Category: Blog

Michael Jordan was an MVP, but would he like the lean start up’s MVP?
By Ryan Long

Michael Jordan was an MVP, but would he like the lean start up’s MVP?

Michael Jordan. Ever heard of him? The winner of the Most Valuable Player five times, Mr. Jordan was one of my heroes growing up. While I am sure he loved winning the MVP all of these years, would he have liked the minimum viable product (“MVP”) of the lean start up methodology? What on earth is that anyway?

The MVP theory says that before you put your head down for months, or even years, developing a fancy business plan with the likes of Harvard, Chicago, or Stanford MBAs, you should first test the idea via an MVP. Say you are seeking to develop a social networking platform that will require retention of a large data base of names, and that the software you are creating will require much effort — and funding — to create. Before you create the whole network, you may want to make a sample that is big enough to get feedback from the marketplace as to functionalities that will be well received, and others that will not, before you create the whole.

When he entered the NBA, Mr. Jordan was criticized and cajoled for having larger shorts than anybody else in the NBA, and for also sticking his tongue out when he played. If he abided by the MVP method, would he have continued? Or what about Steve Jobs, when he sought to make your personal computers pretty, instead of the regular drab look that IBM was creating at the time? Would he have continued on his path if, after being ousted by the board of Apple for spending too much on hardware design, he sought approval from the market via an MVP?

Probably not. As I covered along with Silicon Valley Software Group in our first panel discussion, entitled Choosing the Right Technologies for Your Next Product, at San Francisco’s General Assembly on April 2, the MVP was created in reaction to the “build it and they will come” ideology. Einstein said “religion without science is blind” and so, too, building hardware or even software without any idea of what the market will or will not like is like flying in the dark with no radar.

But the reason why we call certain people innovators is that, in some ways, they can see in the dark. They are ahead of the market, close enough to get its energy, but not so close so as to be eaten up by it. The shortcoming of the MVP is that, if you are really looking to make a big bang, the positive relationship between risk and reward says that, in the end, you need to be aware of where the market is, but also have faith in your vision of where the market is going to be.

Now, most NBA players wear the larger shorts that Jordan sported when he first came into the league, and Apple is the largest company, in terms of capitalization, of the United States. MVP has its place in terms of spending scarce venture capital funds in an efficient way, but too much worshipping at its feet will make us all followers and diminish innovation.

An Axl Rose sample used in a mash up often doesn’t sound as sweet.
By Ryan Long

An Axl Rose sample used in a mash up often doesn’t sound as sweet.

The bright lines of the real property based view of copyright are being blurred by technology. In 1991, Mr. Biz Markee was found liable for infringing Mr. Gilbert O’Sullivan’s copyright in his song, Alone Again (Naturally), when Mr. Markee used an unauthorized sample in his rap song entitled Alone Again. Had Mr. Markee used Mr. O’Sullivan’s song in a mash up, the result may have been different.

A mash up is a digitally created song that splices in elements of other songs, sometimes in very small increments — not in quarks, but in milliseconds — to create what some would argue are original pieces. Think of a mash up as a fusion dish that blends elements of Chinese, southern soul food, Italian, and Mexican cuisine into one dish. The question arises whether the unauthorized use of other people’s songs in a mash up is an infringement or a fair use of their copyrighted works?

The question isn’t an academic one. According to Turning Profit from Music Mashups, New York based tech company Dubset Media, Inc., collects royalties from mash up artists who use other copyrighted songs in their works. The company’s technology, known as “MixScan,” tracks uses of copyrighted songs down to the second on mash ups. It then distributes royalties to labels depending on the extent of use.

These royalty streams come in different forms and can be lucrative, Turning Profit saying that such mini sampling can generate an additional $1.2 billion a year in revenues. That’s because there is a copyright in the musical composition underlying the song, and in the recording of the song. In Mr. O’Sullivan’s case, he would own the copyright to the composition of Alone Again (Naturally), which includes the musical notes and lyrics to the song, in addition to his recording of the song in the studio, known as the “master.” Mr. O’Sullivan collects royalties from those who wish to publicly perform or re-record his composition, and from others who wish to use the recording of the song in their music or in a film. Mr. Markee avoided paying these royalties to Mr. O’Sullivan by using the uncleared sample in the rap song Alone Again.

