FTC Town Hall] Digital Rights Management FTC Town Hall – Panel 4: Informing Consumers

This is, in many ways, the heart of the issue being discussed today – how to let people know what they can expect when making purchases.

David Sohn – Center for Democracy & Technology.

Informed consumers provide an important safeguard against tensions and problems with DRM. If you have an informed consumer base that can vote with their feet, you create market pressures that push DRM in ways that are more flexible and minimize risk. One other argument for transparency is to enable DRM’s role in educating consumers about what’s permissible and what isn’t.

If DRM violates consumer expectations then there needs to be disclosure. If the DRM is just implementing widely understood aspects of business transaction, then disclosure is less of an issue – e.g. if consumer is aware they’re renting a movie, then it’s not a surprise that the DRM will enforce the rental terms. But there’s a middle ground – expectations are formed based on old models and don’t always translate to new models. When the expectations aren’t clear, a default is to look at open unprotected media formats as the baseline for comparison. People are used to making unrestricted use of content today – not to say that all content will be like that or that consumers will react negatively to all protected content, but you need to start with a baseline that compares the protected content to unprotected content.

How’s disclosure going in the marketplace? Some of the effects of DRM are being disclosed in terms of service or technical specs, but can be very hard to find, and often phrased to sound like legal boilerplate. That’s hard to understand and because users know that a lot of what’s in the terms is not meant for them but to provide legal protection for the company.

Andrea Matwyshyn – Wharton School (U Penn)

DRM Harms -
- Functionality Harms – limits on other programs; secret processes running in background
- Information security harms – enabling data theft for ID theft; enabling compromise of machines for botnets

This isn’t the first context that the law has been used to level information balance. One example would be in land tort law, where visitors to land have a right to inspect, and posessors of unsaffe

Regulatory goals – Improve transparency to fix information imbalance – inspect and test DRM products; warn consumers of hidden limitations, conduct, and risks. Protect consumers from unexpected harms – producers should repair known problems promptly.

Reasonable expectations of code safety
Contract – disclosure based on the understanding of a “reasonable digital consumer” (not like EULA language); e.g. “a small proprietary software program” does not equal warning of possible remote code execution risks.
Warning labels and possible recall – Borrow land-based duty to inspect, warn, protect business visitors and the public and to repair defects Labeling of all digital products with risks of functionality and information security harms; recall for extreme cases.

Lee Knife – Digital Media Association

Reads a prepared statement asserting that DRM can be an enabler of new consumer offerings. Contends that a subscription offering cannot exist without DRM (what about eMusic?). Content owners are reluctant to license content to distributors without some way of assuring license term compliance. He says that consumers might be willing to pay more for DRM-less content, or less for DRM’ed content. He says that easy access to content without additional steps is what consumers really want. His members give notice t to consumers of existence and conditions of DRM on products.

Hal Halpin – President, Entertainment Consumers Association

THey’re concerned about DRM and EULAs because consumer awareness and knowledge is very low. Gamers are far more tech savvy than the usual consumer, but even they aren’t aware of details.

EULAs should be standardized for packaged goods. Would also like to see labeling or other overt disclosure that’s digestible to the average consumer.

Matt Schruers COunsel for Computer & Communications Industry Association

What are we educating consumers about? Important to recognize that DRM is not necessarily co-terminus with protection under DMCA. We will ultimately have copyrights that expire and products that are DRMed but are not copyrighted. We all say DRM enables use, but that’s just wrong – it disables use. In some cases that’s good – we’re enabling transactions that can happen because certain uses are disabled. DRM can be valuable in the consumer experience.

Not just disclosure issues, but also important disclosures that need to be made about the law governing the work. Rights are often misrepresented, and being forthright about this is important.

Competitive issues can’t be addressed by disclosure – restrictions on competitive platforms or use of aftermarket products indicate that there’s a serious problem with the use of DRM to control consumer’s subsequent actions, which is an area that may be as important as disclosure. This is an anticompetitive method, which is part of the FTC’s purview.

Good quote from Matt – “For most people, copyright is the aspect of the law that most regulates their behavior on a daily basis.”

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