[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: declanat_private From: J Plummer <jplummerat_private> 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 jplummerat_private http://www.nccprivacy.org/ Policy Analyst, Consumer Alert National Consumer Coalition Privacy Group Phone: 202-467-5809 Fax: 202-467-5814 ------------------------------------------------------------------------- POLITECH -- Declan McCullagh's politics and technology mailing list You may redistribute this message freely if you include this notice. To subscribe to Politech: http://www.politechbot.com/info/subscribe.html This message is archived at http://www.politechbot.com/ Declan McCullagh's photographs are at http://www.mccullagh.org/ ------------------------------------------------------------------------- Like Politech? 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