The Y of VR

Here’s my Y theory of the VR marketplace. Since there is no common file format for making VR content, and no common platforms, each piece of content made has to be custom-made for each platform. We saw this with computers, as well as in mobile. Until there is a common platform, the larger set of creative producers will not produce VR works. Only a few will produce them. So you are not likely to see a lot of content produced for the middle of the market, best analogized to console games, and characterized by Oculus Rift. However, there is a common platform for low end confectionary VR; Google Cardboard. As a result, a wide variety of creative producers can, and have produced for the Google Cardboard platform. This content has limited production value, so it sells at the lower end of the pricing scale. Content can also be made at the higher end of the pricing scale, where production values are critical, and the cost of custom development for a particular platform (or creating in a proprietary platform) is a non-issue. So for example, it works fine for a company to make walk-through VR presentations for large buildings that have not yet been built, or special event theater productions, where the price point is minimally $25,000 per unit up to the millions of dollars.

Thus, there is low end content, and high end content, but nothing in the middle. It is a Y market for VR content.

Failure to comply with the Foreign Corrupt Practices Act may cost your company millions

Pfizer recently agreed to pay out over $60 million to settle U.S. government investigations into whether the company paid bribes to boost business overseas in violation of the Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. §§78dd-1, et seq. The investigations prompted several pharmaceutical companies to develop anti-bribery compliance programs to identify foreign doctors and healthcare workers who may qualify as “foreign officials.” To avoid heavy business costs like those suffered by Pfizer, any company doing business overseas should familiarize itself and comply with the FCPA.

The FCPA was enacted in the 1970s when an SEC investigation uncovered that 400 U.S. companies made questionable or illegal payments in excess of $300 million to foreign public officials. It created criminal and civil sanctions for bribing a foreign public official. The FCPA provisions falls under two main categories: 1) anti-bribery and 2) accounting. The accounting provisions generally require corporations covered by the FCPA to make and keep books and records to accurately reflect the corporation’s transactions and to create and implement a system of internal accounting controls. The anti-bribery provisions prohibit any U.S. individual or firm and certain issuers of securities, from bribing a foreign official or politician to act, or refrain from acting in violation of his official capacity, or otherwise misuse his official capacity in order to 1) obtain or retain business for or with any person or 2) direct business to any person. (Note that the Department of Justice interprets “obtaining or retaining business” broadly so that it covers more than a mere award or renewal of a contract.) The FCPA criminalizes the act of bribery, whether the bribery achieves its purpose or not. Bribery under the FCPA includes an offer, gift, promise to give or authorization of the giving of anything of value.

However, an individual, firm or an issuer covered by the FCPA may assert two affirmative defenses if charged with bribery of a foreign official or politician. First, the individual, firm or issuer may argue that the payment, gift, offer, or promise of anything of value was lawful under the written laws and regulations of the foreign official’s and politician’s country. Second, it could argue that the payment, gift, offer or promise was a reasonable and bona fide expenditure incurred by or on behalf of a foreign official or politician. Additionally, the expenditure was directly related to 1) the promotion, demonstration or explanation or products or services or 2) the execution of performance of a contract with a foreign government or one of its agencies.

Businesses and individuals should comply with the FCPA because it imposes heavy sanctions. From the outset, the Department of Justice may, in its discretion, bring a civil action to enjoin the bribery in a U.S. district court with proper jurisdiction. A U.S. firm or issuer found to be in violation of the FCPA may be fined up to $2,000,000. An officer, director, employee or agent of a U.S. firm or issuer found to be in violation may subject to a $10,000 civil penalty but a willful violation would result in fines up to $100,000 or imprisonment up to five years, or both.

Also, just because you are not a U.S. individual or firm does not necessarily mean you don’t have to worry about foreign anti-bribery law. First, the FCPA also applies to foreign firms and persons who take any act in furtherance of such a bribe while in the U.S. Second, other countries have similar provisions to the FCPA where they have signed onto the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”). Signatory nations to the Convention have agreed to enact domestic laws to criminalize, sanction and prevent bribery of foreign public officials.

