The Copyright Turing Test

As a formal matter, the litigation in People for the Ethical Treatment of Animals v. David Slater, the “monkey-selfie case” is now over. Although the parties nominally settled the lawsuit last year, the U.S. Ninth Circuit Court of Appeals put an exclamation point on it last month by issuing a formal ruling and opinion anyway upholding the district court’s ruling in favor of the human photographer Slater that was under appeal at the time of the settlement.

Naruto

While the court conceded that, under the Ninth Circuit’s peculiar precedent in Cetacean Community v. Bush, animals like Naruto, the crested macaque who took the famous photos and on whose behalf PETA nominally had brought the case, may have standing to bring a lawsuit in human courts, they do not have statutory standing under the Copyright Act to bring an action for infringement:

We must determine whether a monkey may sue humans, corporations, and companies for damages and injunctive relief arising from claims of copyright infringement…Our court’s precedent requires us to conclude that the monkey’s claim has standing under Article III of the United States Constitution. Nonetheless, we conclude that this monkey — and all animals, since they are not human — lacks statutory standing under the Copyright Act. We but therefore affirm the judgment of the district court.

So, case closed.

Yet as some legal experts have pointed out, the Ninth Circuit didn’t really settle the question of who does own the copyright in the photos at issue if not the monkey. Under the settlement between the parties, Slater, whose camera Naruto borrowed for his self-portrait, is free to license their use on the stipulation that he donate a portion of the earnings to a fund to protect crested macaque habitat — a sort of professional tip of the hat to Naruto — neither the district court nor the Ninth Circuit explicitly determined the copyright to be his. Each ruled on the issue of standing, but neither reached ruling reached the merits of the infringement claim.

Slater set up his equipment in the Indonesian forest where Naruto and his fellow macaques live and left it unattended to see how the monkeys might respond to it. But beyond that, he didn’t have any particular creative input to the photos they took. So on what basis would his copyright in them rest? Is mere ownership of the equipment sufficient? Was providing the opportunity for the monkeys to take the photos by leaving the camera unattended a necessary step? We don’t really know.

Another question not directly addressed by the litigation is what made the monkey selfie so compelling in the first place? Had Naruto managed merely to take a random photo of his foot, or the sky, it’s doubtful anyone would have bothered litigating its authorship.

What made the monkey selfie so compelling, I think, was its seemingly human-like intention. Serendipitously well-framed in the shot, Naruto seems to exhibit human-like self-awareness as he appears to smile into the camera, an effect Slater himself recognized  in titling the book in which it first appear Wildlife Personalities.

The whole case, in effect, functioned as a sort of photographic Turing test: Was the photo a creative act of original expression if perceived that way by humans, even if the law does not recognize its proximate creator? If so, how should the law regard it? Who, if anyone, should have an exclusive right to exploit it commercially, and on what would that claim rest?

While the issue may appear abstract and theoretical, those questions are getting less theoretical by the day, as researchers develop ever more machine-based systems capable of producing Turing-sufficient works of expression. Like monkeys, machines would likely lack standing to bring a claim under copyright law. But that doesn’t mean they can’t produce works that humans perceive as expressive.

In a paper published last month, researchers from Microsoft and Kyoto University describe how they trained a neural net to produce original poems, one of which was accepted for publication by the human editors of a literary journal based on a blind, online submission.

Last year, researchers from Google published a paper describing how they taught a neural net to recognize the aesthetic elements of photography. The artificial intelligence system then produced original works of landscape photography that professional photographers had trouble distinguishing from similar works produced by humans (take that, Naruto!).

Computer scientists as Italy’s Politecnico di Milano, last month submitted a paper describing how they used a two-stage artificial intelligence system to create new levels of video game play on the fly that even other A.I. systems could not distinguish from human-created levels.

Copyright law is designed to incentive creativity by giving legal force to the author’s claim on its economic value. Our systems of commercial licensing of creative works rest on exploiting the exclusive rights of authors spelled out in the Copyright Act.

But as the monkey selfie case has shown, works can have considerable economic value even where there is no obvious or legally recognized author.

How that value is to be realized through our existing author-based licensing systems, and how disputes over that value are to be adjudicated within our author-centric copyright law are questions we’re only beginning to grapple with. We’ll be grappling with some of them at the 2018 RightsTech Summit in New York.

