A hacker appears to have broken a new encryption system for high definition DVD's (yahoo link here) to allow copying protected movies. I use the word appears, because the hacker has yet to publish the full hack but says he will on January 2. He has, however, published a video suggesting he has done it (youtube link here) and participated in a fascinating discussion thread (forum link here) in which he talks about what he has done, more or less step by step.

The New York Times reports the story but sees the issue mainly as affecting which of the two leading encryption systems will be used by the movie industry (NY Times link here). It conjectures that the system not yet broken now has an advantage and points out that it can be reprogrammed on future production even if broken. The Times also notes that the decrypted system might have a competitive advantage among DVD buyers who want to copy (it seems unlikely that studios would make this choice).

With a lot of luck, this will mark the beginning of the end of the whole encryption system, as there are people who are capable of breaking this form of monopoly in which a buyer's rights to his purchase, the DVD, are severely restricted-–he can't copy it and he can't play it on the device of his choice, much less sell additional copies where competition would drive down the price to no more than the cost of production.

Time magazine enters the drug patent debate with an article on a Government Accountability Office study which reports that the bulk of the growing amount of research money is going into “me-to” drugs rather than real innovation (link here). The study notes that the amount spent more than doubled over a ten-year span but the number of ground breaking drugs submitted for FDA approval grew a modest 7 percent, even as the basic science was turning up a large number of promising new leads.

Suggestions for reform were small beer, including more collaboration among government, industry and academia; more scholarships to train "translational" researchers to bridge the gap between basic science and medicine; more incentives for innovative drug research; and patents for breakthrough drugs extended from the current 20 years to 25-30 years, and those for "me too" drugs shortened to 10 years.

Too bad that Time failed to address just abolishing the drug patent system or Stiglitz' idea to have government fund drug development costs.

Writing in the British Medical Journal, Nobel economist Joe Stiglitz editorializes against pharmaceutical patents, at least on some drugs where their market is limited (link here). He cites the large number of people who cannot afford existing patented drugs or who constitute an unattractive market for the development of new drugs. He proposes that governments create big prizes to cover development costs while making the successful discoveries available at the cost of manufacture.

While he would limit the drugs for which prizes would be created, he makes several of the standard criticisms of patents, a healthy stimulus to public questioning of the system. Moreover, for now he proposes a realistic way to deal with a part of the problem when it is unlikely that we will get a major reform of the patent system for a long time to come.

Slashdot draws our attention to an an article by security researcher Peter Gutmann about DRM in Windows Vista. The gist of the article: Microsoft has chosen to degrade in important and significant ways the performance and capability of their operating system to protect "premium content." He is of the view that it probably won't work as far as protecting premium content, but will significantly raise the cost and lower the performance of such things as video cards - as well as making them difficult to reverse engineer for open source operating systems such as Linux and FreeBSD. It may well be that the latter is the intention of Microsoft - certainly the evidence is that Apple's music DRM doesn't do much for protecting content - but protects Apple from competition in the music business.

That said - the demand for degraded computers that can play "premium content" is limited. People just don't buy computers to play movies on them. Michele and I previously dug out some numbers on the size of the "premium content" industry versus the IT industry. According to the RIAA, the value of all CD's, live presentations, music videos, dvds in 1998 was 13.72 billion US$. According to the SOI, in 1998 the business receipts of the computer and electronic product manufacturing including both hardware and software was 560.27 billion US$. I looked up at the census 1997 revenue in the telecommunications industry: 260.50 billion US$. So: are people going to give up their general purpose computers they spend $560 billion on to access less than $14 billion in content? Predictions are dangerous, but I will venture one: Microsoft's decision to build heavy DRM into the core of Vista will go down as one of the colossal business blunders of all time.

