streamcast's Morpheus and the Grokster software.

The ruling does not cover the peer-to-peer networks' liability for damages from past versions of the software or from other past activities. It also does not cover Sharman Networks' Kazaa Media Desktop, which is also being sued by the RIAA and the Motion Picture Association of America MPAA.

Nor did Wilson in any way condone illegal file sharing.

"Just as in Napster, may of those who use (Grokster and Morpheus) software do so to download copyrighted media files, including those owned by the Plaintiffs and thereby infringe Plaintiffs' rights of reproduction and distribution," Wilson wrote. "Thus, for purposes of these motions, Plaintiffs have established direct infringement of their copyrighted works by some end-users of Defendants' software."

Wilson found that Morpheus produced evidence that its P2P network was used to search for public domain materials, government documents and authorized media content.

"It is undisputed that there are substantial non-infringing uses for the (Grokster and Morpheus) software - e.g., distributing movie trailers, free songs or other non- copyrighted works; using the software in countries where it is legal; or sharing the works of Shakespeare," Wilson wrote.

Hilary Rosen, chairman and CEO of the RIAA, which plans to appeal Wilson's decision, put a positive spin on the ruling, "We are pleased with the court's affirmation that individual users are accountable for illegally uploading and downloading copyrighted works off of publicly accessible peer-to-peer networks."

Rosen added, "This is precisely the issue we have been seeking to focus the public's attention on, and yesterday's decision in the Verizon matter makes clear that individual infringers cannot expect to remain anonymous when they engage in this illegal activity."

All of which, is causing heartburn among ISPs and privacy groups.

Verizon's position, supported by an Electronic Frontier led coalition of 28 consumer and privacy groups, including the Consumers Union, ACLU and the Competitive Enterprise Institute, along with a number of Internet ISPs and ISP organizations that the RIAA is unfairly using the subpoena power provision of the DMCA.

U.S. District Judge John Bates disagreed, ruling that copyright holders can issue subpoenas to ISPs to demand identifying information about any Internet users based upon a mere allegation of infringement, with no notice to the user or judicial review of the claim required.

Bates had already sided with the RIAA in January, ruling Verizon would have to disclose under the subpoena power of the DMCA the name of an Internet customer who allegedly downloaded hundreds of copyrighted songs. The telecom giant was seeking a stay of that decision until its appeal is heard. Bates' Thursday ruling rejected Verizon's stay request.

The judge did, however, issue a temporary stay to allow the U.S. Court of Appeals time to consider the issue.

Diane K Reynolds, CEO of Masters Net Internet Solutions of Dayton, Or., a rural ISP, said, "what my subscribers are doing is none of my business." She noted that her terms of service does prohibit users from "illegal actions" but asked, "who decides if it's illegal?"

Ken Slaughter, CEO of Active Internet Communications of Springfield, Mo., said that he supported subpoena requirements for the disclosure of private information. "If I have to turn over names, I'm worried if there's no oversight. We'll get a complaint in a letter that an IP address was being used for something illegal at a specific time, but their server will be on Pacific Standard Time and our logs are on Central. We could accuse the wrong customer if we're given the wrong information."

Many ISPs assign IP addresses dynamically. If any user is online for about one or two hours at a time, incorrect data can point to an innocent customer. If incorrect information harmed an innocent customer, would the RIAA be liable? Would an ISP be liable for participating in a lawsuit by the RIAA that was invalid? Would the disclosure of a user's identity or their activities be grounds for a lawsuit against an ISP? These questions remain.

Kate Lynch, CEO of New York, NY-based Bway.net said, "I have not yet read the decision, so I cannot comment on the details, but it does seem to be bad for the industry. At the very least, we will have to re-examine our policies." The implication was that rewriting policies would require paying for expensive legal advice.

Russ Ferguson, CEO of the American Association of Service Providers (AASP), based in Triangle, Va., said, "of course we have to have copyright laws, but there have to be better ways to enforce them. ISPs are wary of participating in something that may be an invasion of privacy. How, for example, is the RIAA obtaining these IP addresses? Are they doing anything illegal, something perhaps tantamount to spying or wiretapping? Why can't the music industry create a service for people who want to listen to songs before they buy the album, perhaps charging $1 per song?"

Several CEOs of ISPs said claimed the RIAA cannot distinguish between legal and illegal file trading, and bears no risk when its accusations are wrong. Instead, they continued, the ISPs have to bear any risks to its business as a result of the RIAA's actions.

One ISP CEO who asked not to be named said that he was considering simply not keeping records. If the law requires that any data the ISP has be turned over, the ISP could comply by not knowing. Librarians in public libraries across the nation are already starting to do this.

Another ISP CEO quipped to internetnews.com, "I'm thinking of moving to New Mexico. I heard they repealed the PATRIOT act there."
http://dc.internet.com/news/article.php/2197311

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'Monumental' Piracy Ruling Hits Hollywood
Chris Marlowe

A federal court judge has surprised the entertainment industry by denying a request for a summary judgment that would shut down Grokster and Streamcast Networks.

The precedent-setting ruling Friday by U.S. District Court Judge Stephen Wilson is a major blow against a pillar of the film and music business' strategy against online piracy, which is to hold the underlying technology companies responsible.

"It is undisputed that there are substantial noninfringing uses" for Grokster and Streamcast's Morpheus, Wilson wrote in his decision. He cited Sony Corporation of America vs. Universal City Studios, the 1984 milestone usually referred to as the Betamax case and noted that these peer-to-peer services are used for such legal activities as "distributing movie trailers, free songs or other non-copyrighted works," including "the works of Shakespeare."

Wilson agreed that illegal downloading was taking place but determined that the technology could not be held liable for how it is used.

"It's monumental," Grokster president Wayne Rosso said. "This man has changed show business and copyright law."

The Motion Picture Assn. of America and the Recording Industry Assn. of America stated their intention to appeal the decision, which Wilson wrote for the Central District of California in Los Angeles.

Courts in previous legal actions against such peer-to-peer services as Scour and Napster have been generally inclined to agree with the entertainment industry's assertion that the technology abets and contributes to infringement.

However, Wilson drew "a seminal distinction" between Napster and the decentralized nature of the defendants, saying that unlike their notorious predecessor, "neither Grokster nor Streamcast provides the 'site and facilities' for direct infringement."

He added that file sharing could continue even if the defendants "closed their doors and deactivated all computers within their control."

MPAA president and CEO Jack Valenti thought that distinction irrelevant. "The Napster case is very clear, and we think that Napster applies here," he said.

Rosso strongly disagreed. "This is the exact point of law that was never settled when Napster went under," he said. "The RIAA, in their campaign of misinformation, was leading everyone to believe that P2P companies are liable, but in point of fact, it was never addressed in a United States court of law before."

Last month, a Dutch appeals court decided in favor of peer-to-peer service KaZaA when it ruled in Buma Semtra vs. KaZaA that the technology should not be held liable for the fact that its users were infringing on copyrights. Said Rosso: "How many more need rule in our favor before they get the message?"

As to the Betamax references, Valenti said they weren't applicable because current technology far surpassed what that ruling could have foreseen when it allowed time-shifting. "The difference between analog and digital is the difference between lightning and the lightning bug," he said.

MPAA counsel David Kendall added that videotape machines do not aid in distribution.

But Wilson's ruling compared Grokster and Streamcast to companies that sell home video recorders or copier machines, both of which are sometimes used to infringe copyrights.

RIAA chairman and CEO Hilary Rosen found something to be happy about in the decision, namely that Wilson emphasized that sharing copyrighted files without permission was illegal and that "individual users are accountable."

She disagreed with the ruling, however, saying in a statement: "Businesses that intentionally facilitate massive piracy should not be able to evade responsibility for their actions."

Joseph Schleimer, an entertainment lawyer who specializes in copyright, did not expect the ruling to survive the appeals.

"The decision is based on technology, not copyright law," he said. "Look for the copyright industries to come back with an aggressive technological response. And it won't be pretty."

Valenti agreed. "We have an excellent chance of obliterating this ruling on appeal," he said.

Rosso predictably took the opposing view. "Wilson wrote a brilliant decision that I think will stand," he said.

Added Schleimer: "If this decision is upheld on appeal, then any clever technology company can build a global business on stolen entertainment materials, and you can kiss the music and film industries goodbye."
http://reuters.com/newsArticle.jhtml...toryID=2638416

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FT Is Happy
Kazaa owner welcomes file-swap ruling
James Pearce

The Australian-based owner of popular peer-to-peer program Kazaa, Sharman Networks, has welcomed a United States court ruling favouring file-sharing software, but is still evaluating its impact on its own legal battle with the music industry.

US federal judge Stephen Wilson ruled that peer-to-peer network creators Streamcast and Grokster were not liable for copyright infringements that occur using their software, a decision which overturns previous court rulings.

"Sharman Networks Limited, owner of Kazaa Media Desktop, applauds Judge Wilson's decision in his ruling that file-sharing software is legal," said a spokesperson for Sharman Networks in a statement. "Since acquiring Kazaa Media Desktop, Sharman Networks built it to be a legitimate, powerful and efficient distribution channel for rights managed content. Our legal team is currently evaluating the ruling's significance."

Sharman Networks representatives are scheduled to appear in Judge Wilson's court on Monday in the United States for oral arguments in plaintiff's motion to dismiss Sharman's counterclaims against the entertainment industry. Sharman, which is currently being sued by the music industry for allegedly assisting copyright infringers, claims that major entertainment companies have colluded to drive potential online rivals out of business.

Sharman has said it wants to set up a legal peer-to-peer music distribution system that reimburses copyright holders, but has been thwarted by music companies who refuse to contemplate such a system. Paid-subscription sites are now available, but services had to fight hard throughout 2002 to win music licenses, and the right to offer services such as CD burning.

Michael Speck, the manager of Music Industry Piracy Investigations, told ZDNet Australia the decision was a "serious concern".

"The decision has more to say about how the case against the respondents was run than the principles, in my view," said Speck. "Unless it's redressed by [law] or a more thorough prosecution it presents a blueprint for Internet infringement, and it's a serious concern."
http://www.zdnet.com.au/newstech/com...74011-1,00.htm

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Lime Wire Is Happy
Technology Users Rejoice as Judge Rules That Peer-to-Peer Software Such as Gnutella is Legal
Press Release

Judge Stephen Wilson, a federal judge in Los Angeles today handed a victory to users of Gnutella, the peer-to-peer file sharing service by deciding against the record and movie industries in their lawsuit against file sharing companies.

