The University of Chicago Law School Faculty Blog

Digital Rights Management: Defective By Design?

Yesterday, the Free Software Foundation launched a new anti-DRM initiative—in real space quite-cleverly in the yellow suits worn to manage toxic wastes and online at defectivebydesign.org (“There is no more important cause for freedom than the call for action to stop DRM from crippling our digital future”). As Peter Brown, Executive Director of the FSF put it: “In any other industry, such limitations or invasions would be considered major flaws. A media player that restricts what you can play is like a car that you won’t let you steer. Products containing DRM are defective—only, unlike other products, these defects are deliberately created by an industry that has long stopped caring about us.”

Earlier this month, I gave a talk on DRM for our alumni weekend (slides available here and a forthcoming paper here). I started the talk with a description of what we might label the three eras of copying technology. Think of these as monk time and the era of the scriptorium; the time of Gutenberg’s asymmetry; and the era of cheap copying, dated say from 1959 with the launch of the Xerox 914, the first automatic plain paper copier.

A New Cold War?

The Pentagon is sounding the alarm about China’s military buildup.  The Washington Post says:

China's military buildup is increasingly aimed at projecting power far beyond its shores into the western Pacific to be able to interdict U.S. aircraft carriers and other nations' military forces, according to a Pentagon report released yesterday that outlines continued concerns over China's rising strategic influence in Asia.

International law buffs have begun speculating about what China’s rise in power might mean for international law.  Here are some possibilities:

1.  A new cold war, resulting in a bipolar system similar to the one that existed during the old cold war.  China and the U.S. would each have a sphere of influence, would surreptitiously attempt to undermine the other’s sphere of influence, and would resolve conflicts and tensions across spheres on an ad hoc basis.  International law would play less of a role than it does today, and would mainly be applied to countries other than China and the U.S.

2.  A new great power system, similar to the one that existed during the nineteenth century.  China, the U.S., Russia, the EU, perhaps India, and so forth, would resolve international conflicts on an ad hoc basis, or on the basis of a loose set of commitments.  International law would have two tiers, one for the great powers, and one for the rest.

3.  Increased legalization and institutionalization, 1990s-style.  China would join the U.S. and EU in supporting international tribunals and conventions, but these would, as a result, reflect China’s values and interests, to a greater extent than at present.  This means the west would have to compromise on human rights, among other things.

For more discussion, click here.

A link between options timing and taxes?

The Wall Street Journal recently reported on the growing scandal involving the "back-dating" of stock options issued as compensation to corporate executives. The scheme here, according to the news reports and some academic studies, is to issue the options as of a certain past date when the stock was at a lower level. In other words, if the stock is trading at $50 today but $20 dollars two months ago, the firm could issue the options (with a strike price equal to the market price) as of two months ago, allowing the executive to cash out $30 per share immediately. There is nothing illegal about this. So long as the appropriate corporate procedures (e.g., shareholder and board approval) were followed, a firm can issue any options, including back-dated options, it wants.

So why the big fuss?

Happy Birthday, Montenegro

If all goes according to plan, Montenegro will soon separate from the state of Serbia and Montenegro and become a sovereign state.  With this act, Montenegro will become the 193rd or 194th or 195th state, depending on how one defines a state.  For more precision, we can say that Montenegro will be the 192nd member of the United Nations when it takes its seat.  (Taiwan is a state but is not formally recognized as such, and is not a member of the United Nations; there are a few other ambiguous cases.)

Fear and Loathing of Milberg Weiss

Bloggers and journalists are having a field day with the recent indictment of Milberg Weiss and reports of (alleged) illicit hidden payments of cash to cooperating lead plaintiffs. There are a couple of puzzles associated with the news thus far.  One is why the payments (assuming for the sake of the puzzle that the reports are correct, though I think that is most unlikely) would need to be so large (allegedly in the millions). There are many possible representative plaintiffs in most of the securities and other cases that Milberg Weiss becomes involved in; why would any need to be paid, or be paid so much?  Hundreds of lawyers hate the firm and they are quick to say that plaintiffs are paid to lie, to agree to settlements that are not in the interest of other class members, to lie about having been consulted about conflict of interest questions, and so forth.  Some of these possibilities seem implausible, or at least somewhat puzzling, in a world in which named plaintiffs are rarely consulted at all, and in which judges must approve settlements (for better or worse) but are hardly accused of paying too much attention to the wishes of the named, nominal plaintiffs.  And so even if the plaintiffs' firm gains by having a cooperative "client" who expects to be a repeat, long term player with the firm, it is hard to see why this teamwork comes at such a high price.

Classified Information and the Press

The following is an excerpt from a memo I submitted to the House Permanent Select Committee on Intelligence for its pending consideration of restrictions on the press's publication of unauthorized disclosures of classified information:

A central question before the Committee is this: Should the United States criminally punish the press for publishing classified information? This inquiry poses a prospect unprecedented in American history. For more than 215 years, the United Stateshas managed to flourish in the absence of any federal legislation directly prohibiting the press from publishing government secrets. The absence of such legislation is no accident. It clearly fulfills the promise of the First Amendment: “Congress shall make no law . . . abridging the freedom . . . of the press.”

