Information Technology and the Law

I agree completely with Eric and Lauren in their opinions that the “community standards” prong of the Miller test is ridiculous.

Upon first glance, the test seems completely reasonable. Sure, values differ from community to community. That’s why we have red states and blue states. From a normative standpoint, it would be extremely efficient if the law could accurately represent the “average” views of the local community. The judicial system would work just like the legislative system, in that the supposed “majority” opinion would be represented and would set the standards it thinks are right for the whole country. Herein lies the problem: the first prong of the Miller test circumvents the legislative system by relying on unelected, randomly selected citizens to essentially MAKE the law. Think about your family and friends. Do you trust every member of your family and every drinking buddy you’ve ever had to make laws on the fly? Lauren says the test is vague, and I agree. It is this vagueness that gives an unrepresentative portion of the “community” free reign to shut down the first amendment.

I understand that the jury system is not perfect, and I do not expect it to be. Not every juror can be a professor of law. But the Miller test not only exploits this imperfection, but laughs in the face of the democratic process.

An argument against this opinion is that one should know the laws of another state if one plans to utilize any service or system that is under the jurisdiction of that state. For instance, one of the main points of driver’s education is that if you cross state lines in your car, your are required to know the laws of the adjacent state. The excuse “but officer, I didn’t know the law” is not valid, because the burden falls on the individual. By this logic, one could therefore be held responsible for violating the “community standard” of obscenity if one did not know the standard. Eric says this is a problem because you could never figure out what the community standard actually is, and could therefore never efficiently guess to set up a business. I take it one step further – not only would you have no idea what the community standard is, the standard would change from jury to jury. Even if you made decisions based on a poll of the community, and argued your case the exact same way ten times in front of ten juries, you would essentially be subject to ten different laws, depending on how the jury felt that day. It is not the jury’s place to make law, but rather to decide on whether or not a person broke the ones already in place.

It follows that the easiest way to fix the problem is to legislate it away. Eric’s idea to apply the same type of law used in hate crime/hate speech is spot on. If the law specifically says what is and what is not obscene (even if states legislate this individually), then Twelve Angry Men can’t decide what’s best for the country.

In response to mdaly’s post entitled “No-click Clickwrap Agreements,” I agree that passive terms of use that do not require the user to at least click an icon are NOT valid contracts.

Passive clickwrap agreements are the lowest rung on the food chain. If actual written contracts are at the top, EULA’s with an “I agree” click-through are in the middle, and passive terms of use are at the bottom. We argued at length a few weeks ago about whether or not the “I agree” EULAs are valid contracts because the majority of people do not understand what they are agreeing to. If EULAs are shaky, then there is no way passive agreements could ever be considered valid. EULA’s at least give the user the opportunity to understand the terms of the agreement, and reject the offer if they so choose. One of the only arguments in favor of EULAs is that the meeting of the minds occurs when the “I accept” button is clicked. There is no need for negotiation, because the manufacturer of the EULA basically says their terms are not negotiable. With a passive agreement, even this halfhearted argument cannot be applied.

Let’s say you go for a 10-mile run down a suburban sidewalk. You would never expect to encounter on your run a small sign on someone’s lawn that says all people who run across their driveway owe $100 for asphalt upkeep. If someone put that sign up and sued you for the money, the situation would be akin to the passive website terms of use. Of the thousands of other regular driveways you ran across, you were never made aware that you had “implicitly” signed an agreement about the terms of use of the driveway. The driveway (website) was there for you to run across, so you did. Sure, the owner is responsible for the upkeep of the asphalt (server), but everyone knows that maintaining your driveway is just a cost of the privilege of owning a home. If these agreements were allowed to stand, anyone could easily dupe you into agreeing to anything. No judge would ever hold up this contract in court.

