A few days ago, another lawsuit was filed against Apple for maintaining a monopoly in the digital music market (via slashdot). According to Information Week:

The complaint against Apple claims that the company controls 75% of the online video market, 83% of the online music market, more than 90% of the hard-drive based music player market, and 70% of the Flash-based music player market.

…

The complaint takes issue with Apple’s refusal to support the Windows Media Audio format. “Apple’s iPod is alone among mass-market Digital Music Players in not supporting the WMA format,” it states, noting that America Online, Wal-Mart, Napster, MusicMatch, Best Buy, Yahoo Music, FYE Download Zone, and Virgin Digital all support protected WMA files.

This is based on the proposition that music companies “are generally unwilling to license their music for online sale except in protected formats.” Such assertions look increasingly tenuous as unprotected music becomes more widely available through legitimate channels. Amazon.com, for example, claims to offer “Earth’s biggest selection of a la carte DRM-free MP3 music downloads with more than 2.9 million songs from over 33,000 record labels.” A week ago, Amazon said that Warner Music Group would make its artists’ songs available in the unprotected MP3 format. EMI last year also began offering unprotected music online. And that’s to say nothing of Web sites like Amie Street that have been offering unprotected music from independent artists for even longer.

Apple, for its part, might reasonably claim it doesn’t want to license WMA from Microsoft, a cost the complaint speculates is unlikely to exceed $800,000, or 3 cents per iPod sold in 2005.

But the complaint goes beyond software licensing politics and charges Apple with deliberately designing its iPod hardware to be incompatible with WMA. One of the third-party components in iPods, the Portal Player System-On-A-Chip, supports WMA, according to the complaint. “Apple, however, deliberately designed the iPod’s software so that it would only play a single protected digital format, Apple’s FairPlay-modified AAC format,” the complaint states. “Deliberately disabling a desirable feature of a computer product is known as ‘crippling’ a product, and software that does this is known as ‘crippleware.’ “

More at The Unofficial Apple Weblog (“Here we go again”), MacUser (”People never get tired of suing Apple”) and Apple Unvarnished (”The lawsuit heads off into ridiculousness …“).

Technorati Tags: Apple, iTunes, antitrust

A while ago we discussed Radiohead’s decision to sell its new album on a “pay us what you think it’s worth” basis. Today’s NYT has a nice article on the band and the album release. With respect to the donationware pricing, Jon Pareles reports:

The band and its managers are not releasing the download’s sales figures or average price, and may never do so. “It’s our linen,” Mr. Hufford said. “We don’t want to wash it in public.” A statement from the band rejected estimates by the online survey company ComScore that during October about three-fifths of worldwide downloaders took the album free, while the rest paid an average of $6. Factoring in free downloads, ComScore said the average price per download was $2.26. But it did not specify a total number of downloads, saying only that a “significant percentage” of the 1.2 million people who visited the Radiohead Web site, inrainbows.com, in October downloaded the album. Under a typical recording contract, a band receives royalties of about 15 percent of an album’s wholesale price after expenses are recovered. Without middlemen, and with zero material costs for a download, $2.26 per album would work out to Radiohead’s advantage — not to mention the worldwide publicity.

As a general matter, the tradeoff here is one between royalty-free dissemination and obscurity. The graph shows a simultaneous release of a for-pay good (P) and a free electronic download (F), e.g., books, music, etc. Some customers substitute F for P (x%). Others buy P because they became aware of it through F (think Google, costless recommendations, etc.) (y%). As long as y% > x%, the publisher is better off. This is very likely a winning strategy for writers in the “long tail. As to music, I’m not sure, because the free download is a perfect substitute for the for pay version. Hopefully Radiohead will release its data at some point, or others will repeat the experiment.

Technorati Tags: music, radiohead, law & economics

Joshua Spivak posted a nice review of Bruce Abramson’s The Secret Circuit over at the The San Francisco Chronicle.

In “The Secret Circuit: The Little-Known Court Where the Rules of the Information Age Unfold,” Bruce Abramson, author of “Digital Phoenix,” a study of the information economy’s collapse and revitalization, pulls back the curtain of American legal and economic policy to provide an engaging discussion of the recent developments and debates that have led to the creation of the country’s strong patent system. Focusing on the relatively obscure U.S. Court of Appeals for the Federal Circuit in Washington, Abramson provides an excellent discussion of how and why America’s politicians decided to strengthen patent protection, what this new arrangement meant for the American economy and whether further reforms need to be undertaken. Though the end of the book gets a little lost in the minutiae of the circuit court’s non-intellectual property caseload, the overall work is sound, providing a great examination of an important engine for America’s economic growth.

