Tuesday, June 24, 2008

Proposed copyright amendments fall far short

It's been a couple of weeks since the federal government introduced its long-awaited—or dreaded—amendments to the Copyright Act. As was feared, the bill is inconsistent and leaves Canadians vulnerable to pay outrageous damages for activities that no one could reasonably confuse with piracy.

To give one example, you come home with a new CD and a new DVD. You load them both on to your spacious hard drive to play them on your computer or to transfer them to an iPod or other mobile device. Under the proposed new law, you're probably okay with transferring the CD, at least for most CDs now in stores (record companies could decide at any time to change that—it would now be entirely up to them). With the DVD, on the other hand, you could face a lawsuit for at least $20,000 in damages, and possibly several times that, depending on who sues you. And those are just statutory damages—there could be punitive damages as well. Even the tools you used to copy your DVD to your hard drive or mobile device would be banned under bill C-61. And if record companies decide they don't want you putting music on your iPod, with a simple change on their end, you could face a $20,000 lawsuit there as well.

There's no shortage of scenarios online illustrating dire consequences of the proposed legislation—even for legitimate personal use. Larry Borsato has some observations here, Alec Saunders gives his own example here, and, of course, Michael Geist's blog and Howard Knopf's blog are chock full of comments.

Even putting those scenarios aside, C-61 is a failure. All along, we were told by the government that that amendments were needed to bring Canadian copyright law into the 21st century. But C-61 focuses on 20th century technologies—ones that will still be with us for a while, but whose days are numbered. At the same time, it either ignores the networked technologies on the horizon or explicitly removes them from the exemptions contained in the bill.

At best, this is copyright legislation for the last decade, not for the future. The government chose to avoid any serious rethinking of what copyright law should look like and will need to look like. And it's understandable that they wouldn't want to take that on—it wouldn't be easy. But what we got instead was superficial tinkering. I don't know if it's even paving the cow paths so much as throwing some gravel onto them. We're going to have to go through this all over again before too long.

Copyright law is a minefield at the best of times. One of the challenges is that these laws have been violated by nearly everyone, and we didn't need digital technology to get to that point. Photocopiers, tape recorders, and VCRs have been used for decades in ways that were not Copyright Act-approved. Canada has never even had laws that allow people to tape TV shows to watch at another time—something that is only now being introduced with C-61 ... now that people have been time shifting for more than 20 years.

But copyright laws are like speed limits—we seem to be okay with having them on the books as long as their enforcement is less than zealous. While it was never spelled out in the Copyright Act that you wouldn't get in hot water for time shifting or many other copyright violations, it was commonly understood that there was almost no chance that you would face prosecution or a lawsuit.

Unfortunately, we now have industries with outdated business models chomping at the bit to sue as many people as they can for as much as possible. That's the danger of tinkering around with copyright law at this time. Imagine how life would be if an industry association could file suit against you every time they thought they had evidence that you'd gone above the speed limit. If the government was determined to go ahead and cross this minefield, it owed it to Canadians to be very careful about what acts would be allowed or disallowed under its proposed reforms, but C-61 just isn't well thought out or precisely worded.

In the U.S., more than 20,000 people have already been sued by the recording industry. One woman was recently ordered to pay nearly a quarter-million dollars in damages for having about two CDs worth of songs in a shared folder on her computer. It looks like the government was trying to avoid these kind of situations for Canadians when it created a $500 statutory damages cap for personal use infringement. And that would be great. Unfortunately, the current language of the bill is too convoluted to provide any comfort that this would be a real cap. If that's the government's intention, then it should be easy to clarify the language through amendments.

With any contentious legislation, you have to make decisions around whose advice you're going to ignore. The problem here is that the government chose to ignore—or at least give less priority to—what was best for Canadians and brought forth legislation that only please a small number of industry groups (CRIA, CMPDA) while trying to placate Canadians with a few soundbites—throwing them a couple of bones around format shifting and time shifting, which has been an everyday practise for decades, even if it was never formally supported by legislation.

Yes, this bill could have been worse, but it should have been much better. If the government wasn't willing to tackle the deeper issues around copyright law, it should have just left the whole thing alone. But the U.S. lobbyists weren't going to let that happen, so we got what you'd expect from a half-assed process and a desire to appease the lobbyists—even if it was at the expense of Canadians.

Instead of spending his time tinkering around with copyright laws, I wish Industry Minister Jim Prentice had focused on providing more resources for IRAP. It's one of the most important programs in Canada for bringing our economy into the innovation era—and has been a great help to startups in Waterloo Region. Unfortunately, the program has run out of money just two months into its fiscal year. If Prentice really wants to do something that will benefit Canadians, he can let C-61 die on the order paper and put his support behind IRAP.

