Truthiness on the Market

Last week, a couple of bloggers—one of whom spent a few years as an assistant law professor a decade or so back—wrote a laughably inaccurate critique of my paper with Chris Hoofnagle, What We Buy When We Buy Now, which is out now in the University of Pennsylvania Law Review. 

A response of commensurate seriousness and rigor probably would have taken the form of a single animated gif. Nonetheless, I can't resist the urge to outline their inept effort in more detail. But before getting into the specifics, some context might be helpful. What We Buy When We Buy Now reports the results of an empirical survey designed to measure the extent to which consumers understand the bundles of rights they acquire when they obtain digital media goods from companies like Amazon and Apple. In particular, we were interested in whether the phrase "Buy Now" accurately communicates to consumers the restrictions on use, possession, and alienability that are part of those bargains.

As it turns out, after constructing a simulated e-commerce site offering digital books, music, and movies and surveying nearly 1300 respondents, we found that a significant number of consumers are mistaken about what rights they get when they Buy Now. And that rate of confusion was considerably higher than the rate among those who purchase corresponding physical goods. What’s more, removing the Buy Now button and replacing it with a short notice outlining the things consumers can and can’t do with their purchases reduced confusion significantly. We also establish that these rights are material to consumers. That is, they affect whether consumers will buy these products and at what price. 

One final prefatory point on the timing here. The critique of our work comes on the heels of  the USPTO and NTIA announcing a Public Meeting on Consumer Messaging in Connection With Online Transactions Involving Copyrighted Works. The event grows out of the Commerce Department's White Paper on Remixes, First Sale, and Statutory Damages, which expressed some concerns about misleading terms like Buy Now. I was asked to present our work there and expect it to play a role in shaping the conversation. The critique does a great job of distracting from the issues on the agenda, issues that could have uncomfortable financial and public relations consequences for a handful of powerful companies.

Ok, so these two wrote a 2600 word response to our article. It was a real slog. I mean, are these guys paid by the word, or what? I expect long-winded posts from academics; we have nothing better to do with our time. But I'd expect a couple of free-marketeers to be out there contributing productively to the economy or something. So what flaws do they point out in our study? The following is as close as they come to actually addressing that question:

The authors seek to establish this deception through a poorly constructed survey regarding consumers’ understanding of the parameters of their property interests in digitally acquired copies. (The survey’s considerable limitations is [sic] a topic for another day….)

Cool story, bro.

In all that text, they don’t offer a single meaningful critique of our survey methodology, the reliability of our data, or our analysis of the data. Hell, they don’t even bother to summarize our findings, lest some stray reader make up their own mind. Instead, they argue the data don’t matter. And they offer their own set of assumptions about the state of the world that are inconsistent with the facts we present. Call me old fashioned, but I’m not ready to embrace the world of alternative facts just yet. If you want to critique empirical research, you have to engage with the evidence. These guys don't even try.

From there, they begin constructing their straw man, putting words in our mouths and mischaracterizing our conclusions in terms that are easier for them to dismiss. For example:

[T]he authors assert, because the common usage of the term “buy” indicates that there will be some conveyance of property that necessarily includes absolute rights such as alienability, descendibility, and excludability, and digital content doesn’t generally come with these attributes. 

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We assert no such thing. In fact, we did the opposite. Rather than asserting, we asked consumers what rights they thought they obtained in digital transactions. The results were mixed. Some thought they obtained a right to lend their ebooks; others didn't. Some thought they obtained the right to leave their mp3 collections in their wills; others didn't. The key point, however, is that a significant percentage of consumers—far more than in the case of physical goods—misunderstood the nature of these admittedly and obviously non-absolute rights.

Our critics might not like the results that we uncovered, but they don't get to dismiss them by insisting that our conception of property requires some sort of absolute transfer of rights.

But they go on:

Getting to their conclusion that platforms are engaged in deceptive practices requires two leaps of faith: First, that property interests are absolute and that any restraint on the use of “property” is inconsistent with the notion of ownership; and second, that consumers’ stated expectations (even assuming that they were measured correctly) alone determine the appropriate contours of legal (and economic) property interests. Both leaps are meritless.

They are wrong on two fronts here. First, neither of these assumptions are necessary to establish our fairly modest claims. Second, we don't make either of these assumptions in the paper.

