To: intellec@virtconf.ntia.doc.gov
From: bcox@gmu.edu (Brad Cox; Coalition For Electronic Markets)
Subject: Re: [INTELLEC:55] Fair and unfair use
Cc: tesler@taurus.apple.com
Bcc: 
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Larry Tesler wrote:

>Which of these options (or others) would be allowed by the proposed rules?
>Which would best balance the rights of copyright holders and the public?

The options listed here were all terms and conditions. All deserve (and may someday get, 
given revenue collection infrastructures not yet available) the same answer. Terms and 
conditions are nobody's business but the buyer and seller. The seller proposes, the buyer 
disposes.

There is a common misconception about the superdistribution approach (Idea Fortes section, 
Wired Magazine, Sept 1994) that invocation-based charging implies pay-per-view terms and 
conditions. Superdistribution takes absolutely no stand on terms and conditions. It leaves 
these entirely up to market-mediated buyer/seller interaction. If the seller thinks pay-
per-keystroke terms/conditions will thrive on the market, that's his business (and the 
buyer's).

I hope *nobody*, most certainly not the government, will have any say about how to balance 
such rights. Markets are wonderfully efficient at such balancing. 

What's missing is not a balancing mechanism but a sufficiently robust revenue collection 
mechanism that market forces can apply with comparable robustness for goods made of bits 
as they have for tangible goods since antiquity.

To: intellec@virtconf.ntia.doc.gov
From: bcox@gmu.edu (Brad Cox; Coalition For Electronic Markets)
Subject: Re: [INTELLEC:88] INTELLEC digest 16
Cc: tesler@taurus.apple.com
Bcc: 
X-Attachments: 

>Larry Tesler wrote:
>Hello, Brad.  Good to hear from you.

H'lo Larry! Likewise!

Rather than responding point by point (since I doubt that we're really disagreeing in the 
slightest), I've enclosed a recent response to the editor of The Scientist magazine that 
expresses the excitement that I sense in the issues dealt with in this list.

In 'Of Multimedia CD-ROMs And Real-Time Access: `Information 
Nirvana' Is Still Not On Horizon', Eugene Garfield effused about the role of CD-ROM 
technology for multimedia publishing:

        This burgeoning catalog of multimedia reference works promises to 
        make a reality of early visions of universal, real-time access to 
        our accumulated archive of knowledge--what Vannevar Bush called 
        "Memex" and H.G. Wells termed the "World Brain." But don't hold 
        your breath for the dawn of this information nirvana.

The 'World Brain' is both nearer, and farther, than you think. And it is coming from an 
entirely different direction. Although CD-ROM drives attached to traditional stand-alone 
computers will certainly have its uses, the shortest path is via the telecommunication 
innovations that are increasingly used to link computers into mutually cooperative 
ensembles.

By far the most exciting of these innovations is the World Wide Web, which is presently 
growing at the astounding rate (I'm told) of 30% _per month_. As one tiny example of the 
implications of this development, I do not subscribe to The Scientist. The Web (via 
Science magazine's gopher pages) was how I encountered Eugene Garfield's column and thus 
became party to this exchange. Count on it, K12 schoolteachers and their unruly (at worst) 
and knowledge-thirsty (at best) charges won't be far behind.

My connection to the web is neither complicated nor expensive. A 14.4kB modem ($200) was 
my only hardware investment. The Internet Starter Kit, a book by Adam Engst, provides the 
necessary software for my Macintosh. I pay about $30/month for an internet account, but 
this cost is only because my free university account doesn't yet provide certain needed 
capabilities (SLIP or PPP) quite yet.

The space advantages of CD-ROM are hardly compelling. Disk space costs about $.50 per 
megabyte these days, based on the $250.00 I paid for my 500 mB disk. Enough space to store 
Encarta (2.5 megabytes) costs $1.25 and Compton's (20 MB) only $10.00. These amounts 
shouldn't be an obstacle even with today's shrinking research budgets. Better yet, the 
space is only needed on the server that provides this information over the Internet.

