June 28, 2004
Volume 5, Issue 3
US Senate's PIRATE Act
By Doug Campbell, DCIA Government Relations
With the passage of the PIRATE Act (S. 2237) by the Senate on Friday without a committee hearing, without debate or amendment, and without a recorded vote, legislative balance and good policy have been forced to walk the plank.
At the behest of one special interest - the entertainment industry - the Senate has authorized and directed the Department of Justice to sue individuals who infringe copyrights through peer-to-peer (P2P) file sharing for huge damages, and to collect corresponding damages for the copyright owners, at government (taxpayer) expense.
The bill's sponsors, in a marvel of creative positioning, claim this step is a compassionate one, since it would allow the Department of Justice (DOJ) to sue for damages instead of seeking jail time. They complain that the Justice Department does not currently pursue these prosecutions because the standard of proof for a criminal conviction is high. Coming from the Judiciary Committee, this complaint is disquieting.
Rather than abiding by that high criminal proof standard, one of our most cherished American civil liberties protections, designed to protect the innocent from the immense prosecutorial power of the federal government, they have sought a way to involve the government through a weakened standard.
The real question is why the government should be involved in these damages suits at all. The movie studios and the recording labels already have unmatched legal authority to sue anyone who in any way disturbs their many-faceted rights under copyright law. They are entitled to large statutory damages, without having to prove actual damage at all (this despite recent studies that demonstrate little if any harm to their economic interests from unauthorized file-sharing).
They have large legal staffs populated with top talent, and, in the case of the recording labels, a trade association that has a financial incentive to sue individuals for infringement. They have gained much experience and expertise in suing consumers over the last couple of years. They hire the best outside law firms to litigate for them.
Nevertheless, the bill's introductory statement (which is all there is, since there were no hearings and no floor debate) claim these suits are too expensive and too complicated for the likes of Time Warner and Sony. Thus, it is necessary to have the DOJ become the entertainment industry's free, taxpayer-funded plaintiff's counsel.
The measure doesn't even require the deduction from the award given to the copyright holder of a share of the government's investigational or trial expenses. It is truly free. No wonder the entertainment industry placed top priority on pushing this bill through.
Maybe when S. 2237 passed, it was the taxpayer who was forced to walk the plank. A PIRATE Act, indeed.
Report from CEO Marty Lafferty
 Thank you to Les Ottolenghi, President of DCIA Member INTENT MediaWorks, for providing valuable testimony at the Senate hearing Wednesday on "The Future of P2P Technology."
He clearly outlined the commercial viability of licensed content distribution via the P2P channel.
Following differences of opinion voiced by software technology and entertainment content panelists, Les also noted that the DCIA is dedicated to helping these interests find business solutions that will succeed in the marketplace.
The Director of the FTC's Bureau of Consumer Protection, Howard Beales, provided a concise overview of P2P technology: "File-sharing applications work by making selected files on a user's computer available for upload, which in turn gives the user access to selected files on the computers of other users of the same P2P file-sharing software (hence the name, peer-to-peer)."
"P2P file-sharing programs eliminate the need for a central storage point for files, and, therefore can increase the speed of file transfers and conserve bandwidth. This technology is significantly faster than traditional file transfer downloads and significantly cheaper because it requires less bandwidth."
He also cited consumer risks associated with using P2P file-sharing programs, while also acknowledging that many consumers are likely aware of these risks. For example, awareness of infringement arising from some 3,000 music industry lawsuits, and awareness of P2P virus risks inferred from knowledge of e-mail viruses.
"The issue of whether the distributor of a technology has a legal obligation under Section 5 of the FTC Act to disclose risks that depend on individual use is not limited to the P2P file-sharing program context; it also implicates many other consumer technologies."
"For example, consumers can use e-mail to send or receive copyrighted materials, pornography, viruses, and spyware. Similarly, search engine technology may expose consumers inadvertently to child pornography, viruses, and spyware. Videotape recorders and compact disc recorders may be used in violation of copyright laws by individuals who are unaware that they are doing so. Many risks associated with P2P file-sharing seem to result largely from the actions of individual users, rather than from the operation of the P2P file-sharing software itself."
"The FTC reviewed the disclosures on the Web sites of the ten most popular P2P file-sharing software program distributors. Consumers have downloaded these ten file-sharing programs more than 640 million times. The purpose of this review was to determine whether these distributors misrepresent the risks associated with their P2P file-sharing programs."
"FTC staff reviewed and analyzed the representations made by these distributors about the risks associated with downloading and using their programs. None of these representations appear on their face to be false or misleading."
However, he also noted that distributors of P2P file-sharing programs could increase the amount, clarity, and conspicuousness of risk information that they provide: "Because risk information may be useful to consumers, the Commission believes that it would be beneficial for distributors to make this information more accessible."
Director Beales then quoted a recent DCIA letter to the FTC regarding our Member companies' desire "to act responsibly, to improve their products, and to offer consumers a high-quality experience."
We will be meeting with an FTC Commissioner on Tuesday to discuss ways to improve disclosures and with our Best Practices leader on Thursday in NY to develop recommendations for standardizing an optimal approach. Meantime please take time to peruse the FTC Disclosures Brochure and consider ways to incorporate a prominent link on P2P program download sites enabling consumers to access FTC-provided information about risks associated with file sharing.
The Commission staff plans to re-examine the websites of P2P file-sharing software programs to reassess the information that distributors are providing to consumers. This is a terrific opportunity for our new industry to once again demonstrate its responsiveness, innovation, and good citizenship. I'm confident we will do all of that and more.
Welcome New DCIA Member Project V-G
Please warmly welcome Project Venezia-Gondola to the Operations Group. We look forward to providing valuable services to this newest DCIA Member and supporting its contributions to commercial development of the distributed computing industry.
Project V-G is an application framework for peer-to-peer (P2P) commerce. It was started by Raymond Gao, a leading IT industry figure, who DCINFO readers may recall is also the publisher of the affiliated P2P Journal. Project V-G adds "bartering" and "goodwill" functions in addition to regular monetary based online transactions.
It has three components: a P2P commerce network called "Venezia Network", a P2P commerce engine called "Venezia", and a graphic user interface call "Gondola". Project V-G uses a new computing model called the inverted model-view-controller (IMVC) pattern.
It is also an open-source project, allowing developers to write their own user interfaces (UI), i.e. "skins" for "Gondola. Project V-G provides tools for starting multiple P2P commerce marketplaces, with competing, cooperative, inter-dependent, and consolidated relationships, as well as be self-standing. More information can be found at Project V-G White Paper.
Washington Digital Media Conference Wrap-Up
The DCIA-sponsored "Technology for Digital Content Delivery" track on which DCIA Member Relatable's CEO Pat Breslin was a featured speaker, covered a range of cutting-edge topics from Morpheus 4.0's NEOnet technology, which makes it easier to find content with 100 percent accuracy, to Convera's search technology used to index video content for NASA.
Pat discussed Relatable's proprietary TRM technology, an acoustic fingerprinting solution capable of inventorying an enormous database of music files distributed on tens of millions of end-user computers. He also noted that there are more than twenty times (20X) the number of discreet tracks currently distributed via P2P than by the largest centralized download store.
The panel entitled "Spyware: Protecting Consumer Privacy" moderated by DCIA CEO Marty Lafferty, featured the Center for Democracy & Technology's (CDT) Mike Steffen, Verizon's Sarah Deutsch, the DCIA/Fleishman-Hillard's Doug Campbell, and Congressman Jay Inslee's Brian Peters. Mike provided background on CDT's interest in this area stemming from software that doesn't respect a user's control of his/her own computer - a privacy violation akin to trespass.
Sarah added that the intent to deceive or mislead people to do something they don't mean to do is also core to defining what spyware is. Brian noted that Congress felt compelled to respond to such serious issues as privacy invasion and identity theft. And Doug urged an approach in responding to spyware that would avoid the law of unintended consequences.
The CDT has approached this issue comprehensively from the consumer's perspective starting with pre-installation then going through operation and ending with the uninstall process. It formed the Consumer Software Working Group (CSWG), comprised of some fifty companies and interest groups, which developed a list of deceptive practices introduced at the FTC spyware workshop, and is now advising the HR Commerce Committee on proposed spyware legislation.
The panel discussed pros-and-cons of approaches focused on "bad behaviors" in software functionality versus "notice-and-consent" regimes that seem to be favored by Congress. The panel voiced concerns over the potential of the latter approach unintentionally immunizing bad actors, generally preferring the former approach.
The need to protect valid business models, most notably contextual online advertising that brings efficiency and added benefits to advertisers and consumers, was also discussed. There would be great value to users as well as practitioners of knowing with certainty the specific responsibilities that should be required to be considered a best practice in the category.
SML Signs CDBaby to Weedshare
In addition to its file-sharing deal for Heart's "Jupiters Darling" with co-DCIA Member Sovereign Artists, Shared Media Licensing (SML) last week also closed a deal with CD Baby. SML will offer CDBaby affiliated artists the option to digitally distribute their music using the Weed file format. Developed by SML, Weed files can be freely shared over the Internet and earn revenue for musicians.
CD Baby was founded in 1998 by Derek Sivers. Looking for an easier way to market CDs by himself and a few friends, he set up shop on the Internet. Over the last 6 years, the business has mushroomed to become the world's largest online retailer of independent music, with sales exceeding 1 million CDs. CD Baby's digital distribution service currently includes over 230,000 titles by independent artists.
Weed provides CD Baby members with an entirely new way to distribute their music. Weed files are designed to be shared legally over the Internet. When you get a Weed file, you can listen to it 3 times for free before being asked to buy it. If you buy it, you can share it and earn a sales commission.
P2P for Music Discovery
By Paul Resnikoff, Digital Music News
The recent data from BigChampagne on file-trading patterns for non-radio artists may show an interesting side effect of radio consolidation. The effects of FCC deregulation on radio ownership have been debated - but no one can argue that fewer total songs are being played on mainstream radio outlets.
That could be changing the way music fans go about discovering music, with a greater emphasis placed on discovery through mechanisms like
P2P software programs. Unclear is just how much consumer behavior will shift towards more proactive music discovery activities. But the new P2P data does show that more artist success stories could start to develop outside of traditional radio channels.
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