The claim we are making is that the Buy Now button inaccurately communicates something to consumers about the bundle of rights they acquire. The precise content of that bundle isn't all that important, so long as the rights at issue are material. It could be a big bundle or a small one, an absolute bundle or one subject to all sorts of restrictions and limitations imposed by public or private actors. Our goal was to assess the potential mismatch between the bundle consumers thought they were getting on the basis of the Buy Now label—whatever it happened to be—and the bundle as described by the license terms under which these goods were sold.

The relevance of that assessment has precisely nothing to do with "the appropriate contours of legal (and economic) property interests." This paper does not argue that we should reshape property law or expand copyright's first sale doctrine in response to these survey results. We certainly don't claim that consumer perceptions alone should define the scope of property interests. Our critics don't provide a quote or citation for that claim, because they can't.

Instead, what we argue is far more modest: that digital retailers should use language that informs consumers in a clear and effective way about the nature of these transactions. For the market to work well, consumers need accurate information about the products they are buying. And what bundle of rights is transferred in the context of a digital good is crucially important information. Today, consumers are expected to wade through 20,000 word license agreements in order to obtain it. Fixing that particular problem does not require a change to copyright or property law. 

Then things start to get comical, as our critics—in response to a study that reveals what consumers actually think based on, you know, like, evidence and stuff—make a number of speculative and wholly unsupported claims about how they assume consumers should think. Here are a handful of highlights:

When we buy digital goods, we probably care a great deal about a few terms. For a digital music file, for example, we care first and foremost about whether it will play on our device(s). 

In fact, given the price-to-value ratio, it is perhaps reasonable to think that consumers know full well (or at least suspect) that there might be some corresponding limitations on use — the inability to resell, for example — that would explain the discount. 

P&H want us to believe that consumers can’t distinguish between the physical and virtual worlds, and that their ability to use media doesn’t differentiate between these realms. But consumers do understand (to the extent that they care) that they are buying a different product, with different attributes.

And, furthermore, the notion that consumers better understood their rights — and the limitations on ownership — in the physical world and that they carried these well-informed expectations into the digital realm is fantasy. 

Here we have a set of claims about what consumers "probably" care about and what is "perhaps reasonable" to assume they "suspect." Upon what are these suppositions based? Apparently, our critics' superior instincts about consumer psychology. Because they sure aren't based on evidence. We went out and did the hard work of finding out what consumers actually believe. But our critics would rather trust their guts than accept the evidence we present. Part of what is on display here is the reluctance of a certain lineage of law & econ dude to admit that his convenient assumptions about the way the world works might not correspond all that well to reality.  

It turns out this unwillingness to confront reality carries over to the question of price as well. Our critics argue consumers should know they are getting a lesser set of rights because digital goods are so much cheaper than their physical counterparts. To support that claim, we get some back of the envelope calculations based on—and I'm not joking here—the price of CDs in 1982, which adjusted for inflation is $38 today. Putting aside the fact that we took price variation into account in our study, this is an astoundingly dumb argument. Let me get this straight: Today's consumers, many of whom weren't even born in 1982, should know they are getting a lesser bundle of rights in digital goods because CDs were really expensive 35 years ago? Back to the real world, the fact is digital and analog copies are often priced very similarly today, and in a surprising number of cases, digital copies are actually more expensive, not less. But hey, don't let the facts stand in the way of a good story, right?

Then they move back to this refrain:

P&H believe that digital copies of works are sufficiently similar to analog versions, that traditional doctrines of exhaustion (which would permit a lawful owner of a copy of a work to dispose of that copy as he or she deems appropriate) should apply equally to digital copies, and thus that the inability to alienate the copy as the consumer wants means that there is no ownership interest per se.

Citation needed. We do not make this claim in the article. That's not what this article is about. And any honest person who bothered to read what we wrote would understand that it is not advocating for a change in copyright law, the first sale doctrine, the law of sales, or the law of property. It is presenting data that reveal how consumers understand these transactions and then analyzing that data through the lens of false advertising law. 

At root, P&H are not truly concerned about consumer deception; they are concerned about what they view as unreasonable constraints on the “rights” of consumers imposed by copyright law in the digital realm. 

