Still More Whining About Annoyances

Another crop of meaningless, trivial, self-revealing annoyances:

• Those of your having trouble reading this blawg should check to see what browser you're using. If you're still using an Internet Exploder version prior to 7, you need to upgrade. Version 7 fixes a longstanding Microsoft refusal to comply with the CSS standard that appears to affect versions 6 and before, not to mention a passel of security problems. (Or you could just switch to Firefox 2 as a browser and Thunderbird for e-mail instead of OE, but some work-based machines may not let you.)

  And, in the tradition of computer upgrade warnings everywhere, the ones who most need to see this suggestion — which is also good for your system security — won't be able to read it. Thanks, Bill. And thanks for requiring people to use Internet Exploder for all Windows-based security upgrades... even critical upgrades patching critical problems with Internet Exploder itself.

• Hipness sucks. Just try quoting an article from Variety or The Hollywood Reporter in a scholarly piece. It's worse than Le Monde! It's hard to believe that going from French to English is harder than from Californian Narcissist to English, but at least there's a dictionary for the French problem. Or maybe there needs to be another option in BabelFish. Oh, wait a minute: BabelFish is about communication. Hollywood is about ego, not communication. I guess this was just a silly misunderstanding of their intent.
• Public-organization webmasters: If you insist on using Flash and other non-textual means as the only navigation options on your organization's webpage, you'd better hide — I've loaded the 106mm recoilless rifle and I'm waiting in your parking lot. And you're getting two rounds, not just one through the windshield, if you put schedules — especially those announcing facility closure for private parties — in Flash or another non-textual display. You could also try reading the Americans With Disabilities Act and ponder what happened to Target recently...
• Sometimes even the tort-reform crowd accurately assesses a lawsuit. In this instance, I'm referring to Walter Olson of Overlawyered (who isn't as unreasonable as most of the tort-reform crowd) and his comments on the bogus "You miscategorized my book for racially motivated reasons!" lawsuit against Penguin. Sure, the "industry" organizes books (in part) by purported "racial interests", which isn't the highest-personal-integrity method available.

  Unfortunately, that article — although it describes what happened reasonably well — falls prey to the problems plaguing virtually every article originally sourced to the WSJ on the publishing industry: It displays no understanding whatsoever of the "why"s in the industry, and in particular the economic basis for them. (Explicating the irony of the WSJ completely neglecting the economic and financial foundations of a story is left as an exercise for the student.) As I remarked in an e-mail to Mr Olson (formatting corrected):

  The real problem in this instance is not with Penguin. The real problem is an antitrust nightmare: the book distribution system, which is probably the paradigmatic example of "one man's antitrust is another man's economy of scale" — at least until you look into the financing and terms of doing business, which makes me ask "What economies of scale?" The distributors are the ones who demand "pigeonholing" of books, and Penguin's best defense will be to point out that books that are released without a category tend to stay in distributors' warehouses unshipped. In other words, "We had to put some category on it as a business necessity, and this is the one that in our commercial judgment was the best fit."

  In short, "Millenia Black"'s lawsuit needs to be dismissed for failure to join an indispensible party before we even begin consideration of the merits. And that's my overly lawyerly contribution to the debate at Overlawyered. In other words, "It's the procedure, stupid!"

Taking the Bad With the Good

The good: The Ninth Circuit finally got around to ruling in Kahle v. Gonzales, another attack on the length of copyright as constitutionally excessive.

The bad: The court mischaracterized the copyright system in the very first paragraph of its decision.

Plaintiffs appeal from the district court's dismissal of their complaint. They allege that the change from an "opt-in" to an "opt-out" copyright system altered a traditional contour of copyright and therefore requires First Amendment review under Eldred v. Ashcroft, 537 U.S. 186, 221 (2003). They also allege that the current copyright term violates the Copyright Clause's "limited Times" prescription.

Arguments similar to Plaintiffs' were presented to the Supreme Court in Eldred, which affirmed the constitutionality of the Copyright Term Extension Act against those attacks. The Supreme Court has already effectively addressed and denied Plaintiffs' arguments. We AFFIRM.

Kahle v. Gonzales, No. 04–14734 (22 Jan 2007), slip op. at 892 (emphasis added).

