00331-tpm issues eng

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Negotiating Intellectual Property Provisions n Free Trade Agreements.A Workshop on November 19,2003

sponsored n Miami, Florida by:

The Program on Intellectual Property and he Public InterestWashington College of Law, American University, USA

The Consumer Project on Technology, Washington, DC USA

and he

Centro nterdisciplinario de Derecho ndustrial y Econ6mico CEIDIE)Buenos Aires, Argentina

Briefing Paper:

TECHNOLOGICAL PROTECTION MEASURES SSUES PAPER

Gwen Hinze, Esq.Staff Attorney

Electronic Frontier FoundationEmail: [email protected]

Tel.: + (!2~ 436-9333 xllO

A. THE ISSUE

Article 21 of Section 3 of the Ff AA draft Intellectual Property chapter equires signatorycountries o adopt egal protection or technological protection measures TPMs) addedby rightsholders o copyrighted works. Although legal protection s sought or thelegitimate purpose of protecting ightsholders' copyrights, he United States' experiencewith similar provisions n the Digital Millennium Copyright Act (DMCA) demonstratesthat overbroad egal protection may have many serious unintended effects.

The Ff AA November 2002 draft IP chapter contains wo versions of Article 21. Whilethe first would extend existing nternational reaty protections o broadcasters, he secondformulation s much broader and would:

(1) supplant existing national copyright systems;(2) impair access o digital information and widen the digital divide;(3) entrench he use of monopoly-priced proprietary products and services, and result in

a net wealth transfer rom signatory countries' economies o U.S. copyright owners;

and(4) potentially undermine other mportant policy goals by chilling scientific research andstifling technological nnovation n domestic software and consumer electronicssectors.

B. BACKGROUND ON TECHNOLOGICAL PROTECfION MEASURES (TPMs)

Article 11 of the 1996 WIPO Copyright Treaty and Article 18 of the WIPO Performancesand Phonograms reaty (the.aMPI Copyright Treaties) equire signatory countries o

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provide "adequate egal protection and effective egal remedies against he circumventionof effective technological measures" added by copyright owners o their works.

Copyright industries n the U.S., however, pressed or considerably more protection. Theresult was the Digital Millennium Copyright Act (DMCA), which went urther than theOMP! Copyright Treaties equired. The DMCA has since become he model that U.S.trade negotiators have urged on its trading partners.The DMCA's TPM provisions ban both acts of circumventing TPMs used by copyrightowners o control access o their works, as well as any device, service or technology hatis primarily designed or useful for circumvention. These prohibitions apply even f theintended use of the copyrighted work would not infringe copyright. So, for example,under U.S. law there s a copyright exception allowing blind persons o translate booksinto Braille. Under the DMCA, blind persons are no longer able o exercise his right inconnection with e-books hat are protected by TPMs.

The DMCA includes 7 limited exceptions or certain socially beneficial activities,including security esting, everse engineering of software, encryption esearch, nd awenforcement. However, hese exceptions have proven nadequate n practice o protectmany of these egitimate activities. Unfortunately, he proposed FTAA language does not

include even hese imited U.S. exceptions and bans a broader ange of conduct han theDMCA

C. PROVISION PONSORSU.S. copyright owners have obbied strongly or the ncorporation of this type ofprovision in both the FTAA and n the bilateral free trade agreements hat the U.S. hasrecently concluded with Jordan, Singapore and Chile, because t provides an increasedlevel of protection for their works beyond copyright, hat s not dependent n provingcopyright infringement under each country's differing copyright laws.

D. LIKELY IMPACT OF ADOPTING OVERBROAD LEGAL PROTECTION FOR TPMs

1. National Copyright System SupplantedA broad ban on circumventing TPMs, like the second ormulation proposed n Article 21of the FTAA, is likely to entirely supplant a signatory country's existing copyright law.In effect, this allows U.S. copyright owners' rights to trump national sovereignty anddomestic public policy priorities.A similar provision inserted nto U.S. copyright aw by the DMCA in 1998 has displacedthe careful balance of public and private rights in U.S. copyright law created by thelegislature and udiciary over the last 130 years. t has provided U.S. copyright ownerswith an ncreased evel of protection above copyright aw, by granting them a new rightto control access o, and not merely use of, copyrighted works. This has had several

results:. The various statutory exceptions o copyright aw (for instance, or uses n theeducation, ibrary and disabled persons ommunities) have argely beenoverridden or technologically-protected igital information.Most importantly, t has effectively eliminated he ability to make "fair use" ofprotected digital works. In U.S. copyright aw, fair use permits someone o makea reasonable se of a copyrighted work for a socially useful purpose such as

