nic.suzor.net

We went along to another SOOB panel on Saturday. No audio this time, unfortunately, but pictures can be found on the gallery.

Axel Bruns (eyes closed, sorry!), Andy Nehl, Brian Fitzgerald, Sarah-Jane Woulahan

On Thursday we hosted a roundtable on Open Innovation.

I recorded a couple of interviews (with excellent help from Susan Hedge):

• Dan Ravicher – Legal Director, Software Freedom Law Centre, Executive Director Public Patent Foundation: 4.5mb mp3 or 3.9mb ogg.

• Angela Beesley – Wikia 2.6mb mp3 or 1.8mb ogg.

More to come.

Dan Ravicher and I (left, if it's not obvious).

I'll be in Sydney on Thursday for this event hosted by the Arts Law Centre of Australia as part of Arts Law Week Sydney (10-17 July).

The seminar is entitled �Creative Commons � a good thing for artists?�. The panel of speakers includes Myself from Creative Commons Australia, Raena Lea-Shannon (Frankel Lawyers), Professor Graham Greenleaf (School of Law, University of New South Wales), Caroline Morgan (Copyright Agency Ltd) and Mark Pesce (an artist who uses creative commons licences in his work).

The Arts Law Centre of Australia is the national community legal centre for the arts, who provide free legal advice and cheap and accessible legal resources to artists and arts organisations. Arts Law is very interested in Creative Commons, and it is very encouraging to see these types of events. I'd encourage anyone who is interested and in the Sydney area on 13 July 2006 to come along!

Copyright advocates often suggest price discrimination as an efficient solution to deadweight losses. Deadweight losses occur when prices are artificially inflated, meaning that a section of the population who are willing to pay more than the marginal cost, but less than the monopoly price, are unable to access the good. Whereas free market competition would drive prices down to marginal costs, a monopoly with perfect price discrimination could sell each item at exactly the price that each person is willing and able to pay. This would have the effect of allocating all the consumer surplus to the publisher, ensuring that each customer could afford to buy the product, and providing the greatest possible revenue to publishers. The drawbacks to this proposition are significant:

• Firstly, the entirety of the consumer surplus is appropriated by the manufacturers, with the result that each individual is only able to afford access to a smaller range of information than under competition.¹⁾

• Secondly, the process of near-perfect price discrimination would require the near-perfect eradication of individual privacy, as publishers would necessarily need to accurately ascertain each person's demand for each product.

• Thirdly, people would only be exposed to information for which they are willing to pay – the opportunity for accidental discovery is lost, as is the ability to engage in any free content-level dealings with the information.²⁾

• Fourthly, implementing price-discrimination is costly, and the producer is not likely to expend the money needed to correctlyascertain which users value the product at a price between zero and the cost of implementing price-discrimination, and is much more likely to simply bar access to the work from this segment of the market.³⁾

• Finally, since perfect price discrimination is not feasible, producers must engage in imperfect price discrimination, for which there is no guarantee that efficiency will be maximised.⁴⁾

Michael Meurer argues further that the fundamental argument for price discrimination is flawed, firstly because optimal incentive to create copyright works is somewhat less than the full social value of the works. As consumer attention is a limited common resource, high rewards encourage production races to capture that attention, which are duplicative and wasteful.⁵⁾ Secondly, “the private incentive created by expected profit can easily exceed the expected social value of a work”, particularly where there are close substitutes for a work, and the new work displaces users of existing works without attracting any new consumers.⁶⁾

Glynn Lunney argues that allowing the producers of information goods to recoup the entirety of the consumer surplus distorts the market, because producers of physical goods are only entitled to the marginal cost, leading to over-investment in the creation of information goods.⁷⁾ Lunney also notes that copyright owners should not appropriate the whole of consumer surplus because they are not solely responsible for the value of their works. The amount of money a consumer has to spend on a work of authorship is dependent on the price extracted for all other goods and services that consumer values more than the work – noting for example that if “the state had established a lawful monopoly in the provision of food that permitted food suppliers to charge each consumer her reservation price for her food, a consumer would have far less, if any, money left to spend on works of authorship”.⁸⁾

These points significantly undermine the argument put forward that firms will only make the socially optimal investment if they can appropriate all of the social value from their investment.

