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What Principles Apply to Agents? Who Audits the Auditors?

March 30, 2012 2 comments

“Quis custodiet ipsos custodes?”
Decimus Junius Juvenalis, Satires, Satire VI, lines 347–8.

According to Digital Music News, “Google has just tapped the Harry Fox Agency (HFA) to handle certain music-related licensing and administration services for Google Play.”

Depending on what this means, it raises some interesting questions.  As agents for its publisher principals, HFA has been trusted with vast amounts of metadata that many believe more than arguably belong to its tens of thousands of music publishers large and small.  Not only has HFA been trusted with that information, at no time I can think of has that information been of greater value to publishers and songwriters.  Those would be the principals for which HFA is the agent (the “A” in “HFA”).

Agents have lots of duties of loyalty, fiduciary duties, many duties, particularly when they hold themselves out has being the true servant of their principal.  That was all fine as long as HFA was on the same side of the transaction as their principals.

It now appears both due to the company’s rather cloudy role in the RightsFlow transaction and this current story in Digital Music News that HFA’s role is shifting to representing the licensee rather than the licensor at least in some instances.  Or perhaps both the licensee and the licensor.  We call this an “ethical wall” in the law.  In fairness, we should assume that the vast majority of HFA’s business is still in representing licensors and I would also assume that licensors have a far, far better chance of being paid accurately by HFA than by anybody else.  At least to the extent that HFA is provided by the licensee with accurate information in the first place.

My view is that the main value to publishers of using a collective like HFA (or ASCAP, BMI, SESAC, or SoundExchange) is to offload the burden of licensing under the compulsory license available in the US (under 17 U.S.C. 115 for songs or 114(g) for sound recordings for those reading along).  But licensors can do that work themselves if need be, burdensome though it may be.

However, in my view the unique value of using a collective is the ability to audit licensees (like Google) on behalf of a number of publishers, perhaps thousands of publishers and tens of thousands of songs.  This is the ability to audit as a group (or more broadly put, to act collectively to enforce their common rights at a market clearing price).  To conduct an “audit” which is really a royalty examination (not a “financial audit” strictly speaking), there logically must be enough money at stake for a single rights holder to conduct the audit.

I would suggest that the importance of the HFA standard license is that it modified the compulsory license (which does not lay out a procedure for a traditional audit in the regulations as currently drafted, i.e., 37 CFR Sec. 201.19) and gave certain benefits to the licensee not available under the compulsory license (quarterly instead of monthly accounting, for example).  This was arguably in return for the licensee agreeing to certain burdens such as agreeing to be subject to an HFA audit.  Having been on the receiving end of HFA audits in the past, I can tell you that their record company audits were something to behold and really set the standard for the industry to the great benefit of songwriters.

As we have seen with the push for direct licensing in some quarters and the union-busting activities of Google, The Man 2.0 does not like artists and songwriters to organize and the tech oligarchs are incented to stop this pesky organizing and auditing in every way they can.

So if HFA is going to start working for Google, then who will audit HFA’s royalty statements on behalf of their publishers?  And if Google owns Rightsflow, then does that not obviously create several different moral hazards, especially for songwriters and digital retailers who compete with Google Music/Play/Whatever?

Will Google agree to be audited by somone standing in HFA’s shoes, or will HFA discourage its principals from requiring an audit right against Google when HFA is rendering statements?  Or alternatively, will HFA purport to conduct an “independent” audit of itself and would anyone trust it any more than they would an accounting from Google Play’s Rightsflow, certified or otherwise?

Harvard Crimson supports 3 strikes for students: Berkman dealt aces and 8s by campus paper

March 29, 2012 Comments off

[Editor Charlie sez: This post first ran in December 2010]

You gotta know when to hold ‘em and know when to fold ‘em.  The poker capital of Cambridge, Mass. a/k/a The Berkman Center got something of a bad hand in the form of an unsigned editorial from the staff of the Harvard Crimson, the student newspaper at Harvard University, “A Sensible Compromise: The MPAA’s recent approach to illegal downloading is refreshing”.  (Yes, that’s really the title, and no, it’s not a spoof.)

