1                  LIBRARY OF CONGRESS
  2                     +  +  +  + +
  4                     +  +  +  +  +
  9                     +  +  +  +  +
 11                   DOCKET NO. RM 9907
 13                     +  +  +  +  +
 15                        FRIDAY,
 16                     MAY 19, 2000
 18                     +  +  +  +  +
 20       The hearing in the above-entitled matter was
 21  held in Room 290, Stanford Law School, Crown
 22  Quadrangle, Stanford, California, at 9:45 a.m.
 24  BEFORE:
 26  MARYBETH PETERS, Register of Copyrights
 28  DAVID CARSON, ESQ., General Counsel
 30  RACHEL GOSLINS, ESQ., Attorney Advisor
 32  CHARLOTTE DOUGLASS, ESQ., Principal Legal Advisor
 34  ROBERT KASUNIC, ESQ., Senior Attorney Advisor

                                                   PAGE 2
  1                       I-N-D-E-X
  3  Panel I:
  5  Paul Hughes                                    3
  6  Business Software Alliance, Adobe Systems
  8  Emery Simon                                   16
  9  BSA
 11  Fred Weingarten                               29
 12  American Library Association
 15  Panel II:
 17  Steve Metalitz                               111
 20  Panel III:
 22  Robin Gross                                  192
 23  Electronic Frontier Foundation
 25  Dean Marks                                   178
 26  Motion Picture Association of America
 28  Riley Russell                                197
 29  Sony Computer Entertainment America
 31  Jonathan Hangartner                          212
 32  Bleem, Inc.
 34  Morton Goldberg                              222
 35  Cowan, Liebowitz & Latman, P.C.

                                                   PAGE 3
  1               P-R-O-C-E-E-D-I-N-G-S
  2                                          (9:45 a.m.)
  3              MS. PETERS:  Good morning.  We're going
  4  to start our second day of hearings here at Stanford
  5  University Law School.  Yesterday I made an opening
  6  statement.  I will not repeat it.  It is outside for
  7  those who are not aware of it.
  8              This morning we have several witnesses
  9  from the Business Software Alliance.  We have Paul
 10  Hughes of Adobe Systems, Incorporated, and then we
 11  have Emery Simon representing DSA.
 12              We were supposed to have Steve Metalitz
 13  representing a wide range of copyright owners.  He
 14  is stuck in Chicago because of bad weather.  He may
 15  be getting on a plane and may be able to join us
 16  this afternoon, but we're not sure about that.  And
 17  that may cause adjustment of the starting time this
 18  afternoon.  We'll know by the end of this morning
 19  what we'll be doing.  Also with us is Frederick
 20  Weingarten, representing the American Library
 21  Association.
 22              So we will start with Business Software
 23  Alliance, and between the two of you, you decide
 24  who's going first.  Paul?  Okay.
 25              MR. HUGHES:  Good morning.  My name is
 26  Paul Hughes, and I'm Public Policy Advisor at Adobe

                                                   PAGE 4
  1  Systems.  On behalf of Adobe, I would like to
  2  express my appreciation for the opportunity to
  3  appear before you today at this important rulemaking
  4  hearing required by the Digital Millennium Copyright
  5  Act.
  6              Before turning to certain specific
  7  issues raised by this rulemaking proceeding, I would
  8  like to talk about the critical importance of
  9  Section 1201 of the DMCA and Section 1201(a)(1)(A),
 10  specifically, to software companies like Adobe which
 11  confront a serious and pervasive piracy problem.
 12  The anticircumvention rules enacted by the Congress
 13  in the DMCA are the results of a deliberate and
 14  considered response by the Congress to two facts:
 15  dissemination of works in digital form poses very
 16  real piracy threats to copyright holders; and the
 17  use of technological measures to thwart such piracy
 18  is needed to ensure the availability of legitimate
 19  copyrighted works.
 20              Let me tell you a little bit about
 21  Adobe.  Our chairmen, John Warnock and Chuck
 22  Geschke, founded the company in 1982 with a very
 23  modest business plan.  They envisioned employing
 24  around 40 people in what was effectively a copy
 25  shop, doing typesetting based on their Adobe
 26  PostScript printer language.

                                                   PAGE 5
  1              Unfortunately, they failed in that
  2  business plan but instead launched Adobe PostScript
  3  and PageMaker and went on to launch the desktop
  4  publishing revolution.  Today Adobe offers software
  5  for web, print and multimedia publishing.  It's
  6  graphic design, imaging, dynamic media and other
  7  software tools enable customers to create and
  8  deliver visually-rich content across all media.
  9              We are now the third largest personal
 10  computer software company in the United States, with
 11  annual revenues of a hair over a billion dollars.
 12  And it's obviously no exaggeration to say we
 13  wouldn't exist -- in our current form, at least --
 14  were it not for the very strong intellectual
 15  property laws in the United States that have
 16  protected the creative work of all of us who work at
 17  Adobe.
 18              Software has the dubious distinction of
 19  being both the copyrighted work distributed
 20  exclusively in digital form to which technological
 21  protection measures were applied and also being the
 22  first type of copyrighted work to be exposed to
 23  massive digital piracy.
 24              The markets for software are changing
 25  rapidly.  With the establishment of the Internet as
 26  a major avenue for distributing software products,

                                                   PAGE 6
  1  we see both a major business opportunity and a major
  2  potential threat.
  3              First, I'd like to talk about the
  4  opportunity presented by the Internet.  It provides
  5  tremendous prospects for all types of products and
  6  services to be provided and distributed more
  7  quickly, more efficiently and more cost-effectively
  8  worldwide.  Forrester Research estimates that annual
  9  e-commerce sales just among businesses totaled $100
 10  billion last year and will reach $1.33 trillion
 11  worldwide by 2003.
 12              Technology products and, obviously,
 13  software in particular are leading the way in online
 14  distribution and are obvious candidates for such
 15  distribution.  IDC, one of the major research firms
 16  in the information technology sector, predicts that
 17  the worldwide market for electronic commerce in
 18  software reached $3.5 billion last year and will
 19  grow to $32.9 billion by 2003, as more businesses
 20  and consumers become familiar with shopping on the
 21  Net.  According to some estimates, as much as 70
 22  percent of software will be sold online by 2005.  So
 23  that's the good news.
 24              Now, the threat.  Unfortunately, like
 25  other criminals, Internet pirates are ingenious and
 26  adaptive, constantly finding new ways to adapt for

                                                   PAGE 7
  1  illicit purposes the very technology that has made
  2  e-commerce possible.
  3              To give you a sobering example, if you
  4  search on the Internet today, you will find over 2
  5  million web pages offering links to or otherwise
  6  talking about "warez," the Internet slang word for
  7  illegal copies of software.
  8              This rough indicator of the problem has
  9  increased substantially over the past three years,
 10  from 100,000 web page hits two years ago to 900,000
 11  last year, and to over 2 million today.  Virtually
 12  every software product now available on the market
 13  can be located on one of these sites, including all
 14  Adobe products.
 15              Indeed, the Business Software Alliance
 16  estimates that, of business software in use today
 17  worldwide, fully 37 percent of it is pirated.  And
 18  that figure doesn't include consumer software,
 19  games, things like that, for which the piracy rate
 20  frankly, I believe, is probably far higher.
 21              To protect ourselves against pirates,
 22  the software industry has used a variety of
 23  technological protection measures.  Often, these
 24  measures require a person loading a computer program
 25  on their system to enter a passcode or serial number
 26  as part of the installation process.  If the wrong

                                                   PAGE 8
  1  code is entered the software cannot be installed or
  2  accessed.
  3              More recently, the industry has used a
  4  variety of encryption technologies.  For example, to
  5  access certain antivirus products purchased online
  6  and downloaded, the recipient needs a decryption key
  7  which is sent by separate e-mail.
  8              As the marketplace for computer programs
  9  has developed, it has also become the practice of
 10  most developers of business software products to
 11  license their works to their customers.  This has
 12  proved to be a most efficient means of making these
 13  works available to both vendors and consumers.
 14              A business or other user will often
 15  receive a single copy of the work, and the license
 16  will authorize the use of that product by a
 17  specified number of persons.  This practice, often
 18  referred to as "site licensing," is now an industry
 19  standard.  And to ensure that only authorized
 20  persons use the software, loading a specific copy of
 21  the work in a computer often requires the
 22  application of a serial number, password or access
 23  code to ensure that the person is legally entitled
 24  to access and use the software.
 25              Of course, hackers have adapted.  Today
 26  hacker sites offer serial numbers, access codes and

                                                   PAGE 9
  1  software program "patches" that bypass or circumvent
  2  encryption or other technical protections that the
  3  copyright owner may have employed.  Using a popular
  4  search engine again, and searching this time for the
  5  word "crackz" -- always with that great "z" -- we
  6  recently found over one million web pages which make
  7  available such patches, many of which are
  8  specifically designed to defeat technological
  9  protection measures.
 10              To give just one example, an
 11  enterprising hacker has written a small utility
 12  program called "The Adobe Serial Number Generator,"
 13  that unfortunately does exactly what it's name
 14  suggests.  It will generate usable -- but illicit --
 15  pirate serial numbers that enable access to our
 16  products and updaters by those who do not have
 17  legitimate licensed copies of our programs.
 18              The making, distribution, and use of
 19  this pirate serial number generator is analogous to
 20  selling burglar tools or unauthorized satellite tv
 21  descramblers.  The latter two categories of devices
 22  are illegal under state and federal laws and
 23  Congress intended to do the same thing with
 24  copyright circumvention devices -- make them
 25  illegal.

                                                   PAGE 10
  1              From our industry's perspective,
  2  1201(a)(1)(A) is an indispensable legal tool needed
  3  to prevent piracy and distribution of these illegal
  4  access codes and patches designed to defeat
  5  technological protection measures.
  6              We believe that it is self-evident that
  7  the Congress recognized the critical nature of this
  8  cause of action.  That is why it is part of the law,
  9  and why this Administration pushed hard for the
 10  anticircumvision provisions of the WIPO Copyright
 11  Treaty that the DMCA implements.  The fact that
 12  Congress saw fit to establish this rulemaking cannot
 13  be treated as an opportunity to overrule the will of
 14  the Congress.  The consequences for Adobe, and for
 15  the software industry as a whole, would be
 16  disastrous.
 17              The vast majority of the comments
 18  submitted suggest that the anticircumvention cause
 19  of action as a whole should be suspended.  We,
 20  obviously, strongly disagree.  In addition, such an
 21  action is not within the scope of this rulemaking,
 22  and I'll have more on that in just a moment.
 23              A great many other submissions argue
 24  that non-infringing uses of works, such as those
 25  contemplated under the fair use provisions of the
 26  Copyright Act, somehow trump the copyright holders

                                                   PAGE 11
  1  right to license and enjoy their property interest.
  2              Again, that issue is not the subject of
  3  this rulemaking, but much has been made of the
  4  supposed danger, such as the development of pay-per-
  5  use business models which may develop if this cause
  6  of action goes into effect.
  7              The argument that possible non-
  8  infringing uses of works deserve a higher level of
  9  consideration than the copyright owners' interests
 10  has been the subject of much attention recently,
 11  including recent litigation.  We believe these
 12  arguments to be ill-founded.
 13              For example, in the recent UMG
 14  Recordings, Inc. v. MP3.Com, MP3.Com made this very
 15  argument, and the judge had no trouble disposing of
 16  the argument.  He wrote:
 17              "Finally, regarding Defendant's
 18  purported reliance on other factors (analyzing the
 19  four fair-use factors set out in Section 107), this
 20  essentially reduces the claim that
 21  provides a useful service to consumers... Copyright,
 22  however, is not designed to afford consumers'
 23  protection, or convenience, but rather, to protect
 24  the copyright holders' property interests.
 25              Moreover, as a practical matter,
 26  Plaintiffs have indicated no objection in principle

                                                   PAGE 12
  1  to licensing their recordings to companies like
  2; they simply want to make sure they get the
  3  remuneration the law reserves for them as holders of
  4  copyrights in creative works.
  5              Stripped to its essence, Defendant's
  6  "consumer protection" argument amounts to nothing
  7  more than a bald claim that Defendant should be able
  8  to misappropriate Plaintiff's property simply
  9  because there is a consumer demand for it.  This
 10  hardly appeals to the conscience of equity."
 11              As Judge Rakoff makes clear, the goal of
 12  the Copyright Act is, in part, to enable copyright
 13  owners to license their works for a fee.  There is
 14  nothing wrong or inappropriate about this.  The fact
 15  that access control technologies facilitate such
 16  forms of commercialization of works is not only
 17  consistent with the intent of the Copyright Act
 18  generally, but the specific intent of Congress in
 19  enacting Section 1201(a)(1)(A).
 20              Turning to specifics, the goals of this
 21  proceeding are clearly spelled out in the statute
 22  and relevant legislative history.  Those who assert
 23  that the effective date of the Section 1201(a)(1)(A)
 24  prohibition should be further delayed shoulder an
 25  extraordinarily high burden of persuasion.  They
 26  must demonstrate -- and I'm quoting here -- "through

                                                   PAGE 13
  1  highly specific, strong and persuasive" evidence --
  2  and now I'm not quoting -- a likelihood that, over
  3  the next three years, the net impact of outlawing
  4  theft of passwords, unauthorized decryption or
  5  descrambling, and similar acts of circumvention will
  6  be to harm substantially the ability to make
  7  licensed, permitted or other non-infringing uses of
  8  specifically defined "classes" of copyrighted
  9  materials.
 10              The arguments present in the submissions
 11  and the oral testimony make a number of arguments
 12  why the cause of action should not go into effect.
 13  We believe that each of these fails to make the case
 14  required by law.
 15              Many submissions argue that Section
 16  1201(a)(1)(A) should not come into effect on October
 17  28, 2000 for any class of work.  We believe that
 18  this would have the same effect as overturning the
 19  law through rulemaking, which I submit would clearly
 20  be wrong.  Had Congress intended this as a
 21  possibility, it would not have enacted the cause of
 22  action at all.
 23              The statute, by speaking about specific
 24  classes of works, clearly directs the Librarian to
 25  examine, on a case-by-case basis, the balance of
 26  interests in each case.  The case must be persuasive

                                                   PAGE 14
  1  and compelling, and addressed to specific classes of
  2  works, and not to broad types of works such as, for
  3  example, software.
  4              A number of submissions are devoted to
  5  arguments specific to the software industry.  These
  6  submissions argue that 1201(a)(1)(A) would impede
  7  reverse engineering of software.  The interrelation
  8  between anticircumvention rules and acts of reverse
  9  engineering -- and by which I mean legitimate acts
 10  of studying and analyzing the computer program --
 11  were considered in detail by the Congress in the
 12  course of its very long deliberations on the Digital
 13  Millennium Copyright Act.
 14              Section 1201(f), as you know, was added
 15  by the Senate during its consideration of the Act.
 16  That section is a specific exception to
 17  1201(a)(1)(A) and thus reflects the deliberate
 18  judgment of the Congress in respect of exceptions
 19  determined to be appropriate.  The legislative
 20  history of the Senate bill makes clear that the
 21  specific intent of the Senate in adding Section
 22  1201(f) was "to ensure that the effect of current
 23  case law interpreting the Copyright Act is not
 24  changed by enactment of this legislation for certain
 25  acts of identification and analysis done in respect
 26  of computer programs."

                                                   PAGE 15
  1              Section 1201(f) is obviously not the
  2  subject of this rulemaking.  Whether changes to
  3  Section 1201(f) are appropriate -- and Adobe does
  4  not think any are needed -- is a matter for the
  5  Congress, and the Congress has not directed this
  6  rulemaking to consider that issue.
  7              If you will permit, I'd like to make one
  8  final point.  The vast majority of the submissions
  9  argue that truly bad things will happen if
 10  technological measures can be used to control access
 11  to software and other works.  But these arguments
 12  fail to recognize the fact that the use of such
 13  measures is not a new development.
 14              As I mentioned already, software
 15  developers have long relied on technological
 16  protection measures.  Passwords and serial code
 17  controls have been in use for over a decade.
 18  Encryption technologies have been used for more than
 19  five years.  Over the years, companies have made
 20  many changes in how they use these technologies, in
 21  part as a response to consumers' needs, and in part
 22  to thwart pirates.
 23              The submissions filed do not argue that
 24  the use of these technologies has inhibited the
 25  availability of works or harmed the legitimate user.

                                                   PAGE 16
  1  Why do they not argue this?  Because there is no
  2  evidence to bear out such a claim.
  3              The gist of the arguments made is that
  4  creating this cause of action against hackers of
  5  copy protection technologies would somehow change
  6  everything.  While the submissions raise a vast
  7  array of hypothetical possibilities, I submit that
  8  none present compelling evidence that the ongoing
  9  practices have indeed created a problem.
 10              There is substantial evidence, however,
 11  that hackers are developing and posting patches and
 12  other means aimed at defeating these technologies.
 13  Section 1201(a)(1)(A) gives us a powerful message to
 14  fight back, and this is what Congress intended.
 15              Adobe and BSA respectfully submit that,
 16  based on the submissions and testimony to date, the
 17  record fails to demonstrate that any "particular
 18  class of works" is likely to be subject, over the
 19  next three years, to substantial adverse impact.
 20  Therefore, we argue that Section 1201(a)(1)(A)
 21  should take effect on October 28, 2000, as intended
 22  by the Congress.                               0
 23  forward to taking your questions later.
 24              MR. SIMON:  Thank you.  Rather than
 25  reading another prepared statement, I thought I'd
 26  kind of try to take on some of the issues that have

                                                   PAGE 17
  1  been raised in the various testimony to date, some
  2  in Washington, some here yesterday.  And there are
  3  about five or six of these that I'd like to kind of
  4  quickly run through, and then I'd like to say a
  5  couple more words about the reverse engineering
  6  issue as well.
  7              The goal of the copyright law is not to
  8  promote use of works.  It is in part to promote use
  9  of works, but that's only one of its goals.  The
 10  goal of the copyright law is to promote creative
 11  expression.  And somehow to read into this
 12  subsection of this rulemaking the notion that a
 13  predominant goal should be to promote use is simply
 14  wrong.  That's not the intent of the act overall,
 15  that was not the intent of the Congress in enacting
 16  this.
 17              What the Congress did is balance a
 18  series of interests, and it balanced, really, two
 19  sets of interests:  the interests of those who
 20  create works, who make creative expressions and fix
 21  them; and those who enjoy the benefits of those
 22  works, we, society as a whole.
 23              And it balanced the harm posed
 24  potentially by piracy to those who create, against
 25  the harm posed potentially to users through the

                                                   PAGE 18
  1  application of technological measures to prevent
  2  that harm, to prevent that piracy.
  3              In drafting 1201(a)(1) the Congress
  4  determined the harm of piracy was greater.  That's
  5  why the way this statute operates is the cause of
  6  action comes into effect.  That's the fault
  7  presumption.  It fails to come into effect only if
  8  there is some superseding compelling consideration.
  9              And the question there is:  Is there
 10  enough evidence now that wasn't there two years ago
 11  to justify that superseding consideration?  And I
 12  think the answer is no.  I think you have not heard
 13  any testimony of any particular instances beyond
 14  situations of mistake (like the Lexis situation of a
 15  mistake in distributing a CD-ROM that had a time-
 16  sensitive fuse on it) which actually suggests that
 17  there's harm, that there's a problem out there.
 18              Is the mere presence of a technological
 19  protection measure enough to raise a red flag?  I
 20  think the answer to that is clearly no.  What the
 21  Congress said in this act in Section 1201 overall is
 22  that technological protection measures are
 23  appropriate, necessary means that it approves of to
 24  be used in the context of preventing people from
 25  stealing works.

                                                   PAGE 19
  1              The fact of the technological protection
  2  measure is not particularly liked by some people
  3  does not mean that it's a bad thing.  But a lot of
  4  the testimony you have heard suggests that the mere
  5  fact that somebody has applied a technological
  6  protection measure -- like The New York Times
  7  applying an access control measure to its articles
  8  creates a chilling effect and therefore creates a
  9  potential problem -- the statute is not about
 10  chilling effects.
 11              The harm that has to be established here
 12  to suspend this cause of action is harm, actual or
 13  potential.  And a chilling effect does not meet that
 14  test.  There's nothing either in the legislative
 15  history, in the Congress debate of this, or in the
 16  statute itself that suggests that.  In fact, there's
 17  a lot of discussion that's just the opposite.
 18              Okay.  Class of works versus category of
 19  works.  Category of works is a term of art.  It's a
 20  statutory concept which lists particular sets of
 21  things that fall into categories.  Had the Congress
 22  intended for class to be read as  broadly as that,
 23  it would have said category.  Had the Congress
 24  intended for class to be read more broadly than
 25  category, it would have said that.

                                                   PAGE 20
  1              But in fact it said -- the legislative
  2  history suggests just the opposite.  The examples
  3  that it gives is that class is somewhere between a
  4  category and an individual work.  This piece of
  5  paper that I wrote this morning, somewhere between
  6  this and I guess all literary works is where class
  7  falls.  And it probably falls a lot closer to the --
  8  you have to specifically figure out what that
  9  universe of works is, where the actual harm is.
 10              Harm is not -- and the reason I believe
 11  that the Congress did this is because it did not
 12  want a consequence where if, for example, one could
 13  establish that chemistry textbooks, because they're
 14  subject to access controls, become much less
 15  available for educational purposes and that it
 16  causes harm in the sense of one of the five factors
 17  that have to be weighed here by the Librarian.  But
 18  the fact that chemistry textbooks create that
 19  problem and that therefore all literary works --
 20  which is the category that the chemistry textbooks
 21  fall into -- should now no longer be subject to this
 22  rule of law, that's clearly not what the Congress
 23  meant, couldn't have been what the Congress meant.
 24              Because with that, what you end up doing
 25  is sweeping an enormous universe of works out the
 26  door because there may potentially be a problem in

                                                   PAGE 21
  1  one subsegment of that universe.  So that's category
  2  versus class.
  3              Class is clearly much smaller than
  4  category, it's probably not as small as an
  5  individual identifiable work.  But it's somewhere
  6  between that and probably closer to that end of the
  7  spectrum than it is to the end where categories sit.
  8              Factors to be weighed in your
  9  determination.  The statute actually lists that the
 10  Librarian has to examine five variables.  And an
 11  enormous amount of attention has been paid to the
 12  fourth variable.  That fourth variable says "the
 13  impact of prohibiting the circumvention of
 14  technological measure applied to copyrighted works
 15  has on criticism, comment and use, reporting,
 16  teaching, scholarship and research."
 17              I also point out that in that list of
 18  five, it's a conjunctive, it's an "and."  And you
 19  have to weigh the impact in each of those areas in
 20  order to make your determination, or for the
 21  Librarian to make his determination.
 22              And I simply point to two of the other
 23  factors.  The first factor talks about the
 24  availability for use of copyrighted works.  And you
 25  have received a substantial amount of testimony from
 26  Paul, just a moment ago, and from others that the

                                                   PAGE 22
  1  availability of technological measures to protect
  2  our works is one of the reasons why we make works
  3  available in more convenient forms to users.
  4              We talked yesterday about an example of
  5  what would happen if that CD-ROM containing those
  6  French cases had just not been available in digital
  7  form.  That somebody would have gone to dozens of
  8  law journals in physical form and tracked them down,
  9  creating an enormous disincentive to research.  The
 10  fact that those kinds of materials are available in
 11  digital form creates an enormous incentive to
 12  research, as well as other commercial markets.
 13              So the availability of works has
 14  substantially increased, I would pose to you,
 15  because of the availability and the increased use of
 16  technological measures.  That factor weighs no less
 17  and no more in the list of five than any other, and
 18  it can't be dismissed.  It has to be weighed.
 19              The second factor I'll point you to is
 20  the fourth one in the statute, the one that talks
 21  about the effect of circumvention measures on the
 22  market for, or value of copyrighted works.  In
 23  making a determination that there may be harm -- for
 24  example, with respect to chemistry textbooks because
 25  in the classroom environment those textbooks become
 26  less available and it creates an impediment to

                                                   PAGE 23
  1  teaching -- before you say that that is a
  2  dispositive and final decision, you have to look at
  3  the other factors.  And one of the factors that you
  4  have to look at is what does that decision portend
  5  for the market for chemistry textbooks, the
  6  commercial market for chemistry textbooks.  That's
  7  what the fourth factor talks about.
  8              And again, it's a conjunctive between
  9  those factors.  None of these is dispositive, and in
 10  making the determination you have to weigh all of
 11  them and balance them.  This is ultimately a
 12  balancing exercise.
 13              There's been a fair amount of discussion
 14  of the evils of a metered world, of a pay-per-use
 15  world.  I find this baffling.  A huge amount of
 16  commercial activity in our economy, global economy,
 17  is based on metered use.  I rented a car at the
 18  airport yesterday.  I pay so many dollars for so
 19  much time.  If I want to keep it longer, I pay more.
 20  There's nothing wrong with that concept.
 21              Telephone service.  I pick up the phone
 22  to make a call, and I pay for the amount of time
 23  that I use it.  Airport fees, airport user fees.  We
 24  pay user fees.  We pay a whole bunch of fees based
 25  upon use, upon the notion of the benefit that I
 26  derive from that activity determines the price that

                                                   PAGE 24
  1  I pay for it.  That's at the core of a whole
  2  universe of economic activity.
  3              The notion that that is now going to be
  4  applied to copyrighted works being wrong is, to me,
  5  baffling.  Because if it's wrong to be applied to an
  6  intangible property interest like a copyright, why
  7  isn't it also wrong for it to be applied to any
  8  other property interest?
  9              Like the fact that Hertz owns the car
 10  that I happen to be driving around.  And gee, I
 11  really like this car.  It's got this wonderful
 12  navigation device in it, so I never get lost.  I'd
 13  love to take it home with me.
 14              So I have initial lawful access -- and
 15  I'll get to that again in a second -- I have initial
 16  lawful access to this Hertz car, and it's got this
 17  wonderful navigation device in it.  And actually,
 18  the thing that makes the navigation device is a
 19  combination of some hardware and some software.
 20  The software's copyrightable.  Does that mean if I
 21  could figure out some way to just take that software
 22  out of there, and would only use it for fair use
 23  purposes -- I'd guarantee it, I swear -- does that
 24  mean that I could somehow take this because I have
 25  initial lawful access to this car?  I don't know.
 26  It just baffles me.

                                                   PAGE 25
  1              The notion that property can be parsed
  2  based upon the benefit that the user gets out of it,
  3  and the fee charged can be assigned in a way that
  4  corresponds to that benefit, that's a good thing for
  5  consumers.
  6              If every time I flew to San Francisco I
  7  had to buy a new car, that would make no sense at
  8  all.  And one of the increasing trends in the
  9  software industry is to make applications available
 10  off web pages, off the Internet, which enables
 11  people to use, for example, a tax-paying program so
 12  they can do their quarterly taxes by renting, in
 13  effect, the use of that software off the Internet
 14  instead of having to buy the product.  Much cheaper.
 15  Plus, you're getting it constantly updated so you're
 16  getting the latest tax laws.
 17              Isn't that a good thing that instead of
 18  my having to pay $100 for this software program, I
 19  can pay $4 once a quarter?  So the business models
 20  are evolving in a way that creates fees based upon
 21  the benefit that is being derived.  Technological
 22  protection measures are integral to making that
 23  possible.  That's a good thing.
 24              Initial lawful use I think kind of has
 25  been done to death.  But let's kick this one one
 26  more time.  Initial lawful use was a concept that

                                                   PAGE 26
  1  was much discussed within the legislative process
  2  that led to the enactment of the DMCA.  It was a
  3  concept that was posited by many of the same parties
  4  who are putting it forward to you in this rulemaking
  5  proceeding.
  6              The term does not appear in the statute
  7  because the Congress rejected the concept.  For you
  8  to somehow read that concept into the statute where
  9  the Congress specifically rejected it would do
 10  violence to the role that's been assigned to the
 11  Librarian.  It would be substantially outside the
 12  scope of his role and his authority.
 13              It is not for the Librarian to make
 14  laws; it's for the Librarian to make rules
 15  implementing laws.  It's not for those rules to
 16  overturn what the role of the Congress is.
 17              I also find the concept of initial
 18  lawful use kind of baffling in the library context.
 19  Let's do a library context.  I went to Georgetown
 20  Law School, and Georgetown Law School permits its
 21  alumni and its students to use the library but does
 22  not permit the general public to use the library.
 23              So does that mean that if, for some
 24  reason I, as an alumni, do have initial lawful
 25  access to that library on a wonderful Friday
 26  afternoon in May, does that mean that I can go into

                                                   PAGE 27
  1  that library at four in the morning on Christmas Eve
  2  as well?  The fact that I got in once legally, does
  3  that mean that I can get in again and again?
  4  Obviously, it doesn't.  It can't mean that.
  5              Does the fact that I took a book off the
  6  shelf and read it and used it for research mean that
  7  I can now take that book with me?  Obviously, it
  8  doesn't.  The notion of initial lawful access as the
  9  test simply supposes that there's only such a thing
 10  as one permission.  I only have an on/off switch.  I
 11  can give you permission or not give you permission.
 12              That simply is contrary to all the
 13  business models that are evolving in a digital age,
 14  particularly for a software industry but I think for
 15  other industries as well.  And if that is the rule
 16  that you would adopt -- which I would argue to you
 17  is simply not permitted because it's outside the
 18  scope of rulemaking because it was specifically
 19  rejected by the Congress -- but if that were to be
 20  the rule that you would adopt, you would defeat the
 21  entire purpose of this provision.
 22              There's a problem that's common to all
 23  the concepts that have been raised, of the
 24  categories that have been suggested to you, whether
 25  they're some variation on the initial lawful access
 26  notion or thin copyrighted works or some other

                                                   PAGE 28
  1  concept.  And the problem with them is that no
  2  matter how you try to parse them, they ultimately
  3  end up swallowing the whole rule.
  4              There's really no way to say this is an
  5  initial lawful access, fair-use type, thin kind of
  6  work; and that isn't.  They're all either one or the
  7  other.  Fair use can be exercised with respect to
  8  anything.
  9              Okay, last point.  You really have only
 10  one determination to make, and that determination is
 11  adverse effect.  It's really a harm test.  You have
 12  to find harm.  If you do not find harm, the inquiry
 13  stops.  And the burden of finding harm is pretty
 14  high.  The burden is for people to present to you
 15  specific instances where it has occurred.  No harm,
 16  no action.
 17              Resist the temptation to act.  I
 18  understand, having been a bureaucrat, that
 19  bureaucrats don't like to do nothing.  Bureaucrats
 20  like to do stuff.  And I understand that you've been
 21  charged with rulemaking, and you have this enormous
 22  temptation to do something.  They're all fidgeting
 23  and smiling at me.  Don't do anything.  It's cool.
 24  You know, sometimes you avoid making mistakes when
 25  you do nothing.

