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Archives for October 2008

Federal Circuit Reins in Business Method Patents

October 31, 2008 by

This has been a big year for patent law in the technology industry. A few weeks ago I wrote about the Supreme Court’s Quanta v. LG decision. Now the United States Court of Appeals for the Federal Circuit, which has jurisdiction over all patent appeals, has handed down a landmark ruling in the case of In Re Bilski. The case dealt with the validity of patents on business methods, and a number of public interest organizations had filed amicus briefs. I offer my take on the decision in a story for Ars Technica. In a nutshell, the Federal Circuit rejected the patent application at issue in the case and signaled a newfound skepticism of “business method” patents.

The decision is surprising because the Federal Circuit has until recently been strongly in favor of expanding patent rights. During the 1990s, it handed down its Alappat and State Street decisions, which gave a green light to patents on software and business methods, two categories of innovation that had traditionally been regarded as ineligible for patent protection. Even as the evidence mounted earlier this decade that these patents were hindering, rather than promoting, technological innovation, the Federal Circuit showed no sign of backing down.

Now, however, the Federal Circuit’s attitude seems to have changed. The biggest factor, I suspect, is that after a quarter century of ignoring patent law, the Supreme Court has handed down a series of unanimous decisions overturning Federal Circuit precedents and harshly criticizing the court’s permissive patent jurisprudence. That, combined with the avalanche of bad press, seems to have convinced the Federal Circuit that the standards for patenting needed to be tightened up.

However, as Ben Klemens writes, Bilski is the start of an argument about the patentability of abtract inventions, not its end. The Federal Circuit formally abandoned the extremely permissive standard it established in State Street, reverting to the Supreme Court’s rule that an invention must be tied to a specific machine or a transformation of matter. But it deferred until future decisions the precise details of how closely an idea has to be tied to a specific machine in order to be eligible for patentability. We know, for example, that a software algorithm (which is ultimately just a string of 1s and 0s) cannot be patented. But what if I take that string of 1s and 0s and write it onto a hard drive, which certainly is a machine. Does this idea-machine hybrid become a patentable invention? As Ben points out, we don’t know because the Federal Circuit explicitly deferred this question to future cases.

Still, there are a lot of hopeful signs here for those of us who would like to see an end to patents on software and business methods. The decision looks in some detail at the Supreme Court’s trio of software patent cases from the late 1970s and early 1980s, and seems conscious of the disconnect between those decisions and the Federal Circuit’s more recent precedents. Software and business method patents have developed a lot of institutional inertia over the last 15 years, so we’re unlikely to see a return to the rule that software and business methods are never patentable. But it’s safe to say that it’s going to start getting a lot harder to obtain patents on software and business methods.

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DMCA Week: Predictions Are Hard, Especially about the Future

October 30, 2008 by

My previous post on DVD jukeboxes has prompted an interesting discussion among our commenters. There seems to be a lively difference of opinion about how useful a DVD jukebox would be, what it would look like, and who would use it. Personally, I had envisioned a high-end video device that DVD collectors would buy to help them organize their libraries. But some commenters pointed out something I hadn’t thought of: a DVD jukebox—either a set-top device or a portable one—would be a godsend to parents with small children. Children not only like to watch the same video repeatedly, but they’re also far more likely to damage a DVD. Having a sealed, rugged hard drive on which to store a few dozen of junior’s favorite movies seems like it would be extremely convenient.

Of course, I don’t really know. Maybe parents already have devices that fill this need. Maybe the devices would be too expensive or too fragile. But that’s why we have markets: so people can try things to see what works.

It’s worth remembering that new technologies almost always wind up having a “killer app” that their creators didn’t expect. The creators of the Internet didn’t have email in mind, but it was the dominant Internet application by the mid-70s. Visicalc, the first spreadsheet, wasn’t on Steve Wozniak’s radar when he built the Apple II. And Apple didn’t invent podcasting, although they were smart enough to jump on the bandwagon relatively quickly once other people did.

None of these applications could have been developed if the technologies on which they relied hadn’t already been created. But if you’d tried to explain what the Internet, the microcomputer, or the MP3 player was good for before you could create the first one, you wouldn’t have been able to make a very convincing argument. I think the same is true of the kind of products we’d see if DVD ripping were legal. I’m pretty confident that we’d have some useful new technologies, but I can’t say exactly what they’d be.

