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2005 Predictions Scorecard

January 3, 2006 by

Last January, I offered predictions for 2005. It’s time now to review those predictions, to see how I did.

(1) DRM technology, especially on PCs, will be seen increasingly as a security and privacy risk to end users.

The SonyBMG fiasco fulfilled this prediction.

Verdict: Right.

(2) Vonage and other leading VoIP vendors will start to act like incumbents, welcoming regulation of their industry sector.

We did see Vonage embrace 911 regulation (only to back away from it later). But that’s about all.

Verdict: Mostly wrong.

(3) Internet Explorer will face increasing competitive pressure from Mozilla Firefox. Microsoft’s response will be hamstrung by its desire to maintain the fiction that IE is an integral part of the operating system.

Firefox did make headway, and Microsoft was held back initially by a desire to hold back IE updates until the next version of Windows was issued.

Verdict: Mostly right.

As blogs continue to grow in prominence, we’ll see consolidation in the blog world, with major bloggers either teaming up with each other or affiliating with major news outlets or web sites.

We did see plenty of consolidation: TPM Cafe, Pajamas Media, Huffington Post, and so on.

Verdict: Right.

(5) A TV show or movie that is distributed only on the net will become a cult hit.

Readers informed me that this one was already true (Red vs. Blue). Perhaps I wasn’t predicting that this would happen, but that I would learn about it.

No verdict.

(6) The Supreme Court’s Grokster decision won’t provide us with a broad, clear rule for evaluating future innovations, so the ball will be back in Congress’s court.

The Court didn’t give us a bright-line rule, but Congress has kept its hands off, presumably on the theory that the Court’s decision is the best result that is feasible.

Verdict: Mostly right.

(7) Copyright issues will be stalemated in Congress.

Many bills were introduced, but no major bills came close to passing.

Verdict: Right.

(8) There will be no real progress on the spam, spyware, and desktop security problems.

Verdict: Right.

(9) Congress will address the spyware problem by passing a harmless but ineffectual law, which critics will deride as the “CAN-SPY Act.”

No such bill was passed.

Verdict: Wrong.

(10) DRM technology will still fail to prevent widespread infringement. In a related development, pigs will still fail to fly.

I predict this every year, and it’s always right. This prediction is so obvious that it’s almost unfair to count it.

Verdict: Right.

(11) New P2P systems will marry swarming distribution (as in BitTorrent) with distributed indexing (as in Kazaa et al). Copyright owners will resort to active technical measures to try to corrupt the systems’ indices.

There was talk about such systems, but no good ones were developed, so copyright owners didn’t have to respond to them.

Verdict: mostly wrong.

(12) X-ray vision technology will become more widely available (though not to the general public), spurring a privacy hoohah.

There was some discussion about airport security machines that can see through clothes, but they weren’t widely deployed and the privacy discussion was fairly minor.

Verdict: Mostly wrong.

The final score: five right, two mostly right, three mostly wrong, one wrong. Obviously my predictions weren’t sufficiently outrageous. Next: predictions for 2006.

[A few readers made their own predictions for 2005 in the comments on last year’s predictions post. I’ve re-opened comments there to allow discussion of the reader predictions.]

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Open Thread: SonyBMG Lawsuit Settlement

December 29, 2005 by

SonyBMG has reportedly reached a settlement agreement in the class action lawsuits. Alex Eckelberry has posted the motion proposing the settlement, and a brief summary of its terms. The settlement must be approved by a court before taking effect.

We’re on holiday hiatus, so I won’t analyze the settlement now. Feel free to discuss it in the comments, though.

(Update: Discussion had already started in the comments on another post, starting here. It has moved over here now.)

(Update 2: Jim Tyre pointed out that what I had previously called the “settlement” was actually a motion asking the court to approve the settlement. I modified the text to reflect this, and I added a link to the actual settlement.)

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Happy Holidays

December 22, 2005 by

Barring major unexpected news, we’ll be on hiatus until after the holidays. We appreciate you, our readers, but this is the time of year to spend less time with you and more with our families.

Enjoy the holidays, and we’ll see you in January!

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Sony CDs and the Computer Fraud and Abuse Act

December 21, 2005 by

We’ve written plenty here about the adventures of SonyBMG, First4Internet, and SunnComm/MediaMax in CD copy protection. Today, I want to consider whether the companies violated the Computer Fraud and Abuse Act (CFAA), which is the primary Federal law banning computer intrusions and malware. A CFAA violator is subject to criminal enforcement and to civil suits filed by victims.