Anyone interested in addressing them can contact me at paul@concurrentmedia.com.

 

Major Music Licensing Reform Bill Clears Committee

The House Judiciary Committee on Wednesday unanimously approved the Music Modernization Act (MMA), an omnibus bill that would bring the biggest changes to how music is licensed and paid for in more than a generation. The vote was 32-0.

The bill incorporates components of four other bills that were originally introduced separately. They include the original Music Modernization Act, which for the first time creates a blanket license for mechanical rights in the U.S. and establishes a new organization to administer the license and collect the royalties; the CLASSICS Act, which requires digital radio services to pay performance royalties for previously exempt pre-1972 sound recordings; the AMP Act, which codifies current industry practice of honoring so-called Letters of Direction by artists who wish to share performance royalties with producers and engineers; and a provision taken from the Fair Play, Fair Pay Act that establishes a new, “willing buyer, willing seller” standard for setting statutory royalties.

Left out of the bill were other elements of the Fair Play, Fair Pay Act that would have required terrestrial radio stations to pay performance royalties for sound recordings. That provision was strongly opposed by broadcasters and their opposition could have derailed the omnibus bill had it been included.

Although supporters of performance royalties for radio play, primarily the record labels, vowed to push ahead on those provisions their exclusion from the MMA leaves their fate far from certain. The National Association of Broadcasters has successfully resisted similar legislative efforts over many years, and without the cover of the broad coalition backing the MMA the labels’ efforts could be thwarted again.

National Music Publishers Association CEO David Israelite, a principal architect of the MMA, praised today’s vote.

“The House Judiciary Committee’s approval of the Music Modernization Act (MMA) is a critical step towards finally fixing the system to pay songwriters what they deserve,” he said in a statement. “There is unprecedented consensus and momentum behind this bill, and we look forward to seeing it soon pass the full House.”

Although no date has been set for the bill to be taken up by the full House, it is expected to get a vote within the next several weeks.

The Senate has yet to take up the bill in its current form, although individual elements of it have been introduced there. The Senate is not obligated to follow the House’s lead in combining the four individual bills, but the broad support for the bill from disparate industry groups, and the rare display of unanimous, bi-partisan support for it from the House committee is likely to create strong pressure on the Senate to follow suit.

“After years of compromise and collaboration across the music, tech and policy sectors to reach this point, the Music Modernization Act of 2018 will help songwriters to be better compensated for their work and positively impact how their music is licensed,” Copyright Alliance CEO Keith Kupferschmid said of today’s action. “We commend Chairman Goodlatte (R-VA) and Ranking Member Nadler (D-NY), Representatives Collins (R-GA) and Jeffries (D-NY), and all who demonstrated vigorous backing for this critical piece of legislation, enabling it to be passed through committee with decisive and overwhelming bipartisan support.”

Kupferschmid will lead a panel discussion on copyright and licensing reform, including the Music Modernization Act, at the RightsTech Summit on Oct. 5 in New York.

The Music Modernization Act: Making the Case for Open Data

The Music Modernization Act (MMA) has been scheduled for a vote in the House Judiciary Committee on April 9th, where it’s expected to pass with bipartisan support, committee chairman Bob Goodlatte’s (R-Va.) office confirmed Wednesday.

Still to be determined is whether it will go to the House floor as a standalone bill, or gets bundled into a package of music-related measures, including the CLASSICS Act, and the Allocation for Music Producers (AMP) Act. Either way, the MMA stands to be the most significant piece of legislation affecting music licensing in a generation.

“It’s also the only significant piece of legislation affecting music licensing in a generation,” quipped National Music Publishers Association CEO David Israelite during a panel discussion on Capitol Hill this week on music licensing issues.

In addition to being a rare example these days of genuine bipartisanship in congress, the MMA has proved an even more rare example of consensus among nearly all the (frequently warring) institutional voices within the music industry, including organizations representing digital service providers, publishers, songwriters, and record labels.

The bill is aimed at solving an enduring problem within the music industry that has grown more acute with the rise of streaming as the dominate mode of distribution for sound recordings: uncertainty and inefficiency in licensing mechanical reproduction rights for musical compositions.

