IP: ACT letter says Congress must not set digital rights standards

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Declan McCullagh <declan () well com>

---

From: "Mark Blafkin" <mblafkin () actonline org>
To: declan () wired com
Subject: PROPOSALS TO PROTECT DIGITAL MUSIC WILL BACKFIRE, ACT TELLS
CONGRESS
Date: Mon, 8 Apr 2002 14:52:6 -0400

FOR IMMEDIATE RELEASE
April 8, 2002
Contact: Mark Blafkin
(202) 331-2130 x104; mblafkin () ACTonline org

GOVERMENT-MANDATED PROTECTION OF DIGITAL MUSIC WILL BACKFIRE
ACT Tell House Committee that Many Proposals Could Hinder Innovation, Harm
Small Companies

Washington, DC - Today, the Association for Competitive Technology (ACT)
sent its written comments on copyright issues related to digital music to
the House Subcommittee on Courts, the Internet, and Intellectual
Property.  The comments were filed in response to a call by the
subcommittee for all interested parties "to submit written views on the
merits of relevant digital music issues and related proposed amendments to
the Copyright Act."

In the written comments, ACT voiced its concerns about the potentially
devastating effect of current proposals regarding digital music to
innovation and the already thriving digital rights management marketplace.
ACT opposes government-mandated and managed technology standards, for the
following reasons:

•    The government should not pick winners and losers through its
certification process; especially while the IT industry is working to
achieve an open DRM standard.

•    These standards will "freeze" technology by requiring government
approval 
of design changes.  Instead of real-time innovation, we could easily end up
with a one-size-fits-all standard.

•    Publishing standards on government web sites makes it too easy for
hackers to circumvent.

•    Innovators can't receive government certification if your copyright
protection technology isn't "reasonably priced" according to a current
draft of a legislative proposal.

•    Standards-setting bodies often become captives of large companies—even
in 
industry standards organizations.   But when the standard carries the force
of law--allowing only "certified" tools—a few large firms could choke
innovation.

ACT's comments are available online at www.actonline.org.

For more information, please contact Mark Blafkin at 202-331-2130 x104.


ACT is a national education and advocacy group for the technology industry.
Representing mostly small- and mid-sized companies, ACT is the industry's
strongest voice when it comes to preserving competition and innovation in
the high tech sector. ACT's members span the industry, including software
developers, systems integrators, IT consulting and training firms, and
e-businesses.

-30-







April 8, 2002

F. James Sensenbrenner, Jr.
Chairman
John Conyers, Jr.
Ranking Member
Committee on the Judiciary

Howard Coble
Chairman
Howard L. Berman
Ranking Member
Committee on the Judiciary, Subcommittee on Courts, Internet, and
Intellectual Property

Chris Cannon
Member of Congress
Rick Boucher
Member of Congress

VIA FACSIMILE to the Subcommittee on Courts, Internet, and Intellectual
Property

Re:  Digital Music Copyright Issues

The Association for Competitive Technology (ACT) submits the following
views pursuant to your request for information on digital music
issues.   ACT represents over 3,000 information technology (IT) companies
and professionals, including those involved in creating solutions to
transmit digital content.  We strongly believe that the marketplace,
without the assistance of additional legislation or regulation, is in the
best position to respond to the demands of consumers and copyright holders.

With the emergence of web-services, it is a priority to effectively respond
to the estimated $270 billion opportunity for digital content.  Our
comments are broken into two parts.  Part one is a discussion of the
current digital rights management (DRM) technologies as applied to digital
music.  Part two is a discussion of the proposed amendments to sections 109
and 117 of the Copyright Act as well as certain parts of proposed
legislation.

We have limited our discussion to "relevant digital music issues" in
keeping with the parameters of your request.  We note, however, that many
of our comments can and should be applied to other forms of digital content
(e.g., movies, digital television broadcasts, et. al.).

