The Laboratorium
May 2009

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What if Proxy Contests Were Decided by Asking Who Had More Facebook Friends?

Quigley Corp. v. Karkus, No. 09-1725, 2009 U.S. Dist. LEXIS 41296 (E.D. Pa. May 15, 2009):

The Quigley Complaint alleges that the Defendants are attempting to obtain control of the company by means of materially false statements in proxy materials. In the Complaint Quigley contends that the Karkus Defendants have concealed Mr. Ligums’ participation in the proxy contest … .

In addition, however, Quigley presents a variety of evidence that Mr. Ligums has extensive personal and professional connections with other members of the Karkus group.

Quigley notes—and Mr. Ligums acknowledges—that the website for Mr. DeShavo’s construction business includes a testimonial from Mr. Ligums. Further, Mr. Ligums also testified that his son holds a $ 300,000 recorded mortgage on Mr. DeShavo’s home. Quigley asserts that it is also relevant that Mr. Ligums is Facebook “friends” with Mr. DeShavo and one or more of Mr. DeShavo’s children. Quigley also highlights—and, again, Mr. Ligums acknowledges—that Messrs. Leventhal, DeShazo and Karkus were invited to Mr. Ligums’ daughter’s wedding.

What do you want to bet it was an associate, rather than a partner, who had the bright idea of checking on Facebook? The court? It was all for naught, though, as the court dropped a footnote:

For purposes of this litigation, the Court assigns no significance to the Facebook “friends” reference. … Regardless of what Facebook’s apparent popularity or usefullness may say about the nature of 21st century communications and relationships, the site’s designers’ selections of icons or labels offer no substance to this dispute. Indeed, the Court notes that electronically connected “friends” are not among the litany of relationships targeted by the Exchange Act or the regulations issued pursuant to the statute. Indeed, “friendships” on Facebook may be as fleeting as the flick of a delete button.

I wouldn’t endorse it as a general hard-and-fast rule, but this seems like a sensible conclusion. There’s a reason I refer to Facebook “friends” as “contacts” in my scholarship. The social reality of a Facebook friending is, on average, a lot less significant than a $300,000 mortgage.

My Personal Credit Crisis: And More

Edmund Andrews responds, explaining why his second wife’s bankruptcies “had nothing to do with our mortgage woes.” Megan McArdle begs to differ. She finishes with a paragraph that sums up my own feelings quite well:

On a very broad note, I don’t see this as a story about the goodness or badness of Andrews or Barreiro—and I’ve been dismayed by some of the nastiness about her in comments here and elsewhere. Rather, I think this matters because the story Andrews told was basically about the subprime crisis, and the book casts him as a sort of everyman, lured in by cheap credit and a likeable scoundrel of a mortgage broker. That may be what happened to many, or most people in the mortgage crisis—but the back to back bankruptcies strongly suggest that this is not what happened to Andrews. That said, I think the story told with the bankruptcies included would still be a story well worth telling.

My Personal Credit Crisis: There’s More

It turns out that Edmund Andrews wasn’t exactly telling the whole truth in his New York Times Magazine piece about how his subprime mortgage melted down. The story conveniently omits his new wife’s bankruptcy filing—her second. Megan McArdle has a great piece of investigative journalism that digs through the court records to reconstruct more of the story. Laura Rowley and Brad DeLong also supply helpful commentary.

Facebook Phishers Using Latin to Obfuscate Their Malware

A common technique among malware authors is to evade virus scanners by piecing together an encrypted version of an evil code segment a few letters at a time, then decrypting and executing it. This particular version uses Latin and Latin-sounding names for its functions and variables. It still looks like gibberish, but it’s oddly disorienting gibberish.

GBS Blogging: Brewster Kahle in the Washington Post

Brewster Kahle of the Internet Archive has a barn-burner of an op-ed in today’s Washington Post. He makes the argument connecting the class action and the monopoly problems about as succinctly as its possible to make it:

It may seem puzzling that a civil lawsuit could yield monopolies. Traditionally, class-action lawsuits cluster a group of people who have suffered the same kind of harm as a result of alleged wrongful conduct. And under this settlement, authors who come forward to claim ownership in books scanned by Google would receive $60 per title.

But the settlement would also create a class that includes millions of people who will never come forward. For the majority of books — considered “orphan” works — no one will claim ownership. The author may have died; the publisher might have gone out of business or doesn’t respond to inquiries; the original contract has disappeared.

Google would get an explicit, perpetual license to scan and sell access to these in-copyright but out-of-print orphans, which make up an estimated 50 to 70 percent of books published after 1923. No other provider of digital books would enjoy the same legal protection. The settlement also creates a Book Rights Registry that, in conjunction with Google, would set prices for all commercial terms associated with digital books.

