Archive for July, 2012

July 30, 2012 Comments off

What does Google’s counsel Daralyn Durie do for an encore after union-busting fails in Google Books? Argue that scanning 20 million books, lyrics, illustrations, photographs, etc., is fair use. You should understand that what Google does in the books case is exactly what they are going to do in the YouTube class action which is pending in the same New York courts (2nd Circuit)

You should also watch this video by a fired Google whistleblower about the extraordiary secrecy surrounding Google’s digitization factory at a secret building in the Googleplex.  What do they have to hide?

If they can do it for drugs, why can’t they do it for music and movies (and mail order brides)?

July 29, 2012 Comments off

And, oh, by the way—

This is a Google search from today for the term “buy oxycontin online no prescription”.  As you will see, top of the search results are “” (registered in the Ukraine) and “” (registered in China).  Repeat after me, Google is full of bull.

Oh, and don’t worry–the Fat Cat Signal will not be lit for this one.

Not to mention paid Google ads for mail order brides:

A Thought for the EU Antitrust Regulators: It’s More than a Label

July 27, 2012 Comments off

As Google brings its snow cannon to bear on the European Commission’s antitrust investigation, a couple of suggestions for meaningful change that would increase competition in the market.  (These are also appropriate suggestions for US regulators.)

Sale of YouTube:  Google should be forced to sell YouTube for several reasons.

1.  Google has subsidized YouTube from the day it was acquired and the company could never stand on its own.

2.  Google’s subsidy has only extended to YouTube’s overhead costs and not content acquisition costs which it gets for free (by taking) or for a share of revenues that it has refused to have audited.  YouTube has perfected the “notice and shakedown” business model as a way of using the threat of Google’s vast litigation budget to keep smaller players from challenging YouTube and from imposing the “forced monetization” on artists and other rights holders.

3.  Google subsidizes YouTube from its monopoly rents derived from search and advertising, thus extending its monopoly from the search vertical to the online advertising vertical to the online video vertical (including video search), and now to the cable television vertical with Google Fiber in which YouTube will play a leading role.

4.  YouTube already has extensive clips, sometimes entire shows, from many of the cable channels that are not included in the Google Fiber launch (e.g., CNN, ESPN, AMC).  These clips will now be delivered straight to the home.  Just like the old Napster drove broadband penetration, Google is no doubt planning on its (nonunion) YouTube affiliate subsidy helping to drive penetration of its Google Fiber cable television.  And no one will be surprised if Google Fiber is also being subsidized from Google’s monopoly rents from search, advertising, video search and YouTube–a classic example of cross-subsidies.

5.  Got an iPhone?  You very likely have a YouTube app that came with your phone.  If you can figure out how to delete that app, please let me know.  So the cross-subsidy issue extends to mobile as well.

6.  Mr. Almunia may also choose to focus on how YouTube appears in Google’s search results.  Just like the litany of other Google products that it mysteriously seems to favor–and in at least one instance acknowledged it favored–YouTube is no different.  Try searching for 10 current hit songs on Google–especially Anglo-American songs.  I will lay you better than even odds that the only video search results that appear on the first page will be from YouTube (or Vevo, which is essentially dependent on YouTube).

How likely is that to happen all by itself?  Senators Blumenthal and Franken summed it up at the recent U.S. Senate Antitrust Subcommittee hearing:

Senator Richard Blumenthal from Connecticut [told Google’s Eric Schmidt:] “You run the racetrack, own the racetrack, you didn’t have horses for a while but now you do and your horses seem to be winning.” To which his colleague from Minnesota, Al Franken, joked: “Google might be doping the horses.”

When you consider that a senior Google executive acknowledges intentionally hardwiring Google products ahead of their competitors in search results, it should come as no surprise that Google would hardwire YouTube in Google search results.  There are also a number of other techniques they could be using under the hood to slow down competitors in search to favor both the Google service and Google’s advertising sales.

