October 21, 2020

Economic Scene: In a Copyright Ruling, the Legacy of the Betamax

Before Napster and LimeWire, before Megauploads and the Pirate Bay, media companies’ epic struggle against copying, piracy and generally losing control over their creations can be traced to a legal fight more than 30 years ago over a device that has long since passed on to the great trash heap in the sky: the Sony Betamax.

When the Betamax videocassette recorder hit American living rooms in 1976, consumers, for the first time, could tape their favorite TV shows and watch them later. Hollywood hated it.

“The VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone,” Jack Valenti, the garrulous head of the Motion Picture Association of America, told Congress.

The Supreme Court almost bought the argument that because it was illegal to copy shows without the copyright holder’s consent, the Betamax must be an accessory to crime. At the last minute, however, Justice Sandra Day O’Connor changed her mind. In a 5-to-4 ruling in 1984, the technology survived.

Foiling another attempt by studios to control the emerging videocassette market, Congress refused to forbid the renting or reselling videotapes of movies for profit. Blockbuster, Netflix and Redbox would be protected by copyright law’s doctrine of “first sale.” If they had bought it, they owned it.

The decisions had enormous implications for the media economy. The VCR gave way to the DVD player and the digital video recorder. Videotape gave the kiss of life to the low-budget independent film. From “Rip. Mix. Burn.” to YouTube, every step of the evolution of digital media has been affected by that decision.

Last week, the Supreme Court made another call that could have equally far-reaching implications. The ruling referred only to printed books, another technology that predates the Internet. Yet it, too, is likely to reshape the information economy in unexpected ways.

In a 6-to-3 decision, the court took sides with Supap Kirtsaeng, a Thai math student at Cornell who generated roughly $900,000 in revenue reselling in the United States cheap textbooks that his friends and relatives sent from Thailand.

John Wiley Sons had argued that Mr. Kirtsaeng was infringing on its copyright by importing the books without permission. The publisher said this short-circuited its ability to segment markets by price — selling the books more expensively to American students than to poorer Thai students who could otherwise not afford them.

But the court held that the publisher’s right to ban imports was trumped by Mr. Kirtsaeng’s right of first sale. He might not be allowed to make unauthorized copies of the books. But as with old library books or secondhand Gucci bags at a flea market, if the books had been bought legally, whether imported or sold originally in the United States, Mr. Kirtsaeng could sell them.

The decision picks at the scab of an argument that has raged since the first copyright law was enacted in 18th-century Britain: how to balance the interest of copyright holders to profit from their creations — giving them an incentive to create more — against the social goal of promoting access to the movies, books and software programs they create.

Like the Betamax decision in 1984, the Supreme Court’s ruling last week underscores the challenges placed by globalization and information technology on the very idea of protecting intellectual property. It adds to a maze of laws, legal decisions and technological barriers governing what companies and people can do with their stuff in the new economy. And it will probably change the way companies deliver media.

Is the decision good or bad?

Probably both. It depends who you are.

“The decision is a major victory for American consumers because it allows them to shop worldwide for their copyrighted content,” wrote Gary Shapiro, the chief executive of the Consumer Electronics Association. “If the reasoning extended to pharmaceuticals, for example, Americans would no longer be the chumps who pay the highest prices in the world simply because they’re not allowed to shop overseas where prices are lower.”

Others were not so elated. “Software authors will have little incentive to price their programs for foreign markets if they can simply be resold in the United States, and thereby undercut the price of the domestic version,” said the Business Software Alliance in a brief to the court. “Foreign consumers will be deprived of a product that would be useful to them and authors will have fewer resources to innovate for both domestic and foreign markets.”

Besides cheap textbooks on Craigslist and e-Bay, the decision will probably bring a bunch of imports to the aisles of Target and Costco, said Keith Kupferschmid, vice president for intellectual property policy and enforcement at the Software and Information Industry Association.

More than two years ago, after Justice Elena Kagan’s recusal, the court deadlocked on whether Costco could claim a first-sale right to resell imported Omega watches against Omega’s will. Now we know it can go ahead.

Publishers may abandon segmentation and start selling at the same price everywhere. Or they may find other ways to segment markets — perhaps printing foreign books on cheaper paper.

E-mail: eporter@nytimes.com; Twitter: @portereduardo

Article source: http://www.nytimes.com/2013/03/27/business/in-a-copyright-ruling-the-lingering-legacy-of-the-betamax.html?partner=rss&emc=rss

7 Charged as F.B.I. Closes a Top File-Sharing Site

The federal authorities on Thursday announced that they had charged seven people connected to the Web site Megaupload, including its founder, with running an international criminal enterprise centered on copyright infringement on the Internet.

According to a grand jury indictment, Megaupload — one of the most popular “locker” services on the Internet, which lets users anonymously transfer large files — generated $175 million in income for its operators through subscription fees and advertising, while causing $500 million in damages to copyright holders.

