May 31, 2010
Volume XXX, Issue 12
A New Study Sees Added Value in Cloud Computing
Excerpted from TMCnet Report by Lance Whitney
Cloud computing is one of those topics that often elicits a mixed reaction in the tech world. Businesses see it as a strong cost savings at a time when they're feverously trying to trim expenses. But many IT administrators still have their doubts, expressing worries over the security, safety, and reliability of farming out data and services to cloud providers.
Despite any concerns among IT pros, cloud computing is here to stay and is likely to hook itself even deeper into the business world, according to results from a new study by Sand Hill Group.
As an advisor to market leading companies, Sand Hill interviewed more than 500 IT executives to gauge their opinions and deployment plans on cloud computing. Though certain challenges were found, the survey "Leaders in the Cloud" painted an overall rosy picture of the ability of cloud computing to help cut costs, boost return on equity, improve reliability, and even enhance the image of IT within a company.
The in-depth interviews discovered that cloud computing, though in its early stages, is already benefiting companies. The CIOs surveyed were optimistic that cloud computing can help to better align IT with the needs of the business, always a goal and challenge in any organization. In fact, the primary reason for adopting cloud computing is to meet specific business needs. And the executives said that using the cloud has helped them solve problems faster and cheaper, in turn gaining newfound respect for IT from the business side.
Another key driver for cloud computing cited in the survey was business agility. Almost half of executives interviewed said that cloud solutions help them reach business goals with greater flexibility and innovation. IT can quickly and efficiently tap into the cloud to react to the always changing and growing needs of the business.
In total, 40 one-hour interviews were conducted with IT executives. Among those, 22 interviews were done with CIOs, VPs, and technology directors at small, medium, and large companies across a variety of industries. But to get the vendor side of the equation, eight interviews with done with executives responsible for cloud products at small and large software companies.
What about the downsides of cloud computing? Sand Hill certainly uncovered concerns over security and integration. There are gaps between the technology itself and the products being offered by vendors as well as cultural and organizational challenges with IT.
But Sand Hill believes the value of cloud computing is real and that both customers and vendors should work toward building the right cloud solutions to benefit the business.
Deal-Making Is Back in Silicon Valley
Excerpted from San Jose Mercury News Report by Scott Duke Harris
Deal-making is back in style in Silicon Valley. Driven by powerful trends in mobile devices, digital media, and cloud computing, tech companies are acting on the urge to merge - a sign, many say, of an improving economy.
SAP's pending $5.8 billion purchase of Sybase and Hewlett-Packard's (HP) pending $1.2 billion takeover of Palm are the latest headliners among 255 mergers and acquisitions (M&A) with a total value of $17.1 billion that have involved Bay Area companies so far this year. That's a big improvement over the same period last year, when there were 192 deals in the region with a value of $12.9 billion.
"We see this as a return to a more normal pattern of deal-making," said Rob Fisher, a leader of M&A operation of the accounting firm PricewaterhouseCoopers (PwC). The stock market, while recently shaken by Greece's financial crisis, has strengthened over the past year, unleashing pent-up demand for M&A, Fisher said.
For the shrinking venture capital industry, the surge is providing a welcome return on investments (ROI) at a time when the recovery in initial public stock offerings (IPOs) remains spotty.
"We're seeing more companies go public, but the M&A activity outpaces the IPOs," said Promod Haque, Managing Director of Norwest Venture Partners.
Healthy M&A and IPO markets are considered vital to the valley's economy. Both provide venture firms with so-called "exits" that enable them to deliver returns to limited partners, which in turn encourages new investments that fund new start-ups.
While the pace of M&A surpasses pre-recession levels, the average value of deals is down sharply from that same period, according to Brenon Daly, an analyst with the 451 Group, a San Francisco firm that tracks the tech industry. He likened it to a rebound in the volume of home sales, with prices remaining depressed.
With the region's unemployment rate at around 11%, the question is whether all the deal-making will put more people to work.
Some megadeals, such as HP's $13.9 billion acquisition of EDS in 2008, trigger large layoffs as managers eliminate overlapping jobs and promote efficiencies. Other deals may have a marginal impact on overall jobs. But several of the valley's recent deals, executives and venture investors say, are geared to accelerate new market opportunities and should generate jobs.
"We already had an aggressive hiring plan - and Salesforce is going to throw rocket fuel on that," said Jim Fowler, founder of JigSaw, a business database company with about 140 employees that Salesforce.com recently purchased for $142 million.
Cast Iron Systems, a Mountain View, CA company that helps businesses adapt to web-based cloud computing, was focused on the US market - until IBM recently acquired it to bring its technology to a global market. "I believe you will see tremendous growth in that Cast Iron subsidiary now," said Haque, a former Cast Iron director.
The surge in deal-making revives a broad pattern of consolidation in the tech industry that some date to Oracle's high-profile, hostile $10.3 billion takeover of PeopleSoft in late 2004. That trend turned sluggish with the recession and all but ground to a halt in the depths of the financial crisis, said Fisher of PricewaterhouseCoopers.
