Category Archives: Business and Economy

The Freakonomics of fair use

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The NYTimes’ Freakonomics blog uses the subject of poetry criticism to tackle fair use:

In a recent article, the poetry critic of the New York Times complained that to do poetry criticism right, it’s often necessary to quote extensively from a poem. Indeed, in the case of a short poem, it might be helpful to readers to copy the whole thing. But, the critic said, this can’t be done because it might run afoul of copyright law.

It is true that copyright law prohibits the unauthorized copying of any substantial part of someone’s poem, song, or other work.…Is this a good policy?  From an economic perspective, no.

The reason this is bad policy, however widely discussed, bears repeating:

Use of a small bit of someone else’s creative work to build a new creative work rarely harms the economic interests of the first copyright owner, because most “derivative” works do not directly compete with the original.

Every creator builds on what came before, and such building usually doesn’t “compete” with that earlier work in any economic sense.  Creating legal fear and uncertainty about building on the past, however, is quite effective in limiting the creation of new works in the present.

Righthaven “nearing bankruptcy”

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I was suspicious several days ago when I heard that Righthaven might be going under, but apparently it’s true:

The Las Vegas copyright-trolling firm Righthaven told a Nevada federal judge Friday it might file for bankruptcy protection, or cease operations altogether.

To prevent that, Righthaven is asking U.S. District Judge Philip Pro to stay his decision requiring Righthaven pay $34,000 in legal fees to an online commenter it wrongly sued for infringement.

Wired has posted Righthaven’s Motion to Stay here (pdf).  They are exceptionally candid about the economics of copyright troll litigation:

In Colorado, 35 Righthaven copyright infringement cases have been stayed since May 19, 2011 pending a ruling on whether the company has standing to maintain these actions. Likewise, ten infringement actions, most of which involve an amended version of the SAA that addresses the concerns expressed by this Court in its subject matter decision, have been stayed in this District until a standing determination is made. Thus, Righthaven has been precluded from actively litigating and resolving the stayed cases. Moreover, Righthaven has delayed filing new copyright enforcement actions until a standing determination is made based upon the terms of the currently operative version of the SAA. Throughout this period, and despite a lack of incoming revenue given that numerous pending action are stayed, Righthaven has continued to incur operating expenses.

Clearly, Righthaven is a cash-poor outlet these days.  And here’s where things get really interesting:  based on its motion, Righthaven seems deathly afraid that they might have to sell some of their assets to satisfy a $34,000 judgment.  As they explain to the court:

Righthaven also has significant proprietary rights in its copyright infringement search engine software (the “Software”), which plays an integral role in the company’s operations. If a stay is not granted pending appeal, this valuable Software may be seized and liquidated in an attempt to satisfy the Judgment. Liquidation may result in the Software being sold to a competing organization or entity.

Talk about woeful undercapitalization.  A $34,000 judgment is going to force them into selling off their core business assets?  Really?

Righthaven always presented defendants in its copyright litigation with an unfair dilemma:

(1) pay out a few thousand in “go away” money now, or
(2) mount an actual legal defense (at an initial, minimum cost of a few thousand, with no guarantees that things would work out well).

It seems that Righthaven now faces a dilemma of its own:

(1) raise enough capital to pay off this $34,000 pending appeal, or
(2) go bankrupt.

The difference, of course, is that the dilemma Righthaven faces is fair.  They put defendants to the expense of hiring lawyers.  Some of those defendants won.  The law says that those winning defendants should have their legal expenses paid by Righthaven.  Sounds about right to me.  If Righthaven can’t afford to pay without selling assets, perhaps they never should have been filing lawsuits in the first place.

Sears appliance circular does strange things to the Chicago skyline

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It is not too unusual for cities to be misrepresented in movies or television shows but this takes place in other areas as well. A Sears advertising circular from Friday, September 9, takes some interesting liberties with the Chicago skyline. Take a look:

Perhaps this looks fairly standard: the Sears logo in the top left, a “big price drop” balloon coming down from the sky in the upper right corner, six appliances on sale, and then a picture of the Chicago skyline at the bottom. While this may be just pandering to this metropolitan region, it also hints at Sears’ history: the first Sears store opened in Chicago in 1925 and their headquarters are still in the region.

But if you look more closely at the skyline picture, two strange things pop up. The first: a green lawn. Here is a close-up of the bottom left of the circular:

This green view is pretty much impossible. To get a wide view of the skyline from this angle, one needs to be at the Adler Planetarium promontory. From there, one needs to stand either on a hill sloping down, meaning the lawn is difficult to get into the shot, or from the concrete steps or walkway that go around this point. Plus, the grass is pretty high here relative to the height of the buildings. So why include the grass? It would make some sense if the circular was advertising lawn mowers – but it is not. Perhaps the “big price drop” balloon needs a safe place to land. Or the circular needs a touch of pleasing green. Or a focus group suggested the green lawn invokes images of home life, the need for beautiful appliances, and the American Dream.

In addition to the strange grass, there is something odd going on at the right (east) side of the skyline. Here is a closer view:

Even looking closely at the circular, I have a hard time figuring out what is going on here. It appears to be a hill sloping up from the lake with some buildings on the hill. Why was this added to the picture? I really have no good idea – to fill up space?

Here is what the view of the Chicago skyline looks like from my own camera near Adler Planetarium, sans verdant lawn or black hill:

If this was the starting point for the Sears image, one could crop and play with it in such a way that the added blue from Lake Michigan could be removed but adding the lawn and hill is not necessary. It would still be a very nice and useful shot.

Righthaven losing that rocky mountain high

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I noted yesterday that copyright troll Righthaven hasn’t filed any new lawsuits in the past two months, but I was suspicious that it was all over.  After reading Wired’s coverage today, however, I think Righthaven’s end is near:

The new chief executive of MediaNews Group, publisher of the Denver Post and 50 other newspapers, said it was “a dumb idea” for the nation’s second-largest newspaper chain to sign up with copyright troll Righthaven.…

“The issues about copyright are real,” [John] Paton told Wired.com in a telephone interview. “But the idea that you would hire someone on an — essentially — success fee to run around and sue people at will who may or may not have infringed as a way of protecting yourself … does not reflect how news is created and disseminated in the modern world.”

I stand corrected.  Barring a court-ordered miracle, it seems only a matter of time before Righthaven closes up shop.

Mr. Google, take down this content

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Google’s default response to possible copyright infringement on YouTube is surprisingly mechanical and far from perfect.  Consider TMZ’s recent report on the hapless Justin Bieber and his ubiquitous YouTube music videos:

Justin Bieber has been victimized by a brand new cyber-enemy … an enemy who found a way to get every single one of JB’s official music videos REMOVED from YouTube….YouTube has a yank first, ask questions later policy when a copyright claim is made — so they simply pulled the videos off the site … until the dispute is resolved.

Of course, there are myriad problems with such a system, as Ernesto over TorrentFreak elaborates:

YouTube describes its Content-ID anti-piracy filter as a state-of-the-art technology, but those who look closely can see that in some cases it creates a huge mess. The system invites swindlers to claim copyright on other people’s videos and make money off them through ads. It automatically assigns thousands of videos to people who don’t hold the copyrights, and its take-down process appears to be hugely biased towards copyright holders.…

Content-ID allows rightsholders to upload the videos and music they own to a central ‘fingerprint’ database. YouTube will then scan their site for full or partial matches, and if there is a hit the copyright holder can automatically take it down, or decide to put their ads on it.

Although the above sounds like a fair and honest solution, not everything Content-ID does goes to plan.…One of the problems appears to be that people with bad intentions can claim copyright on videos they have nothing to do with, and even run ads on them. In the YouTube support forums there are hundreds of posts about this phenomenon…[although] most of the “misattribution” problems seem to be the result of screwups and technical limitations.

As Ernesto notes in passing, there is supposed to be an opportunity to counter a takedown request under the Digital Millennium Copyright Act (DMCA).  Unfortunately, Google’s Content-ID system doesn’t work this way, as Patrick McKay of FairUseYouTube.org elaborates:

Instead of requiring copyright owners to file a formal DMCA notice in response to a Content ID dispute, thus allowing users to invoke the DMCA counter-notice process, YouTube allows copyright owners to somehow “confirm” their copyright claim through the Convent ID system and re-impose whatever blocks were originally in place through Content ID. In this case, a message will appear on the user’s “View Copyright Info” page for that video saying, “All content owners have reviewed your video and confirmed their claims to some or all of its content.” After this, as far as I can tell, there is absolutely no way for the user to file a dispute and get their video restored.

