When Covering Your Back, Remember That Legal Analysis Shapes Risk Analysis

In 2005, Jonathan Coulton recorded an original arrangement of “Baby Got Back” by Sir Mixalot. In 2013, the popular TV show Glee featured an arrangement of “Baby Got Back” that is, to my untrained ears, indistinguishable from that of Mr. Coulton. I have no evidence to offer that plagiarism or copying occurred. I simply cannot imagine any good-faith argument that the arrangement of the two productions is dissimilar in any way.

Copying Can Be Legal

Even if Glee did steal the arrangement (and I’m not saying they did, and I have no knowledge that Fox ever said they did), the show’s producers and network (Fox Broadcasing) didn’t break any laws. The general consensus by attorneys interviewed by news sources is that blatantly taking the arrangement of a musician’s cover of a third party’s song (especially if the cover is covered by Creative Commons) is mostly ok.

So, let us assume that Fox stole Coulton’s arrangement (for the sake of the academic dissection of a hypothetical case). Let us further assume that Fox is completely innocent of all crimes and liabilities. Now, granting Fox’s total innocence, I conclude: Fox made the wrong decision and failed to truly, meaningfully protect their Intellectual Property portfolio. Wielding copyright offensively offended people and undermined Fox’s goodwill (which is the value of a trademark). Losses in trademark  are rarely worth gains in copyright.

Two Legal Analyses To Get to The Bottom Line

There are two approaches to the question of whether Fox ought to use Mr. Coulton’s arrangement.

Analysis 1

An attorney examines the facts surrounding Mr. Coulton’s arrangement. The attorney researches the law that applies to music covers and the extent of copyright over arrangements. The attorney applies the relevant law to the facts and offers a professional opinion as to the likely legal consequences that would result from copying Mr. Coulton’s arrangement. Fox executives and producers consider the opinion and weigh the risks and rewards, and make a decision.

Analysis 2

An attorney performs the same procedure for analysis as above, but with one addition: The attorney also evaluates the effect on the full IP portfolio of Fox, including their trademark value (which is a concept that is almost interchangeable with “goodwill” in law and business).

Why would such similar analyses lead to a different conclusion? Because the executives and producers are chiefly concerned with the objective mathematics of “the bottom line.” The first legal analysis looks only at one narrow question (“Can we avoid losing litigation if we do this?”), while the second analysis addresses as more broad question (“What effect will this choice have on our IP portfolio?”). By including the harm to the trademark (as “loss of goodwill”) in the analysis, the executives now have different numbers to work with when calculating their bottom line.

Business Law 301: Just Because It’s Good Under the Law Doesn’t Mean It’s Good Under the Bottom Line

The moral of this story is the same lesson that I offered to Nintendo earlier this year: Just because it’s legal doesn’t mean it’s good business. You can legally get away with a lot of things – particularly if you have a lot of attorneys helping you. It is easy for business executives to get caught up in the details of what they can “get away with.” We repeatedly see examples of companies loosing their long-term, broad vision of building a brand. Companies are generally better off when they do not sacrifice short-term copyright wins for long-term trademark growth.

The Tiny Legal Differences That Make A Big Difference

“Building a brand” has a lot to do with intellectual property, but few people distinguish between trademarks and copyrights. However, the differences matter. Executives often think in very concrete terms, and the concept of a trademark is much more abstract than the idea of copyright.

If copyright law seems a little up-in-the-clouds abstract, trademark law is in low Earth orbit. When there’s a copyright dispute, the questions of ownership and rights might be murky, but the thing at issue is very clear: a photograph, a book, a script, a painting, a song, etc. Trademark law is much more robust than copyright law, but the subject matter has always been very, very abstract and vague: how consumers think and feel about a good or service—or the ability of a consumer to identify the source of a good or service. The most tangible that subject matter ever gets is anecdotes and consumer surveys—which always come with a margin of error, by its nature as a set of statistics. The “thing” that trademark law ties to can be very concrete in a counterfeiting case, but outside of that, it’s just “goodwill”—the special feeling that consumers have in their hearts for a good or service.