Four of the seven people, including the site’s founder Kim Dotcom, born Kim Schmitz, have been arrested in New Zealand, the Justice Department and Federal Bureau of Investigation said on Thursday; the three others remain at large. The seven — who a grand jury indictment calls part of a “Mega Conspiracy” — have been charged with five counts of copyright infringement and conspiracy, the authorities said.

The charges, which the government agencies said represented “among the largest criminal copyright cases ever brought by the United States,” come at a charged time, a day after online protests against a pair of antipiracy bills being considered by Congress — the Stop Online Piracy Act, or SOPA, in the House, and the Protect I.P. Act, or PIPA, in the Senate.

In response to the arrests, the hacker collective known as Anonymous said it had taken down the Web sites of the Justice Department, the Motion Picture Association of America, and the Recording Industry Association of America. All three sites were inaccessible late Thursday afternoon.

The indictment in the Megaupload case was handed down by a grand jury in Virginia two weeks ago, but was unsealed on Thursday, and stems from a federal investigation that began two years ago.

The Megaupload case touches on many of the most controversial aspects of the antipiracy debate.

Megaupload and similar locker sites, like Rapidshare and Mediafire, are often promoted as being convenient ways to legitimately transfer large files — a recent promotional video had major stars like Will.i.am of the Black Eyed Peas singing Megaupload’s praises. But they have become notorious among media companies, who see them as abetting copyright infringement on a large scale by giving people easy, but unauthorized, access to movies, music and other content.

Megaupload is currently engaged in a lawsuit with Universal over the promotional video and Universal’s efforts to have it removed from YouTube.

As part of the crackdown on Megaupload, 20 search warrants were executed in nine countries, including the United States. About $50 million in assets were also seized, as well as a number of servers and 18 domain names, the authorities said.

Ira P. Rothken, a lawyer for Megaupload, said in a phone interview on Thursday afternoon that he had not yet seen the indictment, but he added: “Clearly we have due process concerns. This was done without a hearing.”

Article source: http://feeds.nytimes.com/click.phdo?i=6ed5fbe843e26108fcd648d841daf833

Web Piracy Bills Invite a Protracted Battle

But few people in Silicon Valley or Hollywood consider the battle over.

The Motion Picture Association of America, which represents Hollywood studios and is a principal proponent of the antipiracy legislation, suggested that it would continue to push the administration to approve a modified version of the bills, known as the Stop Online Piracy Act and the Protect Intellectual Property Act. “Look forward to @whitehouse playing a constructive role in moving forward on #sopa #pipa,” the association posted on its Twitter feed Saturday night.

Some leaders of the movie industry were not as diplomatic. The chief executive of News Corporation, Rupert Murdoch, in a flurry of Twitter messages in the hours after the White House announcement, accused President Obama of capitulating to the technology industry. “So Obama has thrown in his lot with Silicon Valley paymasters who threaten all software creators with piracy, plain thievery,” he posted on his Twitter feed.

The antipiracy bills presented a difficult test to a young, disorganized and largely politically inactive technology industry. It is unclear that companies like Facebook and Google, left to themselves, could have swayed members of Congress or the White House without using the Internet to marshal opposition from technologists, entrepreneurs and computer-adept consumers. Opposition came from a vast spectrum, including computer security specialists who worried about a provision to tinker with Internet addresses and venture capitalists who feared the legislation would thwart the innovation of technology start-ups.

The opposition has been fueled by some of the most innovative pieces of the Internet — Twitter, Facebook, Reddit.com and even the I Can Haz Cheezburger? sites. “Looks like the Internet is winning a battle against some really bad potential law,” wrote Craig Newmark, the founder of Craigslist, the online classified advertising site, in a blog post on Sunday.

Markham C. Erickson, executive director of NetCoalition, whose members include Google and Yahoo, said Sunday that it was too soon to dismiss entirely the House or Senate versions of the antipiracy bills. “I think the White House statement is very strong and it helps, but, no, I don’t think it’s dead,” Mr. Erickson said by telephone from Washington. “We will continue to have to educate as many members as possible.”

He said it was still an open question whether his group would seek to kill the bills or push for major changes.

Several Internet companies, including AOL, Facebook, Google and Yahoo, endorse an alternative that seeks to punish foreign Web sites that engage in copyright infringement through international trade law. That bill is co-sponsored by Representative Darrell Issa, Republican of California. Last week, Mr. Issa said that his party’s leader, Representative Eric Cantor of Virginia, had assured him that the Stop Online Piracy Act would not come up for a vote until there was consensus. For technology companies, that holds out the promise of returning to the drawing board. For Hollywood and other media companies challenged by piracy, it defers the prospects of antipiracy legislation.

“We have a chance to reset the legislative table to find out what kind of legislation is needed,” Mr. Erickson said. “We have an opportunity to step back, recalibrate and understand what the problem is.”

