The Pirate Bay: sold and (gasp) reformed?

The recent prosecution of The Pirate Bay, a popular site for finding and downloading bootlegged movies, songs, video games and software, suggested that the company's gleeful flouting of copyright law might not be sustainable. (The Stockholm District Court sentenced four of The Pirate Bay's leaders to a year in jail after finding them guilty of violating copyrights, and fined them close to $30 million.) Something had to change at TPB, and it looks like it's going to be three things: the ownership, the business model and the infrastructure. Whether the site ends its love affair with all things bootlegged, however, is another question entirely.

Variety reported that Swedish video game company Global Gaming Factory X agreed to pay about $7.7 million to buy TPB, although the site's blog hinted that the deal was still tentative. (Apprently, the buyer still has to raise the money.) Variety quoted Global Gaming CEO Hans Pandeya as saying the value in TPB was its traffic: more than 20 million visitors and 1 billion page views a month.

"In order to live on, The Pirate Bay requires a new business model, which satisfies the requirements and needs of all parties, content providers, broadband operators, end users and the judiciary," Pandeya said. "Content creators and providers need to control their content and get paid for it. File sharers need faster downloads and better quality."

But as TPB's blog notes, "If the new owners will screw around with the site, nobody will keep using it. That's the biggest insurance one can have that the site will be run in the way that we all want to." Loosely translated, that means Global Gaming will quickly lose those 20 million visitors if it tries to stop users from downloading "Transformers: Revenge of the Fallen" for free....

Dueling spins on the Cablevision ruling

The Supreme Court left intact the U.S. 2nd Circuit Court of Appeals' ruling in favor of Cablevision's network DVR service, a move that almost certainly will lead more cable operators to offer TiVo-like services without putting recorders in their subscribers' homes. Advocates on both sides raced to put their own spin on the court's decision, which the justices issued sans comment. Here are two typical ones: Gary Shapiro, head of the Consumer Electronics Assn., said the decision was important to innovation in remote computing and data storage, such as Google's online applications and Apple's .Mac (now called MobileMe) service. Patrick Ross, executive director of the Copyright Alliance, countered that the decision "is unfortunate and potentially harmful to creators and creative enterprises across the spectrum of copyright industries."

But as the Justice Department noted in its brief, which urged the justices not to take up the case, the 2nd Circuit's ruling may not have much bearing on other companies' services.

Justice Department sides with Cablevision against Hollywood

Just what, exactly, are all those Hollywood types getting in return for their investment in Barack Obama's presidential bid? The Justice Department, a steady ally for the entertainment industry on copyright issues during the Bush administration, today opposed the studios in a potentially precedent-setting dispute with Cablevision over TV recording services. U.S. Solicitor General Elena Kagan urged the Supreme Court not to review the 2nd Circuit's ruling, which held that Cablevision's "network DVR" service did not infringe copyrights (download the brief here.) In addition to some technical arguments about the suitability of the case, Kagan maintained that a network-based recording service controlled by a consumer was on the same legal footing as a VCR in the home -- a device the Supreme Court famously defended in the 1984 Betamax ruling. The critical issue is who makes a recording, not how or where it's made, she wrote, and the 2nd Circuit was correct in finding that individual consumers would be the ones recording TV shows, not Cablevision.

The brief drew praise in tech circles, but Kagan took pains to emphasize how narrow the 2nd Circuit's ruling was. "The court of appeals announced no 'categorical exemption from direct liability' (Pet. 24) for providers of automated services and it did not 'assume[]' (Pet. 19 n.4) that only one person can 'make' a particular copy," she wrote. In other words, the administration's position is that the 2nd Circuit's decision doesn't provide a broad shield for Web 2.0 companies that want to replace home recording and playback devices with online services. Besides, as the brief notes, the appeals court didn't consider the possibility of contributory infringement because the studios and Cablevision agreed not to litigate those issues. (The parties agreed to take fair-use defenses off the table, too.)

Nevertheless, her stance is a departure from the previous administration's expansive view of copyrights. It also shows a welcome degree of technological literacy. "Respondents’ proposed RS-DVR service is part of a broader transition from analog to digital recording and playback, and from business models where consumers purchase a tangible item to those where they pay for a service,” Kagan wrote. Or as Gigi Sohn, president of the advocacy group Public Knowledge, put it more tartly, "Common sense would dictate that a recording is a recording, whether made on a set-top box or in a cable head-end."