To avoid the high costs, a globalized company should pay attention to the FCPA and laws similar to the FCPA, especially in countries where a state government is an active player in the market. As precaution, a company should ascertain 1) whether the party with whom it is doing business is a “foreign official” and 2) whether the payment is a “bribe” or “improper payment” under the FCPA or a similar law. For a more thorough summary of the FCPA anti-bribery provisions, see the Department of Justice’s “Lay-person’s guide” to the FCPA.

Founder’s Interview: eBillity

David Mazur interviewed Douglas Dweck cofounder of eBillity as part of our new monthly initiative to interview clients who have achieved breakthrough success.

Take me back to when eBillity got started. How did you get the idea?
Douglas Dweck came from the time tracking industry with deep operational expertise. He noticed that while there were other time tracking solutions that had many useful features, none of them had all of the best features in one application in the cloud and were smartphone accessible.

What made you think this was an idea worth executing on?
It was clear to us that business applications were moving to the cloud and smart devices like iPhones and iPads are becoming a more critical interface to how people work. We felt that if we could offer a compelling and easy to use tool to service professionals at the right price we would have a great business. Murray Hidary’s experience running Dice.com, the leading job board for IT, led him to believe that people that bill for their time including IT professionals, lawyers, accountants and contractors, would pay for a tool that saved them time and money by making time tracking and billing faster and easier.

How did the cofounders get together, who does what?
The three co -founders grew up together within 2 blocks of each other. Douglas handles the day to day operations of the team while Murray, serial entrepreneur, evangelizes the eBIllity vision and develops new partnerships such as our recent deals with Intuit & Thomson Reuters. David Maleh oversaw the development and launching of the original eBillity application and has now taken a more passive role since his purchase of Blow, a haircare company based in NY’s meat packing district.

What are some of your proudest accomplishments so far?
Our deep integrations with Intuit’s QuickBooks product and Thomson Reuters legal offerings are outstanding. Allowing our customers to capture more billable time makes them more money and that makes us feel great. eBillity has been adopted worldwide and has currently over 37,000 customers who have logged over 50 million hours this year and counting!

What’s eBillity’s vision for the future?
We have a skunkworks project that will allow our elite customers to add a 25th hour to their day. Shh!

Forbes: Leading Venture Lawyer Reveals Best Education Investments Now

An excerpt from Steve Masur’s interview with Forbes:

James Crotty: So, sitting here right now, what do you see as the growth trajectory for education and technology? And for people out there in the ed tech space coming up with new ideas, what are some fertile areas you would like to see some of that computer brainpower going into?

Steven Masur: I would cite three main areas: gamification, interactive communication, and technology-assisted research. But, ever since the early days, what happens in most Internet, Web-based, and mobile-based initiatives is disintermediation. That is, cutting out the middleman. That’s what I think will be happening in the education industries. I see them as multiple industries.

It’s happening in publishing. And publishing is clearly an educational industry in which there is a whole educational book publishing industry. And technology is having a massively disruptive effect on that industry. There is also a lot of money flowing toward this. So, what you will see is almost a redistribution of money, because technologic change is not really changing the rate at which people read books.

And there is an oral education industry. Didactic speaking in front of students and Socratic method teaching. These ancient methods are all methods that technology can enhance. The Socratic method, for example, doesn’t have to take place in a room anymore. You could do that over, like you said, text messaging or video chat.

Skype is something that is being used as an educational platform by default. But getting someone to use a new technology is the most difficult thing in the world. You need to get somebody to use it for a compelling reason. And education is a compelling reason. For example, Mary Helen Bowers, the prima ballerina who instructed Natalie Portman for “The Black Swan,” teaches her Ballet Beautiful classes using Skype when her celebrity clients are on location and cannot come to her studio. This practice was born of the compelling need to do these classes from location. And the compelling needs of education are the same. People are just picking up these technologies and using them. And companies and businesses will catch up to that. Read the full article.