                                                   PAGE 29
  1              Okay.  One last word and that's about
  2  reverse engineering, which is an issue that is
  3  entirely outside the scope of this rulemaking.  Let
  4  me say that again.  It's entirely outside the scope
  5  of this rulemaking.  It is a matter specifically,
  6  thoroughly, comprehensively addressed in Section
  7  1201(f), which creates a specific exception to
  8  1201(a)(1)(A).  The Congress thought about it long
  9  and hard, fought about it, deliberated, and enacted
 10  it.  That's it.
 11              It may be a lousy rule, but it's not for
 12  you to say that.  It's for the Congress to come back
 13  and think again and say, "Hey, we messed up.  We've
 14  got to do it again."  Or not.  That is not the issue
 15  posed to you in this rulemaking.  Thank
 16  you.
 17              MS. PETERS:  Thank you.  Fred.
 18              MR. WEINGARTEN:  Thank you.  Actually, I
 19  haven't been a bureaucrat in 20 years myself.  My
 20  experience is that the typical bureaucrat doesn't
 21  want to do anything.  And so I'm here to urge you to
 22  do something.
 23              My name is Fred Weingarten, also known
 24  as Rick or Frederick Weingarten.  I direct the
 25  Office for Information Technology Policy for the
 26  American Library Association, OITP.  We're a small

                                                   PAGE 30
  1  research and analysis office for the Library
  2  Association.
  3              And for the last year I've had the
  4  privilege of working for the five library
  5  associations in Washington -- the Association of
  6  Research Libraries, American Association of Law
  7  Libraries, Medical Library Association and the
  8  Special Library Association -- in addition to ALA in
  9  trying to do some background digging on this issue
 10  and support their efforts in this rulemaking.  And
 11  so I'm pleased today to speak for all of those.
 12              I come before you, not as a lawyer, nor
 13  even in fact as a librarian, as some of you may
 14  know.  I'm a policy analyst.  I've worked off and on
 15  on information policy, including intellectual
 16  property issues for many years.  I was originally
 17  trained as a computer scientist, but my old
 18  colleagues have warned me long ago never to apply
 19  that word to myself these days.
 20              But I was a computing research manager
 21  for the National Science Foundation for many years.
 22  In fact, I made some of the early grants that led to
 23  the and Internet, and, thus, may be the
 24  cause of some of this heartburn and churning that
 25  we're all going through these days.

                                                   PAGE 31
  1              I've also worked at the Congressional
  2  Office of Technology Assessment where, in fact, in
  3  the '80s we did more than one study of the impact of
  4  technology on intellectual property law.  And, in
  5  fact, the first study we did was for Senator
  6  Matthias and Bob Kastenmeyer's committees.  And I'm
  7  sorry Steve Metalitz didn't make it because when he
  8  was working for Senator Matthias, we worked with him
  9  very closely on these issues.
 10              In our first report, one of the
 11  questions that the Congress had asked was whether
 12  they couldn't resolve some of these technology
 13  issues once and for all.  Couldn't they pass a
 14  copyright law that anticipated technological change
 15  and struck the right balances so they didn't have to
 16  constantly revisit?  And one of our answers was not
 17  very well welcomed because it was no.  And I think
 18  this rulemaking here right now is evidence that we
 19  were right.
 20              You've really got an incredibly
 21  difficult task, I think.  Partly because the law is
 22  really a very confusing law, many of the terms are
 23  vague, ambiguous.  And in our view, in fact, the
 24  law's Section 1201 contains a basic paradox.  And
 25  you're being asked to resolve that paradox in this
 26  rulemaking without a heck of a lot of guidance.

                                                   PAGE 32
  1              Although the description of the process
  2  of the bill made it sound very rational and
  3  deliberative and carefully thought out, that's not
  4  my recollection of how that bill came to pass.  It
  5  was extremely contentious, right up to the end.
  6  Lots of different views, two different committees of
  7  jurisdiction in the House, all fighting over what it
  8  meant and what it should cover.
  9              And so, in some sense, recourse to
 10  legislative history for guidance is not too useful,
 11  either.  But other people closer to that have
 12  already testified for us on that.  But we would say
 13  that we think that itself is a debatable proposition
 14  for this panel to think about.
 15              And, finally, you're really dealing with
 16  fundamental issues.  I mean, copyright law is rooted
 17  in the Constitution.  Rental cars aren't.  So the
 18  basic conflict between the public interest and all
 19  of those terms in the law that we sort of encompass
 20  with the term fair use -- with small F, small U --
 21  are deeply embedded public policy values, and one
 22  can't dismiss them lightly.
 23              So we've raised in our responses and in
 24  our testimony, I realize, some broad issues, broad
 25  concerns, maybe uncomfortably broad.  But we think
 26  it's very important for this panel to consider the

                                                   PAGE 33
  1  fundamental public policy environment in which the
  2  rulemaking is taking place.  And we understand that,
  3  at the end of the process, you have to go into a
  4  room and really decide specific words and get into
  5  details.  And that is a tough problem for you.  But
  6  there is a context that I think we really need to
  7  raise.
  8              I mentioned that the law has a basic
  9  paradox.  And the basic question before this panel
 10  is whether technological measures intended to
 11  control access to digital works also prevent users
 12  from exercising their rights under copyright law to
 13  use the material in non-authorized but non-
 14  infringing ways.  And it seems patently obvious to
 15  us that they do.
 16              In the first place, circumvention is
 17  defined by the law as bypassing a technological
 18  measure without authorization.  Fair use and other
 19  limitations in the law are, by definition,
 20  unauthorized uses.  Therefore, unless the
 21  technological measure itself is programmed to step
 22  aside -- or in some sense, maybe pre-authorize
 23  unauthorized use -- it must block a non-infringing
 24  lawful use.  And that's a basic paradox in the law.
 25              Let me say that, as an aside, that it's
 26  not clear to me from my long ago technical training,

                                                   PAGE 34
  1  that the technology needs to be that rigid.  That we
  2  can't have fair-use soft or fair-use friendly
  3  technological measures that achieve the objectives
  4  of preventing piracy and yet are flexible enough to
  5  allow public interest to be fully exercised.
  6              But that's an area in which we, in fact,
  7  in my office are trying to open a dialogue with
  8  people in the industry with some of the newer
  9  entrepreneurial e-book and e-library firms.  We've
 10  started talking with them and, in fact, would like
 11  to work out some sort of convergence of library
 12  service models and business models that doesn't end
 13  up in a food fight in Washington, which doesn't help
 14  anybody.  Although it pays my salary.
 15              It seems to me that there are four
 16  questions that you have before you.  One, does a
 17  technological measure that controls use also control
 18  access?  The answer is yes.  And I'll discuss that a
 19  little later, but I think the record for the hearing
 20  has clearly established that.
 21              Second question.  Are there now or are
 22  there likely to be in the next three years
 23  technological measures that persistently control
 24  access or use after a user has lawfully acquired a
 25  work?  Again, we think the record unambiguously
 26  establishes that the answer is yes.  Such measures

                                                   PAGE 35
  1  already exist, and these persistent controls are
  2  really central to business models envisioned by the
  3  content community.
  4              What works will be or are protected by
  5  such measures?  Well, I think one could reverse the
  6  question and say what won't be.  Let me just read --
  7  Steve isn't here, but let me just read the range of
  8  industries he will be representing when he
  9  testifies:  Film Marketing Association; Society of
 10  Composers, Authors and Publishers; Media
 11  Photographers; Publishers; Association of American
 12  University Presses; Authors Guild; Broadcast Music;
 13  Business Software Alliance; Directors Guild;
 14  Interactive Digital Software; McGraw-Hill Companies;
 15  Motion Picture Association; Music Publishers'
 16  Association; Professional Photographers; Recording
 17  Industry.
 18              These people are all interested in this
 19  hearing.  Why are they interested in it?  Because
 20  they all want to use technological measures to
 21  protect and market their works.  So how can we,
 22  then, say "Well, it's just this work that is of
 23  concern to us."
 24              The other reason that we look for a
 25  broad exemption, of course, is that libraries don't
 26  like to play favorites.  We serve an incredibly

                                                   PAGE 36
  1  diverse community.  Different libraries serve
  2  different communities, and it is hard to imagine a
  3  kind of work that is not in our concern that we be
  4  able to provide our patrons with access to it.
  5              So what's the harm?  Well, we believe
  6  that the record has established the existence of
  7  harm in four ways.  First, we argue that since fair
  8  use is basic public policy rooted in copyright law,
  9  a balance required by the Constitution, any
 10  diminution of it through strict interpretation of
 11  Section 1201 is de facto serious harm.
 12              You're removing from the public a basic
 13  right they have or a privilege -- however you might
 14  use the term -- under copyright law.  And we should
 15  not have to go any further.
 16              Those rights and privileges have been
 17  established for 300 years.  First in British common
 18  law, and then in U.S. law.  It's been upheld by the
 19  Supreme Court for many years.  It's basic public
 20  policy.  Why should we have to show and re-establish
 21  and re-argue something that has been in the law for
 22  300 years?
 23              Secondly, current experience with
 24  licensed products in which license terms are
 25  protected by technological measures shows that harm
 26  is already being experienced in areas such as

                                                   PAGE 37
  1  archival rights and first sale.  Libraries, the
  2  Copyright Office and the Librarian have every
  3  legitimate reason to presume that these limitations
  4  are just the leading edge of a rapid technological
  5  trend, and that such harm will undoubtedly increase
  6  over the next three years.  And I'll get back to
  7  this issue of why I use term "licensing."  I'll get
  8  back to that in a minute.
  9              Third, although the operative section of
 10  the law has not yet come into force, it is
 11  reasonable to presume that when it does, the threat
 12  of criminal penalties on users, coupled with the
 13  vague and broad nature of the anticircumvention
 14  provisions, is going to result in a severely
 15  chilling effect.                               0
 16  on some of the testimony or some of the responses,
 17  that librarians just can't wait to get out there and
 18  hack.  And just can't wait to provide havens for
 19  piracy for their users.  In fact, what I've observed
 20  in my years working for the Library Association is
 21  that librarians tend to be a fairly conservative
 22  lot.
 23              They really have other things to do than
 24  to try to figure out from day to day what the
 25  copyright law is letting them do or not.  And in
 26  such an ambiguous environment, if there's threat of

                                                   PAGE 38
  1  criminal penalties particularly or lawsuit, their
  2  answer will be no, even if the result is harm to the
  3  user or denying the user access that they might have
  4  legal rights to.
  5              Fourth, it's clear that these controls
  6  are not only for the purpose of preventing piracy,
  7  but they are to implement and enforce a new pay-per-
  8  use model on all information users.  Now, let me say
  9  that we're not asking you to overturn a pay-per-use
 10  business model.  That's not the job of the Copyright
 11  Office, not the job of copyright law.
 12              But it is the job of copyright law to
 13  retain a balanced social policy in that environment.
 14  And, in fact, if we are moving towards that model of
 15  information sale, the role that libraries and
 16  schools play in providing safety-valve access to the
 17  information works is even more important.  And it's
 18  even more important to protect that role.
 19              Let me quote from just one publicity
 20  announcement from a vendor.  And I'm not going to
 21  name the vendor in this. I really don't want to pick
 22  out and embarrass a particular firm.  It really
 23  reflects, I think, the view of the industry.
 24              "This firm has developed a way for
 25  publishers --" and I'm quoting -- "to receive
 26  revenue each time a student accesses even a single

                                                   PAGE 39
  1  page of a title.  This has never been possible
  2  before.  Thus, older titles and out of print books
  3  that have been read and studied thousands of times
  4  over the years in libraries (yet have not generated
  5  new income) will now produce new revenues and become
  6  more valuable assets to publishers."
  7              Now, if that isn't a basic threat to the
  8  fundamental role that libraries have served and
  9  schools have served over the last couple hundred
 10  years, I don't know what is.  We're not speculating
 11  here; we're not imagining problems.  We're saying
 12  that this move to a pay-per-use model threatens the
 13  very basic foundations of what libraries and schools
 14  are all about.  And it is important, if that is
 15  happening, for us to provide or protect the safety-
 16  valves inherent in fair use.
 17              Let me finish by addressing four
 18  particular topics that I think have caused some
 19  confusion in the past.  And although my addressing
 20  them will probably increase rather than decrease the
 21  confusion, I've been wanting to do this after
 22  watching all five days of hearings.
 23              The first is the problem of access and
 24  use.  I think for the purposes of Section 1201,
 25  there's simply no useful distinction between the
 26  term "access" and "use."  Section 1201 does not

                                                   PAGE 40
  1  prevent circumvention for use.  Every time one uses
  2  a digital work one accesses it.  All technological
  3  controls control access.
  4              So if one wants to extract from a work,
  5  one wants to print a work, one wants to play a movie
  6  on a DVD or play a song off of a CD, or view a
  7  picture, what you're really doing is accessing even
  8  though, from your terms, it's a use.  So access is
  9  inseparable from use.
 10              And in my testimony I quote Judge Kaplan
 11  on the Reimerdes case.  That may be the only thing
 12  that Judge Kaplan said that we might agree on, but
 13  we think that he clearly views access as playing the
 14  DVD on a computer.
 15              Secondly, the problem of persistent
 16  controls.  We've called these measures that continue
 17  to control access after the work is initially
 18  acquired persistent controls.  That can be as simple
 19  as a database system that requires repeated use of a
 20  password each time one logs on to use it.  Or they
 21  can be far more complex as technology evolves.
 22              These persistent controls are not just
 23  for the purpose of protecting against piracy, but to
 24  develop and enforce new business models, many which
 25  seek to charge for uses that in the past been free
 26  once a work has been lawfully obtained.

                                                   PAGE 41
  1              Once again, we're not against the
  2  development of those new business models.  But we
  3  don't think copyright law needs to be invoked to
  4  protect particular business strategies.  Let me
  5  quote from a report by an industry marketing firm
  6  that serves the publishing industry:
  7              "For the past several years, digital
  8  rights management (DRM) has focused primarily on
  9  protecting digital content from illegal or unwanted
 10  uses."  And you've heard a lot about that in the
 11  five days of testimony.
 12              "Lately, though, the scope and emphasis
 13  has been evolving to include more than just
 14  copyright protection ... the pressures and
 15  opportunities in digital markets are forcing both
 16  publishers and their vendors to take a broader view
 17  of what a digital rights management platform
 18  entails."
 19              And yet Section 1201, under the guise of
 20  copyright law, is expected to protect all of those
 21  possible models, all of those possible ways of
 22  distributing information.
 23              I'd like to talk a bit about
 24  circumvention.  Many times I've heard the panel ask
 25  presenters whether they have had any experience with
 26  circumvention.  And I've really wished that any one

                                                   PAGE 42
  1  of them has fired back a question, what is a
  2  circumvention?  What do you mean?
  3              Since the definition of technological
  4  measure is so broad and all-encompassing that it can
  5  even include passwords and library cards -- as we
  6  established in our comments -- what does
  7  circumvention mean?  Does using a password to access
  8  a database, to use it in a way that is not
  9  authorized in terms of the license a circumvention?
 10  I don't know.  But I haven't heard anybody tell me
 11  it isn't.
 12              That makes it very difficult for a
 13  librarian to say whether or not she has circumvented
 14  or not.  Will misuse of a library card now become a
 15  federal crime because it is a circumvention to
 16  access a database in a library?
 17              Linda Crowe's library offers access to
 18  an online database system that requires a password
 19  and a library card as an identification and entry
 20  measure.  Suppose somebody in that district loans
 21  their library card and password to a visiting
 22  relative, who then goes to the library and uses it
 23  to download some information for a school project.
 24  Has that person now become a federal felon for
 25  circumventing 1201?  I'm not sure that they haven't.
 26              Now, we might say, "Well, they would

                                                   PAGE 43
  1  never prosecute such a person," and so on.  But that
  2  raises a problem that Bob Kastenmeyer used to worry
  3  about all the time, whether we're creating in our
  4  copyright law the essence of a prohibition that
  5  essentially makes scofflaws and criminals of us all
  6  by winking at minor offenses, and we'll decide what
  7  a major offense is.
  8              Finally, I'd like to talk a bit about
  9  the relationship between licensing and controls
 10  because that's come up several times.  So let me
 11  suggest some considerations, because they do wrap
 12  together and are very difficult to pull apart.
 13              But basically there's no direct
 14  relationship between the technological issue and
 15  licensing.  Section 1201 is part of copyright law.
 16  Licensing is a contract, a private contract.  So we
 17  have no objection to knowledgeable parties,
 18  consenting adults, agreeing to anything they want to
 19  agree to.  Librarians do this all the time.  What we
 20  object is criminal measures under copyright law
 21  being tangled up in that.
 22              People can license away anything they
 23  want.  That has nothing to do with whether Section
 24  1201 and fair use in Section 1201 should be
 25  protected and interpreted.

                                                   PAGE 44
  1              And I'd also like to point to Jim Neal's
  2  testimony -- and Lolly mentioned this yesterday also
  3  and I think Karen Coyle did -- that copyright law
  4  does set some boundary in negotiating licenses, sets
  5  some basic principles.
  6              Second, technological measures can
  7  really restrict negotiation.  Because as they become
  8  more and more embedded in the work itself, it
  9  becomes non-negotiable.  You can negotiate until
 10  you're blue in the face, but if the technological
 11  measure is part of the work itself, there's nothing
 12  to negotiate.
 13              Unbalanced enforcement.  If the database
 14  provider that Linda Crowe works with decides that
 15  that misuse of the password and library card
 16  violates the terms of the license, they can jolly
 17  well go to court and sue for breach of contract.
 18  And if Linda thinks they're being too rigid, she can
 19  go to court and sue.
 20              Disputes in contract law can be resolved
 21  in court and are all the time.  What Section 1201
 22  does, if not equipped with an exemption, is bring
 23  the weight of criminal law against one party in that
 24  dispute, in addition to breach of contract.  That's
 25  an unfair balancing.  That's an interference of
 26  copyright law with licensing, not a support.

                                                   PAGE 45
  1              And, finally, given the trend towards
  2  UCITA and non-negotiated license, the idea that
  3  there's some negotiation that goes on between
  4  consumers of information products -- even libraries
  5  and their providers -- I think is growing dim.  But
  6  that's another fight.
  7              In conclusion, much of our testimony has
  8  sounded alarming and negative, I think, over the
  9  last five days.  Deliberately so.  We're engaged in
 10  an advocacy proceeding here.  But, in fact, most
 11  libraries have embraced technological change.
 12              We believe that to the information
 13  society in this new century, libraries will be even
 14  more important, serving the public, supporting
 15  health research, care providers, the legal
 16  community, underpinning vital research in
 17  educational missions of our schools, colleges and
 18  universities.
 19              We also believe that content providers
 20  should be exploring new ways to serve their public
 21  and expanding markets for their work.  That's
 22  perfectly fine.  That's good.  We use their
 23  products.  And copyright is an important tool for
 24  them to do so.  We're not against copyright.  We're
 25  not trying to undo the DMCA.

                                                   PAGE 46
  1              Of course, libraries are also exploring
  2  new forms of service models using these new
  3  technologies.  There's no reason why both interests
  4  can't be served, why this can't be a win-win
  5  technological change for society and for the
  6  creators and for the publishers.  One goal need not
  7  be achieved at the expense of the other.
  8              Public services provided by libraries
  9  and educational institutions does not threaten, but
 10  if anything, enhances business opportunities.
 11  Copyright law extends rights to creators, but in the
 12  name of the public interest it also assigns
 13  responsibilities to them in the form of limitations
 14  and exceptions.
 15              They're not new ideas; they date back to
 16  the earliest days of copyright law.  Nor are they
 17  trivial.  They've served our society well for 200
 18  years.  We see neither technological reasons nor
 19  economic reasons to sweep them under the table now
 20  in the guise of controlling access to protect
 21  against piracy.
 22              A broad use-based exemption would be a
 23  strong statement that the public interest continues
 24  to be served in the digital age.  Thank you.

                                                   PAGE 47
  1              MS. PETERS:  Thank you.  We'll have our
  2  question and answer session begin with Charlotte
  3  Douglass.
  4              MS. DOUGLASS:  Thank you.  I found all
  5  the testimony quite informative.  I'd like to get
  6  into just a little bit the question of reverse
  7  engineering.  I know you said it two times at least.
  8  So it's reverse engineering, reverse engineering,
  9  reverse engineering.  It's supposed to take, like, I
 10  divorce you, I divorce you, I divorce you.
 11              But I'm going to raise it one more time.
 12  And that has to do with -- suppose there is an
 13  adverse effect?  It seems to me that Section
 14  1201(a)(1) is supposed to address adverse effects.
 15  So that if the Librarian did find an adverse effect
 16  as to which non-infringing could not be made, is the
 17  Librarian prohibited from dealing with reverse
 18  engineering at all or finding that there is an
 19  adverse effect that could be remedied by reverse
 20  engineering or a computer program, for example?
 21              MR. SIMON:  Is reverse engineering a
 22  class of works?
 23              MS. DOUGLASS:  No.
 24              MR. SIMON:  Thank you.  Your rulemaking
 25  is limited to classes of works.  You can have
 26  reverse engineering of a whole universe of stuff,

                                                   PAGE 48
  1  not just computer programs.  So this notion somehow
  2  that reverse engineering requires some specific
  3  treatment within this rulemaking is really -- again,
  4  it confuses me.
  5              Because this rulemaking speaks to
  6  specific classes of works where harm is established.
  7  It does not speak about, necessarily, what the cause
  8  of the harm is.  The Congress addressed a potential
  9  cause of harm in Section 1201(f).
 10              MS. DOUGLASS:  That referred to computer
 11  programs, and I think I heard someone say that
 12  computer programs was a category of works, but it
 13  was not a class of works.
 14              MR. SIMON:  It is.  Read 102, Charlotte.
 15  It's not a category of works.  It's a literary work.
 16              MS. DOUGLASS:  Absolutely, absolutely.
 17              MR. SIMON:  So it's not a category of
 18  works.
 19              MS. DOUGLASS:  So, okay.  So that could
 20  be in a class of works?
 21              MR. SIMON:  It could, if you were to
 22  interpret the statute as saying all computer
 23  programs belong to a single class.  The reality is
 24  that there are hundreds of kinds of computer
 25  programs.  There are games, there are application
 26  products, there are operating systems, there are

                                                   PAGE 49
  1  business products, there are consumer-aimed
  2  products.
  3              So the question would arise, even if you
  4  were to hypothetically entertain the question which
  5  you asked me -- which I think is a fundamentally
  6  wrong question -- the question is, is the harm with
  7  respect to what kind of software?  Is it with
  8  respect to computer-aided design software?
  9              And are you then going to create an
 10  exception for the entire class of any computer
 11  program as defined in the statute?  Which these
 12  days, frankly, includes music and movies.  Because
 13  if you look at the definition of what a computer
 14  program is under the act, it's anything that has a
 15  series of instructions that performs particular
 16  function.
 17              So now you've gone back to, well, what
 18  are you excluding?  You're excluding not just
 19  categories -- not a category, but categories.  So it
 20  doesn't make any sense to me.
 21              MS. DOUGLASS:  Okay.  Thank you.
 22              MR. SIMON:  You're welcome.
 23              MS. DOUGLASS:  Do you have any further
 24  comment on that at all?
 25              MR. HUGHES:  Other than to say that I
 26  agree with Emery, section 1201(f), I guess, was

                                                   PAGE 50
  1  beamed in maybe midway through the long DMCA process
  2  on Capitol Hill and was beamed in specifically
  3  because there were people who were concerned about
  4  the potential negative effect of Section 1201 on
  5  reverse engineering for the purposes of
  6  interoperability.
  7              And they wanted a specific section --
  8  the advocates of this concern wanted a specific
  9  section of 1201 dealing with that.  And they got it.
 10  And indeed, you know, by analogy we have, as you
 11  know, another section dealing with encryption
 12  research and another section dealing with security
 13  testing, firewalls, that sort of thing.  So
 14  certainly it would be my read that those would fall
 15  outside the scope of 1201(a).
 16              MR. SIMON:  The rulemaking.
 17              MR. HUGHES:  The rulemaking.  And
 18  indeed, therefore this rulemaking.
 19              MS. DOUGLASS:  Okay.  We had a comment
 20  about Fontographer.  And one commenter said that in
 21  some situations there was a Fontographer program
 22  where he was licensed to program, but there was a
 23  glitch in the software.  And for some reason that
 24  the copyright owner didn't have in mind, he could
 25  not access that program.

                                                   PAGE 51
  1              Now, would he be prevented from fixing
  2  that glitch by 1201(a)(1)(A) if it came into force
  3  without an exemption, with respect to that?
  4              MR. HUGHES:  I'm afraid I'm not familiar
  5  with the specific case.  It's hard to answer.
  6  Fontographer is probably a product developed by a
  7  company called Altsys, that was then bought by
  8  Macromedia.  And I guess they haven't done any new
  9  revision of this program in quite a long time.
 10              But I'm not, frankly -- you know,
 11  obviously there's a licensing issue, whether the
 12  license would prohibit reverse engineering.  But
 13  actually, as far as I know, this program is an old
 14  enough program that I'm not sure, in fact, it's
 15  protected.  This is pure speculation at this point
 16  because I've never used the program.
 17              But I'm not actually sure it's protected
 18  by a technological protection.  And that would then
 19  be the issue.  If it were, then I would say it would
 20  be covered by the 1201(a)(1)(A) prohibition.  Emery?
 21              MR. SIMON:  I don't know what the
 22  problem is, Charlotte.  There's a glitch in the
 23  program?
 24              MS. DOUGLASS:  Yes.
 25              MR. SIMON:  This person's trying to
 26  engage in what, error correction?

                                                   PAGE 52
  1              MS. DOUGLASS:  Yes.
  2              MR. SIMON:  And he can't do so because
  3  what?
  4              MS. DOUGLASS:  Because the error
  5  correction required that he override some kind of
  6  technological control.  And he's afraid to do that
  7  because of 1201(a)(1).  He would be afraid of doing
  8  that.
  9              MR. SIMON:  Well, would be is -- I mean,
 10  I can't answer that question.  I don't know the
 11  product, I have no idea what the technological
 12  control is.
 13              MR. HUGHES:  Actually, maybe I could
 14  just leap in with an analogy that I think is
 15  somewhat on point.  Firstly, this product is from a
 16  company -- you know, it's still in business as far
 17  as I know.  It's still a supported product.
 18  So I would say that his first course of action would
 19  be to deal with the company.
 20              But then kind of stepping back, I think
 21  this is -- presumably in your example, the person
 22  who wants to do this bug-fixing, for whatever
 23  reason, either doesn't want to deal with the company
 24  or doesn't -- I'm speculating doesn't want to follow
 25  the steps that the company wants him or her to

                                                   PAGE 53
  1  follow and so wants to take some alternate course of
  2  action.
  3              I think it would be a little bit like
  4  one of the examples Emery cited.  I mean, suppose I
  5  dropped off my clothes at the drycleaner, and I
  6  prepaid for them.  Just follow me here.  But it
  7  wasn't convenient for me to come back and pick up my
  8  clothes during the hours that the drycleaner was
  9  open so I decided I wanted to come back at some
 10  completely different time, break into the store and
 11  get the clothes.
 12              I mean, it seems to me if this computer
 13  program were actually covered by technological
 14  protection measures -- and I'm not sure it is --
 15  your user is putting his convenience above the
 16  rights of the company that published the program to
 17  protect their property.
 18              In other words, he's saying, "I don't
 19  want to follow the steps that the company may have
 20  provided for me to fix the program.  I want to kind
 21  of hack it myself."  And I think Congress' intent
 22  here is clearly that the company should have the
 23  right to control it.
 24              MS. DOUGLASS:  Maybe he can't follow the
 25  steps.  Maybe he can't get a hold of the company.
 26  Maybe the company folded or something like that.

                                                   PAGE 54
  1  And, of course, some people might answer "Well,
  2  what's the problem?  Because the company folded, the
  3  company's not around to sue you anyhow."
  4              So I mean, I was just trying to get at,
  5  you know, if it's an extremely minor glitch and the
  6  person was trying to fix a bug to operate the work,
  7  whether that should be something within the scope of
  8  an exemption, and I get your clear answer so thank
  9  you.
 10              Bear with me for one second, please.  I
 11  thought I had a question for you, Mr. Weingarten,
 12  but I think I don't right now.  If I get it later,
 13  maybe I can ask.  Thank you.
 14              MS. PETERS:  Rob.
 15              MR. KASUNIC:  Good morning.  I think I
 16  want to start by returning to the issue of reverse
 17  engineering for a minute.  And just to clarify that,
 18  going into the scope of what is a class of works and
 19  how reverse engineering fits in.
 20              First of all, reverse engineering would
 21  be a form of circumvention; wouldn't that be true?
 22              MR. SIMON:  Not necessarily.  Not
 23  necessarily.  If there is no technological
 24  protection measure in place, there's no
 25  circumvention.

