More importantly, Windows XP, sometimes billed as “the most popular operating system ever,” is set to reach “End of Life” less than a year from now, on April 8, 2014.  This might not seem like an issue, but millions of users, particularly businesses, continue to use the venerable Microsoft XP operating system.  For those of you who are visual, consider the following data from Netmarketshare:

What this table illustrates for us is that Windows is like Star Trek Movies – people only like every other one (sorry Cumberbatch).  There are reasons for this: After its second service pack, XP is sleek, stable, capable, and relatively user-friendly.  Vista is a bloated mess, with numerous unnecessary and obtrusive changes.  Windows 7 made necessary, intuitive changes, and made the OS capable again.  Windows 8 again adds numerous senseless changes, and appears, perhaps as a result, to be following the Star Trek pattern despite being reasonably polished.  Bottom line, the average user is more likely to be using the much-hated Windows Vista than Windows 8 at this point.

The data also shows the problem: at End of Life, security support for XP, still extremely popular, will end.  Who wants their bank using unsupported, insecure operating system software?  What about their government?  Their court system?  Microsoft’s threats are very real – by May of 2014 any security issues in Windows XP will be permanent, unless third-party software developers find a way to step in and extend updates, or at least engineer patches.

Why hasn’t everyone updated?  The strategy behind Windows 8 appears to be to convince people that they want their phone to look like their tablet, which also looks like their desktop.  There are obvious hardware issues with this:

-          Phones are small, and have small screens.  Tablets are slightly larger, but still have small screens.  The greater “real estate” of a laptop/desktop is useful and should be used.

-          Phones have touchscreens.  Tablets have touchscreens.  Most laptops/desktops don’t have touchscreens.  An OS that assumes a touchscreen, or at least is optimized for one, is crippled by the lack of a touchscreen.

-          Phones and tablets, though becoming increasingly viable as work-machines, are still “toys” for the most part.  Laptops/desktops are easily both.

Ignoring the hardware issues, which there is no reason to do, a lot of Windows 8’s changes are intimidating.  Why Microsoft thought it was a good idea to make desktop users boot to something other than the familiar desktop is unfathomable.  The elimination of the much loved start button and program trees entirely blow my mind.  Many hotkeys users have used for a long time appear to be gone, a process that started with previous versions of MSOffice.  Bluntly, the learning curve for Windows 8 is unreasonable for people who have used an essentially identical OS for more than twenty years.

Even the numbers of copies of Windows 8 sold don’t reflect the numbers used however, as Windows 8 simply isn’t being adopted.  Most businesses will switch to tried and tested Windows 7 before they consider Windows 8.  Apart from the more shallow learning curve, Windows 7 retails more cheaply.  Staples alone recently gave $100 off for purchasing a Windows 8 device -basically “buy the hardware, get the software free” – or $100-$400 for trading an older device in for one with Windows 8.  Giving your product away is generally not a winning business strategy.

All of these issues are not lost on Microsoft.  Having only recently confirmed that the rumored “Windows Blue” will be a free update styled “Windows 8.1,” there is some hope that Microsoft is responding to its critics.  Much hype now surrounds the upcoming “Windows 8.1,” which may just be a service pack a la windows XP fame, but has been rumored to be something more.  Some have even suggested that this update, less than 8 months after the release of Windows 8, is the precursor to a subscription based Windows OS at least eventually (which I predict would be a disaster of epic proportions and catapult Linux to the fore).  Though Microsoft has confirmed the likely return of the desktop and probable unveiling of “snap” screen-division effect, the details will remain needlessly secret until the June 26 preview.
By Dov Szego

Essentially, the CAS allows content owners to identify infringing IP addresses after verifying that infringement is taking place by P2P (“peer to peer”) file sharing.  The ISP then sends a warning to the Internet service user who had that IP address at the relevant time.  After multiple warnings the Internet service user may be required to view a video about piracy, and after several warnings that user’s service may be “throttled,” or slowed down to make piracy more difficult or time-consuming.  The CAS includes an arbitration process for challenging warnings (Russell’s teapot: How do you prove you weren’t pirating?), but no circumstance under which an Internet service user’s account is to be terminated.