A major caveat is in order: remember that although I have studied this statute, I am not a lawyer. I think I know enough to lay out the issues, but I won’t pretend to give a firm legal opinion on whether the companies have violated the CFAA. Also, bear in mind that the facts are different as to First4Internet (which designed and distributed the XCP software), SunnComm/MediaMax (which designed and distributed the MediaMax software), and SonyBMG (which distributed both software systems but may have known less about how they worked).

There are two relevant provisions in the CFAA. The first one, which I’ll call the “spying provision”, says this:

Whoever … intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains … information from any protected computer if the conduct involved an interstate or foreign communication … shall be punished …

The second one, which I’ll call the “damage provision”, says this:

Whoever … intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage … shall be punished …

(“Protected computer” is defined in the CFAA to include nearly every computer at issue here.)

Let’s look first at the spying provision. We know that the programs obtained information from the user’s computer (about how the user used the CD drive) and sent that information across the Net to either SonyBMG or SunnComm. In most cases that would be interstate communication. So the main issue would seem to be whether the companies, in installing their software on a user’s computer, intentionally accessed the computer without authorization or exceeded authorized access.

According to the CFAA,

the term “exceeds authorized access” means to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter

In the case of XCP, the software that gathers and sends information only gets installed if the user agrees to an End User License Agreement (EULA), so the company is authorized to access the computer. They might still have exceeded authorized access, if the EULA’s terms did not entitle them to obtain some information that they obtained. Given the vagueness of the EULA language, this seems like a close call. Eric Goldman has argued that a court would give XCP the benefit of the doubt.

Things look worse for MediaMax. The company sometimes installs its software even if the user rejects the EULA. In this case the company is not authorized to put software on the user’s computer or to cause that software to run. But they do it anyway. It’s hard to see how that’s not either accessing without authorization or exceeding authorized access. It looks like MediaMax is in jeopardy on the spying provision.

Sony’s position here is interesting. They shipped the affected software, but they may not have known as much about how it worked. The spying provision applies only if the company accessed the computer (or exceeded authorized access) “intentionally”. If Sony didn’t know that MediaMax installed when the user denied the EULA, then Sony may be in the clear even if MediaMax itself is in violation.

Let’s turn now to the damage provision. This provision covers access without authorization, but doesn’t cover exceeding authorization. As I understand it, this means that you’re not in violation if you had any kind of authorization to access the computer.

The provision also requires that there be “damage”. According to the CFAA, damage includes “any impairment to the integrity or availability of data, a program, a system, or information, that causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals”. As I understand it, the cost of detecting and mitigating a problem, including the value of time spent by people on detection and mitigation, can be included in the loss. Given that, there can be little doubt that each of these software systems caused damage of more than $5000 total. For example, if a system was installed on 100,000 computers and imposed at least five cents in detection and mitigation costs on each one of those computers, the aggregate damage is more than $5000.

It seems clear, too, that the installation of a rootkit, or the installation of software without permission – not to mention the security vulnerabilities caused by the software – constitutes an impairment to the integrity of users’ systems.

So the main sticking point in the damage provision would seem to be access without authorization. XCP gets a limited authorization to access the computer when the user agrees to the EULA, so they would seem to be okay. But when MediaMax installs despite the user rejecting the EULA, that looks to me like access without authorization. Again, it looks like MediaMax may be in trouble.

The word “intentionally” pops up in again in the damage provision, and again it might protect SonyBMG, if SonyBMG did not know that the software was designed to install without authorization.

There are two more issues regarding the damage provision. The first one is a possible objection from MediaMax, claiming that although the unauthorized installation may have been intentional, the damage was not intentional. As I understand it, courts have rejected this reading of the CFAA, holding that only the access must be intentional, but the statute applies even if the damage was an accident. It’s easy to understand why Congress would have wanted to write the law that way, to say that if you intentionally break in to somebody’s computer, you are responsible for any damage you cause to that computer, even if the damage happens accidentally.

The last issue is whether the companies had authorization to install or run software immediately upon insertion of the CD into the computer, even before the user is presented with a EULA. I think there’s a good argument that the companies ran more software than they were authorized to run in that situation, but it seems like a stretch to argue that they had no authorization to do anything at all. It seems reasonable to allow them to at least run enough software to pop up a EULA. In any case, it would be hard to find $5000 in damage from this behavior.