                                                   PAGE 55
  1              MR. KASUNIC:  Okay.  So if we're dealing
  2  with a situation where there's a technological
  3  protection measure, then in order to -- if there was
  4  an exemption to circumvention, reverse engineering
  5  would be a way to accomplish that?
  6              MR. SIMON:  If you were doing it for the
  7  statutorily-permitted purpose.
  8              MR. KASUNIC:  Okay.  And then in terms
  9  of -- there was some discussion about class of
 10  works, categories of works that talked about finding
 11  computer -- that Charlotte had asked whether
 12  computer programs could be seen as a class of works.
 13  And you said, I think, Mr. Simon, that that could be
 14  too broad as a category.
 15              When you were citing the legislative
 16  history before, in terms of narrowing, you were
 17  citing references in the legislative history to
 18  narrow it from categories.  You were saying a
 19  particular part that you mentioned -- for instance,
 20  motion pictures were cited as something that could
 21  be a category of works.
 22              Isn't computer programs exactly related
 23  in that way to -- it's something less than a
 24  category, but you talked about things like
 25  particular games, for instance.  Wouldn't that be

                                                   PAGE 56
  1  something that would be too narrow in that same
  2  section of the legislative history?
  3              MR. SIMON:  No.  The legislative history
  4  speaks specifically to that issue as well.  There
  5  are examples in there about motion pictures; there
  6  are examples in the legislative history about
  7  software as well.  And what it does is, it says it's
  8  not all of software.  It's some subdivision of
  9  software.
 10              MR. KASUNIC:  And so could that
 11  subdivision be something related to a particular
 12  type of use then, as opposed to just a particular
 13  genre of it, like games?
 14              MR. SIMON:  That's not what the statute
 15  speaks to.  It speaks to classes of works.  It does
 16  not speak to uses of classes of works.  It talks
 17  about users, but it does not -- I mean, there are
 18  different people that use different works in
 19  different ways.  So to define a class of uses, I'm
 20  not quite sure how you do that.
 21              A word-processing application is used by
 22  a huge universe of users.  So the statute speaks
 23  about the users.  It doesn't speak about the uses
 24  they put it to.  If the definition had been
 25  contingent upon function or purpose, then that's
 26  what the statute would have said.  It doesn't.

                                                   PAGE 57
  1              MR. KASUNIC:  Well, I'm not sure I
  2  understand how you can say that the statute doesn't
  3  speak to uses when there is quite an abundance of --
  4  the focus being on adverse effect of non-infringing
  5  uses.
  6              MR. SIMON:  No.  The statute speaks to
  7  users.
  8              MR. KASUNIC:  It says in Subsection D
  9  that "non-infringing uses by persons who are users
 10  of a copyrighted work are likely to be adversely
 11  affected."  So there is certainly a part of the
 12  focus is on the particular use that that phrase is
 13  used in there.  Should we just completely ignore
 14  that part?
 15              MR. SIMON:  Well, maybe I can help you
 16  better if you were to explain to me the relevance to
 17  the particular example that you're raising of that
 18  concept.
 19              MR. KASUNIC:  Well, I'm just trying to
 20  focus in how we -- with this class of works and the
 21  narrowing, that there is a certain amount of --
 22  there isn't anything specifically that says how this
 23  can be defined or that necessarily limits within how
 24  the Librarian can define a class of works.  So that
 25  there are certain considerations that are brought

                                                   PAGE 58
  1  into this with non-infringing uses, users and that
  2  can go into that consideration of class of works.
  3              MR. SIMON:  Do you think the fact that
  4  this Congress has spoken specifically to the issue
  5  of interoperability and reverse engineering for that
  6  purpose is relevant to the  determination of harm?
  7              MR. KASUNIC:  Well, I don't think I
  8  should be testifying on that.  But I would ask you
  9  that question.
 10              MR. SIMON:  Well, I've answered that
 11  question.  I think it's dispositive on the issue.
 12              MR. KASUNIC:  But the fact that there is
 13  this scope of non-infringing uses, and looking at
 14  adverse effects, that that doesn't have -- even if
 15  that was found in that particular area of computer
 16  programs, that that would not -- because there is
 17  some mention of reverse engineering, that that would
 18  take this outside the scope of the Librarian's
 19  authority?
 20              MR. SIMON:  The statute speaks to one
 21  area where reverse engineering is permitted, and
 22  that's for the purpose of interoperability.  That
 23  was the area where the Congress thought there was a
 24  danger, and it spoke to that danger.  If it had
 25  thought there were other areas where there was a

                                                   PAGE 59
  1  danger in this particular narrow area, it would have
  2  spoken to those as well.  It did not.
  3              So for you to now somehow read the
  4  congressional examination as incomplete or as
  5  erroneous, and for you to find other areas of danger
  6  than the ones that Congress found, I don't quite
  7  know how you get there.
  8              MR. KASUNIC:  Well, isn't an essential
  9  part of this whole 1201(a)(1) that it's continuing
 10  in nature, that technology does not stay static?
 11  And so we have a situation where this has to be
 12  monitored over time, and that if changes had
 13  occurred from the time when this was initially
 14  enacted, there has been some time that has passed,
 15  wouldn't that be relevant to our inquiry?
 16              MR. SIMON:  Sure.  Show me the harm.
 17              MR. KASUNIC:  Okay.  But it is relevant
 18  that conditions can change and that the situation
 19  that affected the reverse engineering at the time
 20  could at some later time be relevant?
 21              MR. SIMON:  Hypothetically, anything's
 22  possible.  Show me the harm.
 23              MR. KASUNIC:  Let me switch to Mr.
 24  Weingarten for a second.  There was -- I give you an
 25  opportunity, since Mr. Metalitz is not here to
 26  respond to -- part of the argument that was made in

                                                   PAGE 60
  1  his comments -- and see what your response would be
  2  to the fact he said that Congress spoke to non-
  3  infringing uses, but it was primarily speaking to
  4  permitted or licensed uses, as opposed to fair use.
  5              And the rationale being that fair use is
  6  not always a non-infringing use, but that only
  7  permitted or authorized uses are really always non-
  8  infringing uses.  How do you think that that fits
  9  into it?
 10              MR. WEINGARTEN:  It's too torturous for
 11  me to deal with.  Actually, that's a question of
 12  interpretation of law that -- I think you had
 13  offered to send me written questions.  I would like
 14  you to send that question in writing to Arnie.  That
 15  might be more direct.  I don't even understand the
 16  question.
 17              MR. KASUNIC:  Okay.  Well, you did talk
 18  about fair use as a basic public policy.  And how
 19  would you explain, then, the absence of the
 20  preservation of that basic public policy within the
 21  statute itself?  There was discussion that Congress
 22  had the option of including a broad exemption for
 23  fair use within 1201, but chose not to include that
 24  as one of the specific exemptions.  How would you
 25  explain that?

                                                   PAGE 61
  1              MR. WEINGARTEN:  It's a very tough,
  2  contentious debate.  And that law was hotly debated
  3  all the way to the end.  In fact, these terms of
  4  1201 were hotly debated to the end.  If Congress
  5  hadn't been troubled by it, this ruling wouldn't
  6  have been called for.
  7              And I think the idea that they
  8  established the rulemaking, but established the bar
  9  of proof so high that no exemption could be -- you
 10  know, nobody could possibly meet that test is to
 11  trivialize the decision to establish this.
 12              I don't think Congress really was
 13  comfortable -- I mean, we're talking about 535
 14  people as if they're one person sitting there.  But
 15  I don't think that Congress as a body was fully
 16  comfortable with that paradox that I referred to in
 17  my testimony that basic public interest was going to
 18  be fully served by the restrictions in 1201.  And
 19  this rulemaking was sort of the uncomfortable
 20  compromise that came out of it.
 21              So I don't think it would be fair to
 22  say, "Well, they decided and didn't clearly exempt
 23  non-infringing uses; therefore, they didn't intend
 24  to."  I think their discomfort is clear, and that
 25  this is a meaningful rulemaking because of that.

                                                   PAGE 62
  1              MR. KASUNIC:  Well, on the same issue of
  2  fair use and the other two DSA panel, Mr. Hughes, in
  3  your testimony you mentioned that the goal of
  4  copyright is to enable copyright owners to license
  5  their works for a fee.
  6              There is, however, other case law from
  7  that which you cited where the Supreme Court has
  8  clearly stated that that's not the primary goal of
  9  copyright  -- the reward to the owner -- but rather
 10  was a secondary consideration, and the primary goal
 11  would be the general public benefit.
 12              How does -- isn't that something that
 13  should be a factor in this balancing that is a part
 14  of this process that you folks talked about?
 15              MR. HUGHES:  No, I think absolutely.
 16  And we talked about, you know, the different
 17  simultaneous goals of copyright law.  And indeed, in
 18  your rulemaking, I would argue that this five-part
 19  test that Emery discussed some of is indeed a
 20  balancing exercise.
 21              But I think it might be worthwhile just
 22  to kind of step back a little bit, and, you know,
 23  just keep in perspective why 1201(a)(1)(A) -- too
 24  many letters there -- is here in the first place.
 25  And that is because Congress recognized, and indeed,
 26  the Administration earlier when it was negotiating

                                                   PAGE 63
  1  the WIPO copyright treaties as you all know,
  2  recognized what a problem piracy was in the digital
  3  age.
  4              I mean, we probably don't have time for
  5  it, but I could give you lots of examples of ways in
  6  which our products have been ripped off and ways in
  7  which this section of law will, in a way, help us
  8  return as it were to the sort of status quo before
  9  the Internet by protecting our products.
 10              Because I think it's self-evident that
 11  in the copyright world there have always been both
 12  legal but also just kind of physical impediments to
 13  piracy.  I mean, you know, it's physically possible
 14  to xerox a book, but it would cost money and it's a
 15  pain in the tush.  You know, who would want to do
 16  it?
 17              And what technological protection
 18  measures on digital works let us do is basically the
 19  same thing:  reimpose some sort of difficulty, as it
 20  were, in pirating works.  In a way, it's a means of
 21  self-help.  But there's also a very positive thing.
 22              1201(a)(1)(A) is not just about us an
 23  industry playing defense.  I think it's also
 24  important to keep in perspective this is really an
 25  enabling technology for consumers.  I mean, it lets
 26  us do all kinds of neat things, and offer all sorts

                                                   PAGE 64
  1  of new technologies that we wouldn't have been able
  2  to offer before.
  3              I mean, a great example is "trialware,"
  4  which you've probably seen if you surf the Internet
  5  a fair amount.  You know, in the past when you
  6  wanted to buy software, you had to go into the
  7  store, you'd have to buy the box.  And if the
  8  software didn't work out for you, you didn't like
  9  its features, you'd have to return it.  And, indeed,
 10  certainly Adobe's license lets you do that, but it's
 11  a real bother.
 12              The neat thing about trialware is, from
 13  our website for most of our products, you can
 14  download a completely functional, full working
 15  version of our products with complete documentation.
 16  It just has a time-out on it.
 17              So after 30 days or 90 days, whatever --
 18  you know, we disclose right up front, your time's
 19  up.   And you as a consumer can then decide if you
 20  want to buy it, in which case you get some sort of
 21  activation device from us.
 22              Now, without the protections of
 23  1201(a)(1)(A) this would be a very dangerous
 24  exercise to offer this kind of service.  I mean,
 25  another example is how Adobe some years ago used to
 26  market an encrypted CD-ROM called "Type On Call."

                                                   PAGE 65
  1  And we had the whole Adobe library of typefaces, you
  2  know, more than $10,000 worth of retail value,
  3  hundreds and hundreds of type fonts on an encrypted
  4  CD-ROM.
  5              And the idea was if you were a graphic
  6  designer at two in the morning, you're finishing up
  7  some project for your client, and "Oh, damn.  I
  8  don't have the font I need."  It enabled, in an era
  9  when CD-ROMs were really hot, it enabled you to call
 10  an 800 number and get an unlock key for that
 11  particular font that you wanted to buy.
 12              Now, this is in an era before
 13  1201(a)(1)(A).  What happened was someone cracked
 14  the encryption on the CD-ROM, and we basically
 15  stopped selling it.  And it's a little bit more
 16  complicated than that.  There were some other
 17  reasons as to why we stopped marketing it, but
 18  basically we realized that we were, if not naked,
 19  wearing sort of fewer clothes than we would have
 20  wanted legally, out there basically handing out our
 21  products in encrypted form.
 22              And our cause of action in going after
 23  someone that could put a hack up on the matter of
 24  distributed or otherwise, how to get around our
 25  encryption -- I mean, there are a lot of dots to
 26  connect under a contributory infringement theory to

                                                   PAGE 66
  1  get at stopping that hack.  And what 1201(a)(1)(A)
  2  does, it lets us put technologies like that
  3  encrypted CD-ROM back on the market.
  4              So we're excited about the kind of
  5  business models this enables -- and you know, we
  6  think it will be very good for consumers.  And,
  7  frankly, we're obviously in business to make -- to
  8  do things good for our customers.  And if we, as
  9  you've heard in testimony today, make things too
 10  hard for our customers or we're too onerous in our
 11  technological protection measures as to
 12  inconvenience them, they'll go elsewhere.  We're
 13  very conscious of that.
 14              MR. KASUNIC:  Well, I'd say that Section
 15  1201(a)(1) is an effective legal weapon against all
 16  these forms of piracy and the use of passwords and
 17  serial numbers.  Assuming, though, that we found
 18  sufficient evidence of adverse effect in some form
 19  of non-infringing in some area of computer program.
 20  How would we define the class of works that we were
 21  going to exempt?  Would we just -- would it be
 22  computer programs in general, or would it be
 23  computer programs related to a specific type of use
 24  to -- that would avoid the problem that we -- the
 25  specific problem that we have?

                                                   PAGE 67
  1              MR. SIMON:  I think that one would have
  2  to figure out what the harm is to figure out what
  3  the proper remedy is.  And for us to ask the
  4  question what the proper remedy is in the absence of
  5  knowing what the harm is, I don't know.  I don't
  6  know how to answer that question.
  7              MR. KASUNIC:  All right.  So it seems
  8  like there could be, then, some relationship --
  9  rather than have a general --
 10              MR. SIMON:  There is quite a tradition
 11  in American jurisprudence of tailoring remedies to
 12  harm, isn't there?  So it would make sense in this
 13  instance to show us the harm.  If you can identify
 14  the harm, you can tailor a response to it.  The
 15  notion that somehow, because there's a hypothetical
 16  possibility of some harm, you're going to simply
 17  take all categories of works outside the scope of
 18  this cause of action doesn't make any sense.  That
 19  is not just a shotgun, that's a nuclear device in
 20  response to a hypothetical possibility.
 21              So the answer to the class question
 22  depends on the harm question.  And you first need to
 23  cross the harm threshold before you can get to the
 24  class threshold.
 25              MR. KASUNIC:  One last thing on the type
 26  of protection measures used.  You mentioned serial

                                                   PAGE 68
  1  numbers, passwords and access codes.  We've also had
  2  testimony on one type of protection measure dealing
  3  with hardware locks.  And I understand that Adobe
  4  has used those.
  5              MR. SIMON:  Actually, it's Autodesk that
  6  has used those.  You're talking about dongles?
  7              MR. KASUNIC:  Yes.
  8              MR. HUGHES:  We also use them, and have
  9  used them in some of our products.
 10              MR. KASUNIC:  And what is the specific -
 11  - just to get the other side of the perspective on
 12  this.  What is the purpose of those?  Is that an
 13  access control measure, or a use control measure, or
 14  some combination of the two?
 15              MR. HUGHES:  As Adobe has used them, as
 16  I understand them -- I'm not an engineer, but it's
 17  an access control measure.  On very high value
 18  software that our analysis has shown has a very high
 19  likelihood of being pirated, we have gone to the
 20  trouble and expense of engineering a dongle.
 21              Believe me, it's not something that we
 22  do lightly, because it adds to support requirements.
 23  The dongle is expensive.  Dongles, just like
 24  software, get cracked.  You know, you can travel in
 25  the Far East and you can find dongles for sale.

                                                   PAGE 69
  1  People come up with software patches to go around
  2  the dongles.
  3              Our users very often tend not to like
  4  them much.  It certainly -- if you have a computer
  5  program that your license may allow you to use on
  6  more than one machine, but not simultaneously, if
  7  you have a dongle -- obviously, you're going to have
  8  to be moving that around from computer to computer.
  9              So, you know, it's not something at
 10  Adobe that we use lightly.  And as far as I know
 11  right now, the only major product we use it on is
 12  Adobe After Effects, which is a very high-end
 13  professional film compositing and special effects
 14  program, which sells -- has a retail value of about
 15  $1,000, but is very pirated.
 16              The other reason we employ dongles is
 17  because, on the access issue we have a real issue
 18  with end-user piracy.  You know, the term of art in
 19  the piracy community.  Where a company may buy a
 20  couple copies of a given product or license a couple
 21  copies, and then install it on more than one
 22  machine.                                       0
 23  effective way to enforce the fact that people
 24  actually follow that license provision.  But again,
 25  we're conscious of inconveniencing our users, and so
 26  definitively it's a balance.

                                                   PAGE 70
  1              And I think we trust the market to make
  2  this determination, and I would respectfully submit
  3  that you should too.  Because Adobe competes hard
  4  with Microsoft, Macromedia, Apple, Corel, a whole
  5  series of cinema-editing type programs.  And
  6  shareware and freeware.
  7              I mean, one of the most capable
  8  competitors to Photoshop out there is a program on
  9  the Mac platform called "Graphic Converter," which
 10  is a piece of freeware developed by this
 11  enterprising programmer named Thorsten Lemke who
 12  lives in Germany.
 13              And so we want to keep Photoshop from
 14  being pirated, definitively.  But if we cross the
 15  boundary in terms of user inconvenience, we're very
 16  conscious our customers can go elsewhere.
 17              MR. KASUNIC:  Thank you.  Rachel?
 18              MS. GOSLINS:  Thank you.  Mr. Hughes,
 19  are the trialwares you talked about available now on
 20  the Acrobat, on the Adobe's website?
 21              MR. HUGHES:  Yes.
 22              MS. GOSLINS:  And how long have these
 23  been around?
 24              MR. HUGHES:  I think we at Adobe have
 25  made trialware available for about a year.  One past
 26  impediment to doing it is not only, I think, then

                                                   PAGE 71
  1  the fact that we haven't had the imminent arrival,
  2  we hope, of 1201(a)(1)(A).  But also there's just
  3  bandwidth considerations on the Internet that our
  4  programs are -- you know, some of them are a
  5  reasonably hefty size.  And although, obviously,
  6  perform very sveltely and with a 28.8 modem it's
  7  just not practical for people to download big
  8  programs.
  9              MS. GOSLINS:  Okay.  I'm just confused
 10  by your statement that without 1201(a)(1)(A) making
 11  these kind of technologies available would not have
 12  been possible, when the law hasn't even gone into
 13  effect yet.  And you don't know whether it will be
 14  applicable to your products.
 15              MR. HUGHES:  Well, I'm not sure I said
 16  would not have been possible.  If I did I'd like to
 17  amend that.  I'd say it's a far more dangerous
 18  enterprise.  Because then someone who distributes a
 19  crack that basically disables the expire on the
 20  product and turns it into a fully functional
 21  program, again, I suppose we'd have to use
 22  contributory infringement theory to go after the
 23  distributor of the crack.  And also, obviously, we'd
 24  have the license protection as well.
 25              But what Congress was getting at with
 26  doing 1201(a)(1)(A), I think was recognizing the

                                                   PAGE 72
  1  pervasiveness of the problem of piracy on the
  2  Internet, of trying to give us an additional cause
  3  of action to protect our works.
  4              MS. GOSLINS:  Yes, but don't you have
  5  that cause of action in 1201(b)?  You have a cause
  6  of action against anyone who designs, produces or
  7  manufactures devices that are circumventing your
  8  access control protections.
  9              MR. SIMON:  There are some specific
 10  aspects of the software industry which is that, as
 11  Paul was mentioning -- one of our problems is large
 12  corporate end-user piracy.  A company will buy a
 13  single copy of a product, then load it on multiple
 14  machines.  In those circumstances we think that we
 15  have a much more powerful cause of action based on
 16  1201(a)(1)(A).
 17              MS. GOSLINS:  And you also, however,
 18  have the license requirements, correct?  The
 19  contractual requirements that come along with the --
 20              MR. SIMON:  As any good attorney will
 21  tell you, you want as many causes of action as you
 22  can come up with.
 23              MS. GOSLINS:  I understand that.  I'm
 24  just struggling with the idea that any exemption to
 25  1201 would be disastrous to the software industry.

                                                   PAGE 73
  1              MR. SIMON:  It would be.  If you
  2  characterize it as disastrous, I agree.
  3              MS. GOSLINS:  Actually, I don't.  You
  4  do.
  5              MR. SIMON:  I think it would be a
  6  serious problem.
  7              MR. HUGHES:  And I would say we already
  8  have a serious problem.
  9              MR. SIMON:  You know, the harm for us is
 10  today.  We lose billions of dollars to piracy.  It's
 11  not a hypothetical possibility, it's an actual harm.
 12  What the Congress determined that this was a remedy
 13  appropriate for that actual harm.
 14              MS. GOSLINS:  And Congress also
 15  determined, did it not, that we should do this
 16  rulemaking to see when and if exemptions are
 17  possible or needed to that prohibition?
 18              MR. SIMON:  On the presumption the cause
 19  of action would stand, unless there was a
 20  superseding consideration.  Which, frankly, I have
 21  not heard any of the testimony coming even close to.
 22              MR. HUGHES:  And I would say
 23  particularly in the area of software, where I think
 24  the Congress has addressed -- as we've been
 25  discussing with encryption research and reverse
 26  engineering and firewall testing, at least to my

                                                   PAGE 74
  1  mind, the conceivable kind of fair use reasons you
  2  might need legitimately to circumvent the
  3  technological protections on software.
  4              I mean, people -- as Emery and I were
  5  discussing this yesterday -- with a piece of
  6  software I'm not aware of people commonly, or even
  7  needing to excerpt sort of a page -- the way you can
  8  a page of a book, and make fair use of it.  I mean,
  9  software's sort of not like that.
 10              And technically, you know, it's an all
 11  or nothing proposition with the access controls that
 12  you're doing your rulemaking under.
 13              MS. GOSLINS:  Emery, you've given us a
 14  lot of examples of what a class of works isn't.  I'm
 15  curious as to what you think a class of works is.
 16  Can you give us an example?
 17              MR. SIMON:  Not independent of a harm.
 18  I think it needs to be decided within the context of
 19  the harm.  And I think the notion I was answering to
 20  another question before, which is -- you know, there
 21  is a strong notion in the Copyright Act that
 22  remedies should be commensurate with the harm, with
 23  injuries.  You're talking about a remedy, arguably.
 24  You're talking about curing a potential harm, first
 25  you've got to figure out what the harm is.

                                                   PAGE 75
  1              MS. GOSLINS:  I understand that.  But
  2  your point being that a class of works is something
  3  smaller than a category, and something bigger than
  4  an individual work.  Is there an example of that
  5  middle area that you think you could give us as a
  6  description of a class of work?
  7              MR. SIMON:  Well, presumably everything
  8  that is smaller than a category and larger than an
  9  individual work is a class.
 10              MS. GOSLINS:  Okay.  You made the
 11  argument, Emery, that we shouldn't be taking into
 12  account chilling effects as something that could be
 13  construed as actual or potential harm.  And I guess
 14  I just want to know why.
 15              If we assume for a moment, for purposes
 16  of this question, that we have demonstrated to us
 17  that if the presence or the threat of prosecution
 18  under 1201(a)(1)(A) is deterring people from making
 19  legitimate non-infringing uses, why wouldn't that be
 20  a harm caused by the statute?
 21              MR. SIMON:  No, actually I was quite
 22  precise on that point.  Which is that I don't think
 23  a chilling effect should be a dispositive
 24  determination.  Because, frankly, chilling effects
 25  are really easy to find in virtually any context.

                                                   PAGE 76
  1              So it's not -- I mean, a mere chilling
  2  effect, a mere cause of my being adverse to doing
  3  something is not what the statute requires.
  4              MS. GOSLINS:  Okay.  So I just want to
  5  make sure I understand your testimony.  You can look
  6  at chilling effects, it's just not determinative or
  7  the end of the -- shouldn't be the end of the --
  8              MR. SIMON:  No, the statute speaks
  9  specifically about the effect you have to look for,
 10  right?  It talks about adverse effect.
 11              MS. GOSLINS:  And is your testimony,
 12  then, if we had proof that people were deterred from
 13  making legitimate uses because of the presence of
 14  1201, wouldn't that be an adverse effect, or would
 15  that not be an adverse effect?
 16              MR. SIMON:  Making legitimate uses.
 17  What's a legitimate use?  You mean, non-infringing
 18  uses?  You mean deterred from licensing their
 19  products?  That's a non-infringing use.
 20              So if it would prevent Adobe from
 21  licensing its products, would that be a chilling
 22  effect?  Yes, it could be.  If it would prevent the
 23  North Carolina Law Library from buying, you know, a
 24  product from Symantec.  Would that be a chilling
 25  effect?  It could be.  It's very hard --

                                                   PAGE 77
  1              MS. GOSLINS:  And is that something we
  2  should take into account in our determination of
  3  whether we've seen a demonstration of actual and
  4  potential harm?
  5              MR. SIMON:  Sure.  But that's the kind
  6  of testimony you've been hearing.  And I am simply
  7  positing to you, find harm and find adverse effect.
  8  That's what the statute asks you to look for.  It
  9  does not ask you -- and I apologize for coming back
 10  to what I was raising before.  Resist temptation.  
 11              The statute does not require you to
 12  create exemptions.  It requires you to find harm.
 13  If you don't find a harm, the statute says don't do
 14  anything.  And until somebody actually shows real
 15  harm, there's no basis for action here.
 16              MS. GOSLINS:  I understand that.  But
 17  what I'm asking is do you think a chilling effect,
 18  assuming it was shown, should be included in our
 19  determination of whether there's harm or not?
 20              MR. SIMON:  Give me a specific example.
 21  I can't give you a hypothetical answer to that
 22  question because anything can constitute a chilling
 23  effect.  It can be a de minimis chilling effect, or
 24  it can be an enormous chilling effect on free
 25  speech.  It can be -- not that free speech chilling
 26  effects are relevant to this, but it can be an

                                                   PAGE 78
  1  enormous public interest chilling effect.  And you
  2  were quite right in pointing out before that it's
  3  the public interest we're looking at here.
  4              So I don't know, which chilling effect?
  5  If chilling effect as a concept?
  6              MS. GOSLINS:  Looking at the statute for
  7  a moment, as you read the statute, assuming for a
  8  moment that we do find a class of works which we
  9  recommend to be exempted from the anticircumvention
 10  prohibition, then what happens?  Is all uses of that
 11  -- are all uses of that class of works then exempted
 12  from the prohibition, or only non-infringing uses?
 13              MR. SIMON:  Well, it can't be all uses.
 14  Because then we're authorizing infringement.
 15              MR. CARSON:  No, you're authorizing
 16  circumvention at most.  You're permitting
 17  circumvention.
 18              MS. GOSLINS:  You can still prosecute
 19  them for infringement, presumably.  If they then
 20  circumvent access control protection and infringed
 21  your copyright.
 22              MR. SIMON:  Then I guess I don't
 23  understand your question.
 24              MS. GOSLINS:  Okay.  Let's assume we
 25  find a class of works of that is exempted, and the
 26  Librarian recommends it to Congress and that class

                                                   PAGE 79
  1  of works is then listed under (a)(1)(A)(C).  From
  2  that point, under your reading of the statute, are
  3  all uses of that class of works exempted, or only
  4  non-infringing uses?
  5              MS. PETERS:  Or can you basically
  6  circumvent the access control for all classes?
  7              MR. CARSON:  For all uses.
  8              MS. PETERS:  Yes.  Can everybody
  9  circumvent for all -- if I'm an individual, can I
 10  just circumvent it, period?  Because it's one of
 11  those classes.
 12              MR. SIMON:  That can't make sense.  That
 13  can't be right.
 14              MS. GOSLINS:  Okay.  So how does the
 15  statute work?  We find a class of works that is
 16  unattached to any kind of use or users.   And let us
 17  just make up a class of works, whether or not --
 18  computer games.
 19              MR. SIMON:  Let's do chemistry
 20  textbooks.
 21              MS. GOSLINS:  Okay, chemistry textbooks.
 22  And we identify that as a class of works.  From that
 23  point, is your reading of 1201 that anybody can then
 24  circumvent access control protections on chemistry
 25  textbooks?  Or only people who are then going to
 26  make non-infringing uses of them?

                                                   PAGE 80
  1              MR. SIMON:  It's got to be the latter.
  2              MS. GOSLINS:  Okay.  And where do you
  3  find the authority for that in the statute?
  4              MR. SIMON:  Well, that's what (d) days.
  5              MS. GOSLINS:  Great.  Okay.
  6              MR. CARSON:  Can we just -- does anyone
  7  have a different view on that?
  8              MS. GOSLINS:  Sorry, I just didn't ask -
  9  - I didn't think you'd want to get into that.
 10              (Laughter.)
 11              MR. CARSON:  No, I've just been enjoying
 12  -- do you want to address that issue, Rick or Paul?
 13              MR. WEINGARTEN:  I've not been -- I have
 14  nothing to add to that.  We probably will in our
 15  reply comments.
 16              MS. GOSLINS:  All right.  I just have
 17  one last question for Mr. Hughes, and then a couple
 18  questions for you, Mr. Weingarten.  Sorry, I know
 19  we're getting close to our lunch hour.
 20              Mr. Hughes, you made the argument that
 21  we've heard from a number of content owners, that
 22  basically a common sense argument that, "Look, we
 23  have to serve our consumers.  So we're not going to
 24  do anything that would make our product less
 25  competitive."  But isn't that an argument for
 26  accommodating, by law and in proceedings such as

                                                   PAGE 81
  1  this one, sections of the user populace that are not
  2  protected by the market?
  3              Traditionally non-commercial users like
  4  universities or libraries, who -- obviously, they
  5  constitute their own market, academic markets.  But
  6  for a majority of the commercially produced products
  7  aren't the same as the average consumer that you are
  8  aiming your products to.  And indeed, often need
  9  different kinds of licenses and different kinds of
 10  contracts to accommodate the different kinds of uses
 11  that they put their products to, put your products
 12  to.
 13              MR. HUGHES:  Ms. Goslins, well, firstly
 14  I guess I should say I'm not an attorney.  So if I
 15  gave a sort of common sense approach to it, that's
 16  what I fall back on.  It's my years in the foreign
 17  service.
 18              But I almost think you answered the -- I
 19  would almost submit that you answered your own
 20  question at the very end.  I mean, for us and for
 21  software companies, educators, libraries, schools,
 22  these are actually important commercial markets.
 23  And thanks to our freedom to offer licenses, we're
 24  in fact able to offer special educational products,
 25  special educational prices, special educational
 26  terms.

