There are so many “hot button” issues, it is hard to decide which ones to mention. So I’ll just mention the three that I find extremely interesting:

1. Network neutrality. The FCC issued regulations to prevent telcos and other ISPs from engaging in what supporters would call unfair and anticompetitive activities. On November 10, 2011, those regulations came up for a vote in the Senate. Republicans were attempting to overrule the regulations, but the Democrats were able to defeat the bill. Of course, that is only a temporary victory, since the regulations are also being challenged by Verizon in court, and if the Republicans take over the White House in the next election those regulations are likely to be thrown out.

2. Online sales tax. For many years, Amazon, and other online retailers have been able to avoid collecting sales taxes for their online sales. However, political pressure is mounting for Congress to change the law to compel these vendors to collect sales taxes. Much of this pressure is coming from states that are suffering with sagging tax revenues. If such a law passes, of course, there are bound to be constitutional challenges, eventually winding up in the U.S. Supreme Court.

3. Privacy and GPS devices. The U.S. Supreme Court recently heard oral arguments on whether the police can install a GPS device on a suspect’s car and “follow” him around by monitoring the device. Surprisingly, at least to me, the Supremes seemed receptive to the argument that such activities violated the Fourth Amendment. Next year’s decision will be interesting reading, particular if the Court upholds a right of privacy in these circumstances.

Let me know what your hot button issues for 2012.

The FTC previously reviewed the COPPA Rule in 2005 and retained it without change. In light of rapidly evolving technology and changes in the way children use and access the Internet, in 2010 the FTC initiated another review of the Rule on an accelerated schedule. On April 5, 2010, the FTC sought public comment on every aspect of the COPPA Rule, posing numerous questions for the public’s consideration. In addition, the FTC held a public roundtable and reviewed 70 comments received from industry representatives, advocacy groups, academics, technologists, and individual members of the public.

The Internet has clearly changed considerably since 2000 and it is clear that an updated Rule (if done properly) would be of enormous benefit both to parents (whose children are increasingly interacting with Internet on a daily basis) and website operators (who still seem to be unclear on how to comply with COPPA).

One of the most troublesome areas in complying with COPPA is the “verifiable parental consent” requirement. I am pleased to see that this is one area that the FTC is specifically looking at. Unfortunately, the FTC proposals appear to be increasing the burden on websites, not streamlining them as the proposal claims. The promulgation of the original Rule, with its “verifiable parental consent” requirement resulted in many child-oriented sites moving away from efforts by sites to “customize” the experience for each child-visitor, since the information required to do so fell within the strictures of COPPA. Instead, sites changed to provide the same “experience” to every child that came to them, which turned off a lot of kids.

As the number of interactive child-oriented sites decreased, many children starting exploring more adult-oriented sites that did not need to get “verifiable parental consent” as long as the site was not directed to children and the site operator did not ask for the age of the visitor. Under many lawyers’ reading of the COPPA, a Disney-sponsored site would be required to get consent to gather information from an eight year-old, but playboy.com would not. Certainly a perverse result!!

It will be interesting to see whether changes are actually made this time to the Rule, and whether those changes help or hurt websites that are directed at children.

Those early days in the growth of the Internet saw Congress passing several laws that freed the Internet from potential liability – the DMCA “safe harbors” provisions, Section 230 of the Communications Decency Act, and the Internet Tax Freedom Act of 1998 – to name just a few. And the Internet responded to this light touch by growing exponentially both within the U.S. and around the world – with almost two billion users today!

Unfortunately, during the last decade, the Internet has lost its luster – at least as far as politicians and the courts are concerned – and is being subjected to ever-increasing regulation and liability. Many politicians blame all of society’s ills on the Internet. (See here and here for just two examples.) As a result, they are openly hostile to the idea of an open, global forum for the exchange of information and ideas, as well as for global commercial activity, and seem intent on killing the “goose that laid the golden egg.” Just a look at today’s online news sites will confirm that the Internet is under increasing attack worldwide.