The bolded language is disappointingly inept, and should have been thought through much more carefully than it was. On the one hand, in the broadest sense, the 1976 Act made copyright protection (if not necessarily the right to go to court to enforce that protection) automatic upon creation, which can be characterized as a change from "opt-in" to "opt-out." Or can it? Actually, it can't; there is no mechanism to disclaim a copyright in the Copyright Act. That is, once a work is created, it is in copyright. Period. The Creative Commons License, GNU License, and so on are merely covenants not to sue, so long as the reuser fulfills the other terms of the various licenses. They are emphatically not means of placing a work in the public domain. Under the 1976 Act as amended, the only two ways that a work can enter the public domain are expiration of term and failure of fixation.¹ However, the system as a whole remains "opt-in" because one must take the affirmative step of registering the copyright — opting in to registration — to get into court to enforce the copyright.

Thus, it's incorrect to characterize the system as a whole as "opt-out." It's also dangerous because the "opt-in"/"opt-out" terminology has taken on opposite meaning in the debate over orphan works — one of the main concerns of the Kahle plaintiffs. Under the rhetoric commonly used in that debate, proponents of free/unlimited reuse of orphans contend that copyright holders must opt in to maintaining their copyrights.² The better view, though, is that reusers must ensure that the copyright holder has opted out of continued copyright protection.

More suboptimal — indeed, confusing and misleading — writing in a legal document. Who would've thought that could happen?

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1. Until 1989 one could also place a work in the public domain by failure of marking. One could also place a work in the public domain by failing to timely renew it... but, since that renewal would have been due 28 years after initial registration for pre-1976 Act works, that cannot happen to any more works. There are also a few technical exceptions for unpublished works of long-deceased authors, but they're immaterial and relate primarily to the term, not the existence. of the copyright.
2. See discussion in C.E. Petit, Cost Allocation and Copyright Orphans.

Mistaken Federalism (Part II)

Last month, I promised — with as much sincerity, or indeed follow-through, as any politician (that time in DC wasn't entirely wasted) — that I'd discuss more about the mistaken Federalism involved in probating an author's will and allocating copyrights. And so, here we are.

Under ordinary circumstances, federal courts do not get involved in probate battles. A judge-made doctrine known as the "probate exception" holds that ordinary federal jurisdiction does not exist over actions that might be brought in both federal court and state probate court; instead, the federal court "must" defer to the state probate court.¹ However, not all actions under federal law may be brought in both federal and state courts; some federal actions are under exclusive federal jurisdiction. For example,

(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.
   (b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.²

That seems fairly straightforward, right? Except, of course, if there's a Playmate and oil money involved. And, of course, lawyers.

The Supreme Court was forced to confront the oil and the Playmate last spring. The bankruptcy court's ruling had gone in the Playmate's favor; the state probate court's ruling had gone in favor of the "ordinary" heirs to the oil money. (Not entirely coincidentally, the Playmate was not a resident of the state in which the probate court sat, while the "ordinary" oil money heir was.) This led to a conflict: Did the bankruptcy court have an obligation to consider the pleadings before it independently, or was it bound by a (questionable on its face) ruling by the state probate court? The Supreme Court held that the bankruptcy court not only could, but must, independently assert its jurisdiction, and that exercising its jurisdiction could overrule the result in the probate proceeding.

[A] state court's final judgment determining its own jurisdiction ordinarily qualifies for full faith and credit, so long as the jurisdictional issue was fully and fairly litigated in the court that rendered the judgment. At issue here, however, is not the Texas Probate Court's jurisdiction, but the federal courts' jurisdiction to entertain [the Playmate]'s tortious interference claim. Under our federal system, Texas cannot render its probate courts exclusively competent to entertain a claim of that genre.³

So, then, the bankruptcy court had jurisdiction to determine the Playmate's state-law claim within the bankruptcy adversary complaint framework, regardless of the probate court's jurisdiction — or ultimate decision on the merits.

But what happens in the fact pattern I described above? There's another issue of exclusive federal jurisdiction — one somewhat broader than that for bankruptcy.

The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.⁴

Of course, there's still a (potential) exception to this. We'll get there next time I take up this cudgel.

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1. See Markham v. Allen, 326 U. S., 490 (1946); see also Sutton v. English, 246 U.S. 199 (1918); Waterman v. Canal-Louisiana Bank & Trust Co., 215 U.S. 33 (1909)
2. 28 U.S.C. § 1334.
3. Marshall v. Marshall, No. 04–1544 (U.S. 01 May 2006), slip op. at 17 (citation omitted).
4. 28 U.S.C. § 1338(a).