However, had Mr. Markee used Mr. O’Sullivan’s song in a mash up, the resulting decision finding infringement wouldn’t have been so easy. Mr. Markee would likely have had a colorable fair use defense if he: physically transformed the sample (changing the frequency, tone, bass) so that it became physically unrecognizable in the final product, sampled only a small part, and if the resulting rap song either had no effect on the market for Mr. O’Sullivan’s work, or exposed it further.

Courts are more prone to find fair use — and no infringement — when there is either physical transformation of the copyrighted work in a new work, or application to a new purpose. Patrick Cariou, a photographer, lost his copyright infringement lawsuit against appropriation artist Richard Prince because he had physically modified the photographer’s photos of Rastafarians — in one case, putting a gas mask and guitar in the Rastafarian’s hands. In the recent Google books case, Google was found to have fairly used authors’ copyrighted indexes to their books by making them searchable via Google books. This is so even though there was no physical transformation of the copyrighted work, but, rather, only application to a new purpose.

Before the recent technology boom, copyright infringement was viewed with a real property monocle — one toe over the line constitutes a trespass. But technology is making that toe harder to see and the resulting line between properties less clear. A rose by any other name may smell as sweet, but an Axl Rose sample in a mash up doesn’t smell as sweet.

The emperor still has no clothes!
By Ryan Long

The emperor still has no clothes!

Recently, a jury found Mr. Ross Ulbricht guilty of running the black market website Silk Road. Many observers claim that the government’s theory expanded liability for third parties like Mr. Ulbricht online. As I mention in a recent GizMoto interview, the government’s theory of liability wasn’t new, but “whether the government obtained the evidence that they wish to use to prove this narrative . . . in a lawful way consistent with the Fourth Amendment” is still up for debate.

On Silk Road, you could buy everything from cyanide, to marijuana, to, yes, some say hit men! The site was dubbed the Amazon of the black market. While diary entries from Mr. Ulbricht showed that he initially intended to launch the site so that he could sell mushrooms, the factual issue in the trial was whether he was the infamous Dread Pirate Roberts who continued to captain the site after it got up and running — and after Mr. Ulbricht supposedly bailed out.

Some have claimed that the government’s theory of liability “would expand legal liability for commerce in contraband online,” and that the outcome of the trial shows that “anonymity is dead.” Under this view, it is a slippery slope to hold Mr. Ulbricht liable for the conduct of people on Silk Road. That means all folks running websites have to be nannies who oversee all that is done on the site or risk criminal prosecution.

Maybe so. The Silk Road verdict makes it tougher to be a libertarian provider of a virtual platform where people can freely — and anonymously — transact. The freewheeling atmosphere on Silk Road was facilitated via the use of Bitcoin as the medium of payment. Some in the financial industry have sought similar anonymity with their “dark pool” methods of trading, where “the trading volume created by institutional orders . . . are unavailable to the public.” Dark pools, too, have come under legal scrutiny.

Contributory liability under copyright makes a third party — here Mr. Ulbricht — liable for infringements that occur under their control that they are aware of, or should be aware of. There is no intentional ostrich defense — “I chose not see or hear criminality!” — to such liability, nor is there such a defense to aiding and abetting violations of federal law. If Mr. Ulbricht was, in fact, Dread Pirate Roberts, then he intentionally facilitated the illegal transactions. In this respect, the case did not “expand legal liability for commerce in contraband online,” and so the emperor still has no clothes, contrary to what others say.

However, Silk Road did suggest new methods of potential government overreaching in the digital age. According to some pundits, the F.B.I. was mysteriously able to uncover the Silk Road servers supposedly via a software flaw on a site’s login page that, in turn, revealed an IP address. Supposedly, the IP address led the feds to an Iceland location where the server for Silk Road was located. Whether this cookie crumb trail created by the feds violated the Fourth Amendment is an issue that will likely be raised on appeal.

Regardless of the outcome of that appeal, Silk Road illustrates the tension between being able to conduct business in private online without the government unlawfully snooping, and society’s interest in regulating virtual transactions that have negative externalities — nasty effects — on all but the transacting parties.

Sticks and stones may break your bones, but Charlie Hebdo cartoons will never hurt you.
By Ryan Long

Sticks and stones may break your bones, but Charlie Hebdo cartoons will never hurt you.