So, when an executive is faced with “protecting the intellectual property of the brand,” it’s easier for them to think about something concrete and tangible. It’s easier to think that “protecting IP” means “stop someone else from benefiting from an image or sound.” And that is one important part of IP protection. But IP protection is means, not an end. The goal of IP protection is to build your brand and your business. Failing to understand this principle leads executives to make asinine decisions that make them look hypocritical and foolish while undermining their own businesses. Failing to know the difference between the categories of Intellectual Property can mislead smart businesspeople into acting on a misleading risk analysis.

It Would Be Unfair To Make Executives the Butt of The Joke

It is only fitting that I challenge myself on my analysis. Who am I to make such cavalier judgments? The executives at Fox (and other large corporations) have (combined) many decades more experience than I have. How could it be possible that I am right where they are wrong? Is it probable that I understand their product and their brand better than they do? I’m sure a lot of them have law degrees (and I have no doubt they talk to attorneys almost daily) – so why do they not share the same legal analysis or conclusions that I do?

I think that their positions force a particular focus. Business executives stand to lose a tremendous amount from failing to protect their IP. I lose nothing if my analysis of Fox’s or Nintendo’s business decision is wrong. I don’t have the same pressure to start from (or remain in) a deeply defensive trench. My risk-free position liberates me to be dangerously wrong—and therefore allows me to stumble into better ideas than the risk-laden executive can.

This is why I think it is the newer and smaller entertainment companies that will continue to blaze trails in new perspectives in managing their IP portfolios: They have more to gain and less to lose in taking counter-intuitive risks and re-imagining what it means to “protect IP.” It’s scarier for the larger companies to take anything less than a Draconian approach toward their intellectual property. Nintendo can’t imagine letting YouTube see someone play their games for even a few seconds. DevolverDigital can’t imagine NOT letting YouTube see every minute of every game.


Getting an MBA from the University of Auir?

Real Time Strategy games have a lot in common with business practices. The core of both is managing limited resources and making strategic decisions to achieve select objectives. Although the execution of the strategy is the obvious part of the game, Starcraft II rests on theory-crafting, timings, build paths, and strategic decisions.

Businesses – from industrial machinery manufacturing to food and entertainment services – have to consider the strategic advantages of short-term or long-term plans, organizational structures, short- and mid-range objectives, budgetary allocations and constraints, and adequate staffing. Real time strategy* games require consideration about long-term strategies, allocation of resource-gatherers, timing an expansion or an upgrade, investing in buildings or unit production, and monitoring army size and strength. The micro-decisions that appear, on the surface, to comprise the core of the game- tactics, when and where to move armies,  grouping and splitting, and so forth- are actually secondary to the  broader, macro-decisions.

Business is also concerned with the potential decisions of competitors, as well as customers and markets.  Business tries to anticipate the decisions of other forces and position accordingly. This involves some risk taking, but that riskiness is mitigated by a strong understanding of the competitor and the market. Competitive games like Star Craft II also center on anticipation and strategic positioning, and the risk involved is mitigated by experience and game knowledge.

I came to this realization when while reading a series of business emails as executives debated making an  upgrade to their facilities and equipment, and it sounded strikingly similar to the internal dialogue I hear when deciding to upgrade or expand in an RTS. There were all of the considerations about the risk and cost of an immediate investment, but the undeniable fact that the action would be indispensible in the long-term. It isn’t surprising that this similarity exists: The basic concepts of opportunity cost, risk, return on investment, and long-term planning are part of everyday life. But the similarities between executives discussing a facility upgrade and a player deciding to build another base were just too uncanny to ignore. It made me wonder to what extent strategy games can prepare a person for the business world. My assessment is that if the player engages with strategy games with a methodical, process-driven paradigm, the gap is closed substantially. The fundamental essence of business is having an organized structure and process for managing resources towards a goal. Professional gamers strive to achieve exactly the same thing.

