On a panel called “Content Industries in Digital Transformation,” Attaway was speaking for himself and others: moderator and AAP president and CEO Tom Allen, Business Software Alliance’s Robert Holleyman and Recording Industry Association of America’s Cary Sherman, all of whom grappled over whether legislation or collaborative approaches are the correct response to piracy.

“Among my friends in Congress, there is some alarm about what happened [surrounding SOPA and PIPA],” said Allen, who was previously a Maine congressman. “The woman who replaced me in the first district of Maine got 800 e-mails in two days, every one of them opposed to the bills. How in this environment can our respective industries do more to defend the principles of copyright when we’re confronting this wave of the public that goes every day to the Internet and downloads and reads all sorts of stuff for free?”

In general, panelists came down on the side of collaboration — though not necessarily collaboration with the consumer.

SOPA/Pipa Protests: A “Digital Tsunami”

“Right doesn’t always prevail,” Attaway said of SOPA and PIPA. “This time, it didn’t, because our opponents were able to energize a grassroots response. In my view, and I think all of us would agree, [the protest against SOPA and PIPA was spread] primarily through disinformation and spinning their interest in a way that captured the attention of a number of consumers.”

He added “we’ve been rather successful in negotiating with ISPs and other best practices that help protect our content on [user-generated content] sites….I’m very optimistic about our future.”

The Business Software Alliance, however, did not support SOPA or PIPA. “There was a tremendous amount of opposition and we can discuss how it was or wasn’t generated,” Holleyman said. “Shared responsibility and working with other industries is going to be the best, and maybe the only, solution we have, at least for the next several years. I hope we can build a climate where the rhetoric can be lower.”

The RIAA’s Sherman hopes further copyright discussions will be more “rational” than the debate over SOPA and PIPA. “The digital tsunami we encountered with SOPA and PIPA — we’re not going to get the same kind of engagement when we talk about statutory damages or open works,” he said. “We’ll have the opportunity for a more rational discussion. At the same time, I think we actually need to engage. We have criticized the other side for just saying no. We have an enormous piracy problem, and any solution we propose, they just say no. We [also] need to engage and not just say no.”

No, You Can’t Do Whatever You Want With That Movie

The music industry’s Copyright Alert program, which addresses piracy on P2P networks, will begin operation in the second quarter of the year, by July at the earliest, Sherman said. The software crawls P2P sites for pirated content, then works with ISPs to send notices to subscribers alerting them that they’ve been identified as possible copyright infringers.

“This is a concrete example of where we could go, and we would love to be following in your footsteps,” said the AAP’s Allen.

“Education is key,” Attaway said. “It is absolutely ridiculous that a movie that cost $100 million to create, a copy of which you paid $20 for, to say that you own that movie and should make any number of copies you want to. The intellectual base of the Copyleft is pretty flimsy, and we need to do a better job of pointing that out to the public. We need to do it from a grassroots base of the millions of people whose livelihoods depend on copyright protection. [Paying $20 for a movie] doesn’t mean you have the right to make all the copies you want and share them with all of your friends.”

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Hotfile’s court filing details that the company was approached by Warner in 2009 with a request for a more expedited takedown procedure. Hotfile complied by launching a so called “Special Rightsholders Account” (SRA) that made it possible for Warner to directly delete files from Hotfile’s servers and prevent any future uploads of these files. Similar direct takedown functionality is offered by companies like Rapidshare and other file hosts.

Hotfile’s filing states that Warner made extensive use of the functionality, taking down thousands of works per day. However, the studio apparently didn’t always check whether the files it was about to delete were in fact copies of its works. From the filing:

“The URLs corresponding to the some of these files deleted by Warner contained names/titles indicating that thousands of software games, freeware software and videos with pornographic content had been wrongfully deleted by [Warner].”

The cause for these wrongful deletions seems to be rather trivial: Apparently, Warner simply used a keyword-based web crawler to find links to files hosted on Hotfile without checking for the actual content. Again, from the filing:

“Illustrative is the otherwise forgettable Warner movie made several years ago called The Box. Warner records list 3,481 files as deletions from Hotfile.com made via its SRA that it claims were copies of The Box. However, Warner’s own records strongly suggest that many if not a majority of those deleted files were not actually copies of — indeed had nothing to do with — the movie The Box. Rather, most are just Hotfile links that had the two common words ‘The Box’ somewhere in the file name. For example, dozens of files whose name suggests that the content was an audio book entitled Cancer: Out Of The Box, by Ty M. Bollinger—an alternative cancer treatment book were deleted.”

The countersuit may look like payback, but it also brings up a few interesting questions. Hollywood argued in its own lawsuit against Hotfile that DMCA takedown notices aren’t enough to combat piracy on Hotfile. However, the false positives generated by Warner’s own anti-piracy team seem to suggest that only a proper takedown procedure with checks and balances can prevent that works third parties find their works blocked or taken down without their consent.