A confluence of three factors, business leaders say, has made M&A a more vital force in the Silicon Valley economy: regulatory changes, growing corporate clout, and evolving technologies.
The dot-com boom was driven by IPOs and a giddy atmosphere of stock market speculation. In the aftermath of the dot-com collapse and scandals surrounding Enron and other companies, Congress adopted reforms that turned the sprint to Wall Street into a steeplechase.
Most private companies pondering IPOs today require more time and revenues approaching $100 million, said Norwest's Haque. Given such hurdles, the M&A option becomes more attractive for start-up founders, executives, and venture investors.
Many promising start-ups wind up on the shopping list of corporate giants. Cisco Systems, Oracle, HP, and Google - as well as non-valley giants Microsoft, IBM, and EMC - are known for their acquisition strategies. The nation's 10 largest tech companies, one analyst points out, collectively have about $200 billion in cash on hand.
Technology trends often drive the deal-making by providing "synergies." SAP, the German company that is Oracle's chief rival, is counting on Sybase's expertise in mobile computing to help it adapt to the changing business market.
IBM's acquisition of Cast Iron is designed to help it prosper amid the growing importance of cloud computing. Executives at Harmonic and Omneon, video infrastructure companies with complementary technologies, say the recent marriage of their companies will position them within an accelerating revolution of video, ranging from 3-D and high-definition (HD) production to the delivery of video on mobile devices such as the iPad.
M&A can reshape the competitive landscape. Proofpoint, a Sunnyvale, CA based provider of web-based e-mail security systems, found itself competing against giants after Cisco acquired Iron Port, Google bought Postini, and Symantec purchased Message Labs. In sales pitches, Proofpoint tries to use its rivals' size against them, emphasizing that it is more of a specialist in its field, CEO Gary Steele said.
Proofpoint, which has made three acquisitions in the last two years, could itself become a target for acquisition. The company's preference, Steele said, is to pursue an IPO.
"We definitely believe in managing our own destiny, and the public markets offer interesting advantages," he said. Among those advantages: the ability to use stock as currency to make more acquisitions.
"We're constantly evaluating new opportunities," Steele said.
Report from CEO Marty Lafferty
 Earlier this month, US Congressional leaders wrote to the Federal Communications Commission (FCC) voicing their concerns about the agency's apparent inability to respond effectively to Internet-related issues, which they believe as a priority matter should be addressed, given that broadband has evolved into much more than a technology per se.
It has become a vibrant commercial platform for social, economic, and educational opportunity in its own right.
The trigger for this letter was an opinion of the US Court of Appeals, which stated that the FCC lacked legal authority to rule on a highly-publicized instance of P2P traffic throttling. The court did not opine as to whether or not the FCC in fact should be able to regulate the networks that comprise the Internet, which is a much larger issue.
While the federal government embarrassingly stumbled in its response to the public revelation of this now outdated network management technique, the private sector, through both bilateral efforts of the principal parties involved in the matter, and on a broader scale, the DCIA-sponsored P4P Working Group, voluntarily addressed this issue with innovative technological solutions and updated business practices.
Predictably, however, a leading Senator and Congressman, rather than pursuing a course based on encouraging such approaches, instead raised questions about "the Commission's authority to move forward" with government-centric efforts portrayed in as utopian a way as possible: promote broadband adoption and deployment, safeguard consumer privacy, provide subscribers with information about broadband service offerings, protect an open Internet, strengthen public safety communications, and enhance cyber-security.
The senior lawmakers clearly feel that the Commission should be able to have oversight over such aspects of the Internet because of the increasingly vital importance of broadband to our growing digital economy.
The fact that the Internet, absent such regulatory constraints, has significantly outpaced other sectors in its growth, performance, and ability to self-regulate so as to ensure its ability to continue to grow and perform, is completely missing from their situation analysis.
Also absent is any consideration of whether, even if the FCC had legal authority, it would be able, as a practical matter, to effectively impose regulations over all of these aspects of the Internet.
FCC Chair Julius Genachowski's most recently announced approach would be to dredge up now outdated common-carrier non-discrimination rules for Internet service providers (ISPs), which would be a move in exactly the wrong direction for many reasons, including that it would be totally antithetical to the nature of the Internet itself. Not to mention that there is currently no legal basis for this approach.
Once again, unfortunately, these pronouncements and others along similar lines demonstrate how outdated and ineffective federal institutions themselves have become in addressing in a meaningful way the unprecedented openness and ever-accelerating speed of technological advancement of the Internet.
We have written previously about our recommendations to Congress and the FCC for ways to beneficially influence the continuing development of the Internet and Internet-based services.
But now, this week, Senator Jay Rockefeller IV (D-WV), Congressman Henry Waxman (D-CA), Senator John Kerry, (D-MA), and Congressman Rick Boucher (D-VA) have announced they will start a related process to update the US Communications Act.
