Musicians in the U.K. have been staking out positions for and against a proposed 3-strikes law where after 3-strikes, file-sharers of copyrighted material would be banned from the internet. Lily Allen (a personal favorite of mine) launched a blog in support of the 3-strikes law, but resulted more in a lesson to strong copyright supporters that no longer is copyright just an issue for those creating content.

To summarize the more than week long back-and-forth, Lily Allen began her blog, It’s Not Alright, a few weeks ago arguing file-sharing was stealing and hurting new artists writing “File sharing eats away at opportunity for new artists: by cutting off income at the most crucial, cash-strapped point in their careers and by limiting A&R’s ability to sign new acts outside of the mainstream.”

Allen’s blog quickly gathered a large community of copyleft and copyrighters debating Allen’s arguments and the merits of the laws she endorsed. TorrentFreak pointed out Allen copied an entire post from (another personal favorite) Techdirt without citation or a link. Techdirt’s Michael Masnick explained he didn’t care about the copying, but pointed to how hypocritical Allen’s was being.

A few days later it was revealed that Allen, while a new musician herself, released mixtapes online of her and other artists’ music, music which she did not have the copyright to. These mixtapes were still available on her website – entire songs. Allen defended this as her not understanding copyright law when she made them and that the songs were just excerpts.

Hundred of people commented on her blog and many bloggers posed questions for Allen to justify her position on file-sharing while she herself had no problem copying blog posts and file-sharing songs herself. Further, she used free services like Blogger, MySpace, and Twitter to share her music and connect with fans, turning her from a new artist to a famous artist. And she didn’t respond to questions from Masnick and others asking how Allen balanced her belief that file-sharing was harming music when the U.K.’s music industry’s own study showed the music industry was growing.

Allen discontinued her blog claiming Masnick and other copylefters were bullying and attacking her (one person said Masnick of “leading” his “internet army” to attack her while being angry.

But all this really teaches us that copyright affects more than just musicians. There is a growing fervor among consumers that copyright and the content industry are expanding too far onto individuals and their civil rights. Recording companies keep increasing the penalties for file-sharing, yet file-sharing keeps growing because that’s what technology and the market demands. No amount of government intervention will force people to buy CDs again.

Because Allen stopped blogging and has ended her career does not mean copyright isn’t working. The music industry in the U.K. has significantly grown as technology has made it easier and cheaper to make and share music. Allen herself took advantage of these free and cheap tools to make herself famous, and only when famous does she change her tune (see what I did there) on copyright. While I’ll be very sad to not have any more of her music, there are thousands of new artists eager for space on my iPod.

Not content to learn from the 10 plus years of mistakes by the recording industry, the movie industry is stampeding its way to obsolescence.

First, Fox and Warner Bros. have joined Universal in its battle with Redbox, the successful rental kiosks found outside supermarkets and fast food joints. Redbox rents movies for $1 a day, legally purchasing the movies from wholesalers. Redbox will even sell used DVDs for about $7.

Fox, Warner Bros. and Universal have sued claiming Redbox is infringing on their copyrights and are ordering wholesalers to refuse to sell their movies to Redbox before several weeks. The studios are demanding revenue sharing from the kiosks.

Redbox is countersuing for antitrust and abuse of their copyrights.

Redbox, while relying on the movie studios, is in a stronger position. Sony and Lions Gate are backing the kiosks with their movies, recognizing that movie fans love the price and convenience. DVD sales are down 13 percent while rentals are up 8 percent.

Next, the movie studios recently won two important court cases, both likely to cause more damage to the industry rather than help.  The first was the studio’s win over Real’s DVD copying software.  This copier circumvented the DVD’s DRM, which is illegal under the DMCA, but then put new DRM in its place so users couldn’t share their movies.

Now, copying for personal use or backup is considered legal and a fair use of a copyrighted work. But because of the DMCA’s anti-circumvention laws, you can’t backup the DVD you legally purchased.

What’s silly, is Real’s copier cost $20 and used DRM making it a somewhat worthless copier, especially when there are dozens of free DVD copiers without any DRM. So by suing, the movie studios 1) promoted that people could copy movies and 2) sent them to free, DRM-less alternatives.

For their other lawsuit, movie studios won their appeal against Kaleidescape, which is basically an iPod for movies (or a DVD jukebox, if you will), but costs $10,000.  Movie studios of course feared this system would be a haven for piracy, but again, it’s $10,000. It’s for high-end movie fans with lots of DVDs who don’t want to keep switching discs. They backup their discs on Kaleidescape and then watch them on their TV. But because of the DMCA’s anti-circumvention laws, users can’t do what they are otherwise legally allowed to do. And the movie industry gets to stamp out innovation and technology that is trying to help make DVDs and movies more valuable.