Here is a draft of the abstract of my PhD. I'm still working at these concepts, and they're fairly flexible at the moment. Comments are appreciated.

Virtual worlds are becoming increasingly popular and diverse. The immersive nature of these worlds challenges us to consider concepts of place, social relationships, economics, property, and many other aspects of social life. These worlds provide an excellent opportunity for interaction, learning, and research, as well as raising some very interesting questions about culture, regulation, property, and society.

This paper will consider the theoretical basis for legitimate domination in virtual worlds. Most modern virtual worlds are large commercial enterprises, and the owners of these spaces are predominantly cast as (mostly-)benign dictators. This provides an immediate source of conflict for relationships between participants and the administration, particularly where participants are responsible for a large proportion of the value of these spaces. It is not, however, clear whether or not this form of social organisation exists out of necessity. The first objective of this paper will be to examine whether and when consensus governance models can be appropriate within virtual worlds.

The second objective of this paper will be to consider to what extent a functioning virtual government can be considered sovereign, and on what grounds territorial sovereigns may legitimately exercise authority over the owners, participants, and relationships within virtual worlds. As the barriers between real- and virtual-world economies become more porous, how will they be regulated by territorial-based law? Crime, fraud, and taxation are some of the more obvious interests states will have in these virtual spaces, but these factors are by no means exclusive. As these worlds grow, and individuals invest more of their time, money, and social capital inside, what duties and responsibilities will we assign to the operators of the worlds? The fundamental question then is: when can disputes and relationships within virtual worlds be resolved and governed internally, and when must other states interfere?

The event hosted by QUT Law School and the Centre of Excellence for Creative Industries and Innovation was a great success. Organised by Professor Mark Perry (UWO, on sabattical at QUT), and myself, the event saw Mia Garlick from Creative Commons joining Professor Brian Fitzgerald from Creative Commons Australia and Richard Neville, Toby Miller, and Dean Whitbread to discuss the direction of intellectual property in the 21st century. Other QUT researchers present included Axel Bruns, Dilan Thampapillai, Anne Matthew.

Everyone met in Second Life, a fantastic Virtual World created by Linden Labs.

You can find the recording here (~28MB mp3).

Here are some of the links referenced in the discussion:

• Dean Whitbread has some further information.
• Axel Bruns has blogged his discussion at Snurblog.

Ok, so the final version of my Masters thesis is now up: Transformative use of copyright material.

This thesis concerns the ability of individuals to engage in transformative use of copyright expression without the permission of the copyright owner. Transformative use refers to the use of existing expression as an input into the creative process, resulting in the creation of new expression that, while still embodying elements of the original work, is original in its own right. This type of creativity is beneficial for society and should be encouraged. Individuals should have the ability to express themselves, and participate in the interpretation of their culture.

My enquiry has shown that Australian law does not facilitate transformative use. Many forms of transformative expression are not currently permissible without the express permission of the copyright owner. Copyright theory, however, is not in accordance with such a prohibition on transformative use. I will suggest some legislative and judicial reforms to Australian copyright law that can have the effect of encouraging transformative expression, while at the same time providing an economic incentive to invest in creative expression and protecting the legitimate interests of creators in their works.

The primary modification I suggest is that the definition of 'substantial part' in the Coypright Act 1968 (Cth) should be read, in accordance with the interests served by copyright, to allow a consideration of the context in which copyright material is taken. The seeds of such an approach are present in modern judicial interpretations; the discussion that follows attempts to show how such an approach accords with copyright theory, and why it should be preferred by the judiciary. Firstly, with respect to the economic rights, transformative uses of copyright material which are not substitutable for the original expression should not be found to reproduce a substantial part of the original. Secondly, questions of substantiality in the moral rights should be interpreted to protect authors from unreasonable commodification of their works. To the extent to which it is unclear how the right of integrity applies to the context in which a work is used, as opposed to the modification of the work itself, I submit that it should be interpreted such that authors have a right to object to the commercial association of their work with a position, product, or service against their will.