“Reveal Day” and new gTLD’s: a prelude to the changing face of the internet

By: Laura Levin-Dando

About a year ago, ICANN, the Internet Corporation for Assigned Names and Numbers, began accepting applications for new domain name suffixes, specifically generic top-level domains, or gTLD’s. At $185,000 per application, groups have applied to create new website suffixes beyond the standard “.com” or “.net”; some of the applications include “.design,” “.website,” and “.rip.” After a number of delays to the originally announced date, the full list of more than 1,900 gTLD applications will be publicly released today on “Reveal Day,” June 13, 2012.

Reveal Day is important to the players who have submitted applications, who will soon learn the full list of gTLD’s and respective applicants, which comes with implications such as potential conflicts or bidding wars that may result between applicants vying for the same gTLD. Starting today, there will be a 60-day time period, during which the general public may access and comment on the applications. Additionally, this date will trigger a seven-month “objection period,” during which groups may challenge an application. Entities may object to an application on a variety of grounds, including possible negative ramifications of a gTLD with regard to “legal norms of morality,” or conflicts with existing “rights or other legitimate interests,” such as trademark ownership. Brand owners especially should keep an eye out for applications that “consist of or incorporate [their] registered or unregistered trademarks.” A list of legitimate reasons for objection, as well as guidelines for filing, responding to, and resolving objections can be found here. Moreover, brands should see the list as an opportunity to gain a glimpse into the inner-workings of competitors; in addition to potential trademark disputes, it is possible that Reveal Day applications may reveal general marketing and business strategies of different companies.

This is not just a time for applicants to pay attention to the list of potential gTLD’s, but a time when many other parties’ interests may be affected. In addition to applicants themselves, a list of those who should be particularly conscious of the revealed list of gTLD applications includes investors, trademark owners, intellectual property attorneys, and “anyone that uses the internet.” There is no denying that the introduction of potentially hundreds of new gTLD’s will change the face of the internet- from how companies use it to interact with and present themselves to the public, to the way individuals navigate the web day by day. This dramatic change to the internet landscape is lauded by some as an inevitable progression, a way to promote creativity and competition on an extremely relevant communication and interaction platform. However, there are others who are skeptical, worried that new gTLD’s will make the internet less user-friendly or that smaller businesses who could not afford the initial application fee (much less the annual $25,000 fee to whomever is awarded a gTLD) will be at a disadvantage in the marketplace. Given the many costs and benefits this development will have, it is clear that the way parties conduct business, and the way individuals relate to those businesses on the internet will be facing drastic changes. Businesses, small and large alike, would find that it is in their best interest to create an immediate strategy to determine the impact this will have on their operations, and devise a response plan in order to stay ahead of the curve in an ever-evolving internet-based marketplace.

Sources:
www.jdsupra.com
www.washingtontimes.com
www.thedomains.com
www.markmonitor.com

The Dish’s Hopper: customer choice or copyright infringement?

By: Laura Levin-Dando

According to recent complaints filed by several major television networks, there may be a fine line between traditional time-shifting, digital video recording (DVR) technology and copyright infringement. NBC, Fox, and CBS each filed complaints in federal court in California on May 24, claiming that Dish Networks is violating copyright law in the way it broadcasts content to its subscribers. Dish provides its subscribers with the “Hopper,” a device that records and stores content, and also allows subscribers to view network content commercial-free, through a “Primetime Anytime” feature. Primetime Anytime essentially functions to copy and store all primetime programming from a number of television networks on an eight day cycle, and it does not require any action on the part of the subscriber beyond activating this function. (Thus, the networks maintain that it is distinguishable from a traditional DVR, which requires a viewer to take affirmative steps to designate the particular hours during which the device should record content.) Furthermore, when activated, the Hopper’s “Auto Hop” function automatically skips all commercials while viewers play back recorded content. According to Fox, Auto Hop does not serve as a typical DVR time-shift mechanism. A traditional “fast-forward” function prompts viewers to manually pass over commercials; conversely, Auto Hop serves as an automatic setting in which the viewer may choose to have the presentation simply skip commercials.

