Tuesday, March 29, 2011

"Carbon Dioxide is essential to life": the stupidest anti-carbon tax argument

During the recent debates on carbon pricing, the opposition has more closely aligned itself with those that ague that global warming is not man-made. Tony Abbott has even reflected these views in various recent statements, including buying into what is quite possibly the stupidest argument against anthropogenic global warming (AGW) and the carbon price. Abbott said that carbon dioxide is not a proven "environmental villain", which echoes the comments frequently stated by AGW-denialists that carbon dioxide is somehow not a problem because it is "essential to life".

This is quite possibly the stupidest argument against AGW and carbon pricing - there are plenty of other elements and gases that are "essential to life" that are pollutants and are priced and regulated.

Just to take one of them: sulphur. Sulphur is an important trace element that is required by the body for the manufacture of amino acids. It is also a component of many preservatives (particularly in wine). So it could be said that sulphur is essential to life.

However, like carbon, human activity has greatly changed the natural sulphur cycle which has resulted in the atmospheric concentration of sulphur increasing. This has had serious environmental impacts - the most striking of which is acid rain.

To tackle the problem of acid rain governments have used international treaties and a successful emissions trading scheme - sound familiar?

Saying that because carbon dioxide is "essential to life" it can not also be a pollutant is a completely spurious argument, and if we look at the regulation of another element that is also "essential to life", sulphur, we see a similar model to tackling the problem that we have seen proposed for carbon dioxide.

Thursday, March 24, 2011

AFACT appeals against reason

In an earlier post, I predicted that Australian Federation Against Copyright Theft (AFACT) would not appeal its loss in the iiNet case. It turns out that I was wrong. I suspect I was led into error because I was assuming reasonableness would be part of AFACT's decison-making. As I pointed out in the article, AFACT was given a very broad template for an industry negotiated solution to infringement (Emmett, J at [257]), replete with disconnection as a punishment (Emmett, J at [210]) and a warning to iiNet that:
 "... circumstances could not exist whereby iiNet might in the future be held to have authorised primary acts of infringement on the part of users of the services provided to its customers under its customer service agreements." (Emmett, J at [274])
So AFACT got about as close to a win as you can get without actually winning - including a green-light for a 3-strikes system.

iiNet's reaction [PDF] has been to propose a relatively sensible solution to the problem: an independent body to handle copyright infringement complaints. This model has been met with some interest by other industry players. Although iiNet did not answer some fundamental questions about the eventual status, makeup and powers of such a body, the model was not unreasonable. The Australian Internet Industry Association (IIA) has also proposed an industry code to deal with the issue. So the industry has shown willingness to negotiate a mutually agreeable system for dealing with copyright infringement.

However, nothing is reasonable to AFACT. It's their way or the highway - hence the High Court appeal. It appears that AFACT want the ability to essentially control ISPs by the constant threat of litigation and to cower internet users into accepting AFACT's member's business models on AFACT's terms, regardless of the fact that market forces have already rendered them obsolete. It is this obsolescence that has created the infringement market. As iiNet's CEO stated [PDF]:

"People are crying out to access the studios materials, so much so some are prepared to steal it. A more effective approach would be for the studios to make their content more readily and cheaply available online..."

Unfortunately, this appeal to reasonableness will fall on deaf ears because AFACT has only one model in mind. iiNet has characterised [PDF] this model as the "Hollywood solution":

"The ‘Hollywood solution’ (in very simple terms) involves the employment of private detectives, hired by content owners, to trawl the public internet and gather information . The content owner uses this information to generate notices which are sent to internet service providers . The notices demand that the ISP should terminate the service of a customer subsequently determined by the ISP (not the content owner)"

There are several problems with this approach that were examined by Emmett, J in the AFACT v iiNet case at [257]. Firstly, the quality of the evidence needed to be "cogent and unequivocable"; and secondly, AFACT would need to reimburse the ISP for the costs of investigation and indemnify them against mistaken disconnections.

This is obviously unacceptable to AFACT who want a system were a "mere assertion" is enough to force action and that ISPs bear the total costs of being AFACT's copyright police.  This conclusion can be seen in the push from content producers in the various international treaties such as the TPP, which I have examined in a previous post. It is this conclusion that they want from the High Court.