So you can see that when it comes to YouTube, there are tremendous competitive pressures at work.  You have to ask why?  What is so important about capturing the online video vertical with YouTube, a company that has routinely lost what must be closing in on a billion dollars (not to mention the legal fees defending the massive YouTube class action and lawsuit brought by Viacom in which Google recently lost an important appeal).

So why is YouTube worth all this risk?  There must be an answer–I think it’s because the “video” vertical that Google is really after is replacing broadcast television by means of what we now know will be Google Fiber delivered straight to the home.  That video might be worth the risk.  (Don’t forget to ask about any undisclosed product placements from the shadowy Makers Studios, too.)

It Doesn’t Matter What You Call It

It is important to understand that the fact that YouTube is a stand alone subsidiary does not change the fact that it is 100% owned and subsidized by Google and that Google is using it to drive its thirst for dominance to many other verticals.

I think that the course of action is very simple–order Google to divest itself of YouTube.  Google owes a special duty not to manipulate or distort the market because of Google’s dominance in web search.  They know this.  I would argue that you would struggle to find a clearer example of the intentional distortion and manipulation of search to favor its subsidized affiliate than YouTube.

These subsidies have created signifciant barriers to entry for any competitor in the online video space which has severe negative effects on entrants into the video space.  Indeed, in order for music publishers to participate in YouTube’s forced monetization they must sign a covenant not to sue–which publishers would likely only sign with YouTube because of YouTube’s manipulated and subsidized dominance in the online video market and fear of Google’s well known bullying tactics in litigation–including trying to force authors to sue Google individually and not through their union and predeliction for union-busting rhetoric.

As the self-described “biggest kingmaker on Earth”, there is really only one thing that Mr. Almunia can do to remedy the severe distortions in the market resulting from YouTube.  Don’t let them get away with just chaning a name or two.

Mr. Almunia’s best remedy is to take away Google’s ability to abuse its market position by forcing the sale of YouTube to an unrelated third party who will run it without the distortions of Google’s subsidy, search manipulaiton, and will stop bullying the very content owners on whom the service depends for its success in mobile and cable.  This forced sale would balance the forced monetization of content on YouTube and could help to repair the damage to competition that Google has wrought through what appears to be a classic case of patently illegal cross-subsidization.

How to Pay Fines

While it is public record, commentators on Google rarely mention the 10:1 voting advantage that Google insiders have over regular stockholders.  That means that Eric Schmidt, Larry Page, Sergei Brin all have 10 votes per share to every one vote per share by non-insiders.

Why is this important?  Take the Google no-indictment agreement with the U.S. Department of Justice under which Google paid a $500,000,000 fine to the United States.  Google paid the fine to avoid being indicted after a years-long grand jury investigation under which it produced millions of documents.  The U.S. Attorney prosecuting the case told the Wall Street Journal that Google’s involvement went to the highest levels including Larry Page.

Meaning that the senior management team at Google must have been operating outside the scope of their authority, an idea that is supported by the Wall Street Journal’s later reporting.  Yet instead of the management team paying the fine from their own vast wealth (or even a portion of the fine), it appears that Google paid the fine from its general accounts–that is, with the stockholders money.

That is–the insiders with the 10:1 votes used the company’s money to buy their way out of an indictment.

So another piece of unsolicited advice to Mr. Almunia.   If you are going to fine Google for the bad behavior of its executive team, take care about how Google pays those fines.  I recently heard that some of the banks involved in the LIBOR scandal are considering taking the fines out of the bank’s bonus pool.  That would be an excellent idea in Google’s case.

All Google employees should bear the cost of the executive team’s bad behavior whether it’s indiscriminately promoting the sale of drugs (to kids?) or manipulating search results.

Fat Cat Signal Alert: Behind Revolving Door Number 3, New Improved Astroturf, Now With Even More Google Lobbyists

July 26, 2012 Comments off

By last count, Google has way more than two lobbyists or consultants per member of Congress.  So what does Google need in addition to Net Coalition, the CCIA, Public Knowledge, the Electronic Frontier Foundation and millions upon millions in registered lobbyists?  According to reports:

A new trade group representing the interests of Internet companies is set to launch on September 19, with the politically experienced Michael Beckerman as its inaugural president and CEO.

