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Joe Kraus testified to the House Energy and Commerce Committee on April 25, 2002 alongside other industry executives and legal specialists. Here is the text of his testimony.

Introduction

Mr. Chairman and members of this committee, good afternoon.

My name is Joe Kraus and I am co-founder of DigitalConsumer.org, a new consumer advocacy group dedicated to safeguarding citizens' fair-use rights to digital media. To be more specific, we want to be sure that any digital rights management solution or legislation protects the digital rights of consumers in addition to protecting the digital rights of the entertainment industry.

I am here to represent the views of the 35,000 Americans who have become members since our formation 6 weeks ago. We thank the Committee for holding this hearing and for allowing us to testify.

Our members are not teenagers swapping songs on the Internet. They're ordinary, law abiding citizens who insist that Congress protect their historical fair-use rights. They are people who respect intellectual property but who also believe that their rights should not be "collateral damage" in the "war against piracy". They're people like Gregory Brewsaugh, a self-described Republican high school physics teacher in Huntington Beach, California. Mr. Brewsaugh has purchased over 400 CDs. He has copied his CDs onto his computer which he then uses as a 4,000 song personal jukebox to deliver music throughout his home. Mr. Brewsaugh simply loves music, loves electronics and enjoys the freedom he has to listen to the music he lawfully acquired in a manner and form of his choosing.

DigitalConsumer.org members are proponents of intellectual property protection. We do not support or condone piracy. However, unlike what media companies would like you believe, copyright does not confer on the holder of a copyright the power to control every access, use, or copy of a work from cradle to grave. Not all "unauthorized" copying is piracy and not all consumers are potential criminals.

We've all made mixed tapes of our favorite music. We've all made copies of CDs to take to the gym or listen to in the car. We've all recorded a sporting event to watch after our child's soccer practice. None of these copies were "authorized" by the content companies. Yet, is there anyone on this Committee who believes that these are acts of piracy? Of course not. Although they are unauthorized, they are all examples of legal, personal, fair-use.

However, the entertainment industry has consistently denied the existence of consumers' fair-use rights. In July of 2000, Hilary Rosen represented the RIAA before the Senate Judiciary Committee. Senator Hatch asked if it was fair-use for him to make a copy of a CD for him to listen to in his car, or for him to make a copy of a CD to give to his wife. Ms. Rosen responded that "none of those examples is fair-use." Instead, they are examples of what she called "tolerance" on the part of the music industry. In other words, the recording industry takes the view that these are examples of "unauthorized" uses that the entertainment industry chooses not to take us to court for having committed.

We disagree. Consumers have fair-use rights and they expect Congress to safeguard them. Congress and the courts have carefully crafted a deliberate balance between the rights of copyright holders and the rights of citizens. Generally speaking, rights holders have the exclusive right to distribute and profit from artistic works. Consumers who legally acquire these works are free to use them as they see fit, so long as that use is personal and non-commercial.

We respect the right of the content industry to pursue pirates. But, that pursuit must not sweep so broadly that it also punishes law-abiding citizens. Unfortunately, the media industry's technical and legislative agenda does precisely that - it goes far beyond preventing piracy to prohibiting legal personal use. Content companies have used anti-piracy laws to effectively criminalize what to date have been "unauthorized" but nevertheless legal uses of media. The result? Consumers will wind up paying for what they have had previously been allowed to do for free.

Erosion of our personal use rights

Let me give you some examples of the methods the content industry is using to erode fair-use rights.

Method #1. Technological Barriers to Fair-Use. Copy protection technologies in the market today have impacts beyond their stated goal of reducing piracy. These technologies give content companies an unprecedented ability to reduce or even revoke fair-use rights. My mother called me to insist that her MP3 player was broken because she couldn't copy a recently purchased CD to her portable player. She was surprised to learn that the CD was operating as intended - it was explicitly designed to prevent her from making her legally allowed copies.