Under U.S. copyright law, songs are subject to a compulsory mechanical license. Once a song is published, anyone can record it by notifying the songwriter or representative of their intent and paying the statutory royalty set by the Copyright Royalty Board. Unlike the performance right for songs, however, where a venue or service provider can obtain blanket licenses from ASCAP, BMI, SESAC, and GRD for their entire catalogs of works, covering nearly every song published in the U.S., and unlike other major territories, there is currently no blanket licensing facility here for mechanical rights. Instead, a service provider like Spotify or Apple Music, with upwards of 30 million or more sound recordings in their libraries, must locate, notify, and pay the songwriters or administrators for each of those recordings individually, many of which have complex, and often opaque fractional ownership structures.

Alleged failures to correctly locate and pay the appropriate rights owners have led to a raft of litigation against service providers for copyright infringement, including the $1.6 billion lawsuit currently pending against Spotify brought by Wixen Music Publishing.

The MMA would address that problem by creating a blanket license for mechanical rights and creating a new entity, selected by the Copyright Office, to administer it. Instead of having to pay each songwriters individually, service providers could write one check to the new entity, which would assume the burden of locating and paying the appropriate rights owners. The costs of operating the new entity would be paid by service providers, eliminating the need for the new entity to charge a commission to songwriters.

Songwriters and publishers would gain greater certainty of being paid, while service providers would be relieved of an enormous administrative burden and protected against the risk of litigation.

It is that alignment of interests that has led to the broad consensus in support of the MMA within the industry. But the MMA’s most important contribution could be to prove the case for open data and open protocols.

In addition to administering the blanket mechanical license, the new licensing entity envisioned by the MMA would, for the first time, create an open, publicly available database matching sound recordings to musical compositions and their authors and owners.

“We’re really changing the paradigm on data,” said NMPA’s Israelite, one of the MMA’s main architects. “Throughout the history of the music business databases have been regarded as proprietary. ..We want to encourage competition.”

By making critical ownership data public, MMA’s backers hope, entrepreneurs will be able to develop new applications and services beyond the current crop of streaming services, bringing new investment and new revenue into the music business.

“I don’t think streaming is the be-all and end-all in terms of business models,”  Panos Panay, VP for innovation and strategy at Berklee College of Music and a leader of the Open Music Initiative, said during the same panel discussion. OMI is working to develop open protocols for the exchange of music rights data, which could achieve some of the same effects as the proposed MMA database.

“With open protocols you can build an ecosystem, you can have innovation” Panay said. “The MMA, hopefully, will let this industry finally move beyond its past. If we get this right, we won’t have to stop at streaming. All sorts of new applications could be developed to create all sorts of new revenue streams.”

If that pans out, it could provide a valuable proof of concept for other rights based industries. An open and verified database of authenticity and provenance for images and artworks, for instance, could help unlock new licensing and e-commerce opportunities that are today held back by high levels of uncertainty and fraud.

Likewise, the lack of an open, comprehensive database of rights to published works makes it difficult for would-be developers to learn what works are available for license in which territories, holding back the creation of potentially new, digital applications and revenue streams for authors and publishers.

Much will depend on how well the new music rights database is maintained. There are companies in the market today, such as Music Reports and Loudr, that have already compiled comprehensive databases matching sound recordings to compositions and their rights owners, and they invest significant money and effort to verify the data and keep it current. Whether the administrators of the new open, non-proprietary database will have the same incentive to maintain it at a high level of accuracy and currency remains to be seen.

“Everyone will benefit from having this, and everyone is hurt by not having it,” Panay said of envisioned new database. “I think the important thing is that puts a focus on the data, and the importance of good data.”

 

New Storms Over Safe Harbors

CISAC, the international confederation of authors’ societies, this week released a study conducted by University of Texas economist Stan Liebowitz on the impact of the safe harbor provisions in the Digital Millennial Copyright Act and their counterparts in the European Union’s E-Commerce Directive on music rights holders.

Although Liebowitz gives it a scholarly gloss, much of his analysis will be familiar to anyone who has followed the debate over the so-called value gap, between what music rights owners earn from their music appearing on YouTube and other user-upload platforms, and what they earn from fully licensed platforms like Spotify and Apple Music: YouTube is given unfair negotiating leverage over rights holders because the protection from liability offered to service providers by the safe harbors mean it is effectively impossible for rights owners to withhold their content from the platform if they don’t like the terms, resulting in below market rates.

