p2pnet.net News:- US lawmakers should turn their backs on “ceaseless and baseless misinformation” being spread by “powerful and parochial interests” against p2p and p2p technologies, says Michael Weiss, ceo of Morpheus owner StreamCast Networks.

Speaking for his own company and on behalf of members of the commercial peer-to-peer trade group P2P United, he was testifying at today’s Senate Committee on Commerce, Science, and Transportation hearing into the future of p2p technology

“We ask for the full Commerce Committee’s further official explorations of all the facts about peer to peer file sharing software before regulating our fledgling industry in a manner that could keep the dramatic commercial and social benefits of this incredible new technology – as made available by responsible companies like our own – to the American public and our trading partners around the world,” he said

Weiss also dismissed claims by the RIAA (Recording Industry Association of America) that online pornography can be centrally filtered by software developers and emphasised that porn is neither more nor less prevalent, or more virulent, than anything else that’s available online.

He said he wanted to put to rest to all past suggestions that, “our companies, our products, and the people who produce and market them are the willing accomplices of pedophiles, hostile to copyright, intentional seeders of spyware and malicious computer code among an unsuspecting public, evaders of the judicial process and, at root, dangerous to the American consumer”.

Weiss warned, too, about the danger of accepting intellectually empty, but emotionally loaded, phrases about p2p software, such as the “cleverly menacing references to “dark-alley file-sharing software, illegal pirate sites” and use of the word ‘viral’ instead of the far more innocuous ‘distributed’.

“The issues before us are difficult,” he added, “but StreamCast and the other members of P2P United are committed to working with you and the Federal Trade Commission in good faith to strip the rhetoric from the realities of our technology and of the markets here at issue. We look forward to helping craft, and taking a responsible and profitable place, in the market of tomorrow that StreamCast and the other members of P2P United believe we all must work dispassionately to forge today.”

Now read on >>>>>>>>>>>>>>

“THE FUTURE OF PEER-TO-PEER TECHNOLOGY”: Prepared Testimony -
By Michael Weiss – StreamCast Networks

Good afternoon, Chairman Smith, Sen. Dorgan and members of the Subcommittee. My name is Michael Weiss. I am the CEO of StreamCast Networks. StreamCast develops and distributes a “peer to peer” file-search-and sharing software product called “Morpheus.” It is the second most popular “P2P” software and the third most downloaded program on the Internet worldwide. Morpheus is not a network or, a service and it has no subscribers. We are proudly incorporated in Oregon and are backed primarily by venture funders based in Oregon and Washington State. Our corporate offices are located in Woodland Hills, California near Los Angeles.

I very much appreciate the opportunity to appear before you today as the CEO of StreamCast. Where appropriate, however, I also will refer to and speak on behalf of P2P United, a non-profit trade association of the peer to peer technology industry formed almost one year ago by StreamCast and the developers and distributors of several other “consumer” P2P file-sharing software programs. The four other member companies of P2P United distribute the software popularly known as BearShare, Blubster, Grokster and eDonkey. I do not speak for KaZaA, its distributor Sharman Networks, its closely associated business affiliate AltNet, or its trade association the DCIA.

P2P United is based and represented in Washington, DC by a former Member of Congress and by former counsel to the Senate Judiciary Committee. They are in regular contact with Members of Congress and their staffs, as well as with the Federal Trade Commission. The members of P2P United are incorporated both here in the United States and abroad. All but one maintain US offices and that member, Grokster, is StreamCast’s equally visible and accessible co-defendant in the ongoing Federal suit brought against us for vicarious and contributory copyright infringement – that is, secondary copyright infringement — in the Central District of California by eight major motion picture studios, some twenty music labels, and multiple music publishers. Grokster participated fully in those proceedings and the court’s ruling that neither StreamCast nor Grokster violate copyright law by distributing their decentralized file-sharing software applies to Grokster despite its overseas incorporation.

In essence, Mr. Chairman, the court found that the Morpheus and Grokster software is fundamentally different from software originally developed by Napster and should not be compelled to shut down. By extension, if the other members of P2P United had been plaintiffs in that lawsuit, I am confident that the Court also would have ruled in their favor as their software also is based on decentralized architecture.

For the many reasons detailed below, StreamCast respectfully submits that the District Court’s detailed 35-page ruling (Exhibit 1) should figure prominently in today’s proceedings and in Congress’ subsequent consideration of the issues identified in your and Chairman McCain’s letter of invitation to appear before the Subcommittee. Permit me to address those issues in turn:

I. Present and Future Uses of P2P Software Are Frequently and Increasingly Noninfringing or Unrelated to Copyrighted Materials.