In response to Don’s post about Microsoft’s monopoly, I disagree completely that Microsoft could ever be absolved of monopolistic action. Whether or not third-party effects like bandwidth limitations and hard drive requirements barred Netscape from entering the market is inconsequential. The fact of the matter is that Microsoft had/has a huge OS market share, and was acting as basically the sole manufacturer of commercial operating systems. They used this fact to leverage the market for secondary products (like web browsers) in their favor, which is both normatively wrong and illegal. It again comes back to the Lexmark argument (that is, the argument made in discussing the Lexmark case pertaining to its marking scheme, not its copyright assertion). Lexmark was just in trying to allow only their cartridges to work with their printers, because if buyers did not like this marketing scheme, they could just go buy a different printer. Microsoft, as the sole actor in the OS market, provided users with no alternative to their product. Therefore, it was immoral for Microsoft to gain an unfair advantage in secondary markets based on their OS stranglehold because consumers had no choice in the matter. So I guess my response to Don’s question “does that fact that distribution costs for internet browsers have been decreasing, or that hard drive storage spaces have been increasing bar Microsoft from aggressively posturing against competing products and systems?” is a resounding NO.

I was intrigued with Muoyo’s last post, in which he asks why the business model of the company in question has any effect on the court’s decision. At first, I completely agreed with this idea. He’s right – in Sega v. Accolade, the court found that even though Accolade’s reverse engineering of the Sega cartridges would undoubtedly alter the business model of Sega, what Accolade had done was fair use. In Grokster, the perceived immediate threat of massive infringement is undoubtedly detrimental to the recording industry. However, the district and appeals courts both ruled in favor of Grokster, on the grounds that Grokster’s service has other future, commercially significant non-infringing uses.

Why then, is the business model taken into account in cases like Thrifty-Tel v. Beznek and Ebay v. Bidder’s Edge? Because internet trespass is a completely different animal than copyright infringement. A different, stupid animal.

When copyright infringement cases appeared in front of the courts, “fair use” was always the enduring issue. That is, the courts always tried to decide whether or not what the defendant (in most cases) had done was actually in violation of copyright law. The normative nature of copyright law is to protect the innovative interests of artists who contribute to society in a creative way. Therefore, the courts were trying to decide if what the defendant (in most cases) had done would decrease the incentive of an artist or other creative mind to innovate. Innovation is not necessarily linked to money-making, and therefore the business models do not play a part in copyright arguments.

Trespass is different. Trespass law does not try to protect the creative incentive, but rather the livelihood and privacy of an individual or business. A person has the right to do whatever they want (within reasonable limits) with their property and things, even if that includes disallowing the access of another individual or group. Trespass law is meant to protect that right – the right to keep your property and chattels from being messed with by others. In the cases of Thrifty-Tel and Ebay, the court applied trespass reasoning, stating that the chattels of each company had been negatively affected. One of the requirements of trespass to chattels is that harm must be shown to the chattel. In this case, harm to the chattels of the company is directly linked to harm done to the business model of the parent company. Harm to Ebay’s servers could easily be shown in a reduction of other legitimate business traffic to that server. If trespass is to be applied, then business model therefore may not be separated out.

I actually think trespass to chattels is a pretty ridiculous way for the courts to deal with these cases. But, in the framework of the hole the courts have dug for themselves, we must accept the way the law is made to work.

Muoyo’s post makes the point that in general, when a company tries to increase their profits by requiring that necessary accessories to their own product are bought from a specific vendor, this business practice is illegal. I agree in part with this argument, and wish to expand upon Chris Richbourg’s post from 4/30.

In most situations, including pretty much every situation we discuss in class, it should be illegal for a business to require vendor-specific accessories. For instance, Lexmark should allow third-party manufacturers to make printer cartridges to work in their printers. I also agree that it was an abuse of copyright law for Lexmark to sue SCC for copying its tiny bit of code for the cartridge digital handshake. I’ve got to respect Lexmark for trying though – taking refuge under copyright law was a hell of an idea. However, because the printer market is basically an oligopoly, the exclusion of third-party accessory manufacturers limits not only consumer choice, but also the incentive for new companies to enter the market. Everyone loses.

HOWEVER, I put forth the argument that it is okay for a business to require vendor-specific accessories in a perfectly competitive market (where supply is expressed as a market price P – thank you ECO 100). In a perfectly competitive market, a firm is at a disadvantage to dissuade consumer choice, because consumers will simply go elsewhere. This situation is more common than one might think.