Alternatively, I submit that legislative reform to include an open ended defence to copyright infringement could provide much needed flexibility in the Australian system. Such a defence could draw primarily on the US 'fair use' defence, but certain limitations of the US defence could be overcome in an Australian context. Again, as the theory shows, the primary consideration for infringement of the economic rights in transformative uses should be the degree to which the transformative use is substitutable for the original.

Finally, I submit that the reasonableness defence to infringement of the moral right of integrity should be read in such a way as to ensure that the personal interests of authors does not interfere with the legitimate self-expression of future authors. I will show that the theory does not support moral rights to the exclusion of either the ability of future authors to self-actualise. The operation of the reasonableness defence should be clarified to ensure that the legitimate interests of both past and future creators are recognised.

Our article in the 2005 MULR is now available: Brian Fitzgerald and Nicolas Suzor, 'Legal Issues for the Use of Free and Open Source Software in Government' (2005) 27(2) Melbourne University Law Review.

Note that this article is not available under a Creative Commons licence due to the editorial policy of the Melbourne University Law Review.

This article explains the notion of free and open source software ('FOSS') and the reasons why governments throughout the world are giving it close consideration. In particular, it highlights key legal issues facing the adoption and development of FOSS by governments. From the aspect of government procurement the article examines the models used by governments to create a level playing field for the supply of FOSS, intellectual property warranties and indemnities and the operation of the Trade Practices Act. In terms of government development of FOSS, the article considers the licensing mechanisms that will be implemented in the development and distribution of such software. In the final section, the article assesses the threat software patents and the current SCO litigation provide for FOSS. The article concludes by emphasising that governments need to be fully aware of this landscape to assess what is the most effective technology available.

Blizzard make several popular games, including Warcraft, Diablo and Starcraft. Online multiplayer in these games is limited to using Blizzard's Battle.net service. Battle.net provides a mechanism for users to create and join multi-player games, to meet and chat with other users, and to record statistics and participate in tournaments. Battle.net functionality is built into the games. Blizzard's Battle.net servers check the validity of users' cd-keys when a user connects to the service from within the game. This validation is known as the “secret handshake” which allows only users with valid cd-keys to continue connecting to Battle.net.

The Eight Circuit Court of Appeals has determined that an open source replacement to Blizzard's Battle.net violates the DMCA by bypassing this 'secret handshake'.

Blizzard's End User License Agreements on the games themselves state that a user may not “in whole or in part, copy, photocopy, reproduce, translate, reverse engineer, derive source code, modify, disassemble, decompile, create derivative works based on the Program, or remove any proprietary notices or labels on the program without the prior consent, in writing, of Blizzard”¹⁾

Blizzard's Terms of Use on Battle.net state that a player may not

(ii) copy, photocopy, reproduce, translate, reverse engineer, modify, disassemble, or de-compile in whole or in part any Battle.net software;

(iii) create derivative works based on Battle.net;

(iv) host or provide matchmaking services for any Blizzard software programs or emulate or redirect the communication protocols used by Blizzard as part of Battle.net, through protocol emulation, tunneling, modifying, or adding components to the Program, use of a utility program, or any other technique now known or hereafter developed for any purpose, including, but not limited to, network play over the Internet, network play utilizing commercial or non-commercial gaming networks, or as part of content aggregation networks […]

(v) use any third-party software to modify Battle.net to change game play, including, but not limited to cheats and/or hacks;

(vi) use Blizzard's intellectual property rights contained in Battle.net to create or provide any other means through which Blizzard entertainment software products […] may be played by others, including, not limited to, server emulators.²⁾

The defendants were frustrated by the poor performance of Blizzard's Battle.net service, as well as cheating and otherwise offensive players. They subsequently began free development of bnetd, which would act as a replacement server for Battle.net which gave users more control over the games they played online. To create bnetd, the defendants had to reverse engineer the protocol spoken by Battle.net and the Blizzard games, and they also developed a small utility which was used to modify the Blizzard games so they could connect to other multiplayer servers. Notably, the defendants had no way of enforcing the cd-key validity check, and were forced to treat any cd-key presented as valid.