The editorial supports a graduated response plan to call out students who misuse the Harvard network for illegal downloading.  Why?  As The Crimson puts it, because “the unauthorized downloading of copyrighted music, movies, and television programs is wrong.”

Wow.  “Wrong”.  That sounds positively moral.

A bit of context–the 2008 legislation for federal aid to universities–the “higher education bill”–makes a connection between taxpayer dollars for universities and an obligation on the part of those universities to keep their students from using university networks and bandwidth to steal everything that’s not nailed down.  Lessig, a Harvard ethics professor, has said “”What does it say about our democracy when ordinary behavior is deemed criminal?””  I guess it says that “ordinary behavior” is wrong when it is ordinary to break the law.  I won’t even get into the very, very long list of “ordinary behavior” that reeks so badly that even the most relative of moral relativists would have to call foul.  (For an example of relativism, see “Poker money and the ethics prof“.

Apparently, many universities (“thousands” by the looks of the article in The Crimson) are a bit slow on the uptake in developing and implementing these plans.  Although no university has had any interruption in federal largesse, the 112th Congress is shaping up to be a contender for the least porcine Session in many a year.  It’s not like the universities don’t know.  Someone will have to be first.

Long-time MTP readers may remember our 2007 post “Fred von Lohman’s Thimblerig, or Fun with Fallacies on the Short Con” which discussed the ideas in the higher education bill in some detail.  The backdrop for the post was an early example of the “don’t be moral” line of reasoning emanating from the intellectual loins of that starfighter of the EFF who recently was waived in for a soft landing by his ideological fellows at Google.  (See also “Did EFF Lawyer Cross the Line in Limewire Case?”)

So you see, the laudible position taken by The Crimson staff has a history.  The MPAA’s approach isn’t the only thing that’s refreshing:

“Our support for the MPAA’s actions is based on our belief that the unauthorized downloading of music, movies, and television programs, although easy, is questionable at the most basic level. In our postindustrial economy, the protection of intellectual property rights is important for several reasons. First, these rights must be safeguarded in order to provide an incentive for innovation. Without any guarantee of legitimacy, entrepreneurs will have no motivation to create new intellectual property, as it could be stolen at any time. Second, at a broader level, intellectual property rights are important because each person has a fundamental right to enjoy the fruits of his or her mental labor. Intellectual entrepreneurship requires a broad societal commitment to the rule of law and the importance of private enterprise.

This approach strikes the right balance between targeting individuals—who, in the end, are ultimately responsible for their online behavior—and universities, who provide the network resources that can be used to facilitate copyright violations.”

Personal responsibility for “ordinary behavior”, eh?  Lessig could take a lesson from The Crimson.

Class is in session.

Android is the Joe Camel of Privacy: Android Daddy Tells Congress to Live Long and Prosper

March 29, 2012 Comments off

When Eric Schmidt testified before the U.S. Senate Antitrust Subcommittee, he was sworn in and had his swearing in picture taken.  This is as much a rite of passage for Fortune 100 CEOs as is refusing to answer questions under oath on the advice of counsel.  Schmidt did both that day.  In fairness, he only flat out refused to answer questions about Google’s $500,000,000 forfeiture for aiding and abetting the importation of controlled substances and advertising illegal drugs indiscriminately–i.e., to children.  Later, Schmidt had another rite of passage once safely outside of the range of television cameras–in questions for the record, he told Senator Cornyn that he was “confused” by the questions.  Questions his lobbyists and lawyers must–must–have prepped him for answering.

But notice the curious hand gesture with which Schmidt greeted the subcommittee at his otherwise solemn oathtaking.  Is that not the “Vulcan salute”?  Is this guy so smug he thought this would be a funny joke to have in his scrapbook?

Consider these guys pictured below–the tobacco company CEOs about to tell the Congress that cigarettes are not addictive.  Another group with a lot to hide who also jeopardize the health of millions of people.  No Vulcan salutes there.  They know exactly what they are up against.  Of course, none of them ever said their companies would refuse to follow the law, either.

But then again, in order to represent the tobacco monopoly before Congress it took eight guys.  Google just had to send one.

A picture says a thousand gmail accounts….

March 28, 2012 Comments off

Hell is a place where the music is by YouTube; speech is by Google Voice, your car drives itself and royalties are paid by Rightsflow.