Google, Facebook, Amazon and eBay are reportedly among the founding members of the Internet Association, as the organization is named.

It intends to be “the unified voice of the Internet economy, representing the interests of America’s leading Internet companies and their global community of users” by taking advocacy positions on public policy issues. Its stated goal is to “strengthen and protect an open, innovative and free Internet.”

That mission statement makes it clear that the Internet Association wants to ensure legislators are better informed before they work on another bill like the Stop Online Piracy Act or the Protect IP Act, bills that had ramifications beyond what most politicians understood.

Beckerman formerly served as House Energy and Commerce Committee deputy staff director and has a background in telecom and Internet policy.

He issued the following statement: “The Internet isn’t just Silicon Valley anymore, the Internet has moved to Main Street. Our top priority is to ensure that elected leaders in Washington understand the profound impacts of the Internet and Internet companies on jobs, economic growth and freedom.”

Ah, yes.  Main Street.  That would be the place that the shops are where Amazon sends its users to sample goods they then buy from Amazon without paying local sales tax and without Amazon bearing the overhead of maintaining a show room.  That Main Street?  Where the artists live who have been savaged by one of the biggest income transfers of all time?  That Main Street?

And who is this Michael Beckerman? He “has a long record of Internet policy experience, most recently serving as Deputy Staff Director to the House Energy and Commerce Committee….”

So light up the Fat Cat Signal, yet more million dollar lobbyists are representing Internet “users” again.

Cashing in, in other words.  Don’t let the revolving door hit you on the way out.

The NonMaterial Android in the Henhouse: Can the EC Trust Google to Actually Implement a Settlement?

July 25, 2012 Comments off

Rumor has it that the antitrust chief for the European Union is about to reach a settlement with Google for a variety of horribles.  That’s the good news.  There is bad news, but it’s unclear who the bad news is for:  Google is not treating its problems with the EU as what’s called “material” in the world of public companies.  How do we know this?  Because in Google’s most recent filing with the Securities and Exchange Commission (a Form 10Q) Google did not tell its stockholders that its potential settlement was an important financial event.  Not only did Google not disclose the settlement as “material,” it also did not reserve any liability fund for paying fines or settlement costs.  So the Fat Cat Signal is not getting lit up.

So what does that mean?  Let’s compare it to the last major legal hurdle that Google couldn’t blow past–the $500,000,000 fine it paid to the US government for promoting the sale of illegal drugs in violation of the Controlled Substances Act.  That was a very similar situation.  The investigation–in that case a grand jury investigating crimes–went on for years.  Google produced 4.2 million documents.  But if you were a Google stockholder relying on Google’s public disclosure, you would never know it happened.  Then mysteriously Google reserved $500,000,000 all in one quarter.

Here’s the relevant language from Google’s current 10Q:

Legal Matters

Antitrust Investigations

On June 23, 2011, we received a Civil Investigative Demand (CID) from the U.S. Federal Trade Commission’s (FTC) Bureau of Competition and a subpoena from FTC’s Bureau of Consumer Protection relating to a review by the FTC of our business practices, including search and advertising. State attorneys general from the states of Texas, Ohio, and Mississippi have issued similar CIDs. We are cooperating with the FTC and the state attorneys general and are responding to their information requests.

The European Commission’s (EC) Directorate General for Competition has also opened an investigation into various antitrust related complaints against us. On February 10, 2010, we received notification from the EC about three antitrust complaints filed by Ciao, Ejustice, and Foundem, respectively. On November 30, 2010, the EC formally opened proceedings against us. Since November 2010, 1plusV, parent company of Ejustice, and VfT, an association of business listings providers in Germany, have filed similar complaints against us. On March 31, 2011, Microsoft Corporation submitted a similar complaint to the EC against us. On the same day, the EC notified us of additional complaints filed by Elfvoetbal, Hotmaps, Interactive Lab, and, and on August 30, 2011 of a complaint by In addition, in December 2011, the Spanish Association of Daily Newspaper Publishers also submitted a complaint to the EC against us. In January 2012, Twenga brought a complaint against us and, in February 2012, the German newspaper associations, Bundesverband Deutscher Zeitungsverleger (BDZV) and Verband Deutscher Zeitschriftenverleger (VDZ), also brought a complaint against us with the EC. In March and April of 2012, the EC asked us to comment on Expedia’s, Tripadvisor’s, Odigeo’s and Streetmap’s complaints against us. We believe we have adequately responded to all of the allegations made against us. We are cooperating with the EC and responding to its information requests.