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education, criticism or parody, or for a consumer's personal use (such as homevideo recording of television), without having o ask prior pennission rom acopyright owner. Fair use s intended o guarantee ublic access o copyrightedmaterial to facilitate productive uses of information and ree speech. The DMCAbans consumers rom circumventing TPMs to make air use of a protected digitalwork, such as making a back-up copy of a copy-protected CD or DVD that theyhave purchased n addition, echnology vendors are banned rom producing or

selling technologies and devices hat consumers eed f they are o enjoycopyright exceptions hat would otherwise apply to digital media.

In other words, U.S. copyright owners have used TPMs backed by the DMCA to redrawthe copyright balance and unilaterally set how much protection will be given to theirwork. Similar results would likely occur n FT AA signatory countries f the secondformulation of Article 21 is adopted.

2. Impaired Access To InformationThe second ormulation of Article 21 would also have a substantial detrimental mpact onthe ability of educators, tudents and researchers n FTAA signatory countries o accessdigital information and echnology. The current draft of the Ff AA requires signatory

countries o extend copyright protection o facts and data within databases. sinformation is treated as a copyrightable product and ncreasingly becomes available onlyin a technologically protected orm, fair dealing and personal copying exceptions hatpreviously guaranteed ccess will be technologically precluded. This will increase hecost of accessing nformation and ultimately result n the widening of the knowledge gapbetween ndustrialized and unindustrialized countries.

3. Potential For Digital Lock-in And Net Wealth Transfer To U.S. CopyrightOwners.

U.S. copyright owners have used he DMCA's anti-circumvention provisions o obtain amonopoly over uncopyrightable roducts and echnologies hat interoperate with their

works. This has serious anti-competitive mplications or consumers n FTAA signatorycountries. For instance:. Geographic Market Segmentation: The motion picture and video game

industries have used region coding" technologies, acked by the DMCA andsimilar laws, to control the availability and pricing ofDVDs and video games nvarious geographic egions. Other copyright ndustries can be expected o follow,potentially discriminating n both price and availability against consumers nvarious regions of the world.

. Product Lock-in: Lexmark, he second argest printer distributor in the UnitedStates, has used he DMCA to ban the sale of recycled Lexmark printer cartridges,which were being sold to consumers t lower prices han new cartridges andLexmark's own "authorized" remanufactured rinter cartridges.

. Attacking Interoperability: Chamberlain Group, he manufacturer of anelectronic garage door opener, has used he DMCA in an attempt o ban the saleof a universal garage door transmitter mported by its main competitor, Skylink,which can be programmed o open Chamberlain garage door units, as well asseveral other brands of garage door units.

Under FT AA Article 21, vendors could prevent ocal businesses rom creating

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interoperable roducts hat might provide market competition. Consumers n FT AA-signatory countries would be locked nto purchasing products at higher, monopoly-basedprices. For instance, a U.S. automobile manufacturer ould use. TPM, backed by Article21, to ban the sale of , unauthorized" eplacement arts and services n FTAA-signatorycountries. For FTAA signatories who are net mporters of U.S. informational andentertairiment ntellectual property, his would result n a net transfer of wealth fromsignatory countries' domestic economies o U.S. copyright owners.