So here’s my very tentative bottom line: XCP is in the gray area but is probably okay; MediaMax may well be in violation; and Sony’s status depends on how much they knew about what the MediaMax software did. Perhaps a court hearing one of the SonyBMG lawsuits will give us its own analysis.

UPDATE (1:30 PM EST): In the comments, Sam points out an important issue that I missed in writing this post. Even if SonyBMG did not know from the beginning that MediaMax installs and runs without authorization, they did find out about it eventually, and they kept shipping MediaMax discs anyway. So the software’s behavior would seem to be intentional on Sony’s part, at least with respect to those discs sold after Sony learned about the MediaMax behavior. ]

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Is DRM Good for You?

December 19, 2005 by

Randy Picker, a principled DRM (copy protection) advocate, had an interesting comment on one of my prior posts about the Sony incident. Here’s the core of it:

Assume for now that you are right that DRM leads to spyware; all that means is that we need to figure out whether we should or shouldn’t favor active protection/supervision environments.

That gets us to the central point: namely the fact that consumers don’t want it doesn’t tell us anything about whether it is in the joint interests of consumers and producers. I spent the morning writing my exam and then will have to grade it after the students take it (no grad student graders for law profs). By far and away the worst part of the job, and I certainly don’t want it as part of the job, but that doesn’t mean that it isn’t jointly sensible.

Putting that point slightly differently, consumers may gain more from a DRM world than they would from whatever alternative world emerges without DRM; those subject to restrictions rarely want them but restrictions are frequently welfare maximizing; the fact that one party would like to get rid of the restrictions tells me little (nothing, probably) about whether the restriction is in the joint interest of the parties to the transaction.

It’s true in principle that an arrangement can be unwanted but ultimately good for those on whom it is imposed; but I don’t think that observation matters much in the specific case of CD DRM.

To understand why, let’s look at a case where a similar argument has traditionally worked: copyright. Copyright can be understood as an agreement among all of us that we will not infringe. Even though each of us individually would prefer to use works without paying, we understand that if we all refrain from infringing this increases incentives for authors, leading to the creation of more works we can enjoy. By making and keeping this copyright deal with each other, we come out ahead. (That’s the theory anyway. We all know what happens when the lobbyists show up, but work with me here, okay?)

One of the practical problems with this kind of deal is that each individual can gain by defecting from the deal – in the case of copyright, by infringing at will. If enough people defect, the deal could collapse. This danger is especially acute when it’s technologically easy to defect. Some people argue that this is happening to the copyright deal.

Anyway, what Randy is suggesting is that there might be a similar deal in which we all agree to accept some kind of DRM in order to boost incentives for authors and thereby cause the creation of more works than would otherwise exist. I think that if we weigh the costs and benefits, that would be a bad deal. And I’m especially sure it’s a bad deal for CD DRM. Let me explain why.

First, it turns out to be easy technologically to defect from the CD-DRM deal. Experience with the copyright deal teaches us that when it’s easy to defect, many people will, whether we like it or not.

Second, the costs of the CD-DRM deal seem much clearer than the benefits. Allowing spyware-DRM on our computers will open loopholes in our anti-spyware defenses that will foster more spyware infections. And as we have seen already, spyware-DRM will itself expose us to security risks. That’s the cost side. On the benefit side, we have only the dubious premise that CD-DRM might boost record sales. The costs are more certain, and larger.

The best argument against the CD-DRM deal, though, is that it is inferior to the copyright deal. If we’re going to make and keep a deal of this general type, the copyright deal is the one to pick. Compared to the copyright deal, the CD-DRM deal is a loser: costs are higher, benefits are the same at best, and the deal is just as easy to defect from. If we can’t keep the copyright deal, then we won’t be able to keep the CD-DRM deal either. But more to the point, we shouldn’t make the CD-DRM deal in the first place.

I’ve looked here at the specific case of DRM for CDs, but I think the same argument holds for other types of DRM as well. Leaving aside the mythical side-effect-free DRM systems and perfectly just legal regimes that some DRM advocates dream about, and looking instead at DRM systems and legal rules that could actually exist and how they would work in practice – as I am sure Randy and other principled DRM advocates would want us to do – the available DRM deals look lousy. Certainly they look worse than the original copyright deal.

Now I’m not arguing here that the current copyright deal is perfect or even close to perfect. The copyright deal is under stress and we need to keep thinking about how we might improve it or how we might renegotiate it to work better in the digital world. I’m not certain what the best deal would look like, but I’m pretty sure that it won’t try to lock in any kind of DRM.

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