Check out the entire filing below:

Hotfile Counterclaim

Image courtesy of Flickr user hickory hardscrabble.

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The disappointing thing about Janko Roettgers’s post for GigaOm’s NewTeeVee section yesterday is its casual promotion of the idea that stealing movies, TV shows and music is a perfectly acceptable way to save money.

Roettgers writes at length about recent changes in online video offerings, but his real point is this:

“The U.S. credit ratings downgrade, tumbling stocks and international instability have made not just financial analysts nervous this week. Consumers are also starting to wonder whether we’re about to enter another recession. Whenever that happens, people start to tighten their belts and cut unnecessary expenses — like paying for movies and TV shows… With memories of the housing slump still fresh, many people could simply return to BitTorrent and download movies for free instead of going to the movies or paying for VOD.” (emphasis ours)

There’s no question that when people aren’t certain about their finances — because they’re worried they or someone in their family will lose their job, or the prices of gas or other essentials will rise significantly — they change how they think about expenses and spend money. But if Roettgers had written that financially insecure families will shoplift clothes from a department store this fall to save on back-to-school costs for their children, he would be laughed out of the proverbial building, right?

T-shirts and jeans aren’t made out of zeroes and ones, at least not yet. But just because movies and TV shows and songs can now be packaged and distributed as data, not just as film reels or vinyl records or DVDs, and can be acquired or distributed with a few clicks of a mouse, doesn’t mean that the labor and time and money that went into making them is any less meaningful.

We doubt many people will subscribe to the kind of intellectual dishonesty that suggests that it’s fine — or really, that it’s inevitable — to steal as a way of saving. But it’s troubling that by suggesting that stolen content available on rogue sites and elsewhere is just another substitute good, Roettgers is tacitly arguing that content theft is legitimate and socially acceptable. Truth is, it’s neither.

Photo courtesy of (CC BY-SA 2.0) Flickr user Seth Anderson.

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Zediva launched in March, offering up consumers a low-cost way to “rent” DVDs and then stream them over the Internet. Rentals of new DVD releases were priced at $1.99 or 10 for $10, compared with the $4.99 typically charged by streaming video-on-demand services like iTunes or Vudu. The big Hollywood studios, which only received compensation for the initial DVD purchase, weren’t happy with the service, and in April they sued to shut it down.

Zediva tried to argue that its service was no different from renting a DVD from your local Blockbuster store, except, well, that it was transmitted over the Internet. That argument didn’t hold up in court, and ultimately U.S. District judge John Walter sided with the studios, granting a preliminary injunction against the service.

Zediva has vowed to appeal the court’s decision, but in the meantime it has suspended operations. In a message sent by email to its customers that was also posted to its website, the company wrote:

We are suspending Zediva’s operations to comply with an order by the United States District Court for the Central District of California.

While we hope to be back online soon, we don’t know when (or whether) that will happen. We are disappointed by this turn of events, and that we are not permitted to serve you.

We are quite aware that some of you have unused credits with us and appreciate your patience as we figure out our next steps. Stay tuned for more information via email.

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In a long-running case taken by the film studios against British Telecom, the U.K.’s leading ISP, the MPA had said that it was necessary to filter the site and stop users from accessing its trove of pirated material, including hit movies like Oscar-winner The King’s Speech. The reason for taking its fight to the ISP? Because the MPA had previously won a judgment in court forcing Newzbin to shut down, but shortly after it did so, the service simply reopened as Newzbin2.

However, British Telecom had challenged the argument that it should be

made responsible for policing online activity. But that, the court decided, was no argument. In a lengthy judgment, the judge, Justin Arnold, ruled that BT should implement a block:

“In my judgment it follows that BT has actual knowledge of other persons using its service to infringe copyright: it knows tha

t the users and operators of Newbin2 infringe copyright on a large scale… It knows that the users of Newzbin2 include BT subscribers, and it knows those users use its service to receive infringing copies of copyright works made available to them by Newzbin2.”

Our own Janko Roettgers has been following this story closely — it’s been running ever since Newzbin was originally sued over this in 2009 — and recently made the point that the studios have been very calculating in taking on Usenet in this way. As he said, the studios followed this precise series of maneuvers because it gave it the greatest chance of success: BT is Britain’s biggest internet service provider, and it already has a scheme for instituting content blocks, a system the company calls its “Cleanfeed” technology, primarily used to block pornography.

The real issue is whether the threat forces other internet service providers to follow suit in order to avoid costly action — and which other websites, if any, are deemed to fall under this ruling.

After all, most efforts in the past have focused on torrent sites like The Pirate Bay that make it easy to download copies of files without permission of the copyright holder. By comparison, downloading movies or television through Usenet was hard. But in the last few years sites like Newzbin have made it increasingly easy. While Usenet is not exactly the same as torrenting in a technical sense, the question will be whether it is close enough in the eyes of the law.

