Author: David Newhoff

David is an author, communications professional, and copyright advocate. After more than 20 years providing creative services and consulting in corporate communications, he shifted his attention to law and policy, beginning with advocacy of copyright and the value of creative professionals to America’s economy, core principles, and culture.

The Revolution in the Mirror is Closer than it Appears

The father of modern chemistry Antoine-Laurent Lavoisier was beheaded in 1793 in what is now the Place de la Concorde. A victim of France’s post-revolutionary Reign of Terror, he was specifically marked for execution by one vengeful, lesser scientist named Jean-Paul Marat, whose incorrect theory about combustion had been publicly scorned by Lavoisier at the royal academy.

It’s rare when revolutions do not produce new tyrants, and of course the fact that our own war of independence avoided this fate is a legitimate source of national pride for Americans.  This doesn’t mean we’ve managed to avoid tyranny altogether, only that our despots tend to be CEOs instead of warlords.

In an article for Evonomics, Lawrence Lessig writes, “ … the biggest danger to free markets comes not so much from antimarket advocates (the Communists and worse!) as from strong and successful market players eager to protect themselves from the next round of strong and successful market players.”

Lessig is of course referring to historical precedent in which “old innovation” employs—or even revises—legal mechanisms as a means of protection against “new innovation”.  The familiar narrative is one in which the legacy industry clings to power for as long as it can while new industry inexorably builds the market of tomorrow.  Referring to the protectionists as capitalism’s biggest enemies, Lessig sets the stage as follows:

“…there are only two things we can be certain of when talking of free markets:  first that new innovation will change old; and second that old innovation will try to protect itself against the new.”

In the article, he identifies this protectionism as the kind of crony capitalism in Washington that ought to make allies of “progressives on the Left and free-market advocates on the Right”. And indeed, this type of alliance did manifest in 2012 with the shouting down of the SOPA and PIPA bills, when we saw paradoxical solidarity among members as divergent as the ultra-conservative Heritage Foundation and the anarchic hacktivist group Anonymous. And those bills were certainly labeled “protectionist”, although there were no reasonable grounds for portraying either their intent or their mechanisms in that light.  Still, one cannot deny that one droning note of rhetoric, which continues to muddy the waters, is a broad narrative of Old v New, with New having the advantage of at least appearing to be on the “right side” of history. After all,  history will tell you that New always wins.  That’s why it’s called New.

But the crucial detail Lessig leaves out of his otherwise reasonable premise is that New already won quite some time ago. The yearning revolution he’s talking about is in the rear-view mirror.  The self-proclaimed innovators—the market leaders who are presently writing the future and leading the public debate—already have the lion’s share of wealth at their backs.  Google, Apple, Facebook, UBER, Amazon, et al are not seedling enterprises trying to grow through the concrete and rusted barbed wire of outdated policy; they are the crown jewels of Wall Street and private equity with the capital to do just about anything they want and the PR budgets to tell the market that it’s what we want, too.  Far from banging their heads against a wall of protectionism, New industry is actively and effectively rewriting policy and public opinion; and Lessig is correct that both progressives on the Left and free-market advocates on the Right are cheering them on.  Though I don’t think he’s quite right that they should be.

Neither progressives nor free-market advocates (and I personally consider myself a bit of both) should be bamboozled by the rhetoric of innovation yet to come.  This is not to say that new inventions and new paradigms are not on the horizon—no doubt they are—only to propose that the corporations most likely to be at the forefront of the biggest changes, for better or worse, are already among the most financially and politically powerful entities in the world.  And Lessig is right that the powerful will use protectionist measures to entrench their interests, but the funny thing about our market today—in which a company like UBER goes from start-up to a $60bn market cap in five years—is that Silicon Valley’s leaders and VCs have disrupted protectionism itself and renamed it progress.