A Wonder of Modern Communications Post

Arsenal lost 2-1 to Barcelona in an epic Champions League final played this evening in Paris. (If you don’t follow football as they call it over there, think the Super Bowl, only more important (more people in Europe; soccer has a bigger mind-share; plus national overtones (Arsenal is based in London and you know where Barcelona is)). Arsenal and Barcelona have some of the best footballers in the world (or at least the best that Chelsea money can’t buy). Arsenal goal-keeper Jens Lehmann (and the starting keeper for the German National team in the upcoming World Cup) was booted out of the game in the 18th minute, so Arsenal played 10 on 11 for most of the game, and with a second-string keeper to boot. Arsenal led 1-0 for most of the game, but Barcelona closed with two late goals to take the win.

Now for modern communications. Last year, a group of LLM students were nice enough to give me an Arsenal jersey (thanks again!), which I wore today (my 12-year old son is a big Arsenal fan). I “watched” the game at the Law School by reading the BBC’s text feed about the game (not video on demand as I did with March Madness). As I was walking home from work roughly an hour after the game was over, three people—I passed 10 or so—stopped me to tell me what a tough loss Arsenal had suffered. Three!

ESPN2 had the game on live today, and we taped it (actual VCR tape still works), so we will have to see if it was exciting as it seemed in text at the BBC.

Discouraging Patent Holdouts

Over at IPCentral, I am writing and blogging this week about a possible new solution to the problem of patent holdouts. The core idea is relatively simple:

A patent holder whose patent is made public after some relevant technology has been widely adopted can demand not only a royalty that reflects the intrinsic value of that technology but also a royalty that reflects the value of each infringing firm's technology-specific investments. This is the familiar patent holdout problem, and it particularly plagues the standard-setting process. Importantly, and the insight missed both in practice and in the literature today, the greater the number of patent holders in this holdout position, the less each can expect to earn from this tactic. That is, if fifteen patent holders can credibly threaten to shut an infringer for six months while that firm redesigns its products and services, the value associated with avoiding six months of disruption must be split fifteen ways. If three hundred patent holders can credibly make that threat, the pro rata share drops by a factor of twenty. More patents means less money per patent holder. Less money, in turn, means less of an incentive for a firm to strategically delay in the hopes of being a patent holdout, and less of an incentive for an accidental patent holdout to actually bring suit.

"How's My Driving?" for Everyone

       A few weeks ago, I was driving to the airport in Seattle. Traffic was flowing reasonably well on the freeway. Just two car lengths ahead of me, a driver in a pickup truck began swerving violently between the two leftmost lanes, nearly colliding with a minivan. The minivan blared its horns and the pickup driver proceeded to drive like a maniac for the next half mile or so, violently jerking his car from lane to lane, swerving unpredictably across multiple lanes, and forcing numerous drivers to brake suddenly and become agitated during an otherwise uneventful morning commute. The pickup driver then swerved for the exit ramp, and abruptly left the freeway.

       This scenario -- atrocious driving on the freeway by an anonymous motorist, observed by dozens of bystanders, yet sanctioned in no meaningful way -- plays out thousands of times daily on American freeways. The police can’t be everywhere, we rarely know the people driving near us on the freeways, and this combination of rare surveillance and practical driver anonymity contributes substantially to aggressive driving. Largely as a result, vehicular collisions are the leading killer of Americans aged 15 to 29. I have just posted a brand new paper on SSRN (free download available here), that shows how the law can take much better advantage of the information that you and me obtain about our fellow motorists every day on the roads. The paper, entitled, “How’s My Driving?” for Everyone (and Everything?) (forthcoming NYU Law Review, Nov. 2006), advocates mandating the placement of “How’s My Driving?” placards on the bumpers of every car and truck in the United States. My paper argues that with a universal “How’s My Driving?” program, we can reduce vehicle accidents, dramatically lessen our expenditures on traffic police, improve the functioning of the tort system, and curtail road rage and driver frustration. The best available studies suggest that the use of “How’s My Driving?” placards and monitoring systems on commercial vehicles is associated with reductions in accidents of between 20 and 53 percent. There are strong reasons to believe that similar accident reductions could be achieved nationally if “How’s My Driving?” placards were mandated in all vehicles, and that thousands of lives could be saved every year as a result.

eBay v. MercExchange: A Brief Analysis

I am not sure that one can ever describe a 10-page, unanimous opinion for the Supreme Court as badly fractured, but eBay v. MercExchange might be that case.

The simple version is that the Court unanimously holds, in an opinion by Justice Thomas, that the “well-established principles of equity” for granting a permanent injunction apply to disputes arising under the Patent Act. The Court won’t “lightly” imply exceptions to general equitable practice, and after wrestling briefly with a couple of sections in the Patent Act, concludes that the standard off-the-rack rules for permanent injunctions should apply to patent cases. Neither lower court did that, so reversed and remanded to the district court for a first crack at the problem.

Now for the fracturing.