Published: Financial Times Online
August 12 2004 13:27 | Last updated: September 10 2004 13:27 (The Financial Times is enlightened enough
to agree that I can keep copyright in my articles - and thus share them under
the terms I choose. That is one of the
key reasons I write for them. Please
look at www.ft.com/techforum for some
of the other interesting work they publish)
You could tell it was a bizarre feud by the statement Apple issued, one strangely at odds with the Palo Alto Zen-chic the company normally projects. "We are stunned that RealNetworks has adopted the tactics and ethics of a hacker to break into the iPod, and we are investigating the implications of their actions under the DMCA [Digital Millennium Copyright Act] and other laws." What vile thing had RealNetworks done? They had developed a program called Harmony that would allow iPod owners to buy songs from Real's Music Store and play them on their own iPods. That's it. So why all the outrage? It turns out that this little controversy has a lot to teach us about the New Economy.
Apple iPods can be used to store all kinds of material, from word processing documents to MP3 files. If you want to use these popular digital music players to download copy-protected music, though, you have only one source: Apple's iTunes service, which offers songs at 99 cents a pop in the US, 79p in the UK. If you try to download copy-protected material from any other service, the iPod will refuse to play it. That has been the case until now. Real's actions would mean that consumers had two sources of copy-protected music for their iPods. Presumably all the virtues of competition, including improved variety and lowered prices, would follow. iPod owners would be happy. But Apple was not.
The first lesson of the story is how strangely people use the metaphors of tangible property in new economy disputes. How exactly had Real "broken into" the iPod? It hadn't broken into my iPod, which is after all my iPod. If I want to use Real's service to download music to my own device, where's the breaking and entering? What Real had done was make the iPod "interoperable" with another format. If Boyle's word processing program can convert Microsoft Word files into Boyle's format, allowing Word users to switch programs, am I "breaking into Word"? Well, Microsoft might think so, but most of us do not. So leaving aside the legal claim for a moment, where is the ethical foul? Apple was saying (and apparently believed) that Real had broken into something different from my iPod or your iPod. They had broken into the idea of an iPod. (I imagine a small, Platonic white rectangle, presumably imbued with the spirit of Steve Jobs.)
Their true sin was trying to understand the iPod so that they could make it do things that Apple did not want it to do. As an ethical matter, is figuring out how things work, in order to compete with the original manufacturers, breaking and entering? In the strange netherland between hardware and software, device and product, the answer is often a morally heartfelt "yes!" I would stress "morally heartfelt". It is true manufacturers want to make lots of money, and would rather not have competitors. Bob Young of Red Hat claims "every business person wakes up in the morning and says 'how can I become a monopolist?'" Beyond that, though, innovators actually come to believe that they have the moral right to control the uses of their goods after they are sold. This isn't your iPod, it's Apple's iPod. Yet even if they believe this, we don't have to agree.
In the material world, when a razor manufacturer claims that a generic razor blade maker is "stealing my customers" by making compatible blades, we simply laugh. The "hacking" there consists of looking at the razor and manufacturing a blade that will fit. But when information about compatibility is inscribed in binary code and silicon circuits, rather than the moulded plastic of a razor cartridge, our moral intuitions are a little less confident. And all kinds of bad policy can flourish in that area of moral uncertainty.
This leads us to the law. Surely Apple's legal claim is as baseless as their moral one? Probably, but it is a closer call than you would think. And that is where the iPod war provides its second new economy lesson. In a competitive market, Apple would choose whether to make the iPod an open platform, able to work with everyone's music service, or to try to keep it closed, hoping to extract more money by using consumers' loyalty to the hardware to drive them to the tied music service. If they attempted to keep it closed, competitors would try to make compatible products, acting like the manufacturers of generic razor blades, or printer cartridges. The war would be fought out on the hardware (and software) level, with the manufacturer of the platform constantly seeking to make the competing products incompatible, to badmouth their quality, and to use "fear, uncertainty and doubt" to stop consumers switching. (Apple's actual words were: "When we update our iPod software from time to time, it is highly likely that Real's Harmony technology will cease to work with current and future iPods.") Meanwhile the competitors would race to untangle the knots as fast as the platform manufacturer could tie them. If the consumers got irritated enough they could give up their sunk costs, and switch to another product altogether. All of this seems fine, even if it represents the kind of socially wasteful arms race that led critics of capitalism to prophesy its inevitable doom. Competition is good, and competition will often require interoperability.
But thanks to some rules passed to protect digital "content" (such as copyrighted songs and software) the constant arms race over interoperability now has a new legal dimension. The Digital Millennium Copyright Act and equivalent laws worldwide were supposed to allow copyright owners to protect their content with state-backed digital fences that it would be illegal to cut. They were not supposed to make interoperability illegal, still less to give device manufacturers a monopoly over tied products, but that is exactly how they are being used. Manufacturers of printers are claiming that generic ink cartridges violate the DMCA. Makers of garage door openers portray generic replacements as "pirates" of their copyrighted codes. And now we have Apple claiming that RealNetworks is engaged in a little digital breaking and entering. In each case the argument equates the actions required to make one machine or program work with another to the actions required to break into an encrypted music file. For a lot of reasons this is a very bad legal argument. Will it be recognised as such?
There the answer is less certain. In the United States, there are exceptions for reverse engineering, but the European copyright directive bobbled the issue badly, and some of the efforts at national implementation have the same problem. In the legitimate attempt to protect an existing legal monopoly over copyrighted content, these "technological measure" provisions run the risk of giving device and software manufacturers an entirely new legal monopoly over tied products, undercutting the EU's software directive and its competition policy in the process. Pity the poor razor manufacturers. Stuck in the analogue world, they will still have to compete to make a living, unable to make claims that the generic sellers are "breaking into our razors".
Though this is an entirely unnecessary, legally created mess there is one nicely ironic note. About 20 years ago, a stylish technology company with a clearly superior hardware and software system had to choose whether to make its hardware platform open, and sell more of its superior software, or whether to make it closed, and tie the two tightly together. It chose closed. Its name: Apple. Its market share, now? About 5 per cent. Of course, back then competition was legal. One wishes that the new generation of copyright laws made it clearer that it still is.
The writer is William Neal Reynolds Professor of Law at Duke Law School, a board member of Creative Commons and the co-founder of the Center for the Study of the Public Domain