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Apr17th

2012

April 17, 2012 @ 09:00:00
Advertising on Google With Your Competitor’s Brand
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This is a repost of my article that I co-wrote with Robbie Fleming in April of 2011. It was originally published in The Advocate.

Anyone who is familiar with the internet knows that when you do a search you get some results that are advertising.

The way this works is that an advertiser pays Google to post the advertiser’s ad whenever a particular keyword is searched for. When a user next types that keyword into Google, the advertiser’s ad will be displayed at the top of the search results, or sometimes on the right-hand margin of the page.

Does this mean that you can use your competitor’s brand as a keyword so that customers looking for your competitor will find you first?

Courts in California and British Columbia have both answered this question in the last few months, and have come to very different conclusions.

California Decision

In Binder v. Disability Group, Inc.1., the plaintiffs and defendants were in competition for US social security disability claimants, whom they both wanted to provide services to. The defendants advertised their services on Google, and some of their chosen keywords were the trademarks of the plaintiffs. The plaintiffs sued for statutory trademark infringement and the common law tort of unfair competition, which is broadly similar to the tort of passing off in Canada.

US District Judge King wrote:

      “…there was a strong likelihood of confusion. Plaintiffs’ mark and that used by Defendants [as a keyword] are identical – both are Plaintiffs’ registered trademark of “Binder and Binder”. We find that Plaintiffs’ marks are strong based on testimony that Plaintiffs’ extensively marketed and advertised their services and worked to build their reputation based around their name….

The services provided are identical – both Plaintiffs and Defendants are competing for clients for social security disability cases. Defendants intentionally chose Plaintiffs’ mark based on its strength and appeal in the market. Additionally, both Plaintiffs and Defendants market their products through the Internet and rely upon it to obtain clients.”

The judge found that the infringement of the plaintiffs’ trademarks was a willful violation of the plaintiffs statutory and common law rights, and awarded double damages plus reasonable attorneys’ fees and costs against the defendants.

British Columbia Decision

In Private Career Training Institutions Agency v. Vancouver Career College2., the BC Court of Appeal considered similar issues.

The plaintiff was the local regulator responsible for private colleges, and passed the following bylaw:

      “An institution must not engage in advertising or make a representation that is false, deceptive or misleading. Deceptive advertising includes but is not limited to an oral, written, internet, visual, descriptive or other representation that has the capability, tendency or effect of deceiving or misleading a consumer”.

However, some of the colleges advertised their programs on Google using the names of their competitors as keywords. Just as in the California case, these colleges did not pretend that they were their competitors, but they used their competitors’ brands to direct consumer traffic to their own websites instead.

The BC regulator asked the colleges to stop, and when they refused the regulator went to court for an injunction to force them to stop. Unfortunately for the regulator, Mr. Justice Gaul concluded there was nothing wrong with the use of a competitor’s brand as a keyword:

      “I find [the defendant’s] advertising program, including its use of Keyword Advertising that incorporates the names of competitor institutions, was not designed to mislead anyone. The two situations of what the [petitioner] says were students who were deceived by [the defendant’s] advertising are, in my opinion, actually examples of students who made mistakes and it was their own actions or inactions that prompted the errors. Had they been more cautious in their reviews of their search results they would have realized that they were looking at a website of an institution other than the one they were initially seeking.

In my opinion, [the defendant’s] internet advertising strategy provided [two students who actually got misled by the advertisement] with the opportunity to investigate and consider other institutions besides the ones they were looking for. Not only do I find there is nothing wrong with that, I think the option to examine a number of institutions offering similar educational programs is a good one for the consumer.”

Accordingly, Mr. Justice Gaul dismissed the regulator’s application for an injunction.

The Court of Appeal upheld Gaul J.’s decision and found that that there was no reasonable grounds to believe that using a keyword to place one colleges’ website in a higher priority on Google than it would otherwise deserve, “was misleading or likely to mislead”.

The Court of Appeal went out of its way to say that the case was not about trademarks or intellectual property, but if Private Career Training was not about IP it is difficult to see what it was about.

It’s hard to see a difference between the Bylaw’s prohibition on advertising that has the “capability… of deceiving or misleading a consumer” and the common law passing off requirement that a defendant’s conduct creates a “likelihood of confusion” – if anything the test in the Bylaw appears less stringent than the common law.

The essence of an action for trademark infringement or passing off is free riding on the goodwill or reputation of another. While in a classic case a defendant is found to be passing off if he is claiming that his goods are the plaintiff’s, in recent years courts have expanded this concept to include more imaginative attempts to exploit someone else’s good reputation. So an Irish distiller cannot claim to be making “scotch whiskey”, and one video store cannot put a competitor’s sign on the highway in order to divert traffic to themselves.

This latter situation was considered by the US Ninth Circuit Court of Appeals Brookfield Communications Inc. v. West Coast Entertainment Corp.3.:

      “Using another’s trademark in one’s metatags is much like posting a sign with another’s trademark in front of one’s store. Suppose West Coast’s competitor (let’s call it “Blockbuster”) puts up a billboard on a highway reading – “West Coast Video: 2 miles ahead at Exit 7” – where West Coast is really located at Exit 8 but Blockbuster is located at Exit 7. Customers looking for West Coast’s store will pull off at Exit 7 and drive around looking for it. Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there. Even consumers who prefer West Coast may find it not worth the trouble to continue searching for West Coast since there is a Blockbuster right there. Customers are not confused in the narrow sense: they are fully aware that they are purchasing from Blockbuster and they have no reason to believe that Blockbuster is related to, or in any way sponsored by, West Coast. Nevertheless, the fact that there is only initial consumer confusion does not alter the fact that Blockbuster would be misappropriating West Coast’s acquired goodwill.”

