Harvard Law: "an injunction can’t shut down Grokster, the network, because it exists completely apart from Grokster, the company"

Tim Armstrong, of Harvard Law School, has a long commentary on the Grokster case, with a pro-piracy slant. Observing the proceedings personally, he makes a critical assertion: "an injunction can’t shut down Grokster, the network, because it exists completely apart from Grokster, the company."
All we can say is "Bingo."
Grokster, the company, is not profiting directly from the actual infringement going on Grokster, the network, that they have created. Individuals, of their own accord, use the network to infringe. They are liable for that individually.
Grokster, the company, profits by media services associated with the heavy usage of that network. As we said in previous posts, and it appears few dispute, people install the software and use the network so heavily with the goal of infringing. Grokster finds ways to monetize this usage, and that money belongs to the copyright holders, not to Grokster. This is like suing a venue for illegally showing a movie. The venue operators may not themselves copy the movie, but the movie is the reason people came to the venue.
We don't think Grokster liability is based on the dollar amount lost by the various copyright holders based on music consumers didn't buy. Grokster's liability is based on how much money it earned selling advertising and other media services that surround the network it created.

Text of Souter's Grokster Comments about Innovation

See NYT on the Grokster Oral Arguments. Justice Souter, asking "why isn't a foregone conclusion from the outset that the iPod inventor is going to lose his shirt?," seems to focus on an argument that is running wild through the tech blogs that enforcing copyright will shut down innovation. (We think that's horsehockey). This dovetails with other justice's questions on whether the infringing activity is, for all practical purposes, venture funding the new technology. (We think THAT's the travesty with Grokster and have experienced the same thing ourselves).

Grokster is not Betamax: Supreme Court Needs to Wake Up

Most of the news analysis going on about the critical case currently before the U.S. Supreme Court has been barking up the wrong tree. Comparisons are made to the seminal 1984 Sony Betamax case, where the Court ruled that VCR devices can be used for legit purposes, and were themselves legit (See, for example, articles by The BBC and The International Herald Tribune).
The Betamax analogy misses the point. Sony wasn't profiting from the device's use after the sale. Grokster and their ilk, on the other hand, monitize the use of their networks by doing things like selling banner ads, installing spyware and heavens knows what else these pirates are up to. Sony, once it sold a betamax, had no further involvement or gain from how it was used. They certainly didn't install spyware on your TV to pop up an ad for umbrellas when a user taped an illegal copy of Mary Poppins. (In case you don't know, that's precisely what these P2P pirates are doing, and don't be surprised when that concept becomes TiVo's primary business model, but we digress). Unlike the Betamax, the P2P networks profit from the heavy usage of their networks, and that heavy usage would not be there if their networks were not a forum for this ongoing orgy of theft that is P2P.
Maybe plaintiff MGM hasn't found an effective way to monetize their copyrights online (yet). Grokster apparently has, but it's MGM's copyrights that they are monetizing, not their own. Grokster, et. al. owe virtually every penny they have made to the copyright owners. It's that simple.

Piracy's Legacy: 18% of Consumers No Longer Shop Online

The Wall Street Journal has an article on Page D2 today that has dire news:

...nearly 6% of consumers have changed banks and about 18% have stopped shopping online due to concerns that their personal information has been stolen. Financial Insights, Framingam, MA

We at SPN have long contended that the difference between piracy and mere criminality is that the crime of piracy ruins an entire marketplace for everyone. Fear of piracy will shut an entire market down as participants seek safer alternatives. Well, here we can all see it in action. People's fear of piracy in online banking and shopping results in them using them less. When there's piracy, everybody loses.

Affiliates: Google Partners, or Parasites? The lines between friends and foes are very fuzzy these days in the search ecosystem.

Publishers have more options than ever when selecting partners to monetize page-view inventory. Many publishers targeted by Google's AdSense program are prime candidates for other ad networks, as well as for affiliate networks. This pits Google against both affiliate and ad networks for access to contextual inventory. Even banner networks compete for real estate with AdSense and other contextual networks. (Lee, Kevin. "Affiliates: Google Partners, or Parasites?" www.clickz.com (11 Mar. 2005).)

Spyware, Adware ... What to Do? Specifically, what can agencies and advertisers do? Here's a four-point checklist, for starters. From Matt Nelson's perspective, public relations manager for Geeks on Call,

A lot of the problems we see are related to spyware .... It's a large problem, and it's growing. It's nasty out there. It's getting to the point where you as a user will have to have anti-spyware software installed on your machine, the same as you do anti-virus software. (Lerma, Pete. "Spyware, Adware... What to Do?" www.clickz.com (08 Mar. 2005).)

Never Judge A Link By Its Language. We ran across an interesting blog link (http://anti-spam-filter.blogspot.com rel="nofollow"), which appears to cover a topic of interest, yet is itself nothing but link spam. Note that we added rel="nofollow" to the URL, as we wanted our readers to see this example first hand, without building the spam site's link equity each time someone clicks on this link.