Similarly, my dad called to tell me his DVD player was broken because the 'menu' button wasn't working when the previews were playing on his DVD (thereby preventing him from skipping the previews). He was surprised to learn that existing law made it illegal to create a DVD player that would skip through content that the media companies flagged as 'must watch'.

The irony is that these technical barriers have been more effective at preventing my mom from copying her legally bought music to her MP3 player than at diminishing major commercial piracy operations in China and Taiwan. Copy protection isn't breakable by my mother, but it is very breakable by computer hackers.

Method #2. Legislative Barriers to Fair-Use. In 1998 the entertainment industry came to Congress with a proposition: give them greater copyright protection and they would unleash a tidal wave of legal, downloadable digital movies and music for consumers to enjoy. As a result, Congress passed the Digital Millennium Copyright Act (DMCA).

Congress lived up to its end of the bargain but the entertainment industry did not. Four years after the passage of the DMCA, consumers are still waiting for the flood of legally available content; meanwhile the law is being used to diminish or erase consumer's fair-use rights.

Now, the entertainment industry is back making claims similar to those made in 1998: "Give us more protection and great things will happen." We have no reason to believe the outcome for consumers will be any different this time around.

Method #3. Commercial Barriers to Fair-Use. Many decisions relevant to fair-use are increasingly made by entertainment and consumer electronics industry consortia with little or no input from citizens. Ordinary people have historically been excluded from many of the decisions that affect how they enjoy the media they legally pay for. For example, consumers had no voice in deciding that DVDs could disable the 'menu' button during previews. Consumers had no voice when copy protection technologies for CDs were developed that denied consumers their ability to copy CDs onto their portable music players. Consumers were not represented when it was decided that DAT tapes could only be copied once (even if the voice on the DAT tape was your own). And no members of the press were permitted to observe and report on the most recent standards setting consortium - the so-called BPDG. In general, consumers have not been allowed to participate in decisions that affect their daily lives nor has the press been permitted to observe how these decisions are made and report their findings to the public.

The terms of the debate

Most importantly, fair-use rights are being threatened by the way that the entertainment industry is framing this debate. They would have you believe that all copying that they have not authorized is piracy, even though Congress and the courts have affirmed our rights to make personal copies of movies and music. When my mom makes copies of a CD - one to take to the gym, one to listen to on her computer, one to give to her husband - that is not piracy.

The content industries have gone so far as to make a frontal assault on the industries that support consumers' legal rights. They have accused Apple, Intel and Gateway of sponsoring piracy simply because they give citizens tools to exercise their fair-use rights.

The content industries complain that the rest of the country has been slow to come to consensus on copy protection issues. But a compromise will inevitably be difficult when the content industry refuses to concede a fundamental fact - fair-use exists.

I urge Congress to recognize that stopping piracy is just one goal of copyright law. That goal needs to be balanced against the goal of protecting the rights of citizens. Citizens have been left out of this debate even though they stand to be the most affected by the outcome. Your constituents expect Congress to safeguard and assert their fair-use rights.

The Broadcast Protection Discussion Group

The erosion of fair-use rights is occurring in many different places. The forum that concerns us today is the Broadcast Protection Discussion Group - a group this committee is very familiar with. We see three main problems with the process adopted by the BPDG.

No consumer participation. Most importantly, the process has excluded consumers. As in previous cases, consumers are not participants in a process that will affect the way that they watch, record and enjoy their television.

No provisions for fair-use. Second, fair-use is not protected by the specification - in fact, it is not even mentioned. While the interim progress report to this committee briefly discusses fair-use (section 2.7), the draft of the specification ignores it completely. If we all agree that fair-use is going to be protected, then why haven't the parties to the process put it in writing and included it in the specification?

When I attended the most recent BPDG meeting I asked for a positive assurance that fair-use rights would not be abridged by any technology placed on the contentious "table A". Unless the Congress acts to insure that fair-use rights will not be abridged by any technology implemented pursuant to the BPDG, then how can it be sure that devices which enable free time shifting, space shifting, multiple copies, or even multimedia homework assignments, won't be prohibited by this process?