These Congressional lawmakers are Chairs of the Commerce Committees and Subcommittees in their respective bodies that deal with major telecommunications and technology issues, including the Internet.
The referenced US Communications Act is actually the "Telecommunications Act of 1996," itself a major update of the original Communications Act of 1934.
As the first step, legislators will invite stakeholders to participate in a series of "bipartisan, issue-focused meetings" starting in June. A list of topics for discussion and details about this process will be forthcoming.
Industry observers see the timing of this effort as intended to develop input for the ongoing FCC regulatory effort focused on regulating the Internet. But it can and should be understood as much more than that, and industry participants must get involved in this process.
The last effort to revise the Communications Act took approximately five years to complete, and given the extraordinarily disruptive, totally unprecedented, faster-and-faster moving, and increasingly empowering changes brought about by current advances in broadband, any new undertaking will probably require as much as if not even more than this effort.
The main effect of the last set of revisions was to reflect ongoing technological innovation that made it possible to move further away from the old, regimented utility model of telecommunications and content transmission, and more towards a new, open, deregulated model for these activities. Now of course, broadband dramatically accelerates that movement.
At the time the Communications Act was revised, the web was in its infancy in contrast with its current state.
The Act defined the Internet as "the international computer network of both federal and non-federal interoperable packet switched data networks," and said that it was US policy "to promote the continued development of the Internet" and "to preserve the vibrant and competitive free market that presently exists" for it.
Sometimes less really is more. Share wisely, and take care.
uTorrent "Web" Opens Up to the Public
Excerpted from TorrentFreak Report by Ernesto Van Der Sar
This year, the uTorrent development team has made more visible improvements than ever before. In an attempt to make uTorrent more than just a standard BitTorrent client, the ream started several new projects.
Together with Griffin and Pheon, the Falcon project is part of the recently announced uTorrent Labs. With Labs the development team is giving users early access to their latest projects, hoping to get useful feedback from the community.
The Falcon release is one of the main pillars of uTorrent's future. Among other things, it allows users to access their downloads from anywhere through a secure web interface. Another new feature is that Falcon allows users to stream videos so they can start watching before the download has fully finished,
The web interface of the Falcon project has been invite-only since the start of the year, but this week BitTorrent decided that the time was right to open it up to the public. Users can create an account and try it out, privacy and security guaranteed by BitTorrent.
Aside from the features that are currently implemented, uTorrent has other big plans still in the pipeline for the new client and the web interface. Among other things, the Falcon release is expected to make it easier for users to find torrents.
The uTorrent team didn't want to comment on how such torrent search capabilities will be integrated, but Simon Morris has stated that they are working on "better ability for torrent sites to promote content or search within the client."
When we asked if this means that uTorrent will come with a built-in torrent search engine, Morris said that they are more interested in "APIs rather than bloating the uTorrent user experience." We'll see what this means in the months to come.
Emergency First Responders Go James Bond with P2P
Excerpted from Gov Monitor Report
Instantly deployable James Bond-style information and communication technologies are now available to coordinate disaster response among diverse agencies and non-governmental organizations (NGOs), thanks to European researchers.
Emergency crews approach a badly damaged building. The earthquake that struck four hours before left the town destroyed, but many people remain to be found. Eight different agencies are now on site, desperately trying to coordinate efforts to rescue survivors in the twisted landscape.
The team leader consults his PDA, linked via peer-to-peer (P2P) technology to dozens of databases with relevant information. According to the latest census, ten people normally live in the building. The operator is provided with the names and ages.
According to telephone records, two other people were in the building ten minutes before the earthquake struck. When the operator arrives at the rescue location, a city engineer is already running up, sent by the P2P-powered central dispatch.
The engineer declares the building safe to search, and the team enters. As victims are found, central dispatch is updated on their condition, and doctors are standing by. The team leader and central dispatch keeps track of the searchers through geo-tagging, which provides a live update of the team-members' location in the building.
In ten minutes, nine people are rescued, one body is discovered, and the searchers learn from a conscious survivor that two people were away during the quake. The names of the absent are noted and sent to central dispatch, who can alert them on the status of their home and its occupants.
This is a simulation, but it illustrates the coming paradigm for emergency response. Thanks to the work of European researchers at the Workpad project, special-ops style information and communication technologies will be available for instant deployment, easily tied to the databases of diverse emergency agencies and civil authorities, ready to make disaster rescue more safe and effective.
It was a tough problem, or rather many tough problems. Emergency response agencies, civil authorities and the NGOs who typically participate in disaster rescue and relief usually use different back-office systems, so they must be linked together. Then a network must be in place to link the back-office to the front line, where operators mostly use PDAs.
In all, the Workpad project worked on five allied major problems and dozens of minor ones. First, they developed a reference architecture, an overall scheme illustrating the most effective way of providing these diverse needs. That reference was a huge success for the project, receiving plaudits from the IEEE, a technology association, and now influencing "emergency Internet" standards at the W3C.