                                                   PAGE 82
  1              In fact, we heard testimony yesterday
  2  from one of the people on the library side just
  3  sometimes how long these negotiations are that are
  4  engaged in.  Six months, nine months.  But I would
  5  say there's no contradiction here.  That from
  6  Adobe's perspective, we want to see as many people
  7  as we can using our products in a way that, frankly,
  8  maximizes our revenue and our return for our
  9  shareholders.
 10              And if there's an educational market to
 11  be served, gosh darn it, we'll go after them and do
 12  our best to reach a deal that serves both our
 13  interests.  I'm afraid that's as well as I can
 14  answer your question.
 15              MS. GOSLINS:  Does anybody else have any
 16  comments on that?  Okay.  Mr. Weingarten, I was
 17  unclear at the end of the testimony what exactly you
 18  would like us to do.  Are there specific classes of
 19  works you are suggesting that we examine?  And if
 20  so, what are they?
 21              MR. WEINGARTEN:  Well, I mean, I think
 22  the libraries over the course of this hearing, and
 23  in our comments, have expressed what we want to do.
 24  I understand that there's a profound difference of
 25  opinion about how class can be interpreted.  We want
 26  a broad exemption for non-infringing use for

                                                   PAGE 83
  1  lawfully acquired works.  We don't think that's a
  2  troublesome thing to understand, or interpret, as
  3  has been suggested by some people.
  4              We think it's fairly clear.  Whether it
  5  is within the scope of this rulemaking is a matter
  6  of legal debate.  And you've heard from Arnie and
  7  Julie and Peter, who've suggested it certainly is.
  8  And you've heard from other people citing their
  9  authority saying it isn't.  And I really don't know
 10  what I can add to that.
 11              Libraries simply do not -- libraries
 12  serve an incredible diversity of needs.  And on top
 13  of that, more and more works that we deal with,
 14  digital works, are multimedia.  I don't even know,
 15  frankly, that categories is going to be much longer
 16  within the law a very useful set of determinations.
 17  Because things are sliding around, back and forth.
 18              So to talk about classes now as a
 19  subdivision of categories is -- it seems to me just
 20  perpetrates an archaic view of the way the whole
 21  information marketplace is evolving.  And that is
 22  changing rapidly in Internet time the last two years
 23  since the bill was passed.  It's been several years
 24  of Internet time.
 25              So, I mean, I think for all of these
 26  reasons that you are empowered and ought to consider

                                                   PAGE 84
  1  a broad exemption.  And repeating that we are not
  2  interested in a broad exemption that essentially
  3  legitimizes widespread piracy.  We're looking for
  4  non-infringing uses.
  5              And I think that that would be the
  6  appropriate statement for the Librarian to make.
  7              MS. GOSLINS:  Okay.  I just have one
  8  last question.  In your testimony you cite some
  9  quotes from different publishers and content
 10  producers about where they think their practice is
 11  going.  One of them was from a firm who had
 12  developed a way for publishers to receive revenue
 13  from individual titles.  And it says, "Older titles
 14  and out of print books that have been read and
 15  studied thousands of times over the years in
 16  libraries, and yet have not generated new income
 17  will now produce new revenues."
 18              I guess my question to you is why should
 19  that bother us?  If we assume that they are still
 20  available in all of those libraries, and that what
 21  you are getting is a new kind of access that you
 22  would not have had prior to this, why shouldn't you
 23  pay for that?
 24              MR. WEINGARTEN:  Well, in fact, it seems
 25  to me it's not positing a new form of access.  It's

                                                   PAGE 85
  1  positing a new revenue stream for access that people
  2  have had for many years.
  3              MS. GOSLINS:  But you still have that
  4  access from the library books on the shelves that
  5  you could use and study thousands of times without
  6  any revenue, right?  It's just you're getting an
  7  increased access and convenience and speed by
  8  getting it digitally.
  9              MR. WEINGARTEN:  There's a basic trend,
 10  of course, to digitizing works.  Libraries have
 11  limited shelf space, and as we move into the future
 12  we're going to be basically shelving, in some sense
 13  -- whatever that word means -- digital works.
 14              Yes, there is still this question which
 15  has come up.  You're sort of indirectly going to
 16  that question, "Well, if there's print versions
 17  what's the matter with this model for digital?"
 18  There's a lot wrong with it, particularly in areas
 19  of educational research.
 20              Karen yesterday talked about whole new
 21  modes of research that are based on digital access
 22  to information.  We as a nation are busily trying to
 23  modernize our schools and our whole education system
 24  to use digital products.  We're moving towards
 25  distance learning models in which students access

                                                   PAGE 86
  1  information and scholars access information
  2  remotely.  They can't do it from the shelves.
  3              So there is not an equivalent here
  4  between the digital and the paper version.  But the
  5  other part of that quote, or the other reason I put
  6  that quote in there is that it illustrates who we
  7  are striking at the very heart of what libraries do.
  8  I mean, libraries have always bought books.  We
  9  spend over $2 billion a year in the information
 10  marketplace.
 11              We don't steal this stuff.  We don't
 12  break into bookstores, we buy it.  And then it's
 13  there, it's there for people to use.  And you know,
 14  somehow the presumption of saying, "Well, now
 15  publishers can go back in and start recapturing
 16  funds for every time a student pulls that book off
 17  the shelf."
 18              MS. GOSLINS:  But they're not making you
 19  take the books off the shelf.
 20              MR. WEINGARTEN:  No, they're not making
 21  us take the books off the shelf.  These are -- this
 22  is a vision for the future.  But it is a -- it's a
 23  vision that strikes at the very heart of what we do.
 24              MS. PETERS:  Can I ask one other
 25  question that's very related to this?  Which really
 26  has to do with the -- in the Digital Millennium

                                                   PAGE 87
  1  Copyright Act there was an updating of Section 108.
  2  And with respect to a work, a published work that a
  3  library owns that is deteriorating or damaged, a
  4  library now does have the ability to basically make
  5  a digital copy of that work.
  6              MR. WEINGARTEN:  Right.
  7              MS. PETERS:  Doesn't that in some way
  8  answer your question?
  9              MR. WEINGARTEN:  Well, it may be.  And
 10  if so, then there's -- this group won't have any
 11  market.  But I don't think so.  The new products --
 12              MS. PETERS:  Well, it will get to --
 13  what it may get to is the new product may have
 14  search and retrieval capabilities that are enhanced,
 15  that value-added as opposed to what a library may
 16  do.  Which is more like a plain vanilla type
 17  digitization effort.
 18              And if that's true, you know, I would
 19  say that the access to the information is still
 20  there in the plain vanilla version.
 21              MR. WEINGARTEN:  It may be.  And what I
 22  said at the conclusion of my testimony is that we
 23  want to be engaged in a discussion with these
 24  entrepreneurs to see that, both what we do as
 25  libraries and educators, and what they do in terms

                                                   PAGE 88
  1  of their markets converge.  There's no reason why it
  2  can't converge.
  3              But these visions of sort of, "Well, now
  4  we can charge for every time a student turns a page,
  5  or accesses an old out of print book," is -- I think
  6  strikes at the heart of education.  And yet it need
  7  not.  We can, I think, find some way out of it.  But
  8  I guarantee we're not going to find some way of out
  9  it on the floor of Congress, or even within the
 10  Beltway.
 11              MS. PETERS:  But we're looking at the
 12  adverse effect today, and the adverse effect or
 13  potential adverse effect in the next three years.
 14  Based on what I'm hearing you say, we don't have
 15  that now.
 16              MR. WEINGARTEN:  We don't have that now.
 17  And that may be -- if I could address that point a
 18  bit.
 19              One, we believe that an exemption done
 20  ahead of time serves as a message to the marketplace
 21  to develop what I refer to as fair use friendlier,
 22  fair use soft technology controls.  Or at least pay
 23  more attention.
 24              I would agree, Adobe undoubtedly finds
 25  the academic marketplace a very attractive one, an

                                                   PAGE 89
  1  interesting one, and they always have.  The kinds of
  2  products they produce are tuned to that.
  3              But I would refer back to the testimony
  4  of the recording industry association -- and I'm
  5  just paraphrasing it now, because I don't have it in
  6  front of me -- when you asked, "Well, when are you
  7  going to have a library friendly version of a DVD
  8  music disk?"  The answer was, "Oh, 10 or 20 years.
  9  This is not a very important marketplace for us."
 10              And I would submit that that -- it's
 11  that kind of attitude that we need to -- that we
 12  don't trust the marketplace independent of an
 13  exemption to address.  We're always willing to open
 14  discussions with these people, and to possibly even
 15  help them find new ways to market their goods.
 16              MS. PETERS:  I think fear and lack of
 17  trust have a certain role in all of this.  Anyway,
 18  Rachel?
 19              MS. GOSLINS:  I'm done.  Thank you.
 20              MS. PETERS:  David?
 21              MR. CARSON:  Emery, in your testimony
 22  you discussed the assertion that there should be an
 23  exemption for works with respect to which initial
 24  lawful use has been permitted.  Is that accurate?
 25              MR. SIMON:  Initial lawful access.

                                                   PAGE 90
  1              MR. CARSON:  Initial lawful access,
  2  okay.  And you said Congress specifically decided
  3  not to do that.  Can you sort of walk us through how
  4  that decision came about, or what the manifestations
  5  of that conscious decision by Congress?
  6              MR. SIMON:  There were a series of
  7  amendments that were offered first in the House
  8  Judiciary Committee, Subcommittee on Courts and
  9  Intellectual Property, which considered the bill
 10  first.  As I recall, Mrs. Lofgren, whose district
 11  we're actually in, proposed such an amendment, as
 12  did Mr. Boucher of Virginia.
 13              And the objective of those amendments --
 14  and I forget the exact wording of them -- was very
 15  much that.  Which is that if you have acquired
 16  lawful access to a work, thereafter you may make
 17  fair use uses of that work without requiring further
 18  permission.  And you may circumvent to be able to
 19  achieve those ends.
 20              And the House Judiciary Committee,
 21  Subcommittee in the first instance rejected that.
 22  That amendment was a threat -- or a variant of that
 23  amendment, but you probably remember this better
 24  than I do.  Was then considered in the Commerce
 25  Committee as well.

                                                   PAGE 91
  1              And I recall Mr. Boucher offering that
  2  in the Commerce Committee, and I recall he actually
  3  withdrew it before it came to a vote.  There was a
  4  discussion of it, and then he withdrew his
  5  amendment.  That's my best recollection.  I
  6  apologize for it being sketchy, but I'm getting old.
  7              MR. CARSON:  Anyone have any further
  8  recollection to add to that?  Emery and Paul, I
  9  guess I'd like your reaction to an example I think
 10  Rick gave.  If I, on November 1st of this year, if I
 11  gave Rachel my Lexis password and she accessed Lexis
 12  using that password, would she be in violation of
 13  1201(a)?
 14              MR. SIMON:  Yes.
 15              MR. CARSON:  Do you agree, Paul?
 16              MR. HUGHES:  Gosh, it's not Adobe's
 17  business right now.  But it's always my business to
 18  agree with Emery.
 19              MR. CARSON:  I think I'm going to have
 20  to revisit the question of reverse engineering with
 21  you for a moment.
 22              MR. SIMON:  And you'll get a very
 23  creative answers. Responsive answers.
 24              MR. CARSON:  I want to go back to your
 25  last exchange with Rob, because I think you may have

                                                   PAGE 92
  1  admitted something to him.  But I'm not sure.  I
  2  just want to get clarification here.
  3              At the end of that discussion did you
  4  essentially admit to Rob that if we were to include
  5  now, or in three years, or in six years perhaps that
  6  anticircumvention measures are preventing users from
  7  engaging in lawful reverse engineering, that does
  8  not fall within Section 1201(f)?  The Librarian
  9  would have the power under 1201(a)(1)(A) to create
 10  an exemption that would permit circumvention in
 11  order to engage in such reverse engineering?
 12              MR. SIMON:  I think you have to go back
 13  to what the statute permits you to do through
 14  rulemaking.  Which is your statutory authority under
 15  rulemaking is not to make the rule conform to
 16  whatever court decisions there may be.  I think your
 17  statutory authority under rulemaking is to find what
 18  the statute tells you to find, adverse effect.
 19              And that may be found if there are court
 20  decisions that have come through time which then
 21  cause you to think about those adverse effects.  It
 22  may not.  It is not, as a matter of first instance,
 23  your duty to say, "A court opinion and adverse
 24  effect are synonymous."
 25              MR. CARSON:  Okay.  I follow all that.
 26  But the reason I'm asking this question is, I think

                                                   PAGE 93
  1  in your testimony you were saying something that
  2  came close to saying that Section 1201(f) more or
  3  less preempts the field with respect to reverse
  4  engineering.  And that in the 1201(a)(1)(A) process,
  5  the Librarian is powerless to do anything in the
  6  field of reverse engineering.
  7              Maybe you weren't really saying that.
  8  Because I think what you've just said is
  9  inconsistent with that.
 10              MR. SIMON:  Well, let me be quite
 11  specific.  I think whatever the latitude of the
 12  Librarian may be in certain areas, the latitude of
 13  the Librarian is substantially diminished in those
 14  areas where specific issues have been addressed by
 15  the Congress.  And those are the exceptions that run
 16  starting with additional violations.
 17              I'm sorry, not with C but D.  Where
 18  exceptions for nonprofit libraries, archives and
 19  educational institutions already speaks in some
 20  respects to that.  It speaks to law enforcement,
 21  intelligence and other government activities.  It
 22  speaks to reverse engineering, it speaks to
 23  encryption research, it speaks to exceptions
 24  regarding minors.
 25              There are a whole variety of areas where
 26  there was a specific congressional examination.

                                                   PAGE 94
  1  This is not a de novo review of these issues by the
  2  Librarian.  The Librarian was not asked to do that,
  3  the Librarian was asked to look at areas where there
  4  are problems.
  5              And I think that in the areas where the
  6  Congress has spoken specifically to what the
  7  appropriate exceptions are, the latitude and the
  8  discretion of the Librarian was substantially
  9  diminished.  Would I say to you that the Librarian
 10  has zero latitude in those areas?  I think that
 11  would be a ridiculous statement.
 12              But is it much less?  I think the answer
 13  has to be yes.  Because otherwise these other
 14  exceptions would be meaningless.
 15              MR. CARSON:  Okay.  I follow what you're
 16  saying.  This may not be the right group of people
 17  to ask the question to, but since we're talking
 18  about reverse engineering maybe someone can clarify
 19  for me.  Are there circumstances where, in order to
 20  reverse engineer -- and let's assume it's a
 21  legitimate need to reverse engineer -- you really
 22  would have to circumvent access control measures.
 23  Why would that be a requirement in order to reverse
 24  engineer?
 25              MR. SIMON:  I mean, I'm not an engineer
 26  but I can tell you what the engineers tell me.  What

                                                   PAGE 95
  1  you are -- the permitted act or acts of reverse
  2  engineering under the statute are done for the
  3  purpose of achieving interoperability.
  4  Interoperability is defined in the statute
  5  essentially as an exchange of information between
  6  either two software products, or software and a
  7  hardware product.
  8              The points where that information or
  9  exchange occurs may be parts of subroutines, and
 10  there may be second-level technological protection
 11  measures that are applied with a computer program.
 12  There may be a general access control that's applied
 13  to the work as a whole, and any second-level
 14  protection that's applied to particular --
 15              MR. CARSON:  All right.  I see where
 16  you're going.  Okay.
 17              MR. SIMON:  That is, in fact, the reason
 18  why Section 1201(f) is there.
 19              MR. CARSON:  All right.
 20              MR. HUGHES:  Mr. Carson?
 21              MR. CARSON:  Yes.
 22              MR. HUGHES:  If I could I wondered if I
 23  could just return to the first question you asked on
 24  the Lexis/Nexis passwords.  I actually didn't want
 25  to leave the impression I was lukewarm in my
 26  endorsement of Emery's answer.

                                                   PAGE 96
  1              (Laughter.)
  2              MR. SIMON:  Won't be the first time.
  3              MR. HUGHES:  And it's not just because
  4  he'll kick me under the table, which you would see.
  5  But in all seriousness, Adobe in fact is
  6  increasingly in this business, and software
  7  companies are.  And it's not access to databases,
  8  but it's what we call -- it's access to programs, as
  9  Emery discussed earlier, that are hosted on the
 10  Internet.
 11              And in fact Adobe has a service right
 12  now where you can basically lease access to a PDF
 13  Creation tool on the web. You can basically go to a
 14  website, you've got a Microsoft Word document.
 15  Let's say you want to make it PDF.  For $10 a month
 16  you can get unlimited access to this ability to
 17  upload a file.  It will be crunched on our servers
 18  into a PDF and you'll get it back.
 19              Now, clearly, it seems to me, that the
 20  dissemination of my password if I posted it on the
 21  Internet to allow sort of everyone in the world
 22  using my password to use this service -- and the
 23  password is an access control measure, that's why we
 24  have it there -- I, by posting the password with
 25  that intent would be circumventing the access
 26  control.

                                                   PAGE 97
  1              So my answer to your question is yes,
  2  and a very firm yes.
  3              MR. CARSON:  Okay.  We heard Paul talk
  4  about trialware.  And I think he explained it pretty
  5  clearly to me.  Is it pretty clear to you what
  6  trialware is?
  7              MR. WEINGARTEN:  Pardon?
  8              MR. CARSON:  Trialware?
  9              MR. WEINGARTEN:  Trialware, yes.
 10              MR. CARSON:  Okay.  Let's take a case
 11  where someone gets access to trialware under those
 12  terms that are associated with it.  And maybe have
 13  access for 30 days, and on the 31st day you can no
 14  longer use it.  Would it be your position, in
 15  connection with the notion that once you've lawfully
 16  acquired possession or use of a work you should be
 17  able to circumvent, would it be your position that
 18  on that 31st day or the 31st month thereafter one
 19  should be able to circumvent in order to gain access
 20  to the computer program that you first obtained
 21  access to as trialware?
 22              MR. WEINGARTEN:  No.  And I think Lolly,
 23  in fact, addressed this question yesterday.  That if
 24  you have access to a toolwork for a specific period
 25  of time, and that's the agreement you entered into
 26  when you got the work, on the 31st day you don't

                                                   PAGE 98
  1  have lawful access to the work.  And I think that's
  2  perfectly fair.
  3              We are not interested in a license to
  4  hack or steal, or circumvent license terms.
  5              MR. CARSON:  And yet you do say that
  6  your concerned, as a general proposition, about the
  7  notion that a content provider can use access
  8  control measures to enforce licensing terms.  I
  9  mean, this is a licensing term, isn't it?
 10              MR. WEINGARTEN:  Right.
 11              MR. CARSON:  So which licensing terms
 12  are you concerned about, and which are you not
 13  concerned about?  And how does one draw the line?
 14              MR. WEINGARTEN:  I'm not concerned about
 15  you addressing any specific licensing term, I'm
 16  concerned about using 1201 in conjunction with
 17  technological measures to add the force of federal
 18  criminal law on users.  On the user's side of a
 19  license.  That's what I'm objecting to.
 20              MR. CARSON:  All right.  Let me see if I
 21  understand what you're saying, then.  Going back to
 22  the trialware example, you would object to the use
 23  of Section 1201 to create civil liability or
 24  criminal liability with respect to a person who, on
 25  that 31st day or the 31st month, circumvents in

                                                   PAGE 99
  1  order to use the trialware, is that what you're
  2  saying?
  3              MR. WEINGARTEN:  Probably not.  Because
  4  we established that the circumvention would not be a
  5  non-infringing use.
  6              MR. CARSON:  We've established that?
  7              MR. WEINGARTEN:  Didn't we?  Well, I
  8  mean --
  9              MR. CARSON:  That wasn't part of my
 10  hypothetical.
 11              MR. WEINGARTEN:  I mean, you asked me if
 12  I would want the exemption to include that, and I
 13  said no.  Because the work was no longer lawfully
 14  acquired.
 15              MR. CARSON:  Okay.  But what I think I'm
 16  hearing you say -- and maybe I'm not hearing it
 17  clearly enough -- is that licensing terms, okay,
 18  fine.  Licensing terms are what they are, and people
 19  perhaps should abide by them.
 20              MR. WEINGARTEN:  Right.
 21              MR. CARSON:  But as a general
 22  proposition one shouldn't be able to use Section
 23  1201 to create civil or criminal liability for
 24  circumventing technological access control measures
 25  designed to enforce the licensing terms.
 26              MR. WEINGARTEN:  Right.

                                                   PAGE 100
  1              MR. CARSON:  But then again, I think
  2  you've just told me that there's one exception at
  3  least, and that's the trialware exception.  Where
  4  it's okay to use Section 1201 to prevent someone
  5  from accessing that trialware way down the road, or
  6  are you not saying that?
  7              MR. WEINGARTEN:  If I'm no longer in
  8  legal possession of it.  I mean, I'm not in
  9  violation of the license.  If I still have that
 10  stuff after the expiration of the license, I'm not
 11  under license.  So, you know, I'm having trouble --
 12  let's posit that there's some way that, say the
 13  trialware has limited capabilities.  Some trialware
 14  does operate that way.
 15              I don't know, it's hard because programs
 16  are not exactly what libraries exercise fair use.
 17  So suppose it was a trial work, and it had limited
 18  capabilities, and we circumvented to make a non-
 19  infringing use of it during the period of time that
 20  we legitimately had access to it as a trial work.
 21              If we violate the contract, the license,
 22  the publisher, content provider is perfectly right
 23  to go after in a breach of contract or some such
 24  cause.  I do not want 1201 to make a felony out of
 25  that.

                                                   PAGE 101
  1              After the term of agreement is over, and
  2  I no longer have legal access, I'm not under the
  3  contract.  We're not talking about a violation of
  4  contract.  I don't have lawful access, and it
  5  doesn't fall under the exemption that we're seeking.
  6              MR. CARSON:  All right.  Let's take a
  7  different contractual term.  Let's say we have a
  8  contractual term that says only one person may gain
  9  access to that particular work at a time.  And you
 10  decide, "This is silly.  I've got three people in
 11  the library who want to use it right now.  Why
 12  shouldn't they be able to use it?  They're using it
 13  for research, that's fair use.  So I think I should
 14  be able to circumvent," not withstanding the fact
 15  that there's a contractual term limiting access to
 16  one person.
 17              Would it be your position that Section
 18  1201 should not be operative, and you should be able
 19  to circumvent to let three people use it at a time?
 20              MR. WEINGARTEN:  Those are two separate
 21  things.  One, yes, it's my position that 1201 should
 22  not be operative, that it's breach of contract.  I'm
 23  not saying people should do it.  I'm not saying
 24  people should violate their contract terms, I'm
 25  saying I don't want the weight of federal criminal
 26  law sitting on the users, when if the content

                                                   PAGE 102
  1  provider violates terms of the contract it's just
  2  breach of contract and so sue me.  I want an equal
  3  playing field.  And it licenses what I wanted
  4  resolved under is contract law, not federal
  5  copyright law.
  6              MR. CARSON:  Except when the contractual
  7  term is a term -- it has to do with the period of
  8  time in which you can use it.  I gather you're
  9  saying there's an exception.  And if the contract
 10  says you could only use it for a month --
 11              MR. WEINGARTEN:  No.  It's not
 12  exception.  I'm not under the contract at the
 13  expiration of the month.
 14              MR. CARSON:  But you are under the
 15  contract when you're letting three people use it,
 16  even though the contract permits only one person to
 17  use it?
 18              MR. WEINGARTEN:  Yes, that's a violation
 19  of contract.
 20              MS. PETERS:  But this is exactly the
 21  end-user argument that I think you were making.
 22              MR. SIMON:  Well, I mean, this is a huge
 23  issue for us.  And it's a huge issue for us on two
 24  different grounds.  One is we do side licensing.
 25  And we will side license to Stanford University a
 26  copy of "Photoshop" for 100 users.  And then you

                                                   PAGE 103
  1  have 15,000 students using it.  That's clearly a
  2  breach of contract.  No problem.
  3              Now, the question becomes one -- but it
  4  was educational, it was fair use.  Is that a defense
  5  of breach of contract?  Well, I see Lolly shaking
  6  her head.  But I apologize, Lolly, the American
  7  Library Association's been taking the position in
  8  the course of enacting the UCITA that that should be
  9  a defense to breach of contract.  That's an
 10  untenable position as well.
 11              So Rachel was asking me before a
 12  question about various causes of action.  So now
 13  we're back to a situation where we have these 15,000
 14  infringers as well as circumventurists at Stanford
 15  University.  We need both causes of action because
 16  while you say with certainty that, "Oh, this should
 17  be done under contract theories," it's not clear
 18  that we would win under those contract theories in
 19  every instance.
 20              We still have infringement, we still
 21  have harm being done to us, we still have wrongs
 22  being done.  And what you're suggesting is -- I
 23  think what you're ultimately coming down to is
 24  you're afraid of the criminal liability.
 25              MR. WEINGARTEN:  If it's infringement,
 26  if it's an infringement you have just as much cause

                                                   PAGE 104
  1  of action under 1201.  I'm looking for non-
  2  infringing uses.  I don't see any difference here.
  3              MR. SIMON:  I mean, I guess --
  4              MR. WEINGARTEN:  I'm not trying to argue
  5  with a lawyer.
  6              MS. PETERS:  No, I know.  But it's an
  7  important point.  Because the criminal is willful
  8  for commercial purposes or private gain, and yet in
  9  the context that you're using with your Stanford
 10  case, there should have been a license for 15,000
 11  students, correct?
 12              MR. SIMON:  Yes.  Now, is that willful,
 13  is that for commercial gain?  Well, the way the
 14  statute actually now reads, it's not direct
 15  commercial gain, it's actually loss or revenue
 16  counts as well.
 17              So, yes, I think -- but, look.
 18  Ultimately the reality is -- and I can't speak for
 19  other industries, but from a software industry
 20  perspective, we're really not interested in putting
 21  Stanford University in jail.  What we're interested
 22  in doing is selling them 15,000 copies of
 23  "Photoshop."
 24              That's what we want to do, sell -- you
 25  know, we want the criminal sanctions there because
 26  we think they create an effective deterrent.  But

                                                   PAGE 105
  1  the reality is we want to sell product.  That's what
  2  we want to do.  And suggesting somehow that a
  3  contract-based cause of action alone, given the
  4  realities we're confronting in the marketplace right
  5  now is sufficient, is just not true.
  6              Now, maybe libraries and educators are
  7  nicer than most people.  Well, they're certainly
  8  better looking.  And it may be easier to deal with
  9  nice people, but the problem is there's no real way
 10  to parse this law between nice users and bad users.
 11  You guys kept on asking me, "Tell me who a user is."
 12              Well, can you parse it by nice users and
 13  un-nice users?  You can't.  You can't do these kinds
 14  of things that easily.  It's all context specific.
 15              MR. CARSON:  Well, when we're talking
 16  about criminal liability, you can parse the law with
 17  respect to certain kinds of users who simply -- you
 18  can't have criminal liability with.  1204(d) exempts
 19  libraries, nonprofit libraries and educational
 20  institutions, for example.
 21              MR. SIMON:  Correct.  But again, those
 22  are not issues for this rulemaking, those are issues
 23  of the operation of law.
 24              MS. GOSLINS:  Absolutely.
 25              MR. CARSON:  Rick, I think most of the
 26  testimony we've heard from other representatives of

                                                   PAGE 106
  1  libraries -- and I'm not sure, you said it seems to
  2  be implicit, but let me clarify it first.  The types
  3  of technological measures, access control measures
  4  you're concerned with so far seem to be access
  5  control measures that are enforcing contractual or
  6  licensing terms.  Is that, as a general proposition,
  7  the case?
  8              When you run into those technological
  9  measures, or when you run into those licensing
 10  terms, that the licensee had the opportunity in
 11  exchange for, perhaps, a payment of more money to
 12  get licensing terms that would have permitted the
 13  very act that you're trying to circumvent in order
 14  to be able to do it.
 15              MR. WEINGARTEN:  There's probably no
 16  single answer to that.  I mean, I'm not a working
 17  librarian and so I don't know.  But you've heard
 18  from Karen yesterday that there are times when she
 19  has to negotiate for a year or more in order to get
 20  terms she needs.  And she has told me, so I guess
 21  this is secondhand, she's told me that there's
 22  simply been times when she has not been able to
 23  mount products because she couldn't get the terms.
 24              But there are two other issues.  One is
 25  that the technological controls become embedded in
 26  the product itself, and are part of the product.

                                                   PAGE 107
  1  You really can't -- it's no longer negotiable.  And
  2  we think that this is going to be, these licenses
  3  are going to be less and less negotiable for these
  4  sorts of terms.
  5              There are, of course, products, an
  6  increasing number of products that come with click-
  7  on or shrink-wrap licenses where there's no
  8  negotiation whatsoever, we mentioned UCITA which
  9  covers those sorts of products.  So I don't think
 10  there's any single answer.
 11              Yes, if it's a question of, "Well, we'd
 12  like three students or three users instead of one
 13  user to use it," I'm sure that the provider is
 14  perfectly willing to say, "Well, okay.  That will
 15  cost you this much."  Or, "We would like this much
 16  stuff on it, or like the ability to print out of
 17  it," or whatever.  There are negotiable prices in
 18  some cases.  But certainly not in all.
 19              MR. CARSON:  Well, let's take a case
 20  like that, where, in fact, the provider is perfectly
 21  willing to license you to let three people use it
 22  rather than one.  But you decide you don't want to
 23  pay that price.  You'll just take the license for
 24  one, and if we want three people to do it we'll
 25  circumvent.

