Techmeme is all a-flutter, and my ZDNet colleagues have been right on top of the Digg/HD-DVD crack story.  Here's my quick take on things, as I run off to OnHollywood (where Kevin Rose spoke this morning):

Nothing says Digg has to respond to a mere demand letter under any circumstances.  Demand letters are shots across the bow, an effort to get a potential adversary to capitulate without all the bother of litigation and without fully ventilating the issues.  See Chilling Effects if there is any doubt in your mind on this point.

At first blush this situation looks like Universal v. Reimerdes, the infamous case where the Second Circuit affirmed a trial court's finding that 2600 Magazine had violated the anti-circumvention portions of the DMCA by posting DeCSS.

But Digg isn't a magazine, online or otherwise.  It's a social news site populated by user submissions.

If the AACS Licensing Authority decides to take this to the next step and file suit, there's the opportunity for a very interesting test of the scope of Section 230 of the Communications Decency Act.  (For some great context and discussion, catch EFF's Kurt Opsahl on Rules for the Revolution #009.)  Now, Section 230 does not immunize a provider of interactive computer services from liability related to users committing federal crimes.  But here, we're not necessarily talking about crimes under the anti-circumvention provisions of the DMCA.  As I understand it, the demand Digg received (like other related ones) was from a private party.  We're not talking about a DOJ investigation and charges; this isn't Sklyarov.  The anti-circumvention provisions include both criminal and civil penalties, and the criminal ones only attach when violations are determined to be willful and for commercial or private financial gain.  Hence, I see no reason at this point why Section 230 shouldn't be very much in play.

So, good for Digg, and for Kevin Rose, and I hope they'll stick to their guns.  (Though with all this in mind, if I were their lawyer I'd have preferred that Kevin not post the code on the official Digg blog.)  

Kevin Werbach just posted the draft agenda for the upcoming Supernova conference.  I'll be moderating a session at the Challenge Day on June 20 titled "Will Intellectual Property Kill Social Media?," and we've confirmed the following stellar panel to take on this topic:

• EFF Senior Intellectual Property Attorney Fred von Lohmann
• Dabble Founder and Chairman Mary Hodder
• Viacom Senior Vice President and General Counsel Mark Morril
• YouTube General Counsel Zahavah Levine
• Morgan Lewis IP partner Ron Dreben 

I'm kind of beside myself about that lineup.  Here's the description of our session from the conference site:

The promise of social networks, video sharing, and online communities goes hand-in-hand with the challenge of unauthorized use.  Yet some see the legal and technical responses to that challenge doing more harm than good.  Can we find an accommodation between the explosive creativity of social media and the constraints of intellectual property law? 

If you have thoughts, suggestions, questions, or provocations you'd like to put to the panel, I'm all ears. 

Late last month, the Ninth Circuit Court of Appeals came out with an important decision, Perfect 10 v. CCBill (PDF), that required it to interpret and apply both the Digital Millenium Copyright Act and Section 230 of the Communications Decency Act — two of the most important U.S. provisions governing conduct on the Live Web.  Jason Schultz, Professor Goldman, and Joe Gratz all have good summaries of the details.

First, see Jason's rundown of the parties and facts of the case:

Background: Perfect 10 publishes adult entertainment magazines and websites.  Many third-party websites post Perfect 10 images without permission.  CCBill et al provide hosting and credit card services to those sites.  Perfect 10 sued CCBill et al. for assisting in the infringement of their copyrights and associated state claims, such as violating the rights of publicity of Perfect 10 models.  CCBill raised, among other defenses, the DMCA Safe Harbors and Section 230 of the CDA.

Next, there's a lot of meat to the opinion and I encourage you to check out all three of the discussions linked above.  But the most interesting part of the decision to me, particularly in the context of the pending Viacom v. YouTube suit, is the court's take on what constitutes a "direct financial benefit" sufficient to preclude a defendant's successful invocation of the DMCA's safe harbor language.  Once again from Jason:

The Court held that a provider falls outside the protections of 512(c) if they receive "direct financial benefit" from infringing conduct, and that this term should be interpreted consistent with the "similarly-worded common law standard for vicarious copyright liability."  The Court then went on to state that the relevant inquiry was "whether the infringing activity constitutes a draw for subscribers, not just an added benefit."  Since CWIE (the hosting co-defendant) hosted sites for a fee unrelated to the amount of infringing material, the court found this did not qualify as a direct financial benefit.