This novel service poses a number of issues, which are addressed in the networks’ complaints. First of all, the networks claim that Dish’s recording and storage of the networks’ programming is unauthorized and thus in violation of copyright law. If the law comes out on the side of the networks, Dish may be liable not only for direct infringement (the copying and distributing of content that violates the networks’ exclusive rights as copyright holders), but also for indirect copyright infringement. The networks assert that by advertising, providing customer service, and making the equipment and technology available to consumers, Dish induces and contributes to copyright infringement on the part of its subscribers. Second, according to the networks, the Hopper’s Auto Hop function threatens the “fundamental underpinnings of the broadcast television ecosystem.” In other words, the networks invest substantial amounts of money into the production and dissemination of their content and rely heavily on advertisers to provide a return on their investment. Normally, advertisers are willing to pay top dollar to have their ads placed during or around primetime programming hours. However, if viewers use a device that automatically skips commercials, the networks contend that advertisers will be far less likely to pay networks for ad placement during primetime hours, compromising a primary source of network revenue and therefore the networks’ ability to produce its programming. Along with advertiser-supported broadcasts, networks generate revenue through licensed broadcasting of programs on an on-demand basis through individual cable television providers, on-demand online access (both on the network’s own website, as well as licensed websites, available with commercials, or commercial-free), domestic syndication, and sale of “fixed media,” such as DVDs and Blue-Ray Discs. The networks worry that Dish’s services threaten to displace a substantial amount of their revenue stream.

In its complaint, Dish asserts that its services simply give consumers more control over an already-existing right to choose not to watch certain content that they do not desire to watch. Claiming that “this case is about freedom of consumer choice,” Dish states that Auto Hop fits into a long-standing history of time-shifting in television viewing (dating back to the VCR), which allows viewers to choose to skip over commercials. Auto Hop simply provides a more efficient, streamlined way for subscribers to watch television, with the option to view network programming commercial-free. Since Auto Hop does not technically modify the original recording at all (i.e. commercials are not deleted, and may be viewed on the recording), Dish should not be found to be acting in violation of copyright law. From a policy perspective, there is a compelling interest in guaranteeing consumers an efficient tool with which to control their television viewing. Dish does pay the networks a substantial amount of money (hundreds of millions of dollars per year, according to Dish’s complaint) in exchange for the licenses to broadcast the networks’ content. It thus stands to reason that Dish subscribers should be offered a prime viewing experience, and Dish is justified in its pervasive argument that the service it provides customers should not be compromised. However, it appears as though a fact-finding will be necessary to settle what seem to amount to factual disputes regarding Dish’s contracts with the networks, as well as the extent of potential copyright infringement taking place.

 

Source: http://www.hollywoodreporter.com/thr-esq/fox-cbs-nbc-sue-dish-329287

SoundCloudability

By Steven Masur (June 7, 2012)

Why Should We Care About SoundCloud?

SoundCloud is a glimpse at what the future of music looks like. Here’s why. You can do anything on SoundCloud, and SoundCloud can do anything. In order to get the full width and breadth of SoundCloud’s opportunity, you have to look at YouTube, not Spotify. In the same way that YouTube is not a video service like Netflix, Soundcloud is not a music service like Spotify. YouTube is a place to experience and share all types of video, from the intensely personal, to the major commercial release. SoundCloud does this for sounds.

Those sounds can be anything from a recording of a broken water fountain that makes a nice beat (http://snd.sc/IGkyY5), to a great new artist sharing music for free in order to make a name for himself (http://snd.sc/s1kQqp), to a major artist sharing a sample in order to promote an album or live tour (http://snd.sc/tef9WN), to the same artist offering sets for sale (http://snd.sc/cCfGgl). Soundcloud can be used as everything from a music service, to a collaboration tool.

Furthermore, SoundCloud is frictionless and on track to become ubiquitous. If you put me in a room with 30 people each with a different device, from laptops, to mobile phones, to set top boxes to tablets, I can have all of them playing and recording sounds from SoundCloud in 5 minutes.