At root, Geoffrey Manne & Neil Turkewitz are not truly concerned with our scholarship; they are concerned about maintaining cozy and profitable relationships with companies like Amazon. See how easy that is? I have no idea if it’s true. And even if it is, it wouldn’t invalidate any accurate, substantive critique in their post—assuming you can find one. 

But I confess, through their unparalleled powers of reading between the lines and divining the secret motivations, these two have uncovered my deep dark secret. I admit to you all today: I support a digital first sale right

At times, it feels like these guys would rather be writing a hit piece on my book with Jason Schultz, The End of Ownership. And these concerns about digital first sale and the balance between IP and personal property would be legitimate grounds for disagreement there. But this paper, to repeat the refrain, isn't about that question, no matter how much they want it to be. Fellas, if you want to write a nasty blog post about the book, just let me know. I'd be happy to send you a couple of copies.

Then, without a hint of self awareness, they conclude with this gem:

When one starts an analysis with an already-identified conclusion, the path from hypothesis to result is unlikely to withstand scrutiny, and that is certainly the case here.

Finally, a point on which we can agree.

The Year Ownership Broke

We're taking part in Copyright Week, a series of actions and discussions supporting key principles that should guide copyright policy. Every day this week, various groups are taking on different elements of the law, and addressing what's at stake, and what we need to do to make sure that copyright promotes creativity and innovation.

One of our worries in writing The End of Ownership was that, given the pace of traditional print publishing, the questions we raise would be stale before the book made its way into the hands of readers. It turns out that fear, unlike many expressed in the book itself, was unfounded. Sure, new examples of the erosion of consumer property rights have continued to multiply like so many soaking mogwai in the months since we made our final manuscript edits.

But if anything, that demonstrates the ongoing relevance of the basic themes we identify: tangible copies continue to be displaced by digital distribution; license terms still routinely insist that sales should be treated as contingent grants of permission; embedded software and DRM, now more than ever, ensure that manufacturers and IP rights holders are the true masters of the devices we buy, preventing us from modifying, repairing, and even using the things we think we own; and despite evidence of deception, digital retailers still insist on marketing their goods using terms like "buy" and "own." But these profound shifts in the dynamics of ownership remain unknown, or at least poorly understood, by the average consumer attempting to navigate an increasingly complex marketplace—one that highlights the many benefits of licensing, subscribing, and "sharing," while simultaneously diverting attention from the security and autonomy afforded by old fashioned personal property rights.

2017 looks to be a watershed year for ownership. For better or worse, what happens over the next 12 months will go a long way towards deciding whether we will live in a world in which we own and can control the products we rely on. Or instead, 2017 could set us on a path towards a future that looks a lot like Philip K. Dick's Ubik, with each of us negotiating with Alexa over the fee to unlock our front doors.

In the market, the push for smart devices—burdened though they are by restrictive license terms, software locks, and code designed to constrain our behavior—persists. A cursory glance at the new wares on display at CES earlier this month reveals that the trend of software-enabled and network-connected devices is still going strong, all good sense be damned. Can I interest anyone in a wifi hairbrush? Or perhaps a smart mirror?

Given the state of market, developments in the courts, administrative agencies, and perhaps Congress are crucial in determining whether and to what extent consumers will be permitted to retain the rights associated with ownership in the things they buy. 

On the judicial front, the courts are poised to decide two cases that squarely address consumer ownership rights, one in the copyright space, the other concerning patents. The Second Circuit will be hearing the long-awaited appeal in Capitol Records v. ReDigi. There the court will be asked to decide whether consumers who purchase digital music enjoy the same rights to alienate their interests that analog consumers have exercised for decades at used record shops. ReDigi developed a marketplace for used digital music that carefully replicated the one-to-one exchange familiar from the analog world. But in an analytically-murky decision, the district court held that ReDigi's system infringed both the reproduction and distribution rights of copyright holders.