E. ADVERSE IMP ACT ON IMPORT ANT PUBLIC POLICY GOALS

The U.S. DMCA's anti-circumvention provisions have been used n ways not intended bythe U.S. Congress o stifle a wide array of legitimate activities, rather han o stopcopyright piracy. In particular, he provisions have had wo negative effects on importantpublic policy goals:

1. Chilling Effect on Scientific ResearchU.S. copyright owners have used he DMCA's provisions o cast a chill on freeexpression and egitimate scientific research. n 2001 a music industry organizationthreatened o sue a. eam of researchers or violating the DMCA when hey attempted o

publish a research aper describing heir findings on security vulnerabilities n digitalwatermark echnology. The music ndustry group considered hat the nformation in theresearch aper was a "circumvention ool" and publishing the paper would violate theDMCA's ban on distributing "circumvention ools".The chilling effect on scientific research and publication has been profound U.S. andforeign scientists have efused o publish research n access ontrol vulnerabilities, orhave emoved previously published esearch rom the Internet due o fear ofDMCAliability. Foreign scientists have efused o travel to the U.S. and several encryptionconferences ave been moved outside of the United States.In particular, here s growing concern within the U.S. about he mpact of the DMCA oncomputer security research. n October 2002, ormer U.S. White House Cyber Securityadvisor, Richard Clarke, admitted hat the DMCA had chilled security research nd calledfor DMCA reform. The U.S. Congress s currently considering wo proposals hat wouldamend he DMCA to pemrit circumvention and use of circumvention ools for scientificresearch.

2. Technological Innovation Stifled

The DMCA has adversely impacted the U.S. technology sector in two ways. First,because he DMCA defmes "circwnvention" of a TPM in terms of conduct "authorized"by copyright holders, U.S. copyright owners have been able to extend their statutoryrights to control technology that interacts with their copyrighted work, as describedabove.

Second, the DMCA has had a chilling effect on ,the ability of technology companies toreverse engineer computer code in order to develop new products. Reverse engineering iscritical to encourage competition and innovation in the face of monopolistic practices inthe software industry. Legitimate reverse engineering has traditionally been permitted in

I Digital Media Consumer Rights Act (H.R. 107, 10gll1 ong.) ntroduced by Representatives oucher and Doolittle;

B.A.L.A.N.C.E. Act (H.R. 1066, 10Slh Cong.) introduced by Representative Lofgren.

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u.s. copyright law. Today, however, companies ager o impair market competition haveturned o TPMs and he DMCA in an effort to hinder the creation of innovativeinteroperable products. For instance, Sony Corporation has used he DMCA to sue hecreators of reverse-engineered mulator software programs, which allow consumers oplay Playstation video games on their computers, ather han on Sony's proprietaryPlaystation game console.Although the DMCA includes an exception or reverse engineering, he exception has

proven to be too narrow to assist hose seeking o use t. It is clear hat the U.S. Congressdid not intend that the DMCA would be used o stymie echnological nnovation, but theprovisions are oo broad o prevent his sort or misuse. FTAA signatories will face hesame problems f the second ormulation of Article 21, or a provision similar to theDMCA provision, is adopted.

F. PRECEDENTS IN TRADE AGREEMENTS

The bilateral free trade agreements FTAs) that the U.S. has ecently concluded withJordan Article 4(13)), Singapore Article 16.4(7)) and Chile (Article 17.7(5)) containTPM provisions modeled on the DMCA provisions. The most restrictive of the FTAprovisions s in the U.S.-Singapore FTA. The Industry Functional Advisory Committeeon Intellectual Property advising he U.S. President nd the U.S. Trade Representativehas recommended hat the Singapore FTA language hould be ncorporated n to theFTAA.As currently worded, he first formulation of Ff AA Article 21 generally mirrors theobligation set out in the OMP! Copyright Treaties, but extends protection o owners ofbroadcasting ights. This would allow countries of the South o implement TPMprotection n a way that is consistent with their existing copyright aw exceptions.

However, he second onnulation goes urther than both the OMP! Copyright Treatiesand he DMCA provisions and raises similar issues o the DMCA. It bans he act ofcircumvention, With knowledge or having reasonable rounds o know and without

authority, of an effective technological measure dded o a copyrighted work by arightsholder. t also bans he manufacture and distribution of devices, products or servicesthat are (i) advertised or marketed or the purpose of circumvention, ii) have only alimited commercially significant purpose other han circumvention, or (iii) are primarilydesigned, produced, adapted or the purpose of circumvention.Unlike the DMCA, it does not have any exceptions hat would preserve he existingrights of consumers and technology developers n Ff AA signatory countries.

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