But Liebowitz ups the ante by emphasizing two dynamics not often highlighted by other analysts that he claims exacerbate the problem.

The first point — of particular note to RightsTech readers — is Liebowitz’s contention that YouTube could be making its much-touted Content ID system for identifying unlicensed copyrighted works on the platform less effective than it could be because a more effective filter would undermine its leverage with rights owners.

Although copyright owners should have a duty to provide YouTube with information about their copyrighted works before they could claim copyright infringement, once such information were provided, normal copyright law, without the safe harbor, would provide the proper incentives for YouTube to make sure that its Content ID worked better than any alternative…One of the main impediments to this solution, however, is Google’s incentive, which is to make YouTube’s voluntary filtering system only accurate enough to silence critics of its treatment of
copyright holders, as opposed to actually eliminating infringing files…

If Google wants to claim to be going above and beyond the requirements of the DMCA, it is merely necessary for it to provide a Content ID system that works moderately well, since any such system is voluntary. In fact, it would be surprising if Content ID worked as well as Google could make it, since such a Content ID system would weaken YouTube’s bargaining position with the copyright holders with whom it does business. If Content ID worked as Google suggests, meaning almost perfectly, copyright owners who thought they were being underpaid by YouTube would remove their material from YouTube since YouTube’s users would no longer have access to those copyrighted works, as Google claims in the above quote. As we shall soon see, however, the current Content ID system is insufficiently accurate to remove YouTube’s superior bargaining position, which is why YouTube is fighting to keep the safe harbor which it would not need with a more accurate Content ID system.

That comes pretty close to accusing YouTube of bad faith in designing Content ID (without citing any actual evidence of it apart from YouTube’s alleged incentive) — a potentially explosive charge if it were taken up by others as part of the broader value-grab argument.

Liebowtiz’s second (and less tendentious) contribution to the debate is his claim that YouTube’s below-market rates are actually a drag on all market rates, further undercutting compensation to rights owners.

[T]here are two sources of negative impacts of [user-upload content] sites on the revenues to copyright owners. The first, which is a static effect, is the lower direct payment to copyright owners by UUC sites because these sites do not need permission of the copyright owners to provide access to their works and if they get permission they pay below market rates. Second, and of a size that could be larger than the first, is a dynamic effect which is the reduction in revenues from the unfair competition that UUC sites impose on permission based sites, lowering their audiences and  revenues, and by necessity, reducing the payments that they make to copyright owners…

Thus, there are additional sources of harm to copyright owners caused by the advantage that safe harbors provide to UUC sites, and these sources of harm are usually ignored in discussions of safe harbors.

That’s an argument that could find favor with Spotify, Apple, and other fully licensed sites that have so far largely stayed out of the debate over the safe harbors.

The full report is available here.

 

Cat’s Paw: The Promise and Peril of Decentralized Creativity

When the developers behind the viral sensation CryptoKitties first turned their virtual cats loose on the blockchain they intended to hew closely to the blockchain ethos of decentralization. Accordingly, the only components of the game actually registered on the Ethereum blockchain are the ownership of the individual cats and the cats’ “digital DNA” that allows them to “breed” with other virtual cats to create new unique CryptoKitties.

The actually renderings of the kitties — the goofy, cartoonishly colored cat images that have seduced users into the world of crypto and virtual assets — were never added to the chain.

“The code is all open-source. I was really hoping that people would start to do their own renderings of the cats,” CryptoKitties Fat Cat Mack Flavelle told a packed house at the Digital Entertainment World conference this week. “If you wanted to go in and change the code so that your cat rendered with antlers you could do that. It’s your cat.”

Had the code for rendering the images been added to the blockchain it would have become immutable, which would have made modification of the code impossible.

“Decentralization meant decentralization,” Flavelle said.

That philosophy carried over to ownership of the intellectual property in the images as well. Part of goal in launching CryptoKitties, Flavelle explained, was to introduce people without a background in blockchain or cryptography to the concept of owning virtual assets, which mean Axiom Zen, the studio behind CryptoKitties, abjuring any interest of its own in the images.