Meanwhile, the Supreme Court is set to hear Impression Products v. Lexmark, a case that challenges two flawed holdings of the Federal Circuit. Lexmark concerns the printer-maker's single-use restriction that forbids consumers from refilling ink cartridges they've purchased under pain of patent infringement. The Federal Circuit held, first, that such post-sale restrictions on the use of a chattel are enforceable as a matter of patent law, and second, that overseas sales authorized by the patent holder cannot trigger exhaustion—a holding in no small degree of tension with the Supreme Court's 2012 opinion in Kirtsaeng

On the administrative agency side of things—well legislative agency, but who's keeping score—the Copyright Office is fresh off a deeply disappointing report on Software-Enabled Consumer Products, in which it concluded after nearly 70 pages of analysis that software embedded in consumer devices poses no real problems. This, despite the fact that copyright holders have leveraged their ownership of software to interfere with resale, to stifle competition and user innovation, to prevent repair, and to disable devices altogether. The Copyright Office dismisses these concerns, in part, by arguing that the companies involved learned their lesson. It wrote for example that "market forces may discourage copyright owners from attempting to prevent independent repair activitie," citing the outcry when John Deere infamously asserted that farmers enjoy a mere license to operate the equipment they buy. But just weeks after the Copyright Office's handwaving, John Deere released a new license agreement that affirmatively denies farmers the right to repair their devices or even look at the software that makes them run. So much for the market.

As you may have heard, leadership changes are underway at the Copyright Office. The new Register of Copyrights will have many responsibilities, chief among many hope is, you know, registering copyrights. But to the extent the Copyright Office continues to pursue an active policy agenda, it needs to take the question of consumer ownership seriously. The Office still has an study of Section 1201 underway, which implicates many of the same concerns about ownership outlined above. Here's hoping the Office takes them more seriously the second time around.

With a new administration set to take over at the end of the week, other agencies will have new leadership as well, among them the Federal Trade Commission. The FTC has played an important role over the years guarding against the most egregious abuses in the digital marketplace. When Major League Baseball, Microsoft, and Walmart threatened to shut down servers providing consumers access to digital media purchases, the FTC stepped in. More recently, when Nest decided to brick thousands of Revolv home automation hubs without even the offer of a refund, the FTC again flexed its considerable muscle. It made sure that consumers were at least compensated for their now-worthless devices. With the Trump administration poised to choose to three of the FTC's five commissioners, the Commission may be less inclined to aggressively target deception and unfair practices.

Speaking of deception, spurred by the Commerce Department's White Paper on Remixes, First Sale, and Statutory Damages and some research by a couple of crackpot academics, the PTO and NTIA are planning public hearings on the "Buy Now" button and its potential for misleading consumers. Again, how high of a priority this issue will remain in a Trump administration is hard to predict.

Then of course, there's Congress. Copyright reform remains on the agenda. A meaningful overhaul of the 1976 Act should be a longterm project. The current proposal is short on details, but appears to be decidedly small-bore. We've also seen legislation that more directly targets the ownership question in recent years, like the Unlocking Technology Act and the You Own Devices Act. Although these bills haven't made much headway, they do suggest that some in Congress care about the threats to ownership facing consumers. And I expect we will see similar proposals in the coming term.

Legislation, regulation, and judicial opinions matter. But when it comes to the fight for ownership, we think nothing is more important than awareness. As we talk to people about our book, we see over and over again that once consumers recognize the threats to their rights that the current digital marketplace represents, they are alarmed. Some are shocked. Others are outraged. They see the choices they confront and their consequences differently. Some even start to behave differently. That's why we are telling this story to anyone who will listen, and why we hope you will do the same.

Why you can't buy our book from Apple

There's no small amount of irony in selling an ebook that highlights the downsides of shifting from tangible to digital goods. But many people, including us, are persuaded by the virtues of digital reading even once we are fully aware of the tradeoffs it involves. And ultimately, we favor consumer choice. So making our book widely available on as many platforms and in as many formats as possible was sort of a no-brainer.

That's why we were disappointed, if not altogether surprised, when Apple refused to carry The End of Ownership in its iBooks Store, one of the world's largest ebook marketplaces. Although the book is available on the Kindle and Nook , there isn't currently an iBook version. This post explains why.

Apple runs its iBooks Store in the same way it runs the rest of its business—with tight quality control measures and an innate skepticism of anything that interrupts its end-to-end control of the user experience. Much as it does on the App Store, Apple vets submitted iBooks before offering them to the public. Typically, this review filters out submissions with technical flaws as a way of maintaining high quality and promoting consumer confidence.

