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Sunday, February 1, 2015

On the Apollo 1201 Project and Eradication of DRM (response to Thor Benson)

Thor Benson makes two important points: DRM needs to be eliminated and ownership needs to be reestablished as a viable option.

Instead of thinking in terms of preventing duplication of a digital file from occurring (what DRM tries to do), we need to think in terms of making the illegal copy’s value pale in comparison to the legal copy. To achieve this goal innovators need to work simultaneously on both reducing the value of the illegal copy and increasing the value of the legal copy (the digital goods value margin.)

(WARNING: My cohorts and I believe we have the best method for shrinking the digital goods value margin. There may be others. But what follows is, on Super Bowl Sunday, something of a commercial. What is for certain, regardless of who has the best method, is that this is the area in which anyone attempting to eradicate DRM in a decade needs to focus: the digital goods value margin. )

The Digital Content Exchange (; US Pat App. 10591416, priority date 3/4/2004) facilitates the shrinking of the digital goods value margin by setting up an Exchange upon which owners of media voluntarily register the copies they own. Whether the purported owner is in fact a true owner is verified rather painlessly by the DCE method.

On top of these voluntary (and verified) registrations, the DCE adds a digital storage locker so that owners can access their media. The DCE can also receive registration information from the parties that vend digital content, which information will ease the process of registration and verification from the owner-end.

In addition to providing user/owners everywhere access for streaming or downloading of their media, the DCE also serves as a database which has a wide potential subscriber base: e.g., third-party websites who wish to verify that their users truly own the content to which they are providing access, and agents that wish to verify that their author is receiving their due royalties.

Speaking of royalties (and who doesn’t want to speak of them?), the DCE is offering a royalty to all authors and their licensees (we will use the Copyright Act terms copy, author and licensee or rightsholder in order to cover books, music and videos.) Because it is designed as a commodities exchange, the DCE offers users a wide array of different transactions, indeed as wide an array as would be seen on any stock exchange, an array which easily covers what content providers do, what online sellers do, what online music stations do, what streaming services do, what used media stores do, what libraries do … and everything in between. With each transaction there is a potential fee and a division of that fee on a royalty basis.

It is important to note that the problem that gave rise to the bad solution of DRM was unleashed in the 1980s when the record industry, sensing windfall profits, rushed headlong into selling a new product (CDs) in the same old way that they had sold the old product (vinyl and cassettes). That problem has never been addressed, (DRM addressing only a symptom but not the underlying problem). Instead, the problem has been ignored, with everyone just hoping, with blind fideism, that some new revenue stream will make everybody forget that there is a problem and just be happy with the money they are making. Hence, the freefall that the music industry, for example, has been in ever since then. (But the problem has never been solved for videos, books, and games either, industries which are showing the same strain of sales influenza as the music business).

One of the things that is blocking any increase in the value of legal ownership, and therefore causing digital downloads/ownership not only not to be adopted but actually decrease over time is the First Sale Doctrine. This doctrine, nothing more than a bogeyman, nonetheless needs to be addressed.

The content industry has a reflexive “no digital first sale doctrine” position because, truth is, they hated the physical first sale too. But, in the old days of physical media, the industry had to yield to the demands of basic human freedom. But the situation in the digital realm is the same as the situation in the physical realm: human freedom demands the right to own, which we lawyers know is the right to dispose. If you can’t dispose, the incentive to own goes way down. No wonder sales of CDs, books, and DVDs … and their digital accompaniments … are at all-time lows.

In opposing digital first sale, the industry may be killing the golden goose. Because ways can be invented to handle transfers of digital goods, if the industry would relax their position on first sale so as to give inventors an incentive to invent. Even without any incentive (or even encouragement, gulp) provided by the content industries, we at the Digital Content Exchange have invented one way. When a media item is sold it is removed from the storage locker of User A and is then accessible from the storage locker of User B. Every app that User A uses will know that this transaction has occurred immediately by subscribing to the DCE database which allows instantaneous ownership checks. How does this provide User A with any ill-gotten gain? And ill-gotten gain is at the heart of Copyright law, not technical access and transfer rules (the dizzying variety of which Thor’s article does a good job of dissecting for our horror).

Our invention might not be the best way. We encourage others to try. But were pretty sure were in the right arena, though. The problem is insufficient benefits of owners/Insufficient prevention of counterfeits.

