Distributed Computing Industry
Weekly Newsletter

In This Issue

P2P Weblog

Supreme Court

Industry News

Data Bank

Techno Features

Server Convictions

eXeem Launch


January 24, 2005
Volume 7, Issue 9

Welcome New Member Bennett Lincoff

Please warmly welcome Bennett Lincoff to the Platform Group. We look forward to providing valuable services to this newest DCIA Member and supporting his contributions to commercial development of the distributed computing industry.

Bennett Lincoff is a New York-based intellectual property lawyer, consultant, and writer who has been a pioneer in creating new legal structures and business models for the use and protection of intellectual property in digital media.

He works with creators, rights holders, intermediaries, and end-users to maximize their benefit from intellectual property. His practice includes licensing, rights counseling, the Internet, and new media; as well as regulatory and legislative matters and legal reform.

Mr. Lincoff is the former Director of Legal Affairs for New Media at ASCAP, and the author of ASCAP's Internet license agreement. He also served as Senior Counsel at Darby & Darby, PC, as a Senior Consultant at the International Intellectual Property Institute, and as a co-chair of the ABA delegation to the WIPO deliberations that led to adoption of the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty.

Bennett is a frequent speaker at international conferences on Internet uses of copyrighted material and IP generally, and was a panelist at the recent FTC P2P Workshop.

Slaves & Volunteers – World Music Debate

Excerpted from Report in Washington Internet Daily by Louis Trager

Using a monthly licensing fee to break the deadlock over unauthorized music file sharing is getting another push in the US.

"The industry ought to establish a 'music utility' approach to the distribution and marketing of interactive digital music," wrote David Kusek, Berklee College of Music VP and co-author of the forthcoming book, "The Future of Music: Manifesto for the Digital Music Revolution".

Consumers would pay $3-5 monthly to network-access-providers for all they could eat music downloading. This would generate $7-12 billion annually – comparable to the recorded music industry – apart from "packages of premium content, live concerts, new releases, artists' channels, custom compilations, and more," Kusek said.

Under a "music utility license," the fees would be split evenly between the owners of the sound recording and of the composition, net of commissions to the service providers. These providers would track and report music use "employing existing digital identification and tracking technologies."

But much of the online music industry still doesn't get it, according to a report Tuesday by British management consulting firm Shelley Taylor & Associates: "Many of the music services (stores, players, devices) are, with varying degrees of success, trying to enslave digital downloaders," the firm said.

"Why should a download store, like Sony's Connect in the extreme case, expect customers to trust their service (digital music) if their goal is simply to sell portable devices? Should users be required to have a Hotmail account to purchase music from the Music MSN store; be an AOL member to use MusicNet; and a Yahoo account to use LaunchCast?

And should media players be bundled with stores that restrict formats and portability, or should all media players be detachable (and perhaps offered in a paid version) so the player (as with RealPlayer), a software product, is divisible from the music allowing users to buy music anywhere and play it anywhere? Music services need to learn that volunteers engage, slaves revolt."

The shortcomings are turning users off, firm namesake Shelley Taylor said. Users' "initial enthusiasm is being deflated as they realize they've been conned – there are more limitations imposed on 'legitimate' digital media players and portable devices than advertised."

Report from CEO Marty Lafferty

California State Senator Kevin Murray (D-LA) last week proposed SB 96 that if enacted would criminalize parties selling, advertising, or distributing to Californians peer-to-peer (P2P) file-sharing software, who "fail to exercise reasonable care in preventing use of the software to commit unlawful acts with respect to a commercial recording or audiovisual work" or violations related to child pornography or spyware.

Stipulated penalties include $2,500 fines and/or one-year imprisonment.

You may recall that Senator Murray introduced SB 1506 last year to jail consumers for redistributing a "copyrighted file" to more than ten people without disclosing a valid e-mail address.

While clearly intended to support major entertainment rights aggregators' desire to ban P2P technology rather than adopt new business models and license this promising new distribution channel, this bill, like its failed national predecessors in the 108th Congress, would be disastrous to the state's large and vibrant technology sector, and cause other severely negative unintended consequences.

The term "reasonable care" poses problems in this context as too vague and subjective a standard to be practically enforceable – typically meaning the level of care a reasonable person would take under a set of given circumstances.

A basic question would arise here as to whether a reasonable person would attempt to devote resources to developing new content filtering software for integrating into a decentralized file-sharing program or whether a reasonable person would recognize that such a unilateral effort would prove infeasible and ineffective. This is not to say that such a technology solution introduced on an industry-wide basis would not work, which is what the DCIA's P2P Revenue Engine (P2PRE) project seeks to accomplish.