So much for the good news. The bad news is grim news indeed. The computers, CD-ROM 
diskettes, paper magazine copies, and the frankinsense and myrh of antiquity are all 
bought and sold as tangible goods. Being composed of atoms, such goods abide by physical 
laws, such as conservation of mass, that have supported commercial exchange transactions 
since antiquity. 

But within the last generation, the information age has thrust us into a world where 
property is increasing made of bits. Physical conservation law provides no support for the 
traditional economic exchange transaction for such goods. Mankind has not decided 
precisely what it should mean to 'buy', 'sell', or 'own' goods made of bits that can be 
copied in nanoseconds and transported around the globe at literally the speed of light.

I find this rapidly evolving situation quite exciting. To put this excitement into 
chemical terms, mankind discovered a totally new fundamental particle called the bit less 
than a generation ago. The software and publishing industries have discovered ways of 
building useful higher-level compounds from this new particle: electronic publications, 
computer software, clipart, font libraries and so forth. 

However the properties of these higher-level compounds have never received the kind of 
attention that Lavoisier (or was it his predecessors?) applied when he decomposed mercuric 
oxide into elemental oxygen. There are no widely agreed on hierarchies, comparable to 
those physical science evolved for compounds, elements, atoms, and subatomic particles, no 
widely accepted taxonomy for the vast (and growing!) variety of short and long range 
binding forces that join software creations together at diverse levels of granularity. 

For example, the mechanism that links one World Wide Web document with its neighbor is a 
long-range binding force, quite unlike the short-range and more powerful forces that join 
a subroutine (or a C++ object) with its caller. Other object-oriented languages (such as 
Smalltalk, or my own language, Objective-C) emphasize intermediate-range binding forces 
known in the technical community as 'dynamic binding'. These are only three of an already 
long, and continually growing, list of software engineering glue, screws, snaps and 
fasteners.

The search for a robust basis for electronic commerce, comparable to the basis 
conservation of mass provides for tangible commerce, is barely starting. For further 
information on a possible approach, see my article in the Idea Fortes section of the 
September issue of Wired Magazine, or my interview in the 'Software's Persistent Crisis' 
article in the September Scientific American. Or refer to the Web access information in 
this email's signature. 

To: tesler@taurus.apple.com
From: bcox@gmu.edu (Brad Cox; Coalition For Electronic Markets)
Subject: Brad's response to COPYRIGHT IN THE ELECTRONIC AGE
Cc: 
Bcc: 
X-Attachments: 

Hi, Larry. How delightful to hear from you again.

The enclosed response to Henderson's proposal seemed like a bit much to broadcast to the 
list. I suspect we had similar qualms.

You might want to take a closer look at what I've been up to with the Coalition for 
Electronic Markets (see the URL in this email's signature). Other coalition members are 
Taligent (David Sharp), OMG (John Slitz), Citicorp (Dan Shutzer; reports to Colin Crook), 
Wave Systems (Peter Sprague) and Dallas Semiconductor. 

Our recent Dept of Commerce ATP proposal for a nationwide deployment wasn't funded. But 
this issue is far too important for that to stop forward motion.

Do you think Apple might be interested in participating in this initiative?

        Brad

>Date: Sun, 13 Nov 1994 00:20:07 -0500
>To:cch@alawash.org
>From:bcox@gmu.edu (Brad Cox; Coalition For Electronic Markets)
>Subject:COPYRIGHT IN THE ELECTRONIC AGE
>
>To: Carol C. Henderson
>Executive Director, Washington Office
>American Library Association
>cch@alawash.org
>
>Dear Ms. Henderson:
>
>I was heartened by the interest in intellectual property expressed in your draft. I'd 
like to bring to your attention new technologies that might change the foundation 
assumptions upon which your arguments are based. 
>
>You're assuming that existing copyright law and practices necessarily provide the best 
guide as to how maximum social utility might arise from paradigm-shifting technologies. 
Electronic goods are made of bits instead of tangible atoms. Although we loosely think of 
both of them as "information" they differ in a crucial aspect. Books and magazines can be 
bought and sold robustly so it makes commercial sense to invest in providing them. 
Electronic goods are made of bits that can be copied in nanoseconds, which undercuts the 
traditional incentive mechanism (commerce) that causes authors and publishers to produce 
them.
>
>The technology described in the Wired article I've enclosed could alleviate this 
difficulty by allowing charges for electronic goods to be incurred as the goods are 
*invoked* on a computer, as distinct from as they are acquired (from a network, a library, 
or from a friend). The technology required for this is not particularly elaborate apart 
from tamper-proofing. It is little more than exploiting the bi-directional connectivity of 
computer networks to communicate usage information from end-users to financial 
institutions for billing. 
>
>The legal basis for this approach arises from the sections of the copyright law that 
relates to "performance rights" as distinct from authors rights to govern acquisition of 
copies. Now consider the impact of these claimed rights once this capability is readily 
available
>
>  o  to read, listen to, or view publicly marketed copyrighted material
>     privately, on site or remotely;
>
>  o  to browse through publicly marketed copyrighted material;
> 
>  o  to experiment with variations of copyrighted material for fair use
>     purposes, while preserving the integrity of the original;
>
>  o  to make a first generation copy for personal use of an article or other
>     small part of a publicly marketed copyrighted work or a work in a
>     library's collection for such purpose as study, scholarship, or
>     research; and
>
>  o  to make transitory copies if ephemeral or incidental to a lawful use and
>     if retained only temporarily.
>
>Many of these claims are in direct conflict with the technology described in the Wired 
article. The technology would allow free (uncharged) acquisition of electronic goods, 
which is more permissive than existing law governing acquisition of copies. However your 
claims deny the publishers claim to usage rights, and revenue collection thereon, by 
charging on a per use basis. 
>
>Here's where imagination for what's possible must step in. The ownership paradigm implied 
here is very different from what has evolved to date, just as european notions regarding 
ownership of land was different from that of the indian culture that preceeded it in the 
US. The indian culture could (and did!) argue, based on well-established indian law, that 
private ownership of land was wrong. You make a similar argument in this list of rights.
>However regardless of the ethics or esthetics of the matter, history proceeded in a 
manner quite different from indian established law. The european attitudes towards strong 
property rights to land demonstrated social cohesivness and power that what we today call 
"primitive" cultures were entirely unable to resist. 
>
>The idea of electronic property, and what it means to "buy", "sell" or "own" something 
that can be copied and transported so readily, is very much in its infancy, being less 
than a generation old. However I'm intimately acquainted with initiatives that will bring 
radically different possibilities into practice in as short as a year or two. Some of 
these  can lower the transaction cost (hassle factor) of charging for micro-transactions 
down to the point where usage fees of pennies or less could become the preferred way (by 
buyers and sellers alike) of addressing copyright issues.
>
>I've rambled on long enough already so I'll stop here. I'd be happy to discuss this 
further with you by phone or in person.
>
>I've enclosed a Wired Magazine article that outlines the basic idea. An interview in the 
"Software's Persistent Crisis" article in the September issue of Scientific American 
magazine provides relevant background with respect to computer software, which differs in 
no important respect from the issue at hand. Further details are available in the web 
pages in my signature (see Coalition for Electronic Markets).
>
>========
>Superdistribution?
>
>By Brad Cox. Idea Fortes section of Wired Magazine, September 1994. Copyright
>1994 by Wired Magazine All Rights Reserved.
>
>Also see David Henshel's Letter to the Editor and my response. 
>