In Private Career Training, Mr. Justice Gaul concluded that the accused colleges did not use their competitor’s name in their metatags, but it is difficult to see how using the brands in Google adwords is any different – both are tools in which the power of a competitor’s brand is used against it to steer consumer traffic away from the competitor and on to the advertiser’s competing site.

Both Mr. Justice Gaul and the Court of Appeal in Private Career Training concluded that no consumer was ultimately mislead by the use of brands as keywords, because the offending colleges did not pretend to be anything other than themselves in either their ads or their websites, and so any reasonably intelligent consumer clicking on the ‘wrong’ website would have eventually discovered their mistake:

      “… the decision to spend thousands of dollars and several years on a course of education was very important. It was reasonable to expect that potential students would approach the issue with some care.”

But this analysis presumes that end point is the only relevant point of analysis. It ignores the fact that the offending colleges were using their competitor’s brand as a springboard to direct initial inquiries to themselves (“initial interest confusion” as in Brookfield), and it also appears inconsistent with the common law passing off likelihood of confusion test, as formulated in Veuve Clicquot4.:

      “The test to be applied is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the name Cliquot on the respondents’ storefront or invoice, at a time when he or she has no more than an imperfect recollection of the VEUVE CLICQUOT trade-marks, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks.”

Of course the courts in Private Career Training were not considering trademark infringement but the application of consumer protection legislation, and with this idea firmly in mind the Court of Appeal concluded that trademark principles were irrelevant to their analysis.

In fairness to the Court of Appeal, consumer protection legislation has a different purpose than intellectual property laws. IP protects the rights of the intellectual property owners, and so concepts like initial interest confusion matter because any free riding on a business’ brand matters. But consumer protection laws are mostly about final effects – will any consumer be harmed? From this perspective the Court of Appeal’s focus on the final impact of the use of the brand keywords instead of the initial impact is more understandable. However, even this distinction is questionable because of the authority in Canada that consumer protection is one of the fundamental purposes of the tort of passing off: Ciba-Geigy Canada v. Apotex [1992] SCJ 83 at paras 48 to 50.

In any event, whether Private Career Training is about intellectual property or consumer protection is not as significant as the fact that it is the first case in Canada to consider the use of brands in keyword advertising. Because it is the first, and because of its conclusion, this case will be seen by many as an invitation to challenge well established incumbents in the market place by bidding on those incumbents’ own brands on Google adwords. The stronger those brands, the more vulnerable they will be to internet-savvy competitors entering their markets without any brand power of their own.

Categories:Intellectual Property:Intellectual PropertyTrademarks
 Values:Innovation

Apr16th

2012

April 16, 2012 @ 09:00:00
ACTA: The Hidden Why
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This is a repost of my article that I published at MINCOV.COM on June 23, 2010.

As negotiations over the Anti-Counterfeiting Trade Agreement (ACTA) progress and more and more information becomes available on the potential wording of the agreement, the usual suspects from all camps are happy to share their views on how ACTA might influence our lives. Quite expectedly, the opinions range from alarmist to pacifying, from wholly positive to Armageddonist, from neutral with a tint of “it’s not going far enough” to neutral with a “they’re still not gonna get us” tongue-in-cheek attitude.

How is it possible that one and the same document can attract such radically differing opinions from indisputably educated and intelligent people? The answer is simple. No assessment of a draft international agreement (or any piece of legislation) is possible in abstraction from the values against which such agreement is to be gauged by the assessor.

This is the reason why any legislation regulating welfare handouts is usually subject to heated debates: the same piece of legislation would necessarily receive incompatible ratings from human rights activists, union leaders, free market economists, those who are to distribute the handouts, the homeless, the working poor or the uber-rich. This happens because everyone has their own system of values, however consistent, and it is through the prism of these values that one evaluates all existing or proposed rules.

It is one’s system of values that allows one to rank various interests in the order of their importance. What is more important – saving a life of someone else’s child or the ability to buy a new toy for one’s own child; establishing higher wages for auto workers at the expense of car buyers or bringing down car prices at the expense of auto workers’ wages; saving an unbeknown species at the expense of a local industry or the prosperity of the industry workers – even if it means extinction of the species; protecting the rights of authors in a way that may result in severe limitations of availability of certain works or protecting the “rights” of “the public” to a rich cultural life at the expense of creators’ freedom to dictate the terms of use of their works?

The answer to all of these questions is – it depends. It depends on the system of values of the person who is to answer these questions. Any attempt to convince others in the “objective rightness” of one’s answers is nothing more than an attempt to inculcate or force one’s system of values upon others. An attempt to find a compromise under the guise of objectivity is either a reflection of one’s subjective system of values or an attempt to shift the Overton window1. so that one of the conflicting values is marginalized as “too much” and the other one gains weight as the window slowly shifts in its direction. I have already provided one Ayn Rand’s quote about the compromise between food and poison in my recent article, Modernization of the Inconceivable. Here is another one:

      “The good has nothing to gain from … the evil, except a share of its failures and crimes; the [evil] has everything to gain from the [good]: a share of its achievements and values. An industrialist does not need the help of a burglar in order to succeed; a burglar needs the industrialist’s achievement in order to exist at all. What collaboration is possible between them and to what end?”2..