                                                   PAGE 108
  1              If that case were to arise and that was
  2  the choice you made, would it be your position that
  3  even though you had the opportunity to negotiate a
  4  deal that would give you the right for access for
  5  three users, you should be able to circumvent with
  6  impunity?
  7              MR. WEINGARTEN:  Certainly not.
  8              MR. CARSON:  Okay.  1201 should be able
  9  to -- should be operative in that case, then?
 10              MR. WEINGARTEN:  No.
 11              MR. CARSON:  No?
 12              MR. WEINGARTEN:  No.  That contract law
 13  should be operative, not 1201.
 14              MR. CARSON:  And why not 1201?
 15              MR. WEINGARTEN:  Well, if a court were
 16  to determine -- no, I'll take that back.  I was too
 17  quick on that.  That if you violated the terms of
 18  the -- one, if you violated the terms of the
 19  contract, that's contract law.  If somebody took
 20  action under 1201 against you, or against the user,
 21  and the court determined that it was not a fair use
 22  under whatever theory of argument, then 1201 would
 23  apply.
 24              If the court said, "Well, you may have
 25  violated the contract, but it was a fair use under
 26  copyright law, 1201 does not apply, although you

                                                   PAGE 109
  1  still may be in breach of contract."  I mean, people
  2  give up their fair use rights in contract all the
  3  time.  It's various kinds of rights for various
  4  purposes, and that's their right, as I said, as
  5  consenting adults, to do so.  And we do not
  6  recommend that they be scofflaws, or violate their
  7  contract.
  8              MS. PETERS:  Well, I just want to take
  9  over.  If a library today buys a book, only one
 10  person at a time can use that book, right?
 11              MR. WEINGARTEN:  For the most part, yes.
 12              MS. PETERS:  So if, when you now are
 13  buying a package you have a choice with regard to
 14  the simultaneous accesses that you're going to
 15  provide, which really you're substituting for, in
 16  essence, the number of books that you would have on
 17  the shelves so you could serve so many people at a
 18  time.
 19              So I guess I have a hard time figuring
 20  out why that rises to the level of a fair use.
 21              MR. WEINGARTEN:  I didn't say it.  I
 22  don't think I said it did.  I think I said -- I just
 23  said if a court decides it didn't.  And the court,
 24  you're right, the court may well decide that that's
 25  not fair use.

                                                   PAGE 110
  1              MS. PETERS:  Okay.  Do any of you have
  2  anything else that you'd like to add at this point?
  3  Does anyone else have any questions?
  4              (No response.)
  5              MS. PETERS:  All right.  What are we
  6  going to do this afternoon?  First of all, before I
  7  get there, I want to thank the witnesses.  They were
  8  extremely helpful, and I really do appreciate your
  9  testimony and appearing here.
 10              Second, we don't know whether or not we
 11  will have Mr. Metalitz this afternoon, but we do
 12  know that we will have people who can appear earlier
 13  than the two o'clock.  Because of the time frame,
 14  what we're going to suggest is that we start at
 15  1:30.  Not suggest, we are deciding and announcing
 16  that we will be starting at 1:30.
 17              Thank you.

                                                   PAGE 111
  1            A-F-T-E-R-N-O-O-N  S-E-S-S-I-O-N
  2                                          (1:35 p.m.)
  3              MS. PETERS:  Good afternoon.  Welcome to
  4  the last session of our last day of hearings.  We're
  5  fortunate that Steve Metalitz made it here after a
  6  long and difficult trek.  And what we've decided to
  7  do is to let Steve present the testimony that he
  8  would have presented this morning, and then we will
  9  just ask questions of him.  And then we'll take the
 10  panel that we had intended, if it works out that
 11  way.
 12              So, it's all yours, Steve.
 13              MR. METALITZ:  Thank you very much.  And
 14  thank you, particularly, for accommodating the
 15  vagaries of my travel schedule.  I should have known
 16  when I was about to step on Flight 301 from Chicago
 17  to San Jose that it would be pre-empted.  And indeed
 18  it was, but I did get here eventually.
 19              I'll try to be brief, because I am
 20  infringing on your schedule here.  I wanted just to
 21  start by going back to the basics, which I'm sure
 22  have been reviewed several times in the last few
 23  days, as well as two weeks ago.
 24              Congress established this rulemaking
 25  proceeding to answer a single question:  Should the
 26  October 2000 effective date of the statutory cause

                                                   PAGE 112
  1  of action against circumvention of access control
  2  measures be delayed with respect to any particular
  3  class of copyrighted works?  That's the first basic.
  4              And the second basic, as in any
  5  proceeding, is who has the burden of persuasion.
  6  And I think it's clear that those who believe that
  7  the circumvention of access controls should remain
  8  legal after October 28 bear that burden, including
  9  the burden of defining what particular class of work
 10  -- or as to what particular class of work the
 11  prohibition should not go into effect.
 12              On behalf of the 17 copyrighted owner
 13  organizations that I represent, we feel that clearly
 14  the answer to the question Congress has asked is
 15  that no classes of work should be -- as to no
 16  classes of works should the Section 1201(a)(1)
 17  prohibition not come into effect.
 18              And on the second question of the
 19  burden, it follows we don't believe the burden has
 20  been met to show that there's a need for any
 21  exception in this area.
 22              This is a substantial burden, and I
 23  think everyone has recognized that.  And some of the
 24  testimony you heard in Washington called it an
 25  illusory goal, or an unattainable dream.  And that

                                                   PAGE 113
  1  it was impossible for anyone ever to meet this
  2  burden.  I don't agree.
  3              This burden could be met if the
  4  proponents of an exception had specific, strong and
  5  persuasive evidence of the likely effects of the
  6  prohibition on the ability of users to make non-
  7  infringing uses of particular classes of works.
  8  That burden can be met, but it hasn't been met.
  9  Because that type of evidence has not been presented
 10  to you.
 11              You've received a huge volume of
 12  evidence, but most of that does not address the
 13  question, the only question that Congress directed
 14  you to answer.  And what does address that question
 15  doesn't come close to carrying that burden.
 16              It seems as though some of the
 17  participants in this proceeding want to treat it as
 18  an open-ended discussion about the impact of
 19  technology on the way copyrighted materials are
 20  created and produced, marketed and distributed.  And
 21  on the effect of those technological changes on the
 22  relationships among creators, intermediaries,
 23  customers and other stakeholders.
 24              If that's what we were about here, the
 25  copyright industries and the copyright owner
 26  organizations would have a lot to contribute to that

                                                   PAGE 114
  1  discussion.  We have a lot of concerns about those
  2  issues.  But that's not what this proceeding is
  3  about.  You're not here as moderators of a gripe
  4  session, or of an open-ended discussion.  You're
  5  here as decision-makers or as recommenders of
  6  decisions on whether an act of Congress should take
  7  effect as scheduled.
  8              You have a specific job to do, you have
  9  specific ground rules under which that job should be
 10  carried out, and I'd like to focus on those.  The
 11  question before you, and the quantity of the
 12  evidence that's been presented to you.  And whether
 13  it matches up to the burden has Congress has set in
 14  this proceeding.
 15              Now, we've explained in our reply
 16  comments, which were quite extensive, why we think
 17  most of the evidence that's been submitted, at least
 18  so far, is not really relevant to this proceeding.
 19  It's aimed at answering other questions that
 20  Congress actually not only didn't direct you to
 21  answer, but Congress has already answered.
 22              Questions such as whether copyright
 23  owners should have the right to employ technological
 24  measures to control or manage access to their works.
 25  Questions such as what scope of exception should be
 26  provided for reverse engineering.  Questions such as

                                                   PAGE 115
  1  what should the relationship be between the
  2  anticircumvention prohibitions and the concept of
  3  fair use.
  4              Those questions have been asked and
  5  answered, and to provide opinions on them in this
  6  proceeding really is of no value to you.  They don't
  7  shed any light on the single question that Congress
  8  asked you to answer.
  9              Now, a few of the submissions that
 10  you've received have sought to propose particular
 11  classes of works as to which circumvention of access
 12  control should remain legal after October 28th.  In
 13  our view, none of those proposals pass muster.  Most
 14  of them didn't really designate a class of works.
 15              They really talked about an exemption
 16  based on the status of the user of a work.  That's
 17  an approach that Congress considered during the
 18  deliberations on the DMCA, but that Congress
 19  ultimately rejected.
 20              And when there has been an attempt in
 21  this proceeding to identify a class of works -- and
 22  I think upon close examination it proves to be an
 23  extremely expansive class, and it's boundaries are
 24  very difficult to define.
 25              But I think the main flaw of all these
 26  proposals is that they're not based on any specific

                                                   PAGE 116
  1  evidence that the ability to make non-infringing
  2  uses of works would be harmed if Section 1201(a)(1)
  3  came into effect for all works, as Congress
  4  provided.
  5              There have been a limited number of
  6  anecdotes that have been put forward as evidence of
  7  an adverse effect, but they don't withstand
  8  scrutiny.  Even to the extent that any real threat
  9  of harm has been demonstrated, you have to balance
 10  that against the evidence that the use of access
 11  control measures has increased, and not decreased
 12  the availability of works for non-infringing uses
 13  since Congress directed this proceeding to undertake
 14  a net calculation.
 15              Let me just say a word about the concept
 16  of particular classes of works.  I know this has
 17  been a frustration to the members of the panel, to
 18  try to solve this conundrum that Congress has given
 19  it.
 20              The question of what constitutes a
 21  particular class of works can't be answered in the
 22  abstract.  And from our perspective, trying to
 23  answer that at this point would be like asking us to
 24  categorize or classify the specific angels that are
 25  dancing on the head of a pin.  We'd be glad to try,
 26  but we just don't see any.

                                                   PAGE 117
  1              And until we see some evidence of
  2  specific adverse impacts, it's very difficult to
  3  figure out whether you can design a particular class
  4  of works that covers those adverse impacts.
  5              If you agree with this, and if at the
  6  end of the day as you assess the evidence, you don't
  7  think that the adverse impact has been demonstrated,
  8  you may want to take the approach of not addressing
  9  the question of what would constitute a particular
 10  class of works.  You may want to leave flexibility
 11  for yourselves and your successors three years from
 12  now in the next triennial proceeding, when the
 13  evidentiary record may be more complete.
 14              At that time, if there is evidence of
 15  specific adverse impacts, that would be a point at
 16  which you'll need to decide whether that evidence
 17  can be organized to define particular classes of
 18  works.
 19              Let me just turn to, really, three
 20  issues that were quite prominent in the hearings in
 21  Washington.  And in fact they're implicit in all of
 22  the testimony, but I think the Washington testimony
 23  brought them to the fore.  And as I understand it,
 24  some of them have been revisited here.
 25              The first is the question of initial
 26  lawful access, the second is the focus of this

                                                   PAGE 118
  1  proceeding on fair use, and third is the what I
  2  would call the bugaboo of pay-per-use.
  3              First, the notion that it should be
  4  permissible to tamper with access controls as long
  5  as they manage something other than initial access
  6  to copyrighted materials.  I call this the initial
  7  lawful access approach, because that's what its
  8  proponents called it two years ago when they sought
  9  to persuade Congress that these second-level
 10  controls, or persistent access controls ought to be
 11  fair game for circumvention.
 12              They weren't able to persuade Congress
 13  then, and for that reason perhaps they don't use the
 14  phrase as much now.  But it's basically the same
 15  approach.
 16              This approach sees access controls as an
 17  on/off switch, and nothing more.  Where in fact it
 18  was something less, because under this analysis once
 19  access is switched on it can never be switched off.
 20  In this view every license is a perpetual license,
 21  or should be.  Subscribers to copyrighted materials,
 22  like diamonds, are forever.
 23              That's the approach that underlies
 24  Professor Jaszi's suggestion, for example, that
 25  works embodied in copies which have been lawfully
 26  acquired by users who subsequently seek to make non-

                                                   PAGE 119
  1  infringing uses thereof, that those users ought to
  2  be free to circumvent access controls in that
  3  endeavor.
  4              This rulemaking may originally, at one
  5  point, have been intended to give a privileged
  6  status to those who claim to have achieved initial
  7  lawful access to a copy of a work.  But Congress
  8  thought better of this approach.  It was dropped
  9  like a stone when the bill reached the conference
 10  committee.
 11              And the reasons for Congress' change of
 12  mind are, I think, not hard to understand.  The
 13  concept that people who deem initial lawful access
 14  ought to be free to circumvent thereafter is
 15  antithetical to promoting the availability of
 16  copyrighted works.  If the on switch can never be
 17  turned off, there's little incentive ever to provide
 18  initial access in the first place.
 19              To contrast these second-level controls,
 20  or persistent access controls as some have called
 21  them, are being used to maximize access by the
 22  greatest number of users in the most efficient
 23  manner permitted by digital technology.
 24              For example, time-limited access, which
 25  is an example of this type of persistent access
 26  control.  It's not a new concept, it's not a radical

                                                   PAGE 120
  1  concept.  And certainly the library community is
  2  familiar with it because the most familiar example
  3  might be the public library, where borrowing a book
  4  does not entitle you to keep it forever.  The video
  5  rental store operates on the same principle.
  6              Technological measures have been used
  7  for decades to enforce time-limited access to
  8  copyrighted materials.  Once your subscription to a
  9  premium cable service expires, scrambling technology
 10  denies you access to reruns of the programs to which
 11  you once enjoyed initial lawful access. Black boxes
 12  aimed at overcoming this access control mechanism
 13  have been outlawed for many years.
 14              Libraries and our research institutions
 15  seemed to have survived this development.  So it's a
 16  little hard to understand the intensity of their
 17  expressed concern that this model -- extending this
 18  model to online and other digital media will be
 19  fatal to their future.
 20              Of course, they're more used to dealing
 21  with the traditional environment in which purchase
 22  of a physical copy entitled the purchaser to
 23  perpetual access to the work it contained.  But as
 24  long ago as 1976 Congress made it clear that to
 25  equate the copy with the work is a fallacy.

                                                   PAGE 121
  1              You heard testimony earlier this month
  2  from David Mirchin of Silver Platter that made it
  3  clear that libraries have functioned successfully
  4  for years in an environment which includes so-called
  5  second-level access controls, such as a licensed
  6  limit on the number of simultaneous users.
  7              And I think it's significant that,
  8  according to all the testimony I heard -- and
  9  perhaps you heard something different in the last
 10  day -- libraries haven't found it necessary to
 11  circumvent the existing access control measure in
 12  order to deliver to their users the enhanced and
 13  expanded access to copyrighted materials that
 14  digital technology enables.
 15              It's really hard to conclude from this
 16  evidence that cataclysmic changes will occur, or any
 17  significant adverse effect, once the legal
 18  prohibition against circumvention comes into force
 19  on October 28th.  Some witnesses have told you that
 20  Congress really didn't have these persistent or
 21  second-level access controls in mind when it enacted
 22  Section 1201(a).
 23              I think if you look at the legislative
 24  history it's clear that this is exactly what
 25  Congress had in mind when it talked about access
 26  controls.  The House Manager's Report gives the

                                                   PAGE 122
  1  example of an access control that "would not
  2  necessarily prevent access to the work altogether,
  3  but could be designed to allow access during a
  4  limited time period, such as during a period of
  5  library borrowing."
  6              The House Manager cited this as an
  7  example of a technological measure that would
  8  "support new ways of disseminating copyrighted
  9  materials to users, and safeguard the availability
 10  of legitimate uses of those materials by
 11  individuals."
 12              So in fact Congress not only was aware
 13  of these technologies, it counted them on the
 14  positive side of the ledger, and encouraged you to
 15  count them on the positive side of the ledger in
 16  trying to figure out the impact of access controls
 17  on the availability of works for non-infringing
 18  uses.
 19                                                 0
 20  uses.  Congress didn't ask about the impact of the
 21  circumvention prohibition on fair use, it asked
 22  about its impact on non-infringing use.  And, of
 23  course, that's a much broader category.  It includes
 24  fair use, but it also includes licensed or permitted
 25  uses.

                                                   PAGE 123
  1              I had the feeling from some of the
  2  testimony and submissions that licensed uses really
  3  don't count, because they depend upon the agreement
  4  with the copyright owner.  It's the same theory that
  5  makes the apples that you filch from the orchard
  6  taste a little sweeter than those that you buy at
  7  the store.  But from the standpoint of the end-user,
  8  it's hard to see the relevance of this distinction.
  9              I think Congress took the same view,
 10  which is a practical view.  So long as the public is
 11  able to make use of these materials without
 12  violating the copyright law, why is that
 13  availability somehow tainted, if it takes place with
 14  the consent of the copyright owner.
 15              I think the mindset that reads non-
 16  infringing use to mean only fair use helps explain
 17  why the witnesses, again, were not able to come up
 18  with any concrete instances in which circumvention
 19  of technological measures is necessary to serve
 20  library patrons, or students or researchers.
 21              Time and again you were told that there
 22  are potential problems, but that they so far have
 23  been resolved in negotiations with the copyright
 24  owner.  This may be disappointing to some of the
 25  intermediaries who are shouldering the burden of
 26  persuading you that there should be exceptions to

                                                   PAGE 124
  1  Section 1201(a)(1).  But it's good news for the end-
  2  user, and that's the party in whose benefit Congress
  3  directed that this proceeding be carried out.
  4              Finally, let me just say a word about
  5  pay-per-use.  This is a pricing strategy that we
  6  find in some areas of the copyright market.  And
  7  some of your witnesses portrayed it as not only
  8  fatal to the American scholarly enterprise, but
  9  actually unconstitutional.
 10              Pay-per-use, like time-limited access,
 11  has a very distinguished pedigree.  Look back to the
 12  first concert or play for which admission was ever
 13  charged, which was a pay-per-use of the performance
 14  of copyrighted work.  Up to the present day this is
 15  widely used for the delivery of some types of
 16  performances by cable, satellite, over the Internet.
 17              Interestingly, the area where it's
 18  probably made the least inroads is in the academic
 19  and library markets.  Pay-per-use -- or rather, I
 20  should say, unmetered use is probably much more
 21  prevalent today than it was 10 or 15 years ago, when
 22  you had connect time charging, per-search pricing
 23  and these other pricing strategies that are less
 24  common today.
 25              In fact, you could make the argument
 26  that, under some circumstances, pay-per-use may be a

                                                   PAGE 125
  1  cheaper and more efficient means for libraries and
  2  educational institutions to serve their
  3  constituencies than the unlimited use model which
  4  currently prevails.
  5              I think what we'll see, that we've seen
  6  so far, is that where that argument has merit the
  7  market develops in that fashion.  Where pay-per-use
  8  is disfavored for whatever reason, it will remain an
  9  exception and not the norm.  But for your purposes,
 10  the purposes of this proceeding, I think the
 11  opponents of pay-per-use have failed to make any
 12  persuasive showing that the pay-per-use model will
 13  become more prevalent unless the effective date of
 14  Section 1201(a)(1)(A) is delayed for some particular
 15  class of works.
 16              And even if they were able to carry that
 17  burden, they would still have to show that such an
 18  outcome would be likely to lead unbalanced to the
 19  adverse impact which Congress was concerned to
 20  prevent, and which Congress directed your attention
 21  to.
 22              All this gets back to the evidence, how
 23  it matches up with the burden that Congress imposed.
 24  And I think on review of the evidence, I would
 25  suggest to you that there's really not enough
 26  concrete evidence on which the Librarian could

                                                   PAGE 126
  1  rationally base a finding that an adverse impact is
  2  likely to occur if Section 1201(a)(1)(A) goes into
  3  effect on schedule.
  4              You've heard from witnesses their
  5  apprehensions about pay-per-use and persistent
  6  access controls, but many of those same witnesses
  7  said that so far they haven't encountered those
  8  phenomena.  They're worried about licensing terms
  9  that will be inflexible or intrusive.  Some of the
 10  witnesses quite candidly asked you to use this
 11  proceeding to improve their bargaining position.
 12              So far these problems have not
 13  materialized.  They predict that it will be
 14  necessary to circumvent access controls in the
 15  future.  And therefore they ask you to stop the
 16  congressional prohibition on that behavior from
 17  taking effect.  But so far, even though it is not
 18  currently a violation of law to circumvent these
 19  measures in most cases, they can't point to a single
 20  instance where they've needed to do so.
 21              In short, in a proceeding which must be
 22  based on facts, these witnesses have bought you
 23  fears.  And the evidentiary foundation they
 24  presented is too flimsy to support a decision to
 25  delay the effective date of Section 1201(a)(1)(A)
 26  for any class of works.

                                                   PAGE 127
  1              On behalf of the organizations
  2  representing a broad spectrum of U.S. copyright
  3  owners, I urge you to recommend to the Librarian
  4  that the cause of action for circumvention of access
  5  control measures take effect as scheduled, for all
  6  works protected by copyright.
  7              Thank you again for your indulgence in
  8  my tardiness.  And I'd be glad to answer any
  9  questions.
 10              MS. PETERS:  Thank you for managing to
 11  make it here.  I want to start the questioning with
 12  Rob.
 13              MR. KASUNIC:  Okay.  Good afternoon.
 14  Suppose I told you that yesterday we heard
 15  compelling and highly specific testimony that there
 16  was a demonstrable adverse effect from access
 17  control measures utilized in a particular class of
 18  works, namely motion pictures.  And in addition,
 19  these motion pictures were only available in digital
 20  format.  So, a sole source situation.
 21              How would we define a coherent, well-
 22  defined class of works?  Would we exempt all motion
 23  pictures as a class, so that anyone could circumvent
 24  these technological protection measures, both
 25  purchasers and pirates, or would we define the class
 26  as motion pictures that were lawfully acquired?

                                                   PAGE 128
  1              MR. METALITZ:  Well, I can't really
  2  answer a hypothetical question, based on the
  3  evidence that I'm not familiar with.  But I think,
  4  in general, if you were convinced that there had
  5  been this -- or that there was a likelihood of this
  6  significant adverse impact, you would then need to
  7  try to fashion a definition that would be neither
  8  under-inclusive nor over-inclusive.
  9              One that would capture the types of
 10  works as to which that impact had been demonstrated,
 11  and didn't go far afield into areas where that
 12  adverse effect hadn't been demonstrated, or didn't
 13  appear to be likely.
 14              Congress obviously didn't give you a lot
 15  of guidance on this, but they did suggest that it
 16  ought to be a particularized determination.  And
 17  something that was simply based on one type of
 18  protective technology was not appropriate, that a
 19  definition based on one category or description of
 20  users probably wasn't appropriate.
 21              That the touchstone is what class of
 22  works can you describe that -- as to which the --
 23  again, not the use of the access controls, that's
 24  not the issue.  But the prohibition against
 25  circumvention of the access controls would be likely
 26  to achieve that adverse impact.

                                                   PAGE 129
  1              So I doubt that it would be a category
  2  as broad as all motion pictures.  I doubt that it
  3  would be a category as broad as all motion pictures
  4  in a particular technological format.  But, again,
  5  that's the kind of question that I find it very
  6  difficult to answer in the absence of evidence.
  7              Because, for one thing, it may bind your
  8  hands -- or those of your successors -- when they
  9  actually have to deal with evidence that there has
 10  been significant adverse impact. So I think caution
 11  is probably advised in this area, except and unless
 12  -- except to the extent that you are persuaded that
 13  the proponents of an exception had met their burden.
 14              MR. KASUNIC:  In the legislative history
 15  there was discussion from the House Judiciary Report
 16  early on that "Paragraph 1(a)(1) does not apply to
 17  subsequent actions of a person once he or she has
 18  obtained authorized access to a copy of a work
 19  protected under Title 17, even if such action
 20  involves circumvention of additional forms of
 21  technological protection measures."
 22              Doesn't this passage support the
 23  proposed exemption by some groups that classes of
 24  works that are initially lawfully accessed should be
 25  -- you should be able to circumvent?

                                                   PAGE 130
  1              MR. METALITZ:  Well, I think to the
  2  extent that it does, you have to look at the whole
  3  legislative history.  That provision was in the
  4  House Judiciary Report, which is at an early state.
  5  It did refer to 1201(a)(1) which is now
  6  1201(a)(1)(A), and I don't think there's been any
  7  change in that language.
  8              But I think if you look at the
  9  legislative history underlying this proceeding, and
 10  how you're supposed to answer that question, what
 11  issues you're supposed to look at, it's clear that
 12  Congress thought that access control mechanisms that
 13  applied after "initial lawful access," could have a
 14  use-facilitating or use-enhancing effect.  And that
 15  they were a positive element in the calculus for
 16  what the impact of these technologies -- and even
 17  more importantly -- of the prohibition would be on
 18  the availability of works for non-infringing uses.
 19  So I think you'd have to put that observation in
 20  that context.
 21              MR. KASUNIC:  We had discussed earlier
 22  this morning some of the statements in the comments
 23  on reverse engineering.  And in your comment, as
 24  well, there was a discussion that Section 1201(f)
 25  would prohibit the Librarian from making a
 26  determination on this area of -- within the scope of

                                                   PAGE 131
  1  1201(a)(1)(A).  That because Congress had already
  2  acted in that area, that there was no room.
  3              Is that something that would be -- in
  4  terms of changes in technology, if this was -- those
  5  exemptions were done at a specific point in time, if
  6  at some point in time adverse effects were shown in
  7  relation to that, would that be something that would
  8  be prevented from the Librarian to address?
  9              MR. METALITZ:  Well, it depends on what
 10  they would be.  1201(a)(1), as you know, of course,
 11  is not in effect.  Is not now a violation to
 12  circumvent access control measures for the purpose
 13  of reverse engineering, whether or not that reverse
 14  engineering would be infringing under the copyright
 15  law or not.
 16              On October 28th, it will be illegal to
 17  do that.  But only within the scope of what
 18  1201(a)(1) provides, and Section 1201(f) provides an
 19  exception to Section 1201(a)(1) in certain
 20  circumstances.  And to kind of oversimplify it,
 21  perhaps a little bit, if the circumvention is
 22  necessary in order to obtain information in a
 23  reverse engineering context that would not
 24  constitute an infringement, then there's an
 25  exception at Section 1201(a)(1) as well.

                                                   PAGE 132
  1              So that's an area where the scope of the
  2  circumvention prohibition is linked with issues of
  3  infringement to a great extent, it's not exactly the
  4  full extent.  So if in the future, you found that
  5  people -- because they couldn't circumvent the
  6  circumstances that didn't fall within the Section
  7  1201(f) exception were thereby -- because those
  8  circumventions remained illegal, that therefore
  9  caused an adverse impact on the availability of
 10  works for non-infringing uses, then you would be
 11  kind of in the realm of the kind of things that the
 12  triennial proceedings is supposed to look at.
 13              But it doesn't look at Section
 14  1201(a)(1) in a vacuum.  Section 1201(a)(1), when it
 15  goes into effect, will be subject to exceptions for
 16  reverse engineering, for computer security, for
 17  encryption research.  I think those are the
 18  principal ones, and there may be others as well.
 19              So that's the prohibition whose impact
 20  you're supposed to assess, either today its
 21  anticipated impact, or three years from now its
 22  actual impact, as well as anticipated over the
 23  following three years.  I don't know if that answers
 24  your question.
 25              MR. KASUNIC:  Yes.  We have also heard a
 26  lot of evidence or a lot of testimony from the

                                                   PAGE 133
  1  library community and educators that this would
  2  cause the prohibition, and Section 1201(a)(1) would
  3  cause a chilling effect.  And to what extent is a
  4  chilling effect an adverse effect, and something
  5  that should be considered -- or the likelihood of a
  6  chilling effect is something that should be
  7  considered?
  8              MR. METALITZ:  I'm not sure what it
  9  would be a chilling effect on.  Usually, that term
 10  is used in the First Amendment context.  Is that
 11  what --
 12              MR. KASUNIC:  A chilling effect on
 13  making fair use determinations that if -- with some
 14  of the criminal ramifications and civil penalties
 15  involved here, that -- and the uncertainty within a
 16  number of the terms that are involved in Section
 17  1201(a)(1), there's been the claims that there is a
 18  certain amount of vagueness to some of the terms.
 19              That that uncertainty would really
 20  prevent librarians who, it was stated, were by their
 21  nature cautious from -- if there was that
 22  uncertainty they would tend towards, maybe,
 23  cautious.  And that would prevent a use of certain
 24  privileges that existed.
 25              MR. METALITZ:  I think it would help in
 26  evaluating that claim if we knew what types of

                                                   PAGE 134
  1  activities were being chilled.  The whole chilling
  2  concept is, you know, how close to the line of
  3  legality do you encourage people to go.  And the
  4  evidence so far is that they're all the way across
  5  the room from the line of legality.
  6              When you asked the witnesses in
  7  Washington whether they had ever had to circumvent
  8  access controls in order to serve their patrons, the
  9  answer was no.  And when they raised fears about
 10  some of the areas where this might happen, such as
 11  with the image databases and so forth, you pressed
 12  them.
 13              It seemed to me that the evidence was
 14  that they'd been able to resolve this in
 15  negotiations with the copyright owners.  So that
 16  doesn't sound as though they've been chilled yet.
 17  Because every time they felt cold, they've been able
 18  to find some warmth somewhere.
 19              So I think you'd have to know more about
 20  what types of activities they claim they were
 21  discouraged from undertaking before you could
 22  evaluate whether a chilling effect was something
 23  that amounted to a significant adverse impact, as
 24  Congress directed you to assess.
 25              MR. KASUNIC:  Thanks.  That's all I
 26  have.

                                                   PAGE 135
  1              MS. PETERS:  Thank you.  Rachel?
  2              MS. GOSLINS:  Mr. Metalitz, I think
  3  we've asked this question of almost every content
  4  owner representative in front of us.  And I think
  5  we've yet to get an answer we can take to the bank.
  6  But I'm going to try again.
  7              You have all provided us with numerous
  8  examples of what is not a class of works.  And I'm
  9  curious as to whether you have an example of what
 10  might a class of works.
 11              MR. METALITZ:  Well, I'm not sure you're
 12  going to be able to bank any more on what I'm saying
 13  than what the others have said.  And I'd like to
 14  explain the reason why.  I've referred to this in my
 15  testimony.
 16              And that is, when you're dealing with a
 17  null set, it is extremely difficult to categorize
 18  it, or classify it.  And the danger of doing that is
 19  that you set up rules that, in the hypothetical
 20  situation, that may not be the right ones when your
 21  set is no longer null.  And you actually have some
 22  examples of adverse impact.
 23              You know, I recall your dialogue about
 24  this with Mr. Lutzker.  Some things that he said I
 25  wouldn't disagree with.  For example, it doesn't
 26  necessarily have to be a subset of the categories of

                                                   PAGE 136
  1  works in the Act -- not an exhaustive list -- that's
  2  laid out in the act of the cross-cutting.  Or you
  3  could say a class includes elements from more than
  4  one of those categories.
  5              But, again, it's very hard to answer
  6  that when we think we're dealing with -- from our
  7  perspective, we're dealing with nothing.  We're
  8  dealing with a null set.  Let's see the examples,
  9  let's find the clear cases of adverse impact.  Then
 10  it would be more realistic to try to say, "Well, can
 11  we define a particular class of works that kind of
 12  covers that waterfront?"
 13              MS. GOSLINS:  I had a similar discussion
 14  with Mr. Simon this morning, and he similarly said
 15  you have look at the harm.  The problem, I think, in
 16  that is that on one hand we have significant amount
 17  of content owners telling us we shouldn't look at
 18  uses or users in defining a class of works.  On the
 19  other hand, how can you look at harm without looking
 20  at who is being harmed, and what they're doing in
 21  which they're suffering the harm?
 22              So it's hard to recommend -- do you have
 23  any suggests on reconciling -- defining classes by
 24  who is being harmed, and what they're doing, on one
 25  hand.  And not looking at uses or users on the
 26  other.