The ruling appeared to state clearly that decentralized peer-to-peer software such as LimeWire is legal. "Defendants distribute and support software, the users of which can and do choose to employ it for both lawful and unlawful ends," Wilson wrote in his opinion, released today. "Grokster and Streamcast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights."

Lime Wire, which submitted an Amicus brief in the case stating "Gnutella is not Napster," rejoiced in the ruling. "The recording industry has attempted to use the courts to squash some amazing capabilities of the Internet. We are delighted that Judge Wilson has distinguished between the creators and the users of software," says Lime Wire LLC CEO Mark Gorton, "This ruling allows us to focus on building great software without the threat of a lawsuit hanging over our head."

In his ruling, Judge Wilson recognized that it is not the peer-to-peer file sharing companies who are illegally placing and downloading the MP3s onthe networks, rather, the network users themselves. The LimeWire file-sharing software (http://www.limewire.com) (Lime Wire runs on the Gnutella Network) allows anyone to publish material on the Internet.

However, Mark Gorton from Lime Wire LLC warns, "This is not the last we have heard from the army of lawyers at the RIAA. I expect to see more lawsuits aimed at both peer-to-peer companies and users of file sharing networks."

Lime Wire LLC, a privately funded New York-based startup, currently employs the largest single team dedicated to Gnutella software development. LimeWire's free software runs on most operating systems and is available for download at http://www.limewire.com/download. See http://www.limewire.com and http://www.limewire.org for more information.
http://www.prnewswire.com/cgi-bin/st...2003,+09:35+PM

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XoloX Is Happy
XoloX Applauds US Court Ruling

Already operating under an affirmative court ruling in its native Netherlands protecting the legality of peer- to-peer (P2P) software, Dutch file-sharing developer is now on fast track for expansion.
Team XoloX

"We are pleased that the United States courts have reached a similar decision as did the Dutch Court of Appeals to protect the development and distribution of file-sharing software," said Arno Steenbekkers, managing director of Netherlands-based XoloX B.V. "We have been waiting for the day that we could expand our operations on a more global scale without the threat and intimidation of litigation. Perhaps now the entertainment industry will be more willing to put their time, effort and money behind finding ways to embrace technological innovation so that they and their artists can profit from it, instead of spending their profits on attorney fees trying to stop it."

In anticipation of greater demand for Gnutella-based file sharing clients, XoloX has released a new and more robust "Ultra" version 1.56 of their popular software. The new version provides greater connectivity and better search results across the Gnutella network, while still maintaining the ease of installation and use that has made XoloX a favorite of more than 2 million users worldwide. XoloX Ultra 1.56 is available as a free download at www.xolox.com.
Thank you,

Team XoloX
http://www.mp3newswire.net/stories/2003/xolox.html

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Verizon to appeal latest order to identify P2P users
Masons

Verizon is set to appeal a ruling issued on Thursday that gave it just 14 days to reveal the identify of two customers of its ISP service whom the music industry accuse of internet piracy for using free file-sharing services.

The case dates back to August last year when the Recording Industry Association of America (RIAA) took Verizon Internet Services to court because it refused to identify customers who were making available MP3 files of copyrighted songs from their home computers, using file- sharing services like KaZaA.

The RIAA had served a subpoena on the company, basically a demand for the identity of alleged infringers, under a provision of the controversial US Digital Millennium Copyright Act (DMCA) of 1998, which states that: "a copyright owner or a person authorized to act on the owner's behalf may request the clerk of any United States district court to issue a subpoena to a service provider for identification of an alleged infringer".

Verizon argued that because the allegedly infringing files resided on a home PC, not Verizon's servers, the subpoena was not valid. The RIAA countered that the legislation does not specify that the infringing material reside on the ISP's network.

The court decided in favour of the RIAA and Verizon immediately asked for a stay in identifying the subscribers while the decision was appealed. It was this request that was at issue on Thursday.

Verizon argued that the subpoena provisions of the DMCA breached the First Amendment rights of internet users – i.e. the right to freedom of speech – but this was rejected by the court.

Judge John Bates stated: “Because Verizon is unable to show irreparable harm or that it is likely to succeed on an appeal of its constitutional or statutory challenges, the Court also denies Verizon's request for a stay pending appeal.”

In a statement on Thursday, Cary Sherman of the RIAA said:

"If users of pirate peer-to-peer sites don't want to be identified, they should not break the law by illegally distributing music. Today's decision makes clear that these individuals cannot rely on their ISPs to shield them from accountability."

John Thorne, senior vice president and deputy general counsel for Verizon, countered:

"We will continue to use every legal means available to protect our subscribers' privacy and will immediately seek a stay from the US Court of Appeals. The Court of Appeals has already agreed to hear this important internet privacy case on an expedited schedule.”
http://www.out-law.com/php/page.php?...2572&area=news

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Super Spam
Paul Rotello

The RIAA is now sending out hundreds of thousands of warnings to people sharing files on the Fasttrack network. Plans have been made to increase the amount of messages into the millions in the coming weeks.

Cary Sherman, the president of the RIAA, calls it an educational effort informing users that offering copyrighted music on peer-to-peer networks is illegal and that they face consequences when they participate in this activity.

"We're expecting to send at least a million messages or more per week because these users are offering to distribute music on Kazaa or Grokster," Sherman said.

Read more: http://www.reuters.com/newsArticle.j...toryID=2652934

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Shortchanged
The Baby Bells may have bilked consumers out of billions by inflating the cost of their networks. Regulators seem content to overlook the matter.
Scott Woolley

Front-page headlines in June 2000 hailed a historic deal that dramatically cut phone rates for the nation's consumers. The Federal Communications Commission, in persuading the Baby Bells to slash the access fees they charge long-distance carriers for routing calls to their local lines, said it would save customers $3.2 billion a year. The FCC's claim to have enacted "the largest rate cut in the history of federal telephone regulation" was the New York Times' lead story.

The true saving, it turns out, fell far short of that. While the Bells agreed to chop their access fees, they also won the right to offset that reduction by boosting flat monthly fees charged to local customers. These offsetting fee increases now approach $5 billion a year and, even in a world of telecom deflation, have sent local phone bills climbing. Today customers of Verizon (nyse: VZ - news - people ), the biggest of the four surviving Bell companies, see the $72 annual fee--up $30 a year per line so far-- listed as the "FCC line charge" on their phone bills, though the Bell gets the cash.

The little-noticed shift in fees was part of an extraordinary agreement the FCC negotiated with the Bells and a few long-distance titans in a series of secret meetings ending in early 2000. One FCC person present likens the talks to "Al Capone and Bugs Moran in there, cutting up Chicago. Consumers were not at the table." The resulting deal was officially named Calls, for the Coalition for Affordable Local and Long Distance Service, no irony intended. But it also was a way for the Bells to bury what could have become a multibillion-dollar accounting scandal.

Funny numbers have always defined the phone business--arbitrary rate caps imposed by regulators; 40-year depreciation for gear that nowadays loses its value in only a few years; access fees that charge more for carrying calls across town than it costs to carry them across the country. And in the Calls agreement, the Bells managed to paper over some funny numbers indeed: some $10 billion in equipment that FCC auditors found to be missing, nonexistent or untraceable. The total could end up being several times that. The massive discrepancy--which Bell officials vehemently deny--turned up in an FCC audit in the months leading up to the Calls settlement three years ago. Most regulators attribute the overstatement to sloppy record keeping rather than to a Bell conspiracy to intentionally mislead.

Either way, though, the result would be the same: Bells reaping billions of dollars more in revenue over the years than they otherwise would have been allowed to collect. That is because local rates and access fees were all originally justified by carriers' cost bases. Assets carried at erroneously (or intentionally) inflated costs on the books naturally lead to higher regulated prices.

Now some factions are pushing regulators to take a harder look inside this can of worms. In February a small watchdog group, TeleTruth, petitioned the Securities & Exchange Commission to launch an investigation. A coalition of 42 consumer groups, irked by a California state audit that accuses SBC of overcharging customers by $350 million, has filed a plea with the FCC. It demands: "When will the Commission systematically determine if violations of accounting requirements … have resulted in interstate overcharges, not only in California, but in all states in which SBC conducts its operations?" It calls the missing $5 billion in gear "the tip of the iceberg."

But the FCC seems unlikely to deal with this would-be accounting mess. The reason: As part of the Calls settlement, FCC staffers and long-distance executives say, the FCC killed the equipment audit entirely.
http://www.forbes.com/forbes/2003/0512/082.html

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Broadband push lifts EarthLink revenue but loss widens
Dawn Kawamoto

EarthLink announced Tuesday a 6.1 percent increase in first-quarter revenue, as the Internet service provider upped its share of broadband subscribers amid a decline in dial-up customers.

Meanwhile, the company reported a wider loss of $65.7 million, or 43 cents a share, in the quarter, compared with a loss of nearly $60.7 million, or 41 cents a share, for the same period a year ago.

Revenue rose to $353.7 million in the first quarter, compared with $333.4 million for the same period a year earlier.

A rise in broadband revenue helped drive that growth, climbing 51 percent to $81.4 million in the quarter. Broadband now accounts for 23 percent of the company's total revenue. But revenue from dial-up customers, which accounts for 72 percent of total revenue, shrank 3.5 percent in the first quarter to $253.5 million.
http://news.com.com/2100-1030-997839.html

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A Supreme Court case waiting to happen
Group questions state site-blocking law
Declan McCullagh

A civil liberties group is again trying to gain access to a secret list to determine if Pennsylvania's attempt to block access to child-pornography Web sites is affecting innocuous sites.

On Tuesday, the Washington-based Center for Democracy and Technology (CDT) appealed the Pennsylvania attorney general's recent decision not to disclose the list of Internet Protocol (IP) addresses to sites suspected of featuring child pornography. CDT is seeking the list because it suspects the government's campaign is overly broad and has forced Internet service providers (ISPs) to cordon off unoffending sites as well.

"We're trying to determine what other sites have been implicated by this law that have nothing to do with the intent of this law," said Ari Schwartz, a lawyer at CDT, which filed its request under a state open-government law. "We want the IP address to find out how many sites unrelated to the site that is meant to be blocked are also being blocked."

A Pennsylvania state law that took effect last year permits the attorney general to order ISPs to block access to Web sites suspected of featuring child pornography.

As the result of such an order from Pennsylvania Attorney General Mike Fisher, WorldCom said in September that it would block customer access to some offshore Web sites.

But some say the technique that's used to block sites is problematic. It prohibits access by making specific IP addresses off limits. IP addresses are the numeric locators, such as 12.123.12.123, that computers understand, whereas easy-to-remember domain names such as Amazon.com are what most people use to navigate the Web.

