Google released its Voice and Video chat today, and our own unscientific tests here at New Media Rights and UCAN show that the audio and video quality easily rivals competing services such as Skype. The biggest difference is that this is Google making a move into the voice and video area and it has the potential to alter the playing field a fair amount. 

For those of you who use Gmail, think of how often you use the Gchat feature which allows you to talk to any other gmail user in realtime from within your email.  Now add Voice and Video to that service and you have Gmail Voice and Video Chat.  With many people and organizations adopting Gmail as their email client, the potential for day to day casual use of video and voice chat beyond the current user base is tremendous.  Right now, you can go and download programs like Skype, but Google building a service like this into its email client makes voice and video more readily accessible than ever.  We think that's pretty cool.

Our reply comments to the Copyright Office regarding the proposed rulemaking on section 115 compulsory licensing have been posted to the Copyright Office's website and can be found here.

In our reply comments we reiterated our previous argument that the proposed changes would chill innovation in digital technology and we echoed certain concepts and proposed solutions submitted by other public interest commenters who have participated in the proceedings. The Copyright Office is slated to make a decision on Thursday.

To point out just one example of the effect such proposed rulemaking might have on the industry and innovation; today Appleinsider revealed that Apple has considered shutting down Itunes if they are forced to pay double royalties for each download as a result of the proposed rulemaking because they are already teetering on the brink of unoprofitability as it is. If Apple can't afford it, then who can?

The RIAA has consistently attempted to sue P2P network users by claiming that "making available" copyrighted works violate's the copyright holder's exclusive right of distribution under Copyright Law, but yesterday, the RIAA's $220,000 verdict against Kazaa user Jammie Thomas was set aside after the judge declared a mistrial. This decision is significant because the RIAA will now have a substantially higher burden of proof for   infringement; they will need to show affirmative steps toward distribution aside from making the music available in their shared folders.

You can read the decision here .

After much anticipation, Google's beta release of their Chrome browser (based largely on Webkit) was launched on September 2nd. During the morning leading up to the release, tech forums were buzzing with rumors, screenshots of deleted but previously cached pages appeared, and speculations raged. After downloading and tinkering with Chrome, developers and users alike are impressed with what they see. Chrome is not only stable and fast, but shows promise to weaken the dichotomy between browser and operating system; in other words, Chrome is "cloud" friendly.

On its surface, Chrome is beautifully simple and extremely fast. Beneath these obvious qualities, Chrome also delivers some powerful and innovative features and is extremely robust in its ability to handle heavy web activity. I haven't ran any benchmark tests myself, but ZDNET's test results look extremely promising, showing Chrome performing at speeds significantly faster than any of its veteran rivals. Chrome also appears to be very stable. While competing browsers such as Firefox and Internet Explorer 7 crash entirely when one tab crashes, Chrome processes each tab separately, closing only the tabs that crash, not the entire browser.

Chrome has also been released under a fully open source license, which stands as a powerful example of how open source licenses can be very beneficial commercially. By releasing their code, Google hopes that developers and users will not only help help them make Chrome more user friendly, but also change the direction of web development so that other Google products can stay functional and relevant in a fast changing technological landscape. As Google provides more online applications on the cloud such as Gmail, Google Docs, and Google Calendar, Google will increasingly face challenges in meeting compatibility requirements; Chrome seems to be a defense against such incompatibility issues. 

While the Chrome is currently only available for Windows users, Google plans to release Mac and Linux versions in the near future. 

Hakone OAM: Chrome Spere is shared on Flickr.com under an Attribution-Noncommercial-No Derivitives CC License by jpellgen

On July 16 the Copyright Office released a Notice of Proposed Rulemaking soliciting commentary on various issues concerning the treatment of digital phonorecord deliveries with relation to compulsory copyright licenses. A major piece of the discussion was the characterization of buffer reproductions of digital sound recordings under copyright law, an issue which could have a profound effect on innovation in new media. We have issued our comments to the Copyright Office and have posted them here.

The proposed rulemaking was especially disconcerting because it directly contradicted the recent Cablevision decision from the Second Circuit which we discussed in a previous post. The Second Circuit reversed the district court's previous decision which in part ruled that buffer reproductions of digital information were considered copies, a ruling which would place the transmission of any digital information under copyright regulation. Such a ruling threatened to chill of innovation in digital information technology.

Under the Copyright Act, a reproduction of a work must be embodied or fixed in a tangible medium so that it can be perceived, reproduced, or communicated for more than a transitory duration, or in other words, to come under copyright regulation a reproduction must meet the embodiment and duration requirements.

The embodiment requirement is easily identifiable as it is necessary to buffer digital information in a tangible medium (typically RAM) in order to transmit it. The duration requirement is significantly more difficult to analyze as the durability of reproductions varies dramatically between technologies and as technology changes.