AFACT and its ilk are particularly keen to shift all costs of the failure of their business models back to ISPs and to consumers, either by litigation or by international treaty. They are not interested in finding an actual solution to the problem of infringement as it might show up their own failures to adapt to the changing market.

Sunday, March 20, 2011

Cricket World Cup: How to put the world back into the World Cup

As we come to the finals stage of the 2011 Cricket World Cup, cricket fans around the world seem to be giving it a collective "meh". That is not to say that there haven't been some great matches, drama and upsets but the competition has gone on for too long (again) and the tiredness of the World Cup format is becoming more apparent.

So, what is to be done to salvage what is supposed to be Cricket's premier competition?

Predictably, the ICC's reaction has been to suggest that the competition ditches the Associates - assuming that they create too many boring one-sided games (and that they might accidently eliminate India) and that this is the cure to the length and the tedium that has become the Cricket World Cup. This neglects two things: firstly, the Associates have been extremely entertaining to watch and (apart from Kenya), have each pressed a full-member nation or two (although Canada did capitulate against Australia after their brilliant start); and secondly, if cricket is to expand and survive as anything other than a niche sport, it needs to have more countries playing it. Without anything to strive for, it's likely that the popularity and participation in cricket will plummet in Associate nations.

The implementation of the World Cricket League system of qualification has been one high point in the ICC's administration of the game - especially with stories such as the rapid rise of Afghanistan from Div 7 all the way to Div 1 (and narrowly missing out on World Cup qualification). The league system provides Associate and Affiliate teams a clear system of progression and something to strive for. There is no reason why this same system cannot be applied to the test-playing nations as well. Automatic qualification for the World Cup has made the top nations lazy and dismissive of the Associate and Affiliate teams.

The editor of Cricinfo, Sambit Bal, has suggested that a qualification system be in place for the World Cup by having a qualification round prior to the World Cup:

"Here's how it will work. The ICC is yet to decide how many teams will automatically qualify; this should be set at six. Which would mean four of the bottom-ranked teams among the ten Full Members - using this World Cup as an illustration it would mean New Zealand, West Indies, Bangladesh and Zimbabwe - would join the top four among the Associates in a qualifier, the first round of the World Cup. They could probably be split into two groups, with the top two from each group going into the second round - the Top Ten.

This will add to the tournament's length but these first-round matches can be played in a cluster of two or three a day and be finished within a week. It is now routine to play a few practice games before the tournament, and the top six teams can play their practice games concurrently."
Although this is a start, it doesn't get around the problems of the Associates not getting enough games against the test-playing nations and automatic qualification making the test-playing nations lazy and dismissive.

Here's how qualification could work:

  • At the end of the World Cup the ODI rankings table is updated (rather than in August as it currently is, see the FAQ [PDF] for details)
  • The bottom four sides in these rankings are relegated to Div 1. This method of determining the bottom four sides (on current rankings: Zimbabwe, Netherlands, Kenya, Canada) would only be used in the initial phase. Subsequently the teams not qualifying for the World Cup Second Round would be relegated.
  • The remaining sides are "qualified sides" which, on current rankings would be: Australia, South Africa, India,  Sri Lanka, England, Pakistan, New Zealand, West Indies, Bangladesh and Ireland.
  • The Div 1 qualifier is played 2 years before the next World Cup to determine the four sides that qualify for the World Cup. This will add four more sides to the "qualified sides"
  • During the ensuing four years, each team must play each of the other "qualified sides" at least once, with rankings being determined in the usual manner. This ensures that all of the top associate nations get some game experience against top sides before being thrust into the World Cup. Obviously the full compliment of "qualified sides" wouldn't be known until two years before the World Cup - but all games in the four year cycle would be counted.
  • If teams do not play against a particular team then the points are awarded as a forfeit game to the lower ranked side.
  • No-result games are counted as a game played against that country, but not counted for rankings (as is currently the case).
  • At the end of the four year cycle, these rankings would be used to determine the two-round system outlined above. As stated earlier, the four teams not going through to the second round would be relegated to Div 1.
This system gives the Associates games against the top sides before the World Cup and a clear system of progression to the World Cup. It also keeps the test-playing nations on their toes with the threat of relegation.