Ironic Surrealism

... or is that surreal irony?

On occasion, the self-important press in various parts of the entertainment industry manages to come up with a story that — intentionally or otherwise — demonstrates the almost-complete insulation of industry leaders from reality. This morning, it's the goofy Variety, with its desperately pretentious vocabulary (e.g., CBS is The Eye, ABC is The Alphabet Network, and viewers are auds), desperately mathematically challenged content, and desperately ill-informed reviews. The headline of the moment is this one:

MPAA, NATO Reform Ratings System

Before you check to see whether this reform involves NATO-standard 7.62mm or 5.56mm small arms, you'll need to understand that this NATO is the National Association of Theater Owners. In other words, one of the few large organizations more rife with conflicts of interest, historical animosity, and almost complete absence of purpose than the North Atlantic Treaty Organization.

The real irony, though, is that it concerns the absolutely broken ratings system... and that this headline points out exactly why. On the one hand, the system concerns itself almost exclusively with sex, with occasional nods toward naughty words and naughty deeds. It's ok for an action hero to deliver a beating that would kill a healthy individual if the blows were real, and get an R (or possibly even PG-13) rating... but don't even think about an erect penis. And that's where the headline comes back to haunt this story. The ratings board consists of "parents" (all from Southern California, one might add, but that's yet another problem for yet another time). I'd be fascinated to find out if any of those parents had any significant military or law-enforcement experience.

In fact, I'd put down $20 that not more than one member of the ratings panels does. The only explanation I can come up with is that the "parents" on the panels must not understand anything about the application of violence, but do have some kind of fear related to the application of hormones. In all probability, these parents were also shocked by even the concept of Lady Chatterly's Lover — they'd probably drop dead at Naked Lunch — and they find it difficult or impossible to separate the fiction from the reality. Separating fictional violence from real violence, though, seems second nature. So, too, does a strangely self-denying treatment of substance use and abuse.

I'm not advocating censorship and pseudorestrictive ratings; I'm advocating honesty in what the MPAA really believes. Dammit, hypothetical-Peoria-through-the-eyes-of-Encino is not the gold standard — or, indeed, any standard — for how to categorize films. And Peoria (90 miles from here) has its red-light district, too...

NATO isn't just coming to a theater near you. It's already there.

(Oops, pressed post before I was done.) And, on top of that, this is an industry that is pretending to pay attention to, and be sensitive to, flyover country's values... but doesn't consider having a film play in flyover country important enough to determine eligibility for the Academy Awards. A fair number of Oscar candidates, nominees, and even winners have premiered in New York and Los Angeles only during December of year x to gain eligibility for Academy Awards, but were not available in flyover country until year x+1 ... despite that "plays in Peoria" foundation for their ratings.

It's Still Monday

...and it probably will be all week. That's the problem with four-day weeks: Although the weekend is (sometimes) great, one is then left with four business days to make five business days' worth of phone calls, and spend five business days' worth on hold/ignore.

• What a surprise: Getting a "mature audiences" program onto non-paywall cable is no guarantee of evading censorship. Back when I was foolish enough to pay for "basic cable" instead of "broadcast only," I watched a lot of A&E and Bravo (well, relative to what else I was watching that was not prerecorded). I distinctly remember my annoyance at some of the elisions in Homicide... and that had been broadcast over the air!
• Most entertainment industry players wring their hands over copyright piracy, no matter where it occurs. But if it's in a foreign country, look out: The USTR will put you on a list of countries that don't "adequately enforce" copyright — even Canada. The problem here is the linkage between "adequate enforcement" and "availability of criminal sanctions." Sorry, guys, but that's window-dressing at the most. Trust me when I say that going through copyright litigation is itself a criminal sentence.
• On the other hand, one descendant of piracy has begun to have an effect on actual practices. The record store as we knew it is probably terminal, but that's not entirely a bad thing. For all of the vaunted large catalog at Tower, the stores were still far too focussed on topsellers, even in the classical section. For example, I remember going into a Tower in the late 1980s and trying to find a copy of the Ozawa/Boston recording of Beethoven's Ninth Symphony to give as a gift — I wasn't about to part with my copy — and being told that it wasn't available... but the 1962 Karajan/Berlin recording was just as good. (No, it wasn't, either musically or technically, especially in the opinion of the gift recipient.) The clerk in question, who was in charge of the whole classical department, hadn't even listened to both recordings.
• Although this is far too theoretical for morning musings, contrast Zadie Smith on readers' role in "creating" a novel with the amusing context of this artist's show. Does it really make a difference that there is no artist there?
• The Publisher's Marketing Association has responded to the PGW bankruptcy by advocating solutions that go directly to the heart of the antitrust/oligopoly aspects of book distribution: Greater diversity in distributors, availability of short print runs to maintain publisher control, and recognition of cashflow as a critical element of the small-publisher picture. And just how long have I been bitching about these problems? (Long before I began this blawg.)