How are legal remedies helping here? The movie studios are trying to crush three different companies who are trying to help make DVDs more valuable at a time when consumers are showing DVDs are less worth purchasing.

The entertainment industry declared a huge win after a Swedish court convicted the founders of Pirate Bay of copyright infringement. But a win isn’t always a win. The ruling helped galvanize Sweden’s Pirate Party, increasing their numbers by more than three times and helping them win two seats in the recent European Parliament elections.

The Pirate Party seeks to reform intellectual property laws to be more balanced with consumer and civil rights.  Further support for the party came after Sweden passed a law requiring ISPs to turn over user information upon request (even without a warrant or evidence), leading several ISPs to refuse to save any user records.

The Pirate Party party won its seats with more than 200,000 votes, approximately 7 percent of Sweden’s voting population (and 19 percent of voters under 30).  The party has risen to being the third largest in Sweden.

So even though the entertainment industry can claim a win in the Pirate Bay trial (for now at least, since the judge is being investigated for bias), that win helped awaken a social movement against the industry and its causes. Maybe the entertainment industry will start realizing harsh copyright laws and obsolete business models are not the best ways to build a customer base.

One (of the many) points of contention with copyright law is how much it limits fan-created works.  Last week I wrote about a fan-made sequel to the classic video game Chrono Trigger that publisher Square-Enix forced to stop (only a few weeks before release). This fan-made sequel would never have replaced an official sequel. It was a labor of love from fans eager to promote their love to other people.  Cory Doctorow points out, under copyright law, you’re allowed to criticize a work but not praise it.

Under fair use, I can criticize any copyrighted work. I can use clips or excerpts from it to support my criticism. But if I want to promote or praise the work, it’s considered a derivative work, and I have to get permission the copyright holder.

But as my IP classmates say: “Without copyright law, no one will make Transformers.” And “No good has come from remix culture.” These are the future of IP law.

This is where fan creation gets pushed aside. It’s not only the content providers that over value their content. Consumers also give commercial content a higher value than fan or user-generated content, often recognizing professionals do it better (whatever it is). But this assumption under-values the real benefit of fan content.

Video games are the best example of this. Many games have whole-heartedly embraced fan content, providing free tools for fans to create their own levels and add-ons to games.  Fans help extend the longevity of the game with their own creations, extending the shelf life and value of the game for users. Even with tons of free content, game developers will release their own add-ons and fans will pay for them (sometimes even releasing fan content as official content).  These game developers are not scared of the competition – they know the professionally made content will have a larger, more captivated audience because of the fan content.  Other media are slow to realize how beneficial fan made content is for the lifespan of a project.

Fan content doesn’t compete with official content – it’ enhances it (I say official content because fan content can be commercial).  Only devoted fans of the Lord or the Rings would take time to make “Hunt for Gollum.” And only fans of the franchise will go out of their way to see it. Any non-fans who see it will quickly recognize it is not an official production and if they like it, they’ll find the official versions. And if they don’t like it, no harm done (increased expose nevertheless helps).

And to say no value comes from fan or remix content? Let’s understand what that is: All those Disney movies from Snow White to Cinderella to the Lion King are based on fairy tales, Shakespeare, and other already written stories, remixed by fans to tell new, exciting tales. West Side Story is no less entertain for remaking Romeo and Juliet and yet Romeo and Juliet remains popular to perform. Movie versions of books and plays often increase the popularity of the original work. Letting fans create labors of love cost the content creators nothing, but gives them every opportunity to gain. Let fans be fans.

Just because you have a legal right to something doesn’t mean it’s always the right decision.  Copyright allows the creator of a work to control derivative works – creative works based on the original work.  This is a legal right of content creators, but enforcing it hurts the content creators more by alienating the very fans who keep them in business.

Let’s look at two examples.  First, fans of the Lord of the Rings created an impressive film telling an untold story using the characters and lore from the books.  “Hunt for Gollum” was a labor of love by people who love the Lord of the Rings so much, they spent their own time and money producing a film of amazing quality and storytelling.  Thankfully, Tolkien’s estate allowed the film to be released as long it was always non-profit.  But why only non-profit? These fans made this movie (and others will see it) because they already love the Lord of the Rings.  Fans know it’s not an authorized edition or cannon to the storyline (and if you ask most geeks, being cannon is the most important thing to get our interest).  This means if Tolkien’s estate comes out with their own telling of the same story, it will still have the same audience, plus more who found out about the fan-made film – it’s a win-win situation.

But not all companies see the benefits of fan production.  Video game publisher Square-Enix sent a cease-and-desist notice to a fan-made sequel to the classic game Chrono Trigger.  Square has taken down several fan productions related to Chrono Trigger, this most recent takedown happening mere weeks before the game’s release.  But what is the threat? Square is still free to release their own cannon sequels – this fan production only serves to increase the value and attention on this 15 year old franchise.  The people making this massive game are fans – the people Square should be supporting not suing.