In the beginning, I had no reservations about ACTA, other than that it would probably not go far enough in establishing a system that would provide an efficient mechanism of enforcement against mass violations of copyright on the Internet. I had no problem dismissing most comments from scholars known for their focus on the so called “user rights” – simply because they are based on the system of values that is irreconcilable with mine.

However, after I spent some time getting myself familiar with various opinions on ACTA, I realized that the one problem I do have with ACTA is that it can be used as a tool to set up global regulation of the Internet going far beyond the framework against copyright infringements.

The idea that the international agreement that seemingly could provide enhanced level of protection to copyright owners whose works are being used on the Internet could also become a tool of oppression (and by oppression I do not mean one’s inability to download a new movie free of charge), seemed like an irreconcilable contradiction. Then again, Ayn Rand’s philosophy came to the rescue. In “Atlas Shrugged”, she wrote: “Contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.”

This is exactly what I did.

Let me start with setting up the framework of my system of values and beliefs in this regard.

    1. Individual rights are an absolute priority. A society that does not fully protect individual rights is a society of masters (whether the master is a dictator or the majority) and slaves.

      a. Individual rights are impossible without property.

      b. Intellectual property, as a result of one’s creative labour, is no less property than any other type of property.

      c. Unlike in the case of tangible property, there is no way to physically prevent infringement of intellectual property.

      d. If the infringement of intellectual property does occur and is not voluntarily remedied by the violator, the only recourse the owner of the intellectual property may have against the violator would be through the use of coercive force applied towards the violator – which may either be the force applied by the state (through courts and various enforcement procedures) or by the owner of the intellectual property and its agents (i.e. thugs or journalists).

    2. The government’s only proper roles are those designed to protect individual rights through monopoly use of coercive force, i.e. the military, the police and the courts.

      a. More government involvement and regulations based on protection of interests of some people or groups at the expense of some others means less freedom to all but the ruling clique.

      b. Individual rights cannot be voted away by the majority, no matter how overwhelming.

      c. Totalitarianism is totalitarianism, regardless of any allegedly virtuous purposes for which it is being instituted. The state does not have to be run by a murderous dictator for the individuals in that society to not be free. What distinguishes totalitarianism (as the ultimate form of statism) from a free society is that it holds a mortgage on its subjects’ property and lives by sacrificing them to a mysterious common good. The difference between a mixed economy and full totalitarianism is only a difference of degree in lack of freedom. Laissez-faire capitalism, with its recognition of individual rights as the ultimate virtue, is the only truly moral politico-economic system that does not sacrifice, under the barrel of the gun of the government’s enforcement machine, the rights of individuals to the interests of others (be it the dictator, a bureaucrat, a particular group in the society, or the “public” in general).

      d. While a big government involved in roles improper for the government is bad enough, a global government is disastrous.

    3. Given the ease of dissemination of unauthorized content on the Internet and impracticality of initiating a full-blown litigation over each case of infringement, the only sensible solution, if we are to deal with Internet piracy, is through cooperation of ISPs (both hosting providers and Internet connectivity providers).

    4. To create a truly totalitarian state or a global government today, the Internet would necessarily need to be heavily regulated, hence the attempts to force net neutrality down our throats.

      a. No totalitarian state has existed without drastically limiting freedom of speech or without serious invasion of private lives of the state’s subjects.

      b. A system that allows to control ISPs for the purpose of enforcing intellectual property rights can easily be used to impose overreaching control over the Internet.

    5. Internet, as any great invention, can be used for good purposes and for bad purposes. Regulation of the Internet can also be done for good and evil purposes.

    6. Ends do not justify the means. It is impossible to save the free market system by abandoning free market principles, President George W. Bush to the contrary notwithstanding1..

So why does there seem to be a contradiction? Those who have read my article, Modernization of the Inconceivable, might have already figured it out. The main problem with ACTA is that it is based on a compromise of underlying principles. Just as a legislative attempt to balance interests of factory owners with those of looters who openly steal from the factory, is nothing more than institutionalized racketeering, an attempt to appease those who claim that they are entitled to “share” the cultural legacy by downloading, without authorization, any packages of ones and zeros, is nothing more than enslavement of creators (and those with whom creators voluntarily trade) by forcing them to give up the product of their labour and investment on terms that are dictated by someone else.

Until the proposed international agreement clearly states that the protection of intellectual property, as its underlying principle, is undertaken for the benefit of whose who create it and invest in it and that it has nothing to do with the interests of the whole “society”, we are doomed to witness the war between various groups lobbying their interests. When the use of one’s property is subjected to undefined interests of the “society”, one is neither the owner nor a free man. If a person is only allowed to have a private home if the society finds it beneficial, then under the same logic, the society can always expropriate the house, if it should find, through an activist claiming to represent the interests of the society, that expropriation would benefit the society even more. This is precisely what happened in the Soviet Russia where if the place you lived at was more spaceous than 9 sq. meters (97 sq. feet) per person, you were considered too rich and the government had the right to let strangers into your “communal” apartment. When it is up to the society (through its elected or self proclaimed representatives) to decide who should own what, one is merely a slave whose property can be taken away at any time in order to meet the demand of the public.