But sometimes Apple uses its veto power in questionable ways. It has rejected apps that criticize political figures and others that feature adult content. It has approved some cryptocurrency apps and refused others. It even rejected an overtly poltical Palestinian-produced game on the grounds that it was "not appropriate"—a position the company later reversed. Apple's history in reviewing books is likewise problematic. Books have been rejected for having bibliographies that linked to webpages selling hardcover books; others for merely discussing competitors like Amazon.

Booksellers are, and should remain, free to refuse to carry books. That editorial discretion is crucial to their own free speech interests. But how they exercise that discretion should give us cause for concern when the retailer controls a significant portion of the market. For the same reasons we should be troubled when Walmart refuses to sell certain books, we should worry about the implications of Apple's tight control over its marketplace. And since Apple is the only seller for iBooks, the problem is compounded.

So why did Apple decline to sell The End of Ownership? The book is openly critical of Apple in a number of respects. We critique its embrace of DRM, its crackdown on independent repair, its complex and unreadable EULAs, its use of the deceptive Buy Now language to sell digital goods, and its commitment to hermetically-sealed business models.

But that criticism is not the reason Apple cited. Instead, the company pointed to its trademark policies. Apple noted passages in the book where we used the term "iBook" to refer to ebooks sold by Apple. But according to its iBooks Store Formatting Guidelines, Apple prefers the terms "iBooks" or "iBooks Store" be used to refer to its software ecosystem, and discourages the use of "iBook" to refer to ebooks sold using that platform.

Apple's rules regarding "copyrighted terms," by which they mean "trademarked terms."

Apple is certainly free to develop its own internal style guide to determine how it uses its long and growing list of trademarks. But why should we care? The company would likely argue that it is fighting a battle against genericide—the loss of trademark rights that can occur when a brand name becomes the common name for a category of product. Xerox and Kleenex have been subjects of corrective advertising campaigns to remind consumers that they are particular products made by particular companies, not the general term for photocopiers and tissues. 

But we didn't use "iBook" as a generic term; we used it to refer specifically and exclusively to ebooks sold by Apple. So the argument is misplaced. Elsewhere, Apple repeats the common trademark mantra that a mark is an adjective, not a noun. But even casual perusal of Apple's website and marketing materials reveals widespread use of terms like "MacBook," "iPhone," and "iTunes" as nouns.

But there's another, more amusing, explanation for Apple's nitpicking about the use of this particular term. In 1999, long before it was seriously considering becoming a digital book retailer, Apple launched a consumer laptop meant to capitalize on the success of the iMac. At the time, it's professional laptops were called PowerBooks, so the new device was dubbed the iBook. Apple discontinued the product in 2006. But its legacy lives on. Ebooks sold on the iBooks Store are quizzically not called iBooks—because that name was already taken by Apple itself.

Regardless of the ultimate explanation, the fact is our book is currently unavailable to the millions of readers who buy iBooks—the books, not the laptops. We think some of them might benefit from the message our book offers. We could fight Apple on its rejection. After all, we are both IP professors with litigation experience. But Apple has too much power and too many resources for that fight to be worth the effort in the end.

So today, we are submitting three minor changes to the text of our book to appease the Style Guide Gods in Cupertino. To be as transparent as possible, we've included those edits below. We hope to see our iBook—again, the book, not the laptop—posted to the iBooks Store soon.

Page 93 - "Apple’s iBooks can only be read on Apple devices." changed to: "Ebooks acquired through Apple’s iBooks Store can only be read on Apple devices."
     
Page 177 - "We shouldn’t expect every ebook reader to figure out on their own how to make an iBook work on a Kindle" changed to: "We shouldn’t expect every reader to figure out on their own how to make an an ebook from Apple work on a Kindle."

183 - "Sometimes an owner will want to modify their copy for compatibility purposes—to make their iBooks work on a Kindle" changed to: "Sometimes an owner will want to modify their copy for compatibility purposes—to make their iBooks Store purchases work on a Kindle."

When your car owns you

When we try to illustrate the dangers of displacing consumer ownership with a model that relies on software licensing, it's easy to come up with troubling hypotheticals. Would you buy a car with DRM-enforced licensing terms that forced you to buy gas exclusively from BP? Or one that limited you to licensed replacement tires? What about a car that required you to pay an extra fee to carpool? 