Fortunately, the Internet is extremely resilient – both from a technical, as well as a social and economic, perspective. So far the Internet (and those who dwell within it) have been able to “work around” many of these new laws and regulations or adapt to them without significant damage to the “business as usual” nature of the system. But it’s difficult to tell from our vantage point whether real, permanent damage is being done to the Internet – as both a communications medium and a platform for e-commerce. A decade from now analysts may look back at the Internet as a failed experiment – killed off by politicians, judges and self-serving business interests, who thought the Internet had to be “tamed,” and in doing so destroyed its ultimate potential.

Only time will tell….

However, after pressure from my friends and family (all of whom are devoted iPad users), I purchased an iPad for myself last Christmas. While I don’t use it as much as my kids do, or as some of my students do, I have warmed up to the device and have become a regular purchaser from the iPad app store. I use it mainly to do email and read ebooks. That is why I was very distressed to read about an emerging battle between Apple and the e-reader companies (Sony, Amazon and Google) over the nature of the e-reader apps they will be allowed to distribute through the app store in the future. See, e.g., Yukari Iwatani Kane and Stu Woo, “Apple Rejects Sony E-Book App,” Wall. St. j. (Feb. 2 2011).

In general, e-reader apps have been just that. They can be used to read e-books, but if you want to purchase an e-book, you need to go to the applicable website and pay for the e-book there. While it is somewhat inconvenient to have to leave the e-book app to buy a new e-book, it hasn’t been a major issue. At least for e-book readers. Apparently it has been a major issue for Apple, since Apple does not get a cut of the revenues generated by those e-book sales. As Apple stated in a recent press release:

We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.

It is reported that Apple has rejected an e-reader app from Sony, demanding that Sony provide the means to purchase their e-books through the iTunes store – and pay Apple 30% of the revenues generated from such sales. Considering that many e-book sales are made with little or no profit already (various stories assert that Amazon loses money on the e-books it sells for $9.99 or less), having to give Apple 30% of revenues would make most e-book sales unprofitable – which might require e-book sellers to jack up the price of their titles across the board to cover Apple’s cut.

And there is no reason that Apple won’t expand that policy to other e-commerce areas. As one commentator recently stated:

Now that Apple has changed the business arrangement for e-books, you can bet it’s thinking about the terms for video-streaming apps like Netflix and Hulu Plus and music apps like Pandora, or even more general e-commerce apps like Amazon’s Windowshop. If Apple wants a 30 percent cut of my Kindle book today, I assume it will want a 30 percent cut when I try to buy an actual Kindle tomorrow.

Farhad Manjoo, “Ditch the App Store,” Slate.com (Feb. 1, 2011).

It will be interesting to see what Sony, Amazon and others do in response to Apple’s changing policies. And whether the FTC or various state attorneys general may get involved as well.

But Negroponte saw those technological impediments as transitory speed bumps in the transformation of the computer to the center of our world. At the time it seemed unlikely, but over the last 15 years the Internet, smart phones, the iPad, myriad software apps, and high-speed phone lines have proven Negroponte right on so many of his predictions.

When I read the book for the first time in 1995 it made me think about how the law, business and society would need to change if his predictions came true. Much of my research over the last decade and a half has focused on the impact of what I call “transformative media” on the law. Ever five years I reread Negroponte’s book. It is always fresh and generates lots of new ideas. I just finished reading the book for the fourth time and am still amazed by how many of his predictions have come true just over the last five years (since I last read his book) – particularly with regard to the demise of newspapers, the emergence of e-books, broadband technologies driving Blockbuster into bankruptcy and DVD rentals replaced with Netflix downloads, while CDs (“atoms”) continue to lose ground to iTunes and other digital downloads (“bits”).

Although the book is now 15 years old, it is still a compelling read, and I would highly recommend it. (Ironically, the book is NOT available as an e-book. Portions of the book are available online, but to get the whole book, you still must buy the “atoms.”) What’s up with that?

This year I thought I would add a second skills-based course in drafting license agreements. Fortunately, there are a number of good casebooks that have appeared over the last couple of years that focus on licensing law. I thought that using one of those texts, supplemented by some of the licensing materials from my multimedia law treatise, would provide a good foundation for the course. Like my previous course, I thought I could create a series of exercises that could teach students how to draft contract clauses for various licensing situations. However, unlike my prior course, where everyone seemed to be working in the same direction from Day 1, I have found the licensing law class to be a much greater challenge.

