Tag Archive for piracy

The War Against Piracy

September 28, 2008 Litigation 8 comments

    Where DRM fails, companies sue. That's the philosophy of the RIAA, MPAA, and now Activision, who recently filed an infringement action against James R. Strickland of New York for reproducing and distributing copies of CoD3. Not only is there a public suit, but like the RIAA, Activision has been quietly suing individuals for infringement for quite some time. The settlement agreements include a confidentiality provision prohibiting the defendant from discussing the matter.

    On the heels of this news comes the recent turnover of the only case the RIAA ever won against an individual file-sharer.

    A number of issues come up here. First, what can be gained from suing individual infringers?  Are these actions strike suits that only succeed in infuriating the general populous, or are they actually an effective deterrent? Finally, is there a less controversial way of dealing with the problem of piracy in the U.S.?

    The Problem

    In my last post I pointed to an article by Draginol of Stardock, a game (i.e., Sins of the Solar Empire) and desktop enhancement developer. In his assessment, blaming the lack of success in the PC games market on piracy isn't the most efficient way of managing one's business. His suggestion is to focus on making games and products that cater to the market of people who pay for those products.

    This is difficult in games and entertainment generally. Developers and publishers want to make fun games that cater to a large market. Trying to market those games exclusively to people who will pay for those games isn't always a practical answer. One problem is that many infringers do not view copyright infringement as criminal conduct. Another problem is that the suits brought against individuals aren't criminal prosecutions, they're civil actions brought by Big Business against The Little Guy. Most can accept government enforcement of criminal conduct as a social necessity. Yet many may not be comfortable with Big Business taking on this role. The RIAA, MPAA and now Activision have, as a result, earned some very negative press, and the gaming media is fairly vocal about expressing their discontent.

    Who is in the Right?

    Any copyright owner is entitled to and probably should enforce their copyright against infringers. The big content providers are within their rights to seek legal action against pirates who reproduce and distribute their works. The problem is that the primary contributors to piracy import and export come from large black markets in countries with lax or non-existent intellectual property laws and little to no enforcement. Yet according to Big Business, the "everyday" infringer sitting at home in New York burning and selling dozens of copies of cracked games is just as culpable for piracy as the black market criminal syndicates. In the eye of the copyright owner, the only distinction is jurisdictional (disclaimer: this is hypothetical. As yet, the facts surrounding Strickland's conduct have not been made public). Yet in the eye of the public, there are almost always varying degrees of wrong.

    So we have a pretty big disconnect as far as public perception. On the one hand the industries are frantically scrambling to get pirates out of the market. And piracy is a huge problem to content providers, including the little guys. On the other hand you have kids getting slammed with hundreds of thousands of dollars in judgments that no plaintiff can ever reasonably expect to see, and the kid isn't being charged with a crime, he's being sued by corporate thugs. Content providers are trying to remedy this by lobbying for legislation that allows the Department of Justice to bring civil suits against infringers on behalf of content providers. So far, the DoJ has refused to take on any such responsibility.

    Now content providers, who really are the victims as far as piracy goes, are viewed as the bad guys and the individual pirates are treated as martyrs. Big Business may legally be in the right when they bring these lawsuits, but at the end of the day, who cares? We are no closer to eliminating piracy, and now the creators of content are viewed as the obnoxious 5th grade bullies on the playground, stealing lunch money from kindergartners.

    Strike Suits

    Strike suits have a long and glorious history. They have been used by every major corporate entity and cult to intimidate, beleaguer, and abuse "troublemakers." Scientology's "Fair Game" legal tactics are the stuff of legend. To clarify, a strike suit is a lawsuit that is brought for the sole purpose of settlement. The plaintiff never intends on going to trial—the suit is a strategy to force the other party to settle on the principle that the cost of settlement will be less than the defendant's cost to litigate the matter. Often the suits themselves are meritless, but bringing that kind of lawsuit against someone who has no knowledge of the law and no legal representation practically guarantees that the plaintiff will at the least get a semi-decent settlement and at most a big fat default judgment in its favor. Your every-day Joe doesn't understand a concept like "sewer service," they aren't aware that they have legal rights at all, and as a result the defendant is intimidated by or oblivious to the lawsuit.

    Activision's silent litigation against individuals is a very good example of your average strike suit legal tactic. In truth, most companies do not want these cases to go to court. As demonstrated by the recent ruling in the RIAA file-sharing case, they don't want to create potentially damaging precedent to future cases. This is where major content providers hurt their case—you can't view someone who engages in this kind of Mafioso intimidation game as a victim.