While others have sought to exhaustively document the ways in which individual users misuse P2P file sharing software, the District Court’s opinion makes absolutely clear that peer to peer software is not merely “capable of,” but actually is being used extensively for “substantial non-infringing” purposes today. The court noted in particular that, “StreamCast has adduced evidence that the Morpheus program is regularly used to facilitate and search for public domain materials, government documents, media content for which distribution is authorized, media content as to which the rights owners do not object to distribution, and computer software for which distribution is permitted.” Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., (C.D.Cal. Apr 25, 2003)259 F.Supp.2d 1029, 1035)

Its opinion also emphasized that, “as the Supreme Court has explained, the existence of substantial noninfringing uses turns not only on a product’s current uses, but also on potential future noninfringing uses (emphasis in original, citations omitted). Plaintiffs do not dispute that Defendants’ software is being used, and could be used, for substantial noninfringing purposes.” 259 F.Supp.2d 1029, *1036 Indeed, just since the court’s ruling last April, many published reports (Exhibit 2) attest to the fact that peer to peer software has been embraced and used to positive effect by such diverse information distributors as the United States Army (which uses it to inexpensively disseminate game-based recruiting software efficiently); the developer of Lindows, a Unix-based computer operating system seeking to compete with Microsoft (who cites significant bandwidth cost savings), and by the acclaimed Berklee College of Music in Massachusetts to broadly disseminate over 80 diverse music lessons derived from the school’s curriculum.

The remarks on inauguration of this service by Berklee’s Associate Vice President, StreamCast submits, provide a useful lens for the Subcommittee through which to view the issues before it today. He said, “Offering free education over the Internet and through file sharing networks underscores the college’s core belief that these channels are an effective way to openly distribute meaningful educational content to a global audience. It also serves as a powerful promotional platform for artists to market, distribute, and sell their music.”

Further, as reported last month in the Washington Post (Exhibit 3), StreamCast and its fellow members of P2P United are working to finalize arrangements with the FBI to rapidly and extensively disseminate to the public photos and other data about alleged child pornographers wanted by the Bureau. (The material distributed will be determined and furnished solely by the Bureau, of course.) StreamCast and the other members of P2P United initiated this effort inspired by the successful use of milk cartons to carry the photos of missing children. This, too, clearly will constitute “substantial non-infringing use” of inarguable and perhaps inestimable social importance.

Clearly, these are just a few examples of non-infringing uses of P2P technology through our P2P United member companies. Indeed, the plaintiffs in our District Court case acknowledged that millions of non-infringing files are traded each month over P2P networks.

Lastly in this regard, members of the Subcommittee may be particularly interested in the recent display of banner advertisements on eDonkey, a fellow P2P United member, for President Bush’s campaign. Comparable use of Morpheus was made by Senator Kerry’s campaign earlier this month. Of course, all manner of political public domain, and other public domain material, not subject to copyright also may readily be found through Morpheus and other peer to peer software. Political speech, thus represents an enormously important and extensive noninfringing use of decentralized peer to peer software.

Part of my point in citing both the court’s opinion and these few innovative uses of non-restrictive peer to peer software, Mr. Chairman, is not to suggest that such P2P software is not misused by some consumers or that such misuse should not concern Congress and our industry. Rather, I do so to respectfully suggest that Congressionally or administratively mandated changes in the fundamental nature of peer to peer software are likely to have an immediate and substantial chilling effect on technology that the court found to be a content-neutral tool and that experience in our infancy already has shown to be a rapidly expanding boon to enterprises of many kinds: commercial, political, religious, humanistic, academic, and certainly artistic.

Before turning to a rebuttal of the serious charges made by peer to peer technology’s antagonists in the entertainment industries, and the specific concerns expressed in your letter of May 4 attached as Exhibit 4, Mr. Chairman, I’d like also to put clearly on record that – unsupported allegations of the copyright industries notwithstanding — neither StreamCast nor any other P2P United member is unwilling to prevent the misuse of our products by individuals to infringe copyright or commit crimes. Rather, as the District Court unambiguously found and the General Accounting Office has affirmed (Exhibit 5), we are technologically unable to do so for the very reasons that make peer to peer software the powerful, content-neutral tool that it is.