Unfortunately, the durational requirement is more fleeting, which led the district court in the Cablevision case to essentially ignore it, a choice which the Copyright Office blindly followed in their proposed rulemaking. Judge Walker of the Second Circuit explicitly rejected the district court's omission of the duration requirement from their analysis of buffer reproductions for various reasons as discussed in our comments.

Considering the widespread attention received by the Cablevision decision other organizations following this matter will likely echo our concerns. Hopefully they listen.

On August 4, 2008, the trend toward remote network based services received a breath of fresh air in its sails; The Second Circuit reversed the March of 2007 decision of the United States District Court of the Southern District of New York which ruled Cablevision, a cable provider to customers in Long Island, NY, had infringed the rights of various copyright holders by providing remote network based DVR services to their customers. This reversal is a great victory for innovation in the fast growing area of remote network based services, and a great thing for technology consumers.

After Cablevision released its network based DVR service, various television networks, including the Cable News Network and the Cartoon Network, brought copyright claims against Cablevision. The plaintiffs alleged that because Cablevision allowed their customers to record and view time shifted recordings of their television programming from their central servers as opposed to the individual set top boxes, Cablevision violated the networks’ exclusive right to make copies of and publicly perform their works.

The district court agreed with the plaintiffs, failing to consider the non-infringing uses of the technology and the very purpose of copyright laws. They argued that because the remote storage is a “service” and not a device, the equipment is at Cablevision’s building and not in customers’ homes, Cablevision controls what can be recorded, and the service is too similar to video on demand services, Cablevision is directly liable for infringement. The court basically ignored the fact that the “service” did nothing more than a regular DVR and focused merely on the fact that because the time-shifted recordings are transmitted back to customers with the same infrastructure as video on demand content, the service is too dissimilar to a VCR to receive protection under the 1984 U.S. Supreme Court Betamax decision which safeguarded VCR manufactures from copyright liability.

As usual, the intersection of new technology and copyright law lead to confusion. Non-tech-savvy judges tend to focus too much on the technical aspects of a new technology and compare it to the old, failing to address the practicalities of their decisions. The Second Circuit fortunately took the practical route in their reasoning, focusing on who was actually responsible for recording the programs as opposed to the technical infrastructure of the remote DVR service. They concluded that individual customers and not Cablevision recorded the programs because programs were only recorded when customers pressed ‘record’ on their remote controls.

The new decision benefits consumers and cable providers on a variety of levels. First, central storage of recorded programming is cheaper, more secure, and more reliable. It is significantly cheaper to bundle storage in a large central server and generally you can provide faster and more reliable equipment than the cheap hard drives currently packed into DVR units. Because hard drives generate a tremendous amount of heat, and people don’t want a noisy fan in their DVR disrupting their audio visual experience, the cooling systems in DVRs have traditionally been inadequate, requiring frequent replacement in some instances. When customers replace their set top boxes they have to reset all of their recording preferences and they lose their previously recorded programing.

Second, the previous 2007 decision was very damaging to the remote data storage industry in general. While remote storage is cheaper and more convenient, the 2007 decision likely chilled development of the technology. The Second Circuit's decision will serve as a guiding light in future litigation over remote data storage services like Cablevision's such as Mp3tunes.com , a remote music storage locker that has come under fire from the RIAA and others.

The Second Circuit was careful to point out that their decision only applies to non-infringing uses, so the application of the decision to cases services such as Mp3tunes will largely depend on whether the court sees Mp3tunes as a non-infringing use of music. If the courts look at Mp3tunes from a practical standpoint, understanding that users are the ones causing the music to be played on their computers and not Mp3tunes specifically, the prospects for Mp3tunes look great.

Unfortunately, the Second Circuit's decision will probably not be the end of the fight. Blind to the possibilities offered by this innovative technology and in fear of losing the benefits of their video on demand profits, the plaintiffs will likely appeal to the Supreme Court. Hopefully the Court has the wisdom to affirm.

"What to Watch, What to Tape " is licenced under a CC Attribution - Noncommercial 2.0 license by "Cayusa " on Flickr.com  

Last month a former Google developer and her team of 30 employees rolled out a new search engine called Cuil. The new engine boasts an innovative approach to internet searching, a magazine style layout, and superior privacy policies . While many have complained about how search engines like Google collect vast amounts of individually identifiable user data and store it indefinitely, Cuil does not collect nor store such data, making it an attractive alternative for privacy concerned browsers.