Tuesday, June 03, 2008

Why start a startup?

The third StartupCampWaterloo will be starting soon—kicking off with a panel discussion of "why start a startup?" Maybe some startup founders will say that they needed some convincing on that question, but I suspect that if it's something you need to have answered, then maybe creating a startup isn't the best thing for you.

It's always going to be easier being employee #57 or #5,700 where you can have your job description and be given tasks to perform—maybe in a skillful way, but within a framework that is planned and managed by others. Every two weeks, money gets deposited in your bank account, even if you've been in a rut and have only been moderately productive. Want to go to a business event? Feel too sick to work? That's fine, you still get paid your full salary—no money comes out of your pocket. On top of that, you're guaranteed a paid vacation every year and probably have at least a basic benefits package.

It's a pretty good deal and one that most people are happy to take.

Forget all of that with a startup, at least at the beginning. But that's a big part of the appeal. You don't have a job description (or, if you do, it's pretty fuzzy) and you get to do things that no one in their right mind would hire you to do—developing a lot of new skills. You don't have to write a resume and go on job interviews to be asked silly questions hoping that someone will recognize your talents. You work with people you want to work with on the products of your choosing (preferably with a lot of market input) where you get to decide the strategy and how you'll execute. And you never have to stare at the clock and wish it was 5pm.

It's not for everyone, and if your startup grows into a bigger company, some of the freedom of the early days goes away, but for many people who have been there, there's no going back to being employee #57.

Monday, June 02, 2008

Waterloo Tech Digest - June 2, 2008

Compiled and written by
Gary Will
gary@garywill.com

In this issue:
  1. Funding for Igloo & Arius; details about Well.ca
  2. RIM creates $150M investment fund
  3. Virtek receives acquisition offer from U.S. firm
  4. MKS quarterly sales jump 67%
  5. Descartes sales continue at steady pace
  6. Arise reports $5M loss, plans to spend $16M on Waterloo site
  7. STOCK REPORT: Virtek, Sandvine repeat as best/worst performers
  8. Miscellaneous tidbits from Google, NDI, Com Dev
Advertising note: For people who have asked about advertising in the Tech Digest -- spots only become available once or twice a year, and this is one of those times. If you want to get a message in front of 5,000 people with an interest in the Waterloo tech community, and don't compete with any existing sponsors, just send me an e-mail and I'll give you more information. I think all but one of the sponsors we've ever had have renewed, some of them for years.

--Gary Will

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[1]---------------------------------------------------------------
Funding for Igloo & Arius; details about Well.ca
April 23, May 8, 23, 2008

Two new fundings were disclosed in May, along with details about Well.ca's previously-announced funding:
  • Igloo Inc. -- a spinoff from the Centre for International Governance Innovation (CIGI), which became a for-profit corporation in March -- has received $4 million from RBC Venture Partners. Joining Igloo's board is Kevin Talbot, managing director of RBC Venture Partners. Jim Balsillie is also a director. According to Igloo, its platform is now being used to support more than 550 online communities.

  • Arius Software raised $570,000 from 12 investors on April 28, according to OSC reports. No details were announced by the company.

  • Details about the Well.ca reported in the last digest: the company raised $2 million from two common share investors (including Jim Estill) in April and followed with another $425,000 from six preferred share investors on May 23.
[2]---------------------------------------------------------------
RIM creates $150M investment fund for mobile apps
May 12, 2008

RIM, in partnership with Thomson Reuters and RBC, has created the $150 million BlackBerry Partners Fund. The fund will be managed by Toronto's JLA Ventures and RBC Venture Partners and will invest in a variety of mobile applications and services. It will not limit its investments to applications that run on the BlackBerry.

The fund is looking to make investments in companies anywhere in the world that are developing applications for "mobile commerce (payments, advertising, retailing, banking), enterprise applications, communications, social networking, location-based services (navigation and mapping), media and entertainment, and lifestyle and personal productivity applications."

[3]---------------------------------------------------------------
Virtek receives acquisition offer from U.S. firm
May 13, 2008

New Hampshire-based photonics company StockerYale has made an offer to acquire Virtek for about $22 million. That's nearly 50% above the level that Virtek stock was trading a month ago and is about where the company was valued last September. StockerYale says it made the offer on May 13 and Virtek announced it three days later.

StockerYale proposes to pay Virtek shareholders 7.8 million shares of StockerYale stock (just under 20% of the company) with the balance of the price -- about $16.5 million -- to be paid in cash.

StockerYale shares trade on Nasdaq and the company has a market capitalization of about US$27 million. It has a Canadian office in Montreal. Over the last twelve months, it lost US$9.0 million on sales of US$30.5 million. StockerYale only had US$2.4 million in cash as of March 31, but it says it has a "non-binding indication of interest" from a lender to provide the funds for the acquisition.