In preparing this document, ACT mainly drew upon the innovations in the
marketplace.  In addition, ACT reviewed the Library of Congress Copyright
Office section 104 report as required by the Digital Millennium Copyright
Act (DMCA), several of the public comments on this issue as well as
proposed legislation such as the Music Online Competition Act (MOCA).

I. Overview and status of market based content management technologies

Currently, the flow of legitimate online music is merely a
dribble.  Content owners are hesitant to release content for fear that once
a song is lost to digital pirates, all value in the song's investment and
commercial opportunities are lost as well.  Despite differences in opinion,
the IT industry and entertainment industry seem to agree that it's going to
take continued development of new technology and new business models to
provide DRM while expanding consumer distribution, convenience, and choice.
In other words, a DRM model needs to allow consumers to rent, buy, time
shift and place shift any piece of lawfully acquired music.

Content owners, device manufactures and IT companies have agreed that the
successful DRM solutions will have these features:

•    DRM software and devices should be so easy to use that they're nearly
invisible to the consumer, even as they move digital entertainment content
among their own household and personal devices.

•    Users should be able to recombine and share any of their own digital
content .

•    DRM solutions should be inter-operable among devices and distribution
channels, and the technology should have consistent enforcement of rights
wherever the content goes.

•    DRM technology should be flexible enough to adapt to different business
models (e.g., charges for a single use or for a specified time period).

•    DRM technology and devices should be capable of online updates with new
protection software.

•    Content providers will need DRM databases and systems to define and
manage rights to their content.

•    Enterprises such as corporations and educational institutions need DRM
systems to manage content and group rights.

In the attempt to implement these features, two machine-to-machine
standards have emerged. The eXtensible rights Markup Language (XrML) and
Open Digital Rights Language (ORDL) syntaxes provide content owners the
opportunity to specify metadata about royalty arrangements, ownership,
listening limitations, and context pricing (e.g., sale or rental).  This
metadata is attached to the content, so it can "travel" across devices
without degrading the copyright.  XrML has been embraced by Microsoft and
is a primary feature of their DRM function.  ORDL has been submitted to
MPEG and incorporates Real Networks' Extensible Commerce Language.  Over
275 companies have licensed XrML and ORDL based technology to create
distribution systems for digital content.

XrML and ORDL support trial use, rental and sale distribution models.  This
means that "old" models of selling music will find "new" viability.  For
example, content owners , utilizing XrML or ORDL based DRM distribution
systems, can provide a consumer the opportunity to listen to parts of songs
for free, purchase singles for a competitive price, purchase albums for
download to a digital device.

No doubt there are challenges in balancing the rights of music owners with
the demands of music consumers. There should also be no doubt that
thousands of technology developers are racing to deliver solutions that
meet those challenges.  The enormous value of the music market provides a
powerful financial incentive for DRM innovation, but it's up to music
owners and music consumers to pick the winning solutions.

II. The effect of legislative and regulatory proposals on market driven DRM
innovations

Concomitant with the development of DRM technology have been a number of
proposals aimed at amending the Copyright Act as well as proposed
legislation to promote the distribution of digital music.  Given the
maturing market for rights management solutions, we believe that many of
these proposals are not warranted and could act as a disincentive for
competition.   One exception is the proposal to clarify, via legislation,
that incidental temporary copies of digital music are not subject to
liability.

A.  Section 109 of the Copyright Act

Section 109 deals with the "first sale" doctrine, a limitation on the
copyright owners' exclusive right of distribution. The Copyright Office has
noted that the first sale doctrine is not a limit on the right of
reproduction.  The question facing the software community is whether a
change to section 109 that would allow transmission of a digital work from
one person to another is necessary to affect an increase in the flow of
digital content.  The question arises because this transmission results in
a reproduction on the recipient's computer, a right not currently covered
under section 109.

Because of the unknown effect on marketplace rights management solutions,
there should be no change to Section 109.  Expanding the scope of section
109 to include a first sale for transferring digital music as many
commentators have urged, could cause market-driven DRM solutions to
increase in cost and upset the competitive process.

It is clear that a first sale doctrine for transmission and deletion
requires "forward and delete" technology whereby a content owner can be
assured that the sender's copy has been deleted, therefore barring repeated
transmission.  There is evidence that many companies, by utilizing the XrML
and ORDL standards, are creating distribution systems that already comport
with this requirement.  In the hyper-competitive DRM market, technology
firms and content owners are able to monetize the solution that best meets
the needs of consumers and copyright holders.  ACT believes a legislative
or regulatory fiat requiring expansion the first sale doctrine through
would remove this element of competition thus diminishing the incentive to
innovate.

Finally, with respect to the first sale doctrine, it is important to
understand that DRM technologies are in the role of facilitator.  ACT
believes that lawfully acquired digital content (music, video, et. al) can
and should be transferable across platforms and devices.  As mentioned
above, our belief is supported by the very nature of DRM technology and
solutions.  However, it is unnecessary and potentially anticompetitive to
create an outright "ban" on anticircumvention or tethering
technology.  Companies are fiercely competing among themselves for the
ability to offer digital music.  In some instances, they will offer
copyright holders the ability to tether and showcase the quality of their
anticircumvention technology to attract business.  Robust protection is an
important component of competition within the digital media market and
should not become subordinate to perceived "rights" of a broadly defined
"consumer" to receive digital music, irrespective of its origin.

B.  Section 117 of the Copyright Act

Section 117 permits the owner of a copy of a computer program to make an
additional copy of the program where the making of such a copy is an
essential step in the utilization of the computer program conjunction with
a much and that it is used in no other matter.  Given that temporary or
"buffer" copies are a characteristic of most forms of streaming digital
content, there is a question as to whether these copies should be precluded
from liability.  ACT feels that language should be added to section 117 to
remove any uncertainty in this regard as it will aid in the creation of
robust DRM solutions for streaming content.

Most, if not all, technologies that allow a user (or licensee) to playback
streaming music involves the creation of temporary copies of the data in a
computer's Random Access Memory (RAM).  This data is minimal (usually a few
seconds of sound), cannot be accessed for another purpose and is useful
only to the streaming media software program.  These RAM copies are
essential for audio to stream smoothly.  It should come as no surprise that
smoothly streaming audio is a key consumer expectation.

A number of courts have addressed the issue of whether these RAM copies are
"reproductions" subject to the meaning of "copies" in section 101 of the
Copyright Act.  The seminal case on this question is MAI Sys. Corp. v. Peak
Computer, Inc., 991 F.2d 511 (9th Cir.1993).  In MAI, the court concluded
that the data that is loaded into RAM constitutes a "copy" and exposes a
lawful licensee to a copyright action and demands for additional royalty
payments to the copyright holder.  It follows if the webcasters are forced
to pay more in royalties, the costs will be passed through to
consumers.  These increasing costs will drive many consumers away from
digital media, which will have a disastrous effect on this promising market.

ACT believes that the RAM buffer "copies" of digital music should
constitute a fair use.  Therefore, concur with the conclusion of the
Copyright Office and others and advocate a statutory change to section 117
that reflects the fact that buffer copies are truly incidental, have no
independent economic significance and therefore not give rise to liability
from the assertion of a copyright owner's reproduction right.  One method
of implementing this change is to amend section 117 pursuant to section
6(b) of H.R. 3048 which was introduced in the 105th Congress.

C. MOCA

We chose to address MOCA because of the potential impact to our members and
the IT industry.  ACT believes its view provides a different and important
perspective distinct from copyright holder and digital content
advocates.  We limit our comments to three provisions of the bill: 1)
clarification of incidental and archival copying; 2) updating the
"ephemeral" recordings exemption; and 3) assurances of "nondiscriminatory
licensing."