Certainly, Google is under no legal obligation to provide video distribution services to anyone who asks for them no matter how contentious the content’s ownership.  At the end of the day, Google is a business, and dealing with the minutia of these copyright ownership disputes is expensive.  It’s obvious why Google wants to bow out of the fight as early (and cheaply) as possible.

Nonetheless, it is extremely troubling that Google is silencing some users’ speech without allowing them to defend (at their own risk and expense) legal rights provided under the DMCA.

No new lawsuits for Righthaven

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David Kravets over at Wired notes today that Righthaven appears to be on “life support” since it hasn’t filed any new lawsuits in a while:

With [a bunch of sanctions and adverse fee awards] now on appeal, the litigation factory’s machinery is grinding to a halt. A review of court records shows Righthaven has not filed a new lawsuit in two months, after a flurry of about 275 lawsuits since its launch at the beginning of last year. A court filing indicates there have already been layoffs (.pdf) at Righthaven’s Las Vegas headquarters, and even some already-filed lawsuits are falling by the wayside because Righthaven isn’t serving the defendants with the paperwork.

I think Wired may be a bit premature in its prediction of Righthaven’s demise.  Litigation factories have a tendency to rise again and again from the ashes.  Still, it’s nice to hear that no new bloggers are being hassled by Righthaven, at least at present.

What’s good for Amazon.com may not be good for California (or America)

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Even though I just used this phrase (“What good for [company X] is good for America”] when looking at the impact of AT&T on American history, I agree that the deal Amazon is trying to offer California, jobs for no sales tax, is a bit strange:

Amazon has spent more than $5 million loading up their More Jobs Not Taxes campaign for a referendum that would repeal the legislation that started charging them taxes. Meanwhile, the latest turn in the political fight has been that Amazon offered to create 7,000 jobs if the state postpones enforcing its sales tax on the company until 2014.
Here’s why that offer is a big deal. It transforms a debate that is fundamentally about a value — fairness — into a numbers game. The next step will be that Amazon’s political operatives will plant the seed that the bill will kill jobs, probably a nice round number like 7,000 of them. According to our calculations, the politicos will say, California is killing the exact number of jobs that Amazon offered to add! Taxes are bad!
I don’t mean to pick on Amazon here. Every company is after as many tax advantages as they can get. Walmart, for example, which pushed the effort to get the Amazon sales tax bill passed, skirts some online sales taxes, too. And every company has realized that it is good politics to say that taxes kill jobs, whether they have real evidence for it or not…
Now, by transforming tax fights into skirmishes over how many jobs this or that tax will “kill,” every single tax becomes something that hurts America. The narrow (and self-serving) interests of every tax-fighting corporation become part of our national project. And the battlefield becomes the competing spreadsheets of political opponents who say that one plan or another will create more jobs, when it’s pretty obvious that no one knows precisely how that whole mechanism works.

Some observations:

1. Perhaps taxes are supposed to be about fairness – but corporations and municipalities have been playing this tax break game for years. Why wouldn’t Amazon think that it has enough clout to pull this off? Many communities and governmental bodies have been more than willing to give in to others.

2. The math is interesting: no sales tax = 7,000 jobs. I haven’t seen many details about this: does the value of these jobs equal the sales tax revenue that would be lost without Amazon? Couldn’t California hold out for more jobs or make this information public to try to worsen Amazon’s hand?

3. It is interesting that this battle about sales tax revenue between California and Amazon is getting attention; a number of states have already gone through this. Granted, California is bigger so perhaps this is about more money than elsewhere. But, additionally, California was home to some of the biggest property-tax revolts in the United States several decades ago, meaning that homeowners, and not just corporations, are interested in paying fewer taxes.

Netflix’s distribution problems

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Netflix has had a lot of bad press in the last few months.  First, they decided to split their online-only streaming service from their mailed disc service, substantially increasing their customer’s prices.  Second, word came that they are losing their Starz distribution agreement, which will severely curtail the availability of (genuinely) recent movies on their streaming service.

Now, here comes a potential supply shock on the physical distribution side:

The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances….

Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly.

To be sure, a long-term interruption in mail service would be an economic catastrophe extending well beyond Netflix.  Nonetheless, viewing this problem from Netflix’s perspective shows just how dependent even web-savvy companies are on physical infrastructure and distribution systems.  There will be a lot of collateral damage if businesses can no longer count on a robust and dependable USPS.

A brief history of the rise of AT&T

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The young might only think of AT&T as one of the major cell phone carriers. But this ignores AT&T’s long and important history that includes many innovations and cycles the company has gone through:

But AT&T didn’t just conquer the 20th-century via clever marketing, mergers, and strategic deals with the government. In an era profoundly distrustful of corporations, it justified its expansion as a bid to offer “universal service” to the country. “One policy, one system, universal service,” became AT&T’s motto. Rather than breaking up the system, the government would regulate it as a “natural monopoly.”…

For the next 50 years, AT&T would consistently repeat the same cycle to avoid being broken up by the government—innovate, acquire, strategically retreat, then move forward again with a redefined mission. When the public reacted badly to the network’s attempt to take over broadcast radio, AT&T backed off in exchange for a monopoly on wireline service between radio stations. When the government again raised the spectre of a breakup after the Second World War, AT&T agreed to get out of the computer software business, leasing innovations like the Unix operating system to universities for a nominal fee.

Interesting. The research and development arm of this company produced a number of important technological breakthroughs that helped the United States rise to the top of the world heap in the mid 1950s. The company may be once again on the verge of a monopoly but it is hard to refute, to paraphrase a well-known saying, that “what has been good for AT&T has been good for America.”

Shopping Harvard students flock to “Sociology 109: Leadership and Organizations”

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Harvard has a tradition that students can spent the early days of the semester “shopping” among classes before settling on what they will take throughout the semester. A sociology class, Sociology 109: Leadership and Organization, was apparently quite popular during this shopping period:

Peter Chen ’13 had shopped the perennially popular Sociology 109: “Leadership and Organizations” last fall, so he expected the course to be somewhat crowded when he visited it again Wednesday on the first day of shopping period.

But when he arrived at the start of the class, student shoppers were already overflowing out the door, blocking Chen’s entrance into the lecture hall.

“I tried to push in a little bit and funnel into the room,” said Chen, who was forced to stand outside the lecture hall for about 10 minutes before wiggling his way into a newly empty chair.

Another Sociology 109 shopper, Stephanie L. Grayson ’14, said she showed up a full 20 minutes early to ensure a seat in the class, which she suspected would be crowded because it was taught by popular sociology lecturer David L. Ager. The course—which will be lotteried down to 80 students by the end of shopping period—drew about 180 shoppers, according to Ager.

What I am interested in is this: why is this particular class so popular? The article hints at a few reasons that certain classes are overflowing in the shopping period: they fulfill certain general education requirements or, as indicated regarding Sociology 109, has a popular lecturer. These are not unusual reasons.

But looking at the title of the course, I wonder if another factor is at work: this sociology class has direct implications for business. The professor has “a Ph.D. in Organizational Behavior, a joint degree granted by Harvard Business School and the Graduate School of Arts and Sciences at Harvard University.” Additionally, he has worked with both businesses and governments:

Ager has consulted and taught for several large multinational firms from different industries including finance, high-technology, hospitality, consumer products, bio-technology, bio-energy, telecommunications, and wholesale distribution. In addition, he has advised large, family controlled businesses around the world. His list of clients includes companies such as Mars, Inc., Rockefeller & Co., Inc., Caterpillar, and Morgan Stanley. His consulting activities include leadership development, strategic planning, talent management, change management, M&A, team building and succession planning.

Prior to coming to Harvard, Ager worked as an adviser to Cabinet Ministers in the Fisheries and Oceans and the Employment and Immigration portfolios of the Canadian government. He also served as a member of the finance organization at Nortel and as the Director of the Mexico Research Initiative at the Ivey School of Business, University of Western Ontario.

While students might have difficulty seeing how sociology classes directly relate to business settings, this class seems uniquely positioned to attract business majors, entrepreneurial types, and others who might otherwise think sociology is impractical.

Or perhaps there is a growing demand among sociology students for organizational theory. It does seem to be growing within sociology itself.