We are also regularly subject to claims, suits, government investigations, and other proceedings involving competition and antitrust (such as the pending investigations by the FTC and the EC described above), intellectual property, privacy, tax, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury and other matters. Such claims, suits, government investigations, and other proceedings could result in fines, civil or criminal penalties, or other adverse consequences.

Certain of our outstanding legal matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred, and the amount can be reasonably estimated. We evaluate, on a monthly basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and make adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters.

With respect to our outstanding legal matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties.

So which is it?  Does anyone really think that a major antitrust settlement with the European Union will not have a “material adverse effect on [their] business”?  Using the $500,000,000 illegal drug fine as a benchmark, can we conclude that Google believes that a settlement will result in a cost of less than half a billion dollars?

But there is another possible explanation:  Given Google’s recent history with government regulators, is the EU settlement non-material because Google has no intention of complying with the terms?  Or complying enough to have a long running dispute that never quite boils over into a regulatory hammer?  That is–the typical Google “make me” delaying action?

How far back do you want to go for evidence of the total disregard that Google has for regulators?  Even after paying a $500,000,000 fine to keep their executive team from being indicted, you could still find ads and Autocomplete for “buy oxycontin online no prescription.”

And then there’s the human trafficking ads, obstructing the FCC’s investigation into the Street View spying and data slurping,  Google Buzz, various union-busting efforts, the reopening of the ICO investigation and violating the FTC consent decree.

Let me sum it up for Mr. Almunia:  They obfuscate, they shade, they equivocate and they pretty much do as they damn well please.

And there is something else, perhaps a simpler explanation.

At the time that Google bought their way out of a drug indictment, the prescient Professor Eric Goldman of the Santa Clara School of Law, was quoted in the New York Times as follows:

“Web companies can be held liable for advertising on their sites that breaks federal criminal law, and Google and other search engines have faced similar issues over ads for illegal online gambling sites [see, e.g., “Poker Money and the Ethics Professor“]. Eric Goldman, director of the High Tech Law Institute at Santa Clara University, said the latest investigation raised questions about Google’s dependence on such sources.  ’How much of Google’s overall revenues are tied to product lines that are questionable?’ he said. ‘For investors, I think they just got a little bit of a jolt [after Google reserved $500,000,000 to pay its forfeiture in the drugs case] that maybe Google’s profits are due to things they can’t ultimately stand behind.’”  (emphasis mine)

This is how the Google stock behaved around the announcement of that $500,000,000 fine on April 15 last year:

So which do you think will have a greater impact on the stock price, the $500,000,000 fine that Google managed to keep from being reported too widely (and got the DOJ to apologize for), or the antitrust settlement with the EU that the entire financial world knows about?  I tend to agree with Professor Goldman that “maybe Google’s profits are due to things they can’t ultimately stand behind.”

Except I don’t think there’s any “maybe” about it.

UPDATE: Artists: Be The Change, Send A Comment! 7/25 Deadline EXTENDED to August 10th

July 25, 2012 Comments off

As The Trichordist noted in the July 16th post, the White House Intellectual Property Enforcement Coordinator Victoria Espinel has issued a call to the public to file comments with her office about the US intellectual property laws.  If you care about artist rights, this is a good time to tell Victoria Espinel what you think.  You can comment on anything, but she is probably looking for specific comments about how good a job you think the US government is doing in enforcing our IP laws and protecting artist rights and any ideas you have about how the government could be doing more.

