1. 1 CPTWG MEETING #96 April 18, 2006 Legislative/Regulatory Update Jim Burger jburger@dowlohnes.com CPTWG MEETING #96 April 18, 2006 Legislative/Regulatory Update Jim Burger jburger@dowlohnes.com

2. 2 OverviewOverview n Legislation u Audio Broadcast Flag Licensing Act (H.R. 4861) u Perform Act (draft) u House Commerce Committee Hearing: Digital Content and Enabling Technology: Satisfying the 21st Century Consumer u French Implementation of EU Copyright Directive n Litigation u Static Control v. Lexmark u Arista Records v. Flea World n Legislation u Audio Broadcast Flag Licensing Act (H.R. 4861) u Perform Act (draft) u House Commerce Committee Hearing: Digital Content and Enabling Technology: Satisfying the 21st Century Consumer u French Implementation of EU Copyright Directive n Litigation u Static Control v. Lexmark u Arista Records v. Flea World

3. 3 Audio Broadcast Flag Licensing Act of 2006 (H.R. 4861) n Would give FCC authority to require that: u Licenses prohibit unauthorized copying or redistribution via broadcast flag or similar technology u Digital audio technologies be licensed on reasonable and nondiscriminatory terms n Permits performing and mechanical rights organizations to: u Circumvent technological measures to monitor use of their copyrighted works u Obtain free license from the digital audio providers to undertake such monitoring n Would give FCC authority to require that: u Licenses prohibit unauthorized copying or redistribution via broadcast flag or similar technology u Digital audio technologies be licensed on reasonable and nondiscriminatory terms n Permits performing and mechanical rights organizations to: u Circumvent technological measures to monitor use of their copyrighted works u Obtain free license from the digital audio providers to undertake such monitoring

4. 4 Perform Act n Sen. Feinstein draft; Not Yet Introduced n Requires Satellite Radio Providers to u Avoid conduct that permits users to record audio content u Use “reasonably available technology” to prevent copying of audio content n “Reasonable Recording” Exception u Recording of audio content permissible only where technology permits u Recording of audio content permissible only where 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, or F allow users to play songs other than in original broadcast order n Performing Rights Organization to Have Similar Circumvention and Licensing as H.R. 4861 n Sen. Feinstein draft; Not Yet Introduced n Requires Satellite Radio Providers to u Avoid conduct that permits users to record audio content u Use “reasonably available technology” to prevent copying of audio content n “Reasonable Recording” Exception u Recording of audio content permissible only where technology permits u Recording of audio content permissible only where 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, or F allow users to play songs other than in original broadcast order n Performing Rights Organization to Have Similar Circumvention and Licensing as H.R. 4861

5. 5 Digital Content and Enabling Technology: Satisfying the 21st Century Consumer (House Commerce Committee Hearing) n Congress Needs to Content Balance Protection with Fair Use Rights n Testimony From MPAA, TiVo, Sling Media, Entertainment Software Association u MPAA, ESA F DMCA and DRM add comfort to deploying media in new formats u TiVo, Sling Media F Extensive fair use rights necessary to achieve innovation n Congress Needs to Content Balance Protection with Fair Use Rights n Testimony From MPAA, TiVo, Sling Media, Entertainment Software Association u MPAA, ESA F DMCA and DRM add comfort to deploying media in new formats u TiVo, Sling Media F Extensive fair use rights necessary to achieve innovation

6. 6 Law on Author Rights and Related Rights in the Information Society Law on Author Rights and Related Rights in the Information Society n n French implementation of EU Copyright Directive n n Technical Measure Providers Must Share “Information Essential to Interoperability” of DRM Formats u u “Information” includes technological documentation and programming interfaces essential to interoperability” u u “Interested Parties” can decompile to obtain information n n Goal is to Ensure Consumers can Play Any Downloaded Song on Any MP3 player u u E.g., Apple must disclose DRM code so other digital music players can play iTunes files n n French implementation of EU Copyright Directive n n Technical Measure Providers Must Share “Information Essential to Interoperability” of DRM Formats u u “Information” includes technological documentation and programming interfaces essential to interoperability” u u “Interested Parties” can decompile to obtain information n n Goal is to Ensure Consumers can Play Any Downloaded Song on Any MP3 player u u E.g., Apple must disclose DRM code so other digital music players can play iTunes files