So is it just people stealing music, or terrible self-releases you don’t want to hear? No, I don’t think so. It’s actually great as a music service. If you take half and hour to “follow” a few people you like and save a few good things to your favorites, you can pretty much hit play and SoundCloud will do the rest, like Pandora, but with far less obvious musical references. With Spotify, if you hit play without spending a few hours setting yourself up with some great playlists, you can easily end up with the greatest hits of a Clear Channel commercial programmer.

Staying Perfectly Legal vs. Making Money for Artists

Is SoundCloud perfectly legal? No, but neither is YouTube. Nobody ever did anything great without taking some risks and changing the way people think about things. SoundCloud has some major IP hurdles to overcome. The crushed revolts throughout human history show that the incumbents are never excited about change. But SoundCloud can make everyone’s experience of life richer and if you are in the business of selling music, it can make you lots of money.

…but some industry players are going to be disintermediated. It is no longer going to work for the law to support populations of people who no longer add much to the value chain, and technically just cost artists money. SoundCloud adds value, and transfers it directly to the artist in two ways, viral promotion, and direct access to fans (and their money).

Viral Promotion

When you upload a track to SoundCloud, anyone can listen to it, comment on it, and share it with friends on any device. They can pinpoint the exact part they like, and say why they like it. They can follow the artist and check out what the artist is listening to. They can follow other people following that artist, and check out what they like, whether the person responds to their friend request or not. It is all based on musical integrity; sharing what you like with others.

In this way, SoundCloud is the college to Spotify’s middle school.* Spotify has “everything.” Well, everything you can license from a major label. SoundCloud has everything there is, not just what the industry is shilling. It is a multidimensional ecosystem of trash and treasure.

For me, new music has to be a little dangerous to be compelling. It has to push the envelope. Most music services lack this dangerous Wild West component. They are the ABC, NBC and CBS to Mixcloud and SoundCloud’s Vimeo and YouTube. Anyone can upload onto SoundCloud, but in order to get on Spotify, you need to be “somebody.” You’ve got to have some traction, commercial heft and be represented by a known label. Indeed, in order to continue to offer a compelling subscription service, Spotify must actively keep its offering clean and free of the sort of crap on which SoundCloud thrives. As a result, these services complement each other.

But the real difference for artists is that with Soundcloud and Mixcloud, you don’t need a label, or anything else. You just upload your stuff, start promoting and you can make money.

Let’s Make Some Money

Direct access to fans really is such a beautiful thing. You can develop a dialog and relationship. You can find out what they like by hearing from them directly, and in an extremely granular way, down to the 100th of a second in your track, adapt your music, make it better and re-release. You can answer the question, “what makes a good DJ or artist good.” Your followers are telling you what’s good or not.

Money. Unfortunately for artists, these are still early days, SoundCloud is new and it is still defining itself. Like nearly every music service that has preceded it, there is a something of a cooler than thou attitude to the management, and you’re not quite sure who they are going to piss off. This, of course, is common in both music and technology, we’ve all seen it before, and we hope they don’t get sued out of existence, like so many of their predecessors. But on a fully evolved SoundCloud, you could:

– stream your track for free to give people a “taste”, without giving them the whole meal

– Allow users to download MP3s of tracks you want to give away

– Allow users to download and PAY for tracks you don’t want to give away

– Allow users to download and pay for whole albums, collections and mixes

– Promote your live shows

– Promote your merch

– *Create advertising and sponsorship supported pages, without ruining the “free” experience enjoyed by everyone else

– *Upload full radio shows containing work from various artists, such that each artist gets the promotion AND can sell their tracks and albums with referrals directly from the radio upload.

– Stream 24 hour fully ad-supported radio just like the terrestrial radio stations, in fact existing stations could stream themselves on SoundCloud for a rev share.

What Makes SoundCloud Different?

OK, so anyone can compete with SoundCloud with ubiquitously available software, so there are, of course, tons of competitors. But most of them live within the confines of the streaming compulsory license. So the user experience is like SoundCloud lite. You can’t upload, you can’t collaborate, you can’t even rewind. So you’re just a fan, you have to stay in your box and take what you deserve. But at least you’re legal. What about the legality of SoundCloud? Like the state of the law, and a good Minute Men song, I will stop writing with this question left unanswered.

