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.