The "direct financial benefit" exemption is one of the most crucial legal points at issue in Viacom v. YouTube, and here we have the Ninth Circuit saying that if the presence of infringing material is merely an "added benefit" and not a primary draw, a defendant should be immune under the DMCA from liability for the infringing acts of others.  As a practical matter, this requires parties and courts to classify and quantify the role of the infringing material, and thus imports a Sony v. Universal/substantial noninfringing use-esque anlaysis into interpreting and applying the DMCA.  Advantage YouTube/Google — though the Second Circuit (where Viacom v. YouTube is pending) is well known for departing from the reasoning of the Ninth. 

There's much more to tease out of the decision.  Professor Goldman wraps it up as follows:

This Ninth Circuit panel clearly understood the dangers that copyright and publicity rights lawsuits pose to Internet intermediaries, and they took a number of useful steps to push back on a very aggressive plaintiff's novel but expansive theories. Kudos to them. But with two other Perfect 10 cases pending with the Ninth Circuit, I strongly suspect that the most interesting and powerful aspects of this ruling soon will be reshaped by the subsequent opinions.

Yesterday, I was extolling the policy virtues of automation at VON 2007.  Today I was reflecting that until super-intelligent agents arrive and do it for us, humans need to be sure to actually read the documentation attached to the APIs enabling some of the most compelling automated transactions and interactions we see today.

I spent the day at Under the Radar, which lived up to its reputation as a very cool event.  Dan Farber blogged much of the coolness, and I Twittered some as well.  But one thing caught my attention as a slumbering yet big issue for Live Web companies:  if you offer an API, and well you should, people are going to use it.  However, they might not be all that careful about reading and following your API's terms of service — assuming, and let's hope it does, your API has terms of service.  This is true even when the people using your API are in another part of your very own company.  (See:  OUTRAGEOUS: Yahoo!™ STEALS copyrighted photos from Flickr users!)

Consider this scenario: 

1. Site 1 provides a platform for submission and sharing of user generated material.
2. Site 1 offers APIs enabling third party mashups of Site 1's user submitted material in heretofore unimagined, creative ways. 
3. Site 1 neglects to give users the means to affirmatively license their submitted material for third party use; or, a large number of users decline to license, even though given the chance.
4. Site 1 fails to warn Site 2 (and Sites 3 - infinity) that some or all of its users' submissions are not licensed for third party use.
5. Site 2 develops an application, using Site 1's API to make Site 1's user submitted materials available for use or viewing by Site 2's users.
6. Mayhem, outrage, rioting in the streets, denial of service attacks, etc. ensue, instigated by Site 1's ticked off users.

There's a twofold lesson here.  First, if you're going to make user submitted material (ex)portable and mashable through an API, provide a licensing mechanism for your users.  While you're on the right track when you "encourage users to contribute their creations to the public domain or consider progressive licensing terms," Ev and Biz, as a practical matter without a convenient and automated means to apply such terms everything users submit will be "all rights reserved."  Flickr's incorporation of Creative Commons licensing means developers using the Flickr API can readily incorporate tens of millions of Creative Commons licensed works into their products and services.  I'm not sure developers using, for example, the Twitter API (checked out Twittervision yet?  mesmerizing) can incorporate any Creative Commons licensed works — and that's not because Twitter users don't want to license their work.

Second, API terms of service should alert developers to this napping but particularly grumpy grizzly.  Flickr's does this nicely:

1. Licensed Uses and Restrictions.

The Flickr APIs are owned by Flickr and its parent company Yahoo! Inc. (hereinafter "Flickr") and are licensed to you on a worldwide (except as limited below), non-exclusive, non-sublicenseable basis on the terms and conditions set forth herein. These terms define legal use of the Flickr APIs, all updates, revisions, substitutions, and any copies of the Flickr APIs made by or for you. Flickr user photos are owned by the users (the photographers) and not by Flickr. All rights not expressly granted to you are reserved by Flickr.

a. You shall:

1. Comply with the Flickr Community Guidelines at www.flickr.com/guidelines.gne, the Flickr Terms of Use at http://www.flickr.com/terms.gne, and the Yahoo! Terms of Service at http://docs.yahoo.com/info/terms/.
2. Comply with any requirements or restrictions imposed on usage of the photos by their respective owners. Remember, Flickr doesn't own the images - Flickr users do. Although the Flickr APIs can be used to provide you with access to Flickr user photos, neither Flickr's provision of the Flickr APIs to you nor your use of the Flickr APIs override the photo owners' requirements and restrictions, which may include "all rights reserved" notices (attached to each photo by default when uploaded to Flickr), Creative Commons licenses or other terms and conditions that may be agreed upon between you and the owners. In ALL cases, you are solely responsible for making use of Flickr photos in compliance with the photo owners' requirements or restrictions. If you use Flickr photos for a commercial purpose, the photos must be marked with a Creative Commons license that allows for such use, unless otherwise agreed upon between you and the owner. You can read more about this here: www.creativecommons.org or www.flickr.com/creativecommons.
3. Comply with any other terms and conditions a user has attached to his or her photo. For example, if a user marks a photo as "private" after using your service, your application must reflect those changes as soon as reasonably possible. If your application has any cached copies of photos that have become "private," you must remove as soon as reasonably possible.
4. Remove from your application within 24 hours any Flickr user's photos or other information that the owner of the photo asks you to remove.
5. If you use the Authentication APIs, insert a standard header that we will provide into pages you build that access the Flickr API. It's important to us that users have an easy way to return to Flickr if they wish, and have some reference point (the logo) to show them that they're still connected to Flickrland. http://www.flickr.com/services/partners/.
6. Disclose in your application through a privacy policy or otherwise displayed in the footer of each page, how you collect, use, store, and disclose data collected from visitors, including, where applicable, that third parties (including advertisers) may serve content and/or advertisements and collect information directly from visitors and may place or recognize cookies on visitors' browsers.

These terms, by the way, are right in line with the principles of the Attention Trust; bravo, Flickr.   

"Flying and virtual" contracts like machine readable licenses are absolutely fantastic.  Please just make sure that in our exuberance to encourage uptake and creativity through APIs, we don't make the mistake of forgetting about such licenses altogether, or of remembering them when it comes to user submissions but forgetting when it comes to API documentation and use.

The description of Jeff Jarvis's talk on the VON Web site captured precisely what he covered:

Our medium [Internet TV] is so new, we have the chance to do things right, to set ourselves up for success. What do we need to make our small TV revolution successful in advertising, measurement, networks, guides, marketing, PR? We need to get our act together. 

But you can judge for yourself; here are my notes: 

We can nurture an explosion of commerce, but we've got to get it right.  Weblogs didn't get it right.  "To advertisers, metrics are sex.  And size does matter."  Advertisers can't track our performance and their clients all fear us.  They lose, but so do we.  Helping people find the good stuff is important, but remember there's no uniform definition of what's "good" any more.  You don't have to be the blockbuster any more.  The tail of the dinosaur is far more powerful than the dumb brain of the dinosaur.  It's the vastness that matters, and video is now a form of communication.  Size doesn't matter; quality does.  Let's not get stuck in the same traps of old media.  We can do things right.  We are reinventing TV.  It's ours.  

Exploding Video is Jeff's new, very small, television network.  He's learning, learning lots about finding the right voice.  The roughness and bluntness of our new small television gives it credibility.  Our roughness is at least endearing.  We don't want to be old TV, and we're not sure what we should be yet but I hope we never decide.  Per hour cost of network television is $300k/hour as opposed to 18 Doughty Street:  $140/hour, all in.  

TV needs to go to where people are.  This is why Viacom's move against Google is such a collosal mistake.  Fans recommending good stuff is invaluable.  Jeff's 15-year-old son never clicks through channels with the remote.  He finds things only through recommendation.  Monetize and control is the wrong way.  Monetize, Jeff gets.  But we need to figure out a way to monetize without control.

This doesn't mean you ignore the big guys, you work with them.  When they showcase you, you get audience, they get "cool points."  Then there's money.  "I'm not getting enough.  I'm not getting any."  Dina Kaplan at Blip.tv is doing a tremendous job.  What do we need?  Measurement.  We have to give advertisers orgasms.  Metrics are sex.  We have to serve people where they are.  Metrics have to be standard, public, and verifiable.  We need to recognize the value of links and recommendation.  Every media element needs to have a unique identifier.  We need experimentation.  It's 1954, as far as this TV is concerned.

We need ad serving.  The only way the big boys will play is if they can put things multiple places.  We need to sell ads across networks.