*Footnote: In middle school, I listened to KISS, Van Halen, Led Zeppelin, The Doors, Foreigner, Bad Company, Crosby Stills Nash and Young, Cat Stevens, Iron Maiden, etc. To me, that was “everything.” In high school I branched out into DEVO, Flipper, Black Flag, James Brown, Parliament Funkadelic, Oingo Boingo, the Sex Pistols, David Bowie, Bob Marley, The Grateful Dead, yada, yada. But in College? Forget about it. I devoured anything you threw in front of me like a starving animal, not just what major labels were releasing. I would burn through all the CMJ offerings and promos that got sent to my college radio station, then range around trading tapes with strangers, from Brazilian funk, to African rock bands from the 1970s, to Navaho chants, to Indian tabla and sitar tracks, to strange Asian stringed instrument sounds. OK, NOW I was listening to everything. That’s what SoundCloud allows you to do, only without working quite as hard.

Encouraging entrepreneurship and economic development in the United States

By: Laura Levin-Dando

On Tuesday, May 22, the Senate introduced a bipartisan bill, Startup Act 2.0. This bill, introduced by Senators Jerry Moran (R-Kan.), Mark Warner (D-Va.), Marco Rubio (R-Fla.), and Chris Coons (D-Del.), aims to promote the growth of new businesses in the United States, along the same lines as the recent JOBS Act, which we recently blogged about here. The bill offers tax breaks and tax credits that favor startup businesses, but a notable aspect of the Startup Act 2.0 is a focus on keeping international talent in the United States, hopefully securing the U.S. a leading role in fostering entrepreneurial and innovative talent. Instead of returning American-educated, foreign-born individuals to their home countries upon completing their respective degrees, the bill aims to preserve a critical mass of talented innovators who will contribute to the American economy and job market.

New STEM (science, technology, engineering, and mathematics) visas would allow those with U.S. master’s degrees and Ph.D’s in those fields to stay in the country after graduation, and entrepreneur’s visas would allow legal immigrants to remain in the United States in order to execute their startup businesses in the country. Additionally, the bill would eliminate per-country caps for employment-based immigrant visas. The mission is clear: in order to compete with the startup job markets in countries like India and China, the United States must commit to ensuring that the jobs, and therefore the entrepreneurs and other talented minds, maintain a significant presence in the U.S.

Tax breaks and subsidies are certainly helpful in giving the U.S. a competitive edge with regard to advancing the viability of startup businesses. However, without talented individuals in the country, the U.S. cannot maintain the numbers we need to create a significant environment of support for these businesses. The Startup Act 2.0 intends to bridge that gap by turning the Unites States into a hub of creativity and entrepreneurship, fostering the growth of domestic businesses as well as the creation of jobs.

 

Sources:

http://www.politico.com/news/stories/0512/76579.html
http://www.policymic.com/articles/8702/startup-act-2-0-will-make-sure-the-next-google-is-made-in-america
http://www.trackitt.com/usa-discussion-forums/i485-eb/1011680667/new-bill-startup-act-2-0-eliminates-country-based-limits
http://www.accountingtoday.com/news/Senators-Introduce-Bill-Encourage-Startup-Businesses-62764-1.html

 

Is the end of ClearQAM near?

By: Gabriel Goldenberg

Issue: Encrypting signals carried on basic service tier

On October 20, 2011, the Federal Communications Commission solicited comments to a proposal to eliminate the basic service tier encryption prohibition for all-digital cable systems (http://apps.fcc.gov/ecfs/document/view?id=7021738292). This proposal has created a debate that pits the Goliath cable service providers like Comcast and Time Warner against Davidian consumer electronic device startups led by Boxee.

Legislative Background

The prohibition against encrypting basic service tier cable arose from the Cable Television Consumer Protection and Competition Act of 1992.