Recent Ebbers Conviction Sparks Hope. Although the piracy was not strictly digital in nature, we are much encouraged and relieved that the former CEO of MCI / WorldCom, a leading Internet commerce player, finally has been brought to justice for the massive robbery of thousands of life savings accounts and corporate investments that triggered a market crash. We predict that CEOs, now that the actions of subordinate employees and obscure accounting practices are no longer a shield from conviction, will take more of an interest in the behavior of the corporations for which they are responsible, as their continued personal freedom now depends on it. We look forward to similar convictions of other CEO's, either affiliated with MCI / WorldCom or independently engaged in similar practices, which together will have a profound and corrective impact on dishonorable business practices in general, including the schemes and frauds we have reported in our SPN blogs.

Ron Stroud
For the SPN Editorial Board
16 Mar., 2005

"AutoLink", Gator "adware," frames -- to a publisher what's the difference? Over and over again, everyone gets the bright idea to take advantage of someone else's hard work. Remember way back when when the NYT was being "framed" in by a news link site, and that site put banner ads on the top frame? Then came Gator's spyware (oh, yeah, now it "Claria adware"). Now it's this AutoLink stuff.

From a business model perspective, this is genius stuff. Let someone else do all the hard work, and the "innovator" gets to monetize some or all of the traffic. Revenue without cost, and it favors "user convenience" to boot!

What's always missing from these schemes, if they play out fully, is how the producers of the content who can't fully monetize their own work will inevitably produce less content. The consumer is the long-term loser because fewer independent publishers will have their voices heard. It sounds theoretical, except in my own experience I can document how Gator nearly put us out of business.

If Google comes up with a way to revenue share with opt-in publishers, similar to their adsense program, which we participate in, then AutoLink is a winner. Anything less, and it's piracy.

10 Mar., 2005

Undelivered Mail. A recurring theme at SPN is that digital piracy not only affects the targeted victim but also poisons the overall business climate, impeding commerce for everyone generally. As email filtering programs and bulk newsletter mailing services enhance their methods for filtering out junk, to keep pace with ever more sophisticated adversaries, more and more legitimate mail is registering "false positives," blocked and never delivered.

[Bobbi] Henson [at Verizon] ... acknowledged that legitimate mail could get lost or delayed, but said customers were demanding action, because as much as 80 percent to 90 percent of all incoming e-mail is now junk. (Jesdanun, Anick. "Undelivered Mail." www.sun-sentinel.com (06 Mar. 2005).)

Lexis-Nexis Latest Data Theft Victim. On the heels of the massive infiltration at ChoicePoint, the privacy of thousands of users of publisher Reed Elsevier Group's Lexis-Nexis system, including members of the legal profession and judiciary, law enforcement personnel and law school libraries, now has been compromised by a similar breach of security and theft of personal data.

The spokeswoman said the breach was discovered during internal checking procedures of customers' accounts. Reed said it would contact all 32,000 people affected to offer them support in detecting identity theft, including credit monitoring. (Associated Press. "Lexis Nexis: Hackers Accessed 32,000 IDs." www.foxnews.com (09 Mar. 2005).)

Theft of Personal Data at ChoicePoint Prompts Congressional Action. ChoicePoint's defense that it was a victim of fraud in the release of personal customer data has prompted requests by senators for a series of hearings on the need for better protection of privacy in a digital world.

"New technologies, new private-public domestic security partnerships, and the rapid rise of giant information brokers that collect and sell personal information about each and every American have all combined to produce powerful new threats to privacy," [Senator] Leahy said in a statement. "It's time to turn some sunshine on these developments so the public can understand how and why their personal information is being used." Mark, Roy. "ChoicePoint ID Theft Stirs Up Congress." www.internetnews.com (25 Feb. 2005).)

Click Fraud Again Hits the Main Stream Press. SearchEngineWatch reported on a recent New York Times article discussing the growing fear of fraud in connection with pay-per-click advertising. ("The NY Times Publishes Article About Clickfraud." http://blog.searchenginewatch.com/blog/050304-094130 (04 Mar. 2005).

Trade Secret Theft Laws Difficult To Enforce. The fascinating account of Mike Wolf, Lionel Trains and MTH Samhongsa illustrates the difficulty in prosecuting the theft of trade secrets, even when the evidence is compelling.

"The irony of trade-secret theft," says R. Mark Halligan, a lawyer with Welsh & Katz in Chicago and a professor in trade-secret law at the John Marshall School of Law, "is that your entire company can be stolen over the weekend, and you come in on Monday morning and everything's still there. Somebody simply downloads your entire hard drive." (Grossmann, John. "Train Wreck." http://www.inc.com/magazine/20050201/mth.html (Feb. 2005).)

Even invoking the Economic Espionage Act of 1996, after a hard drive clearly containing trade secrets stolen from Wolf which eventually surfaced in new Lionel products was seized in Korea, proved fruitless due to the conflicting priorities of other corporate cases before the Justice Dept., as well as the relative difficulty in prosecuting an icon like Lionel.

Recent Symposium Offers Advice To Victims of Online Thieves. At the recent Search Engine Strategies Conference in Chicago, a panel of experts made recommendations on how to proceed when victimized by trademark and copyright infringement, theft of a website, click fraud and other crimes. For a synopsis and links to the full report, see Crowell, Grant. "Search Engines and Legal Issues." http://searchenginewatch.com/searchday/article.php/3485021 (23 Feb. 2005).