We understand Cuil is still in its early developmental stages, but there is one problem that came to our attention that needs addressed by Cuil developers. Shortly after Cuil’s launch we were contacted by the owner of an underground music site after he found his copyright protected favicon appearing next to the search results for other sites on Cuil. After investigating the matter, it appears that Cuil selects relevant images related to the search terms entered by the user and then randomly assigns those images to the results. This process unfortunately causes copyrighted images and trademarks to appear out of context, likely violating various intellectual property laws.

Apart from the legal ramifications, this random association of images with results should concern Cuil because it is more likely to confuse users than help them. For example, we searched for the fast food restaurant “Taco Bell” and to our surprise we found the official Taco Bell site link accompanied by a photo of an African Lion while the official Taco Bell trademark appeared beside a link to an unofficial website distributing Taco Bell recipes. It was necessary to ignore the images and read individual urls to determine which listing was the official Taco Bell site. Similarly, when we searched for our parent organization by entering “Utility Consumers’ Action Network,” our site’s link was accompanied by the logo for the Rainforest Action Network, an organization unrelated to ours. These examples illustrate how the design flaw is not only confusing for Cuil users but also causes the type of initial consumer confusion trademark law seeks to protect from.

In the popular game Halo 2 on Microsoft’s XBOX, some multiplayer gamers caused Halo 2’s programmers headaches by modding, cheating, and exploiting glitches in the game to gain considerable advantages over other Halo 2 gamers and raise their online ranking. While this activity wasn’t necessarily illegal, it was in contravention of the terms and conditions of the online gaming agreement that gamers had with Microsoft through the online gaming service XBOX Live. Accordingly, XBOX Live moderators monitored gamer activity and suspended the accounts of those who continued to cheat despite warnings. Although the cheating was very frustrating for many Halo 2 players, it wasn't a crime. Now that online environments are beginning to introduce the possibility of buying, selling, and exchanging goods, activity similar in nature to real world crime is emerging, and the solutions to these crimes are proving elusive.

Virtual Theft of Virtual Property

Due to the obscurity and newness of virtual worlds, most gamers who have tried to take their virtual world grievances to real world courts have been summarily rejected. Until now, most actions taken by law enforcement against virtual world criminals have occured in countries like South Korea where virtual world participation is something akin to a national pastime. In 2003 alone, South Korea received reports of over 10,000 virtual world related cybercrimes.

Recently law enforcement in Amsterdam arrested five teenagers for stealing over 4,000 Euros worth of virtual furniture in the virtual world Habbo Hotel . Stealing the furniture wasn’t as simple as picking it up and walking away with it. The teenagers first set up phishing sites posing as official Habbo Hotel sites in order to collect usernames and passwords from other Habbo Hotel users attempting to log in. After they had these usernames and passwords, these teenagers logged onto Habbo Hotel using the stolen information and proceeded to exchange property with their own user accounts. While many at the time argued the teens should only be banned and not charged criminally, a Habbo spokesman stated, “It is a theft because the furniture is paid for with real money.”

Virtual Theft of Real Money

An even more egregious example of virtual theft happened in Linden’s Second Life. A Second Life user discovered that by using Apple’s QuickTime media player technology he could hack into the computers of those who came into contact with their malicious software tool in the virtual world and take control of their characters. After taking control of their characters the hacker transferred ‘Linden Dollars’ to his own account and exchanged them for U.S. Dollars online. The hacker even forced the stolen character to purchase more Linden Dollars with the victim’s credit card.

Money Laundering

Organized crime is even getting in on the action . A recent report released by Symantec explained that the largely unregulated virtual world markets are becoming attractive venues for money laundering. The report said,

"... a criminal enterprise could open several thousand MMOG accounts. Each could be used to trade with other players in the purchase or sale of in-game assets, the funds from which would ultimately be withdrawn from the accounts. Since thousands of accounts may engage in millions of transactions, each with small profits or losses, it would be difficult to trace the true source of the funds when they are withdrawn. These transactions can be conducted worldwide without the oversight that typically accompanies international bank remittances. In fact, in February 2007, China's central bank and finance ministries called upon companies to stop trading QQ coins and virtual currencies, presumably to curb the unregulated exchange of currency."

Virtual Sex Crimes?

In 2007, two different Belgian newspapers reported that a virtual patrol unit was set up to investigate virtual rapes in Second Life. Apparently no details are available just as with real world rape cases. This development troubles some because they believe it might lead to the prohibition of traditionally accepted virtual world activities which are illegal in the real world. Just imagine, no online Call of Duty 4 because virtual killing is illegal. Would Mario still be allowed to stomp on Goombas? Who knows?

What Now?

These examples illustrate the difficulties that lie ahead for law makers and law enforcement officials. Understandably, the virtual fails to seamlessly connect with the real, and the distinctions between what is legal or illegal and ethical or unethical are often blurred, leading to hasty decisions by those who understand the technology the least. During this time of transition it will important for users of these technologies to be vigilant and voice their opinion so law makers can make informed decisions.