Frankly, no one will or even should be satisfied by this system.  For Internet service users the CAS is a generally offensive, paternalistic, probably meaningless annoyance.  First, those who are engaged in piracy will most likely treat the various warnings as “strikes” in the baseball sense – you can still hit a home run after two strikes, and you can still pirate after five.  While those who aren’t engaged in piracy may get the benefit of an “early warning” that someone may be using their Internet connection to pirate, they may just as likely be getting “warnings” for non-piracy in the form of legitimate sharing of documents or other files or even, less likely, fair use.  Furthermore, our firm has experience in cases where intellectual property owners take the position that it is the alleged infringer’s obligation to prove to them that there is no infringement, rather than their obligation to prove that there is.  One can easily see where it might be easier for an intellectual property owner to simply report all the IP addresses that are file-sharing certain search terms, without verifying actual infringement, than to fully download and hash-confirm every file from every apparent infringer.  Though this will violate the terms of the CAS, it will happen, and innocent users will certainly express their aggravation at the expense and hassle of arbitration.  ISPs won’t enjoy their users’ aggravation.

For content owners, the system has no teeth.  The one benefit is that it may make it easier for these providers to ultimately identify repeat offenders if they decide to sue.  That very minor expediting, and even more minor reduction in the cost, of a lawsuit, is almost certainly less relief than they would prefer particularly since none of the voluntarily participating ISPs have indicated they will actually terminatethe service of repeat offenders.  More to the point, CAS is limited to P2P file sharing – what about, say, megaupload, rapidshare, mediafire, YouTube, dailymotion, etc.?  A study in the wake of the shutdown of megaupload showed little effect on piracy.  How happy can intellectual property owners be about the promise to repeatedly threaten slaps on the wrist – without the promise of any actual slap, ever?  Also, not all providers are participating, apparently only AT&T, Cablevision, Comcast, Time Warner Cable and Verizon are - 25% of all broadband users don’t receive service from a participating ISP.  At least 25% of broadband users won’t even get the idle threat…

Worst of all, I am not at all convinced that this system doesn’t actually threaten, in some ways, the CDA immunity it was apparently intended to preserve.  47 USC §230(c), the CDA immunity provision, states that 1) the ISP cannot be considered the “publisher or speaker” of pirated materials, 2) the ISP can restrict “objectionable” content such as “obscene, lewd, lascivious, filthy, excessively violent, harassing” content, and 3) the ISP is entitled to “enable or make available to information content providers or others the technical means to restrict access to pirated material.”  The immunity is intended to protect ISPs from liability for the actions of others because, obviously, they may not be aware of things said by their users (in a defamation context) or content shared (in a copyright/intellectual property context).  Most courts have taken literally the immunity in the form of the ISP not being considered the publisher or speaker, thus insulating against primary liability for, say, defamation or copyright infringement.  It would seem though, that when the ISP has warned the same user 6 times that they are violating copyrights, but continues to provide even throttled service, there may be secondary liability in the form of negligence or perhaps even some possible conspiracy.  Of course, the CAS is far too new for there to be any caselaw on this question, but I would gladly make the argument, particularly where the same user continues to share the same file(s) after several warnings.

Frankly, CAS is more interesting as evidence of some effort by ISPs than as an actual piracy preventer.  It should be interesting to see what happens as people hit or exceed their 6 strikes, but continue to run the bases.

By Dov Szego

This program was designed to avoid the legal problems associated with “traditional” digital transfers — “selling” a digital file means making and transferring a copy of that file onto the buyer’s computer, which has long been viewed as “reproduction” of a protected work within the meaning of the Copyright Act.  “Reproduction” is prohibited by the Act because it yields more copies of the work than existed prior, and only the copyright holder has the right to create such new copies.

This is where the “First Sale Doctrine” comes in, or should come in, as Redigi argued.  This doctrine states that once a copy of a work is sold, that copy can be resold to another buyer without infringing on copyright.  This doctrine is what allows used bookstores or record stores to operate freely.  Because such a transaction does not create an additional copy of the work, the copyright holder’s rights are not infringed.

