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Industries Debate ‘Fair-Use’ Challenges

Although digital technology may threaten existing content distribution patterns, the ability to creatively use current and future technology products must be preserved in the face of pending legal challenges, said Consumer Electronics Association’s president/CEO Gary Shapiro and a majority of panelists who spoke at last month’s summit on “Intellectual Property and Creativity,” here.

Shapiro called on attendees of the event from differing industries to begin to collaborate in order to allow innovation on top of existing content, and to end the ongoing propaganda war.

The multiple-panel event served as a rallying call for pro “fair-use” recording rights activists as the Supreme Court decides on whether to stand by its 1984 Betamax ruling, which opened the doors to home video recording for personal “fair use” purposes, or introduce new conditions for unrestricted peer-to-peer networks such as Grokster, which is the subject of the pending MGM v. Grokster Supreme Court case (see p. 1).

Shapiro started the event by challenging the definition of the term “intellectual property,” saying “it is not real property with well-established legal rights that are clearly defined.”

He said “the rights that you have to other people’s property are very vague and unclear, and so the concept of fair-use [as defined in the landmark Betamax case] is a safety valve.

“If the Supreme Court expressly held that VCR copying in home for non-commercial purposes is a legal activity, how is it suddenly labeled as piracy because the device is a computer instead of a VCR?” Shapiro asked.

In making a distinction between that ruling and the downloading threat his industry currently faces, Mitch Bainwol, Recording Industries Association of America’s (RIAA) chairman, said his industry can document actual harm inflicted by illegal use of peer-to-peer file sharing. “In the last five years we saw unit sales go down by about 30 percent as the advent of file sharing began.”

Other speakers during the day questioned the legitimacy of the RIAA’s claim to actual harm from peer-to-peer file sharing.

Bainwol defended his industry’s position in the Grokster contest by attempting to qualify the scope of the battle.

“None of us want to overrule Betamax,” said Bainwol. “We just have a different point of view about whether Grokster ought to be considered legal under Betamax. We happen to think that a business model predicated on theft is not what the justices meant 20 years ago in the Betamax decision.”

Dan Glickman, Motion Picture Association of America’s president, said that his industry also sees the threat ahead from digital file sharing.

“The proverbial wolf is at the door for us, and the wolf may not be devouring us right now, but it will happen,” said Glickman.

Invited representatives from Capitol Hill also called upon the industries to find common ground to both protect copy rights and allow unfettered innovation.

“In the end, the solutions that will address the problems of the entertainment industry do not lie in more and more litigation or up on Capitol Hill, but ultimately on the common ground between all of the players in this debate,” said U.S. Sen. Norman Coleman, (R-Minn.).

Coleman said some common-ground issues emerged from hearings last year.

“First, suing your customers is bad business,” said Coleman, adding that instead of taking file sharers to court, the record industry should work to better educate consumers on legal and illegal behavior regarding digital content. “Second, we cannot stifle innovation. We live in an information society and the worst thing the government can do is put a leg iron around technology.

“Third, consumers need to compensate artists for their work,” Coleman continued. “The recording industry faces a challenge. They need to rethink their business models and find ways to get end-users quality products and services that are safe, accessible and affordable, and when they do, users don’t only need to listen, they need to buy.”

Coleman said the next step will follow the Supreme Court’s ruling in the Grokster case.

“Once Grokster is decided, I think the legislative focus will be back on the peer-to-peer industry to use technology to filter out distribution systems because the concerns over intellectual copyrights are not going to disappear as peer-to-peer technology continues to develop,” Coleman said.

U.S. Rep. Rick Boucher (D-Va.), co-chairman of the House Internet Caucus, who recently introduced bill HR-1201 to codify the Betamax principles by ensuring it is not illegal to manufacture a product capable of infringing uses, said attendees “should not sit back and hope the Supreme Court once again gets it right.”

“Winning this fight is not just critical for your industry, it is essential to our society as a whole and for the whole of the American economy,” Boucher said. “The fair-use doctrine is used by everyone everyday, whether we recognize it or not.”

Boucher said, “Unfortunately, Congress largely adopted what the copyright holders asked for,” in passing the Digital Millennium Copyright Act (DMCA). This included prohibiting the bypass of access controls on copyrighted material, even for lawful purposes, making it unlawful, for example, to break copy protection to rip songs from a purchased CD to an iPod.

Boucher said the content industry can use tools like the DMCA “to completely extinguish fair-use rights with regard to digital media, and I see the industry moving in the direction of doing precisely that.”

Boucher’s bill will ensure that if a product is capable of a substantial non-infringing application, it cannot be banned from the market. At the same time, it will preserve consumer’s fair use rights of digital media by allowing the bypass of copy protection measures to gain access to work for non-infringing purposes.

“So, if the purpose of the bypass is innocent, then the act of the bypass is no longer punished,” Boucher said. “Finally, we’ve included a provision to ensure that scientists can engage in legitimate encryption research and consumers will get fair warning before they purchase copy-protected CDs [with appropriate labeling].”

The bill would keep the civil and criminal penalties of the DMCA in place for those who circumvent technical protection measures to infringe copyrights or sell black boxes to strip away content protection for unlawful uses.

Boucher said the consumer electronics industry must “be prepared to martial our forces again and be prepared for a legislative fight, should that fight come. And I think that fight is virtually certain. Whoever loses in the Supreme Court will only view that as round one.”