Cable system operators shall not scramble or otherwise encrypt signals carried on the basic service tier. Requests for waivers of this prohibition must demonstrate either a substantial problem with theft of basic tier service or a strong need to scramble basic signals for other reasons. As part of this showing, cable operators are required to notify subscribers by mail of waiver requests. (47 CFR 76.630)

Congress’ aim was to significantly advance compatibility between cable service and consumer electronics equipment. Congress determined that the rule would have a minimal impact on the cable industry since most cable systems at that time did not scramble their basic tier signal.

With the transition to digital transmission, program carriage agreements increasingly required cable operators to encrypt their programming to ensure that programming is only available to subscribers who have paid for service.

The proposed rule change will allow cable service providers to encrypt their entire cable programming service tier.

Benefits of Encryption

Cable operators applaud this proposed rule change as an effort to “eliminate outmoded regulations,” that were adopted in a very different television broadcast environment. Cable operators emphasize that the potential efficiency and environmental benefits greatly outweigh any harm to consumers.

The prohibition against basic tier encryption was enacted in a very different television broadcasting landscape from the one that exists presently. In 1992, consumers had free access to 60-80 analog channels on their televisions. Satellite service was in its infancy, telephone companies were not yet providing video services, and consumers did not have the ability to stream video over the Internet.

Today, the digitalization of cable means that only about 20 basic tier channels are available to consumers without a set top box. A very large majority of digital cable customers have some sort of premium cable service which requires a set-top box or CableCARD. Additionally, consumers have been increasingly accessing premium broadcasting through satellite television, their phone companies, and over the internet through services like Hulu. Proponents of the elimination of this FCC rule claim that very few consumers would actually be affected if all digital cable becomes encrypted.

Repealing the FCC’s prohibition against encrypting digital cable will allow cable companies to hasten the transition to all-digital service, improve service quality and reliability, and reduce service change response times and service visits. Digital cable makes possible two-way communication through consumers’ televisions. This provides advanced interactive services to consumers like video-on-demand and interactive program guides.

Additionally, encrypting the entire digital cable spectrum will have the additional benefit of allowing cable service providers to activate and deactivate service remotely without sending a service technician to the activation site. This will theoretically reduce costs for consumers by reducing the number of technicians needed to perform these types of task as well as the associated vehicle costs of transportation for technicians. Reduction of activation trips will have the environmental side benefits of reducing gas consumption and vehicle emission pollution.

 

Negative Effects of Encryption

Opponents of the encryption plan argue that this just the latest effort by the cable lobby to try to bolster declining cable television subscription numbers.

 

http://blog.boxee.tv/2012/02/08/cable-companies-want-government-to-help-them-increase-your-bill-limit-competition/

Detractors are quick to point out that there are few advantages to consumers from the promulgation of this proposed rule change. Encryption of the digital signal would inconvenience millions of consumers while producing environmental benefits that are miniscule at best.

Cable Television Consumer Protection and Competition Act established a policy that the United State government wanted broadcast channels to be freely available. This proposal would be a divergence from that policy without a necessarily compelling reason to do so and it would create new challenges for consumers to economically receive the broadcast channels on their televisions.

This proposed rule change will mean that televisions that connect directly to cable antennas, devices like Boxee, tv-tuners built into computer video cards, and numerous standalone tv-tuner boxes will no longer be able to get broadcast channels if they will be able to work at all. While data on how many consumers actually use these devices is murky since cable companies do not track ClearQAM use, it is estimated that there are millions of such devices in use. Industry groups have suggested that many consumers use devices that rely on ClearQAM in addition to premium cable service subscriptions that rely on cable decoder boxes or CableCARD devices.

Additionally, detractors claim that the proposed cost savings to consumers and environmental benefits are merely illusory. Encrypting the basic service tier will force consumers to purchase additional set top boxes, costing consumers hundreds of dollars a year in equipment rental fees, and earning cable companies millions of dollars in additional revenue.