Payton Place

So, the NFL is down to four teams. And the possibility that the Super Bowl will resemble Payton Place even more than it usually does remains alive. Peyton Manning v. Sean Payton. Now, if that happens, and we end up with even more scandals than usual... such as Prince suffering a total "wardrobe malfunction" at half time...

I guess that's what I get for growing up around the Seachickens (and they sure choked theirs...)

Gemisch

Yet more short items with little discernable connection between them...

• Jason McClure of law.com asks Does DOJ care about antitrust any more? Of course, this assumes that the DOJ ever cared during this administration (or the preceding three, for that matter). If it had, perhaps the PGW fiasco might not have the impact on publishing. It's not that much of a problem when two midsized publishers plan to merge, but the artificially broad market definitions imposed to evade antitrust scrutiny result in monstrosities like the pending merger among RIAA behemoths. We have to rely on the Europeans to show some sense... and that's not a good thing.
• Somewhat more amusingly, eBay is back in court in France for unauthorized merchandise. Last time, it was Nazi memorabilia (it's illegal to sell Nazi memorabilia in France at the same time as Le Pen's nutcases are resurgent). This time, it's counterfeit Louis Vuitton stuff. This is actually an interesting issue for civil procedure geeks like me; as the case has been described, any judgment obtained in the French courts will not be entitled to respect in any US court, which is going to make things very interesting. Of course, I have no respect for the underlying dispute, or at least the items at issue in the underlying dispute, so maybe I'm just a bit too jaundiced.
• Sly, cunning, and bearing considerable watching. There has been an unfortunate — anticompetitive (are you listening, DOJ?) — trend in US publishing to delegate the slush piles to agents. That leads to nonsense like the unlamented Sobol "contest" as a means to evade the strictures. And all it takes is a multimedia conglomerate to make this even more disturbing. Miss Snark is not impressed; Writer Beware is guardedly noncommital; and I'm irritated, because this is a classic example of why allowing the agents to manage publishers' slush piles is anticompetitive. The key is this: There appears to be no chance for the prospective authors to negotiate anything about their contracts, should they "win."
• Then there's the question of what happens when a novel makes it to Hollywood. The negotiation process is bad enough; when one tells the studio "no, you can't take the copyright in the underlying novel," the studio has a tendency to try to slip in another clause elsewhere in the option to do so. (I've seen this happen five times... in one negotiation.) Those who love sausages, novels, or films should probably not watch them being made. At least there's USDA oversight for the sausage-makers...
• Of course, the fun isn't over when there's a script on the table. There are still other issues to resolve. Peter Jackson went on a little trip to make King Kong. When he had been there and came back again, he found Otho Sackville-Baggins occupying his home. And Lobelia has already made off with the silverware...
• Last for today, there's an effort underway to pardon the last witch convicted in England. And we're not talking about the seventeenth century, either — it was 1944.

Sometimes It Matters Why You Lose

Yesterday, Professor Patry remarked:

While a few courts, misled by Nimmer, ignore the Section 411(a) requirement that subject matter jurisdiction exists only if plaintiff has received an actual registration certificate or a rejection on institution of the suit, the vast majority follow the statute. An opinion issued on January 4th in the Eastern District of Wisconsin... shows some courts may take the requirement too seriously.

"Section 411(a) Bites Plaintiff Twice" (my ellipses). Although I am usually loathe to agree with the "opinion elements" of Nimmer, this time I think Professor Patry is incorrect on a matter of civil procedure.