His preferred course of action: reject the settlement and create a public scanning project:

There are alternatives. Separate from the Google effort, hundreds of libraries, publishers and technology firms are already digitizing books, with the goal of creating an open, freely accessible system for people to discover, borrow, purchase and read millions of titles.

It’s not that expensive. For the cost of 60 miles of highway, we can have a 10 million-book digital library available to a generation that is growing up reading on-screen. Our job is to put the best works of humankind within reach of that generation. Through a simple Web search, a student researching the life of John F. Kennedy should be able to find books from many libraries, and many booksellers — and not be limited to one private library whose titles are available for a fee, controlled by a corporation that can dictate what we are allowed to read.

I agree with his diagnosis but disagree with his prescription, in that I think the settlement is salvageable. The op-ed, having put its finger on the orphan works issue, then whistles its way past the problem of what we’ll do about orphan works without some kind of legal framework to immunize scanners and distributors. The settlement, whatever its concentration-of-power flaws, does genuinely help bring this lost generation of books back into the public sphere.

My Personal Credit Crisis

Edmund Andrews is an economics reporter for the New York Times, and he still managed to get in way over his head on his mortgage. His story is funny, humane, and intelligent—an instant classic of economic crisis journalism:

As I walked out of the settlement office with my loan papers, I couldn’t shake the sense of having just done something bad … but also kind of cool. I had just come up with almost a half-million dollars, and I had barely lifted a finger. It had been so easy and fast. Almost fun. I couldn’t help feeling like a high roller, a sophisticated player who could lay his hands on big money at a moment’s notice. Despite my nagging anxiety about the gamble that Patty and I were taking, I had whipped through the pile of loan documents in less than 45 minutes.

The Sorry State of Journalism

The current “Latest News” at

  • Body found in hunt for prof suspected in killings
  • Woman’s death at resort sparks questions
  • Fog helps firefighters tackle massive blaze
  • Pope stresses harmony in speech at mosque
  • Commentary: Pope’s message might prove risky
  • Ticker: Obama to test his comedic skills
  • Three princes and a frog team up for rainforests
  • South Africa gets flamboyant new president
  • Preacher: God told me to sell stocks
  • Wounded soldier battles to finish marathon
  • ‘Brady Bunch’ mom hugs a lot of people
  • When will the recession be over?
  • Sex-starved Kenyan sues over boycott
  • Whoopi Goldberg: Why I joined ‘View’
  • iReporters reveal their Star Trek secrets
  • Pasta lady takes her wares on the road
  • Hawks dive bomb woman in her yard
  • Watch Afghans play ‘polo on steroids’ buzkashi
  • CNN Wire: Body discovered near place…

I count at most two pieces of actual news in there.

GBS Blogging; Farhad Manjoo Supports Nonexclusivity

Slate, Your Search Returned 12 Million Books:

I’ve long called on the publishing industry to negotiate with Google. Now I’m calling on the publishing industry to negotiate with Google’s competitors. Authors and publishers should be forced—either by the court, or through legislation—to grant rival companies like Amazon and Microsoft the same rights that they’re giving Google. Not only would this likely satisfy the government’s antitrust concerns, it would create a truly vibrant market for books. Google didn’t create a great Web search engine because it alone had access to everything published online; it created a great Web search engine because all its rivals had access, too, and Google was forced to think of an entirely new way to approach searching the Web. The story is no different for books: No single company should be given exclusive legal access to the printed word. That would be a disaster for authors. More importantly, it would be a disaster for readers as well.

GBS Blogging: The Public Index

Remember how I said to watch this space for more news about our plans? Well, I’ve got news. Today would have been the deadline for filing objections to the settlement, had the court not granted a four-month delay to let people better understand the proposed settlement and how it would affect them. What better way to mark the date than by announcing our plans to help foster discussion and analysis of the settlement?

New York Law School put out a press release today explaining how we’ll use the four-month delay. We’ve got three tricks up our sleeve. All three are about harnessing the power of public collaboration.

First, we’ll be launching a web site called the Public Index. The name is a bit of a pun. On the one hand, there’s the massive index of books that Google is assembling, the greatest and most important catalog ever assembled. The universal online library needs a good index, and needs it to be available on fair terms. On the other hand, the site itself is also a kind of index—an index to the important conversations taking place over the future of books and publishing.

The Public Index will be a one-stop shop for settlement news and commentary. We’ll have an archive of legal documents and significant analyses of the proposed settlement, a set of discussion forums, and—this is the fun part—a tool for paragraph-by-paragraph annotation of the settlement. We’re hoping to create a space where legal experts can share their knowledge and their detailed readings in a way that makes it easier for those interested in the settlement to know what it really means for them. We’ll help facilitate the conversations, directing attention to places where people have burning questions, cooling off overheated arguments, and suggesting topics for collaborative exploration.

