WATPA: FW: Supreme Court shows wisdom in guarding intellectual property +

From: Norm Jacknis <norm@jacknis.com>
Date: Tue Jul 05 2005 - 20:21:51 EDT
Interesting collection of articles about the Supreme Court's decisions last week affecting the Internet.  Remember this is the view from the heart of Silicon Valley (San Jose Mercury News).
Posted on Tue, Jun. 28, 2005

Supreme Court shows wisdom in guarding intellectual property

Mercury News

Silicon Valley can breathe a huge sigh of relief. The Supreme Court of the United States really does understand how technology is changing the world, and delivered two well-reasoned decisions Monday in the closely watched Grokster and Brand X cases.

The Grokster decision holds two file-sharing companies liable for rampant Internet piracy, saying they can't wrap themselves in the magic cloak of innovation to defend blatantly illegal behavior. And contrary to the valley's worst fears, this ruling won't discourage new technologies to move forward.

The Brand X decision says companies that build high-speed Internet services don't have to open their lines to competitors. While some may view this as a blow to small Internet service providers up against telecom heavyweights, the court's ruling makes it more likely consumers in the long run will get service from additional networks.

Both decisions underline the importance of intellectual property, a fancy way of saying inventors in the Internet era have the right to profit from creative endeavors without pirates stealing their ideas. Writing a song, acting in a movie or building a new type of broadband wireless system are all deserving of protection.

Silicon Valley's most precious products are ideas, so protection of intellectual property is crucial.

What's more, the valley's growth comes from start-ups that are much like the small prehistoric mammals that scurried beneath lumbering dinosaurs.

The Supreme Court decisions, on the surface, look pro-dinosaur. But dig a little deeper, and you can see the nine justices are also looking after the speedy little mammals.

Justice David Souter delivered a literate and informed majority opinion in the Grokster case. It revolves around peer-to-peer Internet file-swapping, specifically two services -- Grokster and StreamCast Networks' Morpheus -- that existed almost entirely to profit from music piracy.

Technology companies were concerned, with good reason, that an overly broad ruling against Grokster and Morpheus would inhibit legitimate products just because they could potentially be used in part for illegal swapping. Even something as basic as the CD burner in a personal computer could create liabilities for the manufacturer if misused by consumers.

``The more artistic protection is favored, the more technological innovation may be discouraged,'' Souter wrote. ``The administration of copyright law is an exercise in managing the trade-off.''

Walking a fine line, Souter said a company selling a technology product or service should only be liable if it deliberately promotes copyright violation ``as shown by clear expression or other affirmative steps.''

This means the record labels can't get judges to stop the sale of digital MP3 music players -- as the industry once tried to do -- just because MP3 players can be used to play back pirated music. Only if the manufacturer were so clueless as to advertise players as ``your best choice for illegally downloaded files'' would the Grokster ruling apply.

Brand X, the second ruling Monday, relates to painfully esoteric regulatory issues. Boiled down, the Supreme Court upheld a decision by the Federal Communications Commission that cable companies aren't obligated to let competing Internet service providers, or ISPs, have access to their networks.

Most parts of the nation have only two choices for broadband, a cable modem line or DSL from the local phone company. This cozy duopoly isn't doing the best job for consumers, lacking sufficient incentive to improve service or cut prices.

But getting more competitors on the existing networks isn't the answer. Instead, we need more networks.

Intel, for example, is investing heavily in a new technology called WiMax for providing inexpensive wireless broadband over wide areas.

ISPs using WiMax could become a powerful third source of fast Internet connections to the home. But investors might have been reluctant to support WiMax if regulators could force the new WiMax networks to provide service to competitors. At the same time, it's not fair to keep DSL and cable modem service heavily regulated if newcomers get a free hand.

Brand X is only the first step in a long process of change, with many issues that must still be resolved in favor of consumers rather than entrenched industry interests.

``Today's decision makes the climb much steeper,'' said FCC Commissioner Michael J. Copps in a statement Monday. ``But this country just has to find ways to promote innovation, enhance competition, protect the openness of the Internet, and return the United States to a position of leadership in broadband penetration.''

The United States is sometimes faster to invent new technologies than to adopt them widely. But after a period of chaos and dispute, we often end up in a better place than other nations with a top-down approach. Monday's Supreme Court rulings keep us moving along this contentious but worthwhile path.

Contact Mike Langberg at mike@langberg.com or (408) 920-5084. Past columns may be read at www.langberg.com.
Posted on Tue, Jun. 28, 2005

Court backs cable giants on broadband

Mercury News

The U.S. Supreme Court ruled Monday that cable Internet providers such as Comcast do not have to open their broadband networks to potential competitors, a landmark decision that could limit competition in the short term but spur innovation in the long term.

The case pitted the Federal Communications Commission, which generally has been pursuing a path of deregulation, against Brand X, a small Santa Monica-based Internet service provider that wanted the government to require cable operators to share their networks as phone companies are required to. The Supreme Court, in a majority opinion written by Justice Clarence Thomas, sided with the FCC, overturning a 9th Circuit Court of Appeals decision.

Consumer groups immediately criticized the decision, saying it will mean less choice for Internet users by denying independent ISPs access to cable networks. But others said that lighter regulation ultimately could give the cable industry more incentive to invest in networks and new services. The FCC and the cable industry applauded the ruling.

Short vs. long term

``In the short term, you could argue that this is bad for consumers because it shuts down one of the options for competition,'' said Jan Dawson, a Boston-based telecom analyst with Ovum, a technology research firm.

