CAPITOL HILL HEARING TESTIMONY
TESTIMONY June 05, 1998 SETH GREENSTEIN ON BEHALF OF THE DIGITAL MEDIA ASSOCIATION HOUSE COMMERCE TELECOMMUNICATION, TRADE AND CONSUMER PROTECTION COPYRIGHT TREATIES IMPLEMENTATION ACT
TESTIMONY OF SETH GREENSTEIN on behalf of the DIGITAL MEDIA ASSOCIATION Before the Subcommittee on Telecommunications, Trade and Consumer Protection Committee on Commerce U.S. House of Representatives Hearing on H.R. 2281 June 5, 1998 Chairman Tauzin, Members of the Subcommittee: My name is Seth Greenstein. I represent the newly-formed Digital Media Association, DiMA, an association to promote the interests of new media and technology companies that enable the digital transmission and marketing of music and multimedia content. On behalf of DiMA, and the seven founding DiMA members, thank you for inviting us to testify today. We are particularly gratified to testify because, until now, no committee has really heard about the impact that H.R 2281 will have on young, entrepreneurial companies that broadcast and use music and video on the Internet in a new and compelling way. We are excited about the opportunity to build our businesses in ways that support and compensate copyright owners on a fair basis. In this regard, we also express our appreciation to the Commerce Committee for its interest in making the Internet a vibrant and viable commercial medium, as reflected by the recent series of hearings on electronic commerce and the Committee's approval of the Internet Tax Freedom Act. Let me say clearly from the outset that DiMA members view fair implementation of the WIPO treaty as a necessary and enormously significant step. As companies vitally interested in the development of electronic commerce and new broadcast media, we understand and support the need to protect copyright on the Internet. Unfortunately, not all people on the Internet understand this fundamental point. As a result, the recording industry and other copyright owners have taken legal action to shut down sites that infringed their copyrighted works, and we applaud those efforts. Internet companies see technology as essential to safeguarding copyrighted works, and many are developing effective technologies for this purpose. In this regard, DiMA members consider the WIPO treaties, and legal protection for technological measures, to be important components of a broader effort to secure more uniform global protections for copyrighted works. It remains our strong desire and intention to work cooperatively with copyright owners to build an environment that protects and creates excitement about their products. However, while the technology to deliver and protect content over digital networks is developing rapidly, Internet companies are beset by uncertainty over copyright issues. When we perform music over the Internet, some claim that we actually are recording it, and so seek a mechanical royalty. When we sell music over the Internet by downloading a file to be recorded by the end-user, some claim that we are publicly performing the music, and so seek a performance royalty. These and other important copyright issues relating to the Internet will need to be resolved over the coming years, and we look forward to potential industry and legislative solutions to these issues. So, we see H.R. 2281 as an important first step. However, as a great American humorist/philosopher said, "The first step down is a long way." We want to make sure that this first step is not a step in the wrong direction. Our basic concern is that H.R. 2281 does not accommodate the needs and legitimate interests of the other players in this equation: the engines and the drivers -- those who build the technologies, and the websites that use those technologies, to bring copyrighted content to the public. As a result, we believe that H.R. 2281 is in many respects an unbalanced, anti-technology bill that prejudices the development of the Internet as a broadcast medium, and as a new mode of electronic commerce. What Internet companies seek, in a word, is parity. The Section 1201 provisions of H.R. 2281 concerning technological protections must also take into account the needs of those who will be developing those technologies and physically transmitting the content to the public. Section 1202, concerning copyright management information, should recognize the needs of those who are creating the software and the websites that actually will transmit this information. And, where the bill would limit the rights of copyright owners, or the liability of those who transmit copyrighted content, Internet companies should be given the opportunity to benefit from the same limitations. To understand our concerns in context, it is useful to explain our members' varied businesses relating to the Internet and new media. The members of DiMA include: -- a2b music of New York, New York (www.a2.bmusic.com), grew out of a five-year project at AT&T Labs to develop efficient and effective technologies for delivery of music. The a2b music technology consists of three core technologies: AT&T proprietary compression algorithms that deliver music over the Internet at CD-quality, in much smaller files and, therefore, in less time; the CryptoLib Security Library, which encrypts compressed music for secure transmission via the Internet; and PolicyMaker, an electronic licensing system which controls how music is distributed and used