Several prominent Web sites and start-ups that have been among the most vocal opposition to the bills say they will not let up on their online advocacy soon.

The comments by the administration’s chief technology officials was a sign that government officials were beginning to pay attention to the cries of concern from the technology industry about the bills’ ability to enable censorship and tamper with the livelihood of businesses on the Internet.

“It’s encouraging that we got this far against the odds, but it’s far from over,” said Erik Martin, the general manager of Reddit.com, a social news site that has generated some of the loudest criticism of the bills. “We’re all still pretty scared that this might pass in one form or another. It’s not a battle between Hollywood and tech, its people who get the Internet and those who don’t.”

Mr. Marin said that Reddit is planning a sitewide blackout on Wednesday to protest the bills — an effort joined by a number of other sites, including MoveOn, BoingBoing, a popular technology and culture blog, and the Cheezburger Network, a collection of several dozen Internet humor sites, including I Can Haz Cheezburger? and FailBlog.

In New York, the New York Tech Meetup, an eight-year-old organization of nearly 20,000 people who work in the technology industry throughout the city, is planning a protest Wednesday afternoon outside the Manhattan offices of Senators Charles E. Schumer and Kirsten E. Gillibrand of New York, who co-sponsored some of the proposed legislation.

Nick Bilton contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=5f40bc49ca45e3d09e909bef1103638f

Scuffle Over On-Demand Movies Portends Battles to Come

The blow-up is between studios and theater owners over a plan to slip some movies into homes through on-demand video shortly after they arrive in theaters. For Mr. Dodd, the new chairman of the Motion Picture Association of America, it is the first industry crisis since he started in late March.

“I’m the new kid on the block,” Mr. Dodd said in an interview by phone on Friday, acknowledging that both his relative inexperience and the need to stay out of business decisions made by individual studios had kept him largely out of the battle. “Each company has to make up its own mind.”

Studios, exhibitors and filmmakers are arguing about the future of the business, and whether people in coming years will be more likely to watch movies in theaters or in increasingly sophisticated home setups mimicking the quality, immediacy and, perhaps, cost, of today’s theatrical experience.

Last week, four studios — Sony Pictures Entertainment, 20th Century Fox, Universal Pictures, and Warner Brothers — took the first step in their arrangement with DirecTV to release films two months after their theatrical release.

The first premium on-demand offering came on Thursday, as DirecTV offered Sony’s “Just Go With It,” with Jennifer Aniston and Adam Sandler, for $30. Two dozen filmmakers, including James Cameron and Peter Jackson, fired back with an open letter criticizing the experiment as a threat to theaters.

The fight separated allies who had recently joined to spend billions of dollars to upgrade theaters for digital and 3-D projection, and had used their combined political might to thwart proposed trading in a financial exchange based on box office revenue.

The rift underscores how little Mr. Dodd or anyone else can do to buffer the jolts in a film business where the greatest challenges are not the labor disputes or public policy battles that were wrangled by past Hollywood statesmen like the MCA chairman Lew R. Wasserman or the long-serving M.P.A.A. chief Jack Valenti.

Rather, the greatest challenges are philosophical and include business choices largely outside the reach of a trade association, which is limited by antitrust law from interfering in decisions that are really about business rather than public policy — hence Mr. Dodd’s unaccustomed restraint. In fact, the difficulties facing the industry are likely to become tougher as film companies feel their way toward a digital future that is only beginning to unfold.

“What’s really going on is that the architecture of the industry is changing,” said Jeff Berg, chairman of the International Creative Management agency.

Speaking by telephone last week, Mr. Berg predicted increasingly rapid waves of change that would overtake the movie business, as companies struggle to replace disappearing DVD revenue with income from both digitally enhanced theaters and new approaches, like so-called digital lockers, that will allow viewers to store films they have paid for in a pirate-proof virtual space that permits repeat viewing.

“There’s a big narrative that’s going to be very disruptive,” Mr. Berg said.

The fierce response by executives from big movie chains like Cinemark, AMC and Regal to the studios’ relatively cautious step with on-demand is clearly more about setting a line for future battles than it is about losing money from an Adam Sandler comedy that left most theaters weeks ago.

“I have not felt this level of concern about a practice of the studios among our members,” said John Fithian, president of the National Association of Theater Owners, which helped organize the filmmakers’ protest letter (in keeping with that association’s view that it can to some extent oppose the plan without violating the antitrust laws that have held back the M.P.A.A.).

Mr. Fithian, also speaking last week, said theater owners had been particularly shocked about the way they learned of the on-demand program: while they were gathered last month at the CinemaCon movie convention in Las Vegas, shortly after Mr. Dodd delivered an address voicing enthusiasm for the moviegoing experience. The report appeared on the Web site of the trade publication Variety.

Article source: http://feeds.nytimes.com/click.phdo?i=1427d69d011d06871e3828b927991d04