Second, we’ll be taking our amicus brief and putting it online for public editing and discussion. In the run-up to May 5, we’d pulled together a fairly complete amicus brief. We could use the four-month delay to buff it up a few more times ourselves, but the improvements we could make to it pale in comparison to the ones you could make.

Thus, we’re open-sourcing the amicus brief. It will go live on the Public Index in a wiki version. Once there, please take it apart, fix its mistakes, add your own insights, and put it back together in exciting ways we could never have envisioned. At the end of the summer, we’ll collect all the ideas and revisions from the wiki, roll them back together into a single polished version, and file that.

It’s possible that during the summer, the brief will fork, as different groups of interested editors realize they have different perspectives that can’t all be crammed into one brief. So much the better! In addition to our own brief, we hope that the wiki helps other briefs germinate. The wider the range of views about the settlement are placed before the court, the better-informed its consideration of the issues will be.

Third, we’ll be hosting a conference on the issues raised by the proposed settlement. The rescheduled fairness hearing in the case will be on Wednesday, October 7. When you leave the Foley Square courthouse, just stroll across on Worth Street to New York Law School’s new classroom building to our conference on Thursday October 8 through Saturday, October 10. Thursday will be a tutorial day, with presentations walking through exactly how the settlement fits together and how it works. Then on Friday and Saturday, we’ll have an interdisciplinary academic conference on what the settlement means for society, copyright law, the publishing industry, and for the book itself. To bring everything full-circle, we’ll publish the papers written for the conference in a special symposium issue of the New York Law School Law Review.

We’re looking forward to seeing your comments on the settlement, edits to our brief, and questions at our conference. Keep watching this space for announcements, and, of course, feel free to email with any questions.

GBS Blogging: LIbraries’ Amicus Brief Filed

The American Library Association, the Association of College and Research Libraries, and the Association of Research Libraries today filed an amicus brief with the District Court. We’ve known this was coming for a while; these groups were the first to announce that they’d be filing an amicus brief. The timing is interesting, since they’re choosing not to wait until the new September deadline. (It makes sense, since you have to figure that their brief, like everyone else’s, was in or near the final stages of editing when the court announced the delay.)

The brief embraces a theory I first saw expounded by Brett Frischmann: that Google’s database of scans will constitute an “essential facility” under antitrust law. Antitrust scholars debate whether essential facilities still has legs. To the extent that it does, however, the argument runs that since the settlement will create a product that libraries will have no choice but to purchase from Google, Google should be obligated not to impose unfair terms on them. The brief also gives a careful airing to some of the privacy and censorship concerns that librarians are particularly attuned to.

Perhaps the most interesting thing about the brief is its recommendation to the court:

The concerns discussed above all flow from the concentration of power over the two related essential facilities — the ISD and the block of copyrights managed by the Registry. Fortunately, the Settlement that created these essential facilities also contains a means of addressing the possible abuses of the control the Registry and Google possess over them. Specifically, the Settlement provides that this Court “shall retain jurisdiction over the interpretation and implementation of the Settlement Agreement.” Thus, the parties acknowledge this Court’s authority to regulate their conduct under the Settlement. The Library Associations urge the Court to exercise this authority vigorously to ensure the broadest possible public benefit from the services the Settlement enables.

The brief then goes on to discuss specific mechanisms for implementing this judicial oversight, such as “Any library or other possible institutional subscriber must have the ability to request this Court to review the pricing of an institutional subscription.” The model here is the ASCAP and BMI consent decrees, which let customers petition a supervising court for review if ASCAP or BMI overstep their bounds. Provided the court is willing to exercise this degree of oversight, the brief comes down in favor of the settlement.

Jonathan Band, frequent amicus, drafted the brief for the library associations.

Are We Talking About the Same Case Here?

Kermit Roosevelt:

When the Supreme Court considered a copyright case involving the latest file-sharing methods in 2005, Souter’s opinion for a unanimous court showed a deep understanding of peer-to-peer Internet applications. It has won praise from both the legal and the high-tech communities.

Oh, you mean Grokster? See, the way I remember that case is that the Court split so badly on the legal issue before it—whether Grokster was capable of substantial noninfringing uses—that it simply ducked the question entirely. I also remember that the opinion was unanimous in name only, since it featured two “concurrences” profoundly at loggerheads with each other over the issue Souter’s opinion didn’t tackle. And I also remember that the criticism of the opinion from the copyfight side of the legal community was outweighed only by the criticism of the opinion from the high-tech community.

I understand the loyal law clerk’s desire to praise his retiring judge. And I agree with him that Souter has been an excellent and underappreciated Justice. But if there’s one thing Souter’s own work would never contain, it’s this sort of effusively inaccurate troweling.

GBS Blogging: David Eddings Opts Out

He’s up to twenty-six books now? Yowza.