>For subsequent developments see Coalition for Electronic Markets 
>
>
>      Stop selling software. Give it away. Get paid for its use. Meterware is
>      so logical it could be the foundation of the new, networked economy. 
>
>It has become a maxim: intangible electronic goods - software applications, online
>magazine stories, clip art - are quite distinct from tangible goods like baskets,
>potatoes, and oil refinery machinery. Tangible goods are made of atoms; electronic
>goods are made of bits. While those who produce electronic goods must expend the
>same capital, labor, and knowledge as those producing tangible goods, their products
>can be copied in nanoseconds and transported at the speed of light. Given those
>considerable expenses, and the absence of any robust enforcement of property rights,
>reasonable people shy from producing electronic goods. 
>
>The hard-to-copy nature of tangible goods made the traditional pay-per-copy
>mechanism a natural choice. But an info product's ease-of-duplication so thoroughly
>undercuts the traditional notion of pay-per-copy that the possibility of an abundant
>supply of pre-fabricated information-age goods is nearly nixed. 
>
>But imagine a significantly altered market mechanism for electronic goods. Instead of
>treating ease-of-replication as a liability to be prevented - via labor-intensive copy
>protection and legal or moral restrictions - this new model treats ease-of-replication
>as the asset upon which a new foundation for software engineering could be based. 
>
>In Japan this new way is called superdistribution. Superdistribution lets information
>flow freely, without resistance from either copy protection or piracy. Eschewing the
>low-tech property-rights mechanisms already widespread (shrinkwrap software,
>license servers, dongles, demoware, shareware), superdistribution allows miners,
>refiners, fabricators, assemblers, distributors, and marketers to cooperate and
>compete as producers and consumers of electronic goods within a global
>information-age society. 
>
>Existing copyright law distinguishes between copyright (the right to copy or
>distribute) and useright (the right to "perform," or to use a copy once obtained). In
>the eyes of the law, when Joe Sixpack buys a record or CD at a store he's actually
>purchasing a bundle of rights that includes ownership of a physical medium along
>with a limited useright that only allows use of the music on that medium for personal
>enjoyment. 
>
>Large television and radio companies buy an entirely different bundle of rights. They
>often have the same media (whose only difference is a "not for resale" sticker on the
>cover) thrust upon them for free by publishing companies in expectation of substantial
>fees for the useright to play the music on the air. These fees are administered by
>ASCAP (American Society of Composers, Authors and Publishers) and BMI
>(Broadcast Musicians Institute), who monitor how often each record is broadcast to
>how large a listening audience. 
>
>Similarly, superdistribution treats each personal computer as a broadcasting station
>whose "audience" consists of a single "listener." As pioneered in 1987 by Ryoichi
>Mori, head of the Japan Electronics Industry Development Association,
>superdistribution recognizes that electronic objects are fundamentally unable to
>monitor their copying but trivially able to monitor their use. For example, making
>software - whether it's Microsoft's Word or Mike's string compare subroutine - count
>how many times it has been invoked is easy, but making it count how many times it
>has been copied is much harder. So why not build an information-age market
>economy around this difference? 
>
>If revenue collection were based on monitoring the use of software inside a computer,
>vendors could dispense with copy protection altogether. They could distribute
>electronic objects for free in expectation of a usage-based revenue stream. 
>
>      This, of course, raises the same hairy privacy issues that we trade off
>      when we choose to use credit cards instead of cash or talk by telephone
>      rather than face to face. The real risk to privacy here does not arise
>      when usage information is used only for billing, but from any
>      possibility that it might be used for other purposes, just as credit card
>      and telephone billing information can be diverted to purposed for which
>      customers never intended law enforcement, to nam one. 
>
>Treating ease-of-replication as an asset rather than a liability, superdistribution
>actively encourages free distribution of information-age goods via any distribution
>mechanism imaginable. It invites users to download superdistribution software from
>networks, to give it away to their friends, or to send it as junk mail to people they've
>never met. 
>
>Why this generosity? Because the software is actually "meterware." It has strings
>attached, whose effect is to decouple revenue collection from the way the software
>was distributed. Superdistribution software contains embedded instructions that make
>it useless except on machines that are equipped for this new kind of revenue
>collection. 
>
>Superdistribution-equipped computers are otherwise quite ordinary. They run