Section 411 reads:

(a) Except for an action brought for a violation of the rights of the author under section 106A(a), and subject to the provisions of subsection (b), no action for infringement of the copyright in any United States work shall be instituted until registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute an action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights. The Register may, at his or her option, become a party to the action with respect to the issue of registrability of the copyright claim by entering an appearance within sixty days after such service, but the Register’s failure to become a party shall not deprive the court of jurisdiction to determine that issue.
   (b) In the case of a work consisting of sounds, images, or both, the first fixation of which is made simultaneously with its transmission, the copyright owner may, either before or after such fixation takes place, institute an action for infringement under section 501, fully subject to the remedies provided by sections 502 through 506 and sections 509 and 510, if, in accordance with requirements that the Register of Copyrights shall prescribe by regulation, the copyright owner—
      (1) serves notice upon the infringer, not less than 48 hours before such fixation, identifying the work and the specific time and source of its first transmission, and declaring an intention to secure copyright in the work; and
      (2) makes registration for the work, if required by subsection (a), within three months after its first transmission.

This inelegant drafting certainly does lead to some confusion. Is the registration requirement properly treated as jurisdictional, or as an element of the claim? A recent Supreme Court decision implies that the answer is not so clearly "jurisdictional" as many¹ decisions on copyright assume.

Justice Ginsburg began her unanimous opinion with the not-so-cryptic observation that "This case concerns the distinction between two sometimes confused or conflated concepts: federal-court subject-matter jurisdiction over a controversy; and the essential ingredients of a federal claim for relief." Although the case concerns a different statute entirely, Justice Ginsburg's analysis of Title VII of the Civil Rights Act of 1964 — prohibiting employment discrimination on the basis of sex — seems to apply to § 411 of the Copyright Act, too.

If the Legislature clearly states that a threshold limitation on a statute's scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.

Arbaugh v. Y&H Corp., 546 U.S. ____ (2006), slip op. at 14 (emphasis added; footnote and internal citation omitted).

The question, then, is whether § 411 "clearly states" that the presence of a registration certificate "shall count as jurisdictional." Clearly? No. It is certainly not as clear as the examples Justice Ginsburg cites in footnote 11, the note I omitted in that passage — each of which uses the word "jurisdiction." Section 411 does not. Instead, § 411 imposes a curable requirement... and if a requirement for suit that is omitted in the complaint can be cured, it is not (by definition) a failure of subject matter jurisdiction, but a failure to state a claim. And, by that standard, treating § 411 as jurisdictional is improper; it is instead an element of the claim.

That may seem a highly technical and formalistic distinction. It is; however, there is a big difference between the two to a civil procedure geek (like me). It's a particularly significant difference when jurisdiction over copyright actions is exclusively federal (28 U.S.C. § 1338 uses the word "jurisdiction").

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1. See, e.g., Morris v. Business Concepts, Inc., 259 F.3d 65 (2d Cir. 2001), later op., 283 F.3d 502 (2d Cir. 2002).

Two for One Sale

A number of news items (and home thingies) have prompted a two-for-one sale on some items at der Rechtsanwalthaifischschloß — use a good dictionary, it stumps Babelfish — and this week only, free shipping!

• I've got two mint-condition teenagers available. Both are fully testosterone-loaded, low mileage, low labor models with custom-sharpened vanadium-steel tongues. Buyer must provide own private refrigerator and freezer.
• The Sobol Literary Contest has been cancelled. Schade. The really sad thing about the contest is that it was even viewed as necessary. This sort of bullshit is an inevitable result of the publishing industry's decision to allow agents to act as not just assistants to authors, but as a gatekeeper for the industry. Then, too, I'm amused by this assertion (and Mr Italie should certainly know better, as we've discussed this problem before):

  First announced last September, the Sobol prize was immediately attacked by agents, bloggers and other critics for the entry fee and for requiring that Sobol officials serve as the winners' literary representative. Industry policy prohibits agents from charging money to read manuscripts.

  No, it doesn't. The Association of Authors' Representatives — a voluntary trade group of literary agents with significant track records of licensing books to commercial publishers — prohibits anything labelled a "reading fee" in its Canon of Ethics. This leaves two battleship-sized holes to float through. First, not all literary agents belong to the AAR. There are even some successful agents with substantial track records who don't, so one cannot say that nonmembership = crook. (One can say that nonmembership, with rare exceptions — such as an agent with a track record at an agency striking out on his/her own, or an agent who doesn't quite have the 10 licenses in 18 months record required to join — means that inexperienced authors should avoid for their own protection, sort of like not buying a used car at Honest Sam's Used Cars.) Second, the Canon of Ethics does allow for other kinds of "fees," such as "contract fees," "administration fees," and the like that are tied not to reading the manuscript, but to representation. Those fees are still inappropriate. That's right, folks — two gaping loopholes for the price of one!