Why? Because many of the students have worked at law firms and in legal departments of various entertainment industry companies, either as summer clerks or as externs, and have been exposed to licensing agreement actually used in their particular industry – all of which are radically different from license agreements used in other industries. The result is that perhaps a third of the class thinks they know what a license agreement looks like, and are shocked, and often offended, when I tell them that the license clauses they are drafting are not acceptable.

The problem is that every sub-industry within the entertainment field has their own unique way of writing license agreements, and the clauses used have been honed for very specific types of transactions. While the technology industry generally has a style of contract drafting that does not differ significantly with the subject matter – patent license for semiconductors look a lot like patent license for biotech (with some obvious differences in terminology), license agreements in the music industry may look very different depending on whether you are working for a composer, music publisher, record company, recording artist, etc. And that’s just the music industry. The same Tower of Babel exists in the movie industry, television industry, sports industry, etc.

What I have found is that I must ask the students to look beyond the very specific clauses unique to a particular player in a particular entertainment field, and try to see those aspects of licensing that are common to all (or at least most) of the IP fields. That’s turned out to be easier said than done. I need to constantly talk about the important underpinnings of licensing law in general, and how those general principles are then “customized” for each industry. I have to tell the students to see beyond the industry they have some (generally fairly superficial) familiarity with, and understand what sets licenses apart from other forms of agreements.

We are just entering Week 4 of the class, and I think I have around 80% of the students on board to that broader way of thinking about licensing. Unfortunately, that still leaves about 20% of the students thinking that the way they learned to write licenses in their first and only “job” in the field is the only way to write such contracts. The positive results of this ongoing debate is that it gives me a lot of examples to use in class to highlight the fact that licenses are very malleable things that can be modified to meet the needs of a particular industry or sub-industry, but that underlying those differences are certain principles that are (almost) universal in application.

Fortunately, in a couple of weeks the materials we have been covering that focus on the general principles of licensing, will give way to more industry-specific contracts. That will give the students an opportunity to draft clauses that are more particular to specific areas of entertainment law – music, motion pictures, professional sports, etc. I am hoping that this will solve some of the problems I have faced thus far. I’ll let you know.

• With cell phones to tell them the time, there is no need for a wristwatch.
• Email is just too slow….
• They never twisted the coiled handset wire aimlessly around their wrists while chatting on the phone.
• Unless they found one in their grandparents’ closet, they have never seen a carousel of Kodachrome slides.
• Computers have never lacked a CD-ROM disk drive.
• The first computer they probably touched was an Apple II; it is now in a museum.
• They first met Michelangelo when he was just a computer virus.

We all know that technology is evolving at breakneck speed. But it’s always interesting to see just what impact these changes are having on our next generation of workers, inventors and policy makers. It’s amazing how developments in technology have fundamentally affected their worldview.

The difficulty of predicting what technology is going to catch on, and the impact such technology will have on society, is obvious. However, another interesting issue is what impact technology will have on the law. The traditional mantra is that technology changes too fast for the law to keep up. Legislatures are hard-pressed to anticipate technological changes and deal with the legal issues that such changes create. However, in some cases legislatures have attempted to anticipate technological developments – often with interesting results.

I have been developing lectures for an online LLM course I will be teaching this fall in Internet and E-Commerce Law. I was reminded of two pieces of legislation that were enacted in the 1990s to deal with “emerging” technologies that can be seen as somewhat anachronistic in light of later developments.

The first is the Audio Home Recording Act of 1992. The Act was Congress’s response to a controversy between the music industry and the consumer electronics industry regarding the introduction of digital audio recording technology into the domestic consumer market. Everyone thought digital tape recording was going to be the “next big thing” and the music industry was concerned about the ability of these recording devices for piracy. Exempted from the Act were computers, which were viewed in 1992 as an unlikely device for music copying. Well, we know how well that prediction panned out. Portable music players, like the iPod, were not covered by the Act, while digital audio tape recorders (what are they, you might ask?) were. Neither the music industry nor Congress foresaw such technologies as the Internet, broadband, or audio compression (MP3) that would make the copying and transmission of music files over the Internet quick and easy. Oops.

Another interesting, but somewhat irrelevant law, is the DMCA provisions on copyright management information. In 1998, pundits saw a day when digital content files would contain “copyright management information” (CMI) that would be “read” by software and hardware devices and would control the uses that could be made of a digital work. For example, futurists foresaw a time when Internet users could download or share content files and the computer would read the CMI from the file and, depending on what the user wanted to do with the file, would automatically transmit a micropayment from the user’s bank account to the copyright owner’s bank account for an appropriate license. Photocopiers would “read” microscopic barcodes printed on each page of a book or magazine, which would determine whether a particular page could be copied at all, and if so, whether a micropayment should be made to the copyright owner for that copy.

Twelve years later, CMI technology is little used and certainly not a hot topic in legal circles or the courts.. The “problem” that proponents of the CMI legislation identified has never materialized. Oops.

That is not to say that legislatures should never legislate in anticipation of new technologies, only that they should be careful in determining which issues are ripe for legislation and which are not.

Perhaps they should ask an entering college student?

As a result, the Commission is looking for ways to leverage its existing powers to encompass net neutrality regulations. The Commission plans to draft more specific rules governing Internet companies is the result of the Comcast decision last month, where the D.C. Circuit panel agreed with ComCast that the agency had overstepped its explicit legal bounds when it reprimanded Comcast for throttling Internet access.

To address legal ambiguity created by the court’s decision, Chairman Julius Genachowski has announced that he will seek a new approach to Internet regulation — regulating Internet providers with a number of FCC rules that already govern phone companies. The telcos and cable companies, not surprisingly, are bitterly opposed to any regulation of their Internet offerings and are filling the coffers of their supporters in Congress, as well as preparing for court challenges to any new FCC regulations.

This is a defining moment in the growth of the Internet in the United States. Other countries have seen the growth of their digital economies stymied by telcos and other providers who charge high access fees, limit bandwidth and play favorites among websites and e-commerce providers. One reason that our digital economy has grown as quickly and as large as it has is because ISPs traditionally have provided access at a reasonable price to all comers. Now these entities are trying to change the rule of the game to the disadvantage of both consumers and online vendors. The government is the only entity that can protect consumers from those who put short-term profits over the good of the nation and its economy.

But that was several lifetimes ago (in Internet years), and the content industry is having a difficult time grasping the current reality. Content is no longer king. Instead, distribution is king.

For decades in the book, music and movie industries, distribution was viewed as a necessary evil. Antitrust cases forced some content creators out of the role of distributors of their own content, and other industries just found in easier to let others distribute their content. Content creators developed close relationships with the distributors of their product –- making sure that the distributors made enough money to stay in business, but not allowing the distributors to make too much money, or to have too much control over distribution of their content.

After all, those developing the content were the creative people who wore the tuxedos and designer gowns at the gala celebrations of their industry, while the distributors were those faceless minions who got their hands dirty warehousing and shipping content through a maze of wholesalers, jobbers and retailers, until that content finally reached the consumer. Content creators made money by the millions, while the distributors made a few cents per unit. Content creators were household names. And that was the way it was suppose to remain.

But no one told the Internet entrepreneurs. Steve Jobs, Jeff Bezos and others did not grow up answering to the entertainment industry content owners. They grew up talking to venture capitalists, investment bankers and major shareholders. As long as they had a vision for their companies and could execute on that vision to the satisfaction of their investors, they were free to do virtually whatever they chose.

In the early days of the Internet, the major interactions between the techies on one hand, and Hollywood and the publishing industry on the other, were generally in the area of licensing pre-existing content for videogames, CD-ROM titles and the like. At that time, the low processing speeds of personal computers (and videogame consoles), combined with low network speeds and limited storage capacity, did not allow for the distribution of music or movies online. While books and other printed materials could have been distributed online, few viewed that as a viable business model.

But that has all changed over the last decade, as computers have become blindingly fast, storage has become dirt cheap, technology has permitted enormous files of music and video to be compressed to a manageable size, and broadband technologies have made it possible to distribute content almost instantaneously to an array of devices – from computers to cellphone and e-book readers.