“We we get questions from people asking whether they can make a t-shirt with their cat on it to give to someone, and we’re like, ‘knock yourself out.'” Flavelle said. “If you want to print up 800 t-shirts with your cat and sell them you can. It’s your cat.”

As a proof of concept, that approach has worked spectacularly. CryptoKitty owners have quickly become possessive toward their cat and put great store in its appearance, according to Flavelle. The vast majority of the buying and selling of the cats, along with their “breeding” rights, he said, has been transacted directly between owners, rather than through CryptoKitties’ own marketplace, implying that players indeed view the images of their virtual cats as having real value, independent of the platform they were born on.

To date, 10 CryptoKitties have sold for more than $100,000 each, Flavelle reports.

The success of CryptoKitties’ decentralized model, however, turns out to have a dark side. According to Flavelle, scammers have seized on the popularity of CryptoKitties to try to defraud people of money by selling them fake kitties. With no fixed code for the images on the blockchain, and no claim of rights in them itself, Axiom Zen has found itself with few technical or legal tools to pursue the scammers.

Flavelle said he is searching for ways to prevent scammers from infiltrating the CryptoKitties ecosystem without compromising its decentralization, but is yet to hit on a workable solution.

“It’s a problem we need to solve,” he said. And a possible warning sign for other entrepreneurs looking to democratize and decentralize the creative process.

From Art to Artificial Intelligence

The U.S. Patent and Trademark Office last week held its second public meeting on Developing the Digital Marketplace for Copyrighted Works, where one of the topics of discussion was whether and how works authored by a computer running artificial intelligence software should be regarded for purposes of copyright law (disclosure: I was an informal adviser to the PTO on the program for the event).

The question is not merely academic. Companies like Amper Music in the U.S. and Aiva Technologies in Luxembourg are using A.I systems today to create original production music, while Google engineers have taught A.I. systems to create music and art, and to take photographs that professional photographers have trouble distinguishing from professional landscape shots. Works created at least in part by machines are already entering the stream of commerce.

KlarisIP managing partner Edward Klaris

There is a broad, although not universally shared, consensus among legal experts that under U.S. copyright law, non-human actors, whether machine or monkey, cannot be considered to own a copyright. But that still leaves a host of vexing questions likely to occupy courts for many years. If the machine cannot own the copyright on a machine-made work, can anyone, and if so, whom? The owner of the machine? The author of the software program? The human who pushes “start”? Or, should machine-made works be considered in the public domain?

If a copyright is to be assigned, how much creative input must a human provide, and at what stage of the process, to claim it? If there is no copyright, what if any other legal basis is there for licensing their use?

At the Digital Entertainment World conference in Los Angeles February 5-6, KlarisLaw and KlarisIP managing partner Edward Klaris will explore some of those questions in a special presentation called From Art to Artificial Intelligence.

Klaris previewed some of his thoughts on the topic in a blog post this week for Intellectual Property Watch:

The concept of encouraging the production of creative work by protecting it — incentivizing authors financially — is embedded in our Constitution. The Intellectual Property Clause expressly aims “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

In drafting the black-and-white clarity of this clause, our framers could hardly have anticipated the highly gray area of bots making copyrighted works.  You don’t have to incentivize a bot; a machine simply does what it was programmed to do without any need for financial motivation.  That is why the court declined to award a copyright in a work created by a monkey.  Monkeys are not financially incentivized to create works, and even if they were, the monopoly afforded copyright holders was not intended for animals.

In a world where bots may eventually dominate the creative space — manipulating, arranging, color-correcting, filming, and ordering literary, audio and visual content – courts may decide that works created without human input belong in the public domain with no protection. Or, if copyright is granted, bots’ output would be protected for potentially more than 100 years under current copyright law.  Which is better?  What path best promotes our country’s fundamental interest in “the progress of science and useful arts”? And, should copyright subsist for fewer years under certain circumstances?

Klaris’ presentation will be held on February 6 as part of the RightsTech track at DEW. To view the full RightsTech agenda click here. For information on how to register for the event click here.

 

NMPA CEO David Israelite to Speak at DEW on Modernizing Music Licensing

Just before Christmas, a bi-partisan group of lawmakers introduced the Music Modernization Act, which, among other things, would create a new blanket license for mechanical reproduction rights to musical compositions and establish a new entity to collect and distribute mechanical royalties.