Next, Workpad developed a P2P data integration system on the back-end. It is responsible, for example, for pulling together phone records, electoral registries, maps and geo-referencing, among dozens of other potential sources of useful information.
The project then moved onto large-scale collaboration and workflow in a mobile environment, a crucial piece of software that can define tasks, assign roles, and provide step-by-step instructions to the frontline. And it can be updated in real time, so if a more urgent need arises, workers can be interrupted to tackle another task.
The consortium also focused on the use of geo-referenced information to show a team-leader, for example, the location of all his or her team members.
"We started this project with a set of research ideas, technologies we thought would be useful," explains Massimo Mecella, assistant professor at SAPIENZA University of Rome and technical manager of the Workpad project. "But we very quickly sought to get new ideas from the frontline operators. We wanted to deal with real problems, rather than solving problems we thought were important."
Geo-referencing rescue operators was one of the refinements that came from user needs, allowing leaders to know where people are at any time.
Finally, the project looked at a variety of communication technologies to ensure the system could be set-up and transmit in a matter of hours, and that it can adapt to the most appropriate available technology at any site.
The system underwent a test in southern Italy, and performed with flying colors, receiving the enthusiastic endorsement of veteran emergency teams. Workpad's peers, in academia and elsewhere, have been enthusiastic, and the team produced over 90 journal and conference papers on their work.
But there is more work to be done, and the Workpad team has been encouraged to seek further funding under the European Union's Seventh Framework Program for research.
"There is a lot of work we did, and we could do a lot more. For example, the system records all the actions undertaken by various teams, and how the entire operation progresses," notes Mecella.
"While the system already records, we could develop software to analyze how an intervention progressed, and perhaps do some data mining to find better, more effective ways to respond to an emergency in the future."
There are other similarly interesting questions the partners could explore, such as using sensors with frontline workers, PDAs with team leaders and even using independent environmental sensors dropped across the disaster zone.
But the technology developed by Workpad is ready for use in the real world now, and may be deployed soon. Currently, a proposal in the Calabria region of Italy is under consideration. Calabria is a good candidate, because it suffers every year from both flooding and fires, which require frequent emergency response. "The plan would see a deployment of 1,500 PDAs among emergency workers," notes Mecella. Authorities in the Czech Republic, too, are considering implementing Workpad.
In all, it is an impressive list of achievements for a relatively small project, with a budget of just $3.9 million, $2.3 million provided by the EU. And it will mean technology helping front-line disaster workers to save lives.
The Workpad project received funding from the ICT strand of the EU's Sixth Framework Program for research.
Pando Passes 30 Million Game Downloads
Pando Networks, a leading provider of accelerated game delivery services, this week announced that it has successfully delivered more than 30 million game downloads in the past 12 months.
Leading online game companies such as Turbine, Nexon, OnNet, GamersFirst, Ndoors, Gamepot, Gala-Net, LevelUp, and gamigo use Pando services to increase completion rates of their free-to-play games.
The Pando Networks solution includes web services and software that seamlessly interoperate with any content delivery network (CDN) service to accelerate download speeds while significantly reducing delivery costs. By combining HTTP delivery with client side technology, Pando provides a highly scalable game delivery platform with network capacity that expands as demand increases.
This is especially important for online game distribution as new releases of popular games frequently result in a sudden surge in download demand that can degrade CDN performance and the end user experience.
Pando also provides its partners with detailed performance data that goes far beyond traditional reporting metrics. Pando partners can track the delivery speed and completion rate of each game client each day across different geographies and Internet service provider (ISP) networks.
"The performance data from downloading more than 30 million games during the past 12 months speaks for itself - Pando technology is perfectly suited for accelerating game delivery," said Robert Levitan, CEO of Pando Networks. "We are very pleased to help our partners improve both their top line (with more completed downloads) and their bottom line (with lower delivery costs)."
Pando Networks optimizes downloads of some of the most popular online games including "The Lord of the Rings Online," 'Dungeons and Dragons Online," "MapleStory," "Grand Chase," "Ragnarok," "PerfectWorld," "Fiesta Online," "Luna Online," "Rappelz," "Allods," "Flyff," and "Atlantica Online."
Pando is funded by Intel Capital, BRM Capital, and Wheatley Partners.
DistriBrute Demonstrates Windows 7 Migration
DistriBrute is light desktop P2P deployment product which offers fast and reliable data deployment.
A faithful demonstration of the speed and ease of performing such a deployment operation can be accessed here.
DistriBrute does the work that distribution servers normally do, so once the data has traveled over the WAN, the desktops assist each other by distributing data. Consequently 5 GB can be deployed to 10,000 desktops in 5 minutes (depending on the WAN connection). The demonstrations show clearly that a migration from Windows XP to Windows 7 can be done relatively quickly and easily.
Chief Technology Officer, Leo Blom said," There is a lot of discussion about deployment complexity and problems of Win 7 migrations, using DistriBrute our demonstrations show that it can be done without difficulty."