Oh, and also:  jargon – I can’t discount the role of jargon. Both business and gaming have a lot of jargon that sounds stupid, nonsensical, and pretentious to anyone outside of the practice. Often, jargon captures meaningful, actionable concepts, but it is nevertheless a roadblock to being taken seriously by those who don’t already understand and appreciate the language.


*Most of this also applies to turn-based strategy, but Heroes of Might and Magic 5 is a lot less thrilling to watch than Starcraft II.

Infringed Ink and Printing Copies of Cases: How Lexmark Collected Intellectual Property Lawsuits like Joker in Persona 5.

It’s fitting that printer ink turned out to be the subject for the series of lawsuits that took on all three of the major areas of intellectual property. Printers are the bridge between the physical and digital worlds, in a way. They are the symbol, and the means, of the transition between digital and paper documents.

Lexmark’s intellectual property litigation legacy is about the different ways that a variety of laws have different connections and offer different perspectives.  Persona 5 is about seeing the world through a variety of perspectives, and understanding different connections and perspectives that people have. Persona 5 is about complex stories that interconnect and overlap, with multiple layers and facets. That complexity and inter-connection has a similar feel to the complex and layered Lexmark litigation saga.

I. The Many Masks of Intellectual Property

In Persona 5, different “personas” (represented by masks) allow characters to perform different types of attacks. Different attack types will be particularly strong or weak against different enemies. This means that a big part of the game’s tactics is about determining which persona to use in different situations.


Probably the one most people mean when they think of intellectual property, especially related to art or entertainment. Traditionally, this area of IP law was focused on books, music, film, and other art. However, due to the Digital Millennium Copyright Act (DMCA), the law also touches slightly on questions of tampering with proprietary devices to modify them (or to modify their functionality).


I see this used interchangeably with “copyright” a lot, but think of it like this: Copyright protects the painting, trademark is the law about the artist’s signature in the corner of the painting. It’s the law that comes most into play when people are talking about counterfeit goods or brand recognition.


This is what most people mean when they think of intellectual property in most business and financial dealings, and especially in the context of science or engineering. Patents are about owning the right to make and sell a certain kind of thing, from cell phones to medicine.

Trade Secret

Like the healing abilities in Persona 5, trade secrets aren’t used often or even mentioned often, but they can fit some situations just perfectly. The other three kinds of IP law require you to make something public- filing a patent with the Patent Office, or registering a copyright (though you actually only need create a work to have a copyright in it, as of the 1976 re-write of the law), or using a trademark in commerce.  Trade secrets go the opposite way: if you take certain steps to NOT let the public know about something that makes your business work, you can claim a right to protect it.

II. Lexmark Litigation (Backstory)

Lexmark makes printers, but has a lucrative racket with recycling their ink cartridges. Well, had, maybe. Because Americans don’t like feeling taken advantage of, and because American Millennials don’t like a lack of choices, other companies sought to offer competing solutions to Lexmark’s ink cartridge restrictions.

In Persona 5, players collect new personas as they progress through the game. Lexmark litigation managed to collect different areas of intellectual property law as they fought over the issue of other companies coming up with ways to interfere with their ink cartridge schemes. What I find really amazing about this 13 year sprawl of litigation is that none of the involvement of IP law is predicable or very expected. Each application of law is noticeably distant from the original ideas and central, foundational, purposes of these laws.

How did Copyright law get involved?

Mostly through the parts of the DMCA that restrict tampering with controls placed on a device to inhibit 3rd party interactions (e.g., Section 1201). But in 2004, the Sixth Circuit (that most difficult of all circuits to pronounce) issued a ruling that called into question whether “lock-out codes” were actually subject to copyright protection, as they are not a form of creative expression. We might have gotten a more authoritative ruling on this topic, but Lexmark missed the deadline to request an en banc hearing at the Circuit level.

How did Trademark law get involved?