The bill is meant to address one of the abiding sources of friction within the digital music streaming business. Musical compositions in the U.S. are subject to a compulsory mechanical license, meaning anyone can record a song and sell copies of that recording by sending a notice of intent (NOI) to the composition’s copyright owners and paying a per-copy royalty set by the Copyright Royalty Board.

Unlike the public performance right, however, where performance rights organizations (PROs) like ASCAP, BMI and SESAC aggregate millions of compositions and offer a blanket license covering their entire repertoires, anyone availing themselves of the compulsory mechanical license is required to identify and pay the appropriate copyright owners individually. Where the copyright owners cannot be identified or located, the user can file the NOI with the U.S. Copyright Office and the royalties paid are held in escrow until the rights owners are located.

The system worked well enough for many years when it was rare for anyone or any outlet to make bulk use of the mechanical reproduction right. With the rise of digital streaming, however, which has been held to implicate both the public performance and the mechanical reproduction right, the lack of an efficient system for administering mechanical rights has been a constant source of tension, between digital service providers like Spoity and Apple Music on the one hand, and music publishers and songwriters on the other.

That tension has frequently erupted into litigation, including the $1.6 billion lawsuit filed against Spotify in December by Wixen Music Publishing over Spotify’s alleged failure to pay required mechanical royalties.

Should it become law, the Music Modernization Act could go a long way toward easing those tensions. Since it’s introduction, in fact, the bill has gained broad support throughout the industry. In a rare show of unity, a group of more than 20 industry organizations representing music publishers, songwriters, record labels, PROs, and service providers issued a joint statement earlier this month endorsing the bill and urging its passage.

Much of the credit for the bill’s introduction and for rallying support behind it belongs to the National Music Publishers Association (NMPA) and its CEO David Israelite, who worked closely with the bill’s sponsors on Capitol Hill and helped broker the joint statement. Israelite will sit down with me for a special fireside chat at Digital Entertainment World on February 5th to discuss the Music Monetization Act, as well as other issues facing the industry, including the music industry’s notorious data challenges, and the future of performance rights licensing in the wake of recent court cases.

This week, we asked Israelite a few preliminary questions to set the stage for his fireside chat:

RightsTech Project: Last week, a group of music industry organizations jointly endorsed the Music Modernization Act, the Classics Act and the AMP Act. To what do you attribute the sudden outbreak of cooperation among so many different stakeholders?

David Israelite: We have a window of momentum and consensus that is ripe for action. Congressional leaders like Judiciary Committee Chairman Bob Goodlatte, who retires this year, has made copyright reform a priority, and with songwriter champions like Rep. Doug Collins (R-GA) and Rep. Hakeem Jeffries (D-NY) offering consensus bills like the MMA – and the Senate hopefully following suit – there is a real opportunity to move legislation that will significantly help the future of songwriting. Additionally, the MMA is not a wish list for music publishers and songwriters – it is a bill that took months to negotiate because it helps both the tech and music industries. No one got everything they wanted – but both sides are better off with the MMA. DiMA, which represents the biggest tech companies in the world is supportive, as are the biggest songwriter groups in the U.S.

Largely because of the momentum around the MMA – the music industry has coalesced around other music bills that will help legacy artists and producers. As I have always said – we are stronger together – and we have a great opportunity to not just help our segment of the pie – but to advance the whole creative class. After years of trying to develop and unite around reasonable reforms, it is truly exciting that today we stand together and that Congress is invested in these changes as well.

Where do you think the debate over the BMI/ASCAP consent decrees goes now in the wake of the 2nd Circuit decision?

BMI’s win sends a strong message that the DOJ cannot simply reinterpret decades of industry practice and upend the lives of thousands of songwriters. The new leadership in DOJ’s antitrust division hopefully offers a new path forward, and I believe they are looking at the consent decrees with fresh eyes. My hope is that they will ultimately abolish them altogether and give songwriters the free market that other intellectual property owners enjoy.

3) What is NMPA’s position on the various PRO database initiatives (ASCAP/BMI; ASCAP/SACEM/PRS)?

The PROs currently offer searchable repertoires. Their efforts to create a single database will bring clarity to the industry – however these initiative will take time and money. I look forward to seeing their progress in the coming months.