We need trust and identity.  Who made it?  Advertisers won't go for anonymity.  It's also important for creators to get their money and credibility.  

We need guides.  Network2.tv is one.  We're all critics, and we're all networks.  We need to get judged on our recommendations.  The idea of people as guides matter.  The whole role of criticism has changed.  It's social, it's trusting your friends.  But it's hard to find the good stuff.  It's a mistake to concentrate on the flaming farts.  There are gems in there, but it's difficult to find them.  There's hope on Blip.tv, where Jeff found the talent to do his show Idol Critic.  Dina Kaplan and company are developing talent and finding good people.  Network2.tv is another chance to find where the good stuff is.  Jeff started Exploding Video to help find guides.  

The world isn't bifurcated into "premium content" and "the rest."  There's good stuff in the rest (even if it's not yet making money).Viacom is a fool for demonizing fans for recommending shows.  CBS on the other hand, also in the House of Sumner, is trying to find as much as they can to put on YouTube.  

Finally, we need protection against regulation.  Doc Searls:  it's a mistake to think of this stuff as content.  It's conversation, and when you regulate it you regulate our speech and our lives.  We have to be fearful, stand together, and fight together to keep TV ours.  It is our place, protect it.  

We're only going to make TV that's better (it's 1954).  We have a new definition of better, and best.

Q from a New York Times person:  if you do all these things, aren't you just becoming big media?  A:  The economics of this world are different, the definition of a hit is enough to survive.  

Q from a ZDNetter:  who's we?  A:  Anyone who wants to make TV. 

[tag: von07]

Update, 5:32 p.m.:  Consummate and indefatigable blogger that he is, Jeff blogged his own talk.

Point 1 about Viacom v. YouTube:  There is no calling how this case will come out if/as the parties pursue it through the federal courts —

Declan McCullagh:   

Section 512 says Web site operators must not "receive a financial benefit directly attributable to the infringing activity" and that they must not be "aware of facts or circumstances from which infringing activity is apparent."

In practice, that language is sufficiently imprecise that it permits lawyers for both sides to argue that it buttresses their position.

Even the U.S. Supreme Court's decision in the Grokster file-sharing lawsuit hasn't resolved this question. The court said that someone who distributes software with the clear intention of promoting copyright infringement can be held liable — but nobody, not even Viacom, has suggested that YouTube's executives have been as brazen as the founders of file-swapping companies years ago.

Robert Tur's lawyer Francis Puzzilli (on the DMCA defense in Tur v. YouTube):   

They hold it. They store it. They enable it to be categorized.  There are service providers — utility companies, so to speak — and there are content providers. And I would be very surprised at how [YouTube] could possibly qualify as an ISP within the meaning of (the act).

Siva Vaidhyanathan (discussing Google Library) on the Southern District of New York:

Look, when it comes to copyright, the Southern District of New York and the Second Circuit do not make good law. Learned Hand has been dead a long time. The chances of good law coming out of the home turf of Time Warner, Viacom, and the News Corporation at the behest of some punk-kid company from California are as slim as those of good wine coming from New York. I sure wish New York produced good wines. And I wish SDNY and the Second Circuit understood digital copyright better (see Universal v. Reimerdes). But we shall be waiting a long time for both these things.

Point 1a about Viacom v. YouTube:  An out-of-court, business driven settlement can be very tempting —

Mike Arrington:

There's no way this gets settled with Google paying any actual damages. Google will be furiously working to sign a deal with Viacom to get this lawsuit to go away and a licensing deal in place. They’re on a very slippery slope right now, with the Napster carcass lying limp at the bottom.

There's no denying the filing of this suit is just the latest move in a very large chess game the outcome of which may ultimately turn more on business considerations than policy ones. 

Point 2 about Viacom v. YouTube:  Google's legal team understands the short term good/long term harm tradeoff involved in settling these kinds of disputes —

Google's senior litigation counsel Michael Kwun:  "If we don't at least litigate to the point where we get rulings on the issues that matter to us, we’re left with less clarity in the law."

EFF's Fred von Lohmann:  

So I think the YouTube acquisition may well represent a legal opportunity for Google (and the Internet industry generally), rather than a vulnerability. After all, litigation to define the copyright rules for new online services is inevitable — better to choose your battles and plan for them, rather than fleeing the fight and letting some other company create bad precedents that will haunt you later.