As long as the mechanics of the proposed agreement are designed with the interests of the collective in mind, there will always remain a risk that the enforcement tools created by the agreement will be used for unrelated purposes that are, as will be claimed, equally as important to the society. If even a partial justification for establishing the rules for ISP liability is that it would promote the public interest in the encouragement and dissemination of works of art2., then there is no reason not to use the same system of ISP liability with respect to dissemination of extremist speech, the definition of extremism being, naturally, left to the discretion of anybody who will claim that shutting down of a particular opposing view is in the interests of the country.

That is the problem with the current wording of ACTA, not that lobbyists from the recording industry cannot come to terms with lobbyists from the electronic gadgets industry; or that both these groups are vehemently opposed by activists of the “masses are (or should be) entitled to use copyrighted works as they please” movement. The problem is that because ACTA does not clearly establish the notion that the only concern for protection of intellectual property is the creator and subsequent voluntary investors in the creator’s work, the treaty members are not precluded from approaching the issue of such protection from the perspective of the “common good”, thus allowing a dubious compromise between two conflicting philosophies.

That ACTA has more chances of being implemented in the world because of its wording being vague enough to accommodate irreconcilable interpretations, is not good enough. If one scholar says that ACTA establishes a three-strikes-you’re-out rule and another scholar says that all it does is that it confirms contributory liability of ISPs, which liability is lifted subject to the ISP’s reasonable cooperation, it means that the same text may equally reasonably be interpreted as providing a global government with a tool of shutting off dissent and establishing total control over who does what on the Internet. What is attempted to be sold as a virtue of ACTA, that it offers a balanced approach to various groups of interests, is precisely its most important flaw.

As soon as the treaty’s purpose becomes to establish a fair balance of interests (based on whichever group succeeds at extorting favours from the drafters and other parties), the implementation of the treaty would always lie in the domain of re-evaluation of what balance is “fair” under the circumstances (the circumstances being, of course, the relative power of various interest groups in a particular country at a particular time). This is nothing more than warfare between various gangs as to which one of them has more power over the others.

Those who understand the importance of intellectual property should not lull themselves into believing that everything is going their way simply because lobbyists from their camp succeeded at squeezing in a rule that would tip the balance in their favour. As long as the protection is not based on a morally consistent principle, there is no guarantee that the balance will not tip the other way tomorrow or that the enforcement mechanism created by ACTA is not used for purposes radically different from those that it will have been introduced for.

The only way to ensure that an international treaty provides a solution to combat Internet piracy without becoming a tool of oppression is to so word the treaty that it would not leave any doubt as to the reasons why intellectual property is granted protection. And that reason should be stated clearly and proudly – intellectual property is being protected because no one has a right to use the results of another’s creative labour, other than on terms put forward by the creator or the subsequent copyright owner who voluntarily purchases said rights from the creator. It has nothing to do with whether the society benefits from such protection.

Unless the collective interest is left out of the equation, there will always remain a risk of this collective interest being used to enslave everyone into submission to whoever claims to be the representative of the society at any given moment. This is precisely the way all collectivist dictatorships of the past have seized power. It should not be forgotten that no dictator has come to power on the promises to murder millions of citizens in their own country. All the atrocities of collectivist regimes (be it Lenin, Stalin, Hitler, Mussolini, Mao, Khmers Rouges, Che or other blood-thirsty monsters) that are presently being laundered by the left, have been accomplished in the name of the common good.

I am not saying that ACTA will necessarily lead to the world holocaust. What I am saying is that the lack of clarity in the reasons for its adoption would make both IP supporters and haters guilty in the demise of our freedoms. The difference, however, is that the haters’ goal is clear – they openly advocate for the submission of creators and investors to the interests of the “society”. It is the position of many IP supporters that is most inglorious: by trying to carve out a piece of the pie for creators, they are prepared to do away with the philosophical basis for the protection. By throwing the creators to the mercy of the collective, even if it benefits the creators in the short run, all that they are achieving is that the paradigm slowly shifts to the one that IP haters embrace – that there should be no protection other than that which benefits the society as a whole.

Categories:Intellectual Property:CopyrightIntellectual Property
 Values:Individual RightsFreedom

Apr14th

2012

April 14, 2012 @ 09:00:00
“Peaceful” Flotilla Parody & Copyright
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This is a repost of my article that I published at MINCOV.COM on June 9, 2010.

In my article “Why Courts Should Not Allow the Parody Exception to Make a Parody of the Copyright Law”, I shared my view on why I believe that the circumstances in which one should be permitted to use a preexisting work, without authorization, for the purposes of parody, should be extremely limited. That article was based on a law suit brought by J.D. Salinger against a Swedish author whose work was a blatant attempt to parasite on a famous work.

Through a weird and symbolic coincidence, on the same day when the Canadian Government tabled the Copyright Modernization Act that includes the controversial “parody and satire” exception, LatmaTV posted on YouTube a parody ridiculing the support that the world is offering to the so-called “peaceful” Free Gaza flotilla.

To me, it was the perfect opportunity to test my own convictions, for the reasons that follow below.

    1. I believe that it is a brilliant parody.

    2. I believe that the cause behind the parody is righteous and deserving of support.

    3. I recognize that a lot of work and creativity must have gone to create the parody (write the lyrics, distribute roles, record the song and shoot the video) and that it has great transformative value.

    4. I believe that freedom of expression (speech) is of utmost importance.

    5. Because I like the parody and because I think it serves the right cause, I have an urge to allow as many people to see it.

    6. It is not inconceivable that the values of those who took part in creation of the original “We Are The World” video and of those who currently own the rights in the original song and in the original video would hold views that are diametrically opposed to those who call for public condemnation of Hamas and for support of Israel.