>ordinary pay-by-copy software just fine, but they have additional capabilities that only
>superdistribution software uses. In Mori's prototype, these extra services are provided
>by a silicon chip that plugs into a Macintosh coprocessor slot. The hardware is
>surprisingly uncomplicated (its main complexities being tamper-proofing, not base
>functionality), and far less complicated than hardware that the computer industry has
>been routinely building for decades. 
>
>Electronic objects intended for superdistribution invoke this hardware, which
>provides instructions. These instructions check that revenue-collection hardware is
>present, prior usage reports have been uploaded, and prior usage fees have been paid.
>They also keep track of how many times they have been invoked, storing the resulting
>usage information temporarily in a tamper-proof persistent RAM. Periodically (say
>monthly) this usage information is uploaded to an administrative organization for
>billing, using encryption technology to discourage tampering and to protect the
>secrecy of the metered information. (Think of your utility bill.) 
>
>Software users receive monthly bills for use of each top-level component - say,
>Microsoft Excel, Myst, or a Net-based rock video. When these bills are paid,
>payments are divvied up between the makers of the component and makers of
>subcomponents - in proportion to usage. For example, for the rock video, payment
>might go to MTV.com as well as to the artist. In other words, the end-user's payments
>are recursively distributed through the producer-consumer hierarchy. The
>distribution is governed by usage metering information collected from each end-user's
>machine, plus usage pricing data provided to the administrative organization by each
>component vendor. (The various rounds of payment resemble those made by Visa or
>MasterCard). 
>
>Since communication is infrequent and involves only a small amount of metering
>information, the communication channel could be as simple as a modem that autodials
>a hardwired 800-number each month. Many other solutions are viable, such as flash
>cards or even floppy disks to be mailed back and forth each month. 
>
>Consider an author who wishes to distribute or sell a multimedia document that cannot
>be handled as a simple text file. Without superdistribution, the author's market is
>confined to those who have already purchased a program capable of displaying this
>document - a run-time version of Macromedia Director, for example. The same
>occurs at each lower level of the producer/consumer hierarchy. The market of a
>programmer who wishes to sell a reusable software component is restricted to those
>who have already purchased the components and tools upon which the software
>component relies. With superdistribution, the market is no longer restricted to those
>who own Director, because it will be acquired by the customers' operating system as
>if it were a part of the document. The creator of the document accrues revenue from
>those who read it, as does the creator of Director. 
>
>The user's operating system acquires subcomponents of the document, such as
>Director and any sub-components it relies on (QuickDraw, etc.), from the hard
>drive's cache, automatically loading it as needed from the network. The operating
>system can do this automatically and transparently because loading software involves
>no financial commitments when revenue is based on usage instead of acquisition of
>copies. 
>
>Superdistribution addresses the perennial implicit questions of those who might
>potentially provide the smaller-granularity reusable software components upon which
>an advanced software engineering culture could be founded: Where do software
>components come from? Why should I bother to provide them? Why should I engage
>in such gritty activities as testing and documenting reusable software components
>sufficiently that others might use them? What is in it for me? 
>
>Whereas software's ease-of-replication is a liability today (by disincentivizing those
>who would provide it), superdistribution turns this liability into an asset by allowing
>goods to be distributed for free. Where software vendors must now spend heavily to
>overcome software's invisibility, superdistribution would thrust software out into the
>world to serve as its own advertisement. Where the personal computer revolution
>isolates individuals inside a stand-alone personal computer, superdistribution
>establishes a cooperative/competitive community around an information-age market
>economy. 
>
>By separating revenue collection from acquisition of copies, hard drives and
>computers can disappear and become just part of the plumbing that conveys
>information-age goods between producers and consumers. Computers and
>telecommunications links become invisible, a transparent window through which
>individuals can communicate, cooperate, coordinate, and compete as members of an
>advanced socioeconomic community. 
>
>Brad Cox (bcox@gmu.edu) is founder of the Coalition for Electronic Markets and a
>faculty member in George Mason's University's Program on Social and
>Organizational Learning. 
>
>HTML Markup by Brad Cox (bcox@gmu.edu)