The bill defines P2P software as that which "once installed and launched, enables the user to connect his or her computer to a network of other computers on which the users of these computers have made available recording or audiovisual works for electronic dissemination to other users who are connected to the network."

As written, the measure would therefore outlaw a wide range of current general purpose web-based software, including server programs, browsers, commercial search engines, e-mail, and instant messaging – as well as ISPs and the Internet itself; essentially all entities that have a role in the facilitation of unfettered file retransmission.

P2P file-sharing program distributors, in contrast to operators involved in many of these other functions and applications, have virtually no involvement in the creation, maintenance, and control of their user "networks."

And since the language stipulates "advertising or distributing" – hosting, linking, and even referencing such software would be as illegal as developing or marketing it.

The bill goes on to say, "When a transaction is complete, the user has an identical copy of the file on his or her computer and may also then disseminate the file to other users connected to the network," which is true of virtually any digital replication process on public and private networks.

The DCIA opposes this measure as misguided, unenforceable, and dangerous, and, in addition to being detrimental to the commercial development of the P2P distribution channel for legitimate purposes – which is our mission, seriously destructive to technology innovation on a more general level. It would result in unprecedented constraints on software design, and drive billions of dollars of business out of the Golden State.

No such measures have been enacted on a national level, and federal courts have twice ruled that P2P software firms are not liable for illegal actions of those who abuse their programs. Major entertainment interests have now appealed these rulings to the Supreme Court, and most interested parties do not foresee further legislative action before the high court makes a decision, expected this summer.

We continue to believe that the 9th Circuit Court best articulated the current situation: "The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude."

Senator Murray's proposed legislation may prove to be unconstitutional for hindering interstate commerce and/or violating freedom of speech protected under the First Amendment, and it once again underscores a fundamental question.

If it can be argued that inventors of new content distribution technologies have a moral imperative to ensure that their offerings can be used in non-infringing ways before deploying them, should not caretakers of aggregated copyrights have a moral imperative to accept more efficient distribution technologies as they become available rather than resisting them?

Perhaps a Republican Senator should introduce an alternative, "SB 96A," to criminalize parties selling, advertising, or distributing to Californians recordings or audiovisual works, who "fail to exercise reasonable care in licensing new distribution technologies so that users can access duly authorized versions of their content," including in the rapidly expanding digital realm. Penalties could include fines and/or imprisonment.

Would it not better serve the interests of entertainment rights holders to ensure the monetization of P2P file sharing rather than to encourage futile attempts at curtailing its proliferation?

It should be highly desirable that, "when a transaction is complete, the user has an identical copy of the file on his or her computer and may also then disseminate the file to other users connected to the network." It is partly for this reason that P2P continues to hold the greatest promise to be the most efficient and lucrative of distribution channels for entertainment content providers.

P2P Manifesto Launches

Excerpted from Seattle News

A new study explains why peer-to-peer is an unstoppable technology, positive for companies, for the market, and for users.

"Companies can benefit from P2P technology for empowering their products' distribution (products, content, information, etc.) and for creating new kinds of business," says P2P Manifesto's author Marco Montemagno. "The market has been refreshed by P2P, enlarging the number of players and the market size itself."

File sharing is evolving to "social sharing," where individuals share all kinds of socially interesting information.

The swappers of today are becoming "file networkers – individuals capable of creating large social networks that soon will be, paradoxically, the most desired allies of the majors. P2P will then become a more complex integrated system for sharing and networking (PnetP). P2P is here to stay."

P2P Manifesto also allows readers to comment on the original and create new material that will be posted on a dedicated blog to create an expanded P2P knowledge base.

Seamless P2P Acquired by AWBI

Excerpted from Prime Zone

Luke Rippy, President & CEO of DCIA Member Seamless P2P, LLC, reported the sale of its assets to Alpha Wireless Broadband, Inc., which trades on the OTC Bulletin Board under the symbol of AWBI. Luke will now assume the Presidency of DCIA Member Seamless P2P, Inc. an AWBI subsidiary.

The main assets of P2P consist of the Phenom software that provides secure communication over Wi-Fi, local area networks (LAN), and wide area networks (WAN) with its proprietary, Virtual Internet Extranet Networks (VIEN). Phenom provides individuals and corporations with secure Peer Mail, Multi Chat, File Transfer and Remote PC from a 2 meg download.

The Phenom's application protocol interface (API) also supports voice-over-Internet-protocol (VoIP), white boarding, and video-voice conferencing. Seamless P2P believes that, with AWBI's support and knowledge of the Wi-Fi market, the two companies will be able to provide a robust offering to individuals and companies alike to secure their Wi-Fi data over all network types.