Click here for information on how to register for Digital Entertainment World.

 

RightsTech Herding CryptoKitties at Digital Entertainment World

When Satoshi Nakamoto introduced Bitcoin into the world, whoever he, she, or they were set the total number of coins that can ever be released (“mined” in Bitcoin parlance) at 21 million. While individual bitcoins can be sub-divided into an infinite number of smaller units (fractions of bitcoins), the total whole number of units is finite.

CryptoKitties fat cat Mack Flavelle

That inherent scarcity is one of the reasons for the dizzying run-up in the price of bitcoins: At any given time there is a fixed number of bitcoins in the world.

The key to establishing that scarcity is the blockchain, which leverages cryptography to ensure that individual bitcoins (and their subdivisions) are unique, identifiable, unalterable, and un-reproducible. Unlike the internet, where sending a digital file from one computer to another inescapably involves creating a new copy, bitcoins themselves are not really “sent” or transferred over a network so there is no need to create a copy. Instead, the shared ledger that records ownership of bitcoins is updated to reflect the new network address (i.e. owner) of a cryptographically unique asset on the network.

Those properties, of uniqueness and scarcity, are part of what has attracted many artists to blockchain technology. What is unique and scarce can have and hold value, and what has value can be bought and sold, traded and collected, or held as an asset in the expectation of appreciation.

Getting people not steeped in cryptography and accustomed to the infinite reproducibility of digital files on the internet to become familiar and comfortable with the concepts of digital scarcity and uniqueness, however, is a challenge. Without that buy-in from consumers, the blockchain hopes of many in the media and creative industries could be broken.

It was that challenge that Mack Flavelle and his team of developers at AxiomZen set out to tackle. Their solution? Cats.

The team came up with a collection of digital illustrations depicting goggle-eyed, cartoon cats they called CryptoKitties and created an online game allowing people to buy, sell and collect CryptoKitties using Ether. The game also leverages smart contracts to make the kitties “breedable,” based on their unique “DNA,” creating new, unique CryptoKitties.

Why cats? While there are other blockchain-based digital collectibles on the market, most are targeted at limited audiences, such as RarePepes, based on the adopted alt-right mascot Pepe the Frog. Flavelle’s goal was to appeal to a broader market and introduce ordinary consumers to digital collectibels. “Cats are part of the internet,” Flavelle tells RightsTech.  “People are already familiar with the idea of trading cat videos.”

Trading in CryptoKitties has been robust. At one point, it became the dominant application on the Ethereum network, to the annoyance of others trying to use the network.

According to a third-party site that tracks sales of CryptoKitties, some virtual kittens have sold for the equivalent of more than $100,000, based on the then-current value of Ether.

Flavelle, who’s title is Fat Cat, will sit down for one-on-one fireside chat with me on February 6th, as part of the RightsTech track at the Digital Entertainment World conference in Los Angeles.

We’ll discuss the origins of CryptoKitties, what their creators have learned about the market for digital collectibles, what their popularity portends for consumer adoption of blockchain-based applications, and whether CryptoKitties are a fad or will prove to have nine lives.

Click here for information on registering for Digital Entertainment World.

 

Rights Owners Rack Up Victories in EU, Australia

The copyright industries haven’t fared particularly well in U.S. trade negotiations recently, missing out on a chance to extend various copyright-protection measures when the Trump administration pulled the U.S. out of the Trans-Pacific Partner, and facing push-back on efforts to incorporate those provisions into a revised NAFTA agreement with Canada and Mexico. But they’re having better luck in Europe and Australia.

Last week, the Australian government unveiled legislation to extend the current digital safe harbors there to libraries, educational institutions, organizations for the disabled, archives, and other cultural sectors. But in a reversal from a previous government position, the legislation would exclude major commercial platforms like Facebook and Google from such protection.

Under current Australian law, the safe harbors protecting networks from liability for copyright-infringing materials uploaded by their users is limited to ISPs. Earlier this year, the government floated a proposal to expand those protections to cover a wider range or networks, including commercial services like YouTube that rely heavily on user-generated content. That proposal was shelved in March, however, and the government began a series of consultations with the copyright industries leading up to last week’s announcement.