At first glance, Redigi’s service seems to comply with the First Sale Doctrine because it requires the seller to delete the file after selling.  Thus, the number of copies in existence remains the same both before and after the transaction.  However, the Court in Capitol Records LLC v. Redigi, Inc. held that it was the “creation of a new material object and not an additional material object that defines the reproduction right.”  Even though the file was eventually deleted from the seller’s computer, the buyer’s file was still, technically, a copy of that original file and therefore a new “reproduction” within the meaning of the Copyright Act.

This ruling seems to comply with the “letter” of the Copyright Act, though perhaps not the “spirit” of the Act or the First Sale Doctrine.  If the ruling stands, it may have consequences for online streaming services, which briefly place copies of streamed files on a user’s computer before playing and deleting them.  However, the real problem here might be that the long-recognized First Sale Doctrine was created, according to the Court in this case, “in a world where the ease and speed of data transfer could not have been imagined.”  So, in the Court’s view, it is up to Congress to bring the Doctrine into the 21st Century and, for now, its hands are tied. 

Regular readers of Internetbizlaw and the Centre Knowledge blog know that I am pro technology consumer, and very cynical about the “graying” of property rights.  I am not going to spend a lot of time in this post discussing the “right and wrong” of legalizing unlocking, or not, but everyone should understand a few facts:

Fact: Wireless companies sell phones to subscribers at rates lower than the retail price of the phone in exchange for lengthy contracts – 1 to 2 years (The term “subsidized” is probably inaccurate, though commonly used – the existence of a top of the line phone, the nexus 4, at a price in line with these lower rates, the absence of any request by carriers for return of phones at the end of contracts, the rapid drop in prices of phones in the face of planned obsolescence, and the fact that some phones, including the IPhone 5, are now sold “unlocked,” suggest that the “retail price” of phones includes a healthy, if not corpulent, profit margin, and the reduced prices more closely reflect the market value of the phones).  Fact: Simple math tells us that by the end of his contract, the average wireless subscriber who pays $200 up front for a phone with a “retail price” of $700, paying a minimum of $60/month for 24 months, pays far more than the price reduction he was given.   Fact: American full-payment wireless subscribers subsidize service to low-income subscribers – they are overpaying for service.  Fact: at least parts of various wireless companies’ networks may have been built on government subsidies and otherwise these companies benefited from what amounted to massive tax subsidies.  Fact: Profits for wireless carriers have little, if any, to do with the product they provide or the numbers of people they provide it to: just for example, Verizon’s profits grew even as its rate of subscriber growth slowed, and AT&T made “solid profit” despite lacking enough handsets to satisfy demand.  Fact: wireless spectrum is leased to wireless carriers by the FCC, which controls the spectrum in public trust for American citizens, and the wireless carriers then sell access to the spectrum to consumers – the American citizens who “own” the spectrum in the first place.  Fact: The U.S. provides slower, less reliable, more expensive Internet access than much of the rest of the world – in fact, despite cell company claims that average bills are shrinking, it appears they are actually growing.

The recent controversy comes from the Library of Congress’ (“LOC”) interpretation of the Digital Millennium Copyright Act (‘‘DMCA’’), specifically Chapter 12 of Title 17 of the United States Code, which prohibits “circumvent[ion of] a technological measure that effectively controls access to a [copyrighted] work.”  17 U.S.C. 1201(a)(1)(A).  Without going into detail, the “locking” of a phone involves coding, which at least arguably involves the control of access to copyrighted code.  More strange, every person I have spoken to about this matter has uttered a sound similar to “Hwah??” when they realize the rule barring unlocking cell phones comes from the LOC, not directly from a court or Congress.  To explain, 17 U.S.C. 1201(a)(1)(C) requires the Librarian of Congress to hold a rulemaking proceeding to determine categories of work exempt from the prohibition against circumventing electronic controls.

A little history is in order:  The DMCA was passed in 1998; including the most recent, there have been 5 LOC rulemakings.  Here are links to all but the last one, 2012.  Notably, in 2006 (see paragraph 5), the LOC exempted:

 Computer programs in the form of firmware that enable wireless telephone handsets to connect to a wireless telephone communication network, when circumvention is accomplished for the sole purpose of lawfully connecting to a wireless telephone communication network.