To many, these sort of examples probably seem far-fetched. But we've already seen carmakers leverage their control over software to clamp down on independent repair shops. A combination of state-level legislation and industry groups coming to their senses helped address that particular problem. And Ferrari limits resale by insisting on a contractual right of first refusal on used cars. But this week, we got our clearest glimpse so far of the power software and license terms give manufacturers over your vehicle.

As Ars Technica reported, the new Tesla Models S & X can be equipped with "Full Self-Driving Capability" as a $3000 option. The software to actually enable autonomous driving isn't ready yet, but will be at a future date. But once it goes live, there will be one important string attached that could significantly reduce the feature's value to Tesla owners. As the company explained: "Using a self-driving Tesla for car sharing and ride hailing for friends and family is fine, but doing so for revenue purposes will only be permissible on the Tesla Network, details of which will be released next year."

In other words, if you want to make money by charging for rides in your self-driving Model S, Tesla is going to get a cut; no competing ride-hailing services for you. You'd think for $70,000, Tesla owners would get the right to use their cars as they see fit. But Tesla doesn't think so. 

Tesla may have good technological reasons to worry about the integration of its software with other car sharing networks. But it also has strong anti-competitive motivations for this sort of restriction. If Tesla owners can't opt for Uber or Lyft, Tesla will be in a much stronger position to dictate pricing and terms for its ride-sharing service and may be at an advantage when it launches its own fleet of on-demad self-driving vehicles. But regardless of the company's motivations, car owners should be troubled by the claim that a manufacturer can dictate how and for what purpose they drive their vehicles.

Downloads and consumer choice

A few months back, reports surfaced that Apple—the pioneer of digital music sales—would discontinue downloads in favor of an exclusive subscription streaming model within the next two years. Although Apple has sold tens of billions of tracks since launching the iTunes store more than a decade ago, digital downloads have slumped as streaming services have seen massive growth. So Apple's aggressive moves into the streaming market took no one by surprise. The news of the end of downloads, however, raised eyebrows in some corners. But Apple was quick to deny reports that it planned to kill off downloads.

Recent developments cast some doubts on those disavowals. When Apple Music launched in China, it offered monthly subscription plans, but didn't include the ability to buy individual downloads from the iTunes store, although movie and book downloads were available. Similarly, á la carte downloads were conspicuously absent from this week's Apple Music debut in South Korea.

One of the recurring themes in our book is the importance of consumer choice. Streaming  models are not inherently bad. Far from it. In fact, they are often preferable from the perspective of individual consumers. But not everyone wants to stream. Some consumers prefer to own their stuff, both physical and digital. And the option to buy, to possess, to control a local copy does valuable work in the market. Most importantly, it limits the power of service providers to control price and availability. 

We've consistently expressed concern about a future that focuses on inherently contingent forms of access like subscription streaming services to the exclusion of more permanent and durable means of acquisition. When we described this possible future, we were worried that these concerns would be labeled "alarmist." But more and more, they look like the world in which we all live.

Just Blizzard Being Blizzard

Blizzard Entertainment, the company that develops hit video game franchises and licenses forgettable movies that squander directional talent, is back to its favorite pastime—filing and threatening gratuitous copyright lawsuits. Before detailing the latest litigation, it's worth revisiting the company's greatest hits. They include:

  • Suing the developers of bnetd, an open source matchmaking server in 2002. Although bnetd didn't copy any Blizzard code, the developers reverse engineered Blizzard's Battle.net service to discover and implement the protocols that allowed games like Starcraft, Warcraft, and Diablo to interoperate with Blizzard's servers. In 2005, the Eighth Circuit affirmed a district court opinion holding that bnetd violated the DMCA's anticircumvention provisions.
  • Using the DMCA to shut down private World of Warcraft servers in 2008. 
  • Suing the developers of Glider, a program that allowed gamers to automate some of the monotonous drudgery required to level up in Blizzard games. Here, Blizzard wasn't content to offer one damaging misreading of copyright law; it had two. First, Blizzard—like Autodesk, Amazon, and John Deere—argued that its customers don't actually own their copies of World of Warcraft, they merely license them. And applying its disastrous precedent from Vernor v. Autodesk, the Ninth Circuit agreed in 2010. Second, Blizzard argued that by using the game in ways it didn't like, users were infringing the game's copyright. Specifically, Blizzard pointed to its terms of use, which prohibited the use of "cheats, bots, mods, and/or hacks." Despite that prohibition, the court correctly held that breaking a rule is not the same thing as copyright infringement, even if you don't own the copy in question.
  • Apparently unwilling to give up on the "cheating is infringement" argument, suing ten anonymous developers—one of whom was almost certainly Angelina Jolie—for creating the ValiantChaos MapHack, which gave players the advantage of seeing obscured areas of the game map and tracking the movements of opponents.
  • Shutting down the popular Nostalrius server, which gave 150,000 users the chance to play a classic version of World of Warcraft earlier this year. 