A study released in February by Harvard Law School's Berkman Center for Internet & Society concluded that because modern Web standards permit thousands of domain names to share one Internet address, blocking illegal sites tends to lead to innocuous ones being targeted as well. It said the practice of Web sites sharing IP addresses is so commonplace that Yahoo hosts 74,000 Web sites at one address and Tucows.com uses one address for 68,000 domains.

In addition to that problem, backbone provider WorldCom said that because it doesn't have the technical ability to stop residents of only one state from viewing specific Web sites, it would block the sites for all of its North American subscribers.

Fisher's office has sent 313 secret blocking notices to ISPs as of April 1 and has refused to disclose the addresses of the allegedly illegal sites, saying such disclosure would make illegal images accessible. A redacted version of a Dec. 18, 2002, letter to AOL that Fisher released tells the company to "disable access to those items identified as child pornography to your subscribers to your service...within five business days of receipt of this notice."
http://news.com.com/2100-1028-997935.html

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Proxy details Real's MusicNet deal
Stefanie Olsen

RealNetworks paid about $1.25 million to its MusicNet venture for royalties and services last year, but it recouped nearly $1.6 million from the streaming-music subscription service, a regulatory filing disclosed late Tuesday.

The Seattle-based multimedia company received payments of $760,000 from MusicNet for license and service agreements, as well as $620,000 for office-space rental and $217,000 for administrative services, according to a RealNetworks proxy statement submitted to the Securities and Exchange Commission .

Financial details from the MusicNet deal come just one day after RealNetworks said it agreed to buy Listen.com, a rival music-subscription service. MusicNet, a joint venture between RealNetworks, Bertelsmann, AOL Time Warner and EMI Group, was launched in 2001 as technology that offers Web visitors a legal alternative to downloading and streaming music files. RealNetworks owns nearly 40 percent of the service. Analysts said RealNetworks' buyout of Listen.com throws the future of the venture in question.

RealNetworks' proxy statement also said that RealNetworks Chief Executive and Chairman Robert Glaser "received no cash or equity remuneration for his services as chairman and director of MusicNet."

Glaser received no bonus in the previous two years as well, and he remains one of the lowest-paid executives of the company, according to the proxy. Glaser was paid $200,000 as chief executive and chairman in 2002. Still, Glaser owns about 53.5 million shares of RealNetworks, or about one-third of the company.

RealNetworks President Lawrence Jacobson received about $350,000 in salary, nearly $280,000 in bonuses, and 250,000 options.

The proxy also showed that Glaser closed a small software company, Washington-based NonStop Entertainment Software, which he owned in March. During 2002, RealNetworks paid NonStop about $6,150 for royalties and fees--an amount that exceeded 5 percent of the company's gross revenue for the year--to produce video games that RealNetworks had agreed to promote and sell.
http://news.com.com/2100-1027-997934.html

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Victory for P2P file-sharing services
Masons

The entertainment industry suffered a crushing defeat in Los Angeles on Friday when a federal court ruled that companies providing peer-to-peer (P2P) file-sharing software cannot be held liable for copyright infringement by those who use it.

Judge Stephen Wilson threw out the case against Streamcase Networks Inc., the company behind the Morpheus file-sharing software, and Grokster Ltd, saying they "are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights."

The ruling is a major blow for the music industry, which has become used to winning most of its internet music battles since it first began the war with a lawsuit against Napster in December 1999. Napster ultimately collapsed under the cost of litigation, and the Recording Industry Association of America (RIAA) has pursued successor networks. Unfortunately for the RIAA, they operate in a manner significantly different to Napster.

Napster required users to connect to its servers to identify the files that could be downloaded from another user's home computer, a system known as centralised P2P. Grokster and Morpheus are decentralised, meaning that once the users have the netowrking software, they no longer need to connect to the companies' servers to access other users' computers. Accordingly, the companies do not know what files are being exchanged, and cannot stop the network operating or exercise control over user activity.
http://www.out-law.com/php/page.php?...2652&area=news

Friday's ruling is available as a 34-page PDF at: http://eff.org/IP/P2P/MGM_v_Grokster...on_motions.pdf



ISPs Dealing With P2P
Jo Maitland

Power Web Connect, a local ISP in Wisconsin, is one of many service providers across the U.S. getting slapped with legal notices by media giants like Warner Brothers to shut down customers that are swapping peer-to-peer (P2P) files protected by digital copyright (see Application Killers ).

This hot topic was the center of debate at the ISPCON conference yesterday, where it emerged that a recent Power Web Connect user was wrongly accused by Warner Brothers of illegally distributing its movies.

“Warner Brothers came after us… They gave us an IP address of a customer and told us to shut them down,” says a spokesman for Power Web. “We checked it out and the customer was a 72-year-old woman with no clue what was going on.”

The case is ongoing. Warner Brothers is apparently still hassling Power Web Connect with nasty letters citing the 1998 Digital Millennium Copyright Act (DMCA) as grounds to cancel the customer. Warner Brothers was not immediately available for comment.

Officials at Copper Valley Telephone Cooperative in Alaska say it has also run into P2P problems with content providers. “We get several letters a week about this,” says a spokesman for the company. He declined to provide more details. Other service providers at the session nodded their heads in solemn agreement.

Legal experts say the peer-to-peer file swapping issue facing service providers is about to get worse in light of the U.S. government’s decision earlier this month to side with the record industry in its dispute with Verizon Communications Inc. (NYSE: VZ - message board).

New York-based Verizon -- the largest U.S. telephone company -- and the Recording Industry Association of America (RIAA) have been in court since September, arguing over whether Verizon should be forced to help crack down on the online song-swapping phenomenon that record labels blame for a decline in CD sales.

”If the Verizon case goes the wrong way, ISPs can expect to receive unlimited requests for data on their subscribers,” says Chris Hoofnagle, legal counsel for the Electronic Privacy Information Center in Washington, D.C.

Verizon argues that the law only applies to Web pages stored on its computers, not the "peer to peer" networks like Kazaa that merely travel across its wires.

”You don’t shut down a highway because people are moving drugs down it… It just doesn’t make sense,” says Joseph Price, legal counsel with Kelley Drye & Warren LLP, a firm that specializes in telecom law.

It looks as if the Justice Department disagrees.

Meanwhile, the RIAA is singing for joy. ”The government's filing supports the proposition that we have long advocated: Copyright owners have a clear and unambiguous entitlement to determine who is infringing their copyrights online, and that entitlement passes constitutional muster," crows Matthew Oppenheim, senior VP of business and legal affairs for the association. "Verizon's persistent efforts to protect copyright thieves on pirate peer-to-peer networks will not succeed." [Ed note: no, no, no, no, no!]

Aside from the legal issues, there are also new technical concerns popping up with P2P file sharing that will cause service providers more headaches.

According to Yuval Shahar, co-founder, president, and CEO of P-Cube Inc, which makes a router that can control and monitor P2P traffic, the problem is getting worse. "We've migrated from MP3 files to complete videos and games, where the average file size being transported has gone from a few kilobytes to hundreds of megabytes... The increased popularity of these services and file sizes is killing the service providers," he says.

In addition, the original P2P protocols were easy to detect, because there was a fixed number in the header of the packet that signaled a Napster session. Today, P2P protocols bypass this as they no longer use known port numbers, Shahar claims: "They are much, much smarter... P2P traffic is pretending to be real Web traffic now."
http://www.lightreading.com/document...g&doc_id=31767

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I Want MP3s
Jim Mosqueda

Ask students what they believe is the best part of being at college and many will say it’s the unique living experience, the chance to get to meet a variety of people or the opportunity to expand their horizons and develop knowledge. I recently asked a friend what he most liked about college life and he said, “the ability to download stuff a thousand times faster than usual at home.”

Most colleges around the country have high-speed Internet access and many students take advantage of it by using file-sharing software to download music, movies, games or virtually anything that can be transferred digitally.

For most Stanford students, downloading stuff from the Net — especially music mp3s — is rarely given a second thought. It has become a collegiate pastime. The availability of more bandwidth than we know what to do with makes downloading so much faster and more efficient than ever before. But the proliferation of high-speed Internet access has the music industry in a tizzy. The Big Music honchos believe free file sharing is the main reason why record sales have declined over 10 percent in the past two years.

The Recording Industry Association of America successfully brought down the beast that started it all: Napster. Now, the post-Napster world is populated by new peer- to-peer (p2p) software such as Kazaa, Morpheus and Gnutella. What makes these newer incarnations different from Napster (and more difficult to shut down) is the fact that they don’t operate from a centralized server. So the chase continues: The RIAA is now hunting individuals downloading music.

They recently brought a lawsuit against four college students from different schools for operating file-swapping services over their campus networks. The students are facing fines of up to $150,000 per song that was illegally traded. The RIAA is going after the middlemen as well, asking large companies and universities (including Stanford) to prohibit its employees and students from using these file-sharing networks. The RIAA is even forcing telecommunications companies to give it names of subscribers trading large amounts of copyrighted data over their servers.

While music labels and artists have a right to protect their work, the RIAA is pointing too much of the blame for the recent slump in music sales at file-sharing software and their predominant users: college students. This is a grievous mistake; college-aged people are some of the biggest buyers of not only music CDs, but also concert tickets and other music-related paraphernalia. By going after young buyers, Big Music is sending the wrong message — that the music industry is nothing but a greedy, vicious business that doesn’t care about the demands of individual consumers.

The RIAA should first take a look at its own members (companies and artists) for the problems plaguing the music industry. Companies charge too much for CDs in the first place — especially when you consider the quality of the CD. About 15 bucks for 15 decent songs is a good deal in my opinion, but 15 bucks for three good songs and 13 lame ones is not.

Years ago, the radio was the perfect place to hear new songs you wouldn’t get to hear otherwise. Today the opposite is true: You can’t listen to commercial radio without hearing another Avril Lavigne song or the latest Good Charlotte tune. In my opinion, there is more music — better music — out there. But with labels only pushing forward a few artists and pushing aside all the rest, the ability to sample new material is severely limited. This is why so many independent artists prefer that their music is traded online — it creates exposure, which can translate into more sales.

Recently, artists have been putting out bogus mp3s on file-sharing networks in order to thwart downloading. Try finding good copies of the new White Stripes songs online and you’re more likely to get looped versions of them. Now, this did force me to go out and buy their new CD, but I can’t help but feel a little annoyed bythat — especially when I just spent $55 to see them in concert.

When Radiohead’s new album was put online, the band said the version was “incomplete,” and a “work in progress.” I don’t know if that is true or not, but the album sounds pretty good and done to me. It is more likely that it was just a ploy to buy it when it comes out.

