Induce hearings

The Senate Committee on the Judiciary held hearings today about the INDUCE Act: "An Examination of S. 2560, The Inducing Infringement of Copyrights Act of 2004 "

For background and more links, see The Importance of Induce Act coverage and the Tech Law Advisor Induce Act blog (where I will be posting along with Kevin Heller and Chris Rush Cohen.

Rough notes from the webcast follow the jump.

Sen. Hatch:
-Copyright is under assault from large scale, pernicious piracy rings
-Aim is to stop the for-profit piracy rings, not to subject tech companies to unnecessary regulation
-intended to be tech-neutral -- not intended to target p2p solely
-extend liability to inducing actors, should be a small number of bad actors.

Sen. Leahy
-committed to reaching consensus
-One problem consistently appears: "c holders often fear new technologies. we have a lot of people who are in the creative community and their reticence is not without merit. c industries lose billions of dollars per year in c piracy."
-P2P tech has run roughshod over these rights.
-By the way, I'm going back to Vermont.

(Do commercial pirates, like the guys selling pirated DVD's in Union Sq. subway platform) even use public P2P? Can't they use darknets and closed FTP? How does Induce actually target large-sclae commercial piracy?)

Marybeth Peters (Register of Copyright)
-Betamax-- no secondary liability b/c of substantial non-infringing uses
-Grokster is wrong as a matter of copyright law
-Secondary liability is broader-- as a matter of policy, the Grokster decision is flawed-- it's more efficient to sue p2p networks
-bill requires specific intent
-current p2p services make it inevitable that users become infringers by turning on the software
-not overturn Sony-- by focusing on inducement, this bill addresses factual circumstances beyond the scope of Sony
-p2p would be like the VCR if the VCR was designed so that all programs recorded would be available to all other VCRs in the world
-c protection need not be kerely symbolic in face of new tech
-today, most everything can have some kind of substantial non-infringing use, so perhaps the standard needs to be higher.

Shapiro (CEA)
-can not find one leading tech co. supporting this bill
entering a growth age in tech.-- consumers have the freedom to CREATE leading to a renaissance of creativity by individuals.
-biggest threat to innovation in 20 years
-litigation over every new tech that allows content shifting of some sort
-Sony set forth a clear, bright-line standard
-Betamax case is our magna carta
-80 members when Betamax, over 1700 tech companies today are members.
-replaces objective test with a subjective test
-not only to innovators, but to venture capitalists and journalists
-subjective standard invites litigation-- no summary judgment. Expect lots of frivolous lawsuits.
-will chill innovation
-already challenged rio, replaytv, clearplay-- every new gadget will lead to a lawsuit

Hatch: We haven't had much help from the industry people

Holleyman (BSA)
-Piracy is a matter of great concern to BSA-member companies;
-Doesn't require new laws
-Won't encumber the development and distribution of innovative new technologies.
-Deter bad actors without stifling tech. advancement.
-vitally important to educate 'net users
-distinguish bad actors who design software for purpose of piracy from those who produce general-use software:
1. tech products used for significant non-infringing uses are not subject to liability
2. to meet intent standard: conscious, recurring and persistent acts designed to induce another to infringement
3. mere knowledge of infringing acts of another person does not consistute inducement
4. no liability based on advertising or providing support to users
5. mechanism needs to be included to deter weak, harrasing or frivolous lawsuits.

Greenberg (IEEE)
-I'm not just a lawyer, but also a client, er, engineer.
-stand for proposition that IP must be about balancing of interests: neither the status quo nor 2560 adequately balance those interests
-creates a practical uncertainty over scope and application that may chill innovation
-uncertainty is the quivalent of a law barring innovation
-inducement applies to all tech, not just file sharing
-need a more balanced framework
-measure twice, cut once

Hatch: "this is a very interesting hearing"

Kevin McGuiness (Net Coalition)
-Under current law, next Bill Gates will be able to take a product to market,
-legislation puts entertainment industry in a very envious situation: targets can include credit cards, editorial reviews, VC
-entertainment industry leverage over new technolgy will send innovation overseas
-following principles over whether new principles oare needed:
1. must codify betamax
2. target unlawful behavior, not platforms or techs
3. must provide a bright line between lawful and unlawful
4. should ensure that entities who provide product reviews or demonstrate how a product can be used is not subject to liability

Mitch Bainwol (RIAA)
-uniform view of music industry
-we are united b/c music industry has been decimated by piracy
-fewer jobs, fewer capital financing artists
-scope of p2p problem is mind boggling: 1 billion downloads per month
-97% of transfers on p2p are illegal
-make money by selling advertising and using music as lure to draw eyeballs to advertising.
-mechanism for high-tech theft
-mockery of property rights, laughing all the way to the bank.
-business model predicated on taking of property.
-in addition to inducing kids to pirate, also sends porn into America's houses. (But, the porn is pirated, too!)
-villians are the profiteers
-spotlight needs to be focused on bad actors who hijack a neutral technology.
-chasm separating values of kaaza and apple
-take away infringement and the business model of kaaza collapses
-give our community the chance to profit

Hatch: Hey Shapiro, haven't you always vigorously opposed legislation that would curb infringement? What have you done to help us to address this problem?