Concluding footnote about Viacom v. YouTube —

Next week's Video on the Net conference, with its opening day policy summit and concluding day policy panel (which I'm on), has been hit with a discussion bomb of thermonuclear proportion.

The conference call Mike Madison and I recorded earlier this week in anticipation of our session at Community 2.0 (more here and here) is now available as part of the Bag and Baggage Podcast or from the Future of Communities blog.  We talked about:

• Defining community and loosely-joined individuals and interest groups
• Community goals and governance (or lack thereof)
• External innovation communities such as Procter & Gamble's and ownership issues
• Intellectual and liability concerns for company-owned or associated communities
• Whether an initiative similar to the Creative Commons movement has or is in the process of emerging
• Ownership issues and risk-minimization around products or services that emerge from external ideas
• Variations on open source licenses
• Individual rights and protections for community contributors and participants
• Anonymity and accountability
• Nefarious community exploitation: gaming, hacking, spamming
• Trust and reputation management
• The use of trademark law to use and manage community involvement; selective enforcement, the expansion of certification marks
• Insurance industry mechanisms and models
• Defamation
• Company-sponsored (and owned) communities, and the actions taken by participants who find the terms and conditions of such initiatives too draconian
• "Innovator's dilemma" management and patent strategy and the tension between old, successful products and those developed with help from outsourced customer communities
• Personal data ownership and the Attention Trust

Lawyer, assistant law professor, and Chilling Effects founder Wendy Seltzer chronicles the process of combating an overly aggressive DMCA takedown notice, and gets her initially removed YouTube clip, a Superbowl excerpt highlighting the NFL's copyright notice but including several seconds of game play, restored. Nothing like coming out swinging.

From Wendy as it happened:

• 2/8/07, My First YouTube:  Superbowl highlights or lowlights: "Let's see whether the video, clear fair use, gets flagged by a copyright bot."
• 2/13/07, My First DMCA Takedown:  "Their copyright bot didn't seem to see the fair use in my educational excerpt, so YouTube just sent me their boilerplate takedown. Time to break out that DMCA counter-notification."
• 2/15/07, DMCA Saga Act II: Counter-Notification:  "So, having received a mistaken DMCA notification, I sent my counter-notification to YouTube, generated with the Chilling Effects counter-notice generator. 512(g) instructs the ISP to replace the material in 10-14 business days."
• 3/06/07, We Have Put-Back: Super Bowl Warnings Back Online: 
  

I'm left wondering how many other fair users have gone through this process. On Chilling Effects we see many DMCA takedowns, some right and some wrong, but very few counter-notifications. Part of the problem is that the counter-notifier has to swear to much more than the original notifier. While NFL merely had to affirm that it was or was authorized to act on behalf of a rights-holder to take-down, I had to affirm in response that I had "good faith belief that the material was removed or disabled as a result of mistake or misidentification of the material to be removed or disabled." A non-lawyer might be chilled from making that statement, under penalty of perjury, even with a strong good faith belief.

Thus was the educational value of the original clip amplified when Wendy stuck to her guns.  Terrific that she got to illustrate use of the Chilling Effects counter-notification generator — another glimpse of/step toward the future of legal interminglings.  (Via Marty Schwimmer.)

Our rescheduled conference call in anticipation of Community 2.0 (details here) takes place today at 1:00 p.m. PST/3:00 p.m. EST.  Call-in details are here, please join us if you are interested.

In connection with our session at the the upcoming Community 2.0 conference, law professor Mike Madison and I will be hosting a public conference call on Monday, February 26 beginning at 1:00 p.m. PST, and we'd love your participation to help us hone in on the ownership considerations (IP; attention; identity), and issues of governance and liability, most critical to the creation, maintenance, and long-term health of business communities.  The call will be recorded and made available as a podcast from The Future of Communities blog.  You can join us as follows:

From Skype: +990008275785861

From a regular phone (long distance costs apply):
US: 1-605-475-8590

In Europe, call:
Germany 01805 00 7620
UK 0870 738 0763

The Conference Room Number: 5785861

Hope to chat with you then.

(Cross-posted to Bag and Baggage and Between Lawyers)

[Update, Monday 2/26 @ 1:15 p.m.:] Unfortunately, we had problems with the conferencing service lined up to support this, so are having to reschedule. I'll post the new date, time, and call-in details once they're available, sorry for the delay.