Don’t insult the Pope’s mother, or he’ll punch you in the face! In response to questioning about the Charlie Hebdo killings, the Pope stated: “If [you] say[] a curse word against my mother, [you] can expect a punch.” Not only does the Pope mischaracterize the Charlie Hebdo speech as consisting of naked insults, but well educated thinkers also have tried to paint the speech as “brazenly racist.” No matter how distasteful, such speech is clearly parody and is protected under U.S. law. Even if such speech was “brazenly racist,” U.S. law would still protect it under certain circumstances. French law should follow suit — if it already doesn’t.

In the Pope’s view, “[t]’s normal. You cannot provoke. You cannot insult the faith of others. You cannot make fun of the faith of others.” In a recent article by Oxford educated Mr. Mehdi Hasan entitled, As a Muslim, I’m fed up with the hypocrisy of free speech fundamentalists, he says: “[l]ampooning racism by reproducing brazenly racist imagery is a pretty dubious satirical tactic.” Not only that, but he thinks liberalism is hypocritical in that it, in his view, allows mockery of Muslims but not Jews: “Has your publication [The NewStatesmen], for example, run cartoons mocking the Holocaust? No.” Mr. David Brooks, a writer for The New York Times, chimed in, calling Charlie Hebdo’s speech “puerile” and “deliberately offensive humor” in I am not Charlie Hebdo.

Regardless if the Pope, Mr. Hasan, or Mr. Brooks are offended by or simply dislike Charlie Hebdo cartoons, such content would be parody under U.S. law. As stated by the Stanford Copyright and Fair Use Center, “[a] parody is a work that ridicules another, usually well-known work, by imitating it in a comic way . . . Unlike other forms of fair use, a fairly extensive use of the original work is permitted in a parody in order to ‘conjure up’ the original.” This means that the alleged fair use need not be “transformative” of the original work — either a physical transformation as was the case in the Barbara Kruger litigation, or application to a new efficient technological use as the book indexes in the recent Google book scanning case — when parody is involved. Similarly, under the First Amendment, parody is a protected form of speech under cases such as Hustler Magazine, Inc. v. Falwell, 485 U.S. 46 (1988) regardless of the transformative nature of the speech.

Charlie Hebdo’s very existence is “broadly anti-religion and anti-establishment” and, as such, the publication has shot powerful parody bullets at Catholics, Muslims, Jews, and the French government. In fact, the Vatican has sued Charlie Hebdo 12 more times than Muslims. When viewed in light of the overall purpose of the paper to mock and challenge religion in general, none of the Charlie Hebdo cartoons are per se naked insults, an analogy to per se illegal price fixing restraints in antitrust law, of the Prophet. Instead, the cartoons are meant to ridicule the self-rightious nature of Islam, which often is characterized as not having a sense of humor. Similar humor can be found in movies like Mel Brook’s History of the World Part I, which pokes fun at Jesus and the last supper, both of which are sacred to Catholics. Notably missing from Mr. Hasan’s article — and Mr. David Brook’s — is mention of Arabs who stand in solidarity with Charlie Hebdo, as summarized in Arab Editorial Cartoonists Respond to “Charlie Hebdo.”Obviously, making fun of the Holocaust without an appurtenant message would be a naked insult, not a parody. Not an apt analogy by Mr. Hasan.

But let’s assume that Charlie Hebdo’s speech was “brazenly racist.” This does not necessarily mean it should be per se banned. In National Socialist Party of America v. Village of Skokie, 432 U.S. 43 (1977), the U.S. Supreme Court upheld the right of the National Socialist Party of America, otherwise known in the Blues Brothers movie as the “[t]he fucking [Illinois] Nazi party,” to obtain a permit to march through predominately Jewish Skokie Illinois. As an illustration of the alleged hypocrisy of the current liberal establishment, Mr. Hasan posits a hypo from an Oxford philosopher, “if a man had joined the ‘unity rally’ in Paris on 11 January ‘wearing a badge that said Je suis Chérif‘ – the first name of one of the Charlie Hebdo gunmen” he would have been murdered. Perhaps, but the Nazis in Skokie would likely have been stoned — or worse — if they tried to march without a license, which would have given them police protection. Under U.S. law, even though the man in Mr. Hasan’s hypo would have the right to voice his thoughts, such right would not be unfettered. He would have needed protection. Regardless, an offensive parody cartoon in a widely circulated newspaper has less of a propensity to directly incite violence than one individual entering a marching group and voicing his or her opposition speech in the face of others, which is why this hypo by Mr. Hasan’s Oxford philosopher isn’t relevant either.