Readers may flinch at the word “counterfeits”. But it is important to see that the problem is not in fact one of “piracy” (which, if anything refers to the process of getting “on board” a piece of media and taking control of it) but rather one of counterfeit, .. i.e. media downloads which have not been authorized being given “full faith and credit” simply as a result of the insouciance of authors and their licensees. Because even if DRM were taken off of all future media releases, there would still be a billion items or so out there with DRM limitations owned by owners. And owners would be expecting full access to those items. But they would be counterfeits, and no respectable app should honor them any more than a five-star restaurant should accept a bogus $100 bill or the NYSE should accept a bogus share of a stock.

The solution is to go around the DRM system and adopt a registration system where each owner can login and see all the content that she either owns or is currently borrowing … and any app she is using can do the same on her behalf.

It is also important to note on the ownership issue, that ownership exists whether people like it or not. It’s just illegal ownership. All of the big six digital music lockers, for example, assume that you own any download that is presented to them for storage (and playback). Failure to set up a robust legal ownership system is folly, because it just allows the illegal ownership system to thrive more.

In the music field, some would simply prefer to hope to divert users of illegal content by the growing-big of Spotify or Netflix. Spotify increases the value of the legal copy but does nothing to address reducing the value of the illegal copy. In addition, Spotify is limited in its ability to increase the value of the legal copy because it does not provide ownership. To own is obviously better than to rent. Especially when the rental charge has no fixed contractual limits (What if Spotify or Netflix someday charge $99/month ? You will wish you purchased a few downloads.).

When Spotify was launched, among its benefits that were touted by its supporters was that it would reduce “piracy”. And surely it has to some extent. But it was only after subscriber numbers climbed to significant levels, that the anti-piracy effect was felt. Similarly it cannot be an objection to the DCE that it will not reduce piracy significantly. It will reduce it, but only upon significant levels of adoption, just like Spotify and any other app. Industry analysts and futurists alike need to give the DCE a chance to build up its users, just like it did Spotify and Netflix.

But a beginning has to be made. And this is where the Apollo 1201 program can help give us traction. Because there is a “model” out there which says, “Stop whining, just go out and solve somebody’s pain point, get a couple million users and get funded.” The problem is, we don’t solve a user’s pain point, as much as solve an industry-wide design problem which unfortunately will take cooperation among competing parties, if it is going to be fixed within this decade rather than within this century. But as Thor (and Cory) have pointed out, the resultant DRM problem is also a societal problem. And a couple of nods from the USPTO and U.S. Copyright Office would help as well. This problem should get everyone’s urgent attention. Even Google’s, Apple’s and Amazon’s (even though they risk market-share by the democratizing effect of an Exchange that is open to all, the long-term health of the system they labor in should be paramount.)

We believe any serious attempt to eradicate DRM in a decade should include promotion of the DCE as a trusted third-party solution to the digital goods value margin problem.  

Tuesday, January 27, 2015

Censored from Discussion of a Solution

Currently this comment is not being let through over at :

Here is the workaround: they cannot charge anybody sound recording royalties (or royalties of any kind) for playing your own music back to yourself. Or music you borrow, say from a library. already does this. It's the cloud from which you stream your own music, and other people's music that you borrow. Organized on playlists of your choosing, (or other people's choosing).
US Public libraries have been streaming content to borrowers for the better part of a decade without a peep from anybody that a royalty is owed.
Radio stations are a 20th-century idea, as are the royalties occasioned by them ... doesnt matter that they are coming at you digitally in the 21st century. 21st century ... increasingly... you (and your friends) program your own radio station.

Friday, December 12, 2014

Much Ado About Bit Torrent

1. The key to making bit torrent irrelevant is to make the counterfeits that they "mint" less-useful.
2.  Unlike a counterfeit dollar bill, which is a physical thing, with a digital item you can NEVER tell which is counterfeit and which is real. They are identical.  This is why DRM never works ... at least not for long.
3. There is no need to interfere with Bit Torrent, which does in fact have legitimate uses.  Stopping people through legal action is messy anyway.  What we should do with a problem like Bit Torrent is what we've always done: obviate the problem through innovation and cooperation among those negatively affected.
4.  What is needed, then, is an invention of some kind that deals with the digital file on the redemption end of the business: i.e. when you go to use it for its intended purpose (i.e. watch, listen, read, play).
5. This type of invention is not likely to come from the tech industry, or from the entertainment industry. This type of invention is likely to come from people who already have experience dealing with fungible digital commodities and the problems they cause.
6. The people who have experience dealing with fungible digital commodities and the problems they cause, are mostly found in the securities industry, which has the most at stake (dollar-wise) from allowing counterfeits to be redeemed.
7. The Digital Content Exchange is an invention created, prototyped and implemented  (Beta: by former securities industry experts in the Design of Exchanges.