 Again in 2010 (see paragraph 3), the LOC exempted:

 Computer programs, in the form of firmware or software, that enable used wireless telephone handsets to connect to a wireless telecommunications network, when circumvention is initiated by the owner of the copy of the computer program solely in order to connect to a wireless telecommunications network and access to the network is authorized by the operator of the network.

Sound familiar?  So, until recently, unlocking cell phones was entirely legal.

In the literally hundreds and hundreds of posts about this fairly significant change in the law, I have yet to see anyone point to the actual language used by the LOC in its October 26, 2012 rulemaking to suddenly make cell phone unlocking illegal.  As much fun as pontification and rehashed pontification may be, here is the moving part in the flesh (37 CFR 201(b)(3), or p. 65278, column 2, ¶3) – the LOC exempts:

Computer programs, in the form of firmware or software, that enable a wireless telephone handset originally acquired from the operator of a wireless telecommunications network or retailer no later than ninety days after the effective date of this exemption to connect to a different wireless telecommunications network, if the operator of the wireless communications network to which the handset is locked has failed to unlock it within a reasonable period of time following a request by the owner of the wireless telephone handset, and when circumvention is initiated by the owner, an individual consumer, who is also the owner of the copy of the computer program in such wireless telephone handset, solely in order to connect to a different wireless telecommunications network, and such access to the network is authorized by the operator of the network.

This language is so muddled it makes the Magna Carta read like a shopping list (“… Butter, milk, eggs, chocolate chips, and equal protection under law…”).  It appears, at least, that the LOC as of October 26, 2012, made it legal until 90 days (January 26, 2012 or thereabouts) to unlock phones.  After that, such activity became copyright infringement under 17 U.S.C. 1201(a)(1)(A).

Start your truck, we’re looking at driving through…

First, since this falls under Copyright law, and 17 U.S.C. 1201 lists at least some (but not all) defenses to Copyright infringement, should those defenses, including fair use, be available?  Here’s a hint, look at 17 U.S.C. 1201(c)(1)..  (“Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title.”).  Are carriers really going to sue people?  Who has standing, the manufacturer of the phone?  The new carrier?  The original carrier?  All three?  Why would the manufacturer or new carrier ever sue?

Second, what does “a wireless telephone handset originally acquired from the operator of a wireless telecommunications network or retailer” mean?  Assuming it means what it says, what if I give someone my brand new phone and they sell it back to me?  What if my friend and I both swap identical phones?  This seems like a pretty big hole.  I pilot twin Droid Bionics (think “Razr Maxx with half the battery life and a user-swappable battery” – one for backup and development) on Verizon (not at the same time), both bought from third-party prior owners, not Verizon — can I unlock them?  Maybe: the October 26, 2012 rulemaking, after defining “legacy phones” as “used (or perhaps unused) phones previously purchased or otherwise acquired by a consumer” continues, “[t]he Register concluded after a review of the statutory factors that an exemption to the prohibition on circumvention of mobile phone computer programs to permit users to unlock ‘legacy’ phones is both warranted and unlikely to harm the market for such programs.”  Sounds simple, right?

To test this theory, I called Verizon after the loophole closed and told them I wanted to unlock the phone not currently being used on my account to put it on a prepaid network.  I was told that they will not unlock their devices unless the owner is relocating abroad.  Have I satisfied the “if the operator of the wireless communications network…” language?  Now that the loophole has closed, does it still matter?  Since mine are “legacy phones,” did it ever?

Finally, the criminal section for Copyright violation is 17 USC §1204 and reads in relevant part that prison may be in the cards for “[a]ny person who violates section 1201 or 1202 willfully and for purposes of commercial advantage or private financial gain…” (Emphasis added) If I have an unused cell phone and I want to use it on a different network than the one that originally sold it, assuming without argument that my effort to unlock is “willful,” is it “for purposes of commercial advantage” (probably not) or “private financial gain” (does getting access to cheaper wireless qualify)?

So what we have here is an inconsistent and illogical rule, reversing at least 6 years of the opposite rule, with limited justification and basis, and huge, poorly defined loopholes, sewn together with the threat of civil persecution and criminal prosecution.   Doesn’t it make more sense to just sign the petition?

