2. 1 CPTWG MEETING #91 September 8, 2005 Legislative/Regulatory Update Jim Burger jburger@dowlohnes.com CPTWG MEETING #91 September 8, 2005 Legislative/Regulatory Update Jim Burger jburger@dowlohnes.com

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4. 3 OverviewOverview n Legislation u All Quiet – So Far – on the Legislative Front F Senator Stevens MGM v. Grokster and the Balance Between Innovation Services Against Protecting Content Providers n Other developments u StorageTek v. CHE u Monotype Imaging Inc. v. Bitstream Inc n Legislation u All Quiet – So Far – on the Legislative Front F Senator Stevens MGM v. Grokster and the Balance Between Innovation Services Against Protecting Content Providers n Other developments u StorageTek v. CHE u Monotype Imaging Inc. v. Bitstream Inc

5. 4 StorageTek v. CHE – Background n Federal Circuit Court of Appeals Decision n StorageTek – makes storage devices – sued CHE – 3 rd party maintenance Co. – for copyright & DMCA violation n To maintain storage devices CHE had to u boot the system – put maintenance program in RAM u CHE needed error messages u To get them defeated StorageTek’s password protection program n Federal Circuit Court of Appeals Decision n StorageTek – makes storage devices – sued CHE – 3 rd party maintenance Co. – for copyright & DMCA violation n To maintain storage devices CHE had to u boot the system – put maintenance program in RAM u CHE needed error messages u To get them defeated StorageTek’s password protection program

6. 5 n Court found that CHE not guilty of copyright violation under §117(c) of the Copyright Act n On DMCA count CHE not guilty because it did not violate copyright or facilitate copyright infringement n Relied on Chamberlain v. Skylink (garage door opener case): “[Congress] chose to create new causes of action for circumvention and for trafficking in circumvention devices. Congress did not create new property rights.” n Court found that CHE not guilty of copyright violation under §117(c) of the Copyright Act n On DMCA count CHE not guilty because it did not violate copyright or facilitate copyright infringement n Relied on Chamberlain v. Skylink (garage door opener case): “[Congress] chose to create new causes of action for circumvention and for trafficking in circumvention devices. Congress did not create new property rights.” StorageTek v. CHE - Decision

7. 6 Monotype Imaging Inc. v. Bitstream Inc – Background n First Lower Court Case (DC ND IL) to Interpret Grokster n Monotype – Font “Foundry” – Sued Bitstream for TrueDoc font display program for direct, vicarious and contributory copyright infringement n TrueDoc replicates typeface designs for recipient of a document even if doesn’t have font installed on the machine n First Lower Court Case (DC ND IL) to Interpret Grokster n Monotype – Font “Foundry” – Sued Bitstream for TrueDoc font display program for direct, vicarious and contributory copyright infringement n TrueDoc replicates typeface designs for recipient of a document even if doesn’t have font installed on the machine

8. 7 Monotype Imaging Inc. v. Bitstream Inc – Decision n Court found that Monotype failed to prove direct copyright infringement n But went on to examine secondary liability issues u Contributory – even if proved direct no evidence Bitstream knew u Citing Grokster the court says: “ “The Supreme Court has recognized that a court may impute culpable intent as a matter of law from the characteristics or uses of an accused product.” u Supreme Court did not say that the Court held that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.” nCnCnCnCourt found that Monotype failed to prove direct copyright infringement nBnBnBnBut went on to examine secondary liability issues uCuCuCuContributory – even if proved direct no evidence Bitstream knew uCuCuCuCiting Grokster the court says: “The Supreme Court has recognized that a court may impute culpable intent as a matter of law from the characteristics or uses of an accused product.” uSuSuSuSupreme Court did not say that the Court held that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”

9. 8 Monotype Imaging Inc. v. Bitstream Inc – Decision Con’t n The District Court boiled Grokster down to three “features” u “[T]he defendants targeted ‘a known source of demand for copyright infringement, the market compromising former Napster users.’” u “Neither defendant took any steps to diminish the infringing activity that they knew about.” u “The defendants’ models of business were such that they made money by increasing the volume of use of their software, therefore increasing the volume of infringement.” n It then found that Bitstream’s conduct fit none of those “features” n The District Court boiled Grokster down to three “features” u “[T]he defendants targeted ‘a known source of demand for copyright infringement, the market compromising former Napster users.’” u “Neither defendant took any steps to diminish the infringing activity that they knew about.” u “The defendants’ models of business were such that they made money by increasing the volume of use of their software, therefore increasing the volume of infringement.” n It then found that Bitstream’s conduct fit none of those “features”