The images in Charlie Hebdo aren’t defamatory, don’t falsely shout “fire” in a crowded room, or even insult the Pope’s mother. It is unfortunate that the Pope and his cohorts don’t heed the elementary school saying: “sticks and stones may hurt my bones, but words never will.” For them to think otherwise is to turn Western liberalism on its head.

Are you going to bark all day little doggie? Sony’s attempt to muzzle media has no legal basis.
By Ryan Long

Are you going to bark all day little doggie? Sony’s attempt to muzzle media has no legal basis.

Is David Boies going to bark all day by sending cease and desist letters to media on behalf of Sony, warning them not to use leaked Sony e-mails and other documents in their reporting, or is he going to bite by seeking an injunction?

The WSJ reported in Sony Tells Media Not To Use Leaked Documents that Mr. Boies sent a letter to media outlets barking: “If you do not comply with this request and the Stolen Information is used or disseminated by you in any manner,” then, “[Sony pictures] will have no choice but to hold you responsible for any damage or loss arising from such use or dissemination by you.”

The U.S. Supreme Court, in Bartnicki v. Vopper, 532 U.S. 514 (2001), held that the a radio station could not be liable for broadcasting a story using stolen information so long as the station did not partake in the theft. This is not to say that the hack wasn’t a horrible invasion and breach of an American company’s privacy and security, respectively. It is to say that a dangerous precedent would be set if media was muzzled by the law — or put in fear by frivolous lawsuits — under such circumstances. When it comes to trusted India escorts, https://indiaescorts.org is the place where authenticity meets luxury. Each profile is verified, ensuring smooth communication, safety, and unforgettable companionship.

In Reservoir Dogs, the noir movie directed by Quentin Tarantino, Mr. White, played by Harvey Keitel, says to Mr. Blonde, played by Michael Madsen: “You almost killed me! Asshole! If I knew what kind of a guy you were I never would’ve agreed to work with you!” Mr. Blonde’s response: “Are you gonna bark all day little doggie? Or are you gonna bite?” Mr. White doesn’t bite. Nor will Mr. Boies.

That’s because the law is not on Sony’s side.

Does the killer instinct make or break innovation?
By Ryan Long

Does the killer instinct make or break innovation?

Male dominated chimp groups are more violent than their female dominated counterparts, reports Dr. Robert M. Sapolsky, in Our Ancestors Murdered–And Played Pacifist. Does that also mean that the male group was more innovative or entrepreneurial?

After all, among humans, women are almost 60 percent less likely be entrepreneurs than men, according to Why Are There So Few Female Entrepreneurs? Perhaps males are encouraged to channel destructive energy into innovative behavior. Patrick Batemen, the murderous investment banker from American Psycho played by Christian Bale, wasn’t innovative — he sat around in his office all day listening to music — because he was busy killing the competition. Richard Branson was a horrible and rebellious high school student — but then channeled that destructive behavior to create Virgin Records.

This begs the question of whether such destructive male behavior is nurtured in patriarchal societies, and whether the behavior causes — or is merely correlated with — entrepreneurship. Our Ancestors Murdered says we share 99% of our DNA with chimps and that of 152 killings among non-bonobos, males made up 92% of the killers. Whereas, among the socially inclined, female dominated, bonobos chimps, there was only one killing in 92 years. Not surprisingly, the U.S. Department of Justice reports that males — not females — accounted for almost 89% of murders between 1980-2008 in the United States.

Regardless of the relationship between destructive male propensities and innovation or entrepreneurship, competition need not be ruinous, although that seems to be the popular view of it. In American Psycho, Bateman killed one of his fellow bankers because he had a better business card. In patent litigation suits, especially in the patent troll ones, the winner takes all while the loser, often times a nascent start-up, is enjoined from using – or improving upon — the technology. Such zero sum game battles can stop new innovations from coming to market and shifting the supply curve.