With all this exploitation and manipulation going around, it’s no wonder music fans have become jaded. Nowadays, consumer demands are becoming much more complex and individualized. Big Music must realize that these demands cannot continue to be met by packaging the answers in hard-to-open plastic wrapping and tough-to-peel stickers.

The advent of legal online file sharing where artists still get royalties is a good start toward creating a new music market that meets both the demands of the consumers and the music industry, but it can’t be the only solution. Shutting down all file-sharing networks and busting down dormroom doors and arresting college kids won’t solve the problem.

So unless Stanford cuts my Internet cord or the music police comes and gets me, I’ll continue to download my favorite music the way I want to.

Got any good mp3s? Send them to me at mosqueda at stanford.edu.
http://daily.stanford.edu/tempo?page...=0001_article#

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“Plaintiffs appear reluctant to acknowledge a seminal distinction between Grokster/StreamCast and Napster: neither Grokster nor StreamCast provides the “site and facilities” for direct infringement. Neither StreamCast norGrokster facilitates the exchange of files between users in the way Napster did. Users connect to the respective networks, select which files to share, send and receive searches, and download files, all with no material involvement of Defendants. If either Defendant closed their doors and deactivated all computers within their control, users of their products could continue sharing files with little or no interruption.”

- Stephen V. Wilson, United States District Judge, April 2003

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Firms call for open high-speed Net
Heather Fleming Phillips

Leading technology, consumer electronics and entertainment companies -- including Amazon.com, Microsoft and Walt Disney – have joined together to lobby the Federal Communications Commission to adopt rules preserving the free-flowing nature of the Internet.

The group, known as the Coalition of Broadband Users and Innovators, is raising fears that the FCC could fundamentally alter the Internet by adopting rules that could allow providers of broadband services to favor certain services and Internet sites.

The FCC could take action within a couple of months.

If that happens, they say, the Internet could evolve into a cable-TV-like system, where providers of high-speed Internet access could steer subscribers toward affiliated Internet sites. The network owners could also limit the types of devices that could be connected to their network, potentially stifling innovation, the groups says.

''Manufacturers' investment and willingness to innovate in this area undoubtedly will evaporate if network operators have the right to veto what devices their customers can attach,'' said Consumer Electronics Association President Gary Shapiro.

At issue are two separate ongoing FCC proceedings looking into how cable-modem and digital-subscriber-line service provided by phone companies should be regulated.

While these two forms of broadband directly compete in many cities, they are currently regulated in different ways. Phone companies are required to provide Internet service providers non-discriminatory access to their networks, while cable companies can pick and choose among ISPs.

As the commission looks at creating a more even regulatory framework for broadband, the lobbying coalition is worried that the more closed cable regulations will be imposed on all broadband services. It wants the FCC to adopt rules specifying that the basic open framework that has allowed the Internet to thrive is preserved.

The cable-TV industry has said there's no reason to adopt such rules, because it has no intention of discriminating against Web sites or limiting new technologies.

''Supporters of government-imposed regulations of the Internet are using scare tactics to ask for a government solution to a problem that does not exist. Forcing vague regulatory requirements on broadband providers runs contrary to the spirit of the Internet and would only stifle investment, innovation and growth of broadband services,'' said National Cable and Telecommunications Association spokesman Brian Dietz.

But Chris Murray, Internet and telecommunications counsel for Consumers Union, said there is already reason to be concerned. He pointed to regulations adopted by Cox Communications preventing subscribers from using their cable-modem service to link up to their offices using virtual private networks, or VPNs, unless they pay a heftier fee.

He also noted that Time Warner Cable last year sent letters to a handful of subscribers telling them to ''cease and desist'' using WiFi networking equipment outside of their homes.
http://www.siliconvalley.com/mld/sil...ey/5714562.htm

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A New Way to Catch a Hacker
Nicholas Thompson

For a computer security professional, Lance Spitzner has an unusual goal: He wants ill-intentioned hackers to steal more Social Security numbers and medical records.

Mr. Spitzner, a former Army officer, spends his days working at Sun Microsystems and his evenings running the volunteer Honeynet Project, a group of security professionals working to track hackers. Until recently, the four-year-old nonprofit effort focused on building and monitoring honeypots — computer systems designed to be easily penetrated so that Honeynet volunteers can covertly scrutinize hackers' tricks when they break into the systems.

Now Mr. Spitzner, 32, is focusing his efforts on a different type of defense based on the insertion of "honeytokens" into real databases and systems.

Honeytokens are pieces of seemingly enticing information that have no useful value. Embedded in ways so that no innocent person should accidentally stumble upon them, honeytokens trigger alarms when viewed, grabbed or downloaded. For example, a bank could insert a fake credit card number into its files and then set up a program called a "sniffer" on the network that would send out an alarm if anyone touched that particular number.

The term "honeytokens" was coined on Feb. 21 by a programmer named Augusto Paes de Barros who used it in an e-mail message to a list of security professionals. But the idea is not new.

It dates back in computing at least to 1986, when Clifford Stoll, a programmer at Lawrence Berkeley National Laboratory in California, buried fake records for an organization called the Strategic Defense Initiative Network deep in his server. When intruders started downloading the records, and then someone sent a letter to Mr. Stoll about the phony organization, he and federal investigators traced the intruders to East German and Soviet intelligence agencies.

Today, the use of honeytokens is not uncommon. For example, ForeScout Technologies, based in San Mateo, Calif., has built a commercial software program that tracks incidents of surreptitious reconnaissance, like port scans — the computer equivalent of someone turning your doorknob to see if it is unlocked. The program will announce a false message of vulnerability to the scanner in the form of a honeytoken. It then breaks the connection if the hacker follows up with an attack.

Honeytokens, like their cousins the honeypots, are based on the notion that if you build it, they will come. Mr. Spitzner became intrigued by the idea of honeypots after putting a new computer online at home and watching it get attacked within 15 minutes by an automatic program scanning the Internet for vulnerable prey.

Many computer criminals break into systems simply for the fun and challenge. Others are looking to take over vulnerable systems in order to use them as safe houses for setting off further, more serious, attacks. Others want to mine credit card addresses or steal corporate secrets. According to a 2002 report by the Computer Security Institute, 90 percent of the 500 corporations, government agencies, financial institutions, medical institutions and universities surveyed detected security breaches during the previous year.
http://www.nytimes.com/2003/04/28/te...gy/28NECO.html

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Rx for Music Industry: Seek Out the Old Geezers
Harry Shearer

Here's a business model with a future: sue your customers. That's what, as of this month, the recorded-music industry has been doing. It filed suit against four college students involved in Internet file-sharing (in which compressed "files" of music are swapped, Napster-style), asking for billions of dollars in damages. Yes, billions. Interestingly enough, the Bush administration, known to be opposed to frivolous lawsuits and in favor of tort reform, has weighed in on the side of the industry. Let's go after those students. That's where the money is.

This strategy would suggest that lawsuits against computer makers and the manufacturers of modems (and, for that matter, the little cables that connect your computer to the phone line) are in the offing. A calmer voice from the back row of a Business 101 course might well offer this suggestion to the industry: stop seeking as your customers the people most likely to steal from you.
http://www.nytimes.com/2003/04/27/we...ew/27SHEA.html

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Softer Approach or Just Velvet Glove/Iron Fist?
Australia leads the piracy fight
Sue Cant

Australian proposals to deal with piracy could serve as a model for the US internet industry's battle with the music industry over liability for illegal peer-to-peer file sharing.

The Internet Industry Association is negotiating with the Australian Recording Industry Association on a draft code of internet practice on copyright obligations as part of Australia's negotiations with the US over a free trade agreement.

The code lays out the "reasonable" obligations on an internet service provider to prevent or report copyright infringements.

The American music industry has been pushing for the same liability for Australian ISPs over copyright breaches as part of the FTA deal.

The US Digital Millennium Copyright Act holds ISPs liable for piracy unless they sign deals to remove material judged to be in breach of copyright.

"We cannot see a solution to peer-to-peer that wouldn't involve monitoring or breaching the telecommunications act to hand out information on customers," IIA chief executive Peter Coroneos says.

He says the US obligations, which require ISPs to surrender customer details and log files, were "onerous".

ISPs are protected from legal action under Australia's Copyright Act but US law only protects ISPs from liability if they sign up to the copyright regime.

Under the regime, ISPs are required to take down infringing material and then deliver "take-down" notices to alleged infringers.

Coroneos says there is disquiet in the music industry about the tough approach it has taken and speculation the industry might back off with the resignation of Recording Industry Association of America chairwoman Hilary Rosen.

"If we can adopt solutions in Australia it could be a model elsewhere," Coroneos says.

The Australian internet industry has pioneered international internet policy in other areas, including content regulation.

The US Federal Trade Commission invited the IIA to talk at an international summit on spam in Washington, DC to share information on a recent anti-spam initiative. The Spam Forum is a workshop run by the FTC. The Canberra initiative offers individuals, small businesses and corporations free spam filtering software for a month from vendors including Symantec, Norton Internet, Trend Micro and Spamtrap.

"This has got serious attention," Coroneos says. "It's a world first."
http://www.smh.com.au/articles/2003/...381886646.html

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Pirates and Posses: The Battle over Digital Copyright
James L. Gattuso, Bruce Mehlman, Alec French, Gary Shapiro,

The debate over Internet policy, telecommunications policy at one time was dominated by questions of supply: How do you develop the technology? What technologies actually work? How do you get the incentives correct to deploy that technology?

Those are still very important questions and still critical to the future of the Internet, but more and more attention has been drawn to the other side of the equation: demand. How do you get people to use broadband and Internet technology? Do people want to use it? Is there something there for them to watch? Is the content there? How is the content going to be provided?

That has drawn us inexorably towards a debate over intellectual property. How do you protect that content? How do you provide incentives to provide that content? Conversely, how do you make that available enough so that people can obtain it?

The question of content is paradoxical, in a way, in the digital age. The blessing of the digital age is that you can make an infinite number of perfect copies of any one piece of content at a very, very low cost. The curse is that you can make an infinite number of perfect copies of any content without paying for it.

That's what we're dealing with today. It's a tough question for advocates of free markets. On the one hand, property rights are absolutely key to the functioning of any market, and we all know that property rights need to be protected. Here we're dealing with intangible intellectual property rights, but in an economy increasingly driven by intangible intellectual value, it has become even more important to protect those rights.

On the other hand, we know of the dangers of over-regulation, of a strong governmental hand restraining the development and use of technology. So it's a very delicate balance that has to be drawn. Perhaps we can find a way to protect both sides of the equation.

That's what we're here to debate today. This is more than a philosophical battle. The battle over digital copyright has become a prime-time struggle between some of the most powerful sectors in our economy and our society.