                                                   PAGE 137
  1              MR. METALITZ:  I think when you're
  2  looking at the evidence, you have to look at the
  3  uses and the users.  Because you're going to have
  4  examples.  The example will be User X is unable to
  5  make this particular type of non-infringing use of
  6  this particular work, because of the prohibition
  7  against circumventing access controls on that work.
  8              Then you no longer have a null set.
  9  You'd have an example, you'd have at least a
 10  species.  And then you'd have to try to figure out -
 11  - and maybe if you have two species or three
 12  species, then you'd try to figure out what's the
 13  generic class of works that covers those examples.
 14              So I don't think it's irrelevant.  I
 15  mean, I think the examples that you would get
 16  obviously have to have some explanation of who the
 17  user is, and what use it is that they wish to make,
 18  or are unable to make.  But then at that point you
 19  have to go to the next level of analysis and define
 20  a particular class of works that covers that.
 21  Again, we don't see that first step has been shown.
 22              MS. GOSLINS:  As I understood one of the
 23  points in your argument, was that non-infringing
 24  uses should cover -- what we should be looking at is
 25  adverse impacts on other things, such as licensed

                                                   PAGE 138
  1  uses or specifically-permitted uses under specific
  2  exemptions.
  3              And I think, in fact, we have heard some
  4  examples of problems in those categories.  In the
  5  Washington hearings we had a gentleman who talked
  6  extensively about dongles, and what happens when you
  7  have a lost or damaged dongle.  You still have an
  8  operating license, but you're unable to replace it
  9  because the company isn't willing, or it's out of
 10  business.
 11                                                 0
 12  -- but Lolly Gassaway representing the AAU and
 13  several other organizations, talked about a CD that
 14  she had in her library where the content expired,
 15  even though there was no license term restricting
 16  the content.  Restricting the time or limiting the
 17  time that the content should have been available.
 18  So that was a mistake situation.
 19              We also had testimony about libraries'
 20  statutory rights to lend certain things like books
 21  or software programs.  And their inability to do so
 22  if the material is encrypted, because they wouldn't
 23  be able to lend the decryption key to the person to
 24  whom they were lending the object.
 25              So we do have examples of ways in which
 26  people may be prohibited from making uses that would

                                                   PAGE 139
  1  be permissible under their license or under the
  2  statute.  And I'm just curious as to how you would
  3  respond to those.
  4              MR. METALITZ:  Well, let me take it in
  5  reverse order.  The decryption key issue, if I
  6  understand it, is really a question of whether
  7  there's a license agreement that is not -- you
  8  referred, I think, to a statutory right to lend
  9  something, and that certainly is a right that can be
 10  modified by a license agreement.
 11              So that when a library, let's say,
 12  acquires a piece of software, they, I would think,
 13  ordinarily do so subject to a license that states
 14  the circumstances under which it can be lent.  So I
 15  think that's really --
 16              MS. GOSLINS:  But let's assume there's
 17  not a license.  If a library purchases a copy of
 18  Steven King's e-book, "Riding A Bullet," I think
 19  it's called.  It can only be played on the computer
 20  which downloads that for that content.
 21              And even if there's no licensing term
 22  restricting them from lending the book, checking it
 23  out to the extent that they could do so
 24  technologically, they're incapable of doing so
 25  because of the access control protections.

                                                   PAGE 140
  1              MR. METALITZ:  Well, I think you're
  2  going to hear more about that in the next panel.
  3  Because that's a species of the general problem,
  4  which is whether the acquisition of a copy -- to say
  5  it that way -- necessarily brings with it the right
  6  to play that copy, use that copy on a machine of
  7  one's own choosing.  Or, rather, on the one that the
  8  copyright owner intended that it be used on.
  9              I think that would be a pretty -- I
 10  think that would be an expansion of what ordinarily
 11  has been considered the privileges of the user.
 12  It's kind of like saying if you bought a Betamax
 13  tape, you have to be able to play it on a VHS
 14  machine, and vice versa.  Again, these are not
 15  always problems that are as new as we sometimes
 16  think they are.
 17              MS. GOSLINS:  But, historically, the
 18  Copyright Act does go out of its way to ensure
 19  libraries have the ability to do certain things that
 20  a normal individual user wouldn't have.  Like
 21  archive, and like lend, and like preserve materials.
 22  I mean, that is --
 23              MR. METALITZ:  Right.  108 gives them
 24  those privileges.  And I think that was -- if I
 25  understood it, that was your second example that

                                                   PAGE 141
  1  Lolly -- was that a preservation issue that she was
  2  raising?
  3              MS. GOSLINS:  No.  She had purchased --
  4  my understanding is she had purchased a CD without
  5  any time restriction on it, and the material
  6  expired.  And after a fair amount of time she was
  7  able to get the manufacturer to replace it, because
  8  it had been a mistake.
  9              MR. METALITZ:  And, you know, if her
 10  library has bought defective books -- that the
 11  bindings came apart and the pages fell apart
 12  quickly, too.  You know, this would happen.  And I
 13  don't know that it's a copyright infringement when
 14  that occurs.
 15              The preservation issue, as you
 16  mentioned, there are privileges as far as the
 17  ability to copy.  And I think the issue you'd have
 18  to look at there is what exactly is it that the
 19  library or archive wants to do that they're unable
 20  to do without circumventing access controls.
 21              In some cases what they're concerned
 22  about is a copy control.  That they have it, they
 23  have access to it, but they can't copy it to move it
 24  from a fragile medium to a better medium, or from an
 25  obsolete medium to a non-obsolete medium. And that's
 26  a 108 issue.  As to the copyright side, it's non-

                                                   PAGE 142
  1  issue that 1201 affects, because as you know, it's
  2  not a violation to circumvent a copy control.
  3              Then you also have to look at -- so
  4  those are instances in which they don't need to
  5  violate 1201(a)(1) in order to achieve their
  6  objective.  Then you have some circumstances, I
  7  would think, in which even if they could violate --
  8  they did violate Section 1201(a)(1) once it comes
  9  into effect, they still wouldn't achieve their
 10  objective.
 11              If you have something that is in a
 12  medium where you don't have -- the hardware no
 13  longer exists or isn't accessible for you to play
 14  it, then the fact that you have a decryption key
 15  that you can use once you get it on a piece of
 16  compatible hardware doesn't really help you.
 17              So whether or not they circumvent
 18  Section 1201(a)(1) isn't going to have a direct
 19  impact on the ability to make non-infringing uses.
 20              But, again, I would come back to the
 21  question of what's the status quo?  What's happening
 22  today?  Today, aside from the cable area and a few
 23  other areas, it's not illegal to circumvent access
 24  controls.  Where are the instances in which
 25  libraries are forced to do this in order to gain
 26  access to this material?

                                                   PAGE 143
  1              Or are they able to gain it in other
  2  ways, either by locating another library that has
  3  the material in a usable format, and then using one
  4  of the exceptions in the Copyright Act they're able
  5  to gain access to it that way, or by dealing with
  6  the copyright owners.  I think you'd have to look at
  7  the specifics.
  8              MS. GOSLINS:  But if we just look at a
  9  narrow category in which the owner of -- or a user
 10  of a product has a license or the legal entitled to
 11  do something.  And for some reason in this very
 12  narrow category, other than arguably the intent of
 13  the copyright owner, they are prohibited from doing
 14  so by access control protections -- either because
 15  it's malfunctioning or because they can't get a
 16  replacement for their dongle, because the copyright
 17  owner has gone out of business or isn't responding
 18  to their calls.
 19              In those situations do you think -- and
 20  let's assume they want to make non-infringing use --
 21  in those situations do you think it would be
 22  appropriate to allow them to circumvent the access
 23  control?
 24              MR. METALITZ:  I think, again, you'd
 25  have to look at the specifics.  The dongle,
 26  situation, in some cases the copyright owner, as I

                                                   PAGE 144
  1  recall the testimony, was out of business.  And the
  2  witness had built a thriving business on perhaps
  3  violating Section 1201(a)(2).
  4              I don't know whether that's the case or
  5  not, or 1201(b)(1) -- because in many cases these
  6  would be copy controls.  But in any case he seemed
  7  to be having the business unmolested of providing
  8  these solutions to them.
  9              But the other thing that he was unhappy
 10  about was that -- and in the case of some of this
 11  high-end software the copyright owner was saying,
 12  "Well, if you buy it with the dongle, and you lose
 13  the dongle, you have to buy another copy of the
 14  software."  It seems to me that's a market issue
 15  more than a copyright issue.  Unless you think
 16  there's an entitlement to a particular license term
 17  which is, if you lose the dongle you get a new one
 18  free.
 19              And I don't think that the copyright law
 20  dictates that, nor do I think that that would be a
 21  good reason to intervene and bring the -- or hold up
 22  the applicability of Section 1201(a)(1).  So, you'd
 23  have to look at the specifics.
 24              MS. GOSLINS:  All right.  One final
 25  question, just sort of a statutory interpretation
 26  question.  So if you have a copy of the DMCA handy -

                                                   PAGE 145
  1  - I don't know if you do.  You might be able to just
  2  answer this without looking at it.
  3              In your understanding of the statute,
  4  let's assume for a moment that we were to exempt a
  5  particular class of works, assuming we could figure
  6  out what one was.  So we recommend to the Librarian,
  7  who recommends to Congress that a certain class of
  8  works be exempted, and that's accepted.  Then what
  9  happens?
 10              Are all uses of that -- of anything in
 11  that particular class of works then exempted from
 12  the Section 1201(a)(1) prohibition, or only non-
 13  infringing uses?
 14              MR. METALITZ:  Well, I don't think you
 15  have the authority to decide whether infringing uses
 16  are excused.  That's a copyright law issue, not a
 17  Section 1201 issue.  What you have the authority to
 18  -- actually, the Librarian has the authority to
 19  decide without going back to Congress, is whether
 20  the Section 1201(a)(1) prohibition will go into
 21  effect for a particular class of works.
 22              MS. GOSLINS:  And that's what I'm
 23  focusing on, what it means to go into effect.  If we
 24  recommend a class of works which is accepted, then
 25  what is the effect of that exemption?  Is it that
 26  from that point on, anything -- let's use chemistry

                                                   PAGE 146
  1  textbooks.  We recommend chemistry textbooks as a --
  2  I know the chemists are going to come after us.  I
  3  won't keep using that example.
  4              We recommend chemistry textbooks as a
  5  class of works that's exempted, and that's accepted.
  6  Then can anyone circumvent access control
  7  protections to a chemistry textbook, or only people
  8  who intend to make non-infringing uses of it?
  9              MR. METALITZ:  It would depend on how
 10  you define the particular class of works.  Because
 11  if you define a particular class of work as
 12  chemistry textbooks, then I assume that if someone
 13  brought a Section 1201(a)(1) action against someone
 14  for infringing -- or for circumventing the access
 15  control on the chemistry textbooks, that that would
 16  not be a valid cause of action, at least until
 17  October 28, 2003.  At that point it would be a valid
 18  cause of action, unless you made a new determination
 19  that chemistry textbooks --
 20              MS. GOSLINS:  Okay.  Can I ask you to
 21  look at 1201(a)(1)(D).  I apologize, it's a little
 22  dense as far as provisions go, and I don't mean to
 23  spring it on you now.
 24              MR. METALITZ:  No apologies are needed.
 25              MS. GOSLINS:  We've had some testimony
 26  that once the Librarian publishes an exempted class

                                                   PAGE 147
  1  of works, then -- as you'll see by the last sort of
  2  two lines in it, "the prohibition contained in
  3  Subparagraph A should not apply to such users,"
  4  meaning non-infringing users.
  5              MR. METALITZ:  No, it doesn't mean that.
  6  It means a user who circumvents.  I remember this --
  7  I know what you're driving at here, because this was
  8  from the earlier testimony.  In fact, when we go
  9  back and look at 1201(1)(b), "prohibition shall not
 10  apply to persons who are users of a copyrighted
 11  work."  And this is the point I think Arnie Lutzker
 12  was making.
 13              And the reason it says that is the only
 14  person who can be guilty of a violation of Section
 15  1201(a)(1) is a user of the work.  That's the person
 16  who circumvents an access control measure.  You
 17  don't bring that plan, that cause of action against,
 18  for example, somebody who posts the decryption
 19  algorithm on the Internet.  That person may not be
 20  circumventing, but they're trafficking in the tools
 21  of circumvention.  That's a 1201(a)(2) issue.
 22              But Section 1201(a)(1), the defendant is
 23  the user who circumvents an access control.  And
 24  what you have the power to recommend, or the
 25  Librarian has the power to decide, is which users

                                                   PAGE 148
  1  can do that without violating the law for that
  2  three-year period.
  3              MS. GOSLINS:  Not really which users,
  4  right?  Which classes of works, that can be done,
  5  too.
  6              MR. METALITZ:  That's correct.  If the
  7  user is circumventing the access control for a
  8  particular class of work, and that happens to fall
  9  within the particular class of work that you have
 10  identified, then that person is immune from
 11  liability under Section 1201(a)(1).
 12              I mean, the reason is you can't -- you
 13  have to say "user" because you don't sue the work.
 14  You don't -- the defendant is not the work, the
 15  defendant is not the particular class of work.  It's
 16  a user of a particular class of work who is
 17  privileged -- if you so decide and if the Librarian
 18  agrees -- to circumvent an access control measure
 19  during a specified period of time.
 20              MS. GOSLINS:  But if you look at
 21  Subsection D -- and I don't mean to argue with you
 22  here, I'm just trying to understand myself as I go
 23  through this statute.  It says, "The Librarian shall
 24  publish any class of copyrighted works for which the
 25  Librarian has determined pursuant to the rulemaking
 26  conducted under Subparagraph C, that non-infringing

                                                   PAGE 149
  1  uses by persons who are users of a copyrighted work
  2  are or are likely to be adversely affected.  And the
  3  prohibition contained in Subparagraph A shall not
  4  apply to such users with respect to such class of
  5  works."
  6              So why would they say "such users"
  7  unless they were referring to the users who were
  8  making the non-infringing uses?  The persons who
  9  were making non-infringing uses?
 10              MR. METALITZ:  Well, the people who want
 11  to make non-infringing uses are adversely affected
 12  in their ability to do that.  That's the threshold
 13  that you have to cross in order to make that
 14  determination.  If you find that people aren't --
 15  that there isn't an adverse impact on non-infringing
 16  uses, then we're not going to designate that
 17  particular class of work.
 18              But once you designate that particular
 19  class of work, it's not that 1201(a)(1)(A) doesn't
 20  apply to those uses, it doesn't apply to those
 21  users, such users.   And I would think that that
 22  refers back to persons who are users of a
 23  copyrighted work, rather than the non-infringing
 24  uses.  That's a threshold question you have to
 25  decide.

                                                   PAGE 150
  1              MS. GOSLINS:  But then wouldn't such be
  2  totally redundant?  And why wouldn't it just say the
  3  prohibition contained in Subparagraph A shall not
  4  apply to users with respect to such class of works.
  5  Or the prohibition contained in Subparagraph A shall
  6  not apply to such class of works.
  7              MR. METALITZ:  I think the reason it
  8  doesn't say the latter is probably because the claim
  9  is not brought against a class of works, it's
 10  brought against a user.
 11              So your question is inevitably -- in
 12  other words, in your particular class of work only
 13  applied to --
 14              MS. GOSLINS:  The prohibition, the
 15  exemption would only apply to people who were
 16  circumventing access control protections for that
 17  particular class of works who were making non-
 18  infringing uses thereof.
 19              MR. METALITZ:  Well, I think if you were
 20  able to maintain a perfect fit between what the
 21  evidence showed and what the scope of your
 22  particular class was, that that would be the
 23  outcome.  Because you would be able to tailor the
 24  particular class to only cover the evidence that you
 25  were persuaded by, that showed this adverse impact.

                                                   PAGE 151
  1              MR. CARSON:  I just want to make sure.
  2  I think I'm following you, but I just want to make
  3  sure we're absolutely clear on this.
  4              Let's assume that we determine that
  5  motion pictures are one of those classes.  I'm not
  6  saying we're going to, but just for sake of the
  7  example.  Let's say Rachel is a professor of film
  8  history at some university, and I'm someone who
  9  manufactures illicit CDs or DVDs of motion pictures.
 10              Now, motion pictures, maybe even motion
 11  pictures on DVDs, have been exempted from this.  Are
 12  you saying that when Rachel wants to do this, in
 13  order to excerpt -- to make excerpts from motion
 14  pictures to show to her class in an instructional
 15  context, she's able to take advantage of that
 16  exemption to circumvent.  That, I gather, would be
 17  clear.  Are you following me so far?
 18              MR. METALITZ:  Yes.
 19              MR. CARSON:  And because that class is
 20  exempted, if I want to take advantage of the ability
 21  to circumvent so that I can make all sorts of copies
 22  and market them, I would also be exempt because
 23  we've exempted that class.  Is that what you're
 24  saying?
 25              MR. METALITZ:  I think this follows from
 26  the independence of the infringement action from the

                                                   PAGE 152
  1  1201 liability.  The fact that you were making an --
  2  that you were setting out to infringe means you're
  3  going to be guilty of copyright infringement.
  4              MR. CARSON:  Okay.  A representative of
  5  at least one of the people whom you represent right
  6  now, this morning took exactly the opposite point of
  7  view.  So you might want to clarify just what your
  8  view, or the views of all the people you're
  9  representing, actually are on that.  Not that it's
 10  dispositive of the issue, but it would help us
 11  perhaps to know whether you're speaking with one
 12  voice, or what on that issue.
 13              MR. METALITZ:  Well, we're a very
 14  diverse group, as you know.
 15              (Laughter.)
 16              MR. METALITZ:  We've already had one
 17  member of our group tell you that the whole idea of
 18  creating a particular -- recognizing particular
 19  classes of works is unconstitutional, which I don't
 20  think is our unanimous view.
 21              But I think this helps to illustrate
 22  some of the difficulties you run into when you're
 23  talking about this in hypothetical terms.  And I
 24  know you have to operate that way, but it becomes
 25  difficult to answer these questions in the absence

                                                   PAGE 153
  1  of concrete evidence of adverse impact.  And
  2  thankfully, I think Congress recognized that.
  3              They wanted you to find -- they said you
  4  shouldn't find any class, you shouldn't even delve
  5  into these issues of what constitutes a particular
  6  class, and whether it necessarily includes users who
  7  are ultimately making infringing uses, or ultimately
  8  making non-infringing uses, unless you have specific
  9  strong and persuasive evidence that this is likely
 10  to occur.
 11              If you have that, then maybe it becomes
 12  a little bit easier to answer these questions.  And
 13  part of them could be answered, to some degree,
 14  definitionally.  How clearly do you define a
 15  particular class of works.  But I'm not saying
 16  that's a panacea in all these cases, but I think it
 17  illustrates the wisdom of waiting until you have
 18  concrete evidence before you try to answer that
 19  question.
 20              MS. DOUGLASS:  I have just a couple of
 21  quick, kind of broad questions.  And I hope they
 22  don't indicate that I have one view or another.
 23  It's just that I'm trying to put some clothes on a
 24  stick figure in my mind, as far as some of these
 25  concepts are concerned.  And thinking that it might
 26  be helpful to laypeople as well.

                                                   PAGE 154
  1              You said earlier that, I believe,
  2  although some others were saying that the burden of
  3  showing specific adverse effects could not be met,
  4  it can be met.  And I understand that this might be
  5  a statement against self-interest or something, but
  6  I'm going to ask the question anyway.
  7              Could you tell me how the burden might
  8  be -- how might one show adverse effects?  Just for
  9  purposes of understanding.
 10              MR. METALITZ:  Well, I can give one
 11  example that may be helpful in that regard.  If the
 12  witnesses told you that there were a number of --
 13  you know, the library witnesses told you that they
 14  had to circumvent access controls in order to serve
 15  their patrons, and that was the only alternative
 16  that they had.  And they were doing it on a daily
 17  basis, and that there was a -- they linked it to the
 18  particular non-infringing use that they would
 19  otherwise be unable to do.  Certainly that would be
 20  stronger evidence than what they've come forward
 21  with so far.  And particularly at this juncture.
 22              You know, in one sense the proponents of
 23  the exception do have a tougher burden now.  Because
 24  prohibition hasn't gone into effect.  So you can't
 25  say that anyone has been adversely affected by it
 26  yet, at least within the scope of that prohibition.

                                                   PAGE 155
  1              But you could, in theory, have evidence
  2  that shows the likelihood of an adverse impact,
  3  which was that this was a necessity in order -- that
  4  today this was a necessity, a central element of the
  5  way that libraries did business.  And that if they
  6  had to stop doing it on October 28, 2000, XYZ
  7  effects would occur.
  8              I'm trying to -- I'm disagreeing with
  9  the statements that you heard that said that
 10  basically Congress has sent you on a fool's errand
 11  here, and this burden could never be met.  I don't
 12  think Congress did send you on a fool's errand, I
 13  think the burden could be met if the evidence were
 14  there.  But it should be brought forward.  I don't
 15  think it has been met, but I don't think it's
 16  impossible.
 17              MS. DOUGLASS:  I'm trying to think of a
 18  line between adverse effect and mere inconvenience.
 19  And I'm trying to place, at least, something on one
 20  side or the other.  And I'm thinking of a situation
 21  where a library can either use a digitally-encrypted
 22  -- circumvent a digitally-encrypted work, or can go
 23  to 12 different other sources and get that same
 24  material.  Would that be an adverse effect or would
 25  that be an inconvenience?  Or is it harder than
 26  that?

                                                   PAGE 156
  1              MR. METALITZ:  Well, I think it is
  2  difficult to draw the bright line.  The examples
  3  that have been given about people having to come in
  4  late at night to get access because there is a
  5  limitation on the number of simultaneous users.  I'm
  6  not sure that would be an adverse effect at all, but
  7  if it is, it belongs in the mere inconvenience
  8  category.
  9              I think it's clear that, on the issue of
 10  availability of alternatives, which is an important
 11  issue -- and I think it's the one you've raised.  It
 12  doesn't have to be complete substitutability.  I
 13  think the fact that it is more inconvenient to
 14  assemble the material from other sources, rather
 15  than to decrypt it -- you know, that could be in the
 16  category of mere inconvenience.
 17              I guess the question I would ask in that
 18  situation is why is licensed access unavailable?  Or
 19  did the library simply choose, for whatever reason -
 20  - and it could be a very good reason -- not to
 21  license access to that material, or to stop
 22  licensing access to that material.
 23              I mean, as a consequence of that it may
 24  become more inconvenient for them to serve certain
 25  users.  But I think that's the result, certainly not
 26  of Section 1201(a)(1) and not even of the use of

                                                   PAGE 157
  1  access controls.  It's really a consequence of a
  2  decision the library has made, juggling its
  3  priorities and deciding which users it will give
  4  priority to, basically.
  5              MS. DOUGLASS:  Again, for purposes of
  6  understanding.  I'm wondering if it could be said
  7  that anticircumvention amounts to a per se
  8  imposition of liability for non-infringing use.  And
  9  if that's not correct, why not?  And if it is
 10  correct, why?
 11              MR. METALITZ:  Well, I think it's the
 12  cause of action for infringement and the cause of
 13  action for a violation of anticircumvention
 14  prohibitions are two separate claims.  Two separate
 15  causes of action.
 16              So, it's certainly true that someone
 17  could be liable for a violation of Section 1201
 18  without being liable for copyright infringement.
 19  And we've already seen examples of that in the cases
 20  that have come up under 1201(a)(2) and (b)(1).  They
 21  may or may not involve copyright infringement, but
 22  it's an independent cause of action.  I don't know
 23  if that's responsive to your question.
 24              MS. DOUGLASS:  I think it is.  Thank
 25  you.

                                                   PAGE 158
  1              MR. CARSON:  Steve, I'd like to get your
  2  reaction to one example that was brought up this
  3  morning.  Let's assume it's November 1st.  I happen
  4  to have a subscription otherwise Lexis, I have a
  5  Lexis ID.  Rachel doesn't.  She wants to do some
  6  legal research, so I give her my ID and she uses it.
  7  Has she violated Section 1201(a)?
  8              MR. METALITZ:  Has she violated it by
  9  using your, or have you violated it by giving it to
 10  her?
 11              MR. CARSON:  Well, have either of us
 12  violated it?  Is that circumvention of a
 13  technological measure that controls access?
 14              MR. METALITZ:  I mean, she's using your
 15  password presumably with your permission.
 16              MR. CARSON:  But certainly not with
 17  Lexis' permission, right?
 18              MR. METALITZ:  Right.  And it certainly
 19  -- let's assume.  I don't know, but let's assume
 20  it's a violation of the Lexis license agreement
 21  which it was the day before October 28th.  I think
 22  that's probably how that issue would be resolved.
 23              Is it a -- it's a question of whether
 24  she is circumventing an access control measure, and
 25  a password often has that rule.

                                                   PAGE 159
  1              MR. CARSON:  So I gather what you're
  2  saying is that if an unauthorized person uses an
  3  authorized password, that is a violation of the
  4  anticircumvention provision?
  5              MR. METALITZ:  I don't know that it
  6  would be.  Because I think you'd have to see what
  7  the authority of the person -- was there apparent
  8  authority, was there -- you know, you get into those
  9  agency questions.  But if you're saying could it be
 10  a violation, yes, I guess it could be.
 11              MR. CARSON:  Okay.  Can you help me out
 12  by letting me know what the purpose of having this
 13  rulemaking is?  I'm not saying what are we supposed
 14  to be doing, but what is the purpose for having this
 15  rulemaking?
 16              MR. METALITZ:  I think the purpose for
 17  having the rulemaking is that while Congress had an
 18  expectation of how things would evolve, they didn't
 19  have complete certainty about how the digital -- you
 20  know, the use of technologies and online digital
 21  technologies would evolve.  How the marketplace
 22  would evolve.
 23              And although they expected -- at least
 24  the House Manager Report said they thought the
 25  likeliest outcome would be that the use of
 26  technological measures backed up by Section

                                                   PAGE 160
  1  1201(a)(1) and the other 1201 prohibitions would
  2  lead to greater availability, greater access to
  3  material for non-infringing.  That it was possible
  4  that that would not happen.
  5              So I think the purpose of it is Congress
  6  built in a safety valve into this system, and your
  7  job is to see whether there is, in fact, steam
  8  passing through that safety valve.             0
  9  it's got to be pretty hot before you can blow the
 10  whistle.  And I'm about to crash my metaphor here,
 11  but I think the safety valve function is what
 12  Congress asked you to perform.  I'm not sure if that
 13  answers your question.
 14              MR. CARSON:  Well, it's an answer and
 15  it's a good answer.  I'm not sure it totally answers
 16  what I was trying to get at.
 17              MR. METALITZ:  Well, try again.
 18              MR. CARSON:  Well, if we were to
 19  recommend that a particular class be exempt, what
 20  would we be trying to accomplish, or who would we be
 21  trying to help by doing that?
 22              MR. METALITZ:  I think you would be
 23  trying to help the end-user who, if you found such a
 24  class, would in the absence of your action be
 25  substantially adversely impacted in their ability to

                                                   PAGE 161
  1  make non-infringing uses for that particular class
  2  of works.
  3              So I think you have to look at the end-
  4  user.  As I said in my statement, I think that's on
  5  whose behalf this undertaking is the -- you know,
  6  that this rulemaking is proceeding.  I think at the
  7  same time you obviously have to take into account
  8  what are the -- as I said, it's a net calculation.
  9              And you have to take into account what
 10  are the ways in which the use of technological
 11  control measures, backed up by this legal provision
 12  have increased availability, have increased access.
 13  So you have to take into account those interests as
 14  well.
 15              But you're looking at the user is
 16  substantially adversely impacted in his ability to
 17  make non-infringing uses.  That's kind of the litmus
 18  test.
 19              MR. CARSON:  Okay.  Now, I think you've
 20  said in either your oral or your written testimony,
 21  and maybe both, that in defining a class of works
 22  for purposes of this rulemaking, we really can't
 23  include in the definition the type of user who we're
 24  thinking of.  Is that accurate?
 25              MR. METALITZ:  Well, it certainly can't
 26  be determined based on that.  Such as the proposals

                                                   PAGE 162
  1  that it should be any type of work that is marketed
  2  to libraries, for example.
  3              MR. CARSON:  Okay, fair enough.  But
  4  let's go back to an example I gave you a little
  5  while ago.  Let's say motion pictures on DVDs.
  6  Assuming the case were made that there were a
  7  problem there, would it be a legitimate class to
  8  say, "We're not going to exempt motion pictures on
  9  DVDs as such as a class.  But we are going to exempt
 10  motion pictures on DVDs when used by film school
 11  professors."
 12              MR. METALITZ:  I think that would be
 13  very questionable under this scheme, because
 14  Congress asked you to look at particular classes of
 15  works.  I would hesitate to say that you can't make
 16  any reference to the type of -- you know, you have
 17  to define a particular class of works.  And Congress
 18  did not exactly tell you how to do that.  But it
 19  certainly didn't tell you to define a particular
 20  class of privileged users.
 21              At one point it was going to do that.
 22  Originally this rulemaking proceeding was to look at
 23  whether 501(c)(3), (4) and (6) organizations and
 24  people who had initial lawful access, and some other
 25  specified categories of users were being adversely
 26  impacted.  That's not where this ended up.

