A Texan family has been handed a harsh lesson in what the Creative Commons “movement” really means for creatives who use its licences.

Filmmaker Damon Chang uploaded a family photograph of his young niece Alison to Flickr, only to discover weeks later that it was being used by Virgin Mobile in an expensive advertising campaign. Neither Alison Chang nor her youth counsellor Justin Wong, who took the photograph, have received compensation for the use of the image – having handed over the rights without realising it. Damon Chang used a licence which permits commercial reuse – and even derivative works to be made – without payment or permission of the photographer: Merely a credit will do to satisfy the terms of the licence.

Both Changs believe the use of the photograph was insulting and demeaning, as Alison – a minor – became known as the “dump your pen friend girl”. And after taking legal advice, the Chang family is now suing Virgin Mobile USA and the Creative Common Corporation.

Virgin hoovered up over 100 “user generated” images for its ad campaign – saving itself a fortune. The lawsuit accuses Virgin of invasion of privacy, libel and breach of contract, but it’s the section of the lawsuit that names and shames Creative Commons that promises to have lasting consequences for “Web 2.0″ and “user generated content”.
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For all but three of the past 17 years, Microsoft has been involved in antitrust litigation with government agencies. That’s enough to wear anyone down. But as Europe’s highest appeals court delivered its judgement on Monday, I did notice some ennui – not from dogged old hacks, but from a new generation of pundits.

Take this example from former teenage dot.commer Benjamin Cohen – who was six when FTC first trained its lawyers on Redmond. After taking a pop at the at “anti-Microsoft lobby”, he declared on the Channel 4 News website:

The judgement is based on an old case and in many ways an old world – where Microsoft really was the dominant player in information technology

Stop kicking the kindly old man in the Windows outfit, he said.

It’s hard for it to have too much relevance today.

You’d think from this brilliant piece of insight, that there is hardly anyone left who uses Microsoft Windows or Office. Maybe, like the Acorn Archimedes, it’s a hobbyist system lovingly kept alive by a few, devoted enthusiasts! Benji even sounded slightly resentful at being torn away from Facebook (or Sadville) for a few minutes, to write about this piece of computer history.

But the question of “how we deal with Microsoft” is more relevant than ever for two very important and reasons: the second follows from the first.
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So was nine months of relentless iPhone hype and froth just a distraction? Not quite, but you could be forgiven for thinking so. I believe Apple’s most important product of 2007 was actually announced this week, and its significance has been slow to sink in. It might be one of the cleverest moves Apple’s ever made.

The ‘Jesus Phone’ today looks like it was really ‘John the Baptist’.

I hope Apple has ordered enough parts, because the iPod Touch is going to be a sensation – at least for one Christmas shopping season, if not more. Not only does the Touch bring Apple’s big gimmick breakthrough, its capacitive multi-touch interface, to its key music products, it does so at a very low entry point: $299 (or £199). That, rather than $499, is the market sweetspot.

But the whizzy interface is simply a means to an end. Because the Touch has Wi-Fi, so you get the most attractive web browsing device at a very low cost, too.

And as a bonus, the importance of which few pundits or bloggers have realised yet, Apple stealthily enters a new market altogether: the connected PDA. This ‘Second Box’ business is one that almost everyone has neglected, because they’ve followed the conventional wisdom that Everything Must Be Converged. But what if that isn’t true?

Unlike the iPhone, which is locked down at the carrier’s request, third-party applications will not be restricted on the Touch. All it’s lacking is Bluetooth – which was apparently in early specifications, but didn’t make it into version 1.0 – and removable storage.

In short, the Touch brings much of the value proposition of the iPhone to people who are perfectly happy with the phone they’ve got – or who are locked into a long contract with a network operator. All along, I’ve pegged the iPhone as a defensive move disguised as an offensive strategy. If Apple hadn’t introduced a phone, it would be marked down for imminent death at the hands of the mobile phone companies – Sony Ericsson does music very nicely indeed.

My, how that script is going to need a rewrite, after this week…

Perhaps the clues were there all along. iSuppli pegged the bill of materials for the iPhone at just over $200, giving Apple a profit margin of over 50 per cent. That suggested Apple could put much of the technology in a much lower-priced device, which it’s gone and done.

As we can now see, Apple has fulfilled its primary responsibility to its shareholders: to strengthen and extend the appeal of its most successful product line, the iPod.

Where does this place Apple in the great ‘convergence’ debate?