The demonstration does not include the background preparation that is necessary for a migration. Preparation is complex and depends on each organization's configuration.
However, the demonstration shows DistriBrute to be very efficient and recovers easily after connection losses. All the data (OS, Apps and drivers) remain on a separate cache partition during a reinstallation.
Another major benefit of DistriBrute is desktop recovery provided by the reinstall feature. This feature can be used for migrations, but also for refreshing the OS partition, as in the case of a virus breakout. The desktop reinstallations can be achieved without generating noticeable network traffic.
Because of its easy operation and the use of the powerful benefits that P2P delivers, DistriBrute saves costs in many ways. It is also delivers unlimited scalability.
Managing Director, Martin Pak, said," We see many organizations struggling to manage their IT environments and costs. Smaller companies, for example without highly skilled administrators have several challenges. DistriBrute can assist those organizations more efficiently and at a lower cost."
ViewCave and Mininova Forge Historic Partnership
ViewCave, a new online film distribution company based in California is now releasing its content through Mininova, a well known file-sharing indexing site. The event is a world-first for a number of reasons. First, most content video portals focus on streaming technology and primarily within the US (for Hollywood content that is). ViewCave, on the other hand, has decided to stream and offer download options in high and low resolutions concurrently from it site as well as torrent files to international audiences both directly and via indexing sites.
Secondly, Mininova is one of the best well known licensed torrent download sites in the world. For the first time ever, ViewCave has enabled Mininova to offer streaming as well as progressive download options for their content. That means Mininova's users no longer have to wait hours or days before they can watch their desired movies and video content - they can watch them immediately thanks to ViewCave's delivery platform.
The win-win relationship allows ViewCave to reach potentially millions of international viewers and Mininova to share in ViewCave's in-video advertising revenue. Indexing sites do not normally make money from the content that changes hands through their networks, but rather from the ads that are placed on their sites.
Adrian Bertino-Clarke, ViewCave's CEO comments, "ViewCave is much more than an online entertainment hub. We have two main driving passions: to give independent filmmakers who are having difficulty in getting studio distribution deals, a flexible and profitable platform to deliver their content to international audiences. And to give people everywhere access to international content without cost and without obtrusive ad breaks. The relationship with Mininova helps us to achieve both goals".
ViewCave's unobtrusive ad-supported patent-pending platform is currently in Alpha Release. Its content is viewable in most countries. It has licensed over 300 titles, which are being uploaded periodically with more on the way. "Once content owners and advertisers realize the magnitude of what we have created and the reach we have into video consumer networks, the flood gates will be open. In this proposition absolutely everybody wins", Mr Bertino-Clarke added.
Judge: RapidShare No Napster
Excerpted from Online Media Daily Report by Wendy Davis
People might use RapidShare to share copyrighted material, but the company is no Napster. That's according to US District Court Judge Marilyn Huff, who declined to issue an injunction against the German-based file-hosting company.
Huff said in a written ruling that unlike Napster - the original poster child for copyright infringement - RapidShare did not appear to contribute to users' infringement. The decision was a blow to adult entertainment company Perfect 10, which alleged in a lawsuit filed last November that RapidShare "stores hundreds of thousands of unauthorized copyrighted images on its servers, along with billions of dollars in songs and major full-length movies."
RapidShare allows users to upload large files to a site with a unique URL; people can share that address with others who wish to download the files. Perfect 10, which alleged that people used the system to transfer its videos and photos, requested an injunction banning RapidShare from making available images or videos owned by Perfect 10. Perfect 10 also is requesting monetary damages.
But Huff ruled last week that Perfect 10 had not made a strong enough showing that RapidShare encouraged or contributed to copyright infringement to warrant a preliminary injunction, largely because RapidShare isn't easily searchable. "The public cannot enter rapidshare.com and browse through a catalog for desired materials," wrote Huff, a judge in the Southern District Court of California.
"Additionally, a RapidShare user cannot find files located on RapidShare's servers in the same way as a Napster user could find a specific song from a peer's library because RapidShare does not index its files."
Huff also said that RapidShare was capable of non-infringing uses, noting that PC World magazine in Germany had used the service to distribute anti-virus software to readers.
She also criticized Perfect 10 for seeking an injunction when it had not "availed itself of simple, available measures to protect its property," including giving RapidShare enough information to allow it to remove infringing files.
Huff's decision marked the second major pro-RapidShare ruling this month. Several weeks ago, an appellate court in Germany said the company was not responsible for users' copyright infringement.
But the company still faces criticism from content owners. The same week that Huff denied to issue an injunction, the Recording Industry Association of America (RIAA) and lawmakers who belong to the "International Anti-Piracy Caucus" named RapidShare as one of six "illegal" sites, allegedly used mainly to exchange copyrighted material.
Huff's ruling does not yet dispose of Perfect 10's lawsuit. The company will still have the opportunity to present evidence against RapidShare at trial.