The question I asked myself was, if I was a judge who was not restricted either by the parody exception or by its absence, with all the views that I hold, if I was to decide on a claim of copyright infringement by the copyright owners against the parody makers, requesting a permanent injunction that could magically be so efficiently enforced throughout the Internet and other media, that I would cause the parody to become completely inaccessible worldwide forever if I decided that the parody was infringing – how would I decide the case?

I must admit that these were some terrible moments when I was trying to reconcile my seemingly opposing principles by trying to find a middle ground. However, I did not engage in this enterprise to look for easy answers. That is why I made sure that I could not get away with pronouncing the parody to be an infringement in the hope that my decision could not be efficiently enforced, so I could allow the parody makers a chance to look as heroes going against the system twice – first, by opposing the Israel-hating world, and second, by opposing copyright laws that tend to protect “the wrong people”. Hence the requirement that if I rule in favour of the copyright owner, then – without regard to additional requirements that usually surround granting of injunctions – I should erase the parody from existence, forever.

Finally, I convinced myself to disregard the issue of where I stand politically on the flotilla issue, and to return to the principles.

In principle, I agree with the decision in Michelin1., where the Federal court cited New Brunswick Broadcasting Co. Ltd. v. CRTC2., in which Justice Thurlow wrote:

      “The freedom guaranteed by the Charter is a freedom to express and communicate ideas without restraint, whether orally or in print or by other means of communication. It is not a freedom to use someone else's property to do so. It gives no right to anyone to use someone else's land or platform to make a speech, or someone else's printing press to publish his ideas.”

No one's freedom of expression should trump individual rights (including property rights) of others. It would not be a justification for a terrorist who had taken hostages to claim that he only did so to tell the world about whatever cause he is pursuing, even though it is arguably one of the most efficient ways to make the world listen. It would not be a justification for an activist who set someone's car on fire to claim that he only did it to demonstrate his inner convictions of the evils of capitalism. In the same vein, using someone's intellectual property should not be justified by whatever noble political ends that the unauthorized user is pursuing.

On the other hand, as many have rightfully noted, using someone's work does not destroy it (as in the case of a burnt car) and may not necessarily have any serious consequences for the copyright owner (as would be in the case of being taken hostage). Should this change anything?

I would say that if it changes anything, it would be the degree of moral justification for the copyright owner to make a claim that would stifle the parody. Everyone should be justified to ask that the copyright owner not make the claim and to act accordingly (by exposing the copyright owner's viciousness, by instituting private boycotts or otherwise), if the owner does nevertheless make such a claim.

But once that claim is made, in other words, once the copyright owner has decided that his rights to the preexisting works are more important to him compared to the public outrage that would ensue, the copyright owner's claim should be no different from the claim of a burnt car's owner.

If I were to write the decision in such a case and if I were not bound by existing laws but only by my philosophy, this is what I would say:

      “It is beyond reproachful that the copyright owners should wish to stifle such a socially important parody, but it is their right to determine the terms on which their property is used by others, and I have no choice but to grant the permanent injunction.”

Categories:Intellectual Property:Copyright
 Values:Individual RightsIntegrityPassion
Additional Tags:Fair Dealing

Apr13th

2012

April 13, 2012 @ 09:00:00
Modernization of the Inconceivable
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This is a repost of my article that I published at MINCOV.COM on June 8, 2010.

So the Government has finally tabled a bill to amend the Copyright Act. The choice of the Bill’s title, Copyright Modernization Act, is surprisingly accurate. This is exactly what it does – it “modernizes” the existing mess. The two primary principles of modernization were compliance and compromise.

I could not find a document where the proposed changes were consolidated with the existing Copyright Act, so I had to make one myself. UPDATE: Click here for Canadian Copyright Act with provisions of Bill C-11 consolidated

Barry Sookman came up with a great analysis of specific changes in the Bill. Some myths about its provisions dealing with Technological Protection Measures (or, “digital locks”) have been debunked by James Gannon.

This article is different. I am not going to go into the details of all the revamped provisions or compare them with C-61. In fact, this article is reminiscent of my recent article, Copyright and the Great Socialist Degradation. In order to assess the Bill, we must understand why we have copyright in the first place. If we do not know where we are going and why we are going there, how can we expect the attempts to modernize the vehicle by which we are traveling to be successful?

Again, there are only two competing reasons why copyright laws are in existence. The first reason is to provide enforcement for the objective law that every person has a right to their property and the fruits of their labour. Under this paradigm, what we protect are the individual rights of free men to trade whatever values they have to offer; and it does not really matter whether or not such protection benefits the society as a whole, since the protected rights are valuable per se. The other, collectivist, view on copyright is that copyright laws exist primarily for the benefit of the public. The “whole society” has a right to use whatever cultural legacy it can get its hands upon, save for what the Government says the society can only use, subject to a copyright owner’s permission. Under this latter paradigm, the only reason to protect copyright is to encourage creativity by vesting certain economic rights in creators.

Historically, these two paradigms have often been confused because of their respective advocates’ attempts to mask their ideas behind those of their opponents. This has led to numerous compromises and to what is usually called today, a “balance of interests”.

Unlike the prevalent view today, compromises are not always good. As Ayn Rand put it, “There can be no compromise between a property owner and a burglar. In any compromise between food and poison, it is only death that can win. In any compromise between good and evil, it is only evil that can profit.”1. If one approach is true and another one is false, then there really is no compromise between the two.