Through an argument about whether someone could sue Lexmark under the Lanham Act (the actual federal statute that contains most of trademark law). To actually take someone to court, you have to meet a few basic standards: you have to have an actual claim recognized by a law, for example. One standard for having a trial is that the person suing has to have “standing”: they have to have the legal right to bring a claim. Many laws will include a more specific definition of what “standing” will mean for that law.

In 2012, Static Control Inc. tried to sue Lexmark under some federal business-type laws (the Sherman Act and the Clayton Act), but those laws didn’t actually grant standing to Static Control, which meant they weren’t allowed to actually bring Lexmark to court. Then they tried to sue under the Lanham Act, because the rules for standing are different under that law. The Sixth Circuit granted Static Controls the right to a trial under the Lanham Act. Lexmark took the issue to the Supreme Court, who agreed with the Sixth Circuit’s choice to have a trial.

How did Patent law get involved?

The obvious way for patent law to be in a case brought by a printer company is for the case to be about two printer manufacturers arguing over whether one copied the others’ technology. That is not at all how patent law got used by Lexmark. Instead, the patent law question was about patent exhaustion.

This tiny area of patent law is like the “first sale” doctrine in copyrights. The idea for both is the same: once the end-customer buys the product, the manufacturer’s patent is “exhausted.” Under this law, a customer can do whatever they want with the thing they bought (except make new ones and sell those- that part of the patent still applies). This year, Lexmark brought a case to the Supreme Court on this point of law, hoping to stop a different company that was interfering with the ink cartridges. The third time was not the proverbial charm for Lexmark; the Supreme Court held that consumers do have some rights with regard to the re-use of their own purchased property.

III. Conclusion

My favourite thing about the Lexmark litigation is that it isn’t just about the substance of intellectual property law; it’s about how intellectual property law is administered. The trademark issue wasn’t really a trademark issue– it was an issue about who can sue under trademark law. The copyright issue wasn’t really about the copyrights of art or books or movies — it was about whether someone can unlock your digital locks. The patent issue was barely about patents– it was really about whether a patent still applies after a customer buys the product.

I’m excited by this because it’s a sign that intellectual property law is becoming more and more relevant to American life. More details of the administration and applicability and extent of laws have to be established as laws are interacted with more often. Decades ago, intellectual property was a small area of law that only affected a few sectors of a few industries in any meaningful way. Now it affects how we use our cell phones, ingest our entertainment, and even harvest our crops. As this area of law grows in response to innovation and technology, it has the potential to encourage further innovation and advancements, as well as to steer the growth of those new ideas. We are living at a time where we are moving toward either technological salvation or technological armageddon.




What the Internet of Things can Learn from “The Order 1886”

Great (Sounding, Looking) Potential

The Order 1886 has great quality graphics, but is a poor quality game. Just because the technology involved is cutting edge doesn’t mean the final product is good. The internet of things relies on some cutting edge technology and novel ideas, but that doesn’t mean the final product is always favorable.

I’ve been hearing about the “Internet of Things” for several years now. Middle-aged entrepreneurs are just sure that this “the next big thing,” except it’s going to be bigger than the car or the light bulb. From what I’ve seen, IoT is a glossy, shiny, pretty gimmick that hasn’t shown it’s poised to really solve problems that consumers feel they have. So far, we don’t think a fridge that buys eggs for us is really what’s missing in our lives.

Having sophisticated technology isn’t the same as having a great (or even marketable) tech product. In the same way, having glossy graphics isn’t the same as having a good (or even marketable) game. Both IoT and Order 1886 are impressive at a glance, but fail to live up to expectations as one spends more time with them.

Burger King Sets Itself Up For Trolling

The broad IoT idea continues to reveal vulnerabilities and half-thought-out applications. A few months ago, Burger King aired an ad in which the actor in the commercial asked the viewer’s smart phones to read the first paragraph of the Wikipedia page about Burger King’s flagship product, The Whopper. The completely predictable result was that people started vandalizing the Wikipedia page in question, leading the ad to tell people that The Whopper contained humans and cyanide.

