1. 1 CPTWG MEETING #99 October 4, 2006 Legislative/Litigation Update Jim Burger jburger@dowlohnes.com CPTWG MEETING #99 October 4, 2006 Legislative/Litigation Update Jim Burger jburger@dowlohnes.com

2. 2 OverviewOverview n Legislative/Regulatory Issues u Copyright Modernization Act of 2006 (H.R. 6052) u IP Enhanced Criminal Enforcement Act of 2006 (H.R. 5921) u Other U.S. Copyright Developments u WIPO Broadcasting Treaty u Australian Copyright Reform u European Developments n Litigation u Arista Records LLC et al. v. Lime Wire LLC u Cablevision Suits (Twenty Century Fox & Cartoon Network) u MGM Studios v. Grokster u Atlantic Recording Corp. v. XM Satellite Radio u CBC Distribution v. Major League Baseball Advance Media u In re Rambus, Inc. n Legislative/Regulatory Issues u Copyright Modernization Act of 2006 (H.R. 6052) u IP Enhanced Criminal Enforcement Act of 2006 (H.R. 5921) u Other U.S. Copyright Developments u WIPO Broadcasting Treaty u Australian Copyright Reform u European Developments n Litigation u Arista Records LLC et al. v. Lime Wire LLC u Cablevision Suits (Twenty Century Fox & Cartoon Network) u MGM Studios v. Grokster u Atlantic Recording Corp. v. XM Satellite Radio u CBC Distribution v. Major League Baseball Advance Media u In re Rambus, Inc.

3. 3 Legislative/Regulatory Issues

4. 4 Copyright Modernization Act of 2006 (H.R. 6052) n Introduced Sept. 12 by Rep. Lamar Smith; combines three pending copyright measures u Section 115 Reform Act of 2006 (SIRA) F Would establish compulsory license for distribution of digital music via download or streaming F Goal is to streamline process of licensing digital music u Orphan Works Act of 2006 F Eliminates copyright infringement liability where user made diligent effort to locate author u Copyright Protection Resources Authorization Act of 2006 F Creates IP task force to assist in international prosecution of IP infringement n Introduced Sept. 12 by Rep. Lamar Smith; combines three pending copyright measures u Section 115 Reform Act of 2006 (SIRA) F Would establish compulsory license for distribution of digital music via download or streaming F Goal is to streamline process of licensing digital music u Orphan Works Act of 2006 F Eliminates copyright infringement liability where user made diligent effort to locate author u Copyright Protection Resources Authorization Act of 2006 F Creates IP task force to assist in international prosecution of IP infringement

5. 5 Copyright Modernization Act of 2006 (cont.) n SIRA most controversial of the three measures u Consumer groups, IT companies, broadcasters have issues with SIRA; Sept. 13 letter to Sensebrenner F Signatories included CEA, EFF, HRRC, NAB, Sirius and XM Radio F Argued bill would limit consumers’ rights to copy digital music for personal use  Need license for every digital copy, even cache and buffer copies with no independent economic value  Satellite radio providers would incur additional license fees for devices that record programming  Bill is “backhanded technology mandate” that will limit fair use n Bill has been unable to gain momentum; Smith shelved it on Sept. 27 th for remainder of session n SIRA most controversial of the three measures u Consumer groups, IT companies, broadcasters have issues with SIRA; Sept. 13 letter to Sensebrenner F Signatories included CEA, EFF, HRRC, NAB, Sirius and XM Radio F Argued bill would limit consumers’ rights to copy digital music for personal use  Need license for every digital copy, even cache and buffer copies with no independent economic value  Satellite radio providers would incur additional license fees for devices that record programming  Bill is “backhanded technology mandate” that will limit fair use n Bill has been unable to gain momentum; Smith shelved it on Sept. 27 th for remainder of session

6. 6 Intellectual Property Enhanced Criminal Enforcement Act of 2006 n Ch. Sensebrenner Introduced in July n Increase criminal penalties for copyright infringement u Longer prison sentences for unauthorized trafficking in musical recordings and unauthorized recording of movies u Criminalizes “attempts” to traffic in circumvention devices that violate DMCA n Authorizes additional funding for DOJ to create IP theft unit, and for FBI and DOJ to investigate computer crimes n Bill referred to House Judiciary Committee, unlikely to pass in current session; may be reintroduced next year n Ch. Sensebrenner Introduced in July n Increase criminal penalties for copyright infringement u Longer prison sentences for unauthorized trafficking in musical recordings and unauthorized recording of movies u Criminalizes “attempts” to traffic in circumvention devices that violate DMCA n Authorizes additional funding for DOJ to create IP theft unit, and for FBI and DOJ to investigate computer crimes n Bill referred to House Judiciary Committee, unlikely to pass in current session; may be reintroduced next year

7. 7 Other U.S. Copyright Developments n CEA, RIAA recently addressed copyright issues with Rep. Boucher u RIAA sent letter stating CPTWG wasn’t “appropriate forum” to discuss digital radio content protection issues and wouldn’t participate u CEA response: RIAA’s letter refusing to participate confirms that it has nothing to propose; RIAA simply wants to stop consumers from making personal copies of musical works n Music Publishers threatens musicians with suit u MPA & NMPA wants to shut down guitar tablature websites, where musicians exchange tips about how to play popular songs F Claim postings are derivative works of original compositions u Music publishers say losing royalties from sale of sheet music u Suits have been threatened, none filed to date u Several sites shut down n CEA, RIAA recently addressed copyright issues with Rep. Boucher u RIAA sent letter stating CPTWG wasn’t “appropriate forum” to discuss digital radio content protection issues and wouldn’t participate u CEA response: RIAA’s letter refusing to participate confirms that it has nothing to propose; RIAA simply wants to stop consumers from making personal copies of musical works n Music Publishers threatens musicians with suit u MPA & NMPA wants to shut down guitar tablature websites, where musicians exchange tips about how to play popular songs F Claim postings are derivative works of original compositions u Music publishers say losing royalties from sale of sheet music u Suits have been threatened, none filed to date u Several sites shut down

8. 8 WIPO Broadcasting Treaty n Ten Year Series of Meetings n Rome versus Section 325 n February 8, 2006 Draft u Right of Fixation u Right of Reproduction u TPM u 50-year Term n Chairman of May SCCR – Calls for DipCon n General Assembly – October 2 u Decision – Two SCCR meetings & if consensus on signal-based approach, DipCon in Nov ‘07 n Ten Year Series of Meetings n Rome versus Section 325 n February 8, 2006 Draft u Right of Fixation u Right of Reproduction u TPM u 50-year Term n Chairman of May SCCR – Calls for DipCon n General Assembly – October 2 u Decision – Two SCCR meetings & if consensus on signal-based approach, DipCon in Nov ‘07

9. 9 Australian Copyright Reform n Australian AG circulated draft legislation Sept. 4 th & 22 nd designed to create new liability for circumventing technological protection measures n Certain activities carved out as exceptions: u Reproducing software to make interoperable products u Reproduction of copyrighted materials by educational institutions u Inclusion of sound recordings for broadcasting purposes u Circumvention where TPM is obsolete, damaged, defective, malfunctioning or unusable, or where necessary to repair the TPM u Circumventing regional coding on DVDs and video games n Violations could result in up to 5 years in prison and/or fine of up to US $45,000 n Comment period ended Sept. 22; bill expected to be introduced in Parliament in October n Australian AG circulated draft legislation Sept. 4 th & 22 nd designed to create new liability for circumventing technological protection measures n Certain activities carved out as exceptions: u Reproducing software to make interoperable products u Reproduction of copyrighted materials by educational institutions u Inclusion of sound recordings for broadcasting purposes u Circumvention where TPM is obsolete, damaged, defective, malfunctioning or unusable, or where necessary to repair the TPM u Circumventing regional coding on DVDs and video games n Violations could result in up to 5 years in prison and/or fine of up to US $45,000 n Comment period ended Sept. 22; bill expected to be introduced in Parliament in October

10. 10 European Developments European Developments n France’s “Law on Author Rights and Related Rights in the Information Society” u Enacted by French Parliament June 30 F Requires manufacturers to make their devices play music regardless of DRM format F French iPod users will be able to play music downloaded from other services F Users of other devices will be able to play music from iTunes F But Apple not required to share all information about its DRM technology n UK, Sweden, Denmark, Norway and Poland considering measures similar to French law u Apple currently negotiating with Scandinavian governments over proposed laws n UK’s national library also recently called for updating of UK copyright law to restrict the use of DRMs that goes beyond protection of copyrights n France’s “Law on Author Rights and Related Rights in the Information Society” u Enacted by French Parliament June 30 F Requires manufacturers to make their devices play music regardless of DRM format F French iPod users will be able to play music downloaded from other services F Users of other devices will be able to play music from iTunes F But Apple not required to share all information about its DRM technology n UK, Sweden, Denmark, Norway and Poland considering measures similar to French law u Apple currently negotiating with Scandinavian governments over proposed laws n UK’s national library also recently called for updating of UK copyright law to restrict the use of DRMs that goes beyond protection of copyrights

11. LitigationLitigation

12. 12 Arista Records LLC et al. v. Lime Wire LLC n LimeWire operates file sharing service n Record labels brought suit in SDNY Aug. 4 alleging secondary copyright infringement, including Grokster inducement u Labels allege that LimeWire encourages users to “generously” share music files u LimeWire can review users’ searches and should know of infringing activity and know what is being shared u LimeWire knows its users infringe because it has targeted users of other P2P services n Answer and counterclaims filed Sept. 25; LimeWire alleges that labels are colluding to create monopoly over distribution of digital music n LimeWire operates file sharing service n Record labels brought suit in SDNY Aug. 4 alleging secondary copyright infringement, including Grokster inducement u Labels allege that LimeWire encourages users to “generously” share music files u LimeWire can review users’ searches and should know of infringing activity and know what is being shared u LimeWire knows its users infringe because it has targeted users of other P2P services n Answer and counterclaims filed Sept. 25; LimeWire alleges that labels are colluding to create monopoly over distribution of digital music

13. 13 Cablevision Suits n Parties filed cross motions for summary judgment in both cases Sept. 5 u Plaintiffs F By “retransmitting” content to subscribers, remote DVR makes “public performance” that requires a license F Service also violates plaintiffs’ exclusive right to make copies of their copyrighted works F Sony is distinguishable: Cablevision, unlike Sony, would have “continuing involvement” in providing the service u Cablevision F Under Sony, provider of devices used to make copies not liable for direct copyright infringement; plaintiffs must show indirect infringement F Works provided via remote DVR are not “public performances”  Cablevision is not “performing” works because Customer, not Cablevision, operates the DVR  Customers’ personal uses of programs are not “public” n Parties filed cross motions for summary judgment in both cases Sept. 5 u Plaintiffs F By “retransmitting” content to subscribers, remote DVR makes “public performance” that requires a license F Service also violates plaintiffs’ exclusive right to make copies of their copyrighted works F Sony is distinguishable: Cablevision, unlike Sony, would have “continuing involvement” in providing the service u Cablevision F Under Sony, provider of devices used to make copies not liable for direct copyright infringement; plaintiffs must show indirect infringement F Works provided via remote DVR are not “public performances”  Cablevision is not “performing” works because Customer, not Cablevision, operates the DVR  Customers’ personal uses of programs are not “public”

14. 14 Atlantic Recording Corp. v. XM Satellite Radio n XM filed motion to dismiss July 17 u Argues inno device is protected under AHRA F AHRA prohibits infringement claims based on manufacture, sale or consumer use of digital audio recording device F Inno is digital recording device, but not digital download service n Plaintiffs filed opposition to motion on August 31 u XM’s license permits “evanescent public performances;” does not authorizes users to make permanent copy F Inno users can listen to recorded music without listening to live broadcast; makes inno equivalent to download service F Such use “cannibalizes” authorized market for digital downloads u AHRA does not immunize XM’s conduct F Only applies to claims based on the act of manufacturing, importing or distributing digital audio recording devices F Also immunizes users of these devices, and manufacturers that sell them  XM is not engaging in any of these types of conduct, and therefore cannot rely on AHRA n XM filed motion to dismiss July 17 u Argues inno device is protected under AHRA F AHRA prohibits infringement claims based on manufacture, sale or consumer use of digital audio recording device F Inno is digital recording device, but not digital download service n Plaintiffs filed opposition to motion on August 31 u XM’s license permits “evanescent public performances;” does not authorizes users to make permanent copy F Inno users can listen to recorded music without listening to live broadcast; makes inno equivalent to download service F Such use “cannibalizes” authorized market for digital downloads u AHRA does not immunize XM’s conduct F Only applies to claims based on the act of manufacturing, importing or distributing digital audio recording devices F Also immunizes users of these devices, and manufacturers that sell them  XM is not engaging in any of these types of conduct, and therefore cannot rely on AHRA

15. 15 MGM Studios v. Grokster n StreamCast sole remaining defendant after remand from Supreme Court to district court n District court (C.D. Cal.) granted studios’ motion for summary judgment Sept. 27 th u Under Grokster inducement standard, StreamCast distributed its software with intent of encouraging infringement F StreamCast targeted original Napster users F Provided technical assistance to users to play copyrighted content downloaded using StreamCast software F StreamCast knew system could search for copyrighted content; it even had a “Top 40” songs category F Business model depended on mass infringing use F StreamCast took no steps to avoid infringement (e.g., filtering technology) n StreamCast sole remaining defendant after remand from Supreme Court to district court n District court (C.D. Cal.) granted studios’ motion for summary judgment Sept. 27 th u Under Grokster inducement standard, StreamCast distributed its software with intent of encouraging infringement F StreamCast targeted original Napster users F Provided technical assistance to users to play copyrighted content downloaded using StreamCast software F StreamCast knew system could search for copyrighted content; it even had a “Top 40” songs category F Business model depended on mass infringing use F StreamCast took no steps to avoid infringement (e.g., filtering technology)

16. 16 In re Rambus n Background u Rambus, develops computer memory technologies, joined standard setting organization (SSO) for such technologies u SSO’s rules obligated members to disclose relevant IPR, which only could be included in the standard if licensed on RAND terms u Rambus did not disclose certain patents; once the standard was adopted, sued members who practiced standard for infringement u FTC brought charges for anticompetitive conduct and unfair competition n Decision (FTC) u SSO disclosure requirements involve implied duty to operate cooperatively and in good faith F Ambiguous statements from Rambus about its IPR therefore were deceptive and misleading u Rambus’s failure to disclose denied members opportunity to negotiate against excessive royalties n Background u Rambus, develops computer memory technologies, joined standard setting organization (SSO) for such technologies u SSO’s rules obligated members to disclose relevant IPR, which only could be included in the standard if licensed on RAND terms u Rambus did not disclose certain patents; once the standard was adopted, sued members who practiced standard for infringement u FTC brought charges for anticompetitive conduct and unfair competition n Decision (FTC) u SSO disclosure requirements involve implied duty to operate cooperatively and in good faith F Ambiguous statements from Rambus about its IPR therefore were deceptive and misleading u Rambus’s failure to disclose denied members opportunity to negotiate against excessive royalties