Monday, March 14, 2011

TPM & TPP: The constitutional nexus

The US trade representative's (USTR) IP chapter for the Trans-pacific Partnership Agreement (TPP) suggests significant changes to the regulation of technological protection measures (TPMs). These changes extend the scope for causes of action and specifically limit exceptions to the circumvention of TPMs.

According to a leaked document the USTR has proposed the following exceptions:

  • Reverse engineering for interoperability
  • Research into flaws and vunerabilities in encryption
  • Inclusion of a component to prevent access to inappropriate content by minors
  • Security analysis and testing
  • The removal of private data gathering components - so long as their removal does not then allow access to the work
  • Law enforcement
  • Access by public libraries for the sole purpose of acquisition decisions

There is a further exception allowed for when a a legal or administrative decision deems that the effect of the TPM makes the non-infringing use no longer available - but that exception can only be existent for 3 years.

So, the total exceptions are extremely narrow, even taking away some of the narrow exceptions existent in the Australian Copyright Act such as region encoding in s10(1)(c). Outside of these exceptions the TPP prescribes a "separate cause of action, independent of any infringement..." (emphasis mine). So the circumvention of a TPM becomes a cause of action per se.

This significantly changes the landscape of copyright. Making a modification to your own property, regardless of whether it infringes copyright, can now be a cause of action. Ultimately this breaks the nexus between a TPM being a copyright-related device to being a device that limits rights to chattels. This breaks the nexus between the TPM provision and the constitutional head of power that enables the Commonwealth to legislate with regard to copyright, section 51 (xviii).

In the 2005 Stevens v Sony case, at [218] Kirby, J comments:
"To the extent that attempts are made to push the provisions of Australian copyright legislation beyond the legitimate purposes traditional to copyright protection at law, the Parliament risks losing its nexus to the constitutional source of power."

This is not to say that the imposition of the TPP would necessarily be unconstitutional as the Commonwealth has other heads of power upon which it could rely, such as the external affairs power in s51(xxix). However, it is of concern that external treaties such as the TPP should be used to enable the Commonwealth to legislate for the regulation of the use of an individual's private property.

Needless to say, the invasion of copyright into the realm of the regulation of chattels represents a significant intrusion by the international treaties system into citizen's ordinary enjoyment of their private property. It significantly re-balances the rights inherent in intellectual and real property and has the potential to fundamentally change the rights that one has over their own property.

Sunday, March 13, 2011

TPP turning ISPs into copyright police

The 6th round of negotiations for the so-called Trans-Pacific Partnership (TPP) are set to occur from 28th March 2011 - and if we were to rely on DFAT's website the TPP treaty is merely to:
"develop a high-quality, comprehensive 21st century Free Trade Agreement (FTA) that increases economic integration in the Asia-Pacific region, particularly as membership expands over time."
This all sounds very reasonable but what it doesn't mention is that, amongst other things, the TPP has a significant section devoted to copyright.

The US Trade Representative to the treaty negotiations has put forward a number of proposals which would "harmonise IPR provisions strictly upwards", these include:
  • Banning parallel imports
  • Increasing the term of copyright
  • Criminalising Digital Rights Managment (DRM) circumvention - even when there is no copyright infringement
  • Imposing ISP liability for the infringement of their users, including providing incentives for ISPs to become copyright cops for the content industry
  • Requiring ISPs to identify users at the behest of the content industry
  • Expanding the scope of what is patentable and limit objections to patents
This, of course, reads like a wish-list of the content industry and it would probably not surprise anyone to know that there is an extremely close relationship between the content industry and the US government.

Furthermore, the TPP contains provisions for "dispute resolutions" which means that countries that are not compliant with the increased scope of the IP provisions can be fined.

So what does this mean for Australia?

Firstly, the TPP IP provisions exceed those in the AUSFTA and even further than the completed-but-not-in-force ACTA treaty, especially the "exceptions" provisions for DRM and the expanded scope for patentable material.