There’s a lot I could go into about this example, especially about troll behavior and the weaknesses of IoT’s reliance on unsecure nodes. I want to highlight that the problem wasn’t about hacking into Burger King or Android systems. There are some concerns with IoT and that sort of hacking, but there’s another problem: Entrepreneurs rely on the web without knowing what 4Chan is or having have never been verbally abused by a stranger for the length of an entire League of Legends match. That is a mistake.

This example also illustrates why IoT hasn’t gotten traction: It’s still a gimmick that breaks often. Even when it works at its best, IoT is a fun and surprising answer to a question no one asked. The best case for Burger King’s commercial is that they surprise a few consumers, but also stir fears about privacy and security in doing so. The success of IoT still hangs on the uncomfortable reality of diminishing personal privacy, and many consumers haven’t completely reconciled leaving the past with entering the future.

The Order 1886 Fails as a Game, IoT Still Fails as a Tech Product

One of the reasons people were so angry about The Order 1886 is that the trailers looked so good. People bought into the promise and the hype, and then it failed to deliver in meaningful ways. Similarly, the more glossy the presentations about IoT get, the more consumers will feel the gap when they don’t experience a meaningful impact as a result of using it.

It’s the applications that go on top of the tech that really matter. Platforms and apps that balance consumer’s emotions about privacy and security will be the only thing that can really bring about the kind of pervasive, omnipresent IoT about which I keep hearing (excited and vague) presentations.

Things that look really good but don’t do anything are called art. Things that do something useful are called products. Usefulness is not the sole factor in a product’s quality or its marketability, but it is important- especially if it wants to be more than a fad or gimmick that ends up with a discount sticker in the bargain bin.

Blocks and Chains: Secure, Stable, and Not Flexible

Lynes with Rules: How Blockchain Works

Lyne is a minimalist puzzle game in which you must connect a sequence of shapes with a single, contiguous line. Certain rules govern what lines may do, (e.g., only triangles on this line), and where lines may go (e.g., lines may not intersect or pass through one another), with increasingly elaborate additions and variations on these rules as the game progresses and difficulty increases. This general concept of a line that “knows” which nodes it already has connected and which nodes are permissible is a good introductory way to think about blockchain technology.

Blockchain is the data structure used by Bitcoin and other cryptocurrencies, like Dash. The general idea is a bit like the game Lyne: the line is like the ledger of transactions, and the nodes are customers and their transactions. Everyone who wants to be on the line can look back to make sure the line has obeyed the rules and there are no mistakes or problems with the other nodes on the line. Just as in the game Lyne, the line will not allow a square to get on a triangle-only line, blockchain will not allow an improper transaction.

Blockchain touts two distinct features: 1) an open (“public”) ledger (prevents bad checks and double-spending), and 2) a distributed database (prevents tampering with the ledger). The effect is a secure and trustworthy system for conducting and recording transactions. As with all advances in technology, it is important to consider what is lost in the past by the adoption of the new.


Let it Float, Hope It Doesn’t Bounce: How Check Kiting Works

In the time of The Great Before, when humans stumbled about blindly beneath incandescent bulbs and smeared ink on slices of dead trees, there was a method of financial transaction called “writing a check,” which one did from one’s “checkbook,” using a device that was something like a stylus that leaked. By creating these checks, one person could give permission to another person to go to a bank ask for some money from the check-writer’s account.

There was a way to turn these checks into something like a credit card, using a technique called “check-kiting.” Sometimes, the check-writer could give a special instruction during the transaction: “Hey, I can write you this check, but there won’t be enough funds in my account to cover it until 3 days from now. Can you just wait until then to cash it?” Under favourable circumstances (good faith, trust, friendship, etc.), an off-the-record agreement was reached to add additional wait-time to the check-cashing process in order to allow funding to appear in the checking account. This allowed the transaction to proceed, even though funding was not available to cover the transaction.

Another term for this method was “playing the float.” “The float” refers to money that is not yet moved from one account to another, but has been promised to be moved: If a check for $10 is written but not yet cashed, that $10 is still in the first account, but it is expected to appear in the recipient’s account… well, “sometime soon.” Financers, accountants, bankers, regulators, and economists disagree about how to conceptualize, discuss, and manage “float.”

It’s not surprising that float is decreasing in total amount in the face of digital technology. One of the reasons it ever existed was the sheer amount of time it takes for humans to physically process checks. PayPal can digitally send instructions and records around the world much faster than the US Postal Service can physically transport a check from NYC to LA, or even just down the street. The passage of the Check21 law allowed banks to use images of checks in place of the physical copies, which is why your ATM just scans your check now instead of collecting it for a teller to physically process.

Will Large Institutions like Blockchain?

Whether you like blockchain depends on your goals and priorities. This protocol makes it harder to do off-the-record stuff—like asking someone not to cash a check until payday. You could include a separate set of instructions with a transaction that doesn’t go into the blockchain, but sending those instructions separately means missing out on the benefits of blockchain.

It also seems that blockchain would effectively obliterate float, because the transactions are completed and closed-out almost instantly, if not by close of business each day. There might be a way to work float into the blockchain, but it seems almost counter-productive—unless float is very important to you.

Some enthusiasts suppose that blockchain would diminish the need for banks and lawyers. I think it is more accurate to say that the widespread use of blockchain (if its use ever becomes widespread) could change the role such intermediaries play in transactions. For one thing, blockchains require enormous computing power to maintain. Blockchains are essentially nested hashchains, and rely on increasingly complex hashing to ensure their security. Bitcoin’s blockchain now requires supercomputer-level power to mine, for example- and compared to a ledger of a large bank like Citibank or Bank of America, Bitcoin grew slowly and remains tiny.

Additionally, financial professionals are helpful for navigating and orchestrating complex, multi-party, and exceptional transactions. The majority of transactions are simple and similar enough for a program to handle- however, it would be difficult and inefficient to create a program capable of processing rare and difficult transactions. Trained professionals would be useful, at the very least, for handling exceptional cases that do not fit the mold required by blockchain.

Are Trademarks a Data Security Alternative to Sad, Weak, Outdated Copyrights?

If you’ve been on the web for a while, you’ve seen an advertisement that looks like the user interface of the website you’re viewing- or maybe an ad that has a false close button, and clicking it just navigates you to the advertised page. These are blatant ways to trick consumers into taking actions they don’t want to take. Sometimes, these inadvertent actions can create security vulnerabilities such as malware.

Despite all of the focus on applying copyright law to the internet, I wonder if there are hints of trademark and trade dress protections that could become relevant to data privacy issues. I will cautiously, even timidly, explore a few of those possibilities (which several others have explored over the last few years).

I. Trademarks: When it Comes to Data Privacy, Accept No Imitations.

Trademarks have a simple purpose: to let consumers know the origin of a good or service. Trademarks are often a word, phrase, or image (logo), but can also be a sound or smell (on rare occasion, it can get a bit more abstract ).

A major category of trademark infringement is counterfeiting. That $20 “ROLEX” watch from the guy in the alley? That’s a counterfeit (sorry), and one of the legal issues involved in the sale of that watch is the use of a trademark without the legal right to use it. There haven’t been a lot of counterfeit websites on the internet, especially since SSL and other authentication processes got better. However, there are plenty of imitation apps and games. One of the reasons such apps and games fail and are quickly removed from distribution is that they infringe trademarks.

However, some countries do not have the same standards regarding trademark (or copyright) enforcement. Consider an imitation League of Legends game, lampooned here. At the end of the video, the player says “Oh, and it’s also a virus,” as his security software reports malware after playing the game. This humorously underscores the point that many infringing* products pose a security and privacy threat. Using trademark law to limit the proliferation of readily accessible, easily confused programs is a valuable practice in maintaining computer security for consumers.