As P2P United has already emphasized in public fora and in correspondence with Congress, this issue cannot and should not be resolved by any party’s advocates or executives but, rather, by technologists without a political or commercial agenda. StreamCast, for P2P United, here renews our calls for an appropriate agency or other arm of the government to undertake this critical inquiry and to broadly publish its findings. We specifically ask that this inquiry encompass (but not be limited to) audio “fingerprinting” technology knowingly mischaracterized by the recording industry as a “filter” in demonstrations to policy makers, but never made available to P2P United or outside researchers for evaluation despite many written and telephone requests to the RIAA and the software’s developers to do so. Indeed, every such request has been ignored.

To be absolutely clear, Mr. Chairman, without fundamentally redesigning the inherently decentralized nature of our software in a manner that will make it radically less useful (indeed to make it like the original Napster outlawed by the courts), we have no technical ability to centrally “filter” copyrighted, offensive or indeed any file content whatsoever. Frequent claims to the contrary are simply false, Mr. Chairman, and represent just the tip of the iceberg of a well-funded and massively deployed effort in Washington and state capitals across the country to, at root, “smear” decentralized peer to peer software, and the legitimate companies with legitimate business models who (as detailed below) responsibly provide it to the public.

As the court noted, StreamCast and Grokster “provide software that communicates across networks that are entirely outside Defendants’ control. In the case of Grokster, the network is the proprietary FastTrack network, which is clearly not controlled by Defendant Grokster. In the case of StreamCast, the network is Gnutella, the open-source nature of which apparently places it outside the control of any single entity.” 259 F.Supp.2d 1029, *1045] The Gnutella network is available under General Public License. This means, in essence, that no one controls it, anyone can improve it, and anyone can build software that allows the users of that software to access a worldwide network of millions of decentralized peer to peer software users. StreamCast is aware of at least 30 such independently and often anonymously developed and published software programs, Mr. Chairman, many of which have their origins outside the United States. More are developed every day.

The court went on to find that “[w]hile the parties dispute what Defendants feasibly could do to alter their software, here, unlike in Napster, there is no admissible evidence before the Court indicating that Defendants have the ability to supervise and control the infringing conduct (all of which occurs after the product has passed to end-users). The doctrine of vicarious infringement does not contemplate liability based upon the fact that a product could be made such that it is less susceptible to unlawful use, where no control over the user of the product exists.” 259 F.Supp.2d 1028, 1029 and 1045, 1046

The related charge that Grokster and StreamCast had “contributed” to copyright infringement also was rejected by the court with equal force: “Defendants distribute and support software, the users of which can and do choose to employ it for both lawful and unlawful ends. Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights. While Defendants, like Sony or Xerox, may know that their products will be used illegally by some (or even many) users, and may provide support services and refinements that indirectly support such use, liability for contributory infringement does not lie ‘merely because peer-to-peer file-sharing technology may be used to infringe plaintiffs’ copyrights.’ Napster, 239 F.3d at 1020-21 (citation omitted). Absent evidence of active and substantial contribution to the infringement itself, Defendants cannot be liable.” .” MGM v. Grokster, supra, 259 F.Supp.2d 1029, 1043.

StreamCast thus does not “aid and abet” infringement, Mr. Chairman. To the contrary, individually and in concert with P2P United, our company has and will continue to actively and prominently encourage our users to educate themselves about and to respect copyright law. We also affirmatively help them to do that, and (as detailed below) to understand the consequences of failing to obey the law.

II. Commonly Cited Detriments to Consumers of Using Peer to Peer Technology Are Frequently Overstated or Erroneous.

As articulated in your letter of May 4, Mr. Chairman, the most commonly suggested dangers to consumers from peer to peer software revolve around three basic issues: exposure to pornography, copyright infringement liability, and data security breaches. Given limited time and resources to prepare for today’s hearing, StreamCast requests the option to supplement this submission prior to closure of the Subcommittee’s record. For the present, however, we respectfully offer the following points in response to the criticisms outlined above.

A. Pornography Accessible through P2P Software is Not More Prevalent or More Virulent than that Available on the Internet and Cannot be Centrally Filtered by Software Developers.

Late in 2003, Mr. Chairman, Senator Lindsey Graham – joined by you and three other Senators – wrote to StreamCast and the other members of P2P United to ask whether and how we would take steps to “prevent illegal access to pornography.” A copy of our complete response through P2P United to that and other inquiries similar to those before the Subcommittee today is attached a Exhibit 6 to my testimony and incorporated here by reference.