Secondly, it will impose a regime of ISP copyright enforcement that goes much further than the suggested model put forward by Emmet, J in the AFACT v iiNet case. The Internet Industry Association (IIA) has already stated that it is prepared to draft a code to address the uncertainty regarding the steps that ISPs should take in responding to allegations of copyright infringement by their users. However, the imposition of the TPP will make this attempt at industry self-regulation redundant by substituting an industry negotiated code, which will likely contain at least some consumer protections, to a legislative regime which does not. Furthermore, a country is prevented from implementing more consumer friendly provisions by the "dispute resolution" clauses that may result in the country being fined.

So there is a real danger that the TPP will further tip the balance in favour of big content and away from consumers, but then this seems to be the modus operandi  of these FTAs and is hardly surprising. The irony is that the more big content punishes consumers and refuses to provide content in a way that their customers want, the more their customers will pirate their content using the ever-more sophisticated tools available to find and download content and to hide their tracks while doing so - making a legislative regime ineffective.

As IIA president Peter Coroneous said recently:
"Market failure remains a core contributor to the infringement problem. If users have access to more and better content, when, where and in the form they choose to consume it, and at a realistic price, we're quite confident the motivation for infringement will decline. We certainly don't condone the infringement of copyright - but internet users need attractive, lawful alternatives if we are to see positive behavioural change. There's no reason why Australia shouldn't be leading the way here."
And maybe that is the area in which Australia can lead the way, rather than continuing to implement an ever-more draconian legislative regime under the guise of "free trade".

Thursday, March 10, 2011

Carbon pricing: The really simple explanation

I've really, really simplified this and used an 'ideal' model but the principles are the same and it will serve for comparative purposes.

Assume that both Company A and Company B produced widgets at $10 retail. The widgets are identical - apart from their production method.

Assume that the most efficient carbon use for the production of widgets is 1 unit of carbon.

First, let's examine the effect of a carbon price:

Assume 1 unit of carbon is priced at $1

Company A makes a widget that takes 10 units of carbon and pays the carbon price of $10 for its widget which now retails at $20 (the original $10 plus the carbon price).

Company B uses a less carbon intensive method to produce its widgets which only take 1 unit of carbon and pays the carbon price of $1 for its widget which it can retail at $11.

All of the money that the government collects from the price on carbon is used for compensating consumers - let's assume that the redistribution is $1 per person in compensation. All of this compensation coming from the price on carbon and not from the budget. This is important because things that are paid for out of the budget have to be funded by one of three things: tax, cuts or borrowing (deficit)

Now, our average consumer is used to paying the non-carbon priced price of $10 for their widget. They have received $1 in compensation for the government so they now have a potential spend of $11 for widgets.

Now if they buy the $11 widget they are no more worse off than before the carbon price and Company A has a rather imperative reason to reduce the price of their widget - for example, by reducing its carbon use.

Now let's look at "direct action" aka a carbon reduction subsidy:

Direct action pays polluters to reduce their carbon use.

Company A requires $100 in capital costs (with a $20 p.a subsidy to keep their carbon use at this level) to change its production process to bring its carbon use down to the ideal 1 unit of carbon. These costs are now subsidised by the government (funded from either tax, borrowings or cuts).

Now Company A is not going to pass the subsidy to the consumer because its going to use the money in its carbon reduction scheme - we might get a few dollars handed on, but essentially subsidies don't significantly reduce prices (they might decrease the rate of price increases but one only needs to look at subsidies for private schools to see this not working).

Company B doesn't need any money to bring it to its peak efficiency of 1 unit of carbon.

So at the supermarket both Company A and Company B's products still cost $10 - except that, thanks to the fact that there is no price signalling to the consumer, the consumer has no way of knowing that Company A's widget cost the budget bottom line $100 with a recurrent budgetary cost of $20 p.a.

Direct action is expensive. It either means cuts, taxes or borrowing, there's no way around it. And no amount of bleating about "great big new taxes" by the opposition is going to change this economic reality.

So next time you hear the opposition going on about "direct action" ask yourself: "how much are they going to borrow?", "what are they going to tax?" or  more likely, "what are they going to cut?"

Sunday, March 6, 2011

The new gatekeepers- internet freedom has a price but no way to pay

Much has been made of the internet being the great 'leveler'. Citizen journalists and bloggers have challenged the model of traditional publishing, file-sharing has challenged the business models of the music and movie industry (and here, I mean not just file-sharing that infringes copyright but file-sharing as a distribution mechanism) and open source software has challenged the models of software development and distribution. Each of these mechanisms have removed, to some extent, the gatekeepers of content production and distribution, allowing an expansion of the sharing of ideas, content and culture. In the post-wikileaks world, the removal of the traditional gatekeepers of media and government has thrown the spotlight on government practices and the ability of the internet to spread information, culture and ideas has led to significant pressures being placed upon government (including, some would argue, the fall of several governments).