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There’s a bit of history between Hollywood and Newzbin2: The site’s predecessor Newzbin was sued by several studios in 2009, and eventually found guilty of infringement in early 2010. Newzbin shut down in light of the ruling, but the site was quickly resurrected under its new name Newzbin2. Hollywood apparently decided it didn’t want to go to court again only to see the site come back under a different name, so it went after the ISP instead.

The lawsuit is a sign of increasing pressure against Usenet as a source of unlicensed content. Hollywood has in the past successfully sued Usenet.com, which provides access to news groups, including some that make it possible to download movies and TV shows. Newzbin2 doesn’t operate Usenet servers, but instead indexes content on these servers and facilitates downloading through .NZB index files, which can be compared to .torrent files.

BT was not only chosen as a target because it’s one of the U.K.’s biggest ISPs, but also because it also already has technology in place to block sites on the IP address level. BT developed a system to prevent access to sites that host child pornography in 2004. Hollywood now wants the ISP to use the very same filter to block Newzbin2.

Rights holders have long pressed for ISPs to use filters like these against sites like The Pirate Bay, and Newzbin2 seems like the perfect test case to enforce filtering. “If this case is successful, we would hope that other ISPs would take note of the result,” an MPA spokesperson told the Telegraph. In other words: A verdict against BT could lead to other ISPs finding themselves under pressure to block a wide variety of sites, including possibly The Pirate Bay itself.

Image courtesy of Flickr user ell brown.

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In a court document filed late last week, the startup defended its practice of streaming DVD rentals over the Internet, claiming that its service is no different than DVD rental offerings from Blockbuster or Netflix. Furthermore, it compared the major motion picture studios’ efforts to shut down its service with their unsuccessful legal battles against network DVR services that came before it.

Like brick-and-mortar rental outlets such as Blockbuster or DVD-by-mail services like the one Netflix revolutionized, Zediva argues that it purchases physical copies of the DVDs it rents, keeps inventory of those discs and allows viewers to watch those movies for a limited time. For those curious, this is what Zediva’s streaming DVD player racks looks like:

But unlike other services, Zediva’s users never actually take physical possession of the disc or use it on their own equipment. Even so, Zediva argues that the single stream of a single disc to a single viewer that has paid to rent the title doesn’t represent a public broadcast of the movie, and therefore it doesn’t count as copyright infringement. From the filing:

It is not illegal to rent movies to others without the copyright holder’s permission. Blockbuster is free to rent the same movie to many different customers in its stores. Netflix is free to mail DVDs to its rental customers. They must buy the DVDs from the Studios, but once they do, the Studios have been paid, and they have no right to demand a share of the rental fee. Only if a company goes beyond renting the disc they purchased, and actually broadcasts its one lawful copy to the public at large (by showing it on television, for instance), does the copyright owner have the right to be paid a second time.

It’s now up to the court to decide whether it agrees that physically purchasing a DVD and then making it available online constitutes a public viewing. It’s also up to the court to decide whether the first-sale doctrine — which lets companies lend or rent out copies of content that they have purchased — also applies when those copies are being streamed over the Internet.

That said, the same companies that Zediva cites in its filing also take part in the industry-standard practice of licensing content to stream online and to devices like tablets or mobile phones. Of course, those licenses are expensive, which is one reason that Netflix doesn’t have a ton of new release titles available as part of its streaming catalog. But physical DVDs, in contrast, are relatively cheap — which is one reason why Zediva can charge $1.99 a rental for the same new release title that Amazon charges $4.99 to stream.

In addition to traditional DVD rental services, Zediva also cited Cablevision’s win against Cartoon Network in its network DVR case. That service allowed users to record and play back video stored in cloud servers and streamed back to the user. From the filing:

The system in Cablevision operated, from the user’s perspective, like playing a movie back from a DVR with a very long cable attached. Likewise, the Zediva system operates, from the user’s perspective, like playing back a movie from a DVD with a very long cable attached.

Regardless of the actual legal precedent, Zediva argued that the MPAA’s case is simply one more example of the movie industry mistakenly fighting against new technological capabilities. To back that up, it referenced Hollywood’s crusade against the VCR and also its case against hotels that rented movies to patrons — both of which at the time seemed a threat to Hollywood but ended up providing incremental revenues in the long run.

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Warner Bros., Columbia Pictures, Disney Enterprises, Paramount, 20th Century Fox and Universal are all represented in the suit against WTV Systems, parent company of Zediva, and CEO Venkatesh Srinivasan. At issue is Zediva’s business model, which is predicated on streaming DVDs over the Internet for as little as $1 each. The startup argues that since its service is driven by a number of DVDs and DVD players in its data center, it doesn’t need to pay licensing fees for its streaming service.