-We filed a brief in Grokster-- and it induced this legislation. Let's see what happens in the 9th Circuit?
-we worked on the AHRA
-prefer to have no litigation, but it must be narrow, clear and compelling.
-Here is a fundamental attack on the technology community.
-Puts money at risk. Uncertainty of an induce standard of intent is so chilling that the tech industry will suffer. This legislation is very wrong.
-Music industry sales may benefit from P2P.
-What about artists who want music on p2p? This is the horse and buggy stopping the car.
-every new tech has been opposed by the content community, without major harm.
-lost harm: not every download is a lost sale
-penalty for stealing a CD is nothing compared with the penalty for downloading that same CD.
-Oppose commercial piracy

-I don't really want to blow up computers!
-Shaman says: "Kaaza has option to filter bogus, misnamed or incomplete files uploaded by record labels." Does this go with Sony?

Shapiro: It's possible that Kaaza may be found illegal by the 9th Circuit, like Napster or Aimster.

Hatch: Bainwold: will this let you sue mp3 players, cd recorders, or PVRs simply because those devices used to infringe.

-No. Bill seems very highly targetted.
-97% of p2p transactions are illegal.
-p2p decreased the number of top 10 sales and destroying the investment capital of the industry.
-"Harvard study gives harvard an awfully bad name."

McGuiness: disturbing to watch legislation go by based on the presumption based on the good intentions of lawyers in the entertainment community.
-If RIAA won all its cases, would that be sufficient? Will this law stop illegal file sharing and downloading?
-Reality that there is a new medium used to share and obtain music. It may be time to embrace it.
-When the VCR arrived, Hollywood focused exclusively on the record button. It moved on to focus on the play button and now sells lots of DVDs.
-Content community needs to move on.

-Only way that the legal system can succeed is by fighting the illegal systems.
(What about the bottled water analogy? Bottled water competes with free and does very well. iTunes is so much easier and more convenient than P2P. Can't it win by being more convenient?)
-Why, b/c we are in the technological space, do we abandon the notions of property?

Leahy: We've all felt the love here this afternoon. (Hatch and I may be heading to VT, or better yet, MA!)
-c office supports 2560 as does RIAA. Critics support the idea.
-only IEEE has proposed legislative language to assuage their concerns. What about the rest of you?

Shapiro: There have been some good suggestions among the panel. Support a codification of the Betamax principles.

Holleyman: We've laid out the 5 principles

McGinnis: we would have liked to be consulted at the beginning.

Bainwold: if there's another way to go after bad actors, we're willing to find it.

McGuiness: Legislation before us today won't achieve the goals. Here, burning the carpet to kill the spider. Concept of Induce does not fit in with copyright law.

Leahy: I'm just a small-town lawyer. Do we or don't we need legislation?

McGuiness: there may be a need for legislation to codify the broad reading of Betamax. no need for further new legislation, because the harm will far outstrip the benefeits

-Problem of piracy is significant
-Valuable part of the intent was to address bad actors.

Opportunity to make clear how secondary liability is to be balanced against the interests of the various consituents.

What are all consequences? How far down the road should we be legislating for?

Compare with spyware laws. Threats to privacy and internet commerce are real. P2P drives not only piracy, but spyware. Bad actors are driving the debate.

Hatch: Hope to resolve this over the month of August. Let's work together.

[tech industry panelist]: Kaaza screwed up my computer, I want to get back at them!

Hatch: We never entirely get this right. Please help us get as close as possible.

Greenberg: Balance of competing interests that may not be completely reconcilable. Secondary liabliity, by its definition, is asserting IP rights against someone who has not infringed those rights. Copyright law must not be as strong as patent.

Bainwol: Piracy is hurting the livelihoods of performers and composers.

Hatch: There are some of us writing songs who aren't getting a cut. In the end, I'm just going to do what Marybeth Peters tells us to do.

Hatch: we want to solve this for the music industry, and the movie industry, and the book industry. (What about the software industry. The BSA, whose entire industry is based on profiting off of copyrights opposes the bill?)


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