By Dov Szego

What many people do not know is that for the vast majority of people accused of crimes, the criminal justice system can be a meat grinder.  Most of the time, the outcomes are just and fair based upon the alleged actions of a Defendant.  All of the time, the path to that resolution is not easy.  Almost inevitably, prosecutors take a strong stance to enhance a bargaining position and such a back and forth is not easy for Defendants to watch.  Certainly, with a Defendant like Aaron Swartz, who already suffered from depression, that back and forth was probably too much to handle.

If nothing else, this case may be a good lesson in how parties should handle these negotiations.  And while many complain that the Computer Fraud and Abuse Act has become too expansive, I would argue that is not the case so long as the prosecutors charged with seeking redress for violations of the law act with appropriate discretion.  It appears what happened here was just another case of the meat grinder of justice.

Perhaps that meat grinder should come to a halt.

The affiliate marketing space lives precariously out on a limb.  The next e-mail a marketer sends, the next marketer a network signs up, the next policy a merchant creates, or the next advertisement an affiliate drafts could result in a lawsuit or an inquiry from the FTC.  In order to help make sure the proverbial limb does not break, keep in mind these handy tips:

1. When drafting an advertisement, step back and give it the “smell test.”  Does it smell deceptive?  Does it appear to be something (a news story) that it is not?  If the answer is “yes,” go back to the drawing board.
2. Do you have a contract with your affiliate/network/merchant?  You’d be surprised how many people say “no” or have one and do not know the terms of the contract.  Review the contract and write an easy “do not do” list to keep handy to ensure you stay within the bounds of the agreement.
3. Make sure IP is adequately protected (or not wrongly exploited).  Sometimes there are “snooze and lose” situations.
4. Vanity search.  Always.  Google alerts are good, but not foolproof.  Ensure your name/company/product are not being unceremoniously criticized on the web.

If you’re at Affiliate Summit, stop by our booth and say hello.  If you come to our presentation (2PM on Tuesday), I promise there will be much more of interest.  It should be fun.

This post was written by Eric S. Crusius, Esq.

Julie Nichols, an attorney with Centre Law Group, recently wrote about RockYou, Inc.’s settlement with the FTC in which she referenced proposed changes to COPPA.  The FTC very recently released these changes which will go into effect on July 1, 2013.  These changes modify the definitions as well as the procedures and are referenced in detail on the FTC’s website.

Rules relating to parental notice and consent have been altered.  The FTC has had revised the rule to ensure that website operators notify children’s parents prior to collecting their personal information in a “timely manner”.  Obtaining parental consent has been made easier by the new rule, as the FTC stated that it will now accept “electronic scans of signed parental consent forms; video-conferencing; use of government-issued identification; and alternative payment systems”.  The FTC has also implemented a 120 day period in which operators can seek FTC approval of a particular consent method.

Rules relating to the definitions have been changed and expanded in some cases.  Some of the most obvious changes include the change to the definition of “personal information”.  This now includes images, videos, audio files, as well as geolocation information.  The definition of “operator” has also been altered and now covers a “child-directed site or service that integrates outside services, such as plug-ins or advertising networks, that collect personal information from its visitors”.

Although the changes will not go into effect until July 1, 2013, it will be important for you to make sure you are compliant with the latest changes to COPPA before that date arrives.  This is especially true for websites that are now included as “operators” that may not have had to comply with COPPA in the past.  An Internet lawyer from Centre Law Group may be able to help you become FTC compliant.

By Taylor Hume

While my cynical humor may seem funny to some and sad to others, it also has grains of truth.  In this age of digital consumer sophistication and the debate over net neutrality some consumers have taken to the Courts to enforce ISP speed and bandwidth claims.

Consumers have taken a particular perverse satisfaction out of suing the ISPs that charge them month after month.  Consumers in Houston, TX sued SBC Communications and its subsidiaries.  A woman in California sued Verizon.  Where class action settlements have been reached, law firms apparently have made it extraordinarily easy for affected consumers to obtain their share: see here, and here.  It’s been an accelerating issue with the “data throttling” of cell phone speeds over the last year as well.  At least one law firm has sued AT&T and appears to be actively soliciting for members of a class action.  If, as it appears, high speed means more customers and low speed means more money, you can see the dilemma.  The common thread in these consumer lawsuits is generally the speed claimed by an ISP in its advertising as opposed to the speeds actually obtained by users.