                                                   PAGE 163
  1  It ended up with a definition of a particular class
  2  of works.
  3              MR. CARSON:  Well, then, where we seem
  4  to end up with your interpretation, having rejected
  5  the interpretation in Subparagraph D that Rachel was
  6  discussing with you, is that we have a very blunt
  7  instrument indeed to use to deal with problems
  8  caused by the anticircumvention provision.
  9              We can't tailor the class to the
 10  problem.  We simply have to find that if there are
 11  some users, maybe a minority of users of a work who
 12  have serious problems with this particular kind of
 13  work, we've got to exempt that class for everyone.
 14  Does that make any sense at all?
 15              MR. METALITZ:  Well, I don't know that
 16  your tool is quite that blunt.  Because, again, I
 17  think you have some flexibility in how you define a
 18  particular class of work.  But I think by directing
 19  you to make a net determination to take into account
 20  the positive aspects of the use of access control
 21  measures, Congress did intend that you -- you know,
 22  there might be some adverse impacts that would be
 23  counterbalanced by positive impacts.
 24              And that even if there were some adverse
 25  impacts that wouldn't by itself justify finding a
 26  particular class of works, you have to do a net

                                                   PAGE 164
  1  calculation -- I mean, I could go back and look at -
  2  - I mean, it's in the House Manager's Report and
  3  elsewhere.  But it's a net calculation.
  4              MR. CARSON:  I don't think you addressed
  5  it today, but certainly in your written comments you
  6  spent some time talking about the DVD issue and so
  7  on.  This calls for a yes or no answer.  Do you have
  8  thoughts you might want to share with us on that
  9  issue today?
 10              MR. METALITZ:  No, I think I'll leave
 11  that to the experts that you're about to hear from.
 12              MR. CARSON:  All right.  I was going to
 13  ask, but I think you may have answered it.  Whether
 14  it makes sense to have you hang around for the Q and
 15  A on the DVD issue.  But am I hearing that you don't
 16  think you can contribute anything beyond what --
 17              MR. METALITZ:  I'd be glad to.  I'm at
 18  your disposal.
 19              MR. CARSON:  Okay.  That's all I have.
 20              MS. PETERS:  Okay.  I don't have any
 21  additional questions.  Thank you very much, Mr.
 22  Metalitz.  And we'll now go to our last panel.
 23              All right.  As we go to our last panel
 24  we're going to start with you, Ms. Gross.  Thank
 25  you.

                                                   PAGE 165
  1              MS. GROSS:  Thank you.  The Electronic
  2  Frontier Foundation appreciates this opportunity to
  3  testify regarding the adverse effects on the
  4  prohibition against circumvention of technological
  5  protections enacted by the DMCA.
  6              DVD technology causes an adverse effect
  7  on people's ability to make non-infringing uses of
  8  copyrighted works, and should therefore be ruled
  9  exempt from the DMCA's circumvention ban.  The
 10  licensing terms imposed on DVD technology prevent
 11  player manufacturers from offering people the
 12  ability to bypass the region codes.  The same terms
 13  prevent players from making non-infringing copies on
 14  traditional VHS tapes or computer hard drives for
 15  personal or educational use.
 16              People who have attempted to eliminate
 17  these restrictions by making competing DVD players
 18  from legitimate reverse engineering, rather than by
 19  signing a license, have been sued and enjoined under
 20  the DMCA by major movie studios.  The content
 21  scrambling system, CSS, is deliberately designed to
 22  prevent legitimate purchasers from being able to
 23  view their own purchased movies.
 24              The region coding scheme used by DVDs
 25  prevents individual U.S. residents who purchase DVD
 26  movies from anywhere else in the world from simply

                                                   PAGE 166
  1  viewing these movies on DVD players sold in the
  2  United States.  This diminishes the ability of these
  3  individuals to use copyrighted works in ways that
  4  are otherwise lawful.
  5              In other words, the DMCA is being used
  6  to prevent people from watching the movies they own
  7  on the machines that they own.
  8              The adverse effect impact on persons
  9  outside the U.S. is even greater.  A large fraction
 10  of the world's movies are created by U.S. movie
 11  studios in the U.S., and released first on DVD in
 12  the U.S.  At that time, persons anywhere in the
 13  world are free to purchase these DVDs from U.S.
 14  retailers or wholesalers.
 15              However, when they arrive the CSS
 16  technical protection measures prevent them from
 17  playing.  Months later, some of these movies are re-
 18  released on DVDs coded for other regions.  These re-
 19  releases are sold at higher prices than the original
 20  U.S. release, particularly in Europe.  This delays
 21  and diminishes the ability of the entire world's
 22  population to use these copyrighted works in ways
 23  that are otherwise lawful.                     0
 24  coding serve as a technological restraint on the
 25  global trade in copyrighted movies.  The leading UK
 26  grocery chain, Tesco, started selling discount DVD

                                                   PAGE 167
  1  machines in February of 2000.  By mid-February they
  2  were selling tens of thousands of players from 400
  3  stores, "once Internet sites and electrical
  4  magazines showed customers how to change the player
  5  to recognize discs from around the world."
  6              Tesco's press release mentions their
  7  letter to Warner Home Video "Calling for an end to
  8  the 'unnecessary practice' of zoning -- which uses
  9  technology to prevent customers from buying DVD
 10  discs from around the world to play on machines in
 11  the UK.  The letter goes on to say that Tesco
 12  believes "This is against the spirit of free
 13  competition and potentially a barrier to trade."
 14  Their World Sourcing Director, Christine Cross,
 15  said, "If we find a practice that we believe is
 16  keeping prices high -- we'll fight to change it so
 17  prices come down."
 18              The licensing organization that controls
 19  DVD technology, the DVD Copy Control Association,
 20  has taken steps to exterminate this supply of
 21  'region free' players.  Its FAQ says, "In cases
 22  where DVD-CCA learns of such products, immediate
 23  action is taken through the manufacturer to have the
 24  product corrected to conform with the CSS license."
 25              Indeed, it enforced a contract term on
 26  December 31, 1999 that eliminated its licensees'

                                                   PAGE 168
  1  ability to sell computer DVD drives whose region
  2  controls were implemented in software. 
  3       Millions of users of DVD technology have been
  4  adversely affected in their ability to make non-
  5  infringing uses of copyrighted works.  The 'region
  6  coding' scheme prevents virtually every commercial
  7  DVD from being playable in most regions of the
  8  world, raising the prices and reducing the
  9  availability of works to legitimate buyers.  This
 10  has an adverse effect on the ability of buyers to
 11  simply view a work which they have purchased -- the
 12  most non-infringing use possible.
 13              CSS, together with the web of laws and
 14  contracts around it also eliminate the individual's
 15  ability to make non-infringing copies of DVD images.
 16  Fritz Attaway, MPAA's Washington General Counsel,
 17  declared under oath, "Under the terms of the CSS
 18  license, such players may not enable the user to
 19  make a digital copy of a DVD movie."  The
 20  restriction is imposed by contracts, implemented by
 21  technology and enforced by DMCA lawsuits.
 22              There is no balance to it.  It does not
 23  follow the boundaries of the copyright law.
 24  Professors are unable to make excerpts to show their
 25  classes.  Parents are unable to make VHS copies for
 26  their kids' VCRs.  Programmers and artists are

                                                   PAGE 169
  1  unable to manipulate the images with their own
  2  software.  The CSS's blanket prohibition of copies
  3  and excerpts throws the baby out with the bath
  4  water.  CSS prohibits all fair use copying, as well
  5  as all illicit copying.  It prohibits all copying.
  6              Congress expressed its clear intent in
  7  Section 1201(c)(1) of the DMCA by stating that
  8  "Nothing in this section shall affect rights,
  9  remedies, limitations or defenses to copyright
 10  infringement, including fair use, under this title."
 11              According to the DMCA's plain wording,
 12  the traditional limitations to the copyright
 13  holders' exclusive rights shall remain in the
 14  digital realm.  Congress' choice of the word "shall"
 15  indicates in the intention is not permissive or
 16  optional at the choice of the copyright holder.  But
 17  rather a mandatory requirement that balance and
 18  longstanding traditional doctrines such as fair use
 19  and the First Sale Rule continue to have meaning in
 20  the digital paradigm.
 21              There is no debate that Congress
 22  intended balance in the DMCA and preservation of
 23  traditional copyright principles in the digital
 24  world.  Congress recognized the inherent dangers in
 25  enacting a circumvention ban and instructed this
 26  body to anticipate adverse effects and rule

                                                   PAGE 170
  1  additional classes exempt from the general ban as a
  2  remedy.
  3              As the U.S. Supreme Court has explained,
  4  fair use serves as a First Amendment safety valve
  5  within copyright law in Harper & Row, Publishers,
  6  1985.  Copyright law's fair use privilege fulfills
  7  its constitutional purpose by allowing individuals
  8  to copy works for socially important reasons without
  9  the permission of the author.
 10              Thus, granting perfect control to
 11  copyright holders would be constitutionally
 12  impermissible.  This rulemaking is charged with
 13  effectuating the DMCA in such a way that it does not
 14  violate the spirit of the constitutional limitations
 15  placed on copyright.  To find otherwise would allow
 16  the DMCA to swallow fair use in clear contradiction
 17  to Congress' plain intent in Section 1201(c).
 18              At a recent conference at Yale Law
 19  School, the MPAA publicly stated that it was the
 20  organization's position that an individual should be
 21  required to obtain a license before making fair use
 22  of a DVD.  Clearly, this position cannot withstand
 23  legal sanction.
 24              It would be an abuse of intellectual
 25  property law to allow the motion picture industry to
 26  obtain all of the economic benefits of copyright

                                                   PAGE 171
  1  protection with none of the accompanying social
  2  responsibilities.  Technological protection systems
  3  such as CSS that prevent the public from exercising
  4  their legitimate rights abuse the copyright bargain
  5  and should be exempt from the general circumvention
  6  ban.
  7              EFF is not spending millions of dollars
  8  in court merely to exonerate one or two individuals,
  9  or to enable distribution of a poorly-written
 10  software prototype.  We are here to establish the
 11  principle that the anticircumvention provisions
 12  cannot be used to eliminate fair use broadly
 13  throughout society.
 14              Nor can it be used to eliminate
 15  competitors who would offer legitimate access and
 16  copying capabilities to a major consumer market.
 17  Several lawmakers verified congressional intent by
 18  insisting that the DMCA does not and is not intended
 19  to overrule the Betamax Supreme Court case.
 20              Two years ago, there could have been
 21  some doubt about whether the ill effects of the CSS
 22  system were caused by the existence of the
 23  prohibition against circumvention.  Certainly the
 24  movie studios spent a lot of energy lobbying for
 25  these DMCA provisions, but the evidence was
 26  circumstantial.

                                                   PAGE 172
  1              This year it is clear.  The movie
  2  studios have made a clear and obvious causal
  3  connection in their own briefs, tying their
  4  motivation in building the CSS system to the
  5  technological measures that restrict access to fair
  6  use.  And then tying those to the DMCA
  7  anticircumvention statute.
  8              The top eight movie studios, they
  9  themselves declared in their initial briefs, "Each
 10  of the Plaintiffs relied on the security provided by
 11  CSS in manufacturing, producing and distributing to
 12  the public copyrighted motion pictures in DVD
 13  format...CSS is a technological measure that (a)
 14  effectively controls access to works protected by
 15  the Copyright Act, and (b) effectively protects
 16  rights of copyright owners to control whether an
 17  end-user can reproduce, manufacture, adapt, publicly
 18  perform and/or distribute unauthorized copies of
 19  their copyrighted works or portions thereof..."
 20              Thus, the DMCA encourages technological
 21  solutions in general by enforcing private parties'
 22  use of technological protection measures with legal
 23  sanctions for circumvention and for producing and
 24  distributing products that are aimed at
 25  circumventing protection measures like CSS.

                                                   PAGE 173
  1              To be sure, technology provides
  2  opportunity for benefit and abuse on behalf of all
  3  parties to the copyright bargain.  Individuals
  4  engaging in piracy for commercial gain abuse
  5  intellectual property and harm society and creators.
  6  Likewise, the imposition of technology such as CSS
  7  onto the public that prevents creative works from
  8  readily passing into the public domain and restricts
  9  people from exercising their fair use rights is
 10  similarly abusive.
 11              The use of such abusive systems that do
 12  not uphold their end of the copyright bargain cannot
 13  be backed up by force of law if copyright is to
 14  continue to serve as the engine of free expression.
 15              Contrary to the fears expressed by the
 16  publishing industry, it is possible to preserve
 17  constitutional values without destroying the value
 18  behind creative expression.  In its justification
 19  for greater control over creative expression, the
 20  industry claims the new-found phenomena of digital
 21  technology leaves copyright holders at the mercy of
 22  massive unchecked piracy.
 23              While the industry has loudly overstated
 24  any potential harm it might face resulting from
 25  digital technology, it quietly looks the other way
 26  without mentioning the unprecedented power

                                                   PAGE 174
  1  technology provides to copyright holders to control
  2  access and use over creative expression.
  3              The copyright industries' glaringly
  4  self-interested suggestion that this committee
  5  exempt nothing from the circumvention ban ignores
  6  Congress' stated desire that DMCA not effect this
  7  nation's core constitutional values.
  8              It is crucial that this committee
  9  consider the longer and societal view in deciding
 10  these important issues.  If you don't have the
 11  ability to exercise your rights, then you don't have
 12  rights.
 13               There are greater issues at stake than
 14  mere economic interests of a few corporations.
 15  Unencumbered access to information is essential to
 16  knowledge creation, innovation and the democratic
 17  discourse of a free and healthy society.  We must
 18  diligently resist the content industry's push to
 19  build a legal system that optimizes our children for
 20  commercial consumption of creative expression at the
 21  expense of their imagination, education and cultural
 22  enrichment.
 23              I'd like to address the unfounded fears
 24  expressed by the content industry that any
 25  additional exemptions would violate U.S.' WIPO
 26  Treaty obligations.  Article 11 of the WIPO

                                                   PAGE 175
  1  Copyright Treaty provides that, "Contracting parties
  2  shall provide adequate legal protection and
  3  effective legal remedies against the circumvention
  4  of effective technological measures that are used by
  5  authors in connection with the exercise of their
  6  rights under this Treaty or the Berne Convention and
  7  that restrict acts, in respect of their works, which
  8  are not authorized by the authors concerned or
  9  permitted by law."
 10              The DMCA went well beyond what was
 11  agreed to among contracting parties to the Treaty by
 12  granting an additional and completely separate
 13  access right.  Thus, any additional exemptions under
 14  that right would have no effect on U.S. treaty
 15  obligations under WIPO.  Additionally, the plain
 16  language of the Treaty permits circumvention for
 17  fair use.
 18              The Copyright Office should define an
 19  exempted class as DVD movies.  The movie studios
 20  stated in court filings that over one million copies
 21  of such works are sold every week.  This is the
 22  class of works currently showing adverse effects.
 23              It would be disingenuous to designate a
 24  class such as DVD movies protected by a region
 25  coding system.  Since consumers have flocked to
 26  hardware and software devices whose region codes can

                                                   PAGE 176
  1  be disabled, and manufacturers are starting to
  2  rebel, the movie studios might decide to "throw
  3  region coding overboard" in order to save the rest
  4  of their restrictive scheme.
  5              A designation that only applied to CSS
  6  works with region coding would still enable them to
  7  suppress competitors whose equipment provides fair
  8  use copying.
  9              Similarly, the industry could evade a
 10  ruling against a class such as DVDs protected by CSS
 11  by merely switching to a different but equally
 12  restrictive protection system.  An improved CSS-2
 13  system already exists, and the industry is actively
 14  designing stronger ones.
 15              Therefore, the entire class of DVD
 16  movies is threatened with adverse effects now, and
 17  in the next three years, and should be exempted from
 18  the anticircumvention provisions of the DMCA.
 19              The movie studios stated in court
 20  filings in January that about 4,000 movie titles
 21  have been released in the U.S. on DVD, that over
 22  five million DVD players have been sold, and that
 23  over 1 million copies of such works are sold every
 24  week.  This is not an issue of "individual cases,"
 25  but a broadly implemented system that impacts all
 26  segments of society.

                                                   PAGE 177
  1  A deliberately-designed inability to play the work
  2  you purchased is no mere inconvenience.
  3              In the comments and testimony provided
  4  by the content industry before this proceeding, the
  5  charge continues to surface that no one has supplied
  6  any evidence of actual harm resulting from the use
  7  of such dangerous protection systems we discuss
  8  today.  I need not remind the committee of the
  9  hundreds of individuals who submitted comments
 10  complaining about their inability to view or simply
 11  make fair use of DVDs.                         0
 12  testimony before this committee, CCUM described a
 13  teaching method using DVD that has become
 14  unavailable to educators.
 15              It is imperative that this proceeding
 16  recognize that the public's sheer inability to
 17  exercise its legal right with respect to certain
 18  types of works because technological protections
 19  have been applied, is by its mere existence, a
 20  substantial harm perpetrated against the First
 21  Amendment.
 22              As the U.S. Supreme Court stated in
 23  Elrod v. Burns, "The loss of First Amendment
 24  freedoms, even for minimal periods of times
 25  unquestionably constitutes irreparable injury."  I
 26  encourage the Librarian to weigh the constitutional

                                                   PAGE 178
  1  considerations into its determination about the
  2  societal harm.
  3              Copyright's goal is to create a world
  4  full of creators with a rich and thriving public
  5  domain where creativity flourishes.  In addition to
  6  legal protection designed to enable a market for
  7  works, creators vitally rely upon ready access to
  8  information, including a vibrant public domain and
  9  the ability to engage in a wide range of legitimate
 10  uses including fair use.  If copyright is to achieve
 11  its objective, society's true creators must continue
 12  to be allowed to build upon the works of their
 13  ancestors.
 14              Because of the demonstrated widespread
 15  adverse impact on non-infringing use and fair use
 16  imposed by their technological restrictions, DVD
 17  movies should be exempt from Section 1201.  Thank
 18  you.
 19              MS. PETERS:  Thank you, Ms. Gross.  Mr.
 20  Marks?
 21              MR. MARKS:  Thank you.  First I'd like
 22  to thank you for the opportunity to testify at this
 23  important hearing.  My name is Dean Marks and I am
 24  Senior Counsel, Intellectual Property, for Time
 25  Warner.  I appear here today on behalf of Time
 26  Warner and the Motion Picture Association of

                                                   PAGE 179
  1  America.  I would like to make a few general
  2  statements, and then discuss in a bit more detail
  3  the issue of DVD and the CSS protection technology.
  4              As a preliminary matter, much has been
  5  written and said in the context of this inquiry that
  6  seems to pit content owners against consumers over
  7  the fair use issue.  My company and fellow content
  8  providers not only support the fair use doctrine,
  9  but we rely on it every day.
 10              In creating and publishing our movies or
 11  music, we frequently rely on the protections that
 12  fair use provides, for example, to comment or to
 13  parody.
 14              From what I have read and heard during
 15  the course of this inquiry, no concrete evidence has
 16  been adduced that any user has been prevented from
 17  making non-infringing uses of a work due to the
 18  presence of technological protection measures.
 19              Discomfort has been expressed by some
 20  librarians over the terms of certain content
 21  licenses, but this is an issue separate and apart
 22  from whether exceptions to the legal protection of
 23  technical measures should be adopted.
 24              Moreover, the potential harms that have
 25  been described are hypothetical and speculative.
 26  Contrast this with the very real evidence of threats

                                                   PAGE 180
  1  to the rights of copyright owners that arise in
  2  today's digital and Internet environments.
  3              On May 10, the New York Times published
  4  an article entitled "The Concept of Copyright Fights
  5  for Internet Survival."  The article describes
  6  several new software programs, most notably Freenet,
  7  that have been developed and are used to deprive
  8  copyright owners of the ability to exercise their
  9  rights in the distribution of their works.
 10              As stated in the article, the developers
 11  of such programs "express the hope that the clash
 12  over copyright enforcement in cyberspace will
 13  produce a world in which all information is freely
 14  shared."  It is that sort of threat that content
 15  owners worry about when we speak about the copyright
 16  balance today.
 17              These very real threats to the rights of
 18  copyright owners led not only the U.S. Congress, but
 19  also the world community in the WIPO treaties to
 20  determine that technical protection measures used by
 21  copyright owners must be entitled to legal
 22  protection against circumvention.
 23              In considering the possibility of any
 24  exception to the Section 1201(a) prohibition, the
 25  Register of Copyrights and the Librarian of Congress
 26  must weigh the lack of evidence of harm to non-

                                                   PAGE 181
  1  infringing uses with the substantial evidence of
  2  harm to copyright owners that will result from the
  3  weakening of the legal protections afforded to
  4  technical measures.
  5              Furthermore, there's an underlying
  6  assumption of many -- not all, but many of the
  7  remarks made in the course of this inquiry is that
  8  technological protection measures will be used to
  9  "take" works away from users, or to deny access.  I
 10  strongly believe that this assumption is
 11  fundamentally flawed.
 12  Technological protection measures can actually
 13  facilitate the making of works available to
 14  consumers.
 15              We've heard discussions of DVD.  DVD is
 16  a concrete example of this proposition.  My company
 17  would not have released its motion pictures on the
 18  DVD format if DVD did not incorporate technological
 19  protection measures.  The risk of unauthorized
 20  reproduction and distribution of our content in the
 21  digital format without protection would simply be
 22  too great.  Without the content scramble system
 23  there simply would not be DVDs in the market today.
 24              The DVD format has permitted users to
 25  view and own copies of motion pictures in a new and
 26  desirable digital format.  This is why DVD has

                                                   PAGE 182
  1  become so popular.  Why, in fact, a million DVDs are
  2  sold each week.  Because it's a popular and
  3  consumer-friendly format.
  4              Further, DVD has allowed users for the
  5  first time to play high quality copies of motion
  6  pictures on their personal computers.  These new
  7  uses of motion picture content have been made
  8  economically possible due to the development and
  9  implementation of technical measures, including
 10  access controls.
 11              To now argue that these technological
 12  protection measures should be subject to
 13  circumvention because DVDs may not be playable on
 14  all personal computers misses the point that if the
 15  integrity of technological protection measures are
 16  not legally protected, content owners will be
 17  reluctant to make their works available in these new
 18  formats in the first place.
 19              A clear real-life example is DVD-Audio.
 20  Due to the recent compromise of CSS and the fact
 21  that technological protection for DVD-Audio had been
 22  developed and premised on CSS, music companies have
 23  delayed indefinitely the launch of the DVD-Audio
 24  format.  The result is that consumers have been
 25  deprived of a new music format.

                                                   PAGE 183
  1              Thus, circumvention of technical
  2  measures, whether sanctioned through this process or
  3  accomplished in violation of law, can seriously
  4  diminish the general public benefit.
  5              I would like to turn and pick up on a
  6  point made earlier today by Frederick Weingarten.  I
  7  agree with Mr. Weingarten that the development and
  8  implementation of technological protection measures
  9  can be a win/win situation for both content owners
 10  and users.
 11              For example, technological protection
 12  measures are under development that would permit
 13  users to make a copy of certain pay television
 14  programs that are otherwise protected by encryption
 15  and other technical measures.  In the context of the
 16  copy protection work underway in the Secure Digital
 17  Music Initiative, all participating parties have
 18  agreed that consumers who purchase music protected
 19  by technical measures should be able to engage in
 20  certain levels of copying for private use.
 21              Thus, the development and implementation
 22  of technical measures that inhibit massive
 23  unauthorized copying and distribution, but permit
 24  limited consumer copying opportunities, will
 25  actually facilitate the making available of works to

                                                   PAGE 184
  1  more consumers in more formats, and their ability to
  2  make non-infringing uses. 
  3              These technologies may also make it
  4  easier for content owners to make their works
  5  available to libraries in digital format, and, in
  6  turn, for libraries to make these works available to
  7  their users without undue risk of economic harm to
  8  the owners due to unauthorized reproduction,
  9  transmission and re-distribution.
 10              The development and implementation of
 11  technical measures is in its infancy in the digital
 12  world, particularly with respect to the Internet.
 13  We should give some breathing room for the measures
 14  to be developed and implemented before we seek to
 15  undercut their legal protection.
 16              It has been mentioned by prior
 17  witnesses, including Paul Hughes from Adobe this
 18  morning, and Bernard Sorkin from Time Warner at the
 19  Washington hearing, that content providers must be
 20  mindful of the desires of consumers.  We are in the
 21  business of selling our content to the public, and
 22  we cannot survive as an industry if we do not widely
 23  distribute our works to consumers.
 24              Because of this imperative, it is highly
 25  unlikely that we will employ technical measures that
 26  will be seriously detrimental to the ability of our

                                                   PAGE 185
  1  consumers to make non-infringing uses.  But this is
  2  only part of the answer, and you don't need to
  3  simply trust us.
  4              As a practical matter, content owners
  5  cannot unilaterally develop and implement technical
  6  measures of their own choosing.  Why is this?  Well,
  7  sound recordings and audio/visual works can only be
  8  enjoyed by the use of receiving and playback devices
  9  such as television sets, CD or record players,
 10  videocassette players, personal computers, et
 11  cetera.
 12              Therefore, we as content owners cannot
 13  simply apply technical measures to our works that
 14  will cause all receiving and playback devices to be
 15  unable to play our works.  If we were to do this, we
 16  would quickly be out of business.
 17              Equally important, however, the goal of
 18  protecting works cannot be achieved if receiving,
 19  playback and recording devices do not recognize and
 20  respond to the technical measures that we seek to
 21  incorporate in our works, but they simply ignore
 22  them.
 23              So, to work properly, copy protection
 24  technologies must be bilateral.  The technologies
 25  applied by content owners need to function with
 26  consumer electronics and computer devices.  This

                                                   PAGE 186
  1  bilateral requirement means that protection measures
  2  are not simply a matter of technological innovation.
  3  And they are not simply a matter of fulfilling a
  4  list of demands by content owners.
  5              Rather, copy protection technologies
  6  such as the CSS system for DVD require a high level
  7  of consensus among the content industry and the
  8  consumer electronics industry and computer industry.
  9  This consensus requirement means that access control
 10  and copy protection structures, and the use of
 11  technical measures, are heavily negotiated across
 12  industries.
 13  And, indeed, the negotiations over the CSS system
 14  spanned at least two years and possibly longer than
 15  that.
 16              Because the consumer electronics and
 17  computer industries have strong vested interests in
 18  ensuring that their devices permit users wide
 19  latitude to use copyrighted works, the copy
 20  protection structures and technologies that are, in
 21  fact, being developed and implemented in the area of
 22  audio/visual and musical works fully recognize user
 23  concerns.
 24              Finally, this inquiry is not a one-shot
 25  deal.  At the moment it seems clear that there has
 26  been no evidence presented of any adverse effect,

                                                   PAGE 187
  1  and hence it seems premature for any exceptions to
  2  Section 1201(a) to be enacted.  The fears expressed
  3  that the DMCA and the anticircumvention provisions
  4  will harm users or the fair use doctrine have not
  5  materialized, and indeed these fears may never come
  6  to pass.
  7              If any of the "parade of horribles" that
  8  have been described by some of the witnesses
  9  materialize in the future, then the Register and the
 10  Librarian will have the opportunity to consider
 11  appropriate remedies in future rulemaking
 12  procedures.  At the moment, frankly, this exercise
 13  appears to be a case of attempting to devise a
 14  solution in search of a problem.
 15              I now want to turn specifically to the
 16  case of DVD and CSS.  In several of the comments
 17  received by the Copyright Office, reference was made
 18  to DVDs and the alleged inability of users of the
 19  Linux operating system to play DVDs on their
 20  computers.
 21              Much confusion, I would even say
 22  misconception and misinformation, surrounds the
 23  issue of DVD, CSS and Linux.  First, there is no
 24  legal or technical barrier to building an open
 25  source interface between the Linux operating system

                                                   PAGE 188
  1  and a CSS compliant application that will play DVDs
  2  encrypted with CSS on the Linux system.
  3              Second, the CSS technology and
  4  manufacturer's license necessary to build any CSS
  5  compliant application or device is available on a
  6  non-discriminatory basis. The current license
  7  requires a one-time fee of $10,000.  It is expected
  8  in the future that an annual fee of $5,000 will also
  9  be assessed.  These payments are administrative
 10  fees, the license itself is royalty free.
 11              None of the technical or legal
 12  conditions of the CSS license prevent implementation
 13  in the Linux environment.  And indeed, two CSS
 14  licensees have in fact developed CSS implementations
 15  for the Linux operating system.  One, called Sigma
 16  Systems, is hardware-based and another -- whose name
 17  I unfortunately don't have with me -- is software-
 18  based.  But both of these implementations are
 19  available on the market.
 20              It is true that most software
 21  applications that permit the playback of DVDs are
 22  designed for the Windows operating system.  But this
 23  is simply because of market-driven decisions on the
 24  part of software developers who seek to develop and
 25  sell applications for the prevailing operating
 26  system.

                                                   PAGE 189
  1              Neither movie studios nor the licensors
  2  of the CSS technology have sought to prevent the
  3  development of the applications in any other
  4  platforms, including Linux.  Indeed, much to the
  5  contrary, the film studios have a strong interest in
  6  the development of as many CSS licensed and
  7  compliant playback devices as possible, be they
  8  consumer electronic players, DVD drives for
  9  computers, software programs or other platforms,
 10  such as the recently introduced Sony PlayStation 2.
 11  The greater the number and variety of CSS compliant
 12  playback devices available in the market, the
 13  greater the demand will be, hopefully, for DVDs that
 14  carry our content.
 15              Some consumers who have been unable to
 16  play DVDs on their Linux operating system have
 17  argued that they should be permitted to circumvent
 18  the CSS encryption technology in order to gain
 19  access to the content of the DVDs that they have
 20  purchased.  I want to make clear from the outset
 21  that my discussion of that particular argument in
 22  this hearing is separate from the ongoing litigation
 23  in the Reimerdes case, commonly known as the CSS
 24  case.
 25              That case involves violations of Section
 26  1201(a)(2) -- the prohibitions concerning

                                                   PAGE 190
  1  circumvention devices, products or services and
  2  therefore that case is not directly relevant to the
  3  issue at hand in this hearing, namely Section
  4  1201(a)(1) and the prohibition on circumvention
  5  conduct.  Because the Reimerdes litigation is
  6  ongoing and because my company is a Plaintiff in
  7  that litigation, and because I have recently been
  8  noticed for a deposition in that litigation, it is
  9  inappropriate for me to discuss that case.
 10              With respect to the argument for an
 11  exemption on the prohibition of circumvention
 12  conduct for purposes of playing DVD discs on the
 13  Linux platform, I respond as follows:
 14              First, as the number of Linux users
 15  grows, the market will naturally fill the demand for
 16  CSS compliant applications that will play DVDs on
 17  Linux.  As mentioned above, two companies already
 18  offer DVD playback applications for the Linux
 19  operating system.  Hence, adoption of a
 20  circumvention exemption is neither justified nor
 21  necessary.
 22              Second, a consumer who purchases a copy
 23  of a work but does not have the proper equipment to
 24  play back the work does not, in my view, entitle the
 25  consumer to circumvent access control protection
 26  measures.