Today, digital content distributors, such as Apple’s iTunes Store, Amazon’s Kindle Store and Google, have established themselves as the gatekeepers for the distribution of music, books and virtually everything else. Content creators/owners are still acting as if they controlled the distribution of their own products –- when it is obvious to virtually everyone outside the hallowed halls of content companies, that they do not.

That is not to say that the content creators are incapable of establishing their own online distribution networks that could rival (or exceed) those of Apple, Amazon, Google, et al. But the fact is, they have not done so, and there is no evidence that they will do so (at least not in the near future). The question is why they have failed to do so.

There are myriad factors that have lead to the situation that content creators find themselves in today, but there are two that are paramount. First, those in charge of the major content creators today (the movie studios, the record companies and the book publishers) reached the top of their professions because they were good at executing the old business model. Today’s movie moguls were good at distributing films to movie houses (and more recently distributing movies on shiny discs for home viewing). The same is true for record company executives, who reached the pinnacle of their industry by being good at distributing shiny discs to consumers through a multi-layered distribution system. Similarly for print publishers, who know how to print and distribute paper-based products. Not one of these top-level executives became successful by executing an online, digital distribution business model. To them, the choice is either try to squeeze a few more years of profitable operations out of their tried-and-true business model until they can retire with a fat pension -– dumping the digital transition in the laps of their successors. Or to try to execute a risky, digital distribution model with a significant chance of failure. Not surprisingly, most have chosen the former -– using litigation and lobbying for new laws to help them prolong the old business model and slow down the digital juggernaut.

The second primary reason for their failure to develop a successful digital distribution model is the fact that content creators are still dependent on their existing distributors for the bulk of their revenues. Despite all of the hoopla surrounding digital distribution, the fact is that the vast majority of content is still delivered the old fashioned way — in tangible form. Content creators cannot alienate their traditional distributors, who also see that their business model is going away and are trying to hang onto their markets as long as possible. Content creators cannot be seen as favoring digital distributors over the traditional distributors and cannot establish their own digital distribution systems that would be seen as competing with their traditional distributors.

Content industry executives, who may have hidden their heads in the sand when digital distribution was in it infancy, fully understand where the future lies. Unfortunately, they are carrying an enormous amount of baggage that they cannot just jettison for a new digital business model. As a result, entrepreneurs who are not encumbered by such baggage have been able to establish themselves as the dominant players in the digital distribution market. They are the ones who are wearing the crowns and reaping the spoils from their investment in technology. They are the kings.

There is no hard-and-fast definition of “network neutrality.” However, as a baseline, “network neutrality” (or “net neutrality”) should include the general principles that ISPs that provide access to the Internet should not be allowed to discriminate between users, websites or content. ISPs should provide the conduits for the exchange of messages, data and content, and should otherwise stay out of the way.

The Federal Communications Commission has jumped into this debate in its Comcast ruling on August 20, 2008, where it held that Comcast had violated the agency’s Internet Policy Statement when it blocked certain applications on its network. This practice, the FCC concluded, “unduly interfered with Internet users’ rights to access the lawful Internet content and to use the applications of their choice.”

Comcast appealed to the U.S. Court of Appeals for the D.C. Circuit, as have other public interest groups. Comcast argued that the FCC does not have the authority to enforce its Network Management Principles and the Commission’s order was invalid for that reason. The FCC argued that it has ancillary authority under Title I of the Communications Act to implement the broad statutory goals for an open, user-controlled Internet laid out by Congress.

A recent hearing (January 8, 2010), before the D.C. Circuit, did not go well for the FCC. The three judges were openly skeptical of the Commission’s assertion that several provisions in various laws, including the 1996 Telecommunications Act, gave the FCC the ancillary authority required to regulate network management.

If the appellate court rules against the FCC, which is likely, there are several avenues that the Commission can pursue. It can appeal the decision to the U.S. Supreme Court. It can also go to Congress to ask for legislative authority to pursue network neutrality.

It is also possible that the Federal Trade Commission could step in and develop network neutrality principles, under its general authority under Section 5 of the FTC Act, to go after unfair and deceptive trade practices.

To a great extent, the future of the Internet depends on enforceable network neutrality rules. Without them, the Internet may become balkanized, with different ISPs applying different rules to websites, users and content.