Idea Man of LimeWire at a Crossroads
Excerpted from NY Times by Joseph Plambeck
Mark Gorton is a confident guy. He's confident about his ideas. He's confident about his enthusiasms. And he's confident that his successes - like making money on Wall Street and promoting alternative transportation in New York - provide a record that backs him up.
But that confidence faces a new test. Two weeks ago, a federal judge ruled that he and the popular file-sharing service he created, LimeWire, were liable for copyright infringement and could be forced to pay up to $450 million in damages.
Mr. Gorton, 43, says he did not think it would come to this point. He thought that the record industry, sometime since the lawsuit was filed in 2006, would come to appreciate his vision for the future of LimeWire - a paid subscription service providing unlimited downloads of licensed songs - and want to join forces instead of continuing litigation.
"Perhaps I was naive," Mr. Gorton said in an interview last week at LimeWire's office near Chinatown in Manhattan. "If I knew when the lawsuit started what I know now about the music industry, maybe we would have done something different."
Mr. Gorton, a successful Wall Street trader with a varied academic background that includes degrees from Harvard, Yale, and Stanford, is not the sort of figure who springs to mind when the phrase "Internet pirate" is spoken. Nor is he one, he insists.
All along, Mr. Gorton said, he thought he was following the law, despite a series of earlier lawsuits that ended badly for file-sharing services like Napster and Grokster. And where there were doubts about the legality, he said, he tried to remove them.
He reached out to record labels, for example, to get information about their catalogs so he could build a filter that would block those songs from being traded free, he said. But that attempt turned against him, as the ruling from Judge Kimba M. Wood of Federal District Court in Manhattan said that the company's plan to convert users to a paid service, in part by using such a filter, supported the industry's argument that he knew files on the service were being traded illegally.
"It's certainly frustrating," he said. "We were trying so hard to reach an accommodation."
The Recording Industry Association of America (RIAA), the industry group that managed the lawsuit on behalf of 13 record companies, said it thought he had willfully skirted the law, motivated by the money generated by the millions of users of LimeWire. Total revenue increased to an estimated $20 million in 2006 from $6 million two years earlier, according to the court ruling, much of it from a paid service that allowed for faster downloads.
"He thought with his cleverness that he could get away with it," Mitch Bainwol, the association's chief executive, said. "He's the Bernie Madoff of Internet crime. He was thumbing his nose at the rule of law to profiteer enormously."
Yet Mr. Gorton's foray into the music business was not part of any grand plan, either. In fact, he said, he consumes little music, and the bulk of his collection is from his college days. He does not own an iPod.
He does like to build things, though. In seventh grade, he and a friend built 4-by-6-foot scale model of their school in New Jersey. After getting two degrees in electrical engineering, one at Yale and the other at Stanford, he made a modem for a defense contractor that could work in the face of an enemy's jamming systems.
In 1998, armed with a Harvard business degree and some Wall Street experience at Credit Suisse First Boston, he and a co-worker started a hedge fund, Tower Research Capital, that used quantitative trading and investment strategies. They created an automated trading program and then Lime Brokerage to handle the trades.
In 2007, Tower Research reportedly had $117 million in assets. Mr. Gorton would not give specifics about the performance of his financial companies in recent years other than to say that the brokerage house lost money last year.
Back in 2000, when Mr. Gorton jumped into the file-sharing network business with LimeWire, he envisioned it growing into a popular service for commerce, he said. Users could search the network for a new television set, for example, and get results from retailers across the country.
He was not alone. At the time, venture capital and talent poured into other file-sharing companies.
"People have a short memory, and they've gotten caught up in the mythology of file-sharing companies being run by ne'er-do-wells and eye-patch pirates," said Fred von Lohmann, a senior staff lawyer at the Electronic Frontier Foundation (EFF) who has represented some of the file-sharing services in copyright cases. (Mr. Lohmann was named in the ruling as having given legal advice to the company about how to protect itself from liability.)
"LimeWire was not a fly-by-night operation," he said.
Around the time Mr. Gorton started Tower Research Capital, several people who have known him for quite a while said, he started to express his views a little more outwardly. "He really blossomed into somebody with tremendous amount of confidence in his ideas," said Sean B. Hecht, a friend from Yale who heads the Environmental Law Center at the University of California, Los Angeles.
Many of those ideas, and his money, are going toward civic projects. Last year, Mr. Gorton said, he put about $7 million into another of his ventures, the Open Planning Project. That group promotes, among other things, bringing open-source technology to governments, which would allow a local government to build off a computer system used by another government instead of starting from scratch.
He has also been involved closely with Transportation Alternatives in New York, working with the city to increase the number of bike lanes (he rides his bike to work every day from his brownstone on the Upper West Side) and improve pedestrian life. In each of the last six years, he has donated hundreds of thousands of dollars and provided up to a quarter of the group's annual budget.
"He brought us a new communications strategy," said Paul S. White, executive director of Transportation Alternatives. "Before Mark, we were preaching to the choir. We weren't talking in a language that other people could understand."