Credit: Chip Somodevilla / Getty Images

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

It's official: Legendary Pictures hired Kathy Vrabeck to head up digital division

Kathy Vrabeck has been hired to head up games effort, digital division at Legendary Pictures. Credit: Electronic Arts.

It's been an open secret in Hollywood for months now that Legendary Pictures' Thomas Tull, producer of "The Dark Knight" and other blockbuster films, has tapped Kathy Vrabeck to head up a new digital division that will focus on, among other things, video games.

Today, Legendary made it official, announcing Vrabeck's appointment as a crucial step in taking the company's "creative content to the next level of interactivity for both the industry and the consumer," according to a statement.

Tull has not detailed his plans for the newly created interactive division, but the film financier has an abiding interest in games. Among his film projects are movies based on Activision Blizzard's fantasy-themed World of Warcraft game and Epic Games' Gears of War shooter franchise. A gamer himself, Tull invested in Brash Entertainment, a company headed by Massive Entertainment founder Mitch Davis. Brash burst on the scene in 2007 promising to reinvent Hollywood's relationship with video games only to disintegrate months later amid a flurry of lawsuits.

Unlike Davis, who was a relative newcomer to the games business, Vrabeck has more than a decade of industry experience under her belt as head of publishing at Activision and, most recently, president of Electronic Art's casual games division. She is also among a handful of high-profile female executives in an industry that has been dominated by men. 

"The opportunity to combine Legendary’s brand, loyal consumer following and talented creative partnerships with the fastest growing segments of digital entertainment is incredibly exciting," Vrabeck said in a statement.

-- Alex Pham

Making Hulu play nice with cable

The Times' piece Monday on Hulu's growing pains raised an awkward question about the media conglomerates that produce the television industry's most popular programs: how dependent are they on cable and satellite TV operators? As my colleagues Dawn Chmielewski and Meg James reported, a number of programs on cable networks have either been withheld from Hulu or restricted to brief windows on the site. Even one of Hulu's founding owners, News Corp., has yanked cable programs off Hulu.

One alternative being contemplated would be to create premium tiers on Hulu for cable programs, available free to pay-TV subscribers and (possibly) for a fee to everyone else. Such a move would protect the pay-TV incumbents' business model against the online upstarts' ad-supported approach.

But why should Hollywood be defending cable? Shouldn't the studios be supporting an array of distributors to maximize their audience, rather than trying to protect the incumbents against competition? Not necessarily -- it all depends on the revenue produced. Hulu, like other online video outlets, isn't generating the kind of dollars yet that Comcast and DirecTV can, so it can't pay the studios as much for content. And like the music industry at the beginning of this decade (now there's a role model), Hollywood is afraid to undermine today's key revenue sources by supporting the ones that might prove lucrative tomorrow.

The problem with Hollywood's approach to Hulu is that the studios are addressing the wrong problem....

Documentarians, DVDs and the MPAA

You would think that the movie industry, which celebrates documentarians every year at its awards ceremonies, would want to help those same filmmakers overcome the hurdles posed by changing technology. But Hollywood's copyright holders don't see things quite that way. In fact, they're trying to make it harder for documentarians to practice their craft, opposing the latter's bid for the freedom to extract short clips directly from DVDs.

As instructed by Congress in the 1998 Digital Millennium Copyright Act, the Copyright Office considers requests every three years to create or renew exemptions to the DMCA's ban on circumventing the electronic locks on copyrighted material. Such "technical protection measures" include the encryption on DVDs. In one of the rare exemptions granted by the Copyright Office, film professors have been permitted to copy short clips from DVDs for the purpose of creating video compilations for their classes. Of course, the DMCA makes it illegal for anyone to make or sell a tool that professors could use to extract these clips from discs; luckily for them, it's easy to find (illegal) software online that can do the trick.