Book Review: Cooking Up A Storm, Recipes Lost and Found from the Times-Picayune

March 27, 2012 Comments off

My first trip to New Orleans was a long time ago when I was a little boy and our ship was steered through what was then a far more robust but probably equally treacherous Mississippi delta by one of the great romanticized figures of my childhood, a Mississippi River pilot.  We were making our first landfall after departing Southampton, and after over a month at sea I was being treated to yet another adventure that I had only read about: piloting the vast Mississippi River Delta to dock at New Orleans.

The pilot arrived onboard like a surgeon being made ready for his work.  We’d had pilots on the ship before, but they were not welcomed with quite the same degree of reverence and deference.  Even though the crew did not know this particular pilot nor he them, all knew that he was a man with a special gift and unique knowledge without which our ship would founder.

What made this an extra special adventure was that it was the evening of the day before Ash Wednesday and you could hear the sounds of the Mardi Gras over the moonlit delta like a welcome dirge from inebriated jazz ghosts.  One of the mates lowered a bucket over the side and filled up a mason jar with Mississippi River water that would be neatly labeled and go in my little trunk next to other bottles of water I had collected from the many seas.  I didn’t really know why at the time, but I had this sense that I was doing something that was very special and I was in a place that was one of those jazz nurseries from which formed the protogenius of music, culture and the food to sustain it.

There is no silence quite as disturbing as New Orleans gone quiet.  This was the memory of Katrina that will stick with me forever.  If I had to describe it, it was that feeling that in addition to the horror of the storm, the body of the city had been snatched by voodoo and the quiet hung in the air like a curse.

But less than a year after the storm, we were sitting in St. Louis Cathedral and asked for help for the New Orleans artists who were going to be devastated yet again if the deranged orphan works legislation became law.  I had been helping a group of largely visual artists trying to stop the bill, including trying to get the Small Business Administration to help those opposed to the bill by holding a roundtable for the largely independent artists who were about to be rolled by Google.  I was looking for help wherever I could find it.

Later that afternoon, I walked into my office and the first call after I arrived was from an incredibly helpful lawyer at the SBA asking if I thought it would be alright if they held a roundtable in New York.  I said I thought that would be fine.  Then she asked if I thought it would be a good idea if the SBA held a second roundtable in New Orleans.

I never again doubted that there was a strong and unearthly power protecting that place.

The music came back, the people are coming back and while I wouldn’t say life is exactly normal, I think that the people have found the courage to sing.  God knows they found the courage to cook.

We have been reading Cooking Up A Storm, Recipes Lost and Found from the Times-Picayune by Marcelle Bienvenu and Judy Walker, a collection of recipes from New Orleanians who managed to remember traditional family and local recipes and donated them to those who lost theirs.  Recipes are one of the many family heirlooms that were lost, but they tend not to be the kind of thing that people think about preserving or notice until they are gone.  Cooking Up A Storm not only is a magical book for cooks, but it also tells the story of how families rebuilt their lives and helped their neighbors to rebuild theirs.

Marcelle Bienvenu tells her readers of her mother’s admonition, “Don’t eat boiled crawfish in front of people you don’t know.”

Fortunately, she gave us the recipe even so.

Available from Octavia Books, 513 Octavia Street (corner of Laurel) 504-899-READ (7323).

Take the time–you never know.

March 26, 2012 Comments off

You just never know when the smallest moment will have the biggest impact on a child’s life.

Thanks, Tom.  Good to see you back, but then you never left.

Canard du Jour: Reselling the remix

March 25, 2012 Comments off

Of all the canards foisted on the professional creative community by the professional free riders, none has had such a sustained life as the “non-commercial use” dodge.  I would suggest that the longevity of the fallacy is at the very core of Web 2.0 right alongside another reality: there is no free lunch.  If you do not pay for a product, that’s because you are the product.

How are these two frauds connected?  Fortunately, Lessig crystallizes the scam with yet another elaborate rationalization, his speciality.  Lessig tells us about the “hybrid economy” in his book “Remix”.  And what might the “hybrid economy” be?

“Where commercial entities leverage value from sharing economies.”