So who cares?  Potentially everyone.  The Internet is gradually getting faster, but the US isn’t necessarily keeping pace in the acceleration.  Ignoring a government interest in the economic benefits of fast Internet, there are clearly government regulatory interests in Internet speed, penetration, market saturation, and potential monopoly concerns, as well as net neutrality concerns.  Faster speed requires better infrastructure, which costs money, and neither the government nor industry seems inclined to cough it up.  Providers want to maximize profit to investors, not necessarily service to consumers, and consumers want speed, blazing speed, the cheaper the better.

To give an idea how serious data speed concerns are, ISPs aren’t above taking matters of speed and bandwidth to court either.  Take, for example, the lawsuit filed around Christmas by Cablevision against the Communications Workers of America union (CWA) as a result of allegations that CWA has been falsely telling people that data speeds for the Brooklyn borough of New York city are slower than elsewhere in the city.  This is not even the first such lawsuit – Cox sued Centurylink over claims regarding Internet speeds in Las Vegas a few years ago – and with customers, ie. money, on the line, it won’t be the last.  As with the consumer lawsuits, these cases orbit around claims made regarding the speeds others claim are obtained by users.

So how fast IS your Internet speed, REALLY?  …  Know any good lawyers?

By Dov Szego

Users complained most pointedly about the proposed changes’ retroactive application, and about the lack of an opt-out provision.  The new terms allowed Instagram to license photos for advertising or other purposes, even if those photos were uploaded before the new terms took effect.  And the only way to avoid these terms would be to delete your Instagram account.  The new terms went out of their way to emphasize that users still own their images and that the changes would affect only licensing rights, but what good does ownership do if Instagram can sell licenses with impunity?

In response to this widespread criticism, which was picked up and reblogged several times over, Instragram co-founder Kevin Systrom made a lengthy post that backtracked completely on these proposed changes.  He attempted to convince (unsuccessfully, in my opinion) that Instagram never intended to actually sell users’ images or even include them in advertising, and that this interpretation was a result of poor drafting of the new terms.  Mr. Systrom also stated that Instagram will be redrafting the new terms to make this intent (or alleged lack thereof) more clear.

Whichever way this saga ends, Instagram has signaled its intent to follow in the footsteps of its parent, Facebook, to increasingly leverage user data for advertising and promotional purposes.  After all, there is the old adage — when you get something for free, it’s because they are selling you.

By Stephen Ramaley, Esq.

Armslist.com is an online classified website that allows users to browse or post guns for sale.  The website serves as the venue in which buyers and sellers of firearms come together.  The private sale of guns is not a new topic of discussion.  In the past, Internet companies have shied away from involvement in the sale of firearms.  Online auction giant eBay has an extremely detailed policy on what can and can’t be listed on its site as it relates to firearms.  eBay has a section in its policy related to firearms that defines firearm accessories as being “allowed”, “restricted”, or “not allowed”.  While certain accessories can be listed, no complete firearms will be allowed on the site.  eBay is not alone: Craigslist also has the following listed as prohibited items: “Weapons and related items, including firearms, ammunition, silencers, pellet/BB guns, tear gas or stun guns”.  While these successful large websites and others have established policies prohibiting the advertisements of firearms, there are many smaller websites that don’t.  A simple Google search will show you that Armslist is not the only one in the game.  This is certainly something that the Brady Center hopes to change.

This will be an important case to watch as there are many websites that serve as venues for buying and selling goods whose owners undoubtedly believe they are protected because they are not the merchant and are not completing the sale.  This degree of separation may not be enough to hide behind.  Some merchants, even those not affiliated with firearms, may want to watch this case as well.  If you sell, promote, or advertise a good or service that may not be legal to all people, then it will be important to consider how you will limit the availability of your goods and services.  A simple disclaimer may not be all that is necessary.

By Taylor Hume