First File-Server Convictions

Digital Media Wire

The US Department of Justice announced that the first two defendants charged with criminal copyright infringement on the Internet entered guilty pleas this week.

The convictions of William Trowbridge, 50, of New York and Michael Chicoine, 47, of Texas resulted from "Operation Digital Gridlock," a raid by government authorities at the behest of the motion picture and recording industries.

The two admitted to operating Direct Connect file-sharing servers on an online group of hubs known as "The Underground Network," which required that its users share large quantities of copyrighted files with one another.

The two also admitted they operated their servers for commercial advantage, in that they used them to obtain valuable infringing works from others. Due to be sentenced on April 29th, both Trowbridge and Chicoine now face up to five years in prison and $250,000 each in fines.

eXeem Opens New File-Swapping Doors

Excerpted from ZDNet Report by John Borland

Underground programmers hoping to capitalize on the BitTorrent file-swapping community on Friday unveiled highly anticipated software that some peer-to-peer advocates believe could blunt recent legal attacks from Hollywood.

Called eXeem, the software aims to merge the speedy downloads of BitTorrent with the powerful global search capabilities of Kazaa or eDonkey.

The first public version of the program was released by a company called Swarm Systems.

Some of the software's advocates have looked to the release of eXeem to bolster a community that had temporarily contributed to more Net traffic than any other application online.

"We have not recreated BitTorrent, but a totally new P2P, which is a lot different from BitTorrent," said Andrej "Sloncek" Preston, who represents Swarm Systems and operated the now-defunct SuprNova site. "I think it's a fresh approach. Only time will tell if it's going to work."

The software's release is part of a broader maturation of one of the Net's most popular file-swapping communities. Once focused solely on fast downloads, with little capacity for searching or more advanced features, BitTorrent is being reborn as an updated version of Kazaa, as a rival to TiVo and as a grassroots media tool.

Written by independent developer Bram Cohen, BitTorrent has been an extraordinarily popular tool because it allows large files such as movies, TV shows, or software to be downloaded relatively quickly. The technology downloads bits of a file at a time, and each downloader then makes those pieces available to other people trying to find the file.

Coming Events of Interest

  • P2P PATROL - Parents And Teens React On Line - The industry's anti-child-pornography initiative will hold its quarterly working session with private sector and law enforcement representatives in Dallas, TX on February 1st. For more information and to learn how you can contribute to P2P PATROL, please contact sari@dcia.info or call 888-864-DCIA.

  • 2005 Media Summit New York - Held at the McGraw Hill Building, February 9th–10th, this will be the premier international conference on entertainment, media, and distribution technologies. This year's theme is "Global Media + Technology Innovation = Communications Revolution."

The DCIA will present a special evening session "Making Money via P2P – Ten Companies in Two Hours" and networking event on the evening of February 9th in conjunction with MSNY. Please contact Member Services leader Karen Kaplowitz at 888-890-4240 or karen@dcia.info for more information.

  • Digital Music Forum - The 5th annual DMF is set for March 2nd at the French Institute Alliance Francaise in New York. DMF is the premier event for music industry decision-makers focused on business models and legal issues impacting music.

    Shawn Fanning, Co-Founder of SnoCap will be the keynote this year, and featured panelists include Phil Corwin, Chief Lobbyist for DCIA Member Sharman Networks (owner of Kazaa); Jeff Bronikowski, VP of eLabs, Universal Music Group; Martin Elgison, Partner of DCIA Member Alston & Bird; and Ted Cohen, SVP of EMI Music.

  • Canadian Music Week - Headquartered at the Fairmont Royal York in Toronto, March 2nd-5th, CMW will be the largest music and entertainment convention in Canada with delegates representing music broadcasters, manufacturers, retailers and distributors, new media/Internet companies, recording artists, and musicians.

  • The DCIA Is proud to participate in "Redemption Song: Profit from P2P" moderated by LA Times correspondent Joseph Menn March 3rd at 2:45 PM. P2P has been the killer app driving the billion-dollar broadband business, and can generate new revenues for music rights-holders. There are a slew of new companies offering moneymaking P2P plans. This panel will consider whether it's time to talk carrot instead of stick.

  • Supreme Court Oral Arguments – The US Supreme Court will hear arguments March 29th on whether companies that provide peer-to-peer (P2P) software violate copyright laws if their users commit copyright infringement. The Court's date for oral arguments in the case, MGM v. Grokster, coincides with an expected decision in a similar high-profile case in Australia, which involves Kazaa.

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