Consumer Alert on digital technology, consumers, copyright

[Dave Farber <dave () farber net>]

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


[FYI Consumer Alert is a free-market, pro-consumer organization. (Yes, not
all consumer rights groups want to raise taxes and invent ten new
government bureaucracies by lunchtime.) --Declan]

---

Date: Wed, 06 Nov 2002 18:28:02 -0500
To: declan () well com
From: J Plummer <jplummer () consumeralert org>
Subject: FOR POLITECH - Consumers, Digital Technology, and Copyrights

Declan --

This is from the most recent issue (September) of Consumer's
Research.  Your Politech readers may be interested in this -- I'm trying to
take a look at the oft-discussed IP issues from an integrated broader-based
free-market perspective, this piece is my first effort at that.

-JCP

-----------------------
(http://www.consumeralert.org/pubs/research/CRSep02.htm)

Consumers' Research Magazine
Consumer Alert Column
September 2002

Consumers, Digital Technology, and Copyrights
by James Plummer

As computer-processing power and the bandwidths of Internet connections
continue to expand exponentially, Hollywood has become increasingly
nervous. DVD recorders are falling in price, and consumers on peer-to-peer
(P2P) file-trading networks have taken the next step and started
downloading copyrighted video as well as audio. The big media conglomerates
are turning to Congress to codify a complicated Digital Rights Management
(DRM) scheme that would allow the studies to hack into the computers of
illicit file-trading consumers, and are leaning on the Justice Department
to prosecute traders of unauthorized copies of copyrighted material on P2P
networks.

The argument could be made that the studios have a right to go to such
lengths in order to stop the unauthorized distribution of their
intellectual property. Intellectual property protections have obviously
been important to the development of the arts. The framers of the U.S.
Constitution recognized that such would be the case when they granted
Congress the authority "to promote the progress of science and useful arts,
by securing for limited times to authors and inventors the exclusive right
to their respective writings and discoveries."

But rather than putting the burden of protecting copyrights onto the U.S.
taxpayer, copyright holders should bear these costs themselves.

For instance, media companies that think vigilante hacking is justified
should go ahead and do it— but be prepared to accept the legal
consequences. File traders will argue for their fair-use rights and
counter-sue for criminal trespass. These issues are already part of the
common and statutory law. Given that such remedies are already provided
for, new laws establishing a positive right to hack would serve only to
negate any legal liability for the hackers and remove incentives to make
sure the hacking is targeted at actual copyright violators.

Copyright holders already receive a large subsidy from taxpayers. Present
copyright fees do not cover the full operating budget of the U.S. Copyright
Office—and that doesn't even count the cost of the Department of Justice's
intellectual-property enforcement actions. Many of these costs come out of
the pocket of the average taxpayer. The content industry may get additional
help now that the DOJ has indicated a willingness to prosecute P2P swappers
under a provision of the 1997 No Electronic Theft Act that provides prison
sentences and fines for those who distribute over $1,000 worth of
copyrighted material. The law so far has been used only on software pirates.

Smaller copyright holders, and many artists whose work is copyrighted by
large firms, often benefit from the wide distribution that file-swapping
and other fan activities bring, but which conglomerates often denounce as
copyright infringement. Most musical acts, for instance, see little of the
$18 retail price of a CD; they make most of their money by performing live
shows in front of fans who swap music as well as buy it. A full
fee-for-service structure, in which copyright holders pay the full price of
copyright protection, might create additional pressure for copyright reform
from smaller copyright holders, as the chief beneficiaries of the
ever-extending, ever more expensive terms of copyright tend to be large
firms. Greater internalization of the costs of protecting intellectual
property would encourage more cost-effective tactics—such as the successful
practice of cluttering cyberspace with bogus files—over federal
prosecutions on the taxpayers' dime.

And any serious copyright reform should tackle the length issue. The
"limited times" of copyrights, established by Congress under the Copyright
Act of 1790, were 14 years with an option for 14 more. With the fourth
update to the law, the Sonny Bono Copyright Term Extension Act of 1998,
that monopoly protection has been extended to the life of the creator plus
75 years, or in the case of a work copyrighted by a corporation, an even 95
years. Does such a restriction really promote the progress of the arts? Art
builds on what came before. Disney, for instance, has for decades
shamelessly plundered the works of everyone from Homer to Hans Christian
Andersen. And the resultant works, such as O Brother, Where Art Thou? and
The Little Mermaid, often have merit. But no one can dare release a new
spin on cultural icon Mickey Mouse until 2023.

Is that what the framers meant by "limited times"? The Supreme Court thinks
this is a question worth asking. It will hear, in October, arguments on a
case challenging the Bono Act on just those grounds.

The other part of Hollywood's political strategy is codification of DRM
technologies. The big content producers have joined with major hardware
producers in something called the Broadcast Protection Discussion Group
(BPDG) to draw up DRM plans they would like the government to mandate. The
content industry would like to see hardware— VCRs, PCs, DVD players,
etc.—made illegal unless programmed to read and obey "broadcast flags"
limiting how many times a movie or television broadcast can be watched or
recorded. (The Consumer Broadband and Digital Television Act currently
pending in the Senate has similar aims but is not expected to pass any time
soon.)

It takes a lot of effort to get a good cartel together, of course. Phillips
Magnavox is throwing monkey wrenches into the BPDG process because they
think not enough of their proprietary technology is included in the system.
Without such a guarantee, a hardware-focused company like Phillips simply
doesn't have the incentive to cater to Hollywood when consumers prefer more
flexibility to do what they please with the media they purchase. Common law
doctrine currently allows consumers such flexibility. Content companies are
trying to use technology to alter the balance of rights between users and
producers. That's fair, but awfully tough—which is why they're looking to
Washington for help.

If Phillips were to be taken over by a content producer like Viacom, the
merged company would naturally have the financial incentive to build
digital rights management into its home entertainment appliances. Thus, the
content industry could protect its intellectual property—and its right to
make a profit off of such property— without federal mandates on appliance
makers, if it were allowed by antitrust regulators to produce its own
platforms.

It may very well be that a workable DRM system is a kind of "natural
monopoly." DRM platforms will have to be, at the very least, interoperable
if the consumer is to have access to the full range of copyrighted digital
material.

As long as PCs without the dominant DRM set-up are still available to
users, the dominant DRM regime will have to hustle not only to keep the
user interface simple but also to keep the copyright protection rules
reasonable. As the rules get more restrictive, more and more people will
migrate to the open-source frontier. And the more active that sector is,
the greater the number of pirated files migrating back to the "approved"
platform.

The bottom line is this: The dominant studios and broadcasters can remain a
vital part of the culture if they accept reasonable copyright law; if
antitrust regulators leave them free to develop structures that protect
intellectual property; if they pay the full cost of protecting copyrights;
and if they design entertainment systems user-friendly enough and copyright
rules reasonable enough that most consumers will stay on board rather than
turn wholly to independent artists and open-source piracy.

The erosion of conglomerate-dominated culture likely will continue
regardless. As the means to create and distribute cultural content becomes
ever more inexpensive and widespread, it is inevitable. But if
content-producing companies recognize this reality and Washington gets out
of the way, the greater culture industry can continue to turn a profit even
while independent artists are able to find an audience among consumers
offered more choices than ever before.

James Plummer                           jplummer () consumeralert org
http://www.nccprivacy.org/                      Policy Analyst, Consumer
Alert
National Consumer Coalition Privacy Group       Phone: 202-467-5809
                                                 Fax: 202-467-5814


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