Anyway, the Copyright Office held hearings last week on the latest requests for exemptions, including one from a group of documentary filmmakers. Led by Kartemquin Educational Films (the producers of "Hoop Dreams") and joined by well-known filmmakers such as Kirby Dick ("This Film Is Not Yet Rated") and Morgan Spurlock ("Super Size Me"), the group seeks permission to copy short segments from DVDsfor their work. The group (whose papers were prepared by a team from USC's Intellectual Property and Technology Law Clinic and Beverly Hills attorney Michael C. Donaldson) notes that VHS production has all but ceased, meaning that DVD is the de facto medium for video. And without the ability to make fair use of material on DVDs, the group contends, documentaries that cast their subjects in a negative or mocking light may not be possible....

Congress takes on file-sharing, again [UPDATED]

The news that a House committee was reopening its investigation into security risks posed by file-sharing software reminded me of something one of my pals in the computer-security field once told me. The biggest vulnerabilities aren't caused by deficiencies in machines or their software; they're caused by the humans who use them. It's a point that seems lost on the committee.

Ever since successors to Napster's song-swapping program made it possible for users to share any file stored on their PC, people have been unwittingly sharing address books, financial records, resumes and other personal items. They did this because they didn't bother to check which folders the software was offering to the public, or they put items into shared folders that didn't belong there. And they continued to do it even as the programs changed their default modes to force users to be more selective about their sharing. When the file-sharers are using office or government computers, the leaks can be even more damaging. The problem can be mitigated with better software design, but it can't be eliminated -- just as the government can't stop defense contractors from carelessly losing their laptops.

The Oversight and Government Reform Committee had conducted hearings in 2007 into the inadvertent sharing of sensitive and personal information over LimeWire and other peer-to-peer networks. At the time, they extracted a promise from the Lime Group (the company that makes and distributes LimeWire software) to change the program to deter such leaks. But the trade group representing file-sharing companies, the Distributed Computing Industry Assn., had already been working with the Federal Trade Commission on this problem, and it offered to work with the committee as well. In fact, the association had been active on the issue since at least 2004.

Lime Group spokeswoman Linda Lipman told the Associated Press that the latest version of LimeWire software was designed not to share the file types associated with spreadsheets and documents. "In fact, the software does not share any file or directory without explicit permission from the user,” she said. Nevertheless, the chairman and the top Republican on the Oversight and Government Reform Committee -- Reps. Edolphus Towns (D-N.Y.) and Darrell Issa (R-Vista) -- declared in a letter to the Lime Group, "[I]t appears that nearly two years after your commitment to make significant changes in the software, LimeWire and other P2P (peer-to-peer) providers have not taken adequate steps to address this critical problem."

Perhaps the real motive here is to find grounds to ban the software outright, which would please Hollywood but wouldn't solve the problem. Their letter to U.S. Atty. Gen. Eric H. Holder Jr. suggests as much -- it asks whether federal law enforcement efforts can protect people, businesses and the government "from the security risks posed by P2P networks such as LimeWire." They sent a similar inquiry to the FTC. If they were really trying to solve the problem, they would conduct an investigation into what the Pentagon and government agencies were doing to keep file-sharing software off of computers used by their employees and contractors. The right approach here isn't to browbeat Lime Group, it's to demand better security practices by the people who work on the government dime.

Update, 11:40 a.m. Wednesday: Marty Lafferty, the CEO of the Distributed Computing Industry Assn., sent me an e-mail elaborating on the trade group's efforts to deter inadvertent sharing. According to Lafferty, the DCIA's Inadvertent Sharing Protection Working Group, formed two years ago, has worked with federal regulators, the Lime Group and other P2P software providers to develop voluntary best practices.

"Since publishing these in 2008," Lafferty wrote, "we have also completed a compliance report that can be reviewed here. As you will see, our industry takes the safety of consumers very seriously. Once this concern was recognized, we responded proactively. Our best advice now – to parents and children alike – is similar to that given by other Internet software distributors: Please upgrade to the latest version for the best performance and the safest experience."

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

Swedish court finds Pirate Bay file sharing creators guilty, Hollywood hails ruling

 

From left, Gottfrid Svartholm Varg and Peter Sunde, two of the men behind the Pirate Bay. Credit: Fredrik Persson / AFP/Getty Images

In a victory – preliminarily, at least – for Hollywood, a Swedish court today handed down prison sentences for four men behind the Pirate Bay, a popular file-sharing search engine, and ordered them to pay $3.6 million in damages to such entertainment giants as Warner Bros. and EMI.