• From the Hypocrisy in Technology Department, we have this story on employer monitoring of employee communications. Once again, the law has failed to keep up with practice, and employers are repeating the same mistakes they made when telephones started appearing on workers' desks. In the long run, smart employees will simply find a way to install industrial-strength encryption on their computers, such as keeping a copy on an inexpensive USB flash device. That, in turn, will lead to employers installing keystroke monitors. And then somebody will figure out that that's the equivalent of bugging every office, there will be outrage, and our "two for one" sale will kick in. One doesn't just get employee outrage — one invites system vandalism!
• Last for the moment, Wired (as usual) manages to draw two grossly incorrect conclusions about future trends in technology usage in this one article on the pending "demise" of music DRM. The most obvious is that Mr Van Buskirk doesn't recognize that

  The labels' switch to the MP3 format wouldn't necessarily mean losing the ability to track unprotected files sold by online music stores. The Digital Watermarking Alliance (including Thomson Multimedia, which owns the right to license the MP3 codec), recently made a statement in support of the idea of major labels selling watermarked MP3s. This would let labels sell non-DRMed music without losing the ability to track the files. Ideally, these serial, unique watermarks would be used not to sue people who release a purchased MP3 into file sharing networks (sophisticated users would probably figure out a way to strip the watermark before doing this anyway). Instead, the watermarks could be used to monitor playback in order to determine how to pay artists out of a shared revenue pool, tracking not only what was bought, but how much it was played. Such a shift would automate accounting in the recording industry to an unprecedented degree — another bitter pill it may have to swallow. They're suspected of using dodgy accounting to rip off artists (many of whom can't pay for prohibitively expensive accounting audits) for a long time.

  (fake paragraphing removed for clarity) describes a DRM. "DRM" stands for "digital rights management" — and that means far, far more than just "copy protection."

  But that's just the first trip down non sequitur lane in this article. Consider this whopper:

  There's already a case study of what an MP3 store could look like: the Russian site AllofMP3.com, which people are still reporting access to, despite attempts to starve it of U.S. credit cards. Its popularity also indicates that digital music pricing should drop (a 10-cent to 25-cent per unprotected MP3 sounds about right to me). Since increased sales of a digital good can't affect inventory, the labels would more than make up for the price drop by selling far more songs — especially considering the endless targeting capabilities online music stores could eventually offer.

  (fake paragraphing removed for clarity) Notice the four inept, inaccurate assumptions of causality in there?

  1. Popularity of a known pirate site indicates a specific target optimal price for digital recordings
  2. "Starving" the pirate site of US credit cards is directly related to anything other than the site's ownership (the best information available to me indicates that it's a Russian Family business)
  3. "Increased sales of a digital [sic] good can't affect inventory" — what he means is that increased sales do not actually decrease current inventory from that vendor; they will certainly affect availability of both physical-media goods and non-physical-media goods. That is, in fact, the point of item 1!
  4. Increased item sales will necessarily increase income to the labels above the cost of providing for the increased item sales, and impliedly will do the same for the copyright holders.

  So this is a four-for-one sale inside a two-for-one sale.

Perhaps later today, we'll pick up either the hypothetical on the author's estate I began last month or discuss a disagreement with Professor Patry on a fine point of civil procedure.

Comparative Law

Too many people in the entertainment industry — of which the publishing industry is a segment — are isolationists in the old Hawley-Smoot mold. It's not a coincidence that the "manufacturing clause" remained part of US copyright law until 1976! As Professor Patry noted earlier today — and as he implied yesterday — there are lots of interesting things about entertainment and related "stuff" outside the three-mile limit. (Leaving aside, for the moment, that the US is one of a small minority of nations that says the territorial limit is only three miles.)

Sometimes it's amusing to look at foreign coverage of US-based patent issues, and think about what they might mean in a copyright context. Consider, for example, cellphones. Increasingly, bleeding-edge users employ their cellphones as content containers — not just as a phone booth, but for a downloaded copy of Phone Booth. Leaving aside for the moment whether that downloaded copy was a pirate copy on YouTube — which we'll return to in a moment — consider the technology one finds in the cellphone. Many cellphones these days include a digital camera. Well, who exactly has the right to license that technology to cellphone manufacturers? Could creating copyrightable expression using an unlicensed implementation of that technology have implications for ownership of that copyright? Or should we just return to the "lawyers need jobs too!" paradigm? (Hopefully, the University of Washington is getting better legal counsel than did the University of Illinois in a case that virtually every first-year law student has encountered.)