``In the longer term, you could argue -- and it's fair to argue -- that this provides more incentive for cable operators to invest in those networks and roll out higher speeds. Consumers would benefit from the advanced services,'' he said.

The ruling hinged on the definition of a cable Internet provider. In March 2002, the FCC decided that cable broadband was an ``information service'' not subject to the same network-sharing rules faced by the Baby Bells, which are classified by the agency as a ``telecommunications service.'' The 9th Circuit in October 2003 rejected the agency's decision. The commission then sought to overturn that ruling, putting the case before the Supreme Court.

Monday's ruling affirmed the FCC's role in shaping the future of broadband.

Broadband policy

``I think it's a very strong validation of the commission's policy on broadband,'' said Dan Brenner, a senior vice president with the National Cable and Telecommunications Association in Washington. ``The commission attempted to develop a deregulatory approach so service could grow, and it has grown.''

Phone companies already are required to make their DSL networks available to Internet service resellers such as EarthLink and Brand X.

The court's 6-3 decision set the stage for what could be years of turmoil over the future of broadband. Immediately following Monday's ruling, some of the larger phone companies such as Verizon called on Congress and the FCC to finish the job of deregulation and put them on a level playing field with the cable Internet providers.

Currently, cable Internet service offers faster connection speeds than DSL but for a higher price in most cases. Competition in the DSL market has increased and DSL providers have cut their prices in the past few years, mostly through new customer promotions. Today, cable modem service offers download speeds of up to 4 megabits per second, while DSL service offers download speeds up to 1.5 megabits per second.

Since June 2003 -- a two-year period that has seen about 75 percent growth in broadband penetration in the United States -- DSL's share of the market has jumped from 36 percent to 41.4 percent, while cable has slipped from 64 percent to 58.6 percent, according to Ovum.

Part of that growth comes from the presence of independent ISPs that have been able to access the phone companies' DSL lines to offer alternatives to the Baby Bells.

``Today's ruling is bad news for millions of Americans,'' said Mehrdad Saberi, chairman of the California ISP Association, which represents independent ISPs throughout the state. ``The interests of American consumers and businesses have been sold out as the FCC and now the court have defined Internet service in such a narrow way that allows cable companies to escape proper regulation.''

Matt Hartwig, spokesman for the Consumers Union in Washington, said the decision leaves the cable Internet industry with too much control.

``We see it as the cable companies and operators of the cable networks really having consumers under their thumbs,'' Hartwig said. ``This allows them to dictate which services they will provide across their networks and the price they will charge for them.''

Contact Sam Diaz at sdiaz@mercurynews.com or (408) 920-5021.

Posted on Tue, Jun. 28, 2005

Property rights, innovation balanced

Mercury News Editorial

When the U.S. Supreme Court agreed to step into the corrosive feud between Silicon Valley and Hollywood, the technology industry held its collective breath, worried that intellectual-property rights would trump innovation. Monday's decision should give techies reason to breathe again.

Ruling unanimously that illegal behavior, not technology, deserves to be penalized, the court struck a delicate and just balance that helps protect copyrights without jeopardizing technological progress.

The court rightly allowed lawsuits against file-sharing software makers Grokster and StreamCast Networks to go forward. Their networks are ground zero of copyright infringement. As much as 90 percent of the files traded by their users -- billions of files each month -- are copyrighted works. It amounts to theft on a massive scale that the court could hardly ignore.

Defense positions

Grokster and StreamCast had argued that they had no control over what users did with the peer-to-peer networks that their free software helped create. Further, they argued they were protected by the court's 1984 Sony Betamax decision. In that ruling, the court said Sony didn't violate the copyrights of movie studios by allowing VCR users to make copies of TV shows because the VCR allowed ``substantial non-infringing use,'' such as taping shows for later viewing.

The Betamax decision unleashed decades of innovation by insulating technologies, ranging from the PC to CD burners to the iPod, from litigation. All of those technologies can be used to make copies of protected works, but can also be put to many other good and legal uses.

But on Monday, the court ruled that Betamax didn't protect those who distribute technology that actively promotes copyright infringement. In other words, if your technology and your business plan are designed to induce users to steal songs or movies, you can be held liable for the copyright violations you are promoting.

In America's litigious world, the decision could give pause to some innovators. Indeed, the court did not say what conduct would amount to inducing copyright violations. Entrepreneurs treading on technology's leading edge will need to have their inventions checked by lawyers -- at least until courts further clarify the issue.

But there's a long way between the iPod and Grokster. It and StreamCast were designed to do an end run on court decisions that shut down Napster, the original file-sharing network. They marketed their software to former Napster aficionados, never attempted to develop simple filters to weed out copyrighted works and built a business model that worked best when users engaged in massive copyright violations. Innovators that steer clear of such activities should find courts on their side.

Much left untouched

Valley innovators and entrepreneurs should take comfort in what the court didn't do. It did not outlaw peer-to-peer technology. It did not require technology firms to design copyright-protection measures in their products. And it did not reduce the scope of the Betamax decision.

And there's an added bonus too. With the decision seen, at least partly, as a victory for Hollywood, Congress is less likely to embrace the draconian, anti-innovation copyright legislation being pushed by lobbyists for the music and movie industry.

Received on Tue Jul 5 20:22:59 2005

This archive was generated by hypermail 2.1.8 : Thu Jul 07 2005 - 22:55:02 EDT