Not surprisingly, the Hollywood studios disagree. From the lawsuit:

“Unlike Netflix and other licensed online services, [Zediva's] business is based on infringing Plaintiffs’ rights. Defendants transmit performances of Plaintiffs’ copyrighted works to members of the public without Plaintiffs’ authorization. Defendants thereby infringe Plaintiffs’ exclusive rights to perform their works publicly.”

In their complaint, the studios differentiated Zediva’s streaming business model with Netflix, Apple’s iTunes, Amazon Video On Demand, Microsoft Xbox Live, Blockbuster On Demand, CinemaNow and the Sony Playstation Network, all of which pay licensing fees for rights to stream their movies over the Internet. Furthermore, the complaint throws some cold water on Zediva’s characterization of an online rental store, saying that even if that were the case, it would still need to license the studios’ content:

“Defendants’ comparison of the Zediva service to a rental store is disingenuous, and Defendants are attempting to rely on technical gimmicks in an effort to avoid complying with U.S. Copyright Law. Defendants operate an online VOD service, not a neighborhood rental store. Unlike Zediva, rental stores do not transmit performances of movies to the public “over the Internet using streaming technologies. A rental store or any other establishment would also need a license to do so.”

In addition to shutting down the service, the studios are seeking $150,000 in damages for each act of violation of copyright infringement.

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This is the first time the movie studios have taken a so-called one-click file host to court, and the legal arguments used in the lawsuit could spell trouble for sites like Megaupload and RapidShare, or even backup services like Dropbox.

Let’s examine the main arguments made against Hotfile, and how they could affect other services:

Direct download links. Hotfile offers its paying users the ability to directly link (“hotlink”) files hosted on the company’s servers, a feature which the service owes its name to. The complaint argues that through this feature Hotfile “directly sells access to, and copies of, hosted content, profiting directly from its reproduction and distribution,” and in fact does what Netflix and Hulu do, just without a license.

Of course, many cloud storage providers also offer the ability to share direct download links, and companies like Mediafire have been using this feature as an upsell for their premium plans for years. One could even argue that traditional web hosting plans with metered bandwidth offer the exact same feature. Does that mean that every web host profits from the distribution of copyrighted works?

Public sharing. “Hotfile could immediately, with no effort, substantially mitigate the massive public distribution of copyrighted content by password-protecting the ability to download files,” the complaint argues. The fact that Hotfile allows public sharing is seen as proof that the company’s business model is based on infringement. Once again, bad news for any cloud backup or storage service that offers convenient ways to share files. No password for that Dropbox share? Then you must be infringing.

No search engine. “To conceal the scope of its infringement, Hotfile does not provide a searchable index of the files available for download from its website,” the complaint reads. This is a remarkable argument. File sharing services like Napster got in trouble because they offered a central, searchable index of files to download, and Hollywood went on to sue dozens of torrent sites offering search functionality. Now it’s apparently wrong to not offer search. Of course, one could easily argue that companies like Dropbox and Sugarsync also simply want to “conceal infringement” by not making their data available for public search.

Hotfile’s rewards system. Hotfile offers free file storage, but it restricts the amount of data a non-paying user can download. The company offers cash rewards to users whose files are downloaded frequently to get more people to sign up for its premium services. It’s a business model common with one-click file hosts. Megaupload, for example, offers users $1500 in cash if their files generate one million downloads. However, RapidShare eliminated its own rewards system last summer due to piracy concerns.

The rewards system put in place by Hotfile will likely play a big role in this lawsuit, should it go to court. However, some of the other claims made by the MPAA are more than troubling, and cloud storage companies should pay close attention to this case going forward. A legal precedent in this area could spell trouble not only for the RapidShares and Megauploads of this world, but also for a much wider array of cloud service providers.

Image courtesy (CC-BY-SA) of Flickr user tuchodi.

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War Against Cyberlockers Begins: MPAA Sues Hotfile; The studios could have chosen to sue any one of a number of cyberlocker services for copyright infringement, but the fact that they chose Hotfile suggests that they believe that this service is a particularly ripe target. (paidContent)

New Video-Sharing iPhone App Supports 30-Minute Clips; Mobile-to-mobile video-sharing startup Thwapr is released an iPhone app that helps users upload and share videos up to 30 minutes in length. (Mashable)

TokBox Is Shutting Down Its Consumer Video Chat Service; The company will focus on its OpenTok enterprise API offering instead. (TokBox blog)

Logitech’s LifeSize Provides Video Collaboration Through Interoperability With Microsoft UC Platforms; LifeSize HD video conferencing products will integrate with Microsoft unified communication (UC) platforms, enabling users across the enterprise to connect over video from LifeSize systems to the desktop, and vice versa. (LifeSize blog)