False Innovation and the Pursuit of Sustainability

Chris Castle is Managing Partner of Christian L. Castle Attorneys, Los Angeles and San Francisco.

On Thursday, May 21, U.S. District Court Judge Marilyn Hall Patel wrapped up hearings on the preliminary injunction she granted in the fall against Real Networks and its "RealDVD" copying software. And the Real "Facet" DVD copying and storage device that is what the case is arguably "really" about. (News.com has published a handy précis of the case, "MPAA vs. Real Networks: Five Reasons Why Hollywood Will Win".)

Real didn't help itself with the court by playing a bit fast and loose with the evidence, and only partially won a motion to sanction it for intentional spoliation of evidence. As the lawyer I fondly think of as the Roy Cohn of Silicon Valley once told me, those who come to court with the white hats usually prevail. Bad day at Black Rock for Real if that's true.

But there is a larger issue at play in the case that I tried to outline in my San Francisco Chronicle op-ed about the case "What's Innovation and What's Piracy?" It is common for dealers in what Stan Liebowitz has called "parasitic technologies" to wrap themselves in the flag of "innovation" to protect themselves against those who try to enforce their rights on a theory of "creative destruction". When my dog was teething, he completely destroyed a sofa while we were out one afternoon-destructive, yes; creative, not so much.

And it is really that simple point that is at issue in the RealDVD case. Technology isn't innovative just because someone who profits himself from the misfortune of others says it is. Technology that tramples on the economic liberties and labor value of others in a way that prevents that value chain from sustaining itself is "false innovation" not sustainable innovation. The difference is whether the innovator is trying to find a way to respect the economic and human rights of creators or whether he is merely engaged in self-enrichment.

To illustrate the difference in thinking, I juxtaposed two quotations, one from Real Networks CEO Rob Glaser and one from Serge Sasseville of Quebecor:

"Innovation is a two-way street. Wrapping yourself in the flag of "innovation" does not excuse you from respecting economic rights or legal accountability online any more than it does offline. Most public companies are beginning to agree with Serge Sasseville of Canadian communications giant Quebecor that public companies answer not only to CEOs, shareholders and creditors, but as 'a good corporate citizen, (we) cannot remain insensitive to the piracy problems affecting the survival of content producers and rights holders.'

Contrast Sasseville's admonition with RealNetworks CEO Rob Glaser, quoted in an Associated Press story on RealDVD: 'If you want to steal, we remind you what the rules are, and we discourage you from doing it, but we're not your nanny.'

The differences [between the philosophy of Quebecor and of Real] are obvious."

It is a shame that a company like Real that has done a great deal right to create sustainable innovation with its music service has so completely exposed a parasitic vein when it comes to motion pictures. Not surprisingly, late in the preliminary injunction hearing it reached into the bullpen for that old Silicon Valley standby, antitrust. The studios are colluding to prevent Real from getting its way. Or something like that.

In case it was overlooked, the same Judge Patel rejected the copyright misuse defense in the Napster case (which was asserted as an affirmative defense to copyright infringement) and her rejection of that defense was upheld by the 9^th Circuit which cited to UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349, 351 (S.D.N.Y.), for the principle that "A [copyright holder's] 'exclusive' rights, derived from the Constitution and the Copyright Act, include the right, within broad limits, to curb the development of such a derivative market by refusing to license a copyrighted work or by doing so only on terms the copyright owner finds acceptable."

Copyright misuse is a cousin of the antitrust claim that Real asserts and is a "Hail Mary's Cousin Martha" kitchen sink, oh why not, addition to litigation against the creative community. Why anyone thought it was a good idea to bring a claim for which little if any predicate was laid down, the judge had ruled against a similar claim in a similar case in the same circuit, and the defendant was just coming off of sanctions for spoliation of evidence...anyone's guess.

Judge Patel summed it up as reported by News.com: "During opening arguments in the injunction hearing, one of Real's lawyers suggested that the company was in the right because it helped consumers backup their films. 'It's even more attractive to consumers to get everything for free,' Patel said, in a seemingly sarcastic remark."

Judge Patel put her finger directly on the false innovation and how to identify it when you see it.

In our digital society, it is important that the law and the courts support sustainable innovation, which inevitably comes back to supporting economic rights and labor value of creators.