The Copyright Modernization Act expressly states in the Preamble that the reasons for its adoption are, inter alia, “to provide rights holders with recognition, remuneration and the ability to assert their rights; to enhance users’ access to copyright works or other subject-matter; and to enhance the protection of copyright through the recognition of technological measures and other measures, in a manner that promotes culture and innovation, competition and investment in the Canadian economy.” All at the same time!

Imagine an amendment to the Criminal Code that would state in the Preamble that it is adopted “to provide women and children with additional rights and remedies against sexual predators; to enhance rapists’ access to non-violent forms of sexual pleasure; and to enhance family values through encouragement of condom sales in schools”. There really is not much difference between this absurdity and the proposed amendments to the Copyright Act.

There is no middle ground. We may disagree on which philosophical basis we want to found our copyright laws, but it must be one or the other. While the result may turn out to be beneficial for both camps, the primary reason for protection must always be clear. If the cornerstone of copyright protection is the creator (and whichever subsequent owners of copyright that the creator may freely sell his works to), then there is no such thing as “users’ rights”. No one has a right to use something that does not exist unless someone else’s labour or creativity must go (or has gone) to create it. On the other hand, if the cornerstone of copyright protection is the common good, then it is preposterous that we should wish to further broaden the scope of protection granted to creators and industries that humbly keep bringing new chef-d’oeuvres to the altar of the public interest – even without any new rights granted to them by the government. Indeed, if we are to protect the master (the “society”), why would we be granting additional rights to the slave who is not even thinking about a rebellion?

If our paradigm is the common good – why are we implementing the provisions of WIPO 1996 treaties, other than to appease the U.S. and the rest of the world? And if our paradigm is the protection of individual rights of copyright owners – why are we introducing an exception that would allow unauthorized use of preexisting works “for the purpose of parody and satire”, even without going through the trouble of delineating the limits of such purposes?

Aside from the suggestion that the Copyright Modernization Act is an attempt to appease everybody and to do something already, does this attempt to modernize the Copyright Act make any conceptual sense at all?

Two more comments. I consolidated the text of the Copyright Modernization Act with the existing law to make it at least minimally readable. Now, does the structure and, especially, the numbering of sections and subsections produce an impression of a well thought-out document? Does it look like a result of many years’ worth of work? If this were a contract prepared by a law firm for a client, would the client accept it or would he be demanding a document that can actually be understood not only by lawyers who will be happy to litigate it six ways to Sunday?

Why is not the whole thing being rewritten from scratch? I posit that it is exactly because the Government cannot choose behind which values it wishes to stand. There really cannot be a compromise, or a balance here. Either the creators are free to trade on terms that may wish to impose on the use of their works, or they are left to the mercy of the “society” that would decide what is “reasonable and fair” for the creators to enjoy in return for making their works available.

This is why one can often hear a discussion today whether Canadian copyright laws are too weak or too restrictive. There is no way to answer this question without having a standard of values upon which one could base the answer. Too weak for what? To restrictive compared to what? What are we trying to achieve? We are measuring the efficiency of the current law according to what goals?

The Copyright Modernization Act looks like a panicky attempt of overregulation, where a potential fix of one problem through arbitrary rules, inevitably leads to the opening of five more problems that, in turn, get heroically fixed – only to require new fixes and regulations. If the regulation is based on nothing but an attempt to find a compromise between two irreconcilable principles, it will necessarily reveal the arbitrary balance of pull that various players are able to exercise to secure their interests.

This is why it is so hard to comment on the Copyright Modernization Act. The proposed amendments do not add any consistency to the current copyright law. To the contrary, once amended, the new Copyright Act will reflect – even to a greater extent – that it is simply a collection of favours that various groups were able to extort from the Government.

All of this is very sad, albeit understandable. The majority of the electorate have been indoctrinated to become presumptuous about their “rights” to enjoy values created by others. People regard it as natural that progressive taxation should allow the have-nots to receive money to raise their children at the expense of some rich capitalist who would be forced to spend extra hours in the office, away from his own children. The public eduction, public health care, union pensions, users’ rights to use someone else’s works (including the inalienable right to download movies before they are even officially released) are seen as great achievements of a civilized society.

In fact, these are all signs of slavery. No one whose property can be arbitrarily voted away, is truly free. While this may be electorally costly, it is time to finally hear the debate about principles - not about whether “digital locks” would primarily benefit the public or greedy corporations; not about the pros and cons of the parody exception2.. All of this is not about adding or removing ingredients; it is about identifying the whole, the underlying principle, the philosophic nature of the whole. This is the discussion that we must be having. And we should not suppress it by references to some magical balance of interests that only the omniscient Government can be trusted to recognize and impose on its meek subjects.

We must first agree on the standard by which we are to judge the law - is it to serve creators or the public. Simply providing concessions to both camps and hoping that it will appease them, will not do the trick. Appeasement only works to encourage claims for further concessions. One camp would keep requesting new exclusive rights, while the other camp would keep requesting new exceptions. We would keep on making up exclusions from limitations on exceptions from the rights – without even stopping for a second to question why we are doing this. How does this bring us closer to one of the two goals that the copyright law may have. If we want to finally reach a destination, we must know where we are heading to, otherwise we are destined to flounder in the middle of it all, each trying to swim in their own direction.