The reaction of government has predictably been to attempt to crack down on the internet through both censorship laws and the expansion of laws that further empower the private sector to move against the leveling influence of the internet (such as expanded copyright laws and domain seizure laws). In this case, at least citizens have the nominal right to reject these laws by excercising their rights at the ballot-box (and yes, practically this  is more difficult due to entrenched interests and money politics, but that's a rant for another day) and rejecting the government's intrusions.

However, more worryingly, a new danger to internet freedom has raised its ugly head and begun to exert its influence.  Another set of gatekeepers, ones that have not yet succumbed to the leveling influence of the internet, have begun to flex their muscle as gatekeepers of content and information and as these are private entities citizens have no way to counter their power.

I am referring to the financial gatekeepers of the internet. The duopoly of Visa and Mastercard (along with PayPal to a lesser extent) have begun to exert their power over the financial flows to entities and websites that they deem to be undesirable - and governments, recognising this power, have sought to use these gateways to censor and undermine websites and entities that threaten their power.

The most obvious recent case is that of PayPal, MasterCard and Visa halting payments to Wikileaks under the spurious auspice of 'violating their terms and conditions', something which the KKK or NAMBLA somehow don't do. It is quite obvious why the payments were halted - 'pressure' from the US government. There was no actual legal power upon which the government could rely, so they turned to the gatekeepers to block finances and attempt to hamstring Wikileaks. It was a frightening display of State power combined with the power of the gatekeepers brought to bear on an organisation which, to date, has not been shown to break any laws.

The UK government has also discovered that using the gatekeepers is easier than having  to pass legislation - since legislation has to go through that pesky transparency process known as parliamentary scrutiny.

In this case, the content industries, through their industry group IFPI, have bypassed the legislative step entirely and gone straight to enforcement - using  the police to protect their private interests through the police's "economic crime directive" which is ostensibly to combat fraud rather than copyright infringement. Basically, the police verify that the site appears to offer unlicensed copyrighted material and hand the details to Visa and MasterCard to effectively cut of the finances of these sites. There is no recourse, no appeal and no judicial oversight. Whether the accused have violated Visa or MasterCard's 'terms and conditions' is a matter for Visa and MasterCard and not for the courts.

It is not difficult to see this model being extended to other types of activities that either governments or big business find undesirable - they've already done it to Wikileaks. It is in a way similar to the corporate strategic lawsuit against public participation (SLAPP) suit - a legal threat to close down criticism - but at least with a SLAPP suit there is a way to fight it in court. A financial SLAPP from Visa and MasterCard is almost impossible to defeat - it is their terms and conditions and as private entity they can choose who to do business with, or not.

The dominance of these financial gatekeepers represents a dangerous bottleneck to internet freedom. Although we still may be able to publish and distribute information - the ability to finance this distribution also forms an important part of this freedom.

It is often said that "freedom has a price", the problem is that it may become increasingly difficult to find a place to pay.

Saturday, March 5, 2011

The harbour is not as safe as it looks - iiNet wins but consumers will likely lose

On 24th February the Full Bench of the Federal Court handed down its findings in the AFACT v iiNet appeal, with the appeal ultimately being dismissed. However, although the scorers will record it as a 2-1 win to iiNet, the actual ramifications of the case may mean that the much maligned "3-strikes" rules may become existent in Australia and in the most egregious form - one with no judicial oversight and very limited ways for consumers to defend themselves from allegations of infringement.

The dominant view has been that AFACT will likely appeal their loss to the High Court, however, due to the implicit process by which iiNet could be found liable for infringement found within the judgment, I believe it is unlikely that an appeal is on the cards. It is more likely that AFACT will negotiate with iiNet a notification/termination system which iiNet can live with, and AFACT can afford.

