Regarding the acquittal of Jon Johansen, I quoted CNN as saying:
The studios argued unauthorised copying was copyright theft and undermined a market for DVDs and videos worth $20 billion a year in North America alone.
Some elements of the industry did indeed claim that, but such claims are grossly irrelevant, and to bring them up is foolish or dishonest. This case was never about unauthorized _copying_ of DVDs. You can make a bit-for-bit perfect copy of a DVD without decrypting it. Indeed it's easier to copy if you don't decrypt it!
The main thing the industry really had at stake in this case is the "zone locking" aka "region code" system. The studios like to release videos in different parts of the world at different times, and to charge different royalty fees in different places. This is called market segmentation. The idea of an open-source player was abhorrent to them, because it makes it easy to buy a DVD in one region and play it in other regions. This is an example of arbitrage. For "normal" products, market segmentation is neither forbidden by law nor protected by law. Mushrooms that cost $4.00 per ounce at the supermarket can be purchased for $4.00 per pound at the Asian grocery down the street. The stores are free to charge whatever they like, and I am free to shop wherever I like. The law is silent on the issue. People who engage in market segmentation are always looking for ways to prevent arbitrage. For instance, airlines make sure tickets are non-transferable, to prevent some ticket agent from stocking up on tickets at "excursion" prices and reselling them to business travelers. Movie studios never had a really good market segmentation system, because -- I can legally own region-1 or region-4 DVDs or some of both, no matter whether I live in the US or Australia. -- I can legally own a region-1 or region-4 DVD player, or both, no matter whether I live in the US or Australia. To be clear: the industry was never able to erect a legal barrier to arbitrage of disks _or_ arbitrage of players. The closest they could come was to make it slightly hard to get a _multi-region_ player. The manufacturers of player hardware had to do the studios' bidding because of the the controversial (to say the least) "anti-circumvention" provisions of the 1998 "DMCA" law. If we somewhat charitably assume the studios knew what they were doing, their whole market segmentation scheme was predicated on the lack of multi-region players _and_ on the assumption that players would remain sufficiently expensive that users couldn't just buy a stack of players, one per region. Less charitably the scheme was predicated on the foolish assumption that nobody would ever discover the possibility of inter-region arbitrage of player hardware. I repeat, the practical issue in this case was never about cheating the studios out of their per-disk royalties on DVDs. At this point you might be wondering about per-player royalties. First, let's dispose of an irrelevant side-issue. The rights to patents on raw DVD hardware are held by a consortium of hardware companies, not movie studios. These people presumably collected their cut when Mr. Johansen purchased his raw DVD drive hardware. So this case was never about patent infringement. The studios arguably hold intellectual property rights in the CSS decoding keys, and they can collect per-player royalties from hw mfgrs who incorporate such keys in their products. AFAIK Mr. Johansen never copied any such key (or even had one he could have copied), so this case was never about illegal copying even on a per-player basis. The truly amazing thing about this case is that the "crime" would not have occured if the studios had used decently-strong crypto. It's ironic that in an age when for cryptographers enjoy a historically-unprecedented lopsided advantage over cryptanalysts, the industry adopted a system that could be cracked by amateurs. This probably wasn't simply due to stupidity in the industry; it is more plausibly attributed to stupidity in the US export regulations which induced the industry to use 40-bit keys. So what we have here are remarkably intrusive laws: under US regulations the crypto must be easy to break, while under US law it is illegal to break it. The latter is dressed up as a "copyright" law even if no illegal copying is involved. This strikes me as analogous to requiring everyone to use pin/tumbler locks with only a single pin, so that all locks can be picked using a popsicle stick, and then arresting people for burglary whenever they are caught carrying a popsicle stick. US law is not the same as Norwegian law. You should not imagine that this case sets a precedent for US courts. Additional remarks: We should try to avoid overwrought arguments about the "morality" of market segmentation and/or arbitrage. Producers and retailers will always try to benefit themselves by segmenting the market; consumers and arbitrageurs will always try to benefit themselves by defeating market segmentation. In fact it is easy to demonstrate that _some_ market segmentation is good for society as a whole. Please refer to the graphs in http://www.monmouth.com/~jsd/econ/val-cost.gif In both graphs, the abscissa is the total number of units (N), for some product. There are three different ordinates, all denominated in dollars, namely -- the total cost of producing N units (shown in blue), -- the total consumer value of consuming N units, (shown in red), and -- the total market dollar-volume (shown in green). In both graphs, the blue production-cost curve has a large Y-intercept at N=0 and a rather small slope everywhere else. This is characteristic of a wide range of products including DVD movies, which have enormous fixed costs and remarkably small incremental costs. Meanwhile, the slope of the red customer-value curve is steep for small N and less steep for larger N, conveying the idea that the product is more valuable to some consumers and less valuable to others. In the top graph we arbitrarily assume that everybody pays the same price -- no market segmentation. Then the maximum N that can be sold is shown by the tick-mark on the axis: this is the point where the market price (the slope of the green curve) equals the incremental customer value (the slope of the red curve). You can't sell any more units because the product isn't worth it to additional customers at that price. The "created wealth" is given by the length of the magenta line, the difference between the customer-value curve and the producer-cost curve. Now we turn to the lower graph, in which there is some market segmentation. The customers who value the product less highly are allowed to buy the product at a lower price. This process absolutely necessarily ends at the point shown by the tickmark on the lower axis, because this is the point where the incremental producer cost (the slope of the blue curve) equals the incremental customer value (the slope of the red curve). This is the point of maximal created wealth; there is no way to sell a larger number of units N without somebody taking a loss, so that's not going to happen. Note that in the absence of market segmentation, the society as a whole is worse off. Given the producer and consumer curves shown in the figure, or anything qualitatively similar, there is no unsegmented solution that maximizes the created wealth. If the sellers insist on selling every unit at the highest possible price, society loses. If the buyers insist on buying every unit at the lowest possible price, society loses. It would be the height of foolishness and the height of hypocrisy to pretend that whatever favors my selfish interests is "moral" while whatever favors somebody else's selfish interests is "immoral". Much of the debate about intellectual property issues, on both sides, stinks of foolish hypocrisy. There are two not-quite-separate sensible questions: -- Find a way to maximize the created wealth. -- Decide how to divvy up the created wealth among the various stakeholders: inventors, authors, performers, publishers, manufacturers, wholesalers, retailers, consumers, et cetera. It would be nice to have an enlightened discussion of such topics. --------------------------------------------------------------------- The Cryptography Mailing List Unsubscribe by sending "unsubscribe cryptography" to [EMAIL PROTECTED]
