The Digital Millennium Copyright Act: The Digital Copying War Between Hollywood And The Silicon Valley

Hollywood and the Silicon Valley are at war over digital video copying.

The Motion Picture Association of America ("MPAA") claims that digital piracy costs the entertainment industry $3 billion each year. The MPAA and the Recording Industry Assn of America ("RIAA") are actively pursuing legislative, regulatory and court initiatives to protect digital content from piracy. The Consumer Electronics Association ("CEA") and various consumer advocacy groups say the entertainment industry is going too far.

Hollywood's weapon is the 1998 Digital Millennium Copyright Act ("DMCA"), Pub. L. No. 105-304, legislation passed by the U.S. Congress which is being used to support the attempts of copyright holders to control access to and downstream use of their digital content. At the center of the battle is the legal doctrine of "fair use," which has been applied by U.S. courts to protect personal copying of content.

This is not the first time the entertainment industry and the technology industry have been at war. Nor is the war over digital copying the first time that "fair use" has been at the center of the battle.

The First War -Analog Video Recording

The First War between the entertainment industry and the technology industry was the "Betamax" war over analog video copying. In the leading 1984 U.S. Supreme Court case, Sony Corp of America v. Universal City Studios, 464 U.S. 417, Universal City Studios and Walt Disney Productions charged that Sony Corporation was liable for copyright infringement for manufacturing Betamax analog video tape cassette recorders (VCRs) which could be used by consumers to record (copyrighted) television programs. The Supreme Court rejected the studios charges of copyright infringement and authorized "time-shifted" copying for subsequent personal use. In establishing the framework for a fair use analysis, the Court ruled that a copyright owner's right to control reproduction of copyrighted work is limited:

"Any individual may reproduce a copyrighted work for a 'fair use'; ...the sale of copying equipment...does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses." Id. at 442.

The Supreme Court's decision in the Betamax case is supported by a multifactor balancing test under the U.S. Copyright Act. The "fair use factors" to be considered under 17 U.S.C. 107 of the Act are: (1) the purpose and character of the use, including whether it is commercial or noncommercial; (2) the nature of the work (e.g. factual works are entitled to less protection that creative works); (3) the amount and substantiality of the portion of the work used; and (4) the effect of the use upon the potential market for the work.

In applying the test in the Betamax case, the noncommercial use of VCRs for personal purposes prevailed over the desire of the studios to prevent any copying of their programming. As a result, today, consumers have their VCRs, and the studios' recourse against copyright infringement is largely limited to the "FBI warnings" against commercial copying at the start of videotapes. In addition to time-shifting of video, the fair use doctrine has been applied in a number of technology contexts involving the copying of media for personal uses, including the making of backup copies of software, videos and other media in case the original becomes damaged or lost.

Larger issues have been raised since the Betamax War because technological innovation has taken ease of copying and quality of copying quantum leaps forward.

The Second War - MPEG3 Audio Recording

The Second War between the entertainment industry and the technology industry was the war over MPEG3 audio recording. The major battle in the MPEG3 war was fought in the well-known A&M Records, Inc. v. Napster, Inc. case. 114 F. Supp. 2d 896 (N.D. Cal. 2000). The MPEG3 war put ease of copying to the test. The studios won the major battle but lost the war.

In Napster, the U.S. District Court in Northern California prohibited unauthorized computer uploading and downloading of recorded music. Although the court's ruling put Napster out of business, it did not prohibit MPEG3 copying. Rather, the ruling allowed authorized MPEG3 copying but held that the Napster had knowledge of unauthorized copying and contributed to the infringement.

Indeed, in decisions in subsequent ease of copying cases, "peer-to-peer" music file sharing services reminiscent of Napster have been allowed. In April 2003, in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, the U.S. District Court for the Central District of California issued summary judgment in favor of StreamCast Networks (formerly MusicCity Networks) and Grokster that their programs Morpeus and KaZaA were significantly different from Napster and noninfringing. Unlike Napster, the software in question connects to true "peer-to-peer" networks (FastTrack in Grokster's case; Gnutella in the case of Morpheus) which do not rely upon a centralized database.

The court in Grokster reasoned that the defendants did not substantially contribute to the infringing conduct of their software users because their users connected directly with other users. In other words, there was no contributory infringement because defendants did not provide the "site and facilities" for infringement. Likewise, the defendants had no control over the infringing conduct of their users. Following the Napster and Grokster cases, other digital music services have found growing acceptance. Although the Grokster case is on appeal, it would be surprising if its legal analysis was overturned.

As a practical matter, the entertainment industry lost the MPEG3 War because it is widely accepted that the fair use doctrine allows for personal copying of lawfully-obtained digital music through new technologies. As the MPEG3 War comes to a close, the use of MPEG3 player devices, such as the Apple iPod and the Archos jukebox, and Internet radio receiver software, such as RealNetworks streaming media, have been recognized as wholly legitimate means for the personal copying and noncommercial use of lawfully-obtained digital music.

The entertainment industry lost the MPEG3 War in another fashion as well. It fought the war in the courtrooms rather than focusing on commercial opportunities. As a result, instead of setting the standards for authorized copying, the entertainment industry left it to the technology industry to define the standards and capture the market. This year, for example, Apple introduced its iTunes service, allowing for the licensed purchase of digital songs for 99 cents. Various other technology players, including a re-launched Napster, are in the market. The market could have been dominated by the entertainment industry if it had embraced MPEG3 consumer technology rather than leading the war against it.

The Third War - MPEG4 Digital Video Recording

The Third War between the entertainment industry and the technology industry is the war over MPEG4 digital video recording. Digital video technologies pose a significant threat to the entertainment industry because of both the ease and quality of digital copying.

To confront the threat, the entertainment industry has promoted what it calls Digital Rights Management ("DRM") technology. DRM technology is technology used to protect against unauthorized digital copying. One of the leading DRM technologies is called Contents Scramble System (CSS). CSS is an encryption technology used in storing digital movies on DVDs. CSS prevents all copying, regardless of whether its purpose is for a fair use.

The entertainment industry is pursuing several cases addressing MPEG4 video copying. In 321 Studios v. Metro-Goldwyn Mayer Studios, (CV-02-01955, N.D. Cal. 2002), MGM and other studios complained that a software developer's product that cracks DVD encryption is illegal under the DMCA. The software developer, 321 Studios, argues that its software merely enables consumers to exercise their fair use rights to make a single copy of a legally owned DVD for personal use. The consumer interest group Electronic Frontier Foundation (EFF) has weighed in on the side of the developer, arguing that the courts should protect technologies that enable "fair use" copying. The studios contend that, under the DMCA, cracking DVD copy protections is illegal in nearly every case, no matter what a person intends to do with the copies. In a decision in February 2004, the District Court ruled against the software developer but the decision will almost certainly be appealed.

In another ongoing case, Paramount Pictures, et al. v. ReplayTV, 01-09358-FMC (C.D. Cal. 2001), several television networks, including ABC, CBS and NBC, and a number of movie studios, including Paramount Pictures, Disney, Time Warner Entertainment, filed suit against SONICblue claiming that SONICblue's digital video recorder ReplayTV violated US copyright law by enabling consumers to record digital copies of TV shows and movies and distribute them via the Internet to other ReplayTV users.

One key legal issue in the ReplayTV case is whether the devices fall under the fair use doctrine, just at the Betamax VCR did years ago. Under the fair use doctrine, such a device would be legal if it allows for "substantial noninfringing uses" such as noncommercial copying for personal use. The studios claim that the legal issues as to fair use involving digital copying are distinguishable from those involving analog copying because of the higher quality of digital reproduction and the resulting risk of infringing uses. A more fundamental issue is whether a device enabling digital video copying can receive fair use protection under the DMCA.

The Digital Millennium Copyright Act And MPEG4 Copying

The DMCA prohibits gaining unauthorized access to a digital copyrighted work by bypassing technological protection measures put in place by the copyright owner. 17 U.S.C. 1201(a)(1). The Act also prohibits manufacturing or making available technologies, products and services used to defeat technological measures controlling access. 17 U.S.C. 1201(a)(2). Section 1201 of the DMCA prohibits circumvention of technological protections against digital copying.

One reading of the DMCA is that, to be consistent with the fair use doctrine, circumvention of technological protections against digital copying is legal when copying of legally obtained digital media is made for a fair use. An alternate reading is that the DMCA makes it unlawful to circumvent technological protections without regard to the reason the circumvention occurs. In other words, under this latter reading, the DMCA precludes any fair use analysis.

If fair use is outlawed under the DMCA, it is questionable whether any MPEG4 recording device would be legal for use by consumers. The only way a MPEG4 recording device would be legal under this scenario would be if it did not circumvent MPEG4 DRM technologies.

The strict interpretation of the DMCA by the entertainment industry has received resistance from consumer groups which fiercely oppose restricting technological innovation that allows for quality and availability of content to consumers. Various legislative and regulatory responses to the DMCA are also being considered. The DMCA mandates a rulemaking proceeding every three years. In 2003, the U.S. Commerce Department initiated the second rulemaking proceeding, inviting public comment on exemptions to the DMCA anti-circumvention provisions. There has been significant public response.

Whether the ongoing litigation, regulatory proceedings and legislative efforts will close the debate on MPEG4 copying and fair use remains to be seen. In the meantime, several major technology companies, including Panasonic, Sharp and Microsoft, are moving forward to introduce MPEG4 recording solutions for the Internet, digital TV and satellite devices.

The Post-War - Digital World

There can be no debate that digital piracy is a serious, costly issue for the entertainment industry. At the same time, technological innovation which allows for quality and availability of content to consumers should be encouraged. Ideally, the entertainment industry and the technology industry should reach agreement on handling digital distribution and digital media to protect the rights of producers and promote the innovation of consumer-oriented technologies.

Published March 1, 2004.