Mr. Gorton says he has tried to take that same strategy to the record labels to explain the new service he is proposing.
"I tell them to think of Woodstock," he said. "The first one was free, but it ended up making the industry a lot of money and was a huge success. The second and third ones were very expensive for fans and were failures."
But before he can hope to make any progress with the labels on his paid service, he will need to get the lawsuit behind him. And given the heated rhetoric from Mr. Bainwol and the record association, the coming negotiations may not be easy.
At a minimum, the record association says, LimeWire needs to shut the current service and Mr. Gorton needs to pay for damages out of his own pocket. A status conference with Judge Wood is scheduled for early June.
Mr. Gorton says he knows that the music industry needs to alter the behavior of a generation of people who have grown accustomed to getting their music free.
Still, he says that LimeWire has a relationship with that generation that can help make the change. And he says he remains optimistic that, in the end, his idea will triumph.
"I don't want to be on my deathbed thinking that I kept a bunch of musicians from making money," Mr. Gorton said. "I have a lot of work to do to get my karma scores up."
Music Sales and File Sharing
Please click here to listen to an audio podcast with Jim Burger, an intellectual property (IP) attorney with Dow Lohnes. As such, he is as vigorously opposed to copyright infringement as anyone. Nonetheless, Jim questions the validity of claims by music executives that file sharing has been a major cause the industry's revenue decline.
He readily admits a correlation between file sharing activity and declining CD sales, but emphasizes that mere correlation does not constitute causation. For example, CD sales topped-out during the 1999-2000 period, but those were the same years when Napster was most active. Not only was Napster the first popular file-sharing network, it was also probably the most widely used. Album sales did not decline until 2001 which was the same year that Napster was shut-down by a judge's order.
From 2000 to 2008, album sales dropped by almost 50%. Aside from the file sharing on post-Napster networks, Jim notes there were two other rising trends that correlate with the decline in album sales. More importantly, each of the additional factors might also have displaced album sales via substitution.
First, between 2001 and 2004 album sales dropped about 5% per year. During those same years DVD sales grew 65% annually. Given that DVDs and CDs are priced about the same, a fraction of the DVD sales might have been directly competing with CDs for the consumer's discretionary funds. Put another way, at times the typical consumer might have reasoned that a DVD movie was a better value than a CD and consequently elected to buy a DVD instead of a CD. If only one-out-of-eight DVD purchases was influence by such reasoning, the entire decline in CD sales from 2001 to 2004 could be explained by the rise of DVD sales.
Second, although DVD sales flattened from 2004 to 2008, a second factor gained momentum that may also have displaced album sales. Specifically, digital singles became available through online stores such as Apple's iTunes. As album sales declined 13% annually from 2004 to 2008 digital singles grew at an annual rate of over 70%.
Prior to the advent of digital singles, record labels did not commonly promote physical singles. Instead they preferred that customers buy entire albums, even if the customers were primarily interested in only a few tracks. Suddenly the widespread availability of digital singles enabled consumers to "cherry pick" their favorites. For example, they could buy their three favorite tracks of a newly released album for only $3 as opposed to the $15 or so typically required to buy the entire album.
Jim laments the economic decline of the music business because, like nearly everyone, he loves music. As with most of us, his musical tastes are an integral part of his personality. Our favorite tracks provide experiences we want to share with intimate family and friends. For many of us music motivates us while we exercise and for some it inspires us when we think. Our interest in music is not going to vanish.
As noted in earlier posts, when music is easily shared in cyberspace, more of us can more easily become acquainted with new compositions. Some of them will become fresh motivating and inspiring experiences as well. They can brighten our days, lift our attitudes, and underscore our moods. Given a choice of a "free" download that could be bogus or infected with malware, most of us would likely tolerate commercials or pay a fee for a dose of rhythmic Prozac.
File Sharer Takes "Innocent Infringer" Case to Supreme Court
Excerpted from Online Media Daily Report by Wendy Davis
A file sharer who downloaded 37 tracks on Kazaa as a teen is asking the US Supreme Court to rule that she can be considered an "innocent infringer."
In papers filed this week, Whitney Harper argues that she "believed that listening to music using a file-sharing network was akin to listening to a non-infringing Internet radio station" when she downloaded the tracks at age 16.
US District Court Judge Xavier Rodriguez in San Antonio, TX ruled earlier that Harper was an "innocent infringer" and only need pay damages of $200 per track. The copyright statute typically provides for damages ranging from $750 to $150,000 per infringement, but the law slices the minimum to $200 for so-called innocent infringers.
But earlier this year, the 5th Circuit Court of Appeals reversed that decision. The appellate court ruled that Harper couldn't be an innocent infringer because the copyright statute says that status is only available to defendants who have no access to published phonorecords - in this case compact discs (CDs) - that contain copyright notices.
Harper now is asking the Supreme Court to take up the case and reverse the 5th Circuit's ruling. She argues that the statute's wording about notices on phonorecords should not apply in her case because she didn't infringe by copying a CD. "She infringed by copying and distributing music files that bore no such notice," she argues.