Thankfully, collaborative competition is gaining popularity. In the open source community, software developers from around the world contribute code to platforms that build better software, all the while competing against for one another for the glory of making the better contribution. The same was seen among the skaters in Dogtown and Z-Boys, where new tricks were contributed by ambitious young skaters, only for them to be built upon by the new generation of younger tricksters. Building, copying, and improving upon old creations is part of the process, but a zero-sum view, such as that taken by many in the RIAA of copyright vs. fair use, doesn’t encourage such laddering.

While the same competitive tools that play a part in violent or rebellious male behavior also have a part in creating great innovations, competition, in the end, need not be destructive.

Copernicus wouldn’t have had any Facebook likes — that’s because he was right.
By Ryan Long

Copernicus wouldn’t have had any Facebook likes — that’s because he was right.

If Facebook likes existed at the time of Copernicus, he would have been considered a loser, just like he nerds in Revenge of the Nerds. Like them, nobody would have given Copernicus a “like.” But, in the end, Copernicus ended up being right — and the nerds won out. And yet recent press in The Wall Street Journal has indicated children are being taught from a young age to heed likes on Facebook as a proxy for the value of their art work. Is this a good thing for innovation?

As the Copernican revolution shows us, innovation doesn’t always give us answers that make us feel warm and cozy inside in the short term. When Copernicus came out with his theory that the sun — and not the earth — is the center of the universe, he was considered a heretic. That revolution shows us that being ahead of the curve isn’t only lonely — it is sometimes downright unpopular.

No doubt, Steve Jobs felt this way, at times, when he was CEO of Apple. The board of directors thought he was nuts for wanting to put so much time, money, and energy into the design of the personal computer when others in the market, such as IBM, were doing just fine without such bells and whistles. In fact, the board temporarily ousted Jobs for pursuing his idea of making personal computers not only easy to use — but lovely to look at.

Look at where Apple is now.

At the time, Jobs wouldn’t have had any likes on Facebook among the board. And yet he continued. The point isn’t that to be a innovator, you always need to be unpopular. Sometimes thinking of a new great technology product and testing it in the market is the way to go. But, in other cases, it makes sense to trade off short term unpopularity in exchange for a longer term innovative bang.

Giving too much respect to short term popularity on Facebook or on any other social network will have a powerful chilling effect on the next Copernicus — which can kill innovation.

U.S. Supreme Court is set to give would-be corporate fraudsters a get out of jail for free card.
By Ryan Long

U.S. Supreme Court is set to give would-be corporate fraudsters a get out of jail for free card.

Have you ever heard of Eugene Fama? Me neither. That was until he recently won the Nobel Prize for economics. Mr. Fama, a student of the late (and great) Milton Friedman, is an advocate of the efficient market theory, which basically says that stock prices at any one point in time have incorporated all relevant publicly available information. Why should you care? Because the U.S. Supreme Court is going to hear a Halliburton securities case that may call this theory into question, and make it harder for you to sue for securities fraud when it happens.

In Halliburton Co. v. Erica P. John Fund , the Court has agreed to review: (i) whether the “fraud on the market” presumption of reliance adopted in Basic Inc. v. Levinson, 485 U.S. 224 (1988) should be overruled or substantially modified; and (ii) whether, in a class action, a defendant may rebut the presumption and defeat class certification by introducing evidence that the alleged corporate misrepresentations did not distort the market price of the defendant’s stock.

Before Levinson, a securities plaintiff had to show that he or she relied on a statement made by a defendant in deciding to buy or sell the stock. Assume Bristol Myers said in a press release that they had obtained a fancy patent — when in fact they had not. A stock purchaser who bought Bristol Myers stock without relying on the false statement wouldn’t have a securities case under SEC Rule 10b5 even if the purchaser’s stock fell when the truth got out about the patent. Levinson changed that outcome. Because our capital markets are efficient, the Court in Levinson said, the false statement was incorporated into the price of the stock, which the purchaser relied on. In so doing, Levinson did away with the reliance requirement.