"Virtual Security " shared under CC Attribution-Noncommericial-No Derivative works Generic 2.0 License by svenwerk on Flickr.com

It may not be long before the IRS recognizes the sale of
Linden Dollars for U.S. Dollars as a taxable event in the sale of property.

According to Internal Revenue Code section 61(a)(3) “gross income means all income from whatever source derived” including “gains derived from dealings in property.” If virtual property is property, wouldn’t that also mean gains derived from its sale would be includable in gross income? All income is taxable and should be reported on your tax return, but the characterization of that income within the code may significantly alter your tax liability.

The main argument in favor of taxation of virtual property is fairness. Would it really be fair to afford virtual property holders the same protections under the law as intellectual property holders while refusing to tax the sale of their property? Virtual property holders can’t have it both ways, can they?

The rate at which virtual property will be taxed will depend on how income from the sale of virtual property is characterized. Some believe that gains from the sale of virtual property should be taxed at short and long term capital gain rates. Does that mean individuals should get depreciation deductions on their virtual capital assets? Can a virtual building depreciate?

Others argue that virtual property transactions should be taxed as prize winnings or gambling income, and some even suggest the possibility of a ‘Virtual Gaming Commission’ akin to the Nevada Gaming Commission in order to assure participants a fair gaming environment. Gambling earnings are generally taxed at the highest available rate and can be offset by gambling losses, but only up to the value of an individual’s winnings for that year. This would be bad news for those making a living in the virtual world.

"DEATH and TAXES " shared under CC Attribution-Share Alike 2.0 Generic by Paul Stumpr

As the struggle continues to protect intellectual property in our rapidly evolving technological landscape, a new kind of property is emerging that might prove even more vexing, virtual property.

Virtual property is created, exchanged, and sold everyday in virtual worlds such as Linden’s Second Life or Habbo Hotel , as well as in MMORPGs (massively multiplayer online role playing games) like Blizzard’s World of Warcraft . A quick text search for Second Life on eBay.com reveals hundreds of listings to bid on ‘Linden Dollars’ with which Second Life members may purchase real estate, clothing, or scripts for just about anything within the Second Life world. Initially this may not have appeared to be problem. Today however, some participants are earning serious money from their virtual property and are investing significant real world resources to do so. What was once an isolated group of hobbyists is becoming big business, and the legal issues naturally follow.

The most prominent success story in the virtual economy is that of virtual real estate magnate and Second Life fashion designer Anshe Chung , a fictional avatar in the Second Life world. In late 2006, Anshe hit real world headlines when she announced her real-world net worth of over one million dollars earned entirely though her Second Life activities. Anshe has since been featured (in avatar form) on the cover of Business Week , and has also been interviewed in Forbes Magazine. She employs over 60 people full-time to manage her empire which sells and rents virtual real estate, clothing, and most recently, provides virtual banking services in other virtual worlds.

While not everyone is making a fortune, Second Life claims that in May of this year 189 individual users of Second Life earned more than $5,000 from their online exploits. These numbers are just scratching the surface of what is to come. In countries like South Korea, ninety percent of those who are between the ages of twenty and thirty are members of a virtual world called Cyworld , which happens to sell over $300,000 worth of the currency called ‘acorns’ to their users everyday.

With all of this time and money being invested in virtual property, it wasn’t long before the issue popped up in court. The first big case was Bragg v. Linden Research . Bragg, an independent lawyer and Second Life enthusiast, found a way to manipulate the urls associated with purchasing land plots from Second Life in order to purchase plots still unavailable for public sale, and at much lower rates. Linden discovered the activity and canceled Bragg’s account , erasing the structures he built on his land. Bragg filed suit against Linden claiming they deprived him of over $8,000 in virtual property, including property he had purchased before his unauthorized activity. Unfortunately, the case settled privately before the court could rule on the issue, but we do know that Linden reinstated his account and replaced Bragg’s property to some extent. Linden has since modified their user agreement to strengthen their ability to act in future disputes.

Linden’s move to leverage their position is indicative of the constant struggle between virtual world operators’ rights and users’ rights, especially users’ rights in their virtual property. It’s this very relationship that has led some to label Linden’s founder Philip Rosedale as a dictator . While agreeing that he may be a dictator in the generic sense, Rosedale argues that Linden never takes land without reason, unlike real world dictatorships. Rosedale insists that it’s in Linden’s own interest to respect users’ rights because to do otherwise “would so risk everything we have built .” But one fact remains; as long as operators such as Rosedale can terminate accounts largely on their own terms, users will be investing in virtual property at their own risk.