Here are the slides for the October 29, 2007 class on the anatomy of a license agreement and the “antitrust moments,” in negotiating a license agreement.

Technorati Tags: antitrust, teaching, cardozo

Here is an interesting presentation by Nicolas Petit on the VirginMesa case. Virgin claimed that Apple was abusing a dominant position by refusing to license its FairPlay technology to Virgin. Apple is vertically integrated with the iTunes store upstream and the iPod downstream. The two are connected via FairPlay DRM. Virgin is present only at the upstream level and complains that without a FairPlay license its customers cannot play Virgin music files on their iPods. That claim, of course, is almost comical, and the French Competition Council rightly dismissed it. The reason that Virgin’s files don’t play on the iPod is that Virgin’s DRM is incompatible with the iPod, not that the iPod uses FairPlay to tether songs purchased from the iTunes music store to the iPod. The iTunes store-iPod integration is by no means airtight, if anything, it is “one way,” in the sense that (most) iTunes store files only play on iPods, not “two way,” in the sense that iPods only play iTunes music store files. And even the one-way integration is rather loose. Any iTunes file can (in descending order of legality and ascending order of convenience) be burnt to CD, audio ripped, or stripped of DRM entirely. No one keeps Virgin from selling music in mp3 format, which plays just fine on the iPod. And, hey, it’s good karma, too.

Technorati Tags: antitrust, IP, apple, virgin

These slides discuss two of the most common responses to the “patent thicket” problem, cross-licenses and patent pools. As always, comments are welcome.

Technorati Tags: antitrust, teaching

If economic growth through innovation is the policy goal underwriting both the IP laws and (at least parts of) the antitrust laws, then the question arises whether we are better off with “competition only” policies or with a mixture of “competition plus IP protection” policies. In this class, we explore the arguments of the more radical critics of intellectual property. Accordingly, we ask the question: Why have intellectual property laws at all?

Technorati Tags: antitrust, IP

Here are my slides from a recent PLI Seminar on Antitrust Issues in Licensing. Enjoy!

Technorati Tags: antitrust, IP licensing

I very much liked Cory Doctorow’s keynote address at this year’s OSCON on the normative aspects of our technological choices. Open societies need open and autonomy-promoting infrastructres: economic, political, legal, and technological. Design choices are rarely value neutral, indeed, there is a ghost in every machine. As we noted earlier on this blog (in broadly Rawlsian terms) in the context of net neutrality:

Net neutrality is first and foremost a question about the background institutions of a just society. The end-to-end Internet architecture is about to put an end to one-way sender-recipient communication that has all but destroyed the discursive nature of the political process. Net neutrality is about a basic infrastructure of equality built into the protocols of our communication, providing equal freedoms for all. The Bill of Rights was not about maximizing total welfare. It was — and is — about guaranteeing a fully adequate set of equal political and civil liberties to everyone. Architecture mirrors legal code. We insist on equal access to public spaces, and — despite congestion — we insist on equal access to public roads. (And where we do think about congestion pricing, we engage in a full-blown policy debate, in which economics is one but not the only concern.)

Technorati Tags: policy

Here is the (draft) syllabus for the course on Antitrust and Innovation, which I will teach at the Benjamin N. Cardozo School of Law this fall. While there are many excellent casebooks on antitrust on the one hand and IP on the other, there is precious little teaching material focusing specifically on the antitrust/IP interface. (One notable exception is Gary Myers, The Intersection of Antitrust and Intellectual Property (2007).) In selecting materials for the course, I tried to give roughly equal weight to:

• Bedrock case law
• Emerging case law (e.g., exclusion via DRM, DMCA)
• Agency practice (e.g., IP2 report) and mainstream scholarship
• Radical critics of the intellectual property regime.

Comments are very much appreciated.

Technorati Tags: antitrust, IP, teaching

Another awesome project! Kudos to Aaron Swartz (of Reddit fame) and Brewster Kahle (of fame at large).

What if there was a library which held every book? Not every book on sale, or every important book, or even every book in English, but simply every book—a key part of our planet’s cultural legacy.

• First, the library must be on the Internet. No physical space could be as big or as universally accessible as a public web site. The site would be like Wikipedia—a public resource that anyone in any country could access and that others could rework into different formats.
• Second, it must be grandly comprehensive. It would take catalog entries from every library and publisher and random Internet user who is willing to donate them. It would link to places where each book could be bought, borrowed, or downloaded. It would collect reviews and references and discussions and every other piece of data about the book it could get its hands on.
• But most importantly, such a library must be fully open. Not simply “free to the people,” as the grand banner across the Carnegie Library of Pittsburgh proclaims, but a product of the people: letting them create and curate its catalog, contribute to its content, participate in its governance, and have full, free access to its data. In an era where library data and Internet databases are being run by money-seeking companies behind closed doors, it’s more important than ever to be open.
So let us do just that: let us build the Open Library.