1. Incidental and Archival Copying

ACT supports this provision for the reasons stated in II.B above.  In
addition, we agree with the fact that consumers who lawfully acquire
digital music should be allowed to make a copy for back-up purposes.  While
we acknowledge that allowing this type of archiving could create a
temptation for unlawful transmittal, content owners can apply existing DRM
solutions to prohibit unlawful use.

2. Ephemeral Recordings

Currently, the law allows broadcasters and webcasters to make one in-house
"ephemeral" copy.  Because of the protections that can be afforded to
digital music, ACT believes that the changes to the ephemeral recording law
are appropriate to reflect technological reality and encourage delivery of
online music.  Market conditions require that consumers wishing to access
streaming digital music do so through dial-up or broadband Internet
services.  Obviously, consumers using dial-up services need to have a
choice to select a slower bit rate or suffer the excruciating experience of
listening to a choppy playback.  Similarly, broadband users should be able
to select a higher bit rate or there would no incentive to use the
service.  Moreover, companies involved in streaming music have distributed
multiple servers to the "edges" of the Internet backbone to best serve
geographically dispersed customers.  Thus, it is necessary to have copies
of the music located on each of the servers!
  to realize the efficiency of distributed servers.

3. "Nondiscriminatory Licensing"

ACT believes that MOCA's nondiscriminatory licensing provision is
tantamount to compulsory licensing.  Since our formation, ACT has opposed
this practice in all its forms.   We believe that compulsory licensing
schemes erode intellectual property rights and act as a disincentive to
innovate.

As ACT reads the "nondiscriminatory licensing" provision, if the recording
industry's digital music distribution sites MusicNet or Pressplay license
songs to one another, equal terms must be granted to any other legitimate
distribution site. Advocates of this approach argue that content owners
control the supply of songs and if they are not compelled to license them,
there will never be true competition among distribution services.  ACT
finds this argument flawed at best.  In the digital music context, record
companies are seeking to monetize their content.  In the absence of lawful
distribution methods, the record companies created their own services.  As
new services, using robust DRM solutions to protect copyrights, emerge
consumers will demand more distribution mechanisms offering specific
services (sampling, rental, "per song" downloading, etc.).  It seems
counterintuitive that record companies to reject these mechanisms by
withholding content when the greater distribut!
ion would translate into increased revenues and exposure for their
artists.  Further, it stands to reason that if the record companies were
indeed withholding content in an anticompetitive manner, the antitrust laws
will provide the appropriate remedy.

Wayne Crews of the CATO Institute has noted "Today, with electronic
technologies that make it easier to track files and communicate, compulsion
is even less defensible."  We agree.  It appears that proponents of MOCA's
"nondiscriminatory licensing" provision are merely trying to protect
middlemen and their deep-rooted business models.

Conclusion

We appreciate the opportunity to share our views on this important
subject.  Digital music, like other forms of content, provides significant
economic opportunities for technology entrepreneurs as well as content
owners.  It is clear that the IT industry is continuing to work with
content owners to achieve a convergence of protected, cost-effective and
consumer friendly solutions.  It must be said, however, that we remain
steadfast in opposing government-mandated and managed technology standards,
for several reasons:

•    The government should not pick winners and losers through its
certification process; especially while the IT industry is working to
achieve an open DRM standard.

•    These standards will "freeze" technology by requiring government
approval 
of design changes.  Instead of real-time innovation, we could easily end up
with a one-size-fits-all standard.

•    Publishing standards on government web sites makes it too easy for
hackers to circumvent.

•    Innovators can't receive government certification if your copyright
protection technology isn't "reasonably priced" according to a current
draft of a legislative proposal.

•    Standards-setting bodies often become captives of large companies—even
in 
industry standards organizations.   But when the standard carries the force
of law--allowing only "certified" tools—a few large firms could choke
innovation.

We look forward to discussing your findings.  As you continue to consider
this issue as well as the broader DRM debate, ACT stands ready to offer any
and all assistance.

Sincerely,

Jonathan Zuck
President 



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