across the network. - -broadcast.com, inc. of Dallas, Texas (www.broadcast.com), formally known as AudioNet, is an Internet broadcast network. It transmits live signals from some 300 radio stations around the country, live concerts, live television network signals, live local television news, professional and college sports events, events such as the National Association of Broadcasters convention keynote addresses, live press conferences, and shareholder meetings. Although it began in late 1995 operating out of a second bedroom of the CEO's home, broadcast.com now has grown to employ 190 people. Their Internet site is visited by some three million people each month. -- CDnow, Inc., located in Jenkintown, Pennsylvania (www.cdnow.com), testified before the Commerce Committee in the first of its series of hearings on Electronic Commerce. They are an online interactive record and video retail store, where you can read record and artist reviews, listen to clips from sound recordings using the RealAudio software, and purchase music online, 24/7, from a catalog of approximately 200,000 recordings. Begun four years ago by two 24-year-olds in their parents' basement, CDnow has become the Internet's leading music retailer, with revenues last year of more than $17 million. -- Liquid Audio, Inc. of Redwood City, California (www.liquidaudio.com), focuses on the needs of the music industry, providing labels and artists with software tools and technologies to enable the secure online preview and purchase of CD-quality music. Using their technology, record companies can transmit sound recordings in encrypted form, with rules governing access and further use. Liquid Audio technology can protect a sound recording that is electronically purchased by a consumer, transmitted to the consumer's computer hard disk drive, and then can be recorded only once onto a recordable compact disc. -- RealNetworks, Inc. of Seattle, Washington (www.real.com), develops and markets the software used to encode and deliver music and video from about 85 percent of all Internet sites. The RealAudio software, released in its first version just three years ago, created a genuine revolution on the World Wide Web, and is in large measure responsible for the explosive growth of the Internet. Before RealAudio, Internet users would have to spend up to an hour or more downloading a single song or audio file before they could listen to it. With the RealNetworks software, audio data is sent in a stream to the user, so that after a few seconds, the music or video can be played in real time. More than 20 million people have downloaded for free the RealAudio and RealPlayer software. -- TCI Music, Inc. of New York, N.Y., runs several music- oriented Internet websites, including www.sonicnet.com, which features concerts, an Internet radio service, artist interviews and chats, and a guide to music-related information and music sites on the Internet; the Streamland music video site at www.streamland.com; and Addicted to Noise, at www.addict.com, which provides music news broadcasts, and articles and album reviews complete with music clips that illustrate the writer's observations. TCI Music also operates Digital Music Express, a cable and satellite subscription music service; The Box, an on- demand music video network; and the Paradigm Associated Labels record companies. Visitors to such new media Internet sites inevitably come away impressed with the power of what current Internet technology can do. The technology is growing by quantum leaps and bounds, with noticeable improvements in robustness, performance and quality in each generation of product. And each "generation" is really only a few months apart. For example, RealNetworks released its first RealAudio product just three years ago. They now are on the sixth version of their software, released recently in beta form as G2. The difference in quality between the first and current versions of the software is as remarkable as the difference between a pocket-sized AM transistor radio and a home stereo. These companies are only a snapshot or microcosm of the industry at its inception. But it is not hard to project where these industries could be in just a few years. The Internet as we know it today will increase in convenience and ubiquity. Information signals will travel through cable, satellite, and telephone lines, to be received by computing devices that no longer look like computers. Like the light in your refrigerator, when you open the door the Internet is always on. And it will be increasingly easier to find the good stuff from among the leftovers. For example, you could walk into your kitchen, turn on your screen, click on your favorite recipe sites, and follow the instructions along with your favorite chef Go into your basement workshop, turn on the screen, go to your favorite handyman site and build projects step by step along with Tim and Al. Go into your living room and, if you don't like what's on the radio or NBC or Showtime, check out what's playing on the Internet-only radio and TV channels. Go to your desk, and take a course by distance education with teachers, video and audio clips, and tests conducted online. The technology is here to bring compelling content to the public. Our concern is that today's rules may foreclose tomorrow's innovation. The stakes are too high, the future potential is too important, to act precipitously. As copyright law itself has done over the last two centuries, sound policies balance the rights of the copyright owners that create the content, with those of the technology companies who create the means to transmit and who market content over the new Internetworks. Unfortunately, H.R. 2281 is overreaching in its impact on technology in general. H.R. 2281 focuses almost exclusively on restricting technologies without making any provision for technologies or uses that would be legally permissible. As others on this panel will testify, legitimate encryption research, reverse engineering, even fair uses could lead to liability under H.R. 2281. Further, H.R. 2281 does not provide equal treatment of Internet commercial sites as compared to equivalent acts by more established media. As a result, H.R. 2281, and S. 2037, threaten companies that are investing in new technology and, so, will chill innovation and development of the Internet. To list our concerns: - Internet companies need protection with respect to technological protection measures. First, Section 1201 prohibits circumvention of technological protection measures, but does not define what a "technological protection measure" is. By contrast, the bill defines "copyright management information" in section 1202, and defines "standard technical measures" in connection with the service provider liability sections of the bill. Particularly where stiff civil and criminal penalties are being applied, the absence of a definition of this central term is a critical flaw. A bill introduced by Rep. Rick Boucher, H.R. 3048, co-sponsored by several other members of the Commerce Committee, would provide a meaningful definition of this central term. Second, Section 1201 requires respect for technological protection measures, but does not consider whether these measures are inherently compatible with Internet transmission protocols or, indeed, with each other. Unless Internet companies have some reasonable input into how such technologies are designed and used, Internet companies are placed at legal risk if a copyright owner adopts technological measures that are incompatible with Internet transmission technologies. Again, we contrast Section 1201 with the provisions on standard technical measures in the service provider liability sections of the bill, which specifically provide for open and voluntary standards processes to develop and implement these technological measures. Moreover, we are extremely concerned that Section 1201 may prevent Internet companies from upgrading their transmission software if it is not compatible with a technological protection measure. As I noted earlier, Internet companies improve their transmission software over months, not years, and their innovation fuels the explosive growth of the Internet. We are concerned about the consequences under H.R. 2281 if, for example, a particular technological protection measure works with version 5.0 but not version 6.0. The new Internet innovators, such as RealNetworks, may be faced with a decision either to bring their product to market and face the likely prospect of a lawsuit under Section 1201, or not to bring the product to market at all. Third, the bill does not protect Internet transmitters against technological measures that degrade quality or performance. Internet companies are investing millions of dollars to make Internet delivery competitive in quality with other broadcast media. Internet broadcasters should be protected against technological protection measures under section 1201, or copyright management information under section 1202, that would degrade signals or would interfere with other data being carried in the signal format. Fourth, the bill should not prohibit manufacture of devices or software programs that can circumvent for professional production uses, or for facilitating authorized transmissions, fair uses, reverse engineering, encryption research, and other purposes permitted under current copyright law. - Temporary copies made on a user's PC during Internet transmission,for a transitory period and to facilitate performance of the audio or video, should not be considered copyright infringement. Hundreds of thousands of hours of audio and video material now are available over the Internet. "Streaming media" technology is essential to making these Internet transmissions sound as smooth as over the radio. To understand this concern, it is useful to understand a little about how Internet transmissions work. Unlike broadcast radio or television, which is sent in a continuous stream of information, data is sent over the Internet in small packets that are reassembled at the user's PC. It is analogous to sending a book one line at a time to a single addressee, but in different envelopes, with information indicating which line and page it is from, for later reassembly. Streaming media software, like the RealNetworks RealPlayer or the Microsoft NetShow software, store these packets in the memory chips of the user's computer until a few seconds of material are ready for playback. The software then begins playing the audio or video material from one end of this memory "buffer," while receiving and reassembling new packets of data carrying the next few seconds of material. As a result, the user hears or sees a continuous program, even though the data packets are arriving in non-continuous bursts into the