Categories:Intellectual Property:CopyrightIntellectual Property
 Values:Passion
Additional Tags:Philosophy

Apr12th

2012

April 12, 2012 @ 09:00:00
Failed Business Models of the Past, Eh?
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This is a repost of my article that I published at MINCOV.COM May 30, 2010.

In case of dissemination of music, movies, software, books or other works of copyright (I will refer to them as Content), business models are nothing but an interface between Creators and the public. I will be using the term Creator to refer to a natural person in result of whose intellectual and creative efforts Content is created, even if according to applicable law, the first owner of copyright in the Content is some other person. I will be using the term Owner to refer to the current owner of copyright in Content.

A model may only be successful if it meets the needs of Creators, the public and those who provide the interface. Buyers always want to pay as little as possible for the best product available, while the sellers always try to maximize their profits. What makes a business model successful is that it provides an equilibrium between the desires of buyers and sellers.

Also, one successful business model should not necessarily replace all others. Different products require different business models. It would be preposterous if manufacturers of luxury cars used the same business model as manufacturers of toothpaste, even though both manufacturers share the same ultimate goal of maximizing their profits. However, no one seriously suggests that Maybach should be forced to produce millions of cars and sell them cheap. Likewise, no one is forcing Colgate to only manufacture elite sorts of toothpaste and sell it on auctions for several hundred thousands of dollars per tube. If Maybach suddenly realizes that no one wishes to buy their Excelero for $8 Million1., it may reconsider whether it is a good business model. But it will surely not be making these amazing cars if a gang confiscates every new car at the gate of the factory, sells these cars on eBay for a few hundred dollars and then calls it a “new business model” that the greedy and old-fashioned car manufacturer “needs to embrace”.

The term “buyer’s market” refers to a situation when there are more sellers than buyers on the market, which leads to lower prices due to the excess of supply over demand. This term does not refer to hordes of “buyers” breaking stores’ windows and grabbing whatever they want, should the store set prices that the “buyers” do not find agreeable.

Forcing new business models is the same as attempting to force democracy upon Iran. Even if this latter works, which I do not believe is possible, there will still be thousands of people who will honestly think that the Western world ruined a great country, broke its spirit to replace it with a world of greed, evil and vice. Just as thousands of Russians still believe that attempts of Western democracies to educate Soviet people about freedoms were the cause of despicable economic state of Russia in the 1990s when oil prices plummeted. Many Russians still believe (which feeling is successfully being exploited by the government) that the only “real” objective of whatever (literally, every single thing) the West has been doing is to bring Russia down to its knees.

Soviet Union should have been allowed to fail and through its complete failure, seen from the inside, and not only from the outside, to adopt a new model that works2.. Otherwise, as soon as oil prices went up, new Russian leaders began rebuilding the old system claiming that the only reason why the Soviet Union experienced “temporary problems” was because of the forceful imposition of an extraneous ideology. Attempts to save someone who does not realize that they need to be saved or even someone who knowingly resists such “salvation”, will never succeed. For the same reason, refusal of the West to let the Soviet Union rot and fail, allowed the bankrupt socialist and communist ideas to outlive their most successful practical embodiment, because those who support these ideas now have an argument that these ideas failed because of the intervention on pernicious free market ideology. It has always been the tool of collectivists and statists to blame their victim (free, laissez-faire capitalism) for their own misdoings and then offer the same poison they used to bring about the problem they were trying to “fix” as a remedy.

Proponents of “copyright to the masses” ideas keep going back to the same examples over and over and over again, the most popular being one of the movie industry’s war against the VCR, claiming that in the end of the day, it was the VCRs that saved the movie industry3.. The question is – did the movie industry need to be saved? Did the manufacturers of VCRs have an obligation to save Hollywood?

If advocates of the use of VCRs were so confident in superiority of their business model, they should have created a case where VCRs were primarily (or, ideally, exclusively) used for Content provided by those Owners who agreed to having their Content so used. This, however, never happened. “Old” movie industry gave in, had to accept VCRs as part of the new landscape, and immediately went back to its old model, subject to necessary changes. This is because it had never been given a chance to regard the advent of the VCRs as anything but the necessary evil, a chance to truly appreciate numerous features that allowed the industry to benefit from the VCRs after the movie industry lost its battle to VCR manufacturers. Forced adoption of a model that the movie industry tried to resist may have saved the industry, but it never became the industry’s conscious and voluntary decision. And the choice that the industry was facing was not a choice between the old model and the new model. It was a choice between mass disregard of the public to the way the industry wanted to run the business and the new model. It was surrender, not embracing of the new model. If the major element of the “old” industries is described, as William Patry does, as control4., the industries’ surrender to the new model did not dissuade them of the idea that control is a virtue. Being force-fed the new business model and unwilling to see their old model’s flaws, they kept trying to retain as much of their old model as possible. The history kept repeating itself with VCRs, TV, DVDs, the Internet. Instead of letting the industries fail and learn from their failure, the innovators consistently went against the old industries’ wishes and forced new models upon them and kept calling this “salvation of industries running old failed models”.

Yes, maybe if VCR manufacturers would have had to wait before the movie industry realized the potential benefits of the new technology, thus delaying the advent of the VCR. But, assuming that the new model was indeed better, it would have created a completely different landscape of industries embracing the strengths of the new models rather than trying to minimize their impact on the existing models.

Also, one must not forget that VCRs, as any other interface between Content and end-users, only have a meaningful use if there exists Content that they can record or play back. Give a VCR to a caveman in absence of TV broadcasts and other audiovisual Content (even assuming that the caveman will have electricity and a television set), and the VCR will be completely useless, a pile of metal and plastic. It is the Content that gives value to the VCR.