Emmet, J's judgment sets out what could quite possibly become the template for a notification/termination regime in Australia:

  • iiNet has been informed in writing of particulars of specific primary acts of infringement of copyright of the Copyright Owners, by use of particular IP Addresses of iiNet customers.
  • iiNet has been requested in writing to take specific steps [...] in relation to such primary acts of infringement
  • iiNet has been provided with unequivocal and cogent evidence of the alleged primary acts of infringement by use of the iiNet service in question. [...] Information as to the way in which the material supporting the allegations was derived, that was adequate to enable iiNet to verify the accuracy of the allegations, may suffice. Verification on oath as to the precise steps that were adopted in order to obtain or discern the relevant information may suffice but may not be necessary.
Emmet, J at [211] asserts that points one and two have been satisfied in the circumstances of the appeal but point three has not been satisfied. The information provided is not "cogent and unequivocal", but only represents a "mere assertion" by AFACT. Emmett, J also notes that there has been no offer of compensation or indemnity by AFACT.

Although Emmett, J does suggest that the customer ought to have a chance to refute any allegations that are made by AFACT2, there is no suggestion as to what would constitute a refutation that would be satisfactory to prevent termination - I would imagine that with such a system in place iiNet would take a somewhat conservative approach to what would constitute an appropriate refutation, probably requiring a very high degree of proof (to avoid any threat of further litigation on this point). This leaves your average consumer without any realistic means of review. So, although the appeal is a win for iiNet, it does not look like an outright win for consumers.

However, there are a few outstanding issues from the case that could make the system proposed by Emmett, J unworkable.

Firstly, at [207] Emmett, J speculates that the cost3 and complexity of such a system may not be feasible:
"It would be necessary to create a system whereby sufficient information concerning the allegations is communicated to the relevant customer, acknowledgment of receipt by the customer was secured and cross checking for earlier notifications in respect of the same customer was undertaken. Choices would need to be made in the design of such a system, as to the number of warnings that should be given, whether there should be a period of grace, whether all alleged infringers should be treated the same or graded according to severity. Each of those choices adds complexity to the design of a system. iiNet would also need to implement and maintain additional customer support capability since the implementation of such a system would lead to queries and complaints from customers. Senior personnel would need to be involved in the handling of such queries and complaints. Even if such a system is feasible, it would be likely to involve significant expense being incurred by iiNet."(emphasis mine)
However, I would suggest that it is likely that AFACT would suggest a bare minimum system and iiNet (in an attempt to avoid litigation) would likely agree - so long as AFACT was paying. So, one would imagine that such a system would be feasible.

Secondly, there is the question of what constitutes "unequivocal and cogent" evidence. Emmett, J suggests that the method of deriving the evidence may suffice for iiNet to then investigate the alleged infringements however, as anyone who understands the technology, unequivocal and cogent evidence is not as easy to come by as deriving an IP address from a torrent - certainly in the criminal sphere, significant computer forensics is required to meet the high burden of proof required. There is even some English Case law that suggests that an IP address is not significant enough per se to identify an infringer4 - however this case does suggest that an account holder may have a "duty to assist"5 which may still then require the account holder to "give appropriate assurances that there will be no repetition of the acts of infringement"6, a breach of which may then render the account holder liable to termination - and I would guess that similar reasoning would hold in Australia.

Ultimately, the AFACT v iiNet case is a prescription for the negotiations between iiNet and AFACT to derive a workable system. Negotiations which will likely give iiNet the certainty that it has asserted that it requires, and AFACT another weapon in its war against its customers.

In the end, it will be the consumers that lose with a system that will likely have no rights of appeal bar through a court process that is too expensive and complex for the average person; A system that requires something that is a little more than a mere assertion by an organisation whose main aim is not to benefit its members (ie. artists) or to provide for its customers, but to force consumers into its outdated business model. A model which consumers have unequivocally rejected.

Let's just hope that the recently announced review of copyright by the Attorney General results in some sane legislation to restore the balance in favour of both consumers and rights holders and not the middle-men like AFACT and its ilk. I'm not holding my breath.

1 Emmett, J Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23 at 210
2 Ibid
3 Emmett, J suggests at [210] that these costs are to be borne by the rights holders
4 Media CAT Limited v Adams & Ors [2011] EWPCC 6
5 Ibid. at [91]
6 Emmett, J Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23 at 210