7. 7 Law on Author Rights and Related Rights in the Information Society (cont.) n Also “Cracks Down” on P2P u Illegal to “knowingly publish” software that facilitates unauthorized distribution of copyrighted works u Authorized penalties: F Fines of up to 300,000 euros F Up to 3 years in jail n Bill Passed France’s National Assembly March 21 n Senate Commission of Cultural Affairs Approved Amended Version April 14 u Full Senate will consider in May n Also “Cracks Down” on P2P u Illegal to “knowingly publish” software that facilitates unauthorized distribution of copyrighted works u Authorized penalties: F Fines of up to 300,000 euros F Up to 3 years in jail n Bill Passed France’s National Assembly March 21 n Senate Commission of Cultural Affairs Approved Amended Version April 14 u Full Senate will consider in May

8. 8 Static Control v. Lexmark n Background u Static Control makes aftermarket laser printer toner cartridges u Lexmark uses authentication process to prevent third party cartridges from working in its printers u Static reversed engineered process; Lexmark sued claiming copyright infringement and DMCA violation u DC found for Lexmark, 6 th Cir. Reversed, Petition for Rehearing En Banc denied n Status u Lexmark positioning itself for Certiorari Petition u Parties stipulated to summary judgment against Lexmark on DMCA claims on Feb. 23, 2006 u Lexmark has right to petition SC for cert. once trial court enters judgment on all remaining issues n Background u Static Control makes aftermarket laser printer toner cartridges u Lexmark uses authentication process to prevent third party cartridges from working in its printers u Static reversed engineered process; Lexmark sued claiming copyright infringement and DMCA violation u DC found for Lexmark, 6 th Cir. Reversed, Petition for Rehearing En Banc denied n Status u Lexmark positioning itself for Certiorari Petition u Parties stipulated to summary judgment against Lexmark on DMCA claims on Feb. 23, 2006 u Lexmark has right to petition SC for cert. once trial court enters judgment on all remaining issues

9. 9 Arista Records, Inc. v. Flea World, Inc. n Background u Defendants operate flea market in NJ u Vendors at market sold pirated and counterfeit CDs u RIAA sued on contributory and vicarious copyright infringement theories n U.S. Dist. Ct. for Dist. N.J. found defendants liable n Background u Defendants operate flea market in NJ u Vendors at market sold pirated and counterfeit CDs u RIAA sued on contributory and vicarious copyright infringement theories n U.S. Dist. Ct. for Dist. N.J. found defendants liable

10. 10 Arista Records v. Flea World (cont.) n Vicariously liability u Defendants had ability to supervise and control vendors u Financial benefit: sale of infringing CDs draws consumers n Contributory liability – Defendants Argued Not Guilty Under Sony/Grokster Test u Defendants knew vendors sold infringing products u Grokster inducement standard not applicable F Products in Grokster capable of non-infringing uses; defendants had no control once in commerce F Flea market exhibits continuous control over vendors u Defendants “materially contributed” to infringement by providing facilities and services F Grokster “promoting” infringement standard irrelevant; flea market conduct not analogous to putting item in commerce n Vicariously liability u Defendants had ability to supervise and control vendors u Financial benefit: sale of infringing CDs draws consumers n Contributory liability – Defendants Argued Not Guilty Under Sony/Grokster Test u Defendants knew vendors sold infringing products u Grokster inducement standard not applicable F Products in Grokster capable of non-infringing uses; defendants had no control once in commerce F Flea market exhibits continuous control over vendors u Defendants “materially contributed” to infringement by providing facilities and services F Grokster “promoting” infringement standard irrelevant; flea market conduct not analogous to putting item in commerce