This is one of the reasons I think DMCA supporters are wrong to point to the DMCA’s triennial review process as mitigating the DMCA’s negative effect on technological progress. The triennial process requires entrepreneurs to explain in advance how a given act of circumvention will benefit society. If we’d held the inventors of the Internet, the personal computer, or the MP3 player to that standard, we might not have any of those technologies.

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Wikipedia as a Public Good

October 30, 2008 by

My post about Wikipedia and public goods prompted an interesting response from Judd Antin at Berkeley’s School of Information. He makes a number of sharp points, but let me focus on this response to the idea that free-riders don’t hurt Wikipedia:

This completely depends on what your goal is. On the one hand, sure, once you reach critical mass, the marginal cost of providing the good is zero (or near-zero), so who cares how many free-riders there are. On the other hand, there are lots of benefits to adding to the group of contributors. Wikipedia isn’t perfect – not even close. It’s wrong on a lot of topics. It’s poorly written in many places. It’s skewed heavily towards CS and popular culture, and away from things like history and literature. There’s a lot to be gained for Wikipedia by converting free-riders to contributors. And let’s not foget about the many, many systems that never get to critical mass.

Notice the background assumption in this passage that the numbers of free-riders and contributors are inversely correlated. That is, it assumes that each free-rider is in some sense detracting from the overall effort by failing to contribute. And it suggests that a better-designed institution might be able to convert more of those free-riders into contributors and thereby increase the total value of the public good that’s being provided.

The problem with this, I think, is that it gets the sign of the correlation between free-riders and contributors backwards. That is, on the Internet, the potential audience is so enormous that the most effective way to get more contributors is to increase the total number of users. For Wikipedia, there isn’t so much a “free-riding problem” as there is a “free-riding opportunity”: the more free-riders there are, the easier it will be to recruit new contributors down the road.

Antin also seems to be under the impression that I’m suggesting that we need to “rethink 100 years of theory” about public goods, which is certainly not the case. Standard arguments about public good problems work perfectly well for in cases like national defense and clean air, and I’m certainly not suggesting that we need to re-think those cases. My claim is simply that the standard model (and especially the focus on free riding) just isn’t a helpful way to think about online content creation, a public goods problem with dramatically different characteristics from clean air or national defense.

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DMCA Week: A second orphan works problem?

October 29, 2008 by

The orphan works problem in copyright is real and serious. Several congressional hearings and a Copyright Office inquiry that drew hundreds of thoughtful comments—not to mention countless articles and blog posts—attest to that fact. This attention is heartening, and while orphan works legislation seems to have died this year, I’m optimistic that the next Congress will address the issue. As is often the case in Washington, however, such a victory might only mark the beginning of the next battle. The way I see it, the DMCA might create a second orphan works problem.

As you may know, an orphan work is a work under copyright the owner of which cannot be found. For example, say you come across a self-published political manifesto from 1967 in a Berkley archive or garage sale. You’d like to excerpt extensively from it in a book you’re writing about the Summer of Love. You try every possible avenue to locate the pamphlet’s author to get persmission, but you fail. That manifesto is an orphan work: it’s under copyright, but you can’t find the copyright’s owner.

The problem with orphan works is that if you nevertheless use the work without getting permission from the owner, you expose yourself to an infringement lawsuit if the owner later appears. Because statutory damages can run as high as $150,000 per infringing use, most orphan works go unused. This is a loss not only to the potential user, but also to society at large because it will be deprived of the promotion of science that would have resulted from a derivative work. Perhaps worse, an orphan work might be lost altogether because making an archival copy—say from fragile film to a more stable digital format—can be considered an infringement.

I have previously proposed a solution to the orphan works problem that would create an orphan works affirmative defense to infringement similar to fair use. Under this scheme, if you could show that you took every reasonable step to find a copyright owner and came up empty, you would not be liable for infringement. The Copyright Office made a similar recommendation, but instead of serving as a defense, showing a reasonable search for the copyright holder would merely limit the possible penalties for infringement. A bill based on that recommendation passed the Senate in September but never got a vote in the House before it adjourned earlier this month.

So what does this all have to do with the DMCA? My concern is this: Even if a strong orphan works bill were to pass Congress so that one would no longer have to worry about liability for copyright infringement, the work might still be unusable if in order to gain access to it one had to circumvent a technological measure in violation of the DMCA.