buffer. So, for the user, the experience is no different than radio or television - even though the technological means of achieving that experience is somewhat different. The hardware maintenance provisions of H.R. 2281 seem to imply that most temporary copies made in computer memory are infringements of copyright, while only those specifically exempted under H.R. 2281 are not. If temporary RAM copies of those few seconds of material are deemed to be copyright infringement, and streaming media performances and technology could therefore be deemed unlawful, audio and video over the Internet will come to a grinding halt. H.R. 3048 addresses this problem by stating that temporary copying incidental to an otherwise authorized performance is not copyright infringement. We strongly support this measure as an absolutely integral part of this bill, and as essential for the future of the Internet. - The right to make ephemeral copies of sound recordings for transmission and archival purposes should explicitly be extended to all persons exempt from the public performance right, including Internet companies. The Copyright Act includes a provision that essentially states that a transmitting organization that has the right to transmit a copyrighted work also the right to make a copy of that work to facilitate that transmission or for archival purposes. While this is not an issue under the WIPO treaties, it was made an issue under the WIPO bill. In response to concerns voiced by the National Association of Broadcasters, section 104 of S. 2037 made explicit that this otherwise-implicit exemption applied to stations licensed by the FCC. As a matter of fundamental fairness, Internet broadcasters deserve this same exemption. Like traditional radio broadcasters, Internet broadcasters are exempt from the sound recording performance right, and also operate on a non-subscription, non-interactive, advertiser supported basis. Like traditional broadcasters, Internet broadcasters copy music to computer servers to facilitate efficient transmission. If the exemption is not extended to Internet broadcasters, then the law essentially would hold that an Internet radio station that plays its music from CD changers is legal, but would be infringing if it played the same music from a computer server. To DiMA, this is a technical distinction that elevates form over substance. The exemption should be amended so as to explicitly benefit all transmitting organizations that are exempt from the public performance right, thereby removing any possible competitive disadvantage. - Internet website owners should not be secondarily or economically liable for innocent transmission of infringing content, or for carrying links to other websites. The service provider liability sections of H.R. 2281 are a positive step for development of the Internet. These same procedural requirements and immunities should be extended to those Internet websites that carry or link to content, but that have no ability or right to control that content. - The "first sale" doctrine should be adapted for the digital environment Just as consumers have the right to resell or give away a book, CD or video purchased in a physical retail store, they should have the right to transfer ownership of copies received electronically. If Internet commerce is to succeed, consumers must have the assurance that the electronically purchased copy is just as good and valuable as the store-bought copy, and a copy that cannot be resold or given away is a lot less valuable. Rep. Boucher's bill, H.R. 3048, would secure this existing right for the digital environment. In the past, the argument has been made that, in the digital environment, if that transfer of ownership is done by computer, then a copy remains on the sender's computer even after the copy has been transmitted. This is a flawed argument. Technology companies like Liquid Audio and a2b music already have developed technologies for secure electronic delivery and copying of music. They, and many others, are capable of developing software that will ensure that the copy on the sender's computer is deleted after transmission. But they will have no incentive to develop these technologies if the first sale doctrine does not apply, since their technology still would be unlawful. In summary, Mr. Chairman, Internet companies believe in strong protection for copyright, and in the need for Congress to implement the WIPO treaties. However, we also believe that strong copyright protection need not come at the expense of technology. What we seek is fairness -- parity of treatment for Internet companies under the WIPO bill with respect to the rights and privileges accorded to other entities that facilitate transmission, transmit and perform copyrighted works. Both a secure legal environment and a level playing field are essential to making the Internet a vital transmission medium and marketplace. We thank you, the members of your Subcommittee and the Committee on Commerce for your leadership and interest in these critical issues for the future competitiveness of the United States in global electronic commerce. We look forward to the opportunity to work with you and the Committee to make H.R. 2281 a more fair and balanced bill that takes into account the needs of emerging industries on the Internet. I would be pleased to answer any questions that you or the Subcommittee members may have.
|