And, in the reflexive interest of providing entertainment on this blawg, I offer the following test question for a course in copyright law. The embedded video may not be work-safe.

View the embedded video presentation below and discuss. You may assume that the presentation appears on YouTube. Do not limit your perspective to United States law, as the video raises several issues implicating non-US copyright law.

Hint: Your answer should specifically reference other cartoon characters, and should consider the content of the embedded video.
Suggested time: 60 minutes.

Of course, that question does cause some problems for the hearing- and/or visually impaired student...

A Bankrupt System

Last Friday, Advanced Marketing Services, Inc. declared bankruptcy in the District of Delaware (No. 06–11480). AMS is/was the parent of Publisher's Group West, the third-largest distributor of trade fiction (and, depending on how one measures, the third- or fourth-largest distributor of printed books). This is one of the first visible dominoes to fall that will have a significant effect on the publishing industry.

To begin with, let's get an idea of what I mean by "third largest." Unfortunately, the publishing industry does a darned good job of keeping critical data away from prying eyes. (If the publishing industry is as unprofitable as it constantly whinges, why do venture capitalists and the like — not famed for their pollyannish views — continue to acquire publishers?) One of those secrets is the distribution system. Since a massive consolidation during the 1990s (when the Department of Justice and Federal Trade Commission were still dominated by Reagan/Bush I supervisors), there have been very few distributors of printed books in the US. Just how concentrated that segment of the market is depends upon how one defines it.¹

If one were to define the market as all books sold, it's really not all that concentrated. However, that definition includes a lot of markets that simply don't use distributors, such as professional and nontrade books, gift books, and so on. (That's not to say that no distributor will carry them — just that the publishers don't rely upon them.) The most coherent market definition of distributed books is "trade fiction." And the concentration there is astounding: the HHI² is — depending upon the accuracy of the numbers — somewhere between 1700 and 2400. The two biggest players — Ingram, and Baker & Taylor — appear to have just over 60% of the dollar-value market share in distributing trade fiction.

What makes this worse for the publishing industry is the problems that small and mid-sized publishers have. To be honest, I have never been very pleased with the terms offered by any of the major distributors, even before the consolidation a decade ago. It's bad enough that payment isn't going to be for at least 90 days after shipping merchandise! The real problem is that most small publishers, and many mid-sized publishers, are seriously undercapitalized and depend upon relatively constant, predictable cashflow. Further, those small and mid-sized publishers are disproportionately bound to PGW. Or, rather, were.

Small and mid-sized publishers of fiction are thus going to have some serious cashflow problems during the AMS bankruptcy. That's not going to affect the Big Five (or their various imprints) very much. It is, however, going to hit their smaller competitors twice: Once in delayed and diminished cashflow, and once more because their books simply won't be sold until they change their distribution. And that's going to go through to authors, too.

Of course, the big publishers are going to find a way to benefit from this. I strongly suspect that the AMS bankruptcy will be used as yet another excuse to abuse the reserve against returns — asserting a need for a larger reserve, holding it for longer, and so on. And it won't take long to be an issue to show itself — since AMS declared bankruptcy before the end of 2006, royalty-reporting periods ending on 31 December will be affected.

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1. This should come as no surprise to anyone familiar with the merger-approval aspect of antitrust law. Market definition is everything; for example, it's the only way that the recent recorded-music mergers even had a chance of approval, short of Abramoff-like lobbying.
2. The Hirschman-Herfindahl Index is a measure of concentration in a market. One states the market share of each of the top five market participants as a number out of 100, squares the individual results, and then adds the squares. An HHI of over 1800, under Department of Justice guidelines, indicates a concentrated market, and mergers and acquisitions under those circumstances are supposed to get "heightened scrutiny" if they increase the HHI by a further 100 points. That does not necessarily mean they will be rejected; the burden is on the market player(s) involved to show that in that particular market, any increase in the HHI will not have anticompetitive effects.

Morning Edition

This is the morning edition. Later today, I'll have some comments on an event that too many in the publishing world seem to have ignored over the last few days — the bankruptcy filing last Friday by Advanced Marketing. (I've been too busy with health and family stuff to blawg for the last week; I'll be making up for it...) In any event, onward and sideways:

• The NRA is scared of the new Congress. Or, at least, the NRA is reverting to form by engaging in scare tactics over the purported "threat" to gunowners from the Democrat-controlled Congress. "Democrat-controlled" my emaciated little toe! Leaving aside whether the political position stated by the NRA has any connection to reality, does anyone really think that the gun nut in the White House will sign any legislation that restricts gun ownership, or that anybody could come up with a veto-proof majority in this Congress for anything short of apple pie? (With the current anti-gay-marriage backlash, I'm no longer sure that motherhood would be safe... in any form.)
• A fascinating item in the NYT yesterday on the relationship between brain function and music leads me off on my usual tangents. How does that relationship influence other, simultaneous brain activity, such as appreciation for visual art or prose? And does the apparent relationship between autism and Williams syndrome tell us anything about "math rock"?
• There have been lots of information technology items over the last few days. Unlike most who follow ink-and-paper publishing, I follow IT closely, and I'm comfortable with it; I just don't comment on it that often, given the sheer quantity of bloviating on IT issues that overwhelms the 'net and the blogosphere. As an excellent relief from the bloviating, I recommend Denise Howell's not-updated-as-often-as-I'd-like — that is, not updated hourly! — Lawgarithms column at ZDNet. In any event, here are a few IT-related items of interest that have some interesting implications for publishing (etc.):
  • These days, we can't talk turkey about information technology without invoking Linux's potential as a dominant OS... at least twice. And this from a direct descendant of the operating system that epitomizes "user hostile." Compare to —
  • Randy Newman was right: it's money that matters. Even to the already superrich, like Steve Jobs. I've never been a big fan of Apple, particularly in the Macintosh era. It seems somewhat disingenuous to, on the one hand, claim to be the "people's champion" with all of those "ease of use" features, while simultaneously embracing closed-source software, DRM, and closed-architecture hardware. But then, I'm one of those old-school hackers who thinks that if the Flying Spaghetti Monster had meant us to use a GUI, He wouldn't have invented the command line, let alone punch cards. And yes, I still understand JCL; why do you ask?
  • There's been an interesting confluence of Google-related news items. Leaving aside the company's dubious grasp of copyright for the moment, we've got claims that Google is a probable victim of the IT-industry version of Moore's Law; questions about Gmail features and reliability; and Google's hiring of a new special counsel on copyright issues who can actually spell copyright, and understand the history of creators' rights at a visceral level.
  • Antitrust? What's that? Neither publishing nor IT thinks principles of antitrust law apply to them, because they're special. Riiiiiight. Of course, there's a difference between "antitrust" and "protection by patent" — at least, until we consider the nonsense of "business-method patents" (and even more nonsensical "innovations").
  • Of course, the whole point of IT is to enable sharing of information, and access to information by those who need it. Sort of like the ideal of the newspaper. This article on the WaPo's website — which seems oblivious to the irony of its own source — is an all-too-common bit of navel-gazing. And that gets us back toward the publishing industry...
• Without further comment, here's the usual holiday-period story extolling POD technology everywhere without considering either consumables or operator training. I've never seen one of these stories sourced back to someone who understands either the returns, distribution, and sales-reporting system or blems; that should be a big hint that it's not just the technology. At this stage, POD is about up to the turn-the-removable-crank-to-start-the-engine level of the Model A. It's not ready to substitute for all other means of getting people from Point A to Point B (ignoring, for the moment, the potholes). Infrastructure ordinarily determines the commercial success or failure of any specific technology... and I see no attention being paid to the relationship between local-origin POD and infrastructure whatsoever. And the less said of the publishing industry's (and POD proponents') neglect of the relationship between product packaging/definition and commercial success, the better. Gee, I didn't do so well at "without further comment," did I?
• Two emperors. No clothes. No rationality. And no concern for the wellbeing of their respective empires' citizens.

Finally, in "celebration" of Joanne Rowling's (requires flash) announcement of the last Harry Potter title, I offer the following poll (a dubious first for this blawg).

How many Weasleys will die in Harry Potter and the Deadly Hallows?
	All of them
	None of them
	One, but neither Ron nor Ginny
	Ron only
	Ginny only
	Two, but not Fred and George
	Fred and George only
	Three
	Four
	Does Hermione count if she keeps snogging Ron?

For a bonus, I'd ask in which chapter (number) the first Weasley death will occur... but that's fill-in-the-blank, and too annoying to code and track. Not to mention even less meaningful than the basic poll itself...