You should be aware that opponents of artist rights will seize upon this kind of public comment period to flood Ms. Espinel’s office with copyleft and radical anti-artist commentary.  You can bet that they will do it and they will do it from all over the world.  This is so that they can point to the quantity of their comments and try to wrap themselves in some kind of mandate in dealing with the IPEC.  Or more likely, trying to remove that job from the Federal government altogether–I’m sure that is their true goal as Ms. Espinel has done more to protect artist rights by enforcing the laws than anyone in the last 20 years.  And we can’t have that.

Ms. Espinel’s job is to coordinate the resources of the federal law enforcement establishment on enforcing the laws of the United States against those who would steal our intellectual property at all levels–from your song to the avionics for spacecraft.  This is a very hard job that has been allocated very few direct resources and we are lucky to have her.

When Ms. Espinel first announced the comment period it was to end on July 25 (today).  The deadline has now been extended to August 10.

You don’t need to write a letter unless you really want to.  There is a webform for your comments available at this direct link for your comments:!submitComment;D=OMB-2012-0004-0002

Don’t be shy.  Ms. Espinel wants to know what you think.

Here are quotes from the Federal Register notice:

The Federal Government is starting the process of developing a new Joint Strategic Plan on Intellectual Property Enforcement. By committing to common goals, the U.S. Government will more effectively and efficiently combat intellectual property infringement. In this request for comments, the U.S. Government, through the Office of the U.S. Intellectual Property Enforcement Coordinator (“IPEC”), invites public input and participation in shaping the Administration’s intellectual property enforcement strategy.

The Office of the U.S. Intellectual Property Enforcement Coordinator was established within the Executive Office of the President pursuant to the Prioritizing Resources and Organization for Intellectual Property Act of 2008, Public Law 110-403 (Oct. 13, 2008) (the “PRO IP Act”). Pursuant to the PRO IP Act, IPEC is charged with developing the Administration’s Joint Strategic Plan on Intellectual Property Enforcement for submission to Congress every three years. In carrying out this mandate, IPEC chairs an interagency intellectual property enforcement advisory committee comprised of Federal departmental and agency heads whose respective departments and agencies are involved in intellectual property enforcement.

Jimbo strikes again

July 24, 2012 Comments off

One of the funniest anecdotes of Tweets about the copyleft’s “break the Internet” mantra is attributed to Ana Marie Cox (the brilliant founder of the Wonkette blog) who summed it all up:

“It is starting to look like my ‘but I can’t file a piece today, the INTERNET IS BROKEN’ excuse will work afterall. #sopa” — The Guardian‘s Ana Marie Cox.

That Tweet crystallizes the inspired writing of Ms. Cox–one part Dorothy Parker, one part H.L. Mencken.  She now works at The Guardian, the U.K. publication where the well known Internet huckster Jimbo Wales–the gadfly without borders–recently published his latest wailing regarding the extradition of the operator of TVShack (dot something or other depending on which part of his bad advice he’s listening to that day).  Jimbo’s wailing in the Guardian and elsewhere on the extradition subject is yet another piece responding to the Fat Cat Signal.

You can always detect Fat Cat-ism because it blatantly avoids ever acknowledging that it’s artists, authors, actors and journalists–not just the loathsome “Hollywood moguls”–who are getting ripped off by Big Tech and the merry band of useful innocents who feed them.  Oh, sorry–the People of the Internet standing up against Censorship led by their elected representative, Jimbo Wales.  Actually–strike that “elected” and replace it with “self appointed”.  And given that 13% of Wikipedia editors are under age 17, you might be able to add “child labor magnate” to that noun-epithet formula.  You can just hear Gary Hart saying, “He can help you, son, ’cause you’re too young to vote.”

It appears that Ms. Cox the Guardian journalist and Jimbo know each other well enough to get their pic snapped–you’ll recognize this photo as the source for Ms. Cox’s page on Wikipedia.  Maybe one of the legion of unpaid 17 year olds thought that it would be charming to crop Ms. Cox from the couple’s picture where they did for a couple of reasons.

But would the Wikipedia editors have used this picture this way without the photogenic boss man’s consent?  Oh, right.  It’s leaderless.  Just ask Jared Cohen.

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