Video games especially have shown how fan labors of love can help the series.  Many video games include modification tools to allow fans to create their own games and stories, either expanding on the official material or creating worlds of their own.  While Square has the legal right to stop these fan-games, they are hurting the very people who keep them in business.

After my IP class last week, a classmate and I continued our debate.  He said something that stuck with me: “Companies won’t leave money on the table.”  But in many cases, companies do leave money on the table. Sometimes the risk isn’t worth the reward, but sometimes it’s sheer stubbornness.

I mentioned Farhad Manjoo’s article about why there is no iTunes for a movies a few weeks ago.  The reason, according to Manjoo, is there are too many contracts to renegotiate and too many people to get permission from to make an all-you-can-download movie service cost effective.  This is not because it’s actually expensive to make (all those BitTorrent sites seem to manage). It’s because the variety of rights holders demand too much money.  Rights holders over value their copyright (or patent other cases).  They demand more money than someone can make selling another product (like a download service).  Instead of getting paid, nothing gets done or sold, meaning everyone leaves money on the table.

Want a nice, clean consumer example? iTunes introduced variable pricing for music at the demand of the record companies.  Record companies could choose a lower 69 cent price, the regular 99 cent price, and a $1.29. Few chose the lower price, pushing popular and new songs to the higher $1.29.  Early results show the labels are losing money from the decrease in sales – unit sales have dropped to the point where actual revenue is lower than when prices were 99 cents. Don’t say they weren’t warned.

The examples are numerous, from newspapers threatening Google even though its sends them tons of free traffic to monetize to Warner Music demanding more money from YouTube and music games like Guitar Hero, ignoring the huge promotional benefit they get from both.  TV shows like the Wonder Years can’t appear on DVD or TV because of the over-priced music. Other shows have changed the music, from Dawson’s Creek to WKRP in Cincinnati.

In the patent world, having too many patents in one area is called a patent thicket and can make it hard for research because it requires so many different licenses (and too many companies over valuing their intellectual property) that it becomes cost-prohibitive to research either from licensing or lawsuits.  Some companies collect their patents to allow products to be made, but these patent pools often do more harm than good. This is even hampering drug research:

Peter Ringrose, chief scientific officer at Bristol-Myers, has said there are more than 50 proteins possibly involved in cancer that the company was not working on because the patent holders either would not allow it or were demanding unreasonable royalties.

Yes, I went there. You might die because greedy companies refuse to take money.

In all seriousness, intellectual property not only gives monopoly rights to a single entity, but it also comes a sense of entitlement that seems to hurt the rights holder and everyone down the supply chain, including consumers.  This is because rights holders significant over-value their own intellectual property.  Much of the value from content comes from how it reaches the consumer, whether on DVD, TV, or some innovative package.  Pricing yourself out of these products does not make your content more valuable – it devalues it because consumers don’t experience it.  Companies are leaving money on the table, not just from the initial royalties, but from the future revenue made by future sales of products based on new fans or new innovations.

After years of watching blogs and online news sites grow and prosper, you’d hope the news industry would see the potential and not the end.  Unfortunately, all the posturing of the past few years is exploding as the Associated Press and some news leaders are basically declaring war on the internet.

I haven’t been a fan of the Associated Press, who for a news organization, has surprising distain for fair use (except when it suits AP). This week, the non-profit organization announced it will police the web for anyone pirating news content. This is not limited to copying full articles, but anyone partial copies or even sentences and headlines, targeting aggregators like Google News, Digg, and many others.  As part of a coordinated assault, News Corp. owner Rupert Murdoch put it succinctly: “Should we be allowing Google to steal all our copyrights? Thanks, but no thanks.”

But Google and aggregators are not stealing your copyrights. It’s called free publicity. Just because someone else benefits by publicizing you isn’t bad or stealing.  It’s the way the internet works.

The other ironic part of AP’s strategy is to make sure search engines post “the original source or the most authoritative source” first in it’s results. Of course, AP wants to do this by pressuring Google rather than building good SEO websites and encouraging linking to their articles (since Google ranks authority, partly, by how many incoming links you have). So aggregators and linking is bad, but special treatment from search engines, like a special section prioritizing news outlets is okay. And sounds a lot like Google News. Techmeme editor-in-chief Robert Thomson points out the Wall Street Journal and New York Times make use of aggregators themselves, linking to other outlet’s content.  The New York Times was even sued over its linking practices.

Google Chairman and CEO Eric Schmidt spoke to newspaper publishers, urging them to think about the consumers, saying “if you piss off enough of them you will not have any more.” His point is newspapers need to address the needs of consumers, not fight against the way the market is evolving. Aggregators and link sharing is how the internet works – and both make content easier to find and more valuable to the person finding it.  Newspapers spent years hiding behind pay walls and found that didn’t work (though it seems it won’t stop them from trying again).