Now as then, Mr. Chairman, and as the District Court found, no decentralized peer to peer software program is capable of filtering content of any kind. StreamCast, however, both as a subscriber to the industry Code of Conduct adopted by all P2P United members and in its own right (Exhibit 7), has taken significant steps to educate and protect its users. Reproductions of the actual information screens containing a wide range of consumer advisories and cautions seen by Morpheus users during installation and use of our software are attached in a collected “User Guide” for the Subcommittee’s convenience as Exhibit 8.

First, Morpheus software includes a series of “Parental Control” functions. Primary among these is the ability to password protect use of the software in its entirety and to prohibit users without the password from changing or deleting it.

Second, Morpheus also enables parents to easily construct “key word” filters that reside locally on their computer similar to those commercially marketed for general internet use, such as Net Nanny, and our software – as some also have falsely suggested – in no way disables or otherwise interferes with the operation of such independent software in its “web-scrubbing” function. While I’m unaware of commercial filters now designed to review peer to peer files before or after their download, should such software be developed, Morpheus and presumably the other members of P2P United, will not disable or interfere with such software.

Third, like other P2P United members, Morpheus includes a prominent, animated link at the top right of its home page and after its software has been downloaded to the specially designed “Parent to Parent” Resource Center maintained for public education purposes by P2P United and highly prominent on the association’s own website. This unmistakable rotating graphic bears the legend, “Protect Your Child Online. Click Here Now!”

Indeed, as stated in P2P United’s reply to Sen. Graham and you earlier this year, Mr. Chairman, we frankly and conspicuously acknowledge the risk of exposure to legal and illegal pornography through files intentionally downloaded by users of peer to peer software. (Of course, identical material also is readily available in great quantity elsewhere online through websites from which it is further distributed through email, instant messaging programs, such as AOL’s Instant Messenger, and through chat rooms and on-line forums.) We also provide links to many sources of information (such as the National Center for Missing and Exploited Children) and solicit the public’s assistance in making the Resource Center even more robust. The P2P United Parent to Parent Resource Center also allows users to report suspected child pornographers directly to federal law enforcement authorities through the federal government’s website with a single click of their mouse.

StreamCast and Morpheus also will play a key role in the “cyber milk carton” campaign referred to above and intended to more efficiently involve the public in apprehending wanted child pornography suspects high on the FBI’s target list, once the Bureau authorizes and defines the scope of those efforts.

Morpheus here reiterates the request made by P2P United in its reply to Sen. Graham and others that law enforcement authorities be queried directly about whether and how members of P2P United are actively assisting law enforcement authorities in their pursuit of child pornographers in ways that we cannot and should not discuss in a public forum

StreamCast also urges the Subcommittee to take official note of repeated testimony before Congress by former Deputy Assistant Attorney General John Malcolm (Exhibit 9) and multiple analyses by the General Accounting Office. Mr. Malcolm made abundantly clear that, particularly with respect to child pornography, the “most troublesome” sources of exposure to child pornography remain by far commercial websites accessed through ordinary web browsers, like Microsoft Explorer and AOL’s Netscape Navigator. The GAO’s most recent report, released in early April, confirms its findings from the previous November: reported incidents of exposure to child pornography through peer to peer software are literally dwarfed by incidents involving web surfing and e-mail. (Exhibit 10)

As a concerned parent of three, grandparent of two and a moral person, Mr. Chairman, I too want the scourge of child pornography abated and eliminated if humanly possible. As parents, grandparents and responsible adults and citizens, the people of StreamCast and its fellow P2P United members are committed to assisting Congress and law enforcement in those efforts and are willing, in fact, to continue to do more than our fair share.

We respectfully submit, however, that imposing extraordinary warning requirements on our industry and technology without making such requirements equally applicable to web browser software, e-mail programs, instant messenger programs, chat rooms, and all other significant avenues of on-line exposure would be unjustified, unfair and – most importantly – ineffective.

StreamCast and P2P United look forward to working with the Subcommittee, the Federal Trade Commission, and their staffs to identify other reasonable steps that we and other responsible members of the peer to peer industry may take as part of the solution to this disturbing set of problems that are inherent to all Internet-based software communications programs.

Finally in this regard, StreamCast takes serious issue with the contention in the May 4 letter that users of peer to peer software could or should bear criminal liability for the “distribution” of legal pornographic material based solely on the passive residence of such material in their “shared files” folder. Absent the proven intent to make available and distribute such material to another individual in a manner that violates existing law, StreamCast does not believe it fair or accurate to suggest that the inherent nature and mere use of peer to peer software does or should make criminals of adults engaged in activities which many may view as unsavory, but which are legal and protected by the First Amendment.

