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Tech Industry

What goes around comes around

If two upcoming trade pacts get signed by President Bush, Charles Cooper says, the U.S. government could paradoxically find itself accused of breaking the very copyright law it nowadays uses to prosecute others.

Technology buffs usually don't pay much attention to the peregrinations of the United States Trade Representative. They ought to start taking a closer look.

Sometime this month, the current post holder, Robert Zoellick, is going to request President Bush's imprimatur on a couple of free trade deals his office worked out with Singapore and Chile. If that comes about, the government may one day find itself accused of breaking the very law it nowadays uses to prosecute people accused of digital piracy.

Among other things, the so-called IFAC-3 (bureaucratese for Industry Functional Advisory Committee on Intellectual Property Rights for Trade Policy Matters) provides a framework for handling trade-related intellectual property issues.

There's nothing seemingly untoward about that. After all, rip-off artists cost American businesses enormous losses every year. But here's the rub: The two agreements contain provisions that come awfully close to duplicating the restrictions of the Digital Millennium Copyright Act, an awful piece of legislation that testifies both to the stupidity and the cupidity of the hired help in Washington.

The law, enacted in 1998, was supposed to give the government a legal tool to combat the (then novel) scourge of digital piracy. They should have renamed it the law of unintended consequences because its anti-circumvention provisions gave legal cover to special interests to defend entrenched privilege while allowing free-speech abusers to muzzle computer scientists and other such scalawags. (For headline-grabbing examples of the DMCA at work, look no further than the prosecution of Russian programmer Dmitry Sklyarov, the lawsuit against 2600 magazine, and the threats against Princeton professor Edward Felten.)

Up until now, defenders of the DMCA have won all the court arguments--but how long can that winning streak last? The DMCA is such a sloppy law that one has to assume it is only a matter of time before the statute gets modified by Congress or thrown out by a higher court.

What might happen next is anyone's guess but those aforementioned foreign trade agreements would effectively put the United States in violation of the very law it enacted to go after the bad guys.

Up until now, defenders of the DMCA have won all the court arguments, but how long can that winning streak last?

Too screwball a situation? You never know. Treaty obligations get taken very seriously. At the very least, it would lay the groundwork for an incredibly chaotic situation where trade treaties wreak havoc with U.S. law governing immigration, antitrust and intellectual property.

That was the gist of a letter sent to the USTR by Reps. Rick Boucher, D-Va., and Zoe Lofgren, D-Calif., late last month, asking for a clarification from Zoellick. So far, neither has heard back. A call I put in with the USTR seeking comment similarly went unreturned.

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Jammed on spam
Speaking of the hired help in Washington, federal lawmakers keep talking about doing something about spam but nothing gets done. So, riddle me this, Batman: The U.S. government can send the military halfway around the world and wipe the floor with a foreign army in three weeks. Yet it's damn near impotent when it comes to stopping the spam fedayeen.

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Tech sleaze and ultimate rewards
What is a fitting and proper punishment for breaking the law? The answer depends on how good your lawyer is.

Financial regulators this week assessed a $1.4 billion fine on ten Wall Street investment houses. Among the biggest individual losers are Henry Blodget and Jack Grubman, two former hotshots from the heyday of irrational exuberance. Blodget, who worked for Merrill Lynch, will pay $4 million in fines; while Grubman, formerly of Salomon, will fork over some $15 million.

But will it make any lasting difference to either man? I suppose it made for a nice press release, but the fines are chump change for insiders who made a pile during the go-go days of the tech bubble. As for suffering shame to their reputation, neither Blodget nor Grubman is being required to admit any wrongdoing.

And even if they had been forced to fess up, they could have taken solace in the public's astonishingly limited capacity to remember history.

If you think I'm exaggerating, consider the amazing comeback of Michael Milkin, one of the poster boys for the insider trading scandals of the 1980s. Milkin, who was sentenced to 10 years in the slammer, later reduced to two years plus three years probation, has since been rehabilitated as a philanthropist and born-again entrepreneur. This jack-of-all-trades also managed to write a best-selling cookbook, "The Taste for Living."

The latest hotshot to face the music is Frank Quattrone, the former Credit Suisse First Boston technology banker. Quattrone is charged with obstructing justice and tampering with witnesses. I have no idea whether he's guilty or innocent. Even if the prosecution has a case, Quattrone doesn't have to worry about the Feds taking away his Midas fortune. That's just not the way Uncle Sam does business.

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Is Apple on key?
Contrary to some of the more breathless headlines this week, the debut of Apple Computer's online music store is not the definitive answer to the Internet file-swapping controversy.

Sorry not to participate in the general swooning, but I don't think any of the current music services--legal and illegal--offer enough to satisfy the people and special interests on both sides of this digital divide.

Apple's action stands in sharp contrast to the shock-and-awe campaign undertaken by the Recording Industry Association of America.
Still, credit Steve Jobs and Apple for creative thinking and elegant implementation. The iTunes Music Store lets users buy the music they want at 99 cents per song downloaded. As it has the active participation of all five of the major record labels, the service is kicking off with a library of some 200,000 titles. That's not going to include everything under the sun, but it's a good start. Even more important, Apple's not treating folks as if they were prospective criminals.

That stands in sharp contrast to the shock-and-awe campaign undertaken by the Recording Industry Association of America (RIAA). In the past few months, the music industry group has gone to court to get a judge to force Verizon Communications to hand over the name of a subscriber accused of swapping music files online. It also filed suit against four college students accused of copyright infringement and, more recently, began blitzing people who trade copyrighted music with online warnings not to break the law.

The smart set running the labels has convinced itself that the cumulative effect will be enough to convince file-swappers to stop stealing music. If file-swappers are mainly base, cheating scoundrels, then it's a black-and-white issue, where it's certainly right and proper to let loose the dogs of war.

But a more-nuanced consideration of the motivations of the millions who turned on to the Napster revolution leads me to a very different conclusion. Sure, ripping off the big music labels is part of it; but reducing a complicated issue like this to a case of payback on a grand scale misses a larger point. If anything, the post-Napster file-swapping phenomenon is evidence of a deep desire among people to own their own music.

The defining truth of the Internet age is that technology is always going to trump whatever proscriptions hired legal guns can wheedle out of the courts. That's why Apple has helped advance the debate in a sensible way. If it works, then Jobs may have devised an approach that points a way out of this endless morass.

The clock is ticking.