Sitting very nicely, actually. With the iPod Touch, Steve Jobs is saying: ‘Look, you can have your One-Box converged device if you really, really want it. But people won’t mind two – if the second is attractive enough.”

Opting for ‘best of breed’ actually gives you much more choice, of course. In Europe and Asia – although not, alas, the US market – small and stylish phones are available for next to nothing. These do 3G, are so small you can wear them as jewelry, and they’ll also run Mobile24 or Google Maps, or Opera Mobile, very nicely. Because of a strange bug for which Nokia and Zimbra can both be blamed, my ‘dumbphone’ actually does IMAP email fetches more reliably than an E61i. The consequence is that the ‘smartphone’ category has really become a distinction without a difference.

What the introduction of the iPod Touch implies is that you can keep your beautiful, small, low-end or mid-range phone. The Touch will take care of music, and once it has Bluetooth, the rest. Long live the PDA!

The losers in this are manufacturers of do-it-all converged devices, particularly high-end smartphones. Nokia has most to think about here because, as the champion of One Box converged products, it’s been undertaking some very ill-advised marketing recently.

Firstly, it’s selling its easy-to-use consumer devices – phones – as “multimedia computers” – reminding us that computers are hard-to-use, and using a word, “multimedia”, that no civilian has ever, ever used. And it’s been making fun of the public who choose several best-of-breed devices, with its Great Pockets ad campaign:

Now my first thought on seeing this was not, ‘how stupid, carrying several devices’, but ‘Hey! What a fantastically useful pair of trousers!’

But don’t listen to me – I’m funny like that.

I’m the contented user of a Nokia N800 tablet – it has a great radio and a decent browser. But even with its generous removable storage slots, and its 800-pixel screen, I can’t imagine many people opting to pay a premium – it’s around $385 retail in the US – to buy the tablet over an iPod Touch.

At a stroke then, Apple makes one market category look ridiculous, while stealthily entering another.

More dismal news for the US consumer. After the simultaneous failure of Municipal Wi-Fi projects in three major US cities – something we predicted four years ago – faster, cheaper mobile data looks further away than ever.

So why are Google lobbyists advocating for the next wave of collapsing wireless initiatives – rather than helping things?
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The record producer and co-founder of Def Jam has only been “co-head” of Sony’s Columbia Records since May, but he’s already setting about destroying the old business so a new one can be built in its place.

It remains to be seen how effective he will be, but for now Rubin is prepared to say what seasoned executives think, but can’t say out loud. And he spelled out the future of the record label in a lengthy profile in this week’s New York Times:

“Columbia is stuck in the dark ages. I have great confidence that we will have the best record company in the industry, but the reality is, in today’s world, we might have the best dinosaur. Until a new model is agreed upon and rolling, we can be the best at the existing paradigm, but until the paradigm shifts, it’s going to be a declining business. This model is done.”

Rubin advocates a subscription model instead. Not one with a capped number of discrete downloads, but one where music “will come anywhere you’d like … a virtual library accessible from your car, from your cellphone, from your computer, from your television. Anywhere.”

Once that’s accepted, the music business will be much bigger than it is today, he believes.
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At times you can feel sorry for Nokia. The company is damned when it dares to plan for the future, and it’s damned if it doesn’t.

But that illustrates the depth of its dilemma. Today, Nokia is phenomenally successful in one business – handsets – which generates £27bn ($54bn) a year, with a margin of between 15 to 20 per cent.

However, Nokia relies on a small number of powerful customers as its route to market. This isn’t a problem for every business. If you sell fighter aircraft, you know who your handful of customers are, and can schmooze them directly. If you sell bangles from a market stall, you can choose which market you sell from. Nokia doesn’t have the luxury of either: its channel is its market.

And “getting from here to there” is the problem.

At great expense last week, Nokia began to imagine itself as a very different kind of company: a vertically integrated services business. Mobile users would flock to the company’s new portal, Ovi, for games, music, information and “social” interaction. You might call this a “post-operator” world, but it’s also a “post-Nokia” world, as it presumes that both data and devices are commoditised. It’s a Plan B.

However, the strategy takes today’s complex mobile data eco-system and promises to torch it. Today, there’s room for a Real Networks selling games or ringtones, for example, or an AQA providing an answers service. Nokia’s Ovi portal effectively declares war on all these smaller service providers. That can be considered bad manners (or a business necessity) – but it isn’t fatal to Nokia’s plans. It’s the biggest, would-be service companies who are the most threatened.
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