1. 1 CPTWG MEETING #97 May 31, 2006 Legislative/Litigation Update Jim Burger jburger@dowlohnes.com CPTWG MEETING #97 May 31, 2006 Legislative/Litigation Update Jim Burger jburger@dowlohnes.com

2. 2 OverviewOverview n Legislation u Perform Act (S. 2644/H.R. 5361) u Orphan Works Act of 2006 (H.R. 5439) u Intellectual Property Act of 2006 (draft) u Section 115 Reform Act of 2006 (draft) u Consumer Competition and Broadband Promotion Act (draft) u French Implementation of EU Copyright Directive u Proposed Australian Copyright Reforms u WIPO Broadcasting Treaty n Litigation u Atlantic Recording Corp. v. XM Satellite Radio, Inc. u Macrovision v. Sima Products Corp. u Twentieth Century Fox et al. v. Cablevision Systems Corp. n Legislation u Perform Act (S. 2644/H.R. 5361) u Orphan Works Act of 2006 (H.R. 5439) u Intellectual Property Act of 2006 (draft) u Section 115 Reform Act of 2006 (draft) u Consumer Competition and Broadband Promotion Act (draft) u French Implementation of EU Copyright Directive u Proposed Australian Copyright Reforms u WIPO Broadcasting Treaty n Litigation u Atlantic Recording Corp. v. XM Satellite Radio, Inc. u Macrovision v. Sima Products Corp. u Twentieth Century Fox et al. v. Cablevision Systems Corp.

3. 3 LegislationLegislation

4. 4 Perform Act of 2006 n Senate version (S. 2644) introduced April 25; House bill (H.R. 5361) introduced May 11 u House and Senate bills are virtually identical n Senate Judiciary Committee Hearing -- April 26 u Testimony from both sides F In favor: Artists, Labels (Warner) F Opposed: Other artists, XM Radio, NAB, Live365 n Consumer Electronics Retailer Coalition u Perform Act interferes with lawful uses of CE products u Purpose of Act is “to limit the options of honest people” n Senate version (S. 2644) introduced April 25; House bill (H.R. 5361) introduced May 11 u House and Senate bills are virtually identical n Senate Judiciary Committee Hearing -- April 26 u Testimony from both sides F In favor: Artists, Labels (Warner) F Opposed: Other artists, XM Radio, NAB, Live365 n Consumer Electronics Retailer Coalition u Perform Act interferes with lawful uses of CE products u Purpose of Act is “to limit the options of honest people”

5. 5 Perform Act of 2006 (cont.) n Satellite Radio Providers u Cannot authorize, cause, enable or induce users to make copies of satellite radio content u Must use “reasonably available, technologically feasible and economically reasonable” technology to prevent such copying n “Reasonable Recording” Exception u Recording of content permissible only if technology permits u Recording of content permissible only if technology permits F “Automatic recording;” or F Playback based on specific programs, time periods, or channels u Exception does not apply to devices that F Enable recording or playback based on specific songs, artists, genres or other user preferences; F Allow users to change the order of songs for playback; or F Permit users to transfer the songs to other devices, except for use over a home network n Satellite Radio Providers u Cannot authorize, cause, enable or induce users to make copies of satellite radio content u Must use “reasonably available, technologically feasible and economically reasonable” technology to prevent such copying n “Reasonable Recording” Exception u Recording of content permissible only if technology permits u Recording of content permissible only if technology permits F “Automatic recording;” or F Playback based on specific programs, time periods, or channels u Exception does not apply to devices that F Enable recording or playback based on specific songs, artists, genres or other user preferences; F Allow users to change the order of songs for playback; or F Permit users to transfer the songs to other devices, except for use over a home network

6. 6 Orphan Works Act of 2006 (H.R. 5439) u Introduced May 23 by Rep. Lamar Smith u Creates guidelines for use of copyrighted material when original owner cannot be found u Among other things, the bill F Outlines steps potential user must undertake before using a work F Requires use of pay search tools when reasonable F Provides that owner can recover attorneys fees if user refuses to pay reasonable royalty F Establishes definition of reasonable compensation F Provides that lack of visible copyright information is insufficient to deem work an orphan work u Introduced May 23 by Rep. Lamar Smith u Creates guidelines for use of copyrighted material when original owner cannot be found u Among other things, the bill F Outlines steps potential user must undertake before using a work F Requires use of pay search tools when reasonable F Provides that owner can recover attorneys fees if user refuses to pay reasonable royalty F Establishes definition of reasonable compensation F Provides that lack of visible copyright information is insufficient to deem work an orphan work

7. 7 Intellectual Property Act of 2006 n Draft bill circulated by Rep. Lamar Smith in April n Expands criminal enforcement for copyright infringement u Liability for attempting or conspiring to infringe copyrights u Penalties for first violation increased from 5 to 10 years; subsequent violations from 10 to 20 years n Broadens DMCA u Expands definition of “trafficking in” technology that circumvents copy protection F No one may “ make, import, export, obtain control of, or possess” tools that would permit circumvention n Draft bill circulated by Rep. Lamar Smith in April n Expands criminal enforcement for copyright infringement u Liability for attempting or conspiring to infringe copyrights u Penalties for first violation increased from 5 to 10 years; subsequent violations from 10 to 20 years n Broadens DMCA u Expands definition of “trafficking in” technology that circumvents copy protection F No one may “ make, import, export, obtain control of, or possess” tools that would permit circumvention