Redefining IP as Protectionsim

Not surprisingly, in this broader narrative about protectionism, Lessig invokes criticisms of both patent and copyright law.  With regard to the former, he refers to an increase in patent litigation from 2007 to 2011, with particular focus on the “patent troll”, who might litigate away an otherwise useful innovation.  Although patent trolls are a problem—the worst are sort of the ambulance-chasers of IP law—these actors do not generally represent a protectionist agenda for legacy business.  Ironically enough, though, the Google and Facebook-backed “reform” bill HR-9 is a protectionist proposal inasmuch as its language so broadly defines “patent trolls” that the law could actually harm small, entrepreneurial inventors while entrenching already-big patent owners—like Google and Facebook.

With regard to copyright, Lessig accuses the recording industry of seeking Internet radio rates “designed” to stifle diversity and competition online.  But in describing he innovation being hindered in this case, he first broadly conflates amateurs and enthusiasts with big, corporate players and then blames the RIAA for assuming the online radio market will consolidate.  It’s a bit hard to summarize his point here since he begs some important questions.  You can read the section for yourself, but his larger argument that the recoding industry “wants” a smaller market seems to overlook clear evidence that the networked economy tends to produce monopolies by its own means, and not because of so-called protectionist maneuvers by traditional industries.

Moreover, given that Lessig’s broader thesis is a criticism of money in politics, it seems especially disingenuous to ignore the fact that the VC money behind most of these technology plays is very much betting on market consolidation rather than expansion. In this extensive profile of Marc Andreessen, Tad Friend, writing for The New Yorker, describes the sensibilities of Silicon Valley’s major venture capitalists, who make big bets with the understanding that just one needs to become the “unicorn” while the others can fail entirely.

It is a rationale driven by an instinct for knowing that the 1000x return is somewhere in the mix of proposals that may sound like haphazard lunacy to many of us, but which sound like the future to this niche club of mostly male investors. But the point not to be missed is that this culture produces extraordinarily powerful, competition-resistant companies that go from zero to Forbes cover at historically unprecedented speed. And the political influence they wield scales in tandem, as we see when Google shifts in a matter of a few years from virtually no lobbying to ranking among the top ten in the country.  So, Lessig’s portrayal of private industry leveraging public policy is fair; it’s simply looking in the wrong direction.

Perhaps most importantly, the ideology of the venture capital behind the businesses we tend to aggregate under the generic term innovation is one that has almost no kinship with Lessig’s stated political reform agenda (i.e. getting money out of politics).  Guys like Marc Andreessen and Peter Thiel don’t talk about “fixing” American politics; they talk about rejecting it altogether—taking themselves quite seriously with proposals to establish alternative, technocratic states.

Utopian fantasies like Seasteading may be appealing to any number of libertarians and anarchists out there, but it’s a world view that should not in any way be confused with, for instance, a Bernie Sanders-like proposal to effect reform from within the system. In fact, the two interests are wholly antagonistic since Sanders-style political reform is predicated on forcing American-made wealth to reinvest in America itself—not on billionaires building autonomous societies akin to Ayn Rand’s magic valley in Atlas Shrugged.

Meanwhile, the extent to which Silicon Valley’s brand of libertarian ideology speaks with money in Washington, it is often disguised as anti-protectionist, legislative reform proposals just like HR-9.  Political clout is not exclusively a matter of pay-to-play; it’s also a manifestation of market capitalization that buys even unproven companies a seat at the table simply because they’re too disruptive to ignore. Meanwhile, it’s clear that there is a lot of stable, economic value in “old” industry. And so, this narrative that, for instance, the rights of individuals—be they authors or inventors—are just nuisance barriers to be innovated around, can foster our own economic reign of terror in which lesser innovators are financially incentivized to decapitate greater genius.

Phoenix Center Responds to Singapore Fair Use Study

In 2012, a report was published in the online journal LAWS entitled A Counterfactual Impact Analysis of Fair Use Policy on Copyright Related Industries in Singapore.  I know. Sounds like a real page-turner for the general reader, right? To be sure, most of us are not schooled in the arcana of statistical economic analysis, but suffice to say the report, written by Roya Ghafele and Benjamin Gibert, concluded (or at least implied) that expansion of the fair use doctrine in the Singapore Copyright Law in 2005 resulted in economic growth in what the researchers identified as the “copying technology industries” (e.g. disk drives, CDs, etc.) and with no detrimental impact to the copyright industries.  When the report was published, it was predictably seized upon by Mike Masnick as proof of one of Techdirt’s core tenets, namely that “less copyright is always economically beneficial”.