The scale on which this class operates is that of large, public companies. In general, these types of firms do not operate in perfectly competitive markets, because companies in the same business do not offer the same product. Take video games for example – sure, company A may make a game for NES, and company B may make a game for NES, but the games are different, and attract different consumers. On smaller scales, however, many firms offer the exact same product. If you hired guy A to lay the bricks on your patio, you could have just as easily hired guy B at the exact same price for the exact same job. Consumers benefit from this type of market, because it not only forces prices down, but quality up as firms try to edge each other out. Guy A can also require you use some other company he made a deal with to power-wash that patio in order to get his service if he wants. Maybe he’ll even give you a deal on laying the bricks for using his power-washer. But, if the consumer doesn’t want to use his power-washer, he can just go and hire guy B at no loss to anyone. When consumers are given free choice, it makes this type of deal between firms okay.

I also agree with Muoyo that the box top contract is ridiculous. It is, in fact, even worse than EULAs. EULAs are at least somewhat legit, because software is licensed and not bought. In my previous post, I made the assertion that software manufacturers have an unfair market advantage because somehow they got a deal where they own all the products their consumers use (in most cases). However, you BUY a printer cartridge. Therefore, you OWN that printer cartridge. You’re not renting the rights, but you can do whatever you want with it. That a company requires you to comply with a contract on a piece of equipment you already own is therefore absurd. They’d be better off asking you for scout’s honor that you’ll return the cartridge to them.

The structure in which software economics operates is ridiculous. Allowing all software to be licensed instead of bought is bad law.

On this blog, and in class, it has been mentioned that most people do not understand what they are signing when they click “I Accept” on a EULA. I believe this to be true. The majority of people do not know that when they buy a piece of software, they do not own it, but they have rather rented it indefinitely for a flat license fee paid at the store.

Originally, unconscionable contracts were brought before courts to protect consumers who did not know any better than to enter into bad deals. The first cases defended poor people who had rented furniture or taken out loans at ludicrous interest rates. This is called predatory lending. Because they did not know better, the contracts were found to be unconscionable (literally, it weighs on your conscience for this to happen).

One might argue that because people don’t know that they are licensing software, the entire system is unconscionable. I disagree. It may weigh heavy on my conscience to see some poor bum get charged 400% interest when he rents a couch because he doesn’t know it’s a bad deal, but it doesn’t really affect me that much to know that people are signing agreements to license software instead of buying it. Rather, I believe that the licensing system is just a stupid way of doing business, and should not be allowed.

Licensing software is very different from buying it. Because the manufacturer still owns their product, they are allowed rights to it that would not normally be allowed if the end user actually owned it instead. Imagine if Ford still owned every car they sold. They could tell you how many miles you were allowed to put on it, and require you to bring it back when they said so with a full tank of gas, just like rental car agencies do when you sign their contract. This is the deal software manufacturers have.

Because they maintain rights to the software in the framework of the licensing system, I believe it is not out of the software manufacturer’s domain to legally include reverse engineering clauses. They own the code, and it would not weigh heavy on a judge’s conscience if a few renters couldn’t reverse engineer it.

That said, I believe people should own software. If the end user owned the software, the reverse engineering clauses would be illiberal, as proven in Sega v. Accolade. This would be the best overall solution.

Software should be dealt with like literature. You own a book when you buy it at a store. It is not necessary for publishers to control exactly how people use their books, because congress passed a whole set of laws called copyright law to protect authors and publishers. Because copyright law now extends to software, it should not be necessary for manufacturers to control exactly how people use their software. Once again, the freedom to tinker.

There have been a few posts recently recommending monetary compensation schemes for artists in the event that P2P file sharing dominates CD sales. The common thread between all these posts is the destruction of the record companies.

Yes, it’s true that record companies are big, evil monopolies who make CDs for a few cents, and sell them for $20. I also believe the recording industry got themselves into this mess by overcharging for their product. However, I do not think that elimination of the recording industry by direct distribution of music by artists over P2P networks is the answer. Here is why:

Recording companies take on the financial burden. Most artists do not have the money themselves for the studio time and marketing expenses necessary to create a successful album. When artists are rewarded recording contracts, they are basically given a financial guarantee that they may take their music to its full potential in a studio somewhere, at no cost to themselves. This is very much like when a college professor is rewarded a research grant. Eliminating this system would be detrimental to the quality of music produced in general, and would actually deter many new, poor artists from cutting albums and realizing their potential.

