[Continuing my criticism of a Cato paper attacking the DMCA]

Innovation is a key theme in this paper, namely that it is good and that the DMCA prevents it. There are many assumptions the reader is expected to make, such as "new technologies allow us to consume media in new ways." Not sure how that applies to a frost-free refrigerator or anti-lock brakes, but it's one of many examples of sweeping generalizations upon which the paper is constructed.

The DMCA, we're told, threatens the emergence of "upstarts like Apple, Netscape and Google" that have gone from "two-man operations to billion-dollar trendsetters seemingly overnight. The DMCA threatens to undermine that competitive spirit by giving industry incumbents a powerful legal weapon against new entrants." This is shockingly nonsensical.

Google didn't exist before the DMCA, and its successes (or failures) have nothing to do with the law. Apple has seen its fortunes revive post-DMCA with the introduction of the iPod and the launch of iTunes, a product and a service that use DRM protected by the DMCA. So I'm confused here. Post-DMCA, Apple was able to innovate to the benefit of consumers, but in fact the DMCA prevents innovation. Apple can use the DMCA to prevent new entrants, but in fact it's wrong for not interoperating with those other entrants, that do exist despite Apple's market power. This is a paper that is supposed to show an understanding of markets?

The paper also appears to embrace piracy. Take this example: "Shipping a carton of bootleg videotapes across state lines is expensive, time-consuming, and legally risky. Uploading a bootleg movie to a file-sharing network, in contrast, costs almost nothing, can be done in minutes, and is unlikely to lead to jail time. In the Internet age, people can infringe copyright from the comfort of their homes." This is all factual. It also seems to be a compelling case for government to re-exert its traditional role of defining and enforcing property rights to ensure a functioning market. But the author seems to believe that this ease in piracy -- and the decreased risk in jail time -- means that the copyright owners should be willing to surrender some of their rights that were more easily enforced in an analog world. That is not striking a copyright balance. Balance is ensuring that copyright holders continue to maintain their rights while consumers continue to have access and use. Under the DMCA, rights were not diluted and consumers have more access to content, with more possible uses, than they ever did before. The author fails to consider whether music distributors would have felt comfortable releasing songs, even with DRM, if they knew it was legal to circumvent DRM. These are market considerations -- what will induce entry into the market, what level of infringement will a copyright holder accept relative to possible returns on investment, at what point will parties not enter a market. These questions are absent in the paper; instead there is a presumption that any market flexibility currently offered by a provider is insufficient, the end-user should be free to decide use. That, of course, is a formula for the piracy that the author so casually describes with P2P networks.

I mentioned earlier some surprise at the hostility the author expresses toward Apple, usually a darling of techies. But the author devotes significant attention to the Linux operating system. Some of it is erroneous informational, like his claim that the DVD CCA never approved any software DVD players for Linux or that the DVD CCA must approve DVD software players. But he shifts from a woe-is-me attitude on alleged Linux incompatibility with DVDs to the specter of Blue-Ray, which he fears also won't be compatible with Linux. At the core of his Blue-Ray concern, however, is that it is a standard. He fears it will become a universal standard, and other manufacturers could be "frozen out of the market." Again there is a lack of comprehension of markets here. Nowhere in the paper does it mention that Blue-Ray currently is in a race to market with another high-definition DVD standard, HD-DVD. That is market competition, two standards competing both for studio adoption and consumer adoption.

Note that these are all market decisions, based on market entrants and consumer preferences and choice. Laws such as the DMCA aren't relevant here, at least not relevant in that they don't suppress competition. But the author attempts to pin the DMCA on every possible corporate evil he perceives, including the OpenCable platform designed by cable's CableLabs consortium. I toured CableLabs a few years ago, and attended a two-day conference they held there. I didn't see any diabolical plots to kill competition while I was there; I saw a bunch of engineers trying to jump-start the broadband industry. Shame on them! It turns out that they are in cahoots with their cable funders to deny consumers competition and block out new entrants. The author makes the ridiculous claim that, if only there wasn't a DMCA, TiVo would be free to reverse-engineer a cable card. I guess he forgot about all that tresspass law he praised at the beginning of his paper.

The CableLabs example is cited as part of the author's broadest and most absurd claim, that the DMCA is suppressing technology. There has been an explosion of new technologies and new innovations in the last eight years, but the author would argue that somewhere out there is an innovation we'll never see because of the DMCA. But let's not worry about all those phantom technologies that now, alas, will never be born, as how can we discuss something that never existed? Let's look at the author's argument that under the DMCA and the CableCARD, "it is unlikely that the first VCRs would have gotten industry approval."

This shows a stunning lack of understanding of the creative process. What was innovative about the VCR was not that it was the same size as a 1970-era stereo receiver. It wasn't that cool top-loading feature that disappeared for decades only to resurface in "Napoleon Dynamite." No, what was innovative about the VCR and Betamax is that both offered consumers time-shifting and space-shifting. Those were revolutionary developments that most of us now take for granted (I never know when a show actually airs because TiVo takes care of that for me.) Those innovations would have made their way to the consumer in some form or another, there would have been a court challenge akin to the Sony case, and we would have been assured the right to time-shift and space-shift. However a law or another technology might have interfaced with the particular engineering of the VCR, innovation would have ensured that something would have reached the market. I can't accept that once society knew how to time-shift and space-shift it would simply not, and the innovation would vanish into the ether.

The conclusion of this criticism will be found in a third blog.