All Things Digital

Digital music sales are soaring, but that hasn’t stopped the recording industry from continuing to spin its long-running woe-is-me tale of piracy and declining revenues.

According to the International Federation of the Phonographic Industry’s 2008 Digital Music Report (PDF), global digital music sales rose to $2.9 billion in 2007, up from $2.1 billion in 2006.

Now that 40% increase isn’t nearly the doubling of digital sales we saw in 2006, but it’s not insubstantial, either. Especially when one considers that digital sales grew to account for 15% of the world’s music market, up from 10% in 2006. That means that almost a sixth of music sales already come through digital channels. This despite five or so years of the recording industry’s Keystone Kops approach to the digital music revolution.

All things considered, things aren’t going too poorly–even if the growth of digital music sales hasn’t yet offset declines in physical music. That being the case, it’s difficult not to look askance at the IFPI’s calls for governments and Internet service providers to take a hard line against file-sharing.

“Copyright theft has been allowed to run rampant on [ISP] networks under the guise of technological advancement,” IFPI Chairman and CEO John Kennedy wrote in the report. “Some estimates say no less than 80% of all Internet traffic comprises copyright-infringing files on peer-to-peer networks.”–80%? Does the IFPI suffer from the same math disability as the MPAA?–”ISPs have largely stood by, allowing a massive devaluation of copyrighted music. This in turn–and despite all the positives about our digital growth–has prompted a crisis in recorded music that has wide implications for the whole digital marketplace and all those businesses to whom music is an important ingredient. … Today, however, a sea-change is happening. The whole music sector, governments and even some ISPs themselves, are beginning to accept that the carriers of digital content must play a responsible role in curbing the systemic piracy that is threatening the future of all digital commerce. After years of discussing and debating, I am convinced it is no longer a question of whether the ISPs act–the question is when and how.”

And the answer? Five bucks and a copy of the latest Britney Spears album says it’s network-level filtering.

NTP has finally found a good use for the $612.5 million patent settlement it won from BlackBerry-maker Research in Motion last year: underwriting more patent-infringement lawsuits.

Last Friday the patent holding firm sued AT&T, Verizon, Sprint and T-Mobile for infringing on its portfolio of mobile email-services patents and demanded they pay royalties on the sales of BlackBerries and other devices that send and receive email. Apparently NTP feels that because Good Technology, Visto and RIM have licensed the same patents, these big wireless carriers should as well. Said the company in its complaint against Verizon: “Verizon’s continued infringement with its present knowledge of NTP’s patent rights and their relevance to defendant’s operations is reckless and willful.”

NTP’s lawsuit will no doubt again raise questions about the validity of its patents, a number of which are still under re-examination by the U.S. Patent and Trademark Office–those, that is, that haven’t already been rejected.

The laundry rooms at Sun Microsystems and Network Appliance must be on the fritz, because the two companies have begun washing their dirty laundry in public. Yesterday, NetApp sued Sun, alleging that its ZFS storage software, a key element of its Solaris operating system, violates seven NetApp patents. Dave Hitz, co-founder of NetApp, explained the rationale for the suit in a post to his blog:

Like many large technology companies, Sun has been using its patent portfolio as a profit center. About 18 months ago, Sun’s lawyers contacted NetApp with a list of patents they say we infringe, and requested that we pay them lots of money. We responded in two ways. First, we closely examined their list of patents. Second, we identified the patents in our portfolio that we believe Sun infringes.

“With respect to Sun’s patent claims, our lawsuit explains that we do not infringe, and–in fact–that they are not even valid. As a result, we don’t think we should be paying Sun millions of dollars.

“On the flip side, our suit points out that Sun’s ZFS appears to infringe several of NetApp’s WAFL patents. It looks like ZFS was a conscious reimplementation of our WAFL file system, with little regard to intellectual property rights.”

Obviously, Sun disputes NetApp’s claims. It says NetApp approached it looking to acquire the patents at issue in the case, but later decided to try to have them invalidated instead. In a post to his own blog, Sun CEO Jonathan Schwartz described NetApp’s lawsuit as an attack on the open-source community.
“First, Sun did not approach NetApps about licensing any of Sun’s patents and never filed complaints against NetApps or demanded anything,” Schwartz wrote. “NetApps first approached StorageTek behind the cover of a third-party intermediary (yes, it sounds weird, doesn’t it?) seeking to purchase STK patents. After Sun acquired STK, we were not willing to sell the patents. We’ve always been willing to license them. But instead of engaging in licensing discussions, NetApp decided to file a suit to invalidate them. To be clear, we never filed a complaint or threatened to do so, nor did anyone, to the best of my knowledge, in the ZFS community.”

Thought the principle of liability was well settled? Think again. The judge presiding over Atlantic v. Howell has ruled in favor of the Recording Industry Association of America, finding that making content available for distribution over an Internet connection is in and of itself a copyright infringement –regardless of whether that content is ever distributed.

A bit of background: In 2006 the RIAA sued Pamela and Jeffrey Howell for copyright infringement, accusing the pair of “making copyrighted works available” over a peer-to-peer network. The RIAA had no evidence that the Howells ever transferred content to a third party. It did, however, have screen shots of their Kazaa account. And that was proof enough for the court to grant its motion for summary judgment against them. “It is no defense that a Kazaa user did not directly oversee the unauthorized distribution of copyrighted material,” the judge wrote, noting that “the mere presence of copyrighted works in a shared folder is enough to trigger liability.”

So even though the RIAA couldn’t prove the Howells distributed files illegally, the mere fact that they owned a computer with a shared-files folder on it that contained copyrighted files “made available” over an Internet connection was enough to constitute infringement of the “distribution” rights under the Copyright Act.

Essentially, the Howells have been found criminally liable for what they might have done. Which is an unsettling thought in a Dick-ensian (Philip K.) sort of way. But not for the RIAA which, thanks to this ruling, no longer has to work quite so hard to provide proof of violation in these cases.

“Plaintiffs wish to establish two violations of copyright law when a person both downloads and uploads sound recordings via the Internet,” the Computer & Communications Industry Association and US Internet Industry Association wrote in an amicus brief filed in Elektra v. Barker, another RIAA “making available” case. “Proof of the download violation may be relatively straightforward when a plaintiff can establish that a recording has been copied to a person’s computer. Proof of a violation by uploading cannot, however, be established merely by showing the availability of files for potential uploading. A plaintiff must establish a connection to someone else’s actual download. That requires a plaintiff to establish a connection between an uploader and a corresponding downloader, to establish the facts of an actual transaction between the two. Although such proof may require investigation, a plaintiff should not be relieved of its burden. Since copyright holders may (and often do) seek statutory damages of up to $150,000 per work infringed, see 17 U.S.C. §504(c)(2), without having to prove actual harm, for such remedies they should be required to furnish allegations and proof of actual violations.

“The remedies provide an adequate incentive for a proper investigation. Amici believe that plaintiffs want to invoke the concept of ‘making available’ instead of the statutory elements of a section 106(3) distribution because plaintiffs perceive that the investigations needed for proper allegations and proof of uploading liability (as contributory infringement liability for another’s download) are burdensome.”

They’ve got a steep, steep learning curve over there at Perfect 10. Having unsuccessfully sued Amazon and Google for copyright infringement, the “publisher of tasteful model and supermodel images” has filed suit against Microsoft.

Like those brought against Google and Amazon before it, the lawsuit alleges that Microsoft’s MSN image search displays thumbnail images linking to sites that host infringing pictures. “Microsoft is showing tens of thousands of extremely valuable celebrity images, along with Perfect 10 images, without authorization, which it obtains from hundreds if not thousands of pirate Web sites,” Perfect 10 President Norm Zada said in a statement. “Search engines could greatly reduce infringement if they would simply delist obvious infringers upon receiving notice, and stop copying and linking to copyrighted works without permission.”

Perhaps. But wouldn’t these infringements be more easily reduced by, you know, suing the infringers themselves? Taking legal action against third parties for not enforcing your copyrights seems a circuitous way of resolving disputes like these.

We do a good job of educating users about copyright law.”

–YouTube CEO Chad Hurley, D5 Conference, 2007

The National Legal and Policy Center has finished up its latest list of potentially copyright infringing movies on YouTube and Google Video, and it’s largely what you’d expect. Not the “New Releases” tab on Netflix, but not exactly the dusty DVD display rack at the local convenience store, either. Among the films on the list: “Sicko,” “The Fast and the Furious: Tokyo Drift” and the Vietnamese dub of “The Wicker Man.”

When was it again that Google was supposed to finish those video identification tools? Ah yes, “the not-too-distant future.”

In a statement, the NLPC tarred and feathered Google for failing to prevent users from uploading pirated material. “For a company that wants to organize the world’s information and boasts about the most sophisticated search technology in the world, we just find it remarkable that they can’t seem to find and remove apparently copyrighted content hosted on their own servers,” said NLPC Chairman Ken Boehm. “… Google’s response that they are ‘taking the lead’ in offering ‘state of the art tools and processes’ to promptly remove infringing content is just plain nonsense. In just the past few days, we’ve found repeated uploads of ‘Sicko,’ ‘Harry Potter and the Order of the Phoenix’ and ‘Live Free, Die Hard’ on the video site. Google claims to have a sophisticated ‘hash’ system to block repeated uploads of the same infringing material, but if the repeated uploads of the movies we’ve found so far are any indication, video pirates are making a hash of Google’s ‘hash’ technology.”