Recording companies take care of the business end. Most artists are probably not very interested in taking the time to distribute their music (on the internet or otherwise), and rightly so. Artists’ time is better spent making music. This is why industry “big wigs” make so much money – their sales and distribution effort (as well as their control of CD prices and artist payout) allow them to take a large chunk for themselves.

I agree that the recording industry is antiquated, and their current fight against Grokster is a desperate reach to maintain their old way of doing business. But, I think any new P2P payment scheme should include the recording industry, in order to guarantee the variety and quality of music we currently enjoy.

Therefore, I propose that the recording industries open their own P2P networks for each label, over which all their copyrighted music is freely distributed. If the industry did this, it would make other P2P services like Kazaa and Grokster obsolete, shifting P2P services to their “intended” non-infringing ueses. Users would flock to the Industry P2Ps to get the newest, highest quality recordings.

In order to compensate the recording industry and artists for this service, the recording industry should advertise the heck out of their P2Ps. It would take the 65 million users away from other P2P networks, and also bring in at least double that number of new users who were previously too scared to use P2P, or did not use it because of its illegality. The recording industry could probably bring in large advertisers like Nike or Pepsi, and set their scheme up like television, where the cheapest ads run at night, and each industry label was like a “channel” with different music and advertisements. The idea is to make access to the industry P2Ps easier, or just as easy as independent P2Ps like Kazaa, because any negative force (like a fee, or difficult, non-user friendly interface) will push people back to illegal means of obtaining music. Napster is the best example of this. People don’t want to pay the new Napster for legit music because they can still get the music they want for free.

If the RIAA does this right, they will only suffer small losses to their yearly revenue, while maintaining the beneficial services they provide artists.

If MGM wins, they can really only punish Grokster in two ways:

1) Monetary Compensation. In order to make up for the monetary damages caused by the copyright infringement over Grokster’s software, MGM may be asking Grokster to make up what they lost.
2) An Injunction. The court may decide to issue Grokster an injunction, shutting down their service. I don’t know the law, so I’m not sure if this would shut down only the version under attack, or all possible versions of Grokster, but regardless, the aim would be to shut down the service that allows the infringement.

The way I see it, neither of these punishments really does anything for MGM. If the decision requires monetary compensation, it will likely be a sum much greater than Grokster (who is up to their elbows in legal fees anyway) could ever afford. Therefore, Grokster would likely pay MGM all they had, and go bankrupt thereafter. Whatever sum Grokster paid would pretty much be couch change to a colossus like MGM, though. So, there is no way MGM brought this lawsuit to recover monetary damages.

In the same vein, an injunction wouldn’t really do anything for MGM either. Because most new P2P software (like Grokster) is fully de-centralized, shutting one service down would do nothing to stop the users of the entire network. This was thoroughly discussed in seminar, and in previous posts.

MGM must have known coming into this trial that anything they could get directly from Grokster would be worthless. Therefore, I propose what I think are the two real motives for MGM:

1) Set an Example. Just like the RIAA lawsuits against individual infringers, MGM may be seeking to discourage potential writers of new P2P software, by scaring them with the potential of a lawsuit. Shout out to Professor Felten and Alex here for tinyP2P.
2) Set Precedent. If MGM wins, they could potentially use the decision as precedent in future cases against P2P software providers as a part of their crusade to rid the world of file sharing.

Of course, neither of these really makes that much sense either. Nobody is going to stop writing this software just because Grokster lost. As tinyP2P shows, it would be exceedingly easy to publish a freeware, non-moneymaking P2P. Software like this would be nearly impossible to take to court, much less stop from existing. Also, a decision in favor of MGM doesn’t really set precedent for future cases. If Grokster loses, it will likely be on very small technicalities (like their support service telling a user to upload Beatles songs). The 9th circuit decision in favor of Grokster made it exceedingly clear that P2P software is not inherently illegal.

This isn’t entirely related, but I don’t quite understand why people are now saying Grokster has no chance to win, when they did not say such things before the 9th circuit decision. I suppose it has something to do with the evidence cited in the MGM brief citing Grokster’s knowledge of infringement on its system. However, the appellate court must have heard this argument as well (since MGM isn’t allowed to bring any new evidence), and they still ruled strongly in favor of Grokster. So, I think Grokster probably has the same shot they did in the lower courts.