The district court granted summary judgment to Blizzard, holding that fair-use reverse engineering could be excluded by terms in shrink-wrap or click-wrap contracts, and that the reverse-engineering exceptions in the DMCA do not protect reverse-engineering in order to create fully functional alternative products, or where the program is distributed for free.³⁾

The Eight Circuit Court of Appeals affirmed the decision. Blizzard's EULA and ToS were enforceable contracts, and the defendants had waived any fair-use defence they may have had.⁴⁾ The 'secret-handshake' constituted an effective Technological Protection Measure (TPM), and bnetd circumvented that TPM by allowing all clients to connect. The 'interoperability' exception did not apply, on the basis that the bnetd emulator allowed unauthorised copies of the Blizzard games to be played on the bnetd.org servers. The court considered that this constituted infringement of copyright, and as such, the interoperability defence could not apply. The Court did not consider whether bnetd was a dual use technology which could have both infringing and non-infringing uses, or whether the playing of an infringing copy of a game on an internet server constituted copyright infringement at all.

In Australia, reverse engineering to make interoperable products is protected as an exception to copyright by Copyright Act 1968 (Cth) s 47D. Section 47H provides that section 47D, which was inserted by the Digital Agenda amendments, can not be excluded by contract. In Australia, Blizzard could not require that its users refrain from reverse engineering.

Reverse engineering for interoperability is also an exception to circumvention of a technological protection measure, in s 116A(3), where a 'qualified person' is permitted to circumvent a TPM for a permitted purpose, which includes interoperability from s 47D. A qualified person in this case would mean the owner or licensee of the copy of the game. Section 116A(4)(b) provides a similar exception for supplying a circumvention device.

There is nothing in the text of the anti-circumvention law that prevents the right to reverse engineer for interoperability from being excluded by contract. The exceptions to infringement in s 116A are not protected in the same way as s 47D protects ss 47B(3), 47C, 47D, 47E and 47F.

This case shows that this gap in Australian anti-circumvention law can have real consequences for Australian developers. Reverse engineering for interoperability is an important exception to the exclusive rights of the copyright owner, in that it provides developers with a mechanism to make competing products, or to adapt a technology product to work in new environments.

These exceptions are important – they concern not the piracy of games, but the right of players to make use of their lawfully acquired games in the way they want. A player who purchases a game which doesn't work satisfactorily with another product, like an internet game server, should not be precluded from seeking to play the game on another interoperable server. The right to use a game is a fundamental right of a purchaser of a copy of that game, and if the game must be reverse engineered in order to enable its use, then that reverse engineering should be permissible.

Both the Copyright Law Review Committee Copyright and Contract report and the Philips Fox Digital Agenda Review recommended that the Copyright Act be amended so that the permitted purpose exceptions in s 116A(3) cannot be excluded by contract.⁵⁾ If these recommendations are not followed, there is a significant risk that the ability to create interoperable software in Australia will be crippled, and producers of computer games will be able to require that purchasers of their games are tied to their other software products and services in order to make use of the games.

This week I'm in Edinburgh, attending the VI Computer Law World Conference, and, importantly, the associated GikII workshop which was held on Monday and Tuesday. GikII was a lot of fun – about 30 participants, and a really good discussion.

Predictably, I was speaking about the governance of Virtual Environments; particularly, introducing the hypothesis that the degree of legitimacy of a platform owner will be a very good starting point to knowing whether courts should interfere with their rules and the way they enforce their rules.

Interestingly, Lilian Edwards suggested that European Law would be ready now to look at these sorts of disputes on the basis of EU consumer law (legislated unconscionability). Procedural fairness and transparency is apparently taken into account under this legislation. The problem is, Lilian notes, that such a claim is not likely to be brought in the EU.

I'm not sure that common law unconscionability would be ready to deal with oppressive EULAs, or more importantly, with arbitrary decisions made by platform owners, unless you can frame it in terms of property rights. The discussion of importance and value just hasn't happened yet – particularly, we can't evaluate the importance of social networks to individuals within virtual environments.

My slides are here in OpenOffice ODP or (MS PPT formats; also notes available on the wiki. As always, notes are very poorly formatted, but feedback is appreciated.