But Blizzard has another hit on its hands, Overwatch. Which apparently means more litigation is in the offing. This time Blizzard is suing a German company that sells Overwatch cheats. Again, Blizzard argues that gamers who use these cheats are committing copyright infringement, and Bossland, the company offering them, is contributing to that infringement.

To see the absurdity of this position, consider an analog analog. Some players of Hasbro's classic Monopoly often find the standard set of rules that accompany the game lacking. Maybe you think they are needlessly complex and lead to interminable gameplay. Maybe you are a lunatic and don't think they are complex enough as is. In either case, users come up with their own variations on the rules. There are two approaches to respond to these house rules. One approach is the one Hasbro has adopted. Embrace them. The other is the approach Blizzard has pursued. Insist your rules are the best rules. The only rules. And that anyone who modifies, alters, or breaks them is not only a cheater, but a copyright infringer. Imagine if Hasbro went around suing players for deciding you shouldn't receive rent while your game piece is in jail. Of course, you own your Monopoly set, so you can do what you damn well please with it. As a matter of copyright law, the same should be true of software-based games.

Repairing the right to repair

If a device that you own breaks, you should be able to repair it. That's a common sense principle with which most would agree. Historically, the law agreed too. The right to repair has been recognized in U.S. patent law since at least 1850. In Wilson v. Simpson the Supreme Court explained:

It is the use of the whole of that which a purchaser buys, when the patentee sells to him a machine; and when he repairs the damages which may be done to it, it is no more than the exercise of that right of care which every one may use to give duration to that which he owns, or has a right to use as a whole.

Even though the notion of repair is a less obvious fit in the copyright context, courts analogized to patent law's repair doctrine as early as 1901. In Doan v. American Book, the court held that a reseller did not infringe when it reproduced missing and damaged sections of children's books and rebound them.

Despite these clear limitations on the scope of IP rights, device makers keen on preventing repair have a number of effective strategies at their disposal:

Various legislative proposals—mostly unsuccessful—have been proposed over the years. Most have focused on automative parts, a multibillion dollar industry. As early as 2001, Senator Paul Wellstone and Representatives Joe Barton and Edolphus Towns introduced the Motor Vehicle Owners' Right to Repair Act. Variations on the bill have been reintroduced periodically. Most recently, Representatives Darrell Issa and Zoe Lofgren, along with Senators Orrin Hatch and Sheldon Whitehouse introduced the Promoting Automotive Repair, Trade and Sales (PARTS) Act, which would shorten the duration of design patents for automotive repair parts. So far, federal legislation has failed to gain much traction.

On the state level, Massachusetts enacted a bill in 2014 that requires auto manufacturers to make "diagnostic and repair information" and ""diagnostic repair tools" available to vehicle owners and independent repair shops on fair and reasonable terms. Shortly thereafter, two major trade associations hammered out a deal to effectively implement the Massachusetts law nation-wide.

But what about all of our non-car devices? Our phones, computers, televisions, cameras, and copiers? A New York bill, the Fair Repair Act would have required manufacturers to make diagnostic and repair information, replacement parts, and software updates available to device owners and third-party repair shops. But intense lobbying pressure from companies like Apple and Cisco killed the bill.

With help from groups like The Repair Association, pubic awareness of these attacks on the right to repair is growing. Collectively we have a choice to make—whether we value the ability to repair our devices when they inevitably wear down and malfunction, or instead we are comfortable with discarding them on predictable product upgrade cycles.