    Finding a Better Way

    I strongly believe that business and law should only rarely interact, and that's primarily for the purpose of enforcing contracts and creating alienable property rights. I don't believe suing individuals should ever become a viable business model. However, I also know that piracy is a multi-billion dollar problem across all of the entertainment industries, and I don't believe that the public is entitled to free content. I'm sorry, but you're not. Companies spend millions producing films, music and games for your entertainment, and if it's not worth paying for you have no business enjoying it. So my suggestions to big business are three-fold, and two of them are reiterations of prior points:

    1. Develop a new business model that relies on selling access to content, not physical or digital "copies". Once you put "copies" into the business model, you introduce the possibility of piracy. Selling access to content as opposed to individual bits and bytes of content significantly handicaps pirates because it kills their market. The only ones who can actually provide access to the content is the content provider. Anyone can make a copy.

    2.
Reduce the cost to the consumer. Currently, it seems that the entertainment industries are passing along the cost of piracy directly to the consumer. I like this about as much as I like the idea of my taxes being used for the big Wall Street Bail Out. It's not the consumers who created this problem. Stop making it their problem. It only inflates the piracy market by creating a higher demand for less expensive product.

    3. Educate, Educate, Educate. Do not litigate, educate. Using strike suits and intimidation tactics only reinforces the belief that content providers are the bad guys, which is a very backwards view of the entire situation. Instead of paying your lawyers (and it desperately hurts me to say that), put your money where your mouth is and inform people of the problem, why it's a problem, and why it is illegal. Most people do not view file-sharing as wrong. They don't understand the cost of creation. It's important that your potential consumer base is made aware of the issue and realize that contributing to piracy will eventually mean less content for them.

Dealing with Digital Rights Management

September 27, 2008 Intellectual Property One comment

    Speaking of similarities between the game and music industries, one common threat both industries face is piracy. On the one hand, you have Activision going RIAA on individual game pirates, and on the other you have class action lawsuits brought by disgruntled Spore players as a result of iffy DRM software embedded in the digital download. The RIAA already demonstrated how completely ineffective and bad for business suing kids is, but if Activision believes doing so will really cut down on console game piracy, more power to them. The current climate is antagonistic to say the least. You have disgruntled publishers who feel the value of their product is severely undermined by copyright infringement, and you have disgruntled consumers who are a) being sued and b) are required to install questionable DRM software that limits their ability to use the product they purchased at full retail price. It's a highly controversial topic and really resolving the issue would require completely reformatting how we view digital property as distinct from personal property. I'll get to that later. First I'd like to discuss what DRM is, and how it's treated under the law.

    What is DRM?

    DRM is Digital Rights Management, and it typically comes in the form of encryption software embedded in a program, CD, or DVD that prevents certain uses of content. This isn't always a bad thing. DRM can be used to provide a means of creating new business models (i.e., subscription or 'rental' based digital download models). However, DRM becomes a problem when it is used in a manner that conflicts with the ordinary understanding of "first sale" and personal property rights. It is here that the ultimate conflict between publisher and consumer arises.

    DRM and the Law

    DRM and rights protection software generally are given substantial protection under the Copyright Act. Chapter 12 prohibits circumvention of rights protection technology and creates criminal liability for circumvention and the distribution of circumvention technology, and the No Electronic Theft (NET) Act creates criminal liability for electronic reproduction and theft of copyrighted works that exceed a total value of $1,000. So circumventing the technology is one crime, and then willfully reproducing and distributing the underlying content by electronic means (or otherwise) is also a crime. It is clear that lobbyists for the entertainment industries have been quite successful in getting the law on their side as far as protecting digital rights.

    Even now lawmakers are attempting to increase the severity of punishment for both civil and criminal copyright infringement. A new bill seeks to increase the scope of forfeited property in criminal copyright prosecution and create a new executive branch position, the Intellectual Property Enforcement Coordinator. Furthermore, the original (and unsuccessful) versions of the bill sought to enable the Department of Justice to pursue civil action on behalf of content owners. Interestingly, the Department of Justice refused. They contend that taking on that role is tantamount to providing pro bono services to content owners.