Also part of the news industry’s problem is an attachment to the medium paper.  As Michael Masnick writes: “It’s like saying ‘how to reinvent the horse-drawn carriage’ rather than ‘how do we improve transportation’”.  Charlotte Hall, an editor from the Orlando Sentinel, says:

It stops the clock once a day and takes an assessment, offering the kind of in-depth and analytical work that the 24/7 breaking news world on the Web cannot provide. Print is good at the things the Web is not good at–watchdog, explanatory, enterprise, narrative storytelling.

But Masnick notes that nothing Hall says print is good at can’t be done on the web. Newspapers are trying to convince people that if newspapers all go out of business, there will no news. All those television networks seem to be absent in this dialogue. But this is not the case.  Newspapers can be replaced by news websites.  Websites do some things better; paper does some things better, but neither matters when consumers are more and more choosing to get their news on websites.  The customer is always right, unless, it seems, it destroys your century old business model.

I don’t think paper will completely disappear. Some people still like the tangible product, so there is a market to sell to.  But overall the market is demanding evolution, and if the current players do not want to fill the market demand, someone else will.

The Author’s Guild, made up of many brilliant fiction writers, made up some fiction of its own and have pressured Amazon to remove a key feature of its eBook reader upgrade.  The Kindle 2 included a text-to-speech feature like many computer programs do.  The Author’s Guild president, Roy Blount, claimed turning text-to-speech in this fashion was copyright infringement, undermining the billion dollar audio book industry.

Um, no. Reading text out loud is not copyright infringement.  Blount has been pushing this issue, most recently in an op-ed in the New York Times, offering no legitimate argument for why text-to-speech is bad or illegal.  He says Amazon is not paying for audio rights, but there’s no need.  Michael Masnick points out the text-to-speech feature is not a fixed work, which is a requirement for copyrightable material. It’s the same as someone reading the book out loud, as much as Blount wants to pretend it isn’t.  Masnick says the only way this violates copyrights is if someone records the computerized voice, and then tries to sell it. Blount says he doesn’t want this to prevent parents reading to their children or the blind, but for no other reason than doing so would sound bad.

As for Amazon, shame on you. You come out with this innovative and successful product that makes people want to read more books, helping these very authors. But instead, without any legal basis, you cave.  It makes the product less valuable to consumers and even ebooks lose some value.  This is a lose-lose-lose situation (the third being consumers) where authors are decreasing the value of their books, Amazon is decreasing the value of Kindle, and consumers have less valuable products to buy – for the same price.  It’s sad Amazon was scared away from this legal fight. Instead it sets a scary precedent that groups can raise a little hell and make this retail giant fall.

I missed posting about the Watchmen fiasco. Basically, Fox once owned the rights to the Watchmen movie and actively decided not to make the film. So a few months before Warner Bros. releases their version, Fox sues saying it still owned the rights.  To keep its release date, Warner Bros. settled, paying off Fox for doing nothing. Copyright doing its duty, right?

Activision, likely giddy at the prospect of being its own Fox, is threatening to sue EA for publishing a game Activision gave up on.  Activision merged with Vivendi Games and in the merger, Activision dropped several titles including Brutal Legend, which EA picked up. Now that Brutal Legend is getting hype and an anticipated release, Activision is claiming EA is infringing on their rights on a game Activision said they don’t want to release – they want money for doing nothing.  I particularly love EA’s response.

We doubt that Activision would try to sue. That would be like a husband abandoning his family and then suing after his wife meets a better looking guy.

Senator Diane Feinstein added an odd amendment to the stimulus package aimed at forcing ISPs to regulate copyright infringement (and child pornography) on their networks.  The content filtering amendment has been pushed off the stimulus bill, but more for procedural issues than merits making it likely we’ll see it again.

Feinstein’s amendment is a dream for copyright holders with little regard for consumers and service providers (ironic Feinstein’s from California, right?). Her amendment calls “for reasonable network management practices such as deterring unlawful activity, including child pornography and copyright infringement.” These being the most heinous things one can do online.  Congress almost regularly puts up these “stop child pornography” bills that chill free speech and are struck down by the courts, but no members of Congress are likely to vote against protecting our children.

Content filtering, for all the grandstanding done by copyright holders (and attorney generals against child pornography), are wholly ineffective.  No technology has been shown to know what’s copyrighted material or even pornography, legal or otherwise.  So this reasonable network management is pie in the sky meant to put the responsibility of policing everyone on ISPs who are protected under various safe harbor provisions.  The only way they could even attempt this is with deep packet inspections which lead to serious privacy concerns.  Public Knowledge brought great attention to the issue, which is quiet for now, but likely to return again.