(The Digital Content Exchange in Seven Steps.)

Monday, November 24, 2014

What happens when music purchases are a small fraction of their current numbers?

.... asks Billboard magazine.

The DCE comment:

The author is quite right to note this trend, which shows no signs of abating.  The problem? 
Look no further than the weak definition of "Permanent Digital Downloads (PDDs)" contained in CFR 385.2 ("means a digital phonorecord delivery that is distributed in the form of a download that may be retained and played on a permanent basis.") and by Harry Fox Agency ("A download that can be retained and played permanently, like songs downloaded to your PC or phone").

What does a purchaser get when he purchases?  Not much. What does "permanently" mean anyway?  Is it any more permanent than an illegal download?  Not at all.  They both are given the same "full faith and credit".  

What is needed is to devise a way that ownership can be given value again.  The Digital Content Exchange is one way.

All this focus on "streaming" is misplaced or at least a misnomer.  What Spotify, Youtube, Netflix and Pandora really are is "renting".  You are renting a universe of songs for a month. They could be gone next month. Or the rent could be raised to $50 a month (beyond your budget). Owning is the only sure way to guarantee access to a movie, book, game or video that you really like and would want to play again.  But the industry is offering no alternative for those who want to own.  In music, there is no fluctuating marketplace, just $.99 or free from Bit-torrent or a "streaming" service. Digital Rights Management was and is a bad idea.  So because of that, the entire content industry gives up on finding a good idea??

Sunday, November 2, 2014

Where We've Been/Dialogue on

Although we have been busy practicing law, raising a family, etc. the Chronicle of a Solution continues unabated. The content industries (movies, music, books and games) are no closer to a solution than they were when we last posted. We had a meeting with Neal Harmon recently who obviously "gets it".  

We have also been active on various comboxes and message boards. A notable one of which is a recent exchange on, reproduced below.   The dialogue started around the article about industrial-rock pioneer Trent Reznor, who has been hired by Apple to do... well, er, something.   

"Ownership is waning. Everybody is comfortable with the cloud -- your documents, who knows where they are? They are there when you need them. That idea that I've got my records on the shelf doesn't feel as important even to me as it used to. I just think we haven't quite hit the right formula yet."

  • Trent is confusing ownership with location. I own my stuff in the cloud, too. I better, anyway, or we have a problem... No, I dont care "where it is", but I do own it.

    2) Laz Laz  2 days ago
    This is one of the best interviews I've read, props to the interviewer. Some really excellent questions, and TR really comes across as a smart guy. He's an artist who's been on the cutting edge of the writing/ packaging/releasing music for decades, it's interesting to see what happens next - combining the weight of Apple and the expertise of Reznor...

    Have to disagree. Being on the cutting edge of writing/ packaging/releasing music has nothing to do with coming up with something unique to solve the technical/design/business problem

    I don't get that. I didn't say TR would be the guy to 'run' the business. But there's very few people with MORE knowledge about what works and doesn't work in the music industry. If anyone can come up with how to transform the music industry, TR is a good bet.

    I get that. Maybe we disagree about what the problem is, then. It is not a problem of what "works or does not work in the music industry", like a problem of which genre, which sound, which album cover, which marketing campaign.
    What we have is a technical problem. It is a problem that was unleashed in the 1980s when the record industry rushed headlong into selling a new product (CDs) in the same old way that they had sold the old product (vinyl and cassettes). That problem has never been addressed. Instead, the problem has been ignored, with everyone just hoping, with blind fideism, that some new revenue stream will make everybody forget that there is a problem and just be happy with the money they are making. Hence, the freefall that the music industry has been in ever since then. (Incidentally, it has never been solved for videos, books, and games either).
    If you keep turning to "music guys" (e.g., Jimmy Iovine, Dr. Dre, Trent Reznor), the problem is never going to get fixed. Like any other problem that you want fixed, you have to turn to innovators, i.e inventors. We are actually a very innovative country (the USA). There has hardly been a problem we have not been able to solve. But you have to actually turn to the people to fix it, or it is not going to get done. The music industry has never had to do that in its entire history. (Sure, scientists have brought them new technologies, and they have employed them. But they have never had a technical problem before that has cratered the industry like this one).
    What about Google, Apple and Amazon, you say? Aren't they innovators?? Yeah, sure. And they could fix it if they wanted to. But it is not their problem, it is the content industries' problem. Why should they fix the content industries' problem? The chances of it conflicting with one of their business models are too high (e.g. the venerable "Opt-out" rather than "opt-in" at Google.)