The change in course represents a major victory for copyright owners, particularly the music industry, which has lobbied heavily for steps to help close the “value gap” it claims the safe harbors have created on social media platforms. Keeping YouTube and Facebook out of those harbors will make it easier for rights owners to negotiate favorable licensing deals with the platforms.

In Europe, meanwhile, the European Parliament voted this week to reject most provisions of the European Commission’s so-called Sat-Cab proposal that would have allowed broadcasters within the European Union to include content they had licensed for broadcast in their own territory in their pan-European digital video-on-demand and over-the-top services.

The proposal by the European Commission was intended to advance the EU’s Digital Single Market initiative but was strongly opposed by the film and TV industries that have long relied on exclusive territory-by-territory licensing to maximize revenue and secure financing for production.

The vote by the European Parliament is not the final step in the EU’s complicated procedures. The proposal now goes to the Council of Ministers made up of senior officials from the member countries, where European broadcasters have vowed to continue pushing for expanded distribution. But for now, the vote in the Parliament is a major victory for the film and TV producers, who lobbied heavily against the commission’s proposal.

That win comes on the heels of a similar victory for rights owners last month, when both the European Parliament and Council agreed to exclude most copyrighted works for at least two years from another provision of the Digital Single Market rules that strictly limits the use of “geo-blocking” measures on digital goods. The elimination of geo-blocking was strongly opposed by book publishers, who feared it would allow online booksellers such as Amazon to sell ebooks throughout the EU with a single license, undercutting the industry’s practice of licensing digital rights territory-by-territory or language-by-language.

As with the Cab-Sat proposal, the agreement on geo-blocking is not the last word on the matter. But for now, at least, the regulatory tide in the EU that had been running strongly against the copyright industries’ long-standing licensing practices appears to be turning.

 

The Purr-fect Blockchain Application? Collectible Digital Assets

Many a fortune has been built on the internet, but we all know the internet’s real purpose is to share funny cat videos. So it’s perhaps no surprise that the latest iteration of a digital network — blockchain — is also being overrun with kitties.

Apart from trading Bitcoin, just about the hottest application running on a blockchain at the moment is CryptoKitties, discrete bits of digital art featuring cartoon felines that can be bought, sold, traded and even interbred with other CryptoKitties to create new, “genetically” unique pussycats. By one estimate, traffic in CryptoKitties is currently taking up 13 percent of the Ethereum networks capacity., making the application the single biggest user of that blockchain.

Apart from the internet’s natural affinity for cats the appeal of CryptoKitties lies in their collectibility. Each CryptoKitty cartoon is generated from a unique digital “genome” and is visually distinct. The application then generates a cryptographic hash of the unique image that is then registered to the Ethereum blockchain. The images therefore cannot be reproduced or forged.

Whether CryptoKitties turn out to be a passing fad, or not, they’re helping popularize the concept of blockchain-based collectible digital assets — a notion pioneered by serious-art blockchain registries like Monegraph and Ascribe. Similar efforts include Rare Pepe cards featuring the alt-right’s adopted mascot, Pepe the Frog, and Cryptopunks.

Now, digital collectibles are moving beyond the world of visual arts into music and other media sectors. Earlier this year, artist-management services provider Boogie Shack Music Group teamed with music blockchain developer Tao Network to create a new type of licensed artist merchandise in the form of blockchain-based digital tokens.

Tokens will be offered in limited editions via “initial artist offerings,” with 50 percent of the proceeds going to the artist. The tokens can be exchanged for fiat currency or Bitcoin, but since each token is cryptographically unique they can also be collected, traded, or used as currency within an artist-centric “engagement” economy, according to Tao Network founder and CEO Bryce Weiner.

“You think about a band like The Grateful Dead and there’s a whole ecosystem of collectibles among their fans,” Weiner said. “That’s an ecosystem that could be monetized with digital tokens. As the tokens increase in value it becomes like a new royalty stream for the artist. It’s an example of another right that could be monetized with blockchain.”

Tao and Boogie Shack plan to launch a token exchange to be called AltMarket in early 2018. Artists initially on board for the launch include the estate of the Wu Tang Clan’s  Ol’ Dirty Bastard, and Digital Underground, with more expected to be announced soon.

Weiner will be speaking a panel in the RightsTech track at the Digital Entertainment World conference in Los Angeles on February 5-6. For information on how to register for the conference click here.

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