Too much control in industry hands. Third, the BPDG members tell you their intent is to prevent the unauthorized retransmission of content over the Internet. That may be the charter, but the document produced thus far establishes a technical regime which would give BPDG members far greater control - control over how consumers watched, recorded and enjoyed their digital television. Nothing in the specification prevents the deployment of technologies which would: allow media companies to control when your VCR recordings expired (imagine going on a two week vacation only to find out that your recordings of your favorite programs expired after a week); stop you from taking your home recordings on your laptop to watch on the train to work; or prevent you from watching recorded shows during primetime.

When I raised these issues at the latest BPDG meeting, I was told that the technologies deployed would most certainly have "baggage" that would affect fair-use. While fair-use rights may be "baggage" to the entertainment industry, those rights are cherished by citizens. And citizens expect Congress to act in their defense.

The members of the BPDG say that Congress should enforce the consensus of the content and technology industries or give the FCC the power to do so. We believe Congress also has an obligation to safeguard the rights of citizens who have not had a voice in this debate. Congress should insist that consumer's fair-use rights be explicitly asserted and defended in the BPDG specification.

Legislation to give more rights to copyright holders is not needed

The entertainment industry is back in Washington asking for more changes to the law. They claim that the marketplace has failed to help them develop technologies to protect their intellectual property and that therefore the government needs to step in legislate. We believe this is the wrong path for Congress to take for several reasons.

First, Congress should think of this problem in terms of rights, not in terms of technological mandates. Define the rights of the respective parties (copyright holders and citizens) and let the market develop technologies which adjudicate between the two. Copyright holders have strong rights while consumers' rights are weak and ill defined. Therefore, to help the market to work effectively, the first step to solving the piracy problem is not a government mandate, but a strong assertion of consumer rights.

Second, many computer science experts believe that a secure system is not possible. Princeton Computer Science Professor Ed Felten, a computer security expert, noted in his testimony to the Senate Judiciary Committee on March 14, 2002 that "a standard for copy protection is as premature as a standard for teleportation".

Further quotation from his testimony illustrates this point. "Every copy protection scheme for general purpose computers that has undergone serious public scrutiny has been found to be ineffective. Consider what will happen if a government mandated protection measure turns out not to work. Such a measure would do many things: it would inconvenience honest consumers; it would raise the price of media players; it would lengthen product development cycles; it would impede the development of new and better standards. Everyone would suffer, except the pirates. The industry that devised the measure would look technically inept, and the government that mandated its use would look worse."

The solutions that the content industry has advanced to date have been more effective at preventing consumers from copying their legally bought music to their MP3 players than at diminishing major commercial piracy operations. As we all know, copy protection isn't breakable by the average citizen, but it is very breakable by software experts.

A government mandated technology standard will not be any more effective at preventing piracy. Instead, the consumer will lose as another technology that deprives them of control and flexibility is forced upon them.

Third, putting the government in charge moves the decision from a market-based one to a political one. The development of technology should be driven by the private sector, not by a government agency.

Fourth, given the slow speed of a government-driven process, the chosen standard will inevitably become outmoded and the process for revising it and updating it will be slower than a market-based approach.

Finally, while some in Hollywood claim that a government standard is needed to ensure interoperability, legislation has not been needed to guarantee other critical types of interoperability: CDs play in all CD players, DVDs play in all DVD players, Internet Protocols allow all computers to talk to one another. None of these examples required government intervention.