But an analysis published yesterday by George S. Ford, PhD at the Phoenix Center for Advanced Legal & Economic Public Policy Studies, has called the Singapore Study a work of “stunningly poor quality”. Citing numerous flaws in methodology, he insists that the report’s conclusions should not be considered instructive to copyright law in Singapore or anywhere else.  In fact, the reason I qualified the study’s conclusion in the previous paragraph is that apparently Ghafele and Gibert themselves do not claim to identify a causal relationship between Singapore’s revised fair use doctrine and an increase in sales in “copying devices”. Ford argues this flaw alone is sufficient to label the entire study as “worthless to policymakers”. Naturally, one must be careful about taking sides among economists, whose stock and trade is critiquing one another’s methods that the rest of us don’t really understand.  Nevertheless, Ford’s critiques ought to at least raise questions among us laymen when he says unequivocally …

“While evidence on fair use policies is welcome and critical to informed policy reform, Ghafele and Gibert’s empirical analysis is so poorly done that it fails to shed any light on copyright laws. Governments reviewing their copyright laws should dismiss the Singapore Study as junk science.”

Ford’s criticisms include Ghafele and Gibert’s failure to employ a proper control group, to account for differences in scale among the technology businesses aggregated into the study, and to exclude from their analysis catalytic factors other than changes to fair use—not the least of which were other 2005 amendments to Singapore’s Copyright Law. As stated, I cannot presume either to critique or defend the computations applied by Ford, but what I can comment on is this aspect of his conclusion:

“… the expanded fair use policy was incorrectly interpreted by consumers as a license to pirate and distribute intellectual property without consequence. Less than a decade after the new fair use policy was implemented, Singapore amended its copyright law to address widespread digital piracy.”

Indeed. Fair use has been so chronically misrepresented in the public dialogue that the principle has been broadly interpreted as the antithesis of copyright, which is simply incorrect. In fact, this issue points to one of the reasons I find the hypothesis of the Singapore Study a bit odd in the first place. An attempt to quantify the extent to which Singapore’s fair use revisions acted as a market catalyst at all seems to treat the doctrine as though it were a universal exception to copyright rather than a narrowly defined, case-by-case, limitation—one that is in fact expected to spawn some portion of new copyrightable works. For instance, if 100 fair uses are made and half are for new works that have their own copyrights, that’s 50 new copyrights supported by fair use doctrine. So, would that be a net win for copyright or for fair use?  The question is absurd because fair use is a part of copyright law. If fair use were indeed the opposite of copyright and without reasonable limitations, then it would simply nullify copyright, taking the concept of fair use with it across the event horizon into irrelevance.

More specifically, fair uses in Singapore, which they call fair dealing, are conditional just like they are in the US. The first four of five factors Singaporean courts consider in a fair dealing defense are modeled almost verbatim on the four factors applied in our courts. Like our Copyright Act, Singapore’s fair dealing statutes seek to define the specific conditions under which there are limitations on exclusive rights; and most encouragingly, those statutes appear to have the same intent to protect free speech, which was the original reason we codified fair use in the 1976 law. So, the decision to examine the effect of Singapore’s fair dealing doctrine on the market for devices and media used for data storage seems inscrutably haphazard.

After all, any number of factors may increase the sale of disk drives, recordable CDs and DVDs, etc., including rampant piracy itself, which is outright infringement and not a fair dealing.  More acutely, as Ford mentions, 95% of Singapore’s electronics production is exported. Singapore is a tiny market (pop. 5.5 million) whose economy includes a robust wholesale and retail sector shipping to foreign markets and catering to a very large volume of tourist/shoppers from the region. In other words, Australians traveling to Orchard Street to buy hard drives tells us nothing at all about Singapore’s fair dealing statutes in its copyright law. So, if Ford and other critics are right that the Singapore Study does not account for this, that is a considerable flaw in the research.

Additionally, an analysis in the sales of electronic hardware used for copying and storing digital media does not appear to address any of the questions being asked about fair use doctrine in the age of the Internet. If there is merit to that conversation, it would rationally involve—and in fact does involve—a discussion of platform-based uses like YouTube, blogs, or fanfic sites that encourage remix; or we may consider the casual sharing of content via social media; but this line of investigation would seem to consider fair use’s initial intent to protect free speech more than an inquiry into broader economic benefits. I am skeptical that new, platform-based uses—however common and ubiquitous they may be—provide a rationale for “expanding” our own doctrine; but at least these types of uses do represent changes in the nature of how works are used, which is not the case with regard to storage media.

Meanwhile, the general consumer in our market appears to be moving away from a paradigm of storing media at all, thanks to the convenience and low cost of streaming and the availability of cloud-based options in lieu of local devices. (Note the lack of disk drive in your new computer.) So, if sales of certain recordable media were to decline over the next five years, what would that tell us about our fair use doctrine, which has been law for 40 years?  Not much, I think.  It’s simply an odd metric to examine—a bit like measuring bottled water sales in order to determine how many Americans are going to the gym and then to draw conclusions about our overall cardio-vascular health.

While limitations on copyright’s exclusivity, including fair use, can produce market benefits, it is always necessary to seek a balance. As the market evolves, the contours of fair use may indeed shift, though the more those contours cease to define boundaries at all, the more the doctrine is stripped of its significance.  As such, neither professional nor amateur analysis should confuse the policy discussion by asking the wrong questions.

What Exactly Does the EFF Want?

As stated in my post announcing a voluntary agreement between MPAA and domain-name service Donuts, both rights holders and digital rights proponents should applaud this kind of B2B approach to mitigating online piracy.  That doesn’t mean I thought the latter parties actually would applaud it. And with the stalwart predictability of a honey badger, Mitch Stoltz of the Electronic Frontier Foundation fired off this missive, eager to criticize the agreement just hours after it came out of the shrink wrap.  The conditions of the agreement are so straightforward that it seems to me any honest acknowledgment of its terms might have stayed Stoltz’s hyperbolic pen before describing Donuts in this context as the “copyright police” or before beginning his post as follows:

“The companies and organizations that run the Internet’s domain name system shouldn’t be in the business of policing the contents of websites, or enforcing laws that can impinge on free speech.”

Right off the bat, Stoltz misrepresents the process as described in the agreement.  Donuts will not be “policing” any content at all.  Instead, the agreement outlines very specific conditions under which the MPAA may send a referral, backed by evidence, to Donuts regarding a domain that is “clearly and pervasively” engaged in large-scale piracy. At that point, Donuts has full discretion to choose to investigate further and to consider taking mitigating action consistent with its own Terms of Service.  That’s not quite the same as engaging a private company to “enforce the law” as Stoltz states. It is a voluntary effort by a company to uphold or comply with the law in its practices, which is consistent with the internal policies of corporations all over the world.  So, why is the broader rationale different with a domain name service provider? I know.  Because the Internet is special.

Meanwhile, shutting down, delisting, or blocking sites dedicated to enterprise-scale piracy via court-ordered injunction has occurred repeatedly for at least 15 years, and yet free speech has endured. So, it is hard to imagine how the free speech calculus changes if a private company—which has a clear, vested interest in keeping domains online—decides to not support a specific enterprise engaged large-scale infringement. But as we’ve seen in other contexts, the EFF is a place where imaginations run wild.  For instance, Stoltz writes:

“Taking away a website’s domain name means interrupting all of the speech that takes place on that site. It creates a much greater danger of censorship than suppressing individual pages or files. And the domain name system only works so long as most Internet users trust it to direct them to the websites they ask for, not only those that politically connected companies and repressive governments want them to see. That’s why domain registries and registrars shouldn’t take part in policing the contents of websites and services. And that’s why we’ll continue to fight the website-blocking power grab.”

So, here’s the bottom line of the agreement vis-a-vis Donuts’s role, with some important words in bold:

If Donuts is satisfied that the domain clearly is devoted to clear and pervasive copyright infringement, Donuts may, in its discretion and as permitted under its Acceptable Use and Anti-Abuse Policy, suspend, terminate, or place the domain on registry lock, hold, or similar status as it determines necessary to mitigate the infringement.

I have to admit the ability to translate that into “interrupting speech” or to invoke “repressive governments” is actually something of an art-form.  The EFF should probably give an award for Best Post Making a Mountain out of a Molehill (of course, I’ve never been invited to one of their dinners, so maybe they do).  Anyway, is Stoltz actually suggesting that if Donuts—and by extension other services—were to suspend domains under these types of guidelines, that this is a slippery slope toward censorship by order of a repressive government?  Why? How? Which repressive government?  China?  The Web is already massively censored in China, which is a human rights issue that has nothing to do with the mechanisms in this type of voluntary, anti-piracy initiative.

Here’s a news flash:  free speech doesn’t exist in several other countries.  And where free speech doesn’t exist, it cannot be infringed or chilled; it is instead a right yet to be won—a struggle largely separate from the exigencies of either Hollywood studios or Silicon Valley Internet companies, though both industries have a vested interest in a world where speech ultimately prevails. Meanwhile, in this country, there can be consequences for actually stifling someone’s speech, so Donuts has legal and financial incentive to proceed with due diligence in regard to any referral it receives. Moreover, it will be the case that any domain meeting the standards for referral by the MPAA will be an enterprise-scale infringer operating in a foreign country–not somebody’s blog.

Speech simply does not belong in this discussion, but since it is the perennial excuse for piracy, I think it’s worth mentioning, that piracy champions love to say that no measure can stop the major infringing sites because they will always move around the Web; but this same observation is never made about free speech itself, which is considerably more agile and infinitely larger in scope. The EFF might notice that there are trillions of expressions made every hour on the Internet, and no legislative or private-industry measure—at least in this country—is likely ever going to stop that.

At the same time, we might also keep in mind that the platforms we use for most of this speech–like the one I’m using right now–belong to corporations, and corporations sometimes fail.  In this regard, the EFF might consider that the Internet it so staunchly defends can be corrupted by piracy, which has been linked to malware and other scams that harm users and weaken the faith of advertisers in the digital ecosystem. After all, the major Internet companies don’t have hundred-million-dollar valuations because they’re platforms for free speech; they’re valued in the stratosphere because they are advertising and data mining businesses. And that’s fine, I guess, but let’s shed the illusion that these sites are run on principle.  Wall Street doesn’t invest in principle. They like money.

In this regard, I have to call particular attention to Stoltz’s statement that “the domain name system only works so long as most Internet users trust it to direct them to the websites they ask for ….” Indeed. But it’s disappointing that the EFF does not acknowledge the loss of trust in the system that occurs when search for quality information or legitimate resources yield top results that include piracy and SPAM.  At the very least, the user’s time is wasted; and at most, clicking on these links can expose him to malware leading to identity theft and other hazards. Perhaps more benignly, we know that in walled gardens like Facebook, our feeds are no longer chronological but rather represent what that company’s algorithm has determined we “want” to see.  And similar manipulation of results in Google search “tailored” to our apparent preferences continues to be studied as a means to influence political debate or effect the outcome of an election.  If the EFF wants to fuss about free speech, these seem like far more acute areas of focus than the hypothetical shutting down of a handful of criminal operations.

And so, I return to my lead question:  What in blazes does the EFF want?  They don’t like law-enforcement remedies for online piracy, and they apparently don’t want to see voluntary cooperation between OSPs and rights holders either.  At a certain point, it seems we have to conclude that what they want most of all is to maintain their relevance by constantly finding a problem for every solution.