FTC's Revolv investigation

Last week, the FTC issued a closing letter to Nest Labs, officially ending its investigation into the company's bricking of Revolv devices. If you are hazy on the details here, the Revolv was a $300 home automation hub that was sold with a "lifetime subscription." In late February, however, Nest announced its intention to kill the device. As it told Revolv owners: "As of May 15, 2016, your Revolv hub and app will no longer work."

In response to the initial wave of consumer outrage and bad press, Nest made vague and not particularly reassuring noises about "case by case" resolution of consumer complaints. Within a couple of weeks though, it was offering Revolv owners full refunds.

Why the change of heart? I'd guess it had more than a little to do with the launch of an FTC investigation. Coincidentally, I met with the FTC to talk about the issues surrounding the "Buy Now" button the morning the Revolv story broke. When I brought it up, the lawyers at the FTC were, no surprise, already very familiar with Nest's decision. And an expression of concern by the FTC, to say nothing of an ongoing investigation, carries considerable weight.

Here's how the FTC described its initial worries and its decision to close the investigation:

The FTC staff was concerned that reasonable consumers would not expect the Revolv hubs to become unusable due to Revolv Inc.'s actions, and that unilaterally rendering the devices inoperable would cause unjustified, substantial consumer injury that consumers themselves could not reasonably avoid. Nevertheless, upon review of this matter and confidential information Nest provided during our investigation, we have decided not to recommend enforcement action at this time. We considered a number of factors in reaching this decision, including the limited number of units sold; Nest's practice of providing full refunds after the Revolv system shutdown was announced; and its announcements - via the Revolv website, in-app notifications to Revolv system users, and emails to Revolv purchasers - that it will refund Revolv customers the purchase price ofthe Revolv hub. Thus, it appears that no further action is warranted at this time and the investigation is closed.

The FTC secured a positive outcome for consumers. In fact, short of requiring Nest to continue to support these devices, it's the optimal outcome for most Revolv owners. Some, I'd wager, would prefer to adapt the code that runs their device and extend its useful life. Unfortunately, the current state of copyright law calls that right into question. 

It's no surprise that the FTC acted. The Revolv incident was an egregious abuse of the power the Internet of Things cedes to device makers. By stepping in here, the FTC sends a strong signal that may prevent other companies from pressing the remote self-destruct button in the future. It has also offered some helpful questions makers of smart devices should consider. But the key question remains. What kinds of injury—short of explicitly rendering a device inoperable—will the FTC take seriously? 

Thoughts on IoT's "dirty little secret"

In an inspired debut column at The Verge, pseudonymous Twitter moniker Internet of Shit raises a number of important critiques of the current fascination with "smart" devices. These devices are often unnecessary, sometimes unreliable, and constantly collecting data about your behavior. Nonetheless, they seem irresistible to consumers.

If you’re shopping for a thermostat you’ll see two choices: the boring but reliable Honeywell that doesn’t do much more than turn on your heaters, or the slick, shiny iPhone-esque Nest that promises to change the way your home is heated forever by just connecting to the internet. What would you choose? I can almost guarantee that you’ll end up with a Nest, or at least something similar.

So how do we respond to this trend. One tactic, which Internet of Shit has been employing for a year or so now, is public education. By shining a satirical light on these concerns, consumers become more aware of them. Our book, though admittedly far less funny, tries to do the same thing. But the column offers another suggestion:

What we really need from those building the Internet of Things is commitment. Companies should step up and guarantee the longevity of their products, no matter the cost or bind it might put them in.

Of course companies should make products that work as advertised. They should live up to their warranties. And consumers should discipline companies that fail to make good on their promises. That's just as true for Honeywell as it is for Nest. But as Alphabet/Google/Nest's treatment of Revolv owners underscores, a lifetime subscription doesn't mean much when the code that runs a device is under the exclusive control of its manufacturer. 

In addition to demanding better treatment from device makers, we need to give consumers back control over the devices they buy. If a software update removes valuable features, you should be able to revert to an earlier version or write an update yourself. If a server goes dark, consumers should be allowed to roll their own. Even a small community of users can guard against abuse when we treat them as owners of the code that makes these devices work. But as long as consumers are at the mercy of companies with interests that diverge from their own, their ownership and control of the products they buy will be at risk.