A dearth of viable, legal alternatives

We believe that one of the causes of the illegal copying of music and movies (although not the only one) is the dearth of commercially viable legal alternatives. MusicNet and PressPlay (the music industry's legal alternatives) have serious flaws: they lack deep catalogs and they don't provide consumers with the flexibility they expect from their music. For example, in many cases consumers cannot transfer music to portable players, or in the case of PressPlay the music "expires" as soon as users stop paying the subscription fee. Consumers are voting with their feet and avoiding these services. I believe this is not primarily because the competition is free, but because the competition delivers what consumers expect: they can find the music they're looking for and once they find it, they can do with it what they expect (i.e. take it to the gym, listen to it in their car, etc). As the Economist magazine (March 21, 2002) accurately observed, "the meaner the industry is over what people can do with the [content] they pay to download, the more the studios' own services will be a second-rate alternative to piracy"

It is instructive to contrast the approach of the media companies with the approach of software companies in the digital world. As we've heard many times in this debate, media companies claim to lose $3.5B per year to piracy. But, software companies claim to lose $12B per year. Therefore, one would logically expect the software companies to have the same reservations about the digital medium that the media companies have. One would expect that the software industry would be clamoring for government mandates like the media industry. One would expect that the software industry would be shying away from digital distribution like the media industry.

But the software industry does not behave like the content industry even though they suffer nearly 4 times the piracy. Unlike their media company counterparts, software companies have generally chosen to embrace the digital medium. A huge number of software titles are available for digital download. Once downloaded, these software programs behave just like software bought at the store.

We believe it's important to ask why the software companies who lose so much more to piracy embrace the digital medium while the media companies claim that their business will be ruined if they embrace digital delivery in its current "insecure" state?

Along those same lines, it's important to ask why the Business Software Alliance (an organization dedicated to detecting and stopping piracy) does not support government mandated technologies for copy protection. I believe the reason is that the software industry has been down this path before and has found that it does not work. In the early 1980s, many major software companies decided to implement strong copy protection schemes on their products. They discovered two things. First, their schemes did not stop piracy. Dedicated commercial pirates circumvented the copy protection. Second, their copy protection alienated and infuriated paying customers because the copy protection altered the expected behavior of the software. For example, consumers could not back up their software, and if a consumer upgraded his computer by buying a new one, they could not re-install the software on that machine. Software companies discovered that treating all customers as potential criminals was bad for business; it didn't stop theft and it alienated the people who actually paid for their products.

Instead of forcing technical solutions that inconvenienced paying customers, the Business Software Alliance shifted to a strategy of actually pursuing pirates. Today the BSA investigates piracy allegations, conducts raids, and assesses large fines on violators. Through the enforcement of existing law, the BSA has been extremely effective at diminishing piracy in the United States.

In short, computer security experts believe and software history teaches that technical solutions will not solve the problem of piracy. The only way to reduce piracy is to engage the market by offering viable legal alternatives to consumers and to pursue the pirates, not the average consumer.

Conclusion

Content providers have a right to pursue and prevent piracy. However, law abiding consumers cannot have their personal use rights swept away in the process. In order to protect consumers' rights from further erosion and in order to ensure that any technical solution to content protection respects consumer's fair-use rights, the members of DigitalConsumer.org urge this Committee to make a positive assertion of citizens' personal use rights. The vehicle is a set of principles we call the Consumer Technology Bill of Rights and it is a statement of fair-use principles grounded in history, legislation and the courts.

After years of successful litigation and legislative efforts, many in the entertainment industry are back in Washington asking for more changes to the law. All the while, they have been quietly developing services, technologies and products that eliminate fair use for their customers, your constituents. Many in the copyright community will not admit that there is such a thing as fair use. This denial persists despite 30 years of Congressional action and Supreme Court rulings affirming consumers' fair use rights. And, while I am not a lawyer, I do know this much: consumers believe they have personal use rights and they expect Congress to insure that they are safeguarded. Before this Committee considers yet another change in the law at the behest of the copyright community - a change in law that would make "unauthorized" copying synonymous with piracy - I would respectfully urge you to insure that the rights of consumers are protected and spelled out in the legislation.

Thank you very much for the time to address this committee today.