In one sense, it's a battle between the entertainment community and the digital community. It's a battle between Silicon Valley and Hollywood--not just powerful economically, but some of the most powerful cultural leaders in our society. As a Californian, I see it as a battle between Northern California and Southern California, which is a traditional battle. It's the World Series of public policy debates.

The stars are beginning to come out on this issue. Britney Spears devoted her considerable weight to a Public Service Council ad. Those of you who saw today's USA Today saw an op-ed by Janis Ian on this subject.

This is nothing new. Copyright, despite its rather boring reputation, has attracted stars for years. In 1906, there was a battle over copyright featuring, in congressional testimony, John Philip Sousa for the musicians and Mark Twain for the authors, who, as you might expect, had very strong views for his particular special interest.

Although Twain was a supporter of intellectual property, he had no illusions about the political process that we're facing and how the sausage-making machine works in Washington. I thought one quote from his writings on copyright was particularly apt for us. He said, "Whenever a copyright law is to be made or altered, then the idiots assemble."
http://www.heritage.org/Research/Int...logy/hl785.cfm

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Are file traders next?
Lisa M. Bowman

Friday's ruling that the makers of Grokster and Morpheus aren't liable for copyright infringement occurring as a result of people using their peer-to-peer software could spell bad news for the file traders themselves.

Although the ruling is being hailed as a victory by file-swapping supporters, record labels are unlikely to step back from their attempts to stomp out free file-trading, which they view as a threat to their survival.

In fact, the ruling could accelerate the labels' plans to go after individual users, especially when coupled with a decision Thursday in a separate case that gives them more power to unmask the identity of individual file swappers. In that decision, a judge said Internet service provider Verizon had 14 days to turn over the name of a subscriber accused of offering music files for download using the Kazaa file-swapping service.

On Friday, representatives for the Recording Industry Association of America (RIAA) hinted the industry group would step up its efforts to pursue individuals in the wake of both decisions.

"We are pleased with the Court's affirmation that individual users are accountable for illegally uploading and downloading copyrighted works off of publicly accessible peer-to-peer networks," RIAA CEO Hilary Rosen said in a statement. "This is precisely the issue we have been seeking to focus the public's attention on, and yesterday's decision in the Verizon matter makes clear that individual infringers cannot expect to remain anonymous when they engage in this illegal activity."

If upheld, Friday's ruling on Grokster and Morpheus could make it harder for the record industry to go after technology that allows people to trade files, provided the companies that offer such tools have no control over how their technology is used. As a result, record companies are going to have to find other targets for their legal wrath.

"The obvious alternative is what the record companies have begun to do: Go after the worst traders," said Mark Radcliffe, an intellectual property attorney at Gray Cary Ware & Freidenrich.

Civil liabilities for willful copyright infringement are substantial, carrying a maximum fine of $150,000 per violation. Individuals accused of copyright infringement as a result of file swapping activities could also face criminal charges under the No Electronic Theft Act, with a guilty verdict carrying a maximum three-year prison sentence as well as fines up to $250,000.

Already, the record companies have done more than sound a warning. In April, the RIAA sued four students who operated file-search services on their school's internal networks, accusing them of promoting widespread thievery.

The entertainment industry hopes the high-profile suits will scare others out of operating such systems, or sharing files at all. But the strategy is risky for an industry that's trying to lure a group of tech-savvy youngsters into paying for content through official channels, instead of taking it.

For one thing, the industry's targets are potentially its most rabid customers, and suing such people could be a bad public relations move.

In addition, as a practical matter, tracking down and suing vast numbers of file traders and operators of file-sharing networks is a costly and impossible task.

Michael Page, an attorney at Keker and Van Nest who represented the defendants in this case, said the judgment handed down Friday will force the record industry to develop alternative business models.

"It puts pressure on the labels to take seriously that the public wants electronic distribution," Page said. "They're going to have to stop trying to figure out a way to make the Internet go away and figure out a way to use it."
http://news.com.com/2100-1027-998419.html

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The 10-10-220 of File-Sharing
Ninety-nine cents for all your songs at Apple's new music store.
Paul Boutin

A few record execs must have wandered into Steve Jobs' reality distortion field. After four years of denial, doublespeak, and lawsuits over digital music, all five major labels— Sony, Time Warner, Universal, BMG, and EMI—have somehow been persuaded by the Apple CEO to finally deliver a music service worth paying for.

At least, that's my verdict after a morning spent with the iTunes Music Store, unveiled today at one of Jobs' famous stage ceremonies in San Francisco's Moscone Center. The store is built right into a newly downloadable version of the iTunes software for the Mac. Just sign up with a U.S. credit card for an account at the Apple Store (iTunes walks you through this if you haven't already bought from the Apple Store in the past), and you can download any of 200,000 songs—from Franz Joseph Haydn to Eminem—provided by the five major labels. Most are 99 cents, although new tracks that you can't buy on CD (such as Eminem's "These Drugs") are bundled with other exclusive songs and sold in packs of two or three ($1.98 and $2.97, respectively). You can listen to 30-second clips of everything in the store, and you get to keep songs you buy forever, even if you sell your current computer: Apple lets you designate up to three computers as "yours" at any one time and will play your songs on any of them. Plus, if you've got an iPod, you can transfer your music to it and take it with you.

The downloads come in the AAC format supported by Apple's computers and iPods. Even at a modest 128 kbps, AAC sounds better than most MP3s, although that may be because professional encoding sounds better than at-home amateur ripping. More important, AAC is unfettered by the clunky copyright protection technologies that keep other pay-to-play music services' tunes from playing outside your PC (and sometimes inside it). Apple has built a few roadblocks into iTunes to make it tough to pass around free copies of a song after you've paid for it, but enterprising students are picking the locks already.
http://slate.msn.com/id/2082157/

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Death knell sounds for the CD
Greg Kot

When it was introduced, the compact disc helped bail out the music business: Domestic sales of the new technology zoomed from 800,000 copies in 1983 to 288 million by 1990, and continued to surge by the hundreds of millions through the '90s.

But with this year marking the CD's 20th anniversary, the boom is over. Compact disc shipments in the U.S. plunged nearly 9 percent last year to just more than 800 million, according to the Recording Industry Association of America (RIAA). The statistics confirm a downward trend that has been gaining steam since 2001, and continues this year, with CD sales down more than 6 percent from their already slack 2002 pace.

The ripple effect is only beginning as the music industry braces for a future that will involve the death of CD stores and the rise of wireless, pocket-size MP3 players that will enable consumers to access thousands of hours of music at the touch of a button. The only real question is how long it will take for those scenarios to become reality.

"You'll see CD sections in stores decline quickly over the next few years because they will be replaced by technology that provides dirt-cheap storage and the ability to basically access and play any type of music anytime, anywhere," says Mike Dreese, the CEO and founder of Newbury Comics, a New England record-store chain. "Wireless technology basically will create a world where we can have anything we want all the time."

The death knell is already ringing for CD stores, some retailers and industry observers say. In January, two major chains – Warehouse Entertainment and Value Music – filed for Chapter 11 bankruptcy protection. And nearly 500 music specialty stores nationwide have been shut down in recent months.

"Brick-and-mortar specialist CD stores are done in five years," Dreese says. "Stores like Tower or Sam Goody or Virgin are fast becoming anachronisms."

Not so fast, says Dan Hart, CEO of Echo, a joint venture of retailers (Best Buy, Tower Records, Virgin Entertainment, Warehouse Music, Hastings Entertainment and Trans World Entertainment) that is licensing songs from labels and plans to begin offering in-store downloads this year. Internet retailing was one of the few growth areas for music stores last year, with sales up 8.4 percent to 8.1 million units, according to Nielsen SoundScan.

"There's no question CD sales are declining, but the phase-out of retail will take longer than people predict – it'll be more like 30 years rather than five," he says. "There is a whole generation of people out there educated to using CDs as their primary music format."

But even Hart says that to retain a role in the marketplace, CDs will have to evolve.
http://www.recordonline.com/archive/2003/04/29/bz29.htm

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Dale McFEATTERS
More musical Big Brother is back

DURING the 1960s and'70s, America's college campuses reverberated with loud music and paranoia.

At the time, the music was regarded as a sign of cultural breakdown and the paranoia as a sign of youthful narcissism, as if college kids were important enough for the
government to actually spy on.

As secret files were pried open and White House officials shuffled off to jail, it turned out that the FBI, CIA, narcs and local red squads really had infiltrated college campuses. And why not? It was easy, fun and a lot less dangerous than chasing real criminals.

The paranoia finally blew over. One thing about the Bill Clinton years: He was a hard president to be paranoid about.

But the loud music stayed, even got louder because of better sound systems, and the old bands never went away. If they were dead, their music was reissued, and if they were alive, they went on reunion tours. Thus, a college student today is expected to be conversant with about 40 years of rock 'n' roll, plus hip-hop, techno, etc. Fortunately, technology was there to help. Computers can keep track of all that stuff.

But now paranoia is back on campus, and from an unlikely source: the music people themselves, the Recording Industry Association of America. It's as if campus pizza delivery turned out to be an arm of the Department of Homeland Security and the pepperoni contained tracking devices.

The RIAA this month filed big-time copyright-infringement suits against four college students from three campuses -- Rensselaer Polytech Institute, Michigan Tech and Princeton.

It's an interesting mix of schools, hardly names that echo organized crime. What's interesting about the three is that none of them is what you would call a party school. Where are the LSUs, the Florida States, the Tennessees -- campuses where party music is a major industry?
http://www.timesstar.com/Stories/0,1...55801,00.html#

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New file-sharing site appears despite recent RIAA lawsuit
Renata Stepanov

A new file sharing search engine named Incognito has recently been made available to students on the Princeton network through a link on the Princeton Portal Project website.

Matthew Stack '03, who developed both the Portal website and Incognito, said he took steps to ensure that no copyright laws were infringed. Concern over copyright violation has heightened since the Recording Industry Association of America sued Dan Peng '05 in early April, contending that his file-sharing search engine at wake.princeton.edu facilitated the transfer of copyrighted music. [See April 12thWIR - Jack.]

Stack cited a genuine academic need for such a search engine, as well considerable student interest in gaining access to network files for legitimate purposes. Incognito, which is only accessible from within the University and not open to distribution, is no more of a target for copyright violation than a Windows XP search engine, Stack said.

Incognito works like other multimedia search engines such as Altavista and Google, Stack said. He posted a legal disclaimer on the website, in addition to the terms of use and a privacy statement, which can be consulted for further information about legal concerns.