Cable service providers advocating for this proposed rule change tout the cost savings and environmental benefits of requiring fewer service technicians to go on-site to activate and deactivate cable service. Advocates for the status quo argue that the reduction of service calls will be minimal since many of the major cable service providers, including Comcast, TimeWarner Cable, Charter and Cox, already offer self-install kits. Moreover, the set top boxes that cable companies rent out to subscribers to decode cable signals actually consumer more energy than ClearQAM alternatives such as video cards and devices like Boxee Live.

To view the FCC proposed rulemaking and public comments: http://apps.fcc.gov/ecfs/proceeding/view?name=11-169

To add your own comment:

http://apps.fcc.gov/ecfs/upload/display?z=11d3j

(Proceeding 11-169)

 

Should Mark Zuckerberg close his Facebook account in the wake of the Viacom v. YouTube decision?

By: Kristine Holm

Last week, the Second Circuit handed down its long-awaited decision in the Viacom v. YouTube copyright litigation. Although those on each side of the argument claimed that the decision fell in their respective favor, the Court’s rulings in its complex, 39-page opinion did not provide a clear “win” for either the content industry or the tech industry. Some issues were seemingly answered, but then remanded for further fact finding. In short, this opinion did not provide definitive answers as to whether YouTube’s actions have removed it from the DMCA’s safe harbor protection. In fact, it makes us wonder – should Mark Zuckerburg close his Facebook account in light of this decision?

We ask this question to illustrate the lingering uncertainty that tech companies face with respect to liability for knowledge of infringing content on their websites. Section 512(c) of the DMCA provides a safe harbor from liability for online service providers whose users upload copyright-infringing content. However, an online service provider is disqualified from this safe harbor protection if it has knowledge of specific instances of infringing content on its site and does not act expeditiously to remove that content. This knowledge can be actual knowledge, or can be what is referred to as “red flag” knowledge, i.e., an awareness of facts and circumstances from which infringing activity is apparent. In the YouTube case, the Second Circuit held that the District Court interpreted the DMCA correctly – that in order to be disqualified from the safe harbor, knowledge of infringement, whether actual or red flag, must be specific and not merely a general awareness.

Although YouTube affirms a high standard for demonstrating knowledge – which, on its face, is good news for the tech industry – the Court then held that the District Court’s summary judgment for YouTube was premature. After reviewing the facts on record, the Court found that a reasonable juror could conclude that YouTube had actual knowledge of infringing activity, or was aware of facts and circumstances from which specific infringing activity was apparent. Thus, the District Court erred in granting summary judgment.

Specifically, the Court gave weight to several internal email exchanges in which YouTube’s founders identified video clips uploaded by users and discussed whether those clips should remain online. In the emails, specific videos are discussed, including “budlight [sic] commercials” and a “CNN space shuttle clip.” Furthermore, the words “clearly infringing, official broadcast footage” were used with regard to Premier League football (soccer) footage, and the words “blatantly illegal” were used in reference to video clips of Viacom television shows including Family Guy, South Park, MTV Cribs, Daily Show, and Reno 911. The Court believed that these aforementioned emails could indicate the type of specific knowledge necessary to be disqualified from the safe harbor protection and incur liability for infringement (in contrast, the Court did not find the requisite specificity in the general knowledge that an estimated 60% to 80% of all material on YouTube was infringing).

Which brings us back to Mr. Zuckerberg…. If Mark Zuckerberg is logged in to his Facebook account and, while browsing through his friends’ photo albums comes across infringing content, does Facebook now have knowledge of specific infringement sufficient to incur liability? If, for example, one of Zuck’s friends has posted still photos from Hollywood movies or other material that could be considered “clearly infringing” or “blatantly illegal,” could Facebook fall outside of the safe harbor for those specific instances? If the emails in the YouTube case may be sufficient to constitute knowledge, then perhaps Zuckerberg’s comments on an infringing photo would constitute knowledge of that infringing material.

In summary, although the YouTube decision affirmed the necessity for specific knowledge of infringing activity before incurring liability, it leaves open, for the time being, the type of knowledge that would rise to this level. Tech companies should follow this case on remand in order to remain apprised of the answers to this question.

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MasurLaw is a full-service transactional law firm focused on the media, entertainment and technology sectors.