    Yet there is another aspect of the Copyright Act and personal property law generally that is in many ways undermined by DRM and rights protection technology. When a person purchases a product to own that product, they do so believing that they have rights in and to that product. Ownership connotes control over the use and enjoyment of the property. The Copyright Act supports this notion by way of the First Sale Doctrine, which cuts off the copyright owner's distribution rights in a particular copy once that copy is lawfully purchased. There are limitations to the first sale doctrine. You can't, for instance, make additional copies of the physical copy you purchase and sell those copies to other people; and most notably, the first sale doctrine does not apply to the rental, lease, or lending of computer programs or sound recordings in most cases. It should be noted here that console games are still fully protected by the first sale doctrine and can lawfully be rented or leased by the lawful purchaser. The reason for this is arguably justified. You can "lend" the physical copy you purchased to someone, who can then reproduce a digital copy and return the original physical copy to you. Yet this still handicaps the purchaser of the product, who is now unable to dispose of the product in the same manner that they can any other good under the law. The question, then, is how do we adjust our perception in a way that can adequately ameliorate the divergent interest of copyright owner and purchaser with respect to digital technology and digital ownership?

    Digital versus Physical Software

    The first thing I'd like to note is that you rarely have a right to copy something you purchase. There are a few exceptions to this, including recording television programs for "time-shifting" purposes, the Audio Home Recording Act, which permits the private, noncommercial taping of analog and digital sound recordings (but doesn't apply to MP3 files transmitted via file-sharing), and the obvious exception of installing a physical copy of software on your hard drive in order to use the software. As of yet, there has been no clear court ruling that generally states that making multiple copies of a legally purchased copy for personal use is fair use (except as noted above). This is complicated by EULAs and the licensing of software generally. This is also in no way set in stone, and it is a very murky area of copyright law. I'm making this point because when I talk about ownership and control in the context of purchasing software and music, the reason this is often relevant is because before DRM, people were able to make copies for personal use. The legality of that practice is highly suspect, but up until DRM, no technology existed to prohibit that practice (even if the law does).

    Ownership of a physical copy is not the same as "ownership" of a digital copy. Both are subject to EULA's, and in both cases you are arguably only getting a limited license to the actual content. When you purchase a physical copy, you purchase the right to have physical control over that specific copy, although that control may be limited in some ways by DRM. You can still sell the physical copy or break the CD when you can't get past a certain level and decide to rage. When you purchase a digital copy protected by DRM, you aren't purchasing the right to have physical control over that copy. There is no physical copy that you can control. You are only accessing the content itself, which is limited by the EULA and DRM.

    This is why DRM bothers people when it comes to purchasing goods. It places limitations on our ability to use and enjoy something that we believe we own. We exist in an age where copyright and content owners can control the use of each physical copy long after the first sale. As a result, we are forced to accept that the consumers are not purchasing any kind of ownership in a particular copy. They are purchasing the right to access content in a manner proscribed by the content owner.

    Developing a Different Business Model

    Where this really becomes a problem is in the actual "sale" of a product. With more and more games moving strictly to digital download, consumers are no longer "purchasing" physical copies of games. They're accessing content. Yet they're paying the same amount as they did (and sometimes more) when they could purchase and control a physical copy of the game. Adding a premium to that cost just to allow a purchaser to re-download the game in the event of a computer crash or virus, which is something that wouldn't be necessary if a physical copy existed (it being legal to make a copy if it is necessary to make the software function on your computer, as noted above), makes this even worse.

    There are a couple of simple methods that could be and have been used to "modernize" the business models for digital distribution:

    Reduce the Cost: From an economical standpoint, a digital copy should rarely cost as much as a physical copy. I'm not saying this is a universal truth. There are always counter-arguments, not the least being that cost reflects the value of the product and not the cost of production. None the less, selling access to the product under the marker of a "sale" and then charging more for greater access is a disservice to your consumer base. You're giving them less than they would get for a physical copy and you're charging them more. Physical copies require manufacture and packaging, not to mention the purchase of shelf-space and the costs of distribution generally (i.e., payment to third-party foreign distributors). Digital distribution requires server space.

    Sell Access, not Copies: If you are only selling access to content, sell it as such. Subscription based models like Steam and GameTap are good examples of this—consumers are paying to access the content freely. They are not purchasing copies of the game.This also makes DRM more attractive in general. It enables new business models such as subscription based and "Play once" models exist, allowing consumers to enjoy content at a fraction of the cost of a full purchase.

    Attempting to apply old brick and mortar business models to digital distribution will not remedy the problems facing the industry. Laws are only effective to the extent that they are enforced. When the primary threat to revenue comes from countries where copyright infringement goes unenforced, you can't expect to fix that problem by penalizing those who do want to lawfully purchase your product.

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