Harper also argues that the question "is of unusual national importance because of the unprecedented litigation campaign that the RIAA has been waging against those who listen to music on file-sharing networks."
The RIAA sued or threatened to sue tens of thousands of alleged file-sharers between 2003 and December of 2008. At that time, the organization shifted strategy and said it would no longer file new suits against most individual, non-commercial individuals who share tracks.
File-Sharing Lawsuits Clogged US Courts for Five Years
Excerpted from Geek Report by John Brownlee
Now that the music industry has stopped its foolish campaign of copyright infringement lawsuits waged against file sharers, federal copyright infringement lawsuits have sunk to a six-year low, which only goes to show how much RIAA's lawsuit sprees clogged up the courts during the course of its five year litigious onslaught.
According to court records (and handily summarized in this graph from Wired's Threat Level blog) when the RIAA first began to go after file sharers, the number of copyright infringement lawsuits in the US court system hovered around 2,500 per year. A year after they launched their campaign, though, the RIAA alone accounted for more than half of all copyright lawsuits being filed in the country.
Astonishing. The RIAA basically burdened tax payers and congested the courts - for what? A strategy that didn't work. More people are sharing files than ever, and the record labels behind the RIAA have continued to see their revenue drop. Even the RIAA has admitted defeat.
That said, don't expect copyright infringement lawsuits to continue to drop. In March, a group of independent filmmakers launched their own RIAA-style litigation campaign targeting BitTorrent users. Some people (and some industries) just never learn.
Read more at Threat Level.
Will Time Warner Cable Now Be Sued for Copyright Infringement?
Excerpted form Hollywood Reporter Report by Eriq Gardner
The legal campaign that targets tens of thousands of alleged movie infringers on BitTorrent is getting more interesting. Now one of the nation's largest ISPs could be held responsible for facilitating copyright infringement.
Yesterday, Thomas Dunlap at the "US Copyright Group" filed his response to Time Warner Cable's (TWC) motion to quash or modify thousands of subpoena requests. TWC had asked the court to require no more than 28 IP address lookup requests per month, citing the burden of having to comply with discovery requests that were "far out of line with other comparable copyright infringement cases."
In opposition, Dunlap disputes many of TWC's assertions, including the claim that the cost of compliance is "significant," pointing to $4.6 billion in revenue TWC received in the first quarter of this year and the fact that it pays its employees' salaries, regardless of whether or not it has to respond to plaintiff's subpoena.
But here's the money quote that caught our attention and might foreshadow some significant new litigation:
"TWC highlights the fact that it is not a party to this case, but it appears that TWC is utilizing that fact to garner public support for its position and possibly in an attempt to gain more subscribers who would value TWC's efforts to protect the privacy of demonstrated copyright infringers. To the extent TWC's tactics are just that - letting the public know that TWC is a good ISP for copyright infringers because TWC will fight any subpoenas relating to infringers' activities - TWC exposes itself to a claim for contributory copyright infringement."
That sounds like a threat to us. Immediately after this quote, the plaintiffs refers to the US Supreme Court's Grokster decision, which spelled out liability for contributory copyright infringement on behalf of ISPs.
Over the years, there's been a lot of debate over whether ISPs should do more to police their networks for copyright infringement. But now there's the issue of whether service providers like TWC or Comcast should stand up against some of its customers in the interest of its business or stand aside and comply with all subpoena requests. A judge's marching orders will be the next step here.
Coming Events of Interest
Broadband Policy Summit VI - June 10th-11th in Washington, DC. The most comprehensive, in-depth update about the implementation of the FCC's National Broadband Plan. No other forum provides the detailed coverage, expert insight and networking opportunities you'll receive at Broadband Policy Summit VI. The expanded program includes top-notch faculty who will address the most pressing broadband issues in six panel discussions, two debates and four keynote addresses.
Digital Media Conference East - June 25th in McLean, VA. The Washington Post calls this Digital Media Wire flagship event "a confab of powerful communicators and content providers in the region." This conference explores the current state of digital media and the directions in which the industry is heading.
NY Games Conference - September 21st in New York, NY.The most influential decision-makers in the digital media industry gather to network, do deals, and share ideas about the future of games and connected entertainment. Now in its 3rd year, this show features lively debate on timely cutting-edge business topics.
Digital Content Monetization 2010 - October 4th-7th in New York, NY. DCM 2010 is a rights-holder focused event exploring how media and entertainment owners can develop sustainable digital content monetization strategies.
Digital Music Forum West - October 6th-7th in Los Angeles, CA. Over 300 of the most influential decision-makers in the music industry gather in Los Angeles each year for this incredible 2-day deal-makers forum to network, do deals, and share ideas about the business.
Digital Hollywood Fall - October 18th-21st in Santa Monica, CA. Digital Hollywood Spring (DHS) is the premier entertainment and technology conference in the country covering the convergence of entertainment, the web, television, and technology.
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