Although the word carries confusing and inappropriately negative connotations, it is precisely the “viral” nature of peer to peer programs that make them powerful information sharing tools. Neutralizing that quality of Morpheus or other similar software by either outlawing such software’s use unless confined to a defined set of users, or hobbling it by requiring a change in “sharing” default settings, is simply not justified in this context.

B. StreamCast Has and Will Continue to Educate the Public about the Need to Respect Copyright Law.

As in the case of risks related to legal adult file content, Mr. Chairman, StreamCast has made significant efforts of its own and through its trade association to urge its users to learn more about, and to respect, copyright. Specifically, consistent with P2P United’s Code of Conduct, the Morpheus software prominently includes at the bottom left of every active users’ home page a link bearing the bold P2P United logo and the legend, “Click Here for an Important Copyright Advisory!”

In addition, Morpheus displays a prominent link to P2P United on both its home page and main software user page linking to P2P United with the legend, “Click here for important copyright and consumer protection information.” That link takes users to P2P United’s home page where an exceptionally large icon displaying the familiar “C” in a circle appears labeled, “Copyright and P2P.” The text associated with that link clearly and conspicuously states (with boldface as it appears in the original):

“IMPORTANT NOTICE — P2P United and it’s member companies remind all peer-to-peer software users that – while P2P technology makes it possible to share all kinds of information – some of that information may both be protected by copyright and require the copyright owner’s advance permission to make available to other P2P users. This will often be the case with popular music and other forms of entertainment, including games or other software.

Title 17 of the U.S. Code includes stiff penalties for copyright infringement, including significant fines and – in severe cases – even jail sentences. All P2P users are urged to respect copyright laws and to learn more about them. The links below can help, but represent just a fraction of the material available on this important issue. Please contact us at P2P United with your suggestions for other links that may make this page more useful.”

Immediately below this text, links to key sources of information about copyright appear, including one to the Recording Industry Association of America’s own “anti-piracy” website.

After years of litigation against it StreamCast well understands, Mr. Chairman, that the member companies of the RIAA and MPAA believe that they are at war with the technology that we and other responsible companies legally make available to consumers. But frankly, it doesn’t have to be that way. Indeed, even in the midst of pitched legal battles, StreamCast, and I am certain other peer to peer software companies that compete with us, have sought from the major music labels or their licensed distributors the contractual means for peer to peer software to become a legal means by which our users could receive or purchase entertainment content from the labels and under end user licenses, and subject to digital protection chosen by the record labels. Unfortunately, we have been rebuffed at every turn, Mr. Chairman.

On behalf of my company and the other members of P2P United, I would like today to renew our organization’s frequent call for Congress’ assistance in convening “all stakeholder” discussions of how the 60 million Americans estimated to use decentralized peer to peer file sharing software may be converted from alleged criminals to loyal customers for the benefit of all artists and other copyright holders. Solutions that stop short of mass consumer litigation can only be found if all the parties chose or are compelled, if necessary, to sit down together. As of this date, however, the MPAA and RIAA have been unwilling to do so with P2P United and it members.

C. Claims that Morpheus or Other Responsibly Developed Peer to Peer Software Creates Significant or Disproportionate. Risks to Consumers’ Personal Privacy are Simply False.

StreamCast and the other members of P2P United also seek the assistance of the Subcommittee, Mr. Chairman, in putting to rest persistent and pernicious false allegations about peer to peer software and user security. Regrettably, many such claims were repeated in the May 4 letter to the Federal Trade Commission, and we look forward to the opportunity of Commission hearings to conclusively further rebut them.

For purposes of today’s proceedings, StreamCast wishes to begin that process by emphasizing these 3 key facts:

1) Personal Data – As illustrated by the attached “screen captures” made during the process of installing Morpheus software, at no time and under no circumstances is a users’ entire hard drive (or, indeed any existing file on a user’s computer) automatically made available to other Morpheus users. Rather, all the software does by default upon installation is create two empty file folders which the user immediately has the option of deleting. One folder, the “Shared Folder” is intended to accept files manually inserted by users that they wish to share. The other “Download Folder” is where files that users download using our software will reside, or a folder where they can place other files previously downloaded using other P2P file-sharing software.

Furthermore, at that point in the installation, the user is conspicuously cautioned with asterisked text that, “If there are any folders on your computer you do not wish to share, please be sure to remove them from your shared folders directory.” We are in the process now of further strengthening this warning in the next generation of Morpheus now under development. The new text will read: “If you have downloaded any files that you do not wish to share, please remove them from your ‘Share Folder’ or modify your default settings under ‘Preferences’.” Thus, functionally speaking, only files downloaded to or intentionally placed in a user’s “Shared Folder” will be available to other P2P software users. These safeguards render the feared “broadcast” of personal data to “millions of others of Internet users” cited in the May 4 letter to the FTC wholly without foundation.

These design features and notices also are consistent with the voluntary industry Code of Conduct promulgated by P2P United in September of 2003 and with which all members of the association have pledged to comply. The Code states unequivocally, in relevant part, that: “Members’ software and associated user instructions shall conspicuously require the user to confirm the folder(s) containing the file material that the user wishes to make available to other users before making such material available, and shall be designed to reasonably prevent the inadvertent designation of the content of the user’s entire hard drive (or other principal data repository) as material available to other users.”

Thus, insofar as StreamCast and other members of P2P United in compliance with our Code of Conduct are concerned, allegations that it is easy for a user to inadvertently “publish” sensitive material like medical or tax information through our software is literally the equivalent of an urban myth, no more accurate – though easily as persistent – as reports of alligators in New York’s storm drains. To the extent that the Subcommittee retains concerns about this issue, we urge it and the FTC to call in neutral experts without industry or political portfolio, unlike those cited in the May 4 letter, to systematically and dispassionately assess this matter.

2) Virus Exposure - This issue also cries out for systematic and nonsensationalized investigation, Mr. Chairman, before special strictures on peer to peer software are deemed justified. As StreamCast is confident that such analysis will make clear, neither Morpheus nor any other responsibly designed peer to peer application presents any lesser or greater danger to the public from viruses and other malicious code than web surfing, or e-mailing. The May 4 letter cites a single study, “recently reported” in PC Magazine in support of this allegation. In reality, Mr. Chairman, the quoted article itself is now 7 months old, the study it reports on was done over a year before the article was published, and the study itself was not claimed to be either comprehensive or scientific and consisted a single article in a consumer magazine.

StreamCast and P2P United are not familiar with TruSecure and the data attributed to it in the May 4 letter concerning the alleged prevalence of viruses in a claimed majority of “executable files downloaded with popular file sharing software programs.” I am pleased to be able to state categorically for StreamCast, however, that the Morpheus software available from us over the Internet is 100% virus free as delivered to the consumer. Moreover, even if that were not the case, the Morpheus software package is fully compatible with all of the most popular commercial anti-virus software programs now in widespread use, such as those marketed by Norton and McAfee. Thus, in the event that an infected file subsequently was downloaded to a user’s computer, the resident anti-virus program would work seamlessly with Morpheus.

For valid technical reasons intended to assure compatibility of Morpheus with such applications, the current version of our software asks the user which, if any, such program he or she would like to interface with Morpheus. New versions of Morpheus will automatically seek out and integrate any such commercial anti-virus software resident on a user’s computer to provide consumers with even further protection against malicious viruses.

3) Spyware – StreamCast shares your and the Committee’s concern, Mr. Chairman, about the stealth installation on a users computer of programs of unknown origin, difficult to find and purge, that without the user’s permission can report personally attributable surfing habits and even specific key strokes to unknown third parties. That is “spyware,” Mr. Chairman, and – as noted in Morpheus’ public description of our software on download.com – we are proudly 100% spyware-free. This representation also is made on the very first screen presented to a user who has initiated the process of downloading the Morpheus software.

Like many responsible peer to peer software and other internet companies, however, the free version of our software is advertising supported just as free, over-the-air television has been supported for decades by “pop-up” advertisements of a more familiar and widely accepted kind called “commercials”. The advertising programs installed with Morpheus, properly categorized as “adware,” are identified immediately as “third party software” in the Morpheus setup process and users are urged to read the unavoidably extensive “end user licensing agreement” furnished by StreamCast’s independent adware partners presented on the screen.

Critically, unlike spyware, the advertising software bundled with Morpheus is conspicuous, easily and completely uninstalled in conformance with the P2P United Code of Conduct, and does not record keystrokes or report individually identifiable user data to any third party. In fact, StreamCast clearly explains to users how to uninstall any 3rd party software distributed with Morpheus. Today, only two such software programs come with Morpheus; and both are wholly benign “adware.”

Candidly, Mr. Chairman, StreamCast believes that detailed end user licensing agreements widely used with many forms of software – as well as the printed “shrink-wrap” licenses routinely included in hard copies of popular software – are too often simply “clicked” or scrolled through by consumers because of their length and apparent complexity. This issue, however, is not unique to peer to peer software. Nor, as has been suggested of peer to peer developers, does it not involve intentionally deceptive practices. Rather, lengthy and sometimes complex contracts and licenses are pervasive throughout the software and internet commerce industries.

Accordingly, StreamCast and the other member companies of P2P United affirmatively urge the Subcommittee and the FTC to consider whether and how all similarly situated businesses, including software developers and online marketers might voluntarily (or by regulation, if necessary) be encouraged to make such agreements and licenses both more user-friendly to the consumer, and enforceable.

Lastly, I have made a public and personal commitment to our users that Morpheus will not install anything on a user’s computer of which the user is unaware. StreamCast and I take this commitment very seriously and believe that gaining and keeping the trust of our users and is a primary goal of our company in the face of the outrageous falsehoods being routinely told about us by the entertainment industries by which we have been and continue to be sued.

III. The Envisionable Future for Widespread Social and Commercial Use of Peer to Peer Software May be Bright or Heavily Shadowed, Depending Upon Choices Now Before Congress.

In your letter inviting me to testify here today, Mr. Chairman, you also asked me to address my expectations of how peer to peer technology or “substitute technologies” will develop in the future. I appreciate that invitation and foresee a future for peer to peer technology with little middle ground. On the one hand, if the demonization of peer to peer technology fomented by powerful entertainment business interests continues to be credited without more rigorous scrutiny by policy makers, then technological or other regulatory mandates could well drive companies who strive to market it responsibly out of business.

As reported upon widely in the past several months (see attached articles from Business Week of January 27th and USA Today of June 14th of this year attached as Exhibit 11) that future would be “dark” indeed because, while the widespread use of peer to peer software would continue unabated and could well grow, the new “underground” providers of the software used – unlike StreamCast and the other members of P2P United – would likely operate outside the reach of U.S. law, and proceed blithely about their truly shadowy business without regard for our law or this Subcommittee’s, the FTC’s or any other regulatory body’s concerns over true spyware, or any of the other matters addressed by the Subcommittee today.

In sum, Mr. Chairman, as a parent, grand-parent and law abiding citizen, as well as the CEO of StreamCast, I am concerned that the premature or overregulation of responsibly developed peer to peer software will exacerbate existing problems by driving P2P software development into the true cyber-shadows. Accordingly as we wrote to Senator Graham and yourself early this year, Mr. Chairman, StreamCast and P2P United urge this Subcommittee and the FTC to employ “a light regulatory touch, and technology neutrality in the event of regulation” to avoid the specter of the darknet that already has begun to propagate.

Conversely, Mr. Chairman, with Congress’ help, I also can foresee a win-win marketplace in which no individual user of peer to peer software need be worried about the prospect of crippling copyright litigation or about being labeled a “pirate” or criminal. In this brighter future, music labels and other copyright holders could receive significant royalty revenue based upon the degree to which their copyrighted material is determined to have been distributed each year, and individual artists and songwriters – particularly those not affiliated with one of the major labels — also might share in a significant royalty pool.

I am speaking, of course, of the creation of voluntary collective licensing societies and agreements or, failing agreement, a compulsory license for the peer to peer distribution of copyrighted works. Such a system in this country – already employed in several ways under U.S. copyright law, Mr. Chairman, might be similar to variations employed to positive effect in Canada and several other countries around the globe. While many respected academics have propounded variations on this theme, its hallmarks are essentially the same.

For example, a small levy is placed on goods and services that profit from consumer’s P2P usage (such as the 2 billion blank CDs being sold this year, CD/DVD burners and their software, high speed internet service, and perhaps even net advertising revenue earned by P2P software distributors and others in the P2P “food chain”) in order to build royalty pools that can reach into the billions of dollars annually. Indeed, while Mr. Valenti of the MPAA and the RIAA decry such government intervention in this context, Mr. Chairman, as recently as Monday of this week, Mr. Valenti reiterated his longstanding support for a levy in the US on blank VHS tapes like those applied overseas in a lengthy June 21 interview published on cNet (Exhibit 12).