Patry writes:

      “Consumers are king – not control, not copyright, and not content. Without consumers, copyrights and content have no economic value. Copyright is not fairy dust, vesting everything is touches with magical economic value. Rather, economic value is derived from buyers’ willingness to pay for a product or service.”5.

However, this does not address the issue of piracy. If consumers, instead of buying Content, are accessing it in circumvention of the Owners’ terms, it does not mean that the value of the Content is nil. Just like stealing of a car, which essentially means the particular “customer’s” refusal to buy it, does not mean that the car’s value is zero. If it proves anything, then it is that the mere fact that Content gets pirated means that it has value, however, through various mechanisms, looters of sorts6. have an option to override the necessity to pay the price.

As Barry Sookman wrote, addressing critics of the presently negotiated anti-counterfeit agreement, ACTA:

      “I had always thought that a consumer was someone who legitimately acquires some good or service for that person’s own use. However, the “consumers’ referred to by the coalition [of those who oppose ACTA] appear to be those individuals who engage in repeated acts of copyright infringement despite repeated warnings to stop. So, is the moral fight against the substance of ACTA’s proposed provisions related to graduated response by these detractions really about defending the right to take the creative labour and investments of creative individuals and industries for free?”7.

I share the view of Justice Peterson, who in University of London Press, Limited v. University Tutorial Press, Limited8. wrote: “after all, there remains the rough practical test that what is worth copying is prima facie worth protecting”. If it is worth someone’s efforts to steal, it has a value, even if no one buys it.

Crusaders should not expect to be embraced and to have their views that they attempt to forcefully impose on their victims, celebrated. Unless the sole interest of new model missionaries is in the mere sadistic process of forceful imposition of their ideas unto those who resist them, there are only two interrelated ways to efficiently reach the objective of conversion: to let the “old” models fail without any external pressure, simply by allowing them to rot by themselves, unable to provide something useful enough to keep them afloat9.; and to recruit new adepts by demonstrating the superiority of new models, without any violation of terms established by those who prefer to keep running the old models. This is the only way to have a controlled experiment, the only way to objectively prove that one system is better than the other.

Let us compare this situation with a restaurant that charges exorbitant amounts for its good food, but has less and less customers because of its conservative and somewhat extravagant policies. For example, it only allows men in blue suits and red ties and it only allows women wearing white dresses and red high heel shoes, and requires them to dance before they are permitted to enter the premises. But the food is great. And very expensive. Let us assume that most people find this approach ridiculously preposterous, that the business model of the restaurant owners is wrong and disastrous. Let us assume that it indeed is wrong and disastrous.

By analogy, what the proponents of forced new business models would suggest is to have as many people come to the restaurant, without regard to the limitations to the dress-code that the owners are trying to impose, eat and refuse to pay, claiming that the restaurant owner’s policies are unfair, inconsistent, discriminating, unenforceable, irrational and immoral. This approach is clearly wrong and will never convince the restaurant owner of anything other than he is being assaulted by a lawless gang.

The reason why Montgomery Bus Boycott was so successful during the segregation was that the protest did not involve violation of anyone’s individual rights. Black people did not force a free bus ride under the pretence of fighting against segregation, they boycotted the public transportation, which resulted in serious economic consequences for the public transport system. Feel the difference.

There are several other ways to prove the point, assuming that we are right.

The easiest would be to campaign that people not go to that restaurant. Yes, refuse to eat there – at all, for free or for money. In case of copyright this means – don’t buy and don’t use Content unless it is legally offered to you under conditions you find acceptable. No one has an inherent right to use someone else's works. Just as “public property” and “public interest” are misnomers referring to notions that do not exist, there is no such thing as “users' rights”10..

Another solution is – convince the chef to leave the place and work for you. It is the chef who makes good food, not the restaurant owner. Restaurant owner simply provides a business model, the interface, that we find unfair. If our model is so much better, it should not be a problem to convince the cook to work for us, should it? The cook here, of course, is the Creator. Instead of pouting that the lion’s share of the profits goes past the Creator and instead of sabotaging the business of those whose business models we do not like, convince the Creator that they will be better off under our modernized model. Without a good cook, how is the restaurant to survive? And if we have a great cook and a superior business model, is it not the key to success?

Yet another solution is – buy the restaurant off from its current owners. If we are so sure that our model is better, that the cook is going to stay with us, that we are going to have so much more customers if we change the model and that we are still going to be able to make more money, why don’t we buy the restaurant off?

If someone invents a miraculous vaccine that most people are reluctant to use for some reason, even if the inventor knows for a fact that the yet untested vaccine will “make the world a better place”, he has no right to forcefully inject it to people who do not want to use it. Even if the only reason why the inventor is doing it is that he is trying to save people’s lives, he is still violating their right to refuse treatment. Instead of finding several hopelessly ill who would happily agree to take the treatment and thus convince everyone that the vaccine works, forceful injection destroys any possibility of a controlled experiment, because “patients” are going to resist treatment.

We do not need to save businesses with old business models. If they are bound to fail, we must let them fail. It is their right to be able to fail. We must not forcefully save them by breaking the laws in the hope that they will somehow adopt a new business model and be grateful to us till the end of their days.

Categories:Intellectual Property:Intellectual PropertyCopyright
 Values:Individual RightsPassionIntegrity
Additional Tags:CollectivismPhilosophy
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