"I wanted to remind students of the importance of copyright," Stack said, "especially in this day where the RIAA is going after anybody with mp3's."

In the event that he is contacted to remove the website from the Internet, Stack has written a program in the past week, available for download under the same name, which would allow file sharing to continue. This program constitutes the back end of the interface, while the front end operates from find.Princeton.edu, the Portal website.

"The program is definitely out there in circulation," Stack said, "and it provides somewhat of an insurance."

Stack is certain that his program fully abides by copyright law and is not daunted by the recent onslaught of investigations brought by the RIAA. "I wrote technology to ensure that something like this will always stay up," Stack said.

http://www.dailyprincetonian.com/arc...ews/8084.shtml

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Students Settle with RIAA on Song-Swap Sites
Sue Zeidler

A recording industry trade group said on Thursday it reached settlements, ranging from $12,000 to $17,500 each, with four college students it claimed had been operating illegal song-swap networks on campuses.

While the settlements were lower than the hundreds of millions of dollars initially sought, the industry expects they will serve as a deterrent to individuals running "peer-to-peer" services, which let users download files for free.

The settlements also capped a turbulent week for the music business, marked by a flurry of court rulings, the launch of a new commercial music service by Apple Computer Inc. and the unveiling of new anti-piracy tactics by the industry.

"Given that these were the first lawsuits of this kind and that these individuals had limited means, we believe that the settlements were appropriate," said Matt Oppenheim, senior vice president of business and legal affairs for the Recording Industry Association of America. Oppenheim said future settlements may require stiffer penalties.
http://reuters.com/newsArticle.jhtml...toryID=2670427

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From the Archives
MP3 History and Technology
Aaron Marshall

In 1987 a large German research and development organization called the Fraunhofer Institut started work on a perceptual coding scheme for use with Digital Audio Broadcasting (DAB). The most powerful algorithm they developed eventually became standardized as ISO-MPEG Audio Layer-3, or, as now abbreviated, MP3 (Layers 1 and 2 are essentially less efficient versions of the same algorithm). The goal of the algorithm was to drastically shrink the data size of digital audio with a minimum subjective loss of sound quality; something which could not be done by merely reducing sample rate and bit depth. Whereas as standard CD audio requires a fixed 1400 Kb/s data rate, MP3 typically operates at less than a tenth of that, the de facto standard being 128 Kb/s (it can range from 32 Kb/s to 384).

So how do you throw away the vast majority of data and still end up with something that sounds largely like the original? The key is what's known as perceptual coding, or, essentially, a bag of psychoacoustic tricks designed around the way human hearing works. The most important technique is an exploitation of what's called the masking effect. Imagine a noisy LP. During the soft passages the noise can be obtrusive, you might even hear groove noise and tape hiss. In other words you're hearing right down to the noise floor of the recording and the playback system. During loud passages, however, these problems are much less significant, and even inaudible as they are drowned out or masked by louder sounds. The clicks, pops, and hiss are still very much there, but your ear can't distinguish them from the higher signal content overlaid during loud passages. The theory behind the perceptual coding used in MP3 is that since low level signals are masked by higher level signals, when the two exist simultaneously, at roughly the same frequency, space can be saved by not coding the lower level signal at all.

Say, for instance, you have a steady state tone at 1Khz and another at 1.1 Khz, but 20 db lower in level than the first. Theoretically, the second tone will be inaudible to humans as a distinct sound and the MP3 codec will toss it away. A tone at 6 Khz 20db down, however, would be coded, since it would be distinctly audible as a separate sound because of the difference in pitch. What the codec is doing during loud passages then is essentially raising the noise floor of the recording by throwing away bit depth whenever it thinks it can get away with it. The increased quantization noise created by lowering the bit rate on the fly is masked by the high level signals that make the process possible in the first place.
http://www.audio-ideas.com/columns/m...l-sidebar.html

For several years now the powers that be in consumer electronics have been embroiled in a confusing and divisive attempt to bring a new digital audio standard to market. As it now stands, after all the corporate gnashing of teeth, debates about adequate sampling rates and bit depth, dire warnings against the majors entering into another format war, encryption problems, and a lingering controversy over the audibility of digital watermarking, we have, surprise surprise, two fledgling competing formats, a desperate paucity of software, and lots of confused and wary consumers. Sound familiar? Unlike SACD or DVD-A, however, most consumers had at least heard of VHS and Beta by the time the VCR wars heated up in the early 80's. More importantly, people wanted a home video format on a scale large enough to make the stakes very high for the combatants.

In comparison DVD-A and SACD don't even show up on the radar. Beyond the micro-niche of the audiophile community, there is virtually no demand for what amounts to an improved CD, let alone the knowledge that there are already two candidates. For the vast majority the compact disc is more than adequate, sonically speaking, and the lure of extra channels for surround, insignificant. As some have already pointed out, the only way for this bird to fly is with affordable, multi-format players and backward compatible, high-resolution discs that gradually and transparently replace CDs, eliminating the double inventory problem retailers dread. In other words, the only way audiophiles are likely to get it is if the masses get it too. Whether they choose to make use of the extra resolution or features becomes their decision. Many won't know or care that it's there at all, just as most people don't realize how much audio information can be gleaned from an LP or CD. In addition, this gives the record companies the chance to re-sell their back catalogues yet again to all those with an interest in higher resolution and/or multi-channel sound.

For those of us hoping and waiting for a high-resolution replacement for the CD, however, the situation has recently become even more complicated. While the electronics behemoths were striking committees and issuing press releases about DVD Audio and SACD, the masses have gone right ahead and chosen the next major audio format all by themselves. If the success of DVD-A or SACD was a dubious proposition before the meteoric rise of MP3*, it seems like a serious long shot now. The simple formula behind the CD's success, despite the audiophile objections of compromised sound, was a level of convenience and flexibility the LP simply couldn't match.

"If the success of DVD-A or SACD was a dubious proposition before the meteoric rise of MP3*, it seems like a serious long shot now"

MP3 trumps the CD in a similar way, offering unparalleled access, features, and ease of use to consumers through internet based distribution. Fittingly, the sonic compromise is equally stark, the standard 128 K bit/second MP3 file representing an objectively and subjectively lossy (lousy?) copy of a compact disc. The bottom line? As the CD demonstrated so aptly, the market chooses flexibility over fidelity every time.

As with the CD, MP3 audio quality is more than adequate for the vast majority of users. After all, it's digital, so it must be good, right? With MP3 audio being characterized as "CD Quality" in the media so consistently, most folks would be hard pressed to identify any technical difference at all (besides the obvious lack of a physical carrier). What's worse, is that unlike the CD or LP, where serious users with high resolution systems could get excellent fidelity from the same discs used by Joe Boombox, as it stands right now, no one is getting excellent fidelity from MP3 files.
http://www.audio-ideas.com/columns/mp3-death-knell.html

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XM Satellite radio offers product for users of home computers
Josh Fineman

XM Satellite Radio Holdings Inc., a broadcaster that offers digital channels to half a million subscribers, introduced a product that can be operated on a personal computer. The XM PC Receiver will allow users to listen to XM radio's 101 digital channels on their PCs without an Internet connection, spokesman Chance Patterson said. The satellite receiver has a suggested retail price of $69.95, and programming will cost $9.95 a month. Satellite radio for the computer will be competing with Internet radio and free Internet file-sharing services such as Kazaa and Morpheus. Currently, XM radios are found in cars by General Motors Corp. and Honda Motor Co., and other automakers will offer the service this year. "This is not the home-run product, but it is a product that makes XM more ubiquitous," said Steve Mather, an analyst at Sanders Morris Harris, who has a "hold" rating on the stock and doesn't own it. "Becoming more ubiquitous helps them become a real relevant advertising and media player." Shares of XM rose 89 cents, or 10 percent, to $9.59 in Nasdaq Stock Market trading. They've more than tripled this year.
http://www.detnews.com/2003/technolo...ogy-149716.htm

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Entertainment industry might need Congress for online piracy relief
Alex Pham, Joseph Menn and Jeff Leeds

In their wide-ranging fight against online piracy, the music and movie industries have relied on a combination of carrots and sticks. But on Friday, a federal ruling threatened to take away one of their sticks. And, so far, fans largely have turned up their noses at the carrots. U.S. District Judge Stephen V. Wilson ruled that two of the largest file-sharing networks used by online pirates do not violate coyright laws.

Wilson held that Grokster and Morpheus are not liable for copyright infringement because they have no control over their users' activities, even if much of it is illegal. Friday's legal setback forces the entertainment industry to broaden its approach on three fronts: in the courts, in Congress and in the marketplace. In addition to appealing Wilson's ruling, the movie studios and record labels might start suing individual users who trade songs. The industry is lobbying Congress to fortify anti-piracy laws. And at the same time, record labels are trying to enhance sanctioned online music services to win back fans.

Hours after Wilson's ruling, the trade associations for the record and movie industries vowed to appeal. One of the industry's biggest legal sticks is a strategy of suing individuals, including college students who operate major file-sharing centers over their school's computer networks. The Recording Industry Association of America, for example, recently sued four college students. It also is suing Verizon Communications Inc. to force the Internet service provider to reveal names of customers accused of piracy.

One music label president, who spoke on condition of anonymity, said the industry has no choice but to sue young music fans. "It makes them angrier, but we have no other path right now," the executive said. "It's ridiculous what we're doing, but we have so few options." Even as the case winds through the court system, the entertainment industry probably will turn to Congress for help. In fact, Wilson suggested it in his ruling, writing that "additional legislative guidance may be well- counseled."

On Capitol Hill, the industry could revive a bill from last year to let copyright owners search for pirated content on file-sharing services and delete it. Another step would be to tinker with existing copyright law, for example, by declaring illegal software programs whose primary purpose is to aid in copyright violation. One of the most radical solutions, called compulsory licensing, would force entertainment companies to license their content to all comers. The government would then collect a special tax on Internet service providers, file sharing services and computer manufacturers, and redistribute the money to artists. Although the chances of companies agreeing to this is remote, the solution is slowly gaining backers. "It might be time to just forget about trying to channel the industry," said Jonathan Potter of the Digital Media Association in Washington, D.C. "Just get the content out there, anything to avoid a total loss of control."
http://www.detnews.com/2003/technolo...ogy-147497.htm

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To Jefferson and Madison, copyright was a dangerous monopoly that had to be restrained. Big Music has proved that pretty well

I ain't never seen no horses download it
Wendy M. Grossman

IT'S NOT OFTEN that someone comes up with a new argument against file-sharing of the music kind, but this week the folks in uk.music.folk managed to do just that. I shouldn't have been surprised, of course, since the combatants – er, debaters – include bright people such as Ian Anderson, editor of fRoots Magazine, fellow computer journalist Martin Banks, and Dick Gaughan, one of Scotland's finest performers, along with the original poster, who asked seriously whether we thought she was a prig for refusing to burn copies of CDs for friends. It's been a discussion worthy of Old Usenet – "before September became permanent," as Gaughan Old-Nettishly put it.

