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Monthly Archives: June 2013

Open-source community threatened: JDownloader declared illegal because of third-party add-on

A German court recently declared JDownloader, an open source download program, illegal for copyright infringement because of an add-on tool used to save encrypted video streams. The ruling, which holds JDownloader responsible for the optional contributions of a third-party, a feature that had been removed by the time of the ruling. 

For open source development, this is a disturbing ruling.  Already in the United States, third-party liability create risk for software and service providers worried about how consumers will use their products. This legal concept of contributory infringement was used to ban file-sharing services like Napster and is used to block websites and software that are used to share copyrighted content. However, rarely are the providers of the software themselves infringing on copyright, simply the software can be used for that purpose.

The German court ruling takes this concept even further by declaring an entire software illegal because of code written by a third-party.  JDownloader already can be used for downloading copyrighted content – it downloads links from file lockers like Rapidshare. The issue in this case was over an add-on that downloaded encrypted video streams, which meant circumventing DRM.  Even though JDownloader removed this add-on, it was still held responsible.

Consider how this might apply to other software. There are similar add-ons for Google Chrome and Firefox.  Many third-party tools allow for downloading YouTube videos or copying music off Spotify. It’d be hard to imagine a U.S. court banning these products (though YouTube is fighting a billion dollar lawsuit).

This is why the German court ruling should still make Americans nervous. The internet doesn’t differentiate between court jurisdictions. A website made available to one country will likely be accessible from any other. The fear is that countries may race to the bottom with restrictive court rulings banning important technological innovations out of fear of how they might be misused. Germany’s ban of JDownloader is unlikely to lead ot its removal from the internet, but it could impose a chilling effect on future development, both for contributors to JDownloader, and new software developers deciding whether they should allow third-party contributions.  Having open and vibrant communities has helped make useful products even better.  These communities should be encouraged and incentivized, not stifled and scared away. 

No Xbox DRM: Consumer voice matters when industry is competitive

The internet took a victory lap when Microsoft announced a major policy u-turn regarding it’s next-generation video game system. Microsoft pulled back limitations on used video game sales and frequent online checks verifying the system.  Key in their decision was massive consumer backlash. But also key to the u-turn was the presence of strong competition, specifically Sony, who announced their system would lack any restrictive DRM.  The pressure of consumer backlash combine with a viable alternative compelled Microsoft to give consumers what they wanted.

The video game console industry is particularly unique. It’s a large industry with only three significant players (Microsoft, Sony, and Nintendo), but profit margins can be very tight, particularly early in a new console’s life cycle. Consoles are often sold at a loss in order to establish a larger user base and make up the costs from software licenses. Early values are valued, even when selling at a loss, because the lifetime customer value will be higher and third party game developers will be more interested in selling games on the platform (leading to greater license revenue).

Microsoft and Sony are heated competitors, even on many fronts. Both have comparably functional consoles. Exclusive games, mostly developed by Microsoft and Sony’s own studios, are the key differentiating factors. Nintendo, while also a key competitor, has been targeting a lower price point and more casual gamer, whereas Microsoft and Sony have preferred the hardcore gamer and all-around entertainment center market.  Competition from mobile devices and the PC have further constrained the market size and profitability of the console market.

Compare Microsoft’s response to consumer demands for Apple to open up its iPhone platform, for example, allowing alternative default applications.  Apple and Android are engaged in a mostly two-sided war.  Android, in fact, is by far dominating in market share. But even with its lower market share, Apple is far more profitable. Incredibly profitable. Apple, who manufacturers both the hardware and software for its iOS platform, generates so much revenue, and commands such loyalty from its customers, that Apple has little incentive to respond to those customer demands. Rather, Apple can provide the product it wants to provide, not the product its customers claim they want.

Once again, we’re reminding how important competition is to improving the customer experience.