II. Trade Dress: No One Really “Owns” That Icon… But You Know Who Owns That Icon.

Trade dress is a sort of sub-category of trademarks. It’s rarely talked about or used, but it can be thought of as the totality of design and aesthetics that go into a product, place, or service that make consumers identify the source. Color palette, patterns, shapes, and other factors go into the evaluation of trade dress. Crucially (and perhaps fatally), elements of a trade dress must be considered “non-functional.”  For example, the major case in trade dress concerned a Tex-Mex restaurant that used the same colors and layout of another Tex-Mex restaurant.

Here’s the controversial idea I think deserves consideration: Could misleading, camouflaged web content be considered an infringement of trade dress? (Think of the kinds of ads that make you believe you’re not clicking on an ad, but rather some piece of actual content on the site- especially regarding navigation buttons that match the navigation icons of the site.)

The reason I look to trade dress for a solution is that icons and interfaces, even stylized ones, are not subject to trademark, copyright, or patent protections. Furthermore, websites are increasingly treated as the digital equivalent of stores and offices of businesses- so much so that designs and layouts can come to be the trade dress of that business. Thus, there is a gap in the legal protection of user interfaces, and a need to cover that gap.

(Treating websites as subject to trade dress might have the added benefit of discouraging UX and UI designers from fiddling with the location and arrangement of navigation tools every other month just to justify their paycheck. And that’s the kind of change this world really needs.)

Conclusion: Trademark Protection is Already Working, Trade Dress is Still Vague and Untested

Trademark law is already quietly making the digital ecosystem a little bit safer by eschewing threatening knock-off games and apps. I think there’s a case to be made for applying trade dress to websites and UIs, but it would be a novel application and courts may be hesitant to apply the law so creatively.


* “300 Heroes” Infringes both copyrights and trademarks, but it’s the funniest example.


ISPs Tell Two Lies: “This is Fair” and “This Will Work”

Intro: The Parable of the Watermelon Stand

Once upon a time, two folks (Alphonzet and Balantanoid) decided to sell watermelons at a roadside stand. The two-step business model was: 1) buy watermelons for $1 apiece from a farm, then 2) transport them in their pickup truck to the roadside stand, where they sold the watermelons at a retail price of $1 apiece. After some time, accountant Balantanoid informed business partner Alphonzet that, due to the price of gasoline and other incidental business costs, they were actually losing money. Alphonzet reviewed the numbers and pondered, and then ventured a solution:

“Do you think we need a bigger truck?”

Businesses looking to buy consumer information from ISPs are like the characters in this story considering using a bigger truck. More data isn’t what businesses need, and there is danger is believing otherwise. Furthermore, ISPs unjustly shirk responsibility that ought to come with the entitlement to the data they intend to sell.

I. Background.  Internet Service Providers Aren’t Satisfied With a de facto Monopoly

Internet service providers have no competitors and provide a borderline necessity. They can charge anything (and do) and provide a low quality product and service (as they do), and customers will still pay them (and they do). This isn’t enough for them. The telecommunications industry has successfully lobbied congress into repealing an FCC order that previously prevented the sale of tracked, identifiable consumer data to third parties.

Of course, ISPs are the only ones who can risk fighting their customers. Service providers operating on the internet can’t antagonize their customers because they are subject to fundamental concepts of free market capitalism: If they anger their customers, their customers will go elsewhere. ISPs don’t have “customers” in the traditional sense. They have “victims” or “hostages”- so it makes sense that ISPs wouldn’t worry about treating them like customers.

II. “This Will Work.” ISP’s Already Lie to Consumers and Government- Now They Get to Lie to Businesses

I don’t know how many lies the telecommunications industry had to tell congress to get the FCC’s rule repealed. Probably not many- after some generous donations, congress rarely asks very many questions, or cares about answers. But the lie that ISPs are relying on now is for 3rd party companies to believe that (in the context of the aforementioned parable) a bigger truck will turn their watermelon business profitable. There are two likely outcomes of this business arrangement: either advertising will get better, more efficient, more streamlined, more effective, and benefit both advertiser and consumer, OR advertising will become more obnoxious, more noisy, less useful, less relevant, more intrusive, and worse for consumers and advertisers.