Think about that:  Where commercial entities leverage value from sharing economies–or more precisely, where commercial entities extract commercial rents (a/k/a “profits”) that are not shared from works that are “shared” without charge by the creator.  In other words, the commercial entity is given a supply of goods to sell and resell at no charge by users who do not quite understand that they are the product.

Nowhere is this rather demonic paradigm more clearly revealed than in Lessig’s disastrous appearance on The Colbert Reportin Lessig’s unquenchable craving for attention, he found himself caught in a trap and tried to laugh his way out of appearing to be yet another exploitation monger from Silicon Valley.  I don’t know if Colbert intentionally set the trap, but either way we got to watch Lessig in a kind of verbal Chinese finger puzzle of Colbert’s making, but composed almost entirely of Lessig’s own hubris (at 1:12):

Colbert: “The hybrid economy is that everybody does the work, and Flickr makes the money!”

Lessig: “Don’t tell anybody!”

This actually is not funny, unless you think it’s funny that you are the product.  Then you should have a belly laugh.

On the one hand The Man 2.0 wants to say that the “sharing economy” is a noncommercial use of any copyrights that happen to find their way into the “sharing economy” (a/k/a Limewire, Isohunt, Creative Commons or YouTube).  On the other hand, The Man 2.0 wants to extract commercial rents from those user created works–or if you prefer the machine-analog vocabulary, user “generated” works.  Those user works may be family photographs or direct rip offs of other people’s stuff, but the principle is the same.  The user gets nothing, an underlying copyright creator gets nothing, and the “commercial entity” gets all the commercial value it can extract.

Lessig cites Flickr as an example of his “hybrid economy.”   So doesn’t this mean that people who give their copyrights away as part of Lessig’s ‘hybrid economy’–through “sharing licenses”– can have their works exploited to profit commercial entities without compensation?  Is that what is really going on here? After all, when Flickr was sold to Yahoo! for millions in 2005 how much of that money was shared with the people who ‘shared’ their content with Flickr?

It’s natural that Lessig would want to focus on Flickr as a distraction from YouTube, the real behemoth in the “hybrid economy”.  Ever try searching for “Casablanca full movie” on YouTube?  Guess what you get?  Casablanca the full movie, sliced into 10 parts.  In fact, try that search as “[your favorite movie title] full movie” and see what you get.  It’s probably up there and it’s probably sliced into 10 convenient little parts for you to do what you want with.  (Which may explain why YouTube is increasing the maximum length of its clips, given that it’s such a hassle to download all those parts.)

So is that a noncommercial use?  Perhaps if you look at the pages where these clips from Casablanca appear on YouTube you won’t find ads being served.  Does that mean that YouTube doesn’t benefit from having people searching and viewing these and thousands of other clips on the site?

If they didn’t benefit, don’t you think they would take down these clips without ads?  A more likely explanation of why these clips are still up there is not any explanation about “hybrid economies” or anything else–it’s that there is an incremental benefit in traffic that accrues solely to YouTube even if particular pages have no advertising.  At least that’s what the emails from the YouTube founders say unambiguously (produced by YouTube in the Viacom litigation).

Another part of the “hybrid economy” dodge is Creative Commons itself.  The way I read the history, Creative Commons [Corporation] wasn’t founded by a bunch of songwriters getting together saying what we really need is a better way to give away our rights.  It was founded by Lessig following the Supreme Court’s rejection of his ideas about limiting copyright for everyone else.

Let’s be clear: Google benefits from extracting commercial rents from noncommercial uses to an extent we cannot really imagine, and Google is one of Lessig’s biggest financial backers from what we can find.  Google gave Creative Commons $1.5 million and persons related to Google gave hundreds of thousands more.  It should be clear that Google does these things because it profits them to do so.

Which is fine–but don’t try to wrap it up in this “hybrid economy” or “noncommercial use” dodge.  They want you to focus on the “noncommercial” or “sharing economy” and they don’t want you to look behind the curtain at the “commercial entity” eating your lunch.  Actually eating several lunches.  If the Megavideo indictment demonstrates nothing else, it demonstrates how the “hybrid economy” actually works.

Because lunch is not free and these “remixes” are for resale.

__________________

“Canard du Jour” means “duck of the day”

See also “Creative Commons: Because it sure seems to cost a lot of money to give things away for free

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