Mike at Techdirt (link here) has a good piece on David Levine and Michele Boldrin's book Against Intellectual Monopoly (available on line here), focusing on the chapter on pharmaceuticals. I've been looking for a way to again highlight the book for this blogs readers. Chapter 9, to quote Mike, “completely destroys the idea that without pharma patents, there can be no pharmaceutical industry, by pointing to other countries that had no patent protection over pharmaceuticals until recently -- but still had absolutely thriving pharma industries. In other words, patents aren't needed for a pharmaceutical industry. However, if the patent system does recognize pharmaceuticals, are those patents really beneficial? Again, Levine's book hacks away at that notion, pointing out that, as with any government-granted monopoly, rather than creating real incentives for innovation, the patent system has created a situation where rent seeking occurs.”

Mike goes on to reference the publication of a GAO report downloadable as a PDF from his site, that concludes “there is a worrying trend in fewer new and innovative drugs being created, and also sees evidence that pharmaceutical companies are playing games to expand monopoly protections. It does note that many are concerned that patents are the cause of this, though it's clear that there are many factors playing into it.”

The comments on this post are worth reading as well–-lots of controversy.

IP Bots roam the Internet searching for malfeasance. Just imagine if such efforts were directed for social goods. Delaney, Kevin J. 2006. "Copyright Tool Will Scan Web For Violations." Wall Street Journal (18 December): p. B 1. "Privately held Attributor Corp. of Redwood City, Calif., has begun testing a system to scan the billions of pages on the Web for clients' audio, video, images and text -- potentially making it easier for owners to request that Web sites take content down or provide payment for its use. The start-up, which was founded last year and has been in "stealth" mode, is emerging into the public eye today, at a time when some media and entertainment companies' frustration with difficulties identifying infringing uses of their content online is increasing. The problem has intensified with the proliferation and increasing usage of sites such as Google Inc.'s YouTube, which lets consumers post video clips."

Jim Luke and I are going to get together in the lobby lounge of the Swissotel at one pm for about an hour to talk about intellectual property. Anyone who is interested in joining us, please drop by.

One gets a sense of how complex copyright is by following the cases that come up in courts or in pretrial negotiations or in the news. Here is one, (a letter by Alex Curtis at Public Knowledge) responding to an editorial in the Wall Street Journal. I post the whole short piece because it makes the current law clear and emphasizes that the responsibility for identifying and claiming infringement is on the copyright holder.

Notice and Take Down' Lets Web Services Exist

our Dec. 1 editorial, "Google Search: 'Copyright'" missed crucial elements of the Digital Millennium Copyright Act (DMCA) and the concept of fair use when it comes to the posting of copyrighted material online.

The content industry fought very hard and largely won what it wanted in the DMCA. The trade-off for infringing content hosted by an unknowing service provider was essentially this: no liability for the service provider that expeditiously removes the infringing content after the copyright holder has been notified. This "notice and take down" provision allows most automated Web services like YouTube to exist. The take-down provisions effectively place the responsibility on copyright owners to actively identify infringement and notify the host services, all themselves. That's a fair trade considering they also have the weight of civil and criminal copyright law in their corner. It would be unworkable for YouTube or any other organization to have someone sit behind the curtain and approve every submission of copyright-able works.

I never heard of this before, an EU tax on blank media to compensate copyright owners that are robbed of the royalties they would otherwise have received from sales lost to illegal copies (techdirt link here). This seems nutty to me. Though the amount cannot be much, say for each CD, what basis is there for deciding who gets how much? It has to be arbitrary, another gravy train and the totals must be large. I buy blank CDs for backups of my computer files and to distribute family photos and surmise many Europeans do as well, so I conclude that much of the tax is a straight handout to people who have not been offended. The story goes on that the Europeans were going to abolish the tax but recipients of this largess appear to have fought it successfully. The more I am exposed to stories like this, the surer I am that the IP system as we know it has to go.

Eweek has a post opposing software patents (link here) but in the end comes up with small ideas for change. No one likes them except lawyers and patent trolls, but what to do? Suggestions included making them easier to challenge, buying them up when they are new and cheap, then offering them freely under a general public license, and getting the public to oppose them with demonstrations, in the fashion of the Europeans.

Here again, it seems to me that secrecy should be the only protection provided a software inventor. In short, get rid of them.