This is not a far-fetched idea. The Internet Archive has already successfully argued for a DMCA exemption for “Computer programs and video games distributed in formats that have become obsolete and that require the original media or hardware as a condition of access, when circumvention is accomplished for the purpose of preservation or archival reproduction of published digital works by a library or archive.” It needed this exemption to legally preserve legacy software stored on fragile floppy discs. Without that exemption, it would violate the DMCA even if it did not violate copyright.

You can see this problem presenting itself again. For example, the Prelinger Archive serves to collect and preserve ephemeral films of historical significance. According to its web site, “Included are films produced by and for many hundreds of important US corporations, nonprofit organizations, trade associations, community and interest groups, and educational institutions.” Today its collection is composed largely of videotapes and films, but there will come a time when one-of-a-kind movies will be on CSS-protected DVDs. Similarly, Amazon recently introduced its Digital Text Platform, which allows users to self-publish books that can be purchased and read on the Kindle. This means that there will soon be many books that will exist only as DRM-protected e-books. Therefore, even if we address the orphan works problem so that a user must no longer fear a surprise infringement suit from a previously impossible-to-find copyright holder, the user might still fear a DMCA suit.

The triennial exemption process provided in the DMCA will likely not provide sufficient relief because the Copyright Office is limited to exempting particular “class[es] of copyrighted works.” Just as it has refused to exempt “fair use works” because that is not a “sufficient” or “cognizable” class, the Copyright Office probably won’t recognize orphan works as a class that can be exempt. The sort of classes it will recognize will be very narrow, such as the one in the “obsolete video game or software” exemption. Not only is this exemption for one particular type of work, but it only applies to circumventions made for archival purposes.

Additionally, as Tim Lee points out to me, another way the DMCA might exacerbate the orphan works problem is by preventing the conversion of works into open and widely supported formats—the digital equivalent of what Prelinger is trying to do with film. Most of the proprietary DRMed formats we see around us today are likely to drop out of commercial use within the next couple of decades. As a result, people will gradually forget how to read those formats at all. By 2108, even if the DMCA has been reformed, no one may have any clue how to decrypt a PlaysForSure-encrypted audio file from 2002. Digital libraries in the near future need to be able to say “Boy, this format isn’t commercially supported any more, we’re going to convert it to MP3/MPEG/PDF so our patrons can continue enjoying it.” If they’re not allowed to do that, DMCA reform in the distant future may not matter.

I’m afraid I don’t have a ready solution short of abolishing or limiting the DMCA. One approach might be to include a limit to DMCA liability in the proposed orphan works legislation. However, I wouldn’t want to endanger that legislation’s political viability to address what is still a speculative problem. It won’t be long, however, before we find out if DMCA protections cause a second orphan works problem, metastasizing the harm visited on culture and society by that regrettable law.

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DMCA Week: Where's My DVD Jukebox?

October 28, 2008 by

A difficult challenge in thinking about public policy is understanding which innovations have not happened as a result of bad government policies. For example, it’s generally believed that the Bell phone monopoly stifled innovation in the telecommunications sector during the 1950s and 1960s. But if we had been assessing things from the standpoint of the mid-1960s, it would have been hard to say exactly which innovations were missing. It wasn’t until after the Carterfone decision in 1968, and further liberalizations in the 1970s and 1980s, that we started to see just how many innovations could be unleashed by a competitive market: modems, answering machines, fax machines, competitive long distance service, etc.

We face a somewhat analogous situation with the Digital Millennium Copyright Act. Like a lot of other people, I’ve made the argument that the DMCA has stifled important high-tech innovations. And the DMCA has been on the books long enough that if we’re right, then we’re probably missing out on some important innovations. But it’s difficult to say exactly what they are; they’re what Bastiat called “what is not seen”, and what Don Rumsfeld called unknown unknowns.

But while we can’t say for certain which innovations have been precluded by the DMCA, we can find plenty of hints. Just last week, Apple CEO Steve Jobs commented that “the whole category [of ‘digital living room’ video devices] is still a hobby right now. I don’t think anybody has succeeded at it. And actually the experimentation has slowed down. A lot of the early companies that were trying things have faded away.”