In his NYT Op-Ed on this legislation, former FCC Chairman Tom Wheeler gives the example of ISPs selling data to car dealerships about which customers are visiting car websites, thus allowing car dealers to target more likely customers. One interpretation is that this will help car dealers only target relevant audiences, and customers will get better opportunities and information as customer-business connectivity is optimized. My experience is that this is supremely unlikely.

My most recent experience with targeted advertising is that the business model is not effective. I spent an evening looking for a new pair of shoes from online stores. The next day, ads for shoes show up on my Facebook feed. But I had already bought shoes. I was no longer a potential customer in that market. No amount of advertising is going to persuade me to make a purchase, because the purchase was already complete.

More data doesn’t mean you understand your customer better. You need the right data- and ISPs just can’t provide that. Data science simply isn’t good enough yet. The algorithms consistently fail to capture human thought, intent, and desire. The greater danger in the loss of this privacy isn’t in other parties knowing who you are- it’s in other parties THINKING they know who you are.

This example reveals two facts that render third party purchases of consumer data useless: a single data point or grouping of data points doesn’t tell you all of the important data about a consumer, and second, consumers move faster than companies. For the same reasons that cause all of us to receive junk mail addressed to people who haven’t lived at an address for years, (or even addressed to deceased persons), companies efforts to use consumer data are routinely ineffective. The myriad problems with the over-reliance on big data is its own subject, but one that informs this issue.

The effort to make money off of violating privacy won’t work because companies aren’t equipped to turn data into sales.

III. “This Is Fair.” Justice Requires That ISPs Pick A Single Classification: Common Carrier or Private Enterprise

There is a doctrine in tort law that common carrier services like buses and trains have reduced duties to customers. Private carriers have more discretion about how to run their business, but have increased liability. In the famous tort case Paslgraf v. Long Island Railroad, a railroad company was not held liable when a passenger’s explosive package accidentally detonated, causing injuries. Part of the reasoning relied on the notion that the railroad was a common carrier, and such service providers are not liable for some acts of their customers because they have less discretion regarding their customers than a private carrier has.

This reasoning ought to be applied to internet service providers: ISPs can be either a common carrier or a private carrier, but must accept the responsibilities and limitations of whichever classification they choose.

If ISPs want the benefits of being private enterprises, they need to take on the liability commensurate with those benefits. The concept of safe harbours in the DMCA is predicated on the notion that ISPs are a sort of public utility or common carrier. ISPs that want the benefits of private business need to be liable for crimes and damages that common carriers would not be liable for.

ISPs believe they have a right to the data of their individual customers, such as their browser histories and app usage rates. If they are so interested in the private information of their customers, they should take on criminal liability for crimes committed by their customers, from piracy to identity theft to terrorism or child pornography. This is the burden of responsibility. If an ISP is truly entitled to the content of a customer’s online activity, they are responsible for that content. There is no entitlement without responsibility. This is a fundamental precept of justice that permeates the law.

If the ISP does not want to be liable for the crimes committed using their services, they must opt for the common carrier approach to providing internet and information services. The idea of ISP access to consumer data without responsibility to the consumer is not just offensive to privacy or comfort- it is offensive to the very concept of justice and fairness. It is the ISP getting something extra from a consumer in return for nothing. Forcibly taking from someone in exchange for nothing is the clearest possibly understanding of theft.


The data that ISPs will sell to 3rd parties is unlikely to make advertising substantially better, due to the challenges in execution. The larger issue is settling the classification of ISPs in the context of telecommunications law. ISPs can be either private enterprises or common carriers. They cannot continually shift their classification from moment to moment to suit convenience, reaping rewards and rejecting responsibility.

Update: ISPs earn their place… And they really have a cultural status.