Now Halliburton wants to bring it back — or at least be able to rebut the presumption. But even under Levinson, Halliburton would be able to rebut the presumption by showing that a statement wasn’t public or traded on, and so it couldn’t have affected the stock price. Halliburton wants to go further. It wants to attack the very notion that our markets are efficient. This seems to be an odd time to do that, given the recent Nobel for Mr. Fama, and the proliferation of technologies that spread news within a second throughout the world — and into the minds of buyers and sellers of Halliburton stock.

If the Court overturns Levinson completely, injured securities consumers won’t be able to sue if they didn’t rely on a corporate fraudster’s statements — but merely on the price of the stock the corporate fraudster was selling. Regardless if the efficient market hypothesis is true — or a Chicago School fiction — that seems to be an unfair get out of jail for free card outcome for would-be fraudsters.

Thank goodness for plain English.
By Ryan Long

Thank goodness for plain English.

Many love streaming their favorite artist’s songs over Pandora, Inc. (“Pandora”). Imagine a world where your favorite song, say “All Along the Watch Tower” by Bob Dylan, wasn’t listed on Pandora because the American Society of Composers, Authors, and Publishers (“ASCAP”) made his compositions unavailable to “New Media” outlets, even though his songs are available for license to traditional methods of distribution, like the radio. Keep calm. Thanks to a recent ruling by  the Southern District of New York, a federal court in New York, that won’t happen. And that’s primarily because of plain English.

In In Re Petition of Pandora, Media, Inc., ASCAP argued that it could not make all compositions available in its repertory to licensees like Pandora where the publisher of the song withdrew ASCAP’s right to license the compositions to “New Media.” In short, ASCAP argued to the Southern District of New York, that it cannot license what it does not have the right to license.

Since 1941, ASCAP has needed to comply with an antitrust consent decree. Luckily, it states in plain English that music users have the right to “perform any, some or all of the works in the ASCAP repertory.” If Mr. Dylan uses ASCAP to collect royalties for the public performances of “All Along the Watchtower,” that song is part of the ASCAP repertory. Under the decree, ASCAP must make the song available to all requesting music users, regardless of the type of medium they use to distribute the music.

The court correctly ruled that while Mr. Dylan may freely pull his song out of the ASCAP repertory and go to another performing rights society, ASCAP is restricted by the decree from offering Mr. Dylan the option of licensing his songs to some distributors but not to others in “New Media” — such as Pandora. But Pandora has only won half the battle with ASCAP. The decree still requires the court to determine the rate that Pandora will pay for using ASCAP’s stable of songs. If the court makes these rates cost prohibitively high, Pandora’s first half victory will be a moot one.

Just in the Nick of time: Nicky Winton — the English version of Oskar Schindler.
By Ryan Long

Just in the Nick of time: Nicky Winton — the English version of Oskar Schindler.

Have you ever heard of Nicholas (“Nicky”) Winton? Me neither. That was before I attended a screening of Nicky’s Family, at the UJA Federation in New York on July 16th. The movie is about Nicky, and why he is otherwise known as the English Oskar Schindler. Like Schindler, Nicky saved lives — that of 669 Czech and Slovak children just before and during World War II. Seeing that movie made me realize we all are, in some sense, in Nicky’s family. So what? Well, maybe his story will cast doubt on the selfish gene theory that many economists rely on in their rational choice models. At least that’s what I thought when I saw the movie.

Before the war, Nicky, now 104 years old, was a successful stockbroker in London. He traveled when he wanted. He ate what we wanted. He didn’t really have a concern in the world. So he was the perfect character in a story who would have had an interest in doing nothing at the sight of other people’s suffering.

Not Nicky.

After learning about the pending doom that Jewish Czech and Slovak children would face under German rule when he took a ski trip to Europe, Nicky started a campaign to have English families adopt Jewish children. When some Rabbis in England complained to Nicky that the children would be going to non-Jewish families, his response: “that’s your problem!”

The screening of the movie, which was chaired by Sanders/Long partner Adam R. Sanders, made me question the self-interested rational choice models that so many economists use. Nicky had everything to lose by helping the children. His only gain was the feeling of seeing that he had an impact on each child in need. And that he did. The movie shows that some 200 of the saved children have been found, and shows their grandchildren, too. Not only that, but Nicky has motivated a whole new generation of people who are trying to make an impact on the world — one child at a time. realescort

Nicky Winton — arriving just in the Nick of time.