[FTC Town Hall] Digital Rights Management FTC Town Hall – Second panel – legal landscape

The panel is moderated by Carl Settlemyer, Attorney with the Division of Advertising Practices, FTC, who gives a 3 minute overview of US copyright law (whew!).

Rob Kasunic – Principal Legal Advisor, U.S. Copyright Office. The DMCA. There’s always been a symbiotic relationship between technology and copyright laws.

He draws a link between DRM and access controls on files in operating systems. These were just technological methods, without any legal backing. Traditionally, copyright law was supported by practical constraints on physical copying, but with technology the law may not be enough to protect works.

Congress determined that the solution was to erect legal support for technological self-help measures used ot protect copyrighted works distributed in digital form. The current models of streaming subscription services are an example of models made possible by these protections.

Section 1201 created prohibitions for two activities – circumvention of technological measures (a1), and distribution of devices that circumvent measures (a2). No prohibition on fair use and other traiditonal limitations of the exclusive right of copyright – free to circumvent to preserve legitimate use.

Section 1201 rulemaking – Congress created a triennial rulemaking process as a “fail-safe” mechanism- carried out by Copyright OFfice. Library of Congress may create an exemption for “particular classes of works” for the ensuing three-year period. http://www.copyright.gov/1201/

Steven Metalitz – Attorney – Mitchell Sliberberg and Kunpp (Counsel to Pubklishers, Software Alliance, Entertainment Software Association, MPAA, and RIAA) – use of access controls has encouraged more access by more people. (?) Offers more choices to consumers. As DRM evolves, choices broaden. DRM has encouraged rights-holders to make more content available. DRM as a “key enabling technology” that should be encouraged. Copyright owners recognize the issue of disclosure to consumers and are experimenting with different methods to do so. Content companies have a great incentive to match the expectations of consumers to make their businesses live.

Corynne McSherry – Electronic Frontier Foundation

Copyright is not just about protecting the rights of owners to control creative works – it’s a balance of the rights of content owners and the public. Unfortunately DRM can upset that balance in ways that are harmful to consumers and innovation.

User rights – Fair Use – protects basic personal uses. Reasonable consumer expectations include personal and backup copies, time-shifting, space-shifting, etc. Consumers also expect innovation – new tools and uses, e.g. SlingBox, BnetD, Real DVD. Consumers don’t expect to have to repurchase content every time a new technology comes along. Content owners use the anti-circumvention provisions of the DMCA to shut down innovation. RealDVD tried to play by the rules in licensing DVD technology to make backup copies of DVDs, but they were sued and are now under a restraining order.

There’s also “first sale rights” What about content in the Kindle?

Consumers feel abandoned when services shut down – e.g. Yahoo! Music, MSN Music, etc.

The rest of the story – EULAs – Contract law.

We need disclosures in advance, not pop-ups after you purchase. Disclosures won’t solve the problems with DRM, though.

Justin Hughes – Cardozo School of Law, Yeshiva University

Ten years after the DMCA, we have a world full of digital locks, but is not characterized by digital lockdowns. We’re now in a better place to understand the impacts of DRM. When the DMCA was drafted, there wasn’t much discussion at all about disclosure. Are we here to engage in substantive regulation of the marketplace, or regulation of information? We do have problems of full and adequate disclosure. But we also have substantive issues – securing consumer rights.

DMCA as an attempt at substantive regulation. If your regulation is sufficiently light, it becomes part of the background environment. That’s been true of the DMCA. We might have ended up in a technological arms race, but we don’t live in that world because of the DMCA. What the regulation did not do was to attempt to determine the relation between copyright and contract law. Other countries have provided for capacity to circumvent the DRM in certain circumstances, but that would not be easy in the US.

We could do more on information regulation, but we just don’t know enough. Government agencies that regulate don’t do empirical research about consumer expectations. But the threat of regulation can help keep content owners doing the right things.

Salil Mehra – Beasley School of Law, Temple University

Common Law Fraud – making an intentional, material misrepresentation to another with knowledge of its falsity, for the purpose of inducing the other person to act. The other person relies upon such misrepresentation with resulting injury.

Something like fraud happens with the way DRM is implemented.

Digital Fraud – differences? Don’t usually see Affirmative misrepresentation, but rather concealment – things that appear whole, but are not. An unfair surprise leading consumers to get less than they bargain for. Technology provides new ways of giving people less than they thought they paid for. People buy digital content but don’t realize what they’re buying.

Nicolas Jondet – PhD Candidate, Edinburg Law School

Can we be informed by what’s happening in French law?

DVD Region coding is an issue outside the US. Another issue is videogames. There’s been a lot of litigation in France around DRM on music CDs, where it was introduced early. The most important issue is private copying – there’s a private copy provision in France. You pay a tax on blank media that is supposed to compensate, and consumers expect they’re allowed to make a copy.

French law wasn’t passed until 2006.

Court held in 2005 that DRM CD sold by BMI was defective because it wouldn’t play on all players. But a court held that Warner was ok having disclosed that a CD wouldn’t play on all players. Under French law (according to a court) if you use the CD logo it must play on all players or else it’s a deceptive practice. Sony was found guilty of deceptive practices for Sony Connect service, because they didn’t disclose that you could only purchase content with a Sony device.

New legal requirement that DRM can’t prevent copyright protections and there must be interoperability between DRM schemes. No cases brought yet, but it has had an impact – Apple called it “state-sponsored piracy”, and US thought it was in breach of WTO. But a few months later, Apple changed to DRM-free music.

Carl asks about advertising – does ad language conflict with terms and conditions when they claim you can “own” or “buy” content? Steve – if it’s a sale then first sale doctrine apply, but if it’s a license, then it depends on the terms of the license. But first sale applies to the copy you purchase, not the copy you’ve made online. DRM may help provide a solution to this problem – could enable someone to make a copy, transfer it to someone else, and then no longer have access to the first copy. Corynne – you don’t need DRM to answer this problem. Just have the consumer delete the original copy. (audience mutters, “yeah, right”). The distinction between a sale and a license has been an important one – and if there’s advertising implying you’re owning or buying, then it’s deceptive. Justin – do not assume that the physical world analogies translate to the online world. Maybe we shouldn’t be using words like own or buy.

In response to a question about whether it’s fair to use terms like “buy” and “sale” to transactions that depend on the continued operation of authentication servers, Steve asks whether people trying to innovate should be held hostage to having to continue business in perpetuity. That seems disingenuous to me – people should feel free to try those business models, but make it clear that it’s a content rental or loan or something.

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