Technorati Tags: IP

AP reports:

Talks on an international treaty updating broadcast rights to accommodate the Internet failed Friday because countries were unable to agree how much legal and technological protection to afford broadcasters, a U.S. official said. “It became clear that there was no agreement on any of the fundamental issues of the treaty,” Paul Salmon, head of the U.S. delegation, told The Associated Press. The treaty fell victim to disagreements over issues such as whether protection against piracy should cover only traditional broadcasting methods — meaning cable, antenna and satellite signals — or whether it should include retransmission over the Internet, he said.

Technorati Tags: antitrust, IP

Larry Lessig, whose books have changed my view of the world, is leaving copyright reform to take on what’s arguably the single most important issue of our times: the privatization of public policy.

After talking about the basic inability of our political system to reckon the truth about global warming, Gore observed that this was really just part of a much bigger problem. That the real problem here was (what I will call a “corruption” of) the political process. That our government can’t understand basic facts when strong interests have an interest in its misunderstanding. … Why? The answer is a kind of corruption of the political process. Or better, a “corruption” of the political process. I don’t mean corruption in the simple sense of bribery. I mean “corruption” in the sense that the system is so queered by the influence of money that it can’t even get an issue as simple and clear as term extension right. Politicians are starved for the resources concentrated interests can provide. In the US, listening to money is the only way to secure reelection. And so an economy of influence bends public policy away from sense, always to dollars.

Modern societies vitally depend on the relative independence of their functionally differentiated sub-systems. In order to cope with a world of dramatically increasing complexity, the law liberated itself from the grip of morality and religion and became positive law. The economic system, in turn, broke free from the shackles of a feudal political system and quite literally changed the world by embracing property in rivalrous goods, voluntary exchange, and competition as the means of generating wealth. (Few have described this evolution more engagingly than Marx and Engels.) Functional differentiation and relative independence are the basis for the separation of church and state, of law and morality, and of politics and economics. It is that separation and relative independence, which is at the heart of the political project of the Enlightenment. Godspeed, Larry Lessig!

Technorati Tags: IP

The folks at Ubuntu linux (which is an awesome distro, by the way) debunked rumors that Ubuntu might be next in line to sign the Microsoft patent licensing deal. Here’s what Mark Shuttleworth had to say:

There’s a rumour circulating that Ubuntu is in discussions with Microsoft aimed at an agreement along the lines they have concluded recently with Linspire, Xandros, Novell etc. … We have declined to discuss any agreement with Microsoft under the threat of unspecified patent infringements. Allegations of “infringement of unspecified patents” carry no weight whatsoever. We don’t think they have any legal merit, and they are no incentive for us to work with Microsoft on any of the wonderful things we could do together. A promise by Microsoft not to sue for infringement of unspecified patents has no value at all and is not worth paying for. It does not protect users from the real risk of a patent suit from a pure-IP-holder (Microsoft itself is regularly found to violate such patents and regularly settles such suits). People who pay protection money for that promise are likely living in a false sense of security.

Technorati Tags: antitrust, IP, ubuntu

Daniel Sokol has the list with links. Here’s the short version.

1. Expert Declaration of J. Gregory Sidak Concerning the Competitive Consequences of the Proposed Merger of Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc., J. Gregory Sidak
2. Behavioral Economists at the Gate: Antitrust in the 21st Century, Maurice E. Stucke
3. Mandating Access to Telecom and the Internet: The Hidden Side of Trinko, Daniel F. Spulber, Christopher S. Yoo
4. Competition Law and Copyright Misuse, John T. Cross, Peter K. Yu
5. Authorized Generics: A Prescription for Hatch-Waxman Reform, Tom Chen,
6. Two Puzzles Resolved: Of the Schumpeter - Arrow Stalemate and Pharmaceutical Innovation Markets, Michael A. Carrier
7. Mergers when Firms Compete by Choosing both Price and Promotion, Luke Froeb, Steven Tenn, Steven Tschantz
8. The Empirics of Antitrust in Two-Sided Markets, Marc Rysman
9. Hanging Up on Carterfone: The Economic Case Against Access Regulation in Mobile Wireless, Marius Schwartz, Federico Mini
10. Property, Liability and Market Power: The Antitrust Side of Copyright, Antonio Nicita, G.B. Ramello

Note the two articles on antitrust and copyright, which is quickly becoming a new frontier on both sides of the Atlantic.

Technorati Tags: antitrust, IP