What’s striking about this is how different the evolution of digital home video products is from the explosion of digital audio products a decade ago. The period between the introduction of the first MP3 players in 1998 and the release of the iPod in 2001 was a period of fevered innovation in both hardware and software. Numerous companies, some of them fairly small, introduced music players. By the time Apple entered the scene in 2001, it was entering an already-crowded market. In contrast, we’ve seen only a trickle of new digital video devices. The Video iPod, Slingbox, and YouTube were all introduced in 2005. These are all great products, but they’re also curiously limited. We haven’t seen general-purpose video devices that replace DVD players and cable boxes the way the iPod has largely replaced CD players and is gradually replacing the radio. Today’s home video experience would be completely unsurprising to someone from 10 years ago.

How is the video market different from the audio market was? There are obviously a lot of factors, but it seems to me that the DMCA is one of the most important ones. It has made it effectively illegal to rip video from their DVDs the way people ripped audio from their CDs a decade ago. And the ability to rip CDs into MP3 files created the foundation on which the digital music device market was built, eventually leading to the iPod.

Consider two products that have not been widely adopted, due largely to DMCA-related legal problems. One is the XBMC Media Center, which used to be known as the XBox Media Center before Microsoft’s lawyers came knocking. Two years ago, I pointed out that the XBMC had significantly more functionality than a lot of “legitimate” media players. I think that’s still true today. One of the most important features was the ability to rip DVDs and store them on your hard drive for later playback. Unfortunately, the DMCA makes it essentially impossible for mainstream technology companies to duplicate this functionality.

XMBC, or other software like it, could have been the WinAmp of video, allowing law-abiding people to build libraries of legitimate video in an open format. That, in turn, would have created a market for digital video hardware to store, play, and manipulate these files, just as WinAmp and other MP3 software made the MP3 player market possible. But because the DMCA makes DVD-ripping effectively illegal, there is no legal way for people to get their existing DVD libraries into an open format, which drastically reduces the demand for open video devices.

Or consider Kaleidescape, an innovative, and very expensive, DVD-jukebox device that was introduced almost five years ago and has faced legal trouble almost from its inception. As Ed put it back in 2004:

DVD-CCA [the cartel that controls the DVD standard] is trying to maintain its control over all technology related to DVDs. In the good old days, copyright law gave copyright owners the right to sue infringers but gave no right to stop noninfringing uses just because the copyright owner didn’t like them. These days, copyright interests seem to want broad control over technology design.

Kaleidescape ultimately won its lawsuit, but the decision turned on fairly narrow contractual grounds that don’t provide much room for others to enter the market. The bottom line is that it’s still effectively illegal to sell a product that will rip DVDs to an open video format.

It’s not like Hollywood hasn’t been trying to produce a viable video platform. Way back in 2003, Hollywood had two proprietary download services called MovieLink and CinemaNow. Unfortunately, they crashed and burned. This part of the story is actually strikingly similar to the music industry, which had a proprietary download services of its own that did just as poorly.

What’s different is that video entrepreneurs don’t have the freedom that audio entrepreneurs did to opt out of the incumbents’ preferred platforms and build their own. It’s worth remembering that the recording industry tried to sue the first MP3 players out of existence. What we’re seeing in the video market is what the digital audio marketplace would have looked like if the recording industry had won its lawsuit against the first MP3 players. The recording industry lost that lawsuit, and entrepreneurs went on to build products that were much better than the “official” ones being pushed by the labels. Unfortunately, entrepreneurs in the digital video market don’t have that same option.

If the DMCA were not on the books, it seems likely that products like Kaleidescape and the XBMC would be growing rapidly in popularity. Many of us would have set-top boxes with 500 GB hard drives capable of ripping dozens of DVDs to an open, standard format for subsequent streaming to any display in the user’s house. The existence of those boxes would spur the creation of a wider market for other digital video products designed to interoperate with the emerging open video standard.

Unfortunately, that’s not how things have gone. Hollywood has managed to do what the recording industry was unable to do: to ban users from converting their legally-purchased content to open formats. As a result, the market for open digital video devices is a pale shadow of what it would be in a competitive market. We’re stuck with clunky, proprietary, and non-interoperable products like Apple TV that require users to re-purchase their existing movie collections in order to watch them on the new device. I think everyone would agree that it was a good thing that the courts didn’t let the recording industry shut down the MP3 player market a decade ago. So why do we tolerate a law that effectively shuts down the analogous market for DVD jukeboxes?

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