The member companies of the RIAA successfully sought similar statutory relief and the Audio Home Recording Act imposes a similar royalty pool-building levy on blank digital audio tapes which the music industry regarded some years ago as the certain instrument of their digital doom. Compulsory licensing also was embraced recently by Congress as an imperfect, but necessary, means of fostering the then-fledgling webcasting and audio streaming industry.

Second, representatives of affected rightsholders would meet under Congressional auspices to negotiate royalty rates and entitlements based upon their contributions to the overall market.

Third, responsible means of measuring Internet “play” of individual pieces of copyrighted works would be defined (such technological tools already exist and, in fact, are employed by major music groups today to track peer to peer “uptake” of new music for marketing purposes).

Fourth, an administrative apparatus – not dissimilar from existing collective licensing societies like ASCAP, BMI, and SESAC – would be put in place to distribute collected royalties held in trust according to the formula noted above and based upon Internet downloading measurements. As noted above, such a system recently was deployed for the online webcasting industry and is in place today as mandated by Congress.

Although I am not an expert in international law, I am reliably informed that such a model could be constructed in a manner wholly consistent with the United States’ Berne Convention, WIPO, and TRIPS obligations, and would qualify for reciprocity overseas to the benefit of American copyright holders.

StreamCast and P2P United acknowledge, as any honest stakeholder must, that compulsory licenses of the kind here described are somewhat cumbersome and often are instituted only in the case of market failure. We also recognize that, given the tireless opposition to such proposals by entrenched rightsholders, compulsory and collective licensing models are politically “sensitive.” That said, StreamCast urges this Subcommittee and its counterpart in the House of Representatives to hold a series of hearings in this and the coming Congress on the pros and cons of such a system for the legitimization and monetization of conduct engaged in by more than 60 million file sharing Americans who would much rather be considered customers than criminals.

In conclusion, StreamCast respectfully requests this Subcommittee’s assistance with what we and P2P United view as the real work to be done: building a market in which peer to peer software can fulfill its real destiny as a vehicle for all artists, indeed all citizens, to be publishers and, as merited, to profit from the popularity of their creations. There is room for major copyright conglomerates in such a market, Mr. Chairman, but without encouragement from Congress and the courts, history tells us that they will fight against new business models with all of the considerable resources at their disposal.

When it comes to new technology, Mr. Chairman, history has proven that they have been uniformly wrong, but unfortunately, just like a bad rerun of an old TV program, they continually put innovators through years of pain and suffering to protect their interests before finally adapting-and invariably profiting handsomely-from these very same new technologies.

Indeed, in the only empirical and statistically significant study of actual downloading done to date (others rely on surveys and user self-reporting) — a widely reported (e.g., Exhibit 13), March 2004 study by Harvard Business School professor Felix Oberholzer-Gee and his co-author Koleman Strumpf, of the University of North Carolina at Chapel Hill titled The Effect of File Sharing on Record Sales” – strong evidence was adduced that widespread file sharing does not hurt, and affirmatively helps stimulate the sale of popular music. The full study and more information about it may be accessed online at: www.hbs.edu/about/news/032904_file_sharing.html

The 60 million Americans (and growing) who use file sharing software now considered criminals by the recording industry deserve better, Mr. Chairman.

IV. Other Relevant Matters: A Request for Rhetorical Restraint

StreamCast hopes that it’s willing participation and testimony before the Subcommittee today for itself and P2P United puts to rest to all past suggestions that our companies, our products, and the people who produce and market them are the willing accomplices of pedophiles, hostile to copyright, intentional seeders of spyware and malicious computer code among an unsuspecting public, evaders of the judicial process and, at root, dangerous to the American consumer. Nothing could be further from the truth.

Words matter in the making of policy, Mr. Chairman, and StreamCast urges you and your colleagues not to accept or embrace intellectually empty but emotionally loaded phrases about peer to peer software like the cleverly menacing references to “dark-alley file-sharing software,” “illegal pirate sites” and use of the word “viral” to mean the far more innocuous “distributed” often repeated in your May 4 letter to the federal Trade Commission.

The issues before us are difficult; Mr. Chairman, but StreamCast and the other members of P2P United are committed to working with you and the Federal Trade Commission in good faith to strip the rhetoric from the realities of our technology and of the markets here at issue. We look forward to helping craft, and taking a responsible and profitable place, in the market of tomorrow that StreamCast and the other members of P2P United believe we all must work dispassionately to forge today.

Thank you for the opportunity to appear before you today.

This entry was posted on Wednesday, June 23rd, 2004 at 7:47 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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