So, the argument I hadn't heard before goes as follows. Big Music complains that file-sharing hurts revenues, and no one believes it and if it does, no one cares. Independent Music says the same thing, and people still don't believe it. But if it's true, it hurts small labels much more because they're operating so close to the wire that they can't afford *any* loss of revenues. "If," Gaughan wrote on Wednesday, "small independents like me do not recoup the cost of making the recordings, the recordings don't get made, the small end of the whole recording business goes bust and the only ones left in business will be the very same big corporations that the armchair revolutionaries claim to be attacking."

This is, of course, a likely scenario. If I'm leery of accepting it to the point of doing a 180 and condemning file-sharing, it's because, as I've written here before, the anti-file-sharing agenda – banning file- sharing, enacting laws like the DMCA and the European Copyright Directive, and hard-wiring DRM in everything – will *also* result in the total destruction of independent labels and artists, to say nothing of free speech. The one thing the Internet gives us that we do not have with previous media is access to the channels of distribution. Let the cable companies bring in content-based routing, have ISPs police sites for copyright violations, make P2P illegal, design "trusted systems", keep extending the term of copyright, and you have no public domain and a medium that is controlled the way TV, radio, the telephone network (both mobile and landline), retail stores, and publishing are controlled. Try getting an independent CD into the average record store or played on the average radio station. Yet here on the Net we have a direct line to the world. For the moment. Our access to distribution is, I believe, what the major labels want to stop.
http://www.theinquirer.net/?article=9148

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”Until they can stop the file sharing and co-opt the whole process, we're not going to run out there and worry about having a digital download strategy.”


Michael Koch and Michael Rosenberg
(Photo by Lee Weissman)

Hitting the High Notes
Eric Marx

Musician Dwight Yoakam, a country singer who reviewers describe as "old-timer" or "veteran," has joined the ranks of Rancid, Nick Cave & the Bad Seeds, and Ani DiFranco.

After 16 years with Warner Bros./Reprise, part of the largest company in the music industry, Yoakam is turning to the tactics of musicians thriving at independent labels. The 46-year-old star plans to release his 17th album in June on his own label, Electrodisc Records.

But he won't be going it completely alone. "Population Me" will be distributed through Audium Records, a Nashville label owned by Port Washington-based Koch Entertainment.

Yoakam will have both creative and marketing control, and the artist, who has sold 22 million records, says he feels like a partner for the first time.

"I don't know if this model would work for everybody," said Yoakam in an interview via cell phone as he drove through the California desert. "Today you have to think outside the box and be cognizant of the enormous variety of outlets for music that is multiplying daily."

And he's turned to Koch Entertainment for a direct line to those outlets. Koch owns its own label, but also collaborates on distribution with artists working for other independent labels. This relationship fosters a flexibility and artistic control that has helped push Koch into the No. 1 spot among independent music distributors in the country.

The company saw sales increase 20 percent in 2002 to $140 million and is expecting more growth in 2003. And that's all in an industry dominated by five major recording labels that have slashed budgets and released countless artists in an attempt to stay alive as free music downloading from the Internet cuts into profits and threatens the way they've always done business.
http://www.newsday.com/business/ny-b...ness-headlines

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Tennessee Digital Freedom Network
Grass Roots
Flash News

We're getting down to the wire, with House and Senate hearings coming on April 30th and May 6th. Email your representative, especially if they're on the Judiciary Committee. There's still time to get a postal letter to your senator, so please do that as well (again, especially if they're a Judiciary Committee member!)

Upcoming Events — Remember: We must be PRESENT to WIN!

Tuesday, 4/29 @ 7:30pm
Meeting at Scott Kozicki's home to prepare for Wednesday's HB457 hearing

Wednesday, 4/ 30 @ 8:30am
House Judiciary Committee hearing on HB457

Monday, 5/05 @ 7:30pm
Tentative Meeting planned for SB213 hearing

Tuesday, 5/06 @ 3:30pm
Senate Judiciary Committee hearing on SB213

http://tonyc.com/tndf/

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Hearings

The Copyright Office has scheduled hearings in this rulemaking in Washington, D.C., on April 11, May 1, May 2, and May 9, 2003 and in Los Angeles, CA on May 14 and 15, 2003 at the UCLA School of Law. (Read more information on Washington, D.C., hearings and on the Los Angeles, CA hearings.)

The hearings that were scheduled to take place on April 15 and 30 have been cancelled. Instead there will now be an afternoon hearing on May 1, a full day of hearings on May 2, and a hearing on May 9. The May hearings in D.C. will all be held at the Postal Rate Commission, 1333 H Street, NW., Third Floor, Washington, D.C. (For more information, see the Federal Register Notice announcing these new hearing dates.)

The full agenda of the May hearings in Washington and in Los Angeles is now available. Transcripts of the hearings will be available 7-10 ays after each hearing. See the 1201 Hearing Page for additional information about the agenda and available transcripts.
http://www.copyright.gov/1201/

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Massachusetts Super-DMCA Won't Move Soon
John Palfrey

I just spoke to a senior committee staffer in the Criminal Justice joint committee of the Massachusetts State House. She told me they continue to be deluged with negative commentary about HR 2743, the proposed Super-DMCA bill for Massachusetts (i.e., that lots of people are telling her that the bill is ill-conceived and shouldn't be passed). She also said that there's no chance it's moving anywhere for at least a month, given that it's budget time and also they haven't gotten through all their hearings (last one May 28). In legislative process, delay tends to be good for opponents of bills. So do lots and lots of negative comments inundating committee staffers. Keep it up, software and public interest community and voters of Massachusetts!
http://blogs.law.harvard.edu/palfrey/2003/04/25#a178

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Stiff opposition derails open-source measure
Jeffrey Kosseff

The software industry is slamming the door on a push for Oregon government agencies to use open- source software -- computer programs that don't carry recurring fees or usage restrictions.

House Bill 2892 was scheduled for discussion Thursday at a House General Government Committee work session but was passed over after heavy opposition to the proposal, which would require state agencies to consider open-source software when purchasing computer programs.

Even if the panel eventually considers the bill, some of the strongest -- and most opposed -- provisions have been removed.

Microsoft, other software companies and three national technology trade groups have squared off against a grass-roots group of open-source programmers and school districts pushing for the bill.

"A lot of it is going to depend on whether or not we can work through the issues the folks have," said Rep. Jerry Krummel, R-Wilsonville, chairman of the government committee, which earlier this month held an initial hearing packed with opponents and proponents of the bill.

Krummel ordered both sides into a work group last week to attempt a compromise. The open-source proponents agreed to drop a requirement for state agencies to justify purchases of proprietary programs such as Microsoft Office.

Both the industry and the state's Department of Administrative Services -- Oregon's central purchasing agency -- said requiring agencies to justify the purchases would be cumbersome.

"We took out the justification because that drew a lot of fire," said Ken Barber, the Eugene network engineer who drafted the bill, which was proposed by Rep. Phil Barnhart, D-Eugene. "That basically takes out almost everything they were opposing"

But the industry continues to oppose some requirements.
http://www.oregonlive.com/business/o...6959318260.xml

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A file-trading ship of fools
Don't scapegoat greedy record execs for Napster's failure, says Joseph Menn in "All the Rave: The Rise and Fall of Shawn Fanning's Napster." The inept bunglers who ran the company have only themselves to blame.
Farhad Manjoo

Joseph Menn's "All the Rave: The Rise and Fall of Shawn Fanning's Napster" begins with an epigraph from "Hamlet." The lines are from Act III, Scene ii, a point in the play where Hamlet suspects, but is not yet sure, that his uncle, Claudius, has killed his father. Hamlet needs a second opinion. "Observe mine uncle," he tells his friend Horatio. "Give him heedful note, for I mine eyes will rivet to his face, and after we will both our judgments join in censure of his seeming." It's an elegant way of saying, more or less, "Keep an eye on the old man and let me know if you, too, think he's a rotten creep."

The music world might be very different today had Shawn Fanning ever been so blunt about his uncle, John. Napster was a brilliant bit of technology, and it inspired a host of compelling legal and economic questions, but the early story of Napster, missed by the hundreds of journalists who covered the company, is a classic tale of intra-familial duplicity.

As Menn tells it, Shawn Fanning, the 19-year-old who created Napster in a fit of Red Bull soda-fueled coding, was a sweet, smart kid who loved music and computers. But it was Shawn's uncle, John Fanning -- a struggling businessman who loved only money, power, and himself -- who took early control of the company, and was responsible for many of its big mistakes. Menn suggests that Shawn never quite appreciated, as Hamlet did, his uncle's chicanery. While everyone else involved in Napster saw through the uncle, Shawn himself seemed always to be in thrall to John Fanning -- and that may have been the company's undoing.

While it has its moments of low farce, "All the Rave" unspools like an Internet-age tragedy, a story of technological inspiration that, very quickly, morphs into a mess from which no good end can come. Menn, a reporter at the Los Angeles Times, has exhaustively researched every aspect of the Napster saga, and the book reads like a definitive account.

Subscription required http://www.salon.com/tech/feature/20.../index_np.html

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The freshest spin
Where lawyers see piracy, talent scouts see potential. It's the hip-hop mix tape.
Geoff Boucher

On clear weekends here, a boisterous bazaar sets up along the sidewalks that bracket Broadway and Canal Street, and anyone in the market for a gold chain, a bootleg DVD or a Rolex of questionable pedigree can haggle up and down the block. One of the fixtures on this scene is a salesman -- he identifies himself only as "J" (it's even on his business card) -- who stacks underground rap CDs on a folding table, most priced at $10.

The CDs are called mix tapes, and while the name is defiantly old school in its cassette-era origins, they are the cutting edge of the moment as rap finds some of its future in its own past. A flagship symbol of that phenomenon is best-selling rapper 50 Cent, who this year spun his mix-tape success into major label platinum. J, a proud merchant, is well aware of all of this. "It all starts here," he said with a wave of his hand. "If it's new, it's right here."

The mix tapes are the creations of local DJs who take hits, rarities, the works of up-and-coming rappers or all of the above, and use them to turn a blank CD into a highly personal jukebox. There is intense competition among those DJs to get the freshest material, and because the formal music industry has long viewed the whole scene as a copyright nightmare, a spirit of pirate radio pervades.

With his back to traffic and a pair of customers perusing his stock, J the merchant shakes his head when asked about the edgy topics on mix tapes. "So is this a story that is going to get me in trouble?" He doesn't want to talk about collecting sales tax, either, or the fact that mix tapes sample everyone from Run DMC to 2Pac without permission or payment. "Look, there wouldn't be a rap music industry if it weren't for the mix tapes."

In the 1970s, mix tapes were the first recordings of the nascent hip-hop scene in this city, and back then they were often simply a document of a DJ's playlist at a nightclub on a Saturday night. "We made them and sold them at the clubs and through taxi drivers," hip-hop pioneer Afrika Bambaataa said. "There were no rap records yet, so this was the only way people could take the music with them."

The music crisscrossed the city in those cabs and eventually grew to become one of the biggest commercial forces in American youth culture, largely relegating mix tapes to a quaint chapter of hip-hop's heritage. Now, though, with the stars aligning just right, the mix tape has not only returned as potent tastemaker, it's also enjoying such a flurry of interest and respect from the mainstream music industry that it feels like an overnight sensation. Conflicted labels regard the scene as both piracy menace and talent mother lode.

"What's going on now," Bambaataa said, "is pretty amazing."
http://www.hodder.org/latimes/Thefreshestspin402003.htm

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Tech books to enter public domain
O'Reilly & Associates limiting its own copyright protection
Dennis O'Reilly

Computer book publisher O'Reilly & Associates is taking a dramatic stand against automatic extensions of U.S. copyrights by voluntarily limiting its own copyright protection on hundreds of technical titles--and promising they'll enter the public domain after that.

The publisher is the first to adopt the Founders' Copyright program of the Silicon Valley-based nonprofit Creative Commons. O'Reilly is shortening its books' copyright term from life of author plus 70 years--the period allowed in the Sonny Bono Copyright Term Extension Act of 1998. Rather, O'Reilly's titles will retain copyright for 14 years with an option for another 14 years, which copyright law originally allowed in 1790.

Tim O'Reilly, chief executive officer, announced the stance at the company's Emerging Technology Conference here this week.

"I made a vow at last year's ETech to honor Founders' Copyright," said O'Reilly, referring to the promise he made after a presentation by Creative Commons Chair Lawrence Lessig at the 2002 conference.

Extending copyrights for long periods causes books to be lost to the public because of "fuzzy" copyrights and the difficulty of tracking licenses, O'Reilly says. But he suggests that small communities can give a forgotten work new life. "We have a moral obligation to make books available for others to use," O'Reilly says.
http://www.infoworld.com/article/03/...oreilly_1.html

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DVD Copying Court Battle to Begin Reuters
Reuters

Hollywood's movie studios face a key test in their battle to defend copyright holders from digital pirates, when a federal court in California this Friday hears a case filed by a maker of software that allows users to copy DVDs.

At stake for the studios are potentially billions of dollars in revenues that would be lost if nearly perfect digital copies of movies on DVD were sold in large quantities on the black market or circulated on the Internet in digital files.

But the privately held software-maker, St. Louis-based 321 Studios, argues that its software is designed to protect DVD owners by allowing them to make backup copies in case their DVDs, which can cost as much as $30, get damaged or are lost.

The case, which will be heard in U.S. District Court for the Northern District of California, tests the limits of 1998's controversial Digital Millennium Copyright Act, lawyers said.

The studios claim 321's software violates a portion of the act that makes it illegal for anyone to sell software used to break or bypass digital encryption codes.

But 321 argues that the DMCA allows software owners to get around encryption when copies are made for an owner's sole use.

"This is a very interesting, cutting-edge case," said 321's San Francisco-based attorney Daralyn Durie. "The first issue is what does the DMCA mean, and does it prohibit all circumvention of encryption, or does it only prohibit the circumvention when it's being done to engage in copyright infringement."
http://www.wired.com/news/technology...,58583,00.html

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Online Anonymity Comes Under Fire
Katie Dean

Though Verizon recently lost its fight to keep two subscriber's personal information out of the hands of the recording industry, privacy advocates say the real losers are consumers.

Invoking a provision of the Digital Millennium Copyright Act, the Recording Industry Association of America subpoenaed Verizon to turn over the name of two of its Internet service subscribers, both alleged file- swappers.

Verizon had filed a motion to quash the subpoena, but on Thursday a U.S. District Court ruled that the company must hand over the name of the suspected pirates.

Verizon announced it would ask a U.S. Appeals Court for a stay of the ruling.

While RIAA president Cary Sherman cheered this week's ruling, saying it makes clear that "individuals cannot rely on their ISPs to shield them from accountability," privacy advocates were sorely disappointed. Several digital privacy experts said the decision failed to adequately consider the interests of individual subscribers.

"I think the natural reaction for those of us who value privacy issues is to be saddened by the ruling, and we think the judge went down the wrong path," said Mike Godwin, senior technology counsel for Public Knowledge.

"He was weighing Verizon's interests against the recording industry's interests and it should have been the subscriber's privacy interests that he weighed against the recording industry's interests," Godwin said."To us, the biggest privacy problem for Internet users is the people whose identity is unmasked never get any notice that they've been the target of one of these subpoenas," said Alan Davidson, associate director for the Center for Democracy & Technology. "Notice is one of the bedrock principles of privacy and Fourth Amendment law because it gives you the opportunity to challenge an improper request and to know that your privacy has been invaded."

Davidson said that he agrees that copyright owners should be able to enforce their copyrights, but that procedures to do so must follow due process.

"There's no proof (of infringement) that's really required," he said. "The current standard is really a very low standard for due process."

Besides the entertainment industry, those who could potentially claim copyright infringement include website operators who want to know the identities of those who frequent their site. Or an identify thief could allege copyright infringement, and use the subpoena process to collect personal information. A chat room participant who wants to discover the identity of another person in the room may try and use this method to access personal data.

The potential for such subpoenas is particularly disturbing, Cohn said, since the Internet users whose identifying information is being sought may not have done anything illegal or even suspicious.

"I think most people believe that you're innocent until proven guilty. If somebody thinks that you've violated their copyright, the situation is reversed," Cohn said. "They get to identify you first without proving that you've done anything wrong.
http://www.wired.com/news/digiwood/0,1412,58633,00.html

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Grokster Ruling: Instant Analysis
Edward W. Felten

Judge Wilson's opinion, dismissing the music industry suit against Grokster and Morpheus, contains few surprises beyond the result itself.

Judge Wilson ruled, essentially, that although some users of the defendants' P2P software used the software to infringe copyrights, this infringing activity was beyond the control of the defendants. Unlike Napster, these defendants had no active, ongoing involvement in the infringing activity, and hence had no ability to stop it. Simply creating a product that was capable of infringing uses was not enough to support either contributory or vicarious liability. To hold otherwise, the judge said, would be contrary to established precedent and would make common products like photocopiers illegal.

For example, here is the judge's reasoning in disposing of the vicarious infringement claim:

While the parties dispute what Defendants feasibly could do to alter their software, unlike in Napster, there is no admissible evidence before the Court indicating that Defendants have the ability to supervise and control the infringing conduct (all of which occurs after the product has passed to end users). The doctrine of vicarious infringement does not contemplate liability based upon the fact that a product could be made such that it is less susceptible to unlawful use, where no control over the user of the product exists.

The most important part of the opinion is at the end:

The Court is not blind to the possibility that Defendants may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefitting financially from the illicit draw of their wares. While the Court need not decide whether steps could be taken to reduce the susceptibility of such software to unlawful use, assuming such steps could be taken, additional legislative guidance may be well-counseled.

To justify a judicial remedy, however, Plaintiffs invite this Court to expand existing copyright law beyond its well-drawn boundaries. As the Supreme Court has observed, courts must tread lightly in circumstances such as these:

The judiciary's reluctance to expand the protections afforded by the copyright without explicit legislative guidance is a recurring theme. [Citations.] Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accomodate fully the raised permutations of competing interests that are inevitably implicated by such new technology.

In a case like this, in which Congress has not plainly marked our course, we must be circumspect in contruing the scope of rights created by a legislative enactment which never calculated such a calculus of interests.

Unless this decision is overturned quickly on appeal, the P2P policy battle will now move to Washington. Having lost in the Courts, the content industry will take the judge's hint and lobby Congress to pass legislation changing the rules. My prediction is that we'll see a bill circulated that creates an affirmative responsiblity to design products that make infringement as difficult as possible.
http://www.freedom-to-tinker.com/archives/000374.html

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Faster Than the Speed of Software
The record labels have a new idea for selling music online. The only catch: This time, they are ahead of the technology needed for it to happen.
Jon Healey

It's fashionable in high-tech circles to belittle record labels as dinosaurs. Rather than blaming the Internet for killing CD sales, the argument goes, the labels should embrace new technology that could bring the music industry out of its slump.

But on one important front, the five major record companies are ahead of the technologists — Microsoft Corp. and RealNetworks Inc. in particular.

In a little-known move, the major record firms have agreed to let consumers download an unlimited number of songs and listen to them wherever they go, for less than the price of one CD a month. As long as they keep paying subscription fees, users can have thousands of songs at their fingertips.

That could transform what it means to "buy" music. Instead of paying for prepackaged collections on plastic discs, consumers would pay to access an enormous and growing online catalog of individual songs.

The problem: A new generation of portable players designed for music that's rented, not owned, needs new software to function — something programmers at Microsoft and Real haven't been able to design.

The labels, which have seen CD sales drop in the last two years, need radical new ideas as they fight the proliferation of online file-sharing services that allow users to copy music for free. The pressure increased Friday, when a federal judge ruled that two such services — Morpheus and Grokster — don't violate copyright law.

Morpheus and Grokster attract millions of users, but the online services sanctioned by the record labels have signed up a fraction of that number. One reason is that the label-backed services don't offer the freedom to move a song easily and cheaply from a computer to wherever someone might want to hear it.

That's because of the labels' conflicted attitude about selling music online: They want to take advantage of the market but are so concerned about piracy that they demand electronic locks on their song files.

To work with the unlimited-music services the labels endorse, a device has to be able to unlock files for listening, then lock them back up when a subscriber stops paying the monthly fee. A computer can do that, but today's portable music players can't. They are not smart enough to know which songs came from the subscription service, when their licenses expire or are renewed and how to keep their internal clocks running when their batteries die.

Microsoft was supposed to deliver software to power such devices at the end of last year, but the company now is telling customers it won't be ready for months. At Real, an executive says the company is making progress but is hindered by "pages and pages" of demands by some of the labels regarding "how this stuff has to behave."
http://www.latimes.com/business/la-f...nes%2Dbusiness