The four defendants were convicted of facilitating copyright violations and given one-year prison terms for their role in setting up and bankrolling the website, which allows users to find movies and songs to download for free.

But putting a damper on any Hollywood boardroom cheer, the men vowed to appeal their conviction, a process that could keep the dispute going for years, and the offending website remained up and running even after the verdict was delivered.

Moreover, one of the defendants, Peter Sunde, responded with an insouciant online video press conference in which he dismissed the verdict as “bizarre” and “stupid” and scoffed at the idea of handing over a cent.

“That’s the closest they’re going to get to any money from us,” he said, holding up a piece of paper in front of the camera with the handwritten words “I OWE U 31,000,000” Swedish kroners, or about $3.6 million. “They could’ve gotten 1 billion, and it wouldn’t matter, because we can’t pay, and we wouldn’t pay.”

The case has been closely watched by the entertainment industry, which has ...

Interviews: CNN acquires own Twitter account, @cnnbrk, from James Cox

The race to 1 million Twitter followers has turned into a particularly 21st century kind of media circus.  Ashton Kutcher, who has been steadily elevating his challenge to CNN, has come within about 17,000 followers of the cable news giant. Both Kutcher and CNN have promised to donate 10,000 mosquito nets to malaria prevention programs if they win, and now Electronic Arts has pledged a mountain of video games and a cameo in its next Sims game to whomever becomes Kutcher's millionth follower.

With all the hype, a strange element of the story has been overshadowed. The news broke that CNN had in fact never owned its league-leading @cnnbrk Twitter account, and that only Wednesday had it acquired ownership of the account from 25-year-old London Web developer James Cox, who'd been running it since January 2007.

In interviews with both Cox and KC Estenson, the head of CNN's online operation, it came out that Cox had owned and maintained the account with the permission and oversight of CNN since mid-2007.

"We’ve been managing the feed through him," said Estenson, noting the huge increase in the number of Twitter followers since the November election.  "As Twitter took off and became more prominent, we decided it was time to take our engagement and make it a marriage."

Neither Cox nor CNN would specify the terms of the exchange, noting only that Cox had for some time been contracted by the network as a Web consultant -- he was in Atlanta this week ...

SXSW notebook: Panelists, audience have fun debating fair use

It'd be cool to inhabit the mind of a present-day 16-year-old. Or terrifying. Either way, you'd probably get a stark sense of what, if anything, the new generation of media consumers thinks about copyright. If you're a kid with an Internet connection and unlimited access to a world of instant content -- movies, TV, music, words, images and everything else -- how much do you really understand the fuzzy and complicated  rules about what you're allowed to download, remix and republish?

Even adults can't agree on the answers to those questions -- including some who are paid experts in copyright law. Earlier this week at SXSW, Jason Schultz of Berkeley's Samuelson Law, Technology & Public Policy Clinic ran an entire session on the nuances of so-called fair use. Schultz played a series of online video clips containing repurposed material. After each one, he had a pair of intellectual property attorneys debate whether the filmmaker was an outlaw pirate or an artist engaged in protected creative expression. 

In the corporate corner was Ben Sheffner, an entertainment industry attorney whose client roster has included 20th Century Fox and NBC-Universal, and who worked on John McCain's campaign. And in the creative freedom corner was Julie Ahrens of Stanford Law's Fair Use Project. (The lawyers were arguing standard positions, not their personal opinions.)

After the arguments, Schultz took a vote to see where the 100-or-so-person audience stood on whether the video was fair use. Here's a thumbnail of the panel:

Video No. 1: Synchronized Presidential Debating from 236.com

Sheffner: "CNN or some of the other copyright owners that may have supplied this footage spend millions and millions of dollars on their news-gathering operations. They send huge trucks with lots of equipment and lots of technicians around the country and take these pictures. They need to recoup those costs. When people want to remix or reuse or rebroadcast that footage, they think someone should have to pay for it." 

Also: "What I found out during the campaign is that a lot of the motivation from news organizations making copyright claims is not really even about the money, it's that ...