Virtek said its board would meet during the week of Victoria Day to decide what action it would take in response to StockerYale's offer. So far, there has been no further announcement from either company.

[4]---------------------------------------------------------------
MKS quarterly sales jump 67%
May 6, 2008

MKS announced that it will be reporting sales of about US$21 million in the quarter ended April 30 (Q4 08) -- a 64% jump from the previous quarter and a 67% improvement from last year. It expects to report income before taxes of US$4 million, up from a loss of US$762,000 in Q3.

Part of the revenue jump was a $5 million licensing deal that the company announced in March and which was fully recognized in the quarter. Full Q4 results will be announced on Tuesday.

[5]---------------------------------------------------------------
Descartes sales continue at steady pace
May 29, 2008

Descartes reported earnings of US$1.1 million on sales of US$16.3 million in the quarter ended April 30 (Q1 09). Sales were up 2% from the previous quarter and -- driven by acquisitions made over the last 12 months -- up 23% from last year.

The company ended the quarter with US$46.9 million in cash, up US$2.8 million from the end of Q1. Operations provided US$3.4 million in cash in the quarter.

[6]---------------------------------------------------------------
Arise reports $5M loss, plans to spend $16M on Waterloo site
May 15, 2008

In its final quarter before its PV cell manufacturing facility opened in April, Arise reported a loss of $5.4 million in the quarter ended March 31 (Q1 08). Accumulated deficit stands at $28.6 million.

Arise now has $27.5 million in inventory on its books after paying about $26 million for silicon wafers in March.

It finished the quarter with $6.6 million in cash, but has since raised gross proceeds of $45.1 million through a share offering that close in May (see previous digest). Arise says it will spend about $20 million of those funds on additional silicon wafers and will spend $16 million on a new silicon manufacturing facility that will be built in Waterloo.

[7]---------------------------------------------------------------
STOCK REPORT: Virtek, Sandvine repeat as best/worst performers
May 2008

MKS must be wondering if anyone reads its news releases. It announces a huge quarter and the company's stock actually falls by one cent on the day the announcement is made. So the news was sent out again the next day, this time to better results, but MKS stock was still down slightly for the month. This comes after the company's announcement of its $5 million licensing deal in March which got no response from investors for over two weeks (and when the stock did finally jump, it was fuelled by insider buying).

The Virtek acquisition proposal helped push the company's shares to the top of our list for the second straight month. Virtek stock is now up 46% over the last two months.

For the month of May:

Virtek [TSX: VRK] +23%
RIM [TSX: RIM] +12%
--S&P TSX VENTURE INDEX +8%
--S&P TSX COMPOSITE INDEX +6%
Descartes [TSX: DSG] +1%
Com Dev [TSX: CDV] +1%
Biorem [TSXV: BRM] 0%
===============================
MKS [TSX: MKX] -1%
TurboSonic [OTCBB: TSTA] -3%
Open Text [TSX: OTC] -5%
RDM [TSX: RC] -9%
Dalsa [TSX: DSA] -10%
Arise [TSX: APV] -11%
ATS [TSX: ATA] -11%
Sandvine [TSX: SVC] -16%

It was another bad month for Sandvine shares, which finished at the bottom of the list for the fourth month in a row and the fifth time in the last six months.

RIM ended the month with a market value of $77.5 billion, adding the equivalent of an ATS plus Dalsa plus Com Dev plus Arise plus Descartes plus Sandvine to the total in May.

Companies with core operations outside the area:

ON Semiconductor [Nasdaq: ONNN] +32%
Adobe [Nasdaq: ADBE] +18%
Ansys [Nasdaq: ANSS] +18%
Oracle [Nasdaq: ORCL] +10%
McAfee [NYSE: MFE] +9%
Sybase [NYSE: SY] +9%
NCR [NYSE: NCR] +7%
Agfa-Gevaert [Brussels: AGFA] +4%
Google [Nasdaq: GOOG] +2%
===================================
Blue Coat [Nasdaq: BCSI] -14%

That's two months in a row of 32% gains for ON Semiconductor.

[8]---------------------------------------------------------------
Miscellaneous Tidbits
  • Roger Skubowius has left Google, three years after the company acquired Reqwireless, which Skubowius founded in 2001.

  • Jamie Fraser is the new CEO of NDI. He succeeds David Crouch who announced his plans to retire from the position when NDI was acquired by Audax Group in December. Fraser had been SVP at Connecticut's Amphenol Corporation, an $8 billion, Nasdaq-listed company. He had been with Amphenol for more than 10 years.

  • Com Dev completed its US$12.2 million acquisition of the passive microwave devices product line from L-3 Communications (see February digest).