8. 8 Intellectual Property Act of 2006 (cont.) n Expanded DOJ enforcement power u DOJ permitted to use wiretaps in F Criminal copyright cases F Trade secret theft F Trafficking in counterfeit goods n New provisions on civil forfeiture u Assets (e.g., computers) used to engage in piracy are subject to forfeiture and destruction n Expanded DOJ enforcement power u DOJ permitted to use wiretaps in F Criminal copyright cases F Trade secret theft F Trafficking in counterfeit goods n New provisions on civil forfeiture u Assets (e.g., computers) used to engage in piracy are subject to forfeiture and destruction

9. 9 Section 115 Reform Act of 2006 n Draft circulated in May; hearing May 16 before House Subcommittee on Courts, Internet & IP n New approach to compulsory license for digital music u Aims to address whether sale of digital music is covered under § 114 (public performance) or § 115 (distribution) u Amends compulsory license to permit distribution of digital music via download or streaming u Establishes “general designated agent” and 6 “designated agents” to oversee issuance of licenses u Provides for retroactive royalty for existing digital works n RIAA testimony: Bill leaves many music licensing issues unresolved n Draft circulated in May; hearing May 16 before House Subcommittee on Courts, Internet & IP n New approach to compulsory license for digital music u Aims to address whether sale of digital music is covered under § 114 (public performance) or § 115 (distribution) u Amends compulsory license to permit distribution of digital music via download or streaming u Establishes “general designated agent” and 6 “designated agents” to oversee issuance of licenses u Provides for retroactive royalty for existing digital works n RIAA testimony: Bill leaves many music licensing issues unresolved

10. 10 Consumer Competition & Broadband Promotion Act n Senate Democratic Staff working draft (May 24) n Would give FCC authority to implement broadcast flag u Fairly similar to Stevens Bill u Major difference - RAND issue n Also includes audio flag provision – different than Stevens: u Providers of digital audio devices must adopt technology to protect “disaggregation and indiscriminate redistribution of content” n Senate Democratic Staff working draft (May 24) n Would give FCC authority to implement broadcast flag u Fairly similar to Stevens Bill u Major difference - RAND issue n Also includes audio flag provision – different than Stevens: u Providers of digital audio devices must adopt technology to protect “disaggregation and indiscriminate redistribution of content”

11. 11 Law on Author Rights and Related Rights in the Information Society Law on Author Rights and Related Rights in the Information Society n French implementation of EU Copyright Directive u National Assembly version passed in March F Would require music retailers to share DRM “interoperability” information –Goal is to ensure that consumers can play any downloaded song on any MP3 player u Senate passed amended version May 11 F Would create regulatory authority to oversee music policy issues, including interoperability –Could require retailers to share DRM code –Exemption from disclosure requirement if rights holders accept limits on interoperability u Committee of 14 n French implementation of EU Copyright Directive u National Assembly version passed in March F Would require music retailers to share DRM “interoperability” information –Goal is to ensure that consumers can play any downloaded song on any MP3 player u Senate passed amended version May 11 F Would create regulatory authority to oversee music policy issues, including interoperability –Could require retailers to share DRM code –Exemption from disclosure requirement if rights holders accept limits on interoperability u Committee of 14

12. 12 Australia: Proposed Copyright Reforms n Australia AG proposed May 14 n Reforms would dramatically expand permitted uses of copyrighted works u Permit time shifting of TV and radio programs for a single later use u Allow “format shifting” of music, newspapers and books (i.e., copy onto iPods, etc.) for personal use u Expand exceptions for use of copyrighted materials by schools, museums and libraries u Allow use of copyrighted materials for parody/satire u Provide new enforcement measures to combat piracy F Lower burden to establish copyright infringement n Legislation not yet introduced, but expected soon n Australia AG proposed May 14 n Reforms would dramatically expand permitted uses of copyrighted works u Permit time shifting of TV and radio programs for a single later use u Allow “format shifting” of music, newspapers and books (i.e., copy onto iPods, etc.) for personal use u Expand exceptions for use of copyrighted materials by schools, museums and libraries u Allow use of copyrighted materials for parody/satire u Provide new enforcement measures to combat piracy F Lower burden to establish copyright infringement n Legislation not yet introduced, but expected soon

13. 13 WIPO Broadcast Treaty n Draft Approved at May 1-5 n Provides 50 IPR in Signal to Broadcasters in Addition to Any Copyrights u Exclusive right to retransmit broadcasts by any means, including rebroadcast, retransmission by wire, & retransmission over computer networks u Exclusive right of authorizing fixation of broadcasts u Exclusive right of authorizing direct or indirect reproduction, in any manner or form, of fixations of broadcasts n Contracting Parties to provide adequate legal protection & effective legal remedies against the circumvention of effective technological measures used by broadcasting organizations in connection with the exercise of their rights under this Treaty n Broadcasters claim need protection against signal theft of World Cup Soccer Games n Opponents concerned about broad rights far beyond signal theft n Meeting planned in September & Diplomatic Conference in ‘07 n Draft Approved at May 1-5 n Provides 50 IPR in Signal to Broadcasters in Addition to Any Copyrights u Exclusive right to retransmit broadcasts by any means, including rebroadcast, retransmission by wire, & retransmission over computer networks u Exclusive right of authorizing fixation of broadcasts u Exclusive right of authorizing direct or indirect reproduction, in any manner or form, of fixations of broadcasts n Contracting Parties to provide adequate legal protection & effective legal remedies against the circumvention of effective technological measures used by broadcasting organizations in connection with the exercise of their rights under this Treaty n Broadcasters claim need protection against signal theft of World Cup Soccer Games n Opponents concerned about broad rights far beyond signal theft n Meeting planned in September & Diplomatic Conference in ‘07

14. LitigationLitigation

15. 15 Atlantic Recording Corp. et al. v. XM Satellite Radio, Inc. n Recording industry alleges XM Radio’s “Inno” product, which permits users to make and store digital copies of songs, violates statutory copyright license n Complaint alleges Inno undermines their ability to distribute music through other download services (e.g., iTunes) u “XM subscribers will have little need ever again to buy legitimate copies of Plaintiffs’ sound recordings” n Suit filed May 16 in S.D.N.Y. n Recording industry alleges XM Radio’s “Inno” product, which permits users to make and store digital copies of songs, violates statutory copyright license n Complaint alleges Inno undermines their ability to distribute music through other download services (e.g., iTunes) u “XM subscribers will have little need ever again to buy legitimate copies of Plaintiffs’ sound recordings” n Suit filed May 16 in S.D.N.Y.

16. 16 Atlantic Recording Corp. et al. v. XM Satellite Radio, Inc. (cont.) n Complaint alleges direct and secondary copyright infringement and state law claims n Plaintiffs seek injunctive relief and statutory, compensatory and punitive damages u Statutory damages could be up to $150,000 per work n Industry response: u HRRC: suit ignores AHRA, which would provide for royalties on devices like the Inno and no lawsuits permitted under Section 1008 n Complaint alleges direct and secondary copyright infringement and state law claims n Plaintiffs seek injunctive relief and statutory, compensatory and punitive damages u Statutory damages could be up to $150,000 per work n Industry response: u HRRC: suit ignores AHRA, which would provide for royalties on devices like the Inno and no lawsuits permitted under Section 1008

17. 17 Macrovision v. Sima Products Corp. n Background u Macrovision’s Analog Copy Protection (ACP) technology prevents DVDs from making usable analog copies (i.e., VHS copies) u Sima developed hardware that eliminates ACP, allowing users to make usable copies u June 2005: Macrovision filed suit in S.D.N.Y alleging violation of DMCA and patent infringement n Background u Macrovision’s Analog Copy Protection (ACP) technology prevents DVDs from making usable analog copies (i.e., VHS copies) u Sima developed hardware that eliminates ACP, allowing users to make usable copies u June 2005: Macrovision filed suit in S.D.N.Y alleging violation of DMCA and patent infringement

18. 18 Macrovision v. Sima Products Corp. n Recent developments u April 20: Court preliminarily enjoined Sima from selling products that circumvent ACP F Rejected argument that the products don’t violate DMCA because “primary purpose” is not circumvention F Found no fair use; under DMCA, defense cannot be used by manufacturers or traffickers in circumventing devices u May 15: Sima filed motion for reconsideration of order granting injunction F Argues ACP not “Effective Technological Measure” protected against circumvention under DMCA F Also that Sima’s products are designed for lawful purposes, not circumvention n Recent developments u April 20: Court preliminarily enjoined Sima from selling products that circumvent ACP F Rejected argument that the products don’t violate DMCA because “primary purpose” is not circumvention F Found no fair use; under DMCA, defense cannot be used by manufacturers or traffickers in circumventing devices u May 15: Sima filed motion for reconsideration of order granting injunction F Argues ACP not “Effective Technological Measure” protected against circumvention under DMCA F Also that Sima’s products are designed for lawful purposes, not circumvention

19. 19 Twentieth Century Fox et al. v. Cablevision Systems Corp. n Studios and broadcasters sued Cablevision May 24 in S.D.N.Y. n Suit alleges “network DVR” service violates copyright rights u Service enables retrieval of recorded programs from central server instead of set-top box n Suit alleges that service violates Cablevision’s license, which permits it to broadcast, but not store, the plaintiffs’ programs n Plaintiffs seek injunctive relief and damages n Studios and broadcasters sued Cablevision May 24 in S.D.N.Y. n Suit alleges “network DVR” service violates copyright rights u Service enables retrieval of recorded programs from central server instead of set-top box n Suit alleges that service violates Cablevision’s license, which permits it to broadcast, but not store, the plaintiffs’ programs n Plaintiffs seek injunctive relief and damages