FC: Consumer Alert on digital technology, consumers, copyright

From: Declan McCullagh (declanat_private)
Date: Wed Nov 06 2002 - 22:38:29 PST

  • Next message: Declan McCullagh: "FC: Stop the presses: Politicos turn to TV, radio, print, not the Net"

    [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.
    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 
    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 
    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 
    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 
    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" 
    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
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