                                                   PAGE 191
  1              I want to take an example here.  A
  2  consumer who purchased a subscription to HBO -- Home
  3  Box Office pay television service -- soon after its
  4  launch, but did not own, the consumer did not own a
  5  television set that could accommodate a cable set
  6  top box necessary to descramble the encrypted HBO
  7  signal, would not have been entitled to circumvent
  8  the encryption on the HBO signal.  And that would
  9  have not been entitled, is a legal issue.
 10              Encryption television signals are
 11  protected by various sections of the Communications
 12  Act.  None of these sections provide for exceptions
 13  for users to decrypt signals without the
 14  authorization of the broadcaster.  We have all been
 15  living with this legal regime for more than a decade
 16  with no difficulties, legal or otherwise.
 17              Mindful of this longstanding precedent
 18  in the realm of encrypted broadcasts, no exemption
 19  to the prohibition of circumvention of access
 20  control technology appears justified merely to
 21  accommodate users who lack playback equipment that
 22  is readily available in the market.
 23              Third, copyright owners are applying
 24  technical protection measures today, not simply to
 25  ensure proper payment for access to a work, but they
 26  are apply measures also to manage the exponentially

                                                   PAGE 192
  1  increasing risks of subsequent unauthorized
  2  reproduction and re-distribution posed by the
  3  digital environment.
  4              The danger of permitting circumvention
  5  to facilitate an individual's access to a work is
  6  that such circumvention will also likely undermine
  7  protections against unauthorized copying and
  8  transmission, such as Internet retransmission.
  9  Once circumvention is permitted, there is no
 10  practical manner -- and likely no technical way --
 11  to ensure that subsequent uses of the work will be
 12  non-infringing.
 13              For example, if circumvention of CSS
 14  were allowed solely to permit access to content on
 15  DVDs to Linux users for home viewing, such
 16  circumvention would likely involve a copy of the
 17  content being made in the hard drive of the Linux
 18  user's computer.  Once a copy is readily available
 19  in the hard drive, it is easily subject to massive
 20  replication and distribution for unlimited purposes.
 21              Such risks are not speculative.
 22  Napster, iCrave, Gnutella, MyMP3 and Freenet all
 23  stand as very real examples of the ease with which
 24  works protected by copyright are subject to enormous
 25  unauthorized copying and redistribution once such
 26  works reside on the hard drive of a computer.

                                                   PAGE 193
  1              These very real risks militate against
  2  allowing exceptions to the prohibition on
  3  circumvention conduct.  If any cases of adverse
  4  impact on non-infringing uses of works are
  5  demonstrated in the future, then that would be the
  6  time to discuss alternative remedies.  An exception
  7  to the prohibition on circumvention conduct should
  8  be considered only as a remedy of last resort.
  9  Thank you.
 10              I also wanted to express my response
 11  concerning regional coding.  But I can do that now,
 12  or wait for the question period, if you would like.
 13  Better to do it now?
 14              There's been some discussion of the
 15  regional coding issues, and how regional coding is
 16  used or misused by content providers to prevent
 17  users around the world from playing.  For example, a
 18  DVD disc, a Region 1 disc that they might purchase
 19  in the U.S.  And I want to make a few remarks about
 20  that.
 21              First of all, the way that consumer
 22  electronics equipment have been developed.  There
 23  are different formats in different countries of the
 24  world.  The U.S. is NTSC format, Europe is PAL
 25  format.  If someone were to buy a videocassette that
 26  had been manufactured -- straight old analog

                                                   PAGE 194
  1  videocassette that had been manufactured in the
  2  U.S., it would be in the NTSC format.
  3              That videocassette would not be playable
  4  in Europe on PAL format televisions and
  5  videocassette players.  This situation has existed
  6  since the introduction of video in the early or mid-
  7  80s with no complaint.  So I find it a little bit
  8  interesting that now this issue of regional coding
  9  has become such a hot button for certain
 10  communities.
 11              Second, why do movie studios impose
 12  regional coding in the first place?  It has to do
 13  with the way the economics of the film business
 14  work.  Films are very, very expensive to produce,
 15  and they become increasingly expensive to produce as
 16  the years go by.  Many people assume that the
 17  revenues from theatrical distribution are the main
 18  source of economic return from movie production.
 19  That, in fact, is not the case.
 20              As of today, the receipts from
 21  theatrical distribution usually, on average, account
 22  for only 20 to 25 percent of the gross revenues
 23  earned by a motion picture.  The balance of those
 24  revenues are earned by what have typically been
 25  referred to as ancillary markets.  But now they are,

                                                   PAGE 195
  1  frankly, primary markets because they account for
  2  the lion's share of the revenue.
  3              These markets include home video, pay-
  4  per-view television, pay television and over the air
  5  free broadcast.  The reason why movie studios are
  6  concerned about regional coding is that it is very,
  7  very expensive to produce theatrical prints.  And
  8  therefore, unlike the music business, which
  9  currently tends to release new works on a worldwide
 10  basis -- the new Madonna CD tends to be released all
 11  over the world on the same date -- it is not really
 12  economically practicable for movie studios to do so,
 13  due to the enormous costs of producing prints, and
 14  the costs involved in dubbing or translating of the
 15  prints.
 16              Added onto that are just regional habits
 17  that we try to take account of.  Summer is a big
 18  movie-going season in the United States.  Summer is
 19  a very low season for movie-going in Mediterranean
 20  countries, particularly Italy, where even today a
 21  lot of the cinemas are not air-conditioned.
 22              So therefore if we have a blockbuster
 23  that we want to release in the summer in the United
 24  States, we don't necessarily want to release it in
 25  the summer in Italy.  The importance of having to
 26  exploit the different windows of exploitation of

                                                   PAGE 196
  1  theatrical, video, pay-per-view, pay, free broadcast
  2  means that we are concerned that if we released
  3  region-free DVDs in the United States six months
  4  after theatrical release in the United States, and
  5  those DVDs were widely available in Italy where the
  6  movie had not even been theatrically released, that
  7  the impact would be to cannibalize the theatrical
  8  release.  And take away from the potential economic
  9  return of the theatrical release.
 10              So that, I wanted to lay out, is some of
 11  the explanation as to why we use regional coding in
 12  the DVD system.
 13              Finally, I just wanted to turn to some
 14  of the fair use and First Amendment questions.  It
 15  seemed to me that uses described by Ms. Gross were,
 16  in large part, not the typical fair uses for
 17  education or comment, criticism, parody, but were
 18  consumptive uses.  Making copies for other people,
 19  or copies for your children.
 20              I don't understand how protecting
 21  expressive works from piracy with the use of
 22  technological measures adversely affects free
 23  expression, dissemination of knowledge or creation.
 24  The wider dissemination of works, in fact, that
 25  technological protection measures can afford, in my

                                                   PAGE 197
  1  view, further the goal of spreading culture and
  2  knowledge.
  3              The fact that one million DVD movies are
  4  sold each week indicates that these works are
  5  getting into the hands of users at a tremendous
  6  rate.  And not that users are somehow being denied
  7  or deprived access from the works.  If DVDs were not
  8  readily playable, it is difficult to understand how
  9  millions and millions of DVDs could be sold.
 10              Similarly, I fail to see how the CSS
 11  system deprives any individual of his or her First
 12  Amendment rights.  And I look forward to answering
 13  your questions.  Thank you very much.
 14              MS. PETERS:  Thank you, Mr. Marks.  Mr.
 15  Riley?
 16              MR. RUSSELL:  Russell.
 17              MS. PETERS:  Russell, excuse me.
 18              MR. RUSSELL:  I'd like to introduce
 19  myself.  My name is Riley Russell, I am the Vice
 20  President of Legal Affairs at Sony Computer
 21  Entertainment America.  I am also accompanied by Mr.
 22  Mort Goldberg.
 23              I think it's worth, very briefly -- as I
 24  look around the room and I don't see any 15-year-
 25  olds -- at least to describe very quickly what the

                                                   PAGE 198
  1  PlayStation is.  And that is a video game device
  2  that, of course, plays video games.
  3              Along with the Sony PlayStation, Sony
  4  Computer Entertainment markets and sells over 50
  5  video game products and other services.  Along with
  6  that there are over 350 independent video game
  7  publishers or developers licensed by SCA who produce
  8  approximately 300 games a year for the Sony
  9  PlayStation system.  The independent developers
 10  employ in excess of 6,000 people, most in the United
 11  States.
 12              I would like to thank the Copyright
 13  Office for the opportunity to testify in this
 14  rulemaking proceeding, which deals with what I
 15  believe is a critical issue to the copyright
 16  industries and their customers in the digital age.
 17  This rulemaking poses the narrow question of whether
 18  there are particular classes of copyrighted works
 19  whose users have been, or in the next three years
 20  are likely to be substantially adversely affected in
 21  their ability to accommodate non-infringing use of
 22  the works if the class is not exempted from the
 23  scope of Section 1201(a)(1)(A).  The rulemaking is
 24  to focus on distinct, verifiable and measurable
 25  impacts, speculation, de minimis effects and mere
 26  inconvenience should be disregarded in this inquiry.

                                                   PAGE 199
  1              As you are aware, Congress intended that
  2  the burden of persuasion as to the necessity of any
  3  exemption fall squarely upon the advocates.
  4  Congress, furthermore, had no expectation that in
  5  this proceeding the conditions for any exemption
  6  necessarily would be found to exist.  They, in fact,
  7  may not.
  8              To the contrary, according to the House
  9  Manager's Report, the absence of any such finding
 10  would indicate that "the digital information
 11  marketplace is developing in the manner which is
 12  most likely to occur, with the availability of
 13  copyrighted materials for lawful uses being
 14  enhanced, not diminished, by the implementation of
 15  technological measures and the establishment of
 16  carefully targeted legal prohibitions against acts
 17  of circumvention."  I submit to you that this is
 18  exactly what's happened.
 19              As a benchmark, Congress described the
 20  hypothetical scenario under which it "could be
 21  appropriate" to modify 1201(a)(1)(A)'s flat
 22  prohibition of the circumventing of technological
 23  access controls.  One in which the use of
 24  technological access controls might result in less,
 25  rather than more, access to copyrighted materials
 26  because of a confluence of factors including the

                                                   PAGE 200
  1  adoption of business models to restrict, rather than
  2  maximize, distribution and availability.  It goes
  3  without saying that nothing remotely resembling such
  4  a scenario has been shown to exist today, or to be
  5  likely to arise in the next three years.  In fact,
  6  experience has shown otherwise.
  7              It is telling that, despite the sound
  8  and fury raised in many submissions, few of the
  9  advocates of exemptions responded straightforwardly
 10  to the questions posed in the statute itself and in
 11  the Notice of Inquiry.  A number of respondents
 12  would have the Copyright Office overturn or subvert
 13  the DMCA itself.  Others concerned themselves with
 14  issues beyond the scope of this inquiry, such as the
 15  DeCSS legislation, or issues unripe for examination,
 16  such as preservation of works in a digital format.
 17              In short, Section 1201(a)(1)'s opponents
 18  -- and they're opponents of the statute as Congress
 19  enacted it, have not identified either distinct,
 20  verifiable and measurable impacts -- actual or
 21  prospective -- or lawful use of copyrighted works
 22  caused by the prohibition on circumvention, or a
 23  class of works -- i.e., a "narrow and focused subset
 24  of the broad categories of works and
 25  authorship...identified in Section 102 of the
 26  Copyright Act," which is subject to such an impact.

                                                   PAGE 201
  1  Accordingly, the advocates of exemption have not
  2  sustained their burden, and Section 1201(a)(1)
  3  should come into effect intact.
  4              The backdrop for and impetus behind the
  5  law under discussion here is, of course, the vastly
  6  altered environment in which copyright owners have
  7  been operating since the advent of digital media and
  8  the Internet.  In this brave new digital, networked
  9  world, the traditional arrangements among copyright
 10  owners, copyright works, and the consumers of those
 11  works have already been radically transformed by a
 12  single unprecedented fact:  every consumer, with a
 13  single touch of a button, is now potentially a
 14  global distributor -- or a receiver -- of an
 15  unlimited number of perfect copies of any
 16  copyrighted work which may come into his or her
 17  possession in digital form.
 18  Once distributed, these copies can no longer be
 19  retrieved.
 20              Much has been said of the importance of
 21  maintaining the traditional balance between the
 22  copyright holders' rights and consumers' privileges.
 23  The WIPO and Congress have acknowledged that
 24  technological access control measures, backed up by
 25  laws prohibiting circumvention, are essential to
 26  doing just that.

                                                   PAGE 202
  1              As Congress implicitly recognized, and
  2  as it should be clear to any observer, it would be
  3  derelict for content owners to release their works
  4  in digital form into this new environment without
  5  availing themselves of every practical means of
  6  protecting those works from unauthorized access.
  7              Congress, we recall, mandated that this
  8  proceeding consider the positive effects of these
  9  technological measures on the availability of
 10  copyrighted materials.  For SCEA and, we believe,
 11  many other copyright holders large or small, the
 12  availability of effective access control measures
 13  has had far more than a mere "positive effect" on
 14  the ability to make digital works available.
 15              In fact, the availability of technical
 16  measures offers to the copyright holders means and
 17  scopes of distribution which were unimaginable just
 18  a few short years ago.  For all of us, however,
 19  effective access control will be a precondition to
 20  the wide dissemination of commercial copyrighted
 21  works in digital form.
 22              While SCEA and other content owners
 23  clearly need the protection of access control
 24  technology in order to release works in digital
 25  form, it is equally clear that technology alone is
 26  not enough.  There is not, and there never will be,

                                                   PAGE 203
  1  such a thing as an un-hackable access control
  2  technology.  At least not one that functions
  3  appropriately in the marketplace.
  4              As WIPO and Congress recognized, in
  5  order for access control technology to work
  6  practically in the marketplace for copyright owners
  7  and consumers, it must be supported by laws
  8  prohibiting its circumvention.  Otherwise the
  9  copyright holder is no better off than if the work
 10  was distributed without the access control.  Such a
 11  tradeoff would result in a far narrower distribution
 12  for most works that currently exist.
 13              The WIPO Company Treaty, like Section
 14  1201, refers to "effective technological measures
 15  that are used by authors in connection with the
 16  exercise of their rights."  Some contend that once
 17  the initial access to a copy of a work has been
 18  made, the prohibition on circumvention should no
 19  longer apply.
 20              That the law should protect only a
 21  single "gatekeeper" function for an access control
 22  measure, after which it may be circumvented with
 23  impunity.  There is nothing to suggest, however,
 24  that Congress and the WIPO intended such a result,
 25  and the notion makes little sense.

                                                   PAGE 204
  1              Here I speak not only for SCEA, but I
  2  believe for all copyright holders who deserve the
  3  benefit for protection of technologies.  As perhaps
  4  the author of modest means, the small publisher, who
  5  may well be best benefitted by these technologies.
  6  He may have no other means of enforcing his or her
  7  copyrights in the digital world, and therefore it is
  8  the content holders who require the extra security
  9  afforded by strong access controls.
 10              Of course, under copyright law benefit
 11  to the consumers is an ultimate interest.  To date,
 12  the consuming public has benefitted immensely from
 13  copyright owners' use of technological access
 14  controls which have been instrumental in permitting
 15  dissemination in digital form of enormous numbers of
 16  works which would otherwise not be available today.
 17              It's worth pointing out that SCEA, like
 18  most of the copyright holders that you've heard of,
 19  earns its keep by getting its works into the hands
 20  and ears and before the eyes of its paying
 21  customers.
 22              This is a fundamental characteristic of
 23  our business and all our businesses, that we assure
 24  that for the foreseeable future the benefits of
 25  access control technologies, in the form of enhanced
 26  availability of copyrighted works will continue to

                                                   PAGE 205
  1  flow to the public.  The prospect has been raised
  2  that this most basic business model could someday be
  3  replaced by one based on restriction rather than
  4  dissemination.
  5              SCEA, however, sees no such change on
  6  the horizon, and continues to have a strong
  7  incentive not to risk alienating its customers with
  8  unreasonable or unwielding restrictions on the use
  9  of SCEA's copyrighted works.
 10              In my industry, we survive on plug-in
 11  and play mentality.  We succeed by satisfying the
 12  consumer with what they want.  Access control
 13  measures which include encryption and regional
 14  coding are essential tools in maintaining the high
 15  quality of our copyrighted works, and in controlling
 16  the nature and quality of the goods and services
 17  that bear our trademarks.
 18              Effective access control measures are of
 19  great utility in our ongoing campaign against
 20  counterfeiting and other pirated works with respect
 21  to our products.  As such, they allow us to adopt
 22  technologies that help to keep down the price -- and
 23  therefore increase the availability of our products
 24  that purchasers of lawful copies, who ultimately
 25  must bear some of the costs of infringement.

                                                   PAGE 206
  1              Access control measures also help
  2  protect the consumer's interest, as well as our
  3  reputation and good will, by ensuring that
  4  legitimately produced PlayStation video games are
  5  distributed only in those areas of the world where
  6  they are properly licensed.
  7              PlayStation games, like products in many
  8  other industries, are produced in multiple versions
  9  tailored, in terms of language and other features,
 10  for use by consumers in particular markets.
 11  Distribution of these games in other, unauthorized
 12  markets will inevitably produce dissatisfied
 13  customers and distributors.
 14              The benefits to consumers will continue
 15  if the anticircumvention provision is allowed to
 16  come into effect unimpaired.  As the House Manager's
 17  Report pointed out, the technological measures
 18  protected by Section 1201(a) can be deployed to
 19  support new ways of disseminating copyrighted
 20  materials to users.
 21              Access control technologies enable
 22  copyright owners to offer consumers a wider array of
 23  options tailored more closely to the individual
 24  needs, giving each consumer better value, as well as
 25  allowing more consumers to access a given work.  The

                                                   PAGE 207
  1  importance of such flexibility can be illustrated by
  2  an example from today's marketplace.
  3              We all know that consumers currently
  4  have the option of purchasing a popular video game,
  5  thereby acquiring the right to an unlimited number
  6  of private performances.  They have the right to
  7  dispose of their copy in the marketplace.  
  8       While a certain number take advantage of this
  9  option, millions more choose instead to spend what
 10  is considerably a more modest sum by purchasing a
 11  narrower set of privileges.  By renting the game for
 12  a night or two at their local Blockbuster, or paying
 13  for a single performance, for example, in a hotel
 14  room.
 15              We also offer play and promotional discs
 16  that are distributed, often free for a small fee,
 17  that sometimes give limited access to the players to
 18  try the game before they actually purchase it.  All
 19  this is available to us because of our ability to
 20  control access.
 21              If the consumer likes the game enough,
 22  he or she may find it worthwhile to purchase a copy
 23  outright rather than repeatedly either rent copies
 24  or pay for views.  In many cases the single viewing
 25  or rental suits the customer needs and they're
 26  happy.  And if the consumers don't particularly like

                                                   PAGE 208
  1  it, at least the consumer only spent a small sum
  2  rather than the cost of the entire game.
  3              What is important is that this variety
  4  of options enables many more consumers to avail
  5  themselves of our work than if the only option were
  6  to exist in the marketplace.  It is only through the
  7  application of these effective technological access
  8  controls that this kind of flexibility can be made
  9  available in the digital environment, where perfect
 10  copies can be made and circulated around the world
 11  almost instantaneously.
 12              Those in this proceeding who have urged
 13  you to make broad blanket exemptions would thwart
 14  the creation of flexible  digital-age business
 15  models for making works available to consumers.
 16  Without effective controls -- that is, technology
 17  reinforced with a legal prohibition of circumvention
 18  -- consumers of digital works will in many ways be
 19  left with fewer, more expensive options, and many
 20  which are less desirable.
 21              Proposals for exemptions that were
 22  responsive to the clear parameters the Office set
 23  out in the Notice of Inquiry have been conspicuously
 24  absent in these hearings.  Of course, those who have
 25  advocated the crafting of broad and ill-defined
 26  exemptions based on classes of users or uses, rather

                                                   PAGE 209
  1  than of works, are asking the Office to do something
  2  not within the Office's powers.
  3              Since the number and variety of works
  4  which would fall outside 1201(a)(1)(A) under such
  5  exceptions is potentially infinite, these advocates
  6  are in effect asking that the statute be overturned.
  7  Even if properly delineated, "narrow and focused"
  8  classes of works had been proposed for exemption, we
  9  would remain concerned that in practice any
 10  exemption would spill over to encompass the entire
 11  Section 102 "category of works" within which the
 12  "class of works" fell.
 13              I would like to emphasize that SCEA, as
 14  a responsible member of the copyright community, is
 15  interested in the vitality of the fair use doctrine.
 16  Clearly, however, and contrary to the assertions of
 17  certain educators and librarians in this proceeding,
 18  the fair use defense simply cannot serve as the
 19  basis for delineating a "class of works" that might
 20  properly be the subject of an exemption to be
 21  recommending in this proceeding.
 22              Fair use is a defense to infringement,
 23  whose applicability is determined through a fact-
 24  intensive inquiry undertaken on a case by case
 25  basis.  Fair use, in appropriate circumstances, may
 26  be made of many, many copyrighted works.  To declare

                                                   PAGE 210
  1  in advance that any work of which fair use might be
  2  made is within a class of works exempt from the
  3  statutory prohibition on circumvention would render
  4  the entire provision a nullity -- which may be the
  5  objective of the advocates of "Fair Use Works" as an
  6  exempt class.
  7              It appears, furthermore, that to anoint
  8  a huge number of works, wholesale, as "fair works"
  9  would be incompatible with fair use itself, as an
 10  equitable defense and an equitable rule of reason,
 11  it would contravene Section 1201(c), which mandates
 12  that nothing in Section 1201 is to affect either
 13  copyright rights or "defenses to infringement,
 14  including fair use."
 15              Contentions aside, there has been no
 16  showing that 1201(a)(1)(A) has had a negative impact
 17  on the availability of the fair use defense, or that
 18  any impact is likely in the next three years.  The
 19  same is true of the first sale doctrine, as to which
 20  some commentators have voiced concern.
 21              The first sale doctrine is, of course,
 22  the product of a world in which copyrighted content
 23  was overwhelmingly distributed via sale of tangible
 24  copies.  Even in that world, however, there are
 25  categories of copyrighted works such as broadcast

                                                   PAGE 211
  1  television programming to which the first sale
  2  doctrine have little or no application.
  3              In point of fact, notwithstanding these
  4  ill-defined fears for the future of the first sale
  5  doctrine, technological access control measures to
  6  date have had little discernible negative effect on
  7  it.  Visit virtually any computer software store and
  8  you will find a section devoted to used PlayStation
  9  games.  A quick browse of the Web shows that there
 10  is a flourishing market in second-hand video games
 11  and DVDs as well, particularly if you look on the
 12  auction sites on the Web.
 13              The anticircumvision provisions of the
 14  DMCA comprise a carefully crafted corrective measure
 15  designed to maintain in the digital environment the
 16  balance of rights and privileges of authors and
 17  users worked out over the past two centuries in the
 18  copyright law.  The narrow question posed in this
 19  rulemaking is whether classes of copyrighted works
 20  exist whose users are likely to be substantially
 21  adversely affected in their ability to make non-
 22  infringing use without exemption from Section
 23  1201(a)'s prohibition of circumvention of access
 24  controls.

                                                   PAGE 212
  1              The advocates of exemptions bear the
  2  burden of persuasion, and they have not sustained
  3  it.
  4              I thank you again for giving me this
  5  opportunity, and I will be pleased to answer any
  6  questions.
  7              MS. PETERS:  Thank you, Mr. Russell.  We
  8  now will hear from Mr. Jonathan Hangartner.
  9              MR. HANGARTNER:  Thank you very much.
 10  My name is Jonathan Hangartner.  I'm an attorney in
 11  San Diego and I represent the company, Bleem Inc.
 12  I'd like to thank the Copyright Office for giving
 13  Bleem an opportunity to speak today.  I'm still
 14  hopeful that Mr. Herpolsheimer will make it here so
 15  that he can answer any questions you might have.
 16              I think it would be helpful for me to
 17  briefly describe Bleem and what it does.  And it
 18  provides a good counterpoint to both Mr. Russell's
 19  testimony and also to some of the DVD discussions
 20  that you've heard already this afternoon.
 21              Bleem is a software company that
 22  provides interoperability between different computer
 23  systems.  Specifically, Bleem produces a software
 24  emulator that allows the consumer to play their
 25  PlayStation video games on a personal computer.  And
 26  Bleem will soon introduce a new computer program

                                                   PAGE 213
  1  that allows consumers to play their PlayStation
  2  video games on a Sega Dreamcast video game console.
  3              For the past year I've spent an awful
  4  lot of my time defending Bleem against a lawsuit
  5  filed by Sony Computer Entertainment America, and
  6  one of the principal claims in that lawsuit is a
  7  Digital Millennium Copyright Act claim, although
  8  obviously not under Section 1201(a)(1).  It alleged
  9  that Bleem is a circumvention device because it
 10  allows these games to be played -- the PlayStation
 11  video games to be played on a personal computer.
 12              I think it's important to get into a
 13  little bit of detail about how this access
 14  restriction that Sony alleges works.  Because there
 15  are an awful lot of different possibilities for
 16  access control technologies, and Sony has a specific
 17  one in place which -- it has been sort of put on the
 18  table here by Sony.  And I think it's useful to take
 19  a little bit closer look at it.
 20              The access control device that Mr.
 21  Russell has described, which he calls the whiz code,
 22  is actually a code that is placed onto the
 23  PlayStation game discs themselves.  A PlayStation
 24  video game console, which Sony produces -- and it's
 25  their device which plays PlayStation video games --
 26  looks for that access control code.  And if it's not

                                                   PAGE 214
  1  present, unless the console's modified, it will not
  2  play that disc.
  3              So, in effect, this whiz code only
  4  controls access to PlayStation games on a
  5  PlayStation console.  If a PlayStation game disc is
  6  placed into a regular personal computer, CD-drive or
  7  into any other CD-drive, that CD-drive will actually
  8  read the data on the disc.
  9              The access control device, this whiz
 10  code, does not prevent the information from being
 11  accessed by the disc.  Because essentially what
 12  happens is the disc drive doesn't know to look for
 13  the whiz code.  And since it doesn't know to look
 14  for the whiz code, the access control doesn't take
 15  effect.
 16              And this type of situation is addressed
 17  in the DMCA in the no-mandate provisions, which do
 18  not require consumer devices to search for codes or
 19  to look for codes that might control access.  But
 20  what's happened is that Sony has alleged in the
 21  litigation against Bleem that Bleem is a
 22  circumvention device.
 23              And, in fact, earlier this week a
 24  similar claim in another case brought by Sony
 25  Computer Entertainment America against another
 26  company which produces a PlayStation device,

                                                   PAGE 215
  1  emulation device similar to Bleem -- the District
  2  Court in the Northern District of California ruled
  3  that it was, in fact, not a violation of DMCA's
  4  circumvention device provisions.
  5              The concern that Bleem has at this point
  6  is that similar lawsuits will come along as soon as
  7  Section 1201(a)(1) takes effect.  But those lawsuits
  8  could be directed at Bleem's customers.  It's a very
  9  real and likely possibility that, upon enaction of
 10  this provision, when this provision takes effect,
 11  Sony could allege that Bleem's consumers, when they
 12  access the information on the PlayStation disc and
 13  play a PlayStation game on either their PC or their
 14  Dreamcast are, in fact, circumventing Bleem's
 15  technological measures that it alleges are designed
 16  to control access to its copyrighted works.
 17              This concern, while we think that Bleem
 18  certainly could defend such claims, or could assist
 19  its customers in defending such claims, the threat
 20  of these claims could have a very serious chilling
 21  effect on the sales of Bleem and on the use of
 22  Bleem's products by consumers.
 23              It also has a serious risk of chilling
 24  Bleem's ability to distribute its products.  Because
 25  distributors, retailers, all of the folks up and
 26  down the distribution chain are very concerned about

                                                   PAGE 216
  1  potential lawsuits against customers.  So the threat
  2  of a lawsuit, even if successfully defended, has a
  3  powerful impact on the market.
  4              The risk is also, I think, very real
  5  given the behavior that's been exhibited by Sony in
  6  the past.  Bleem felt early on, quite strongly, that
  7  its device was not covered under the DMCA.  It was
  8  not a circumvention device.  But it's taken a year's
  9  worth of litigation and substantial expense to go
 10  through the process of litigating claims under this
 11  new act.
 12              So, in considering these issues of
 13  burdens of persuasion and the availability of
 14  evidence that establishes a class of works that may
 15  be affected by this new provision, I think it's
 16  important to keep in mind the detrimental effect of
 17  ambiguity.  Ambiguity works in favor of large
 18  companies, and it allows them to bring lawsuits
 19  which, while ultimately unsuccessful, can drive a
 20  small company right out of business before they ever
 21  get to market.
 22              Taking this sort of to the next step, I
 23  think it's useful to compare the situation with the
 24  PlayStation disc with the DVD/CSS issues that we've
 25  been talking about, which involve complicated issues
 26  of licensing up and down the distribution chain.

                                                   PAGE 217
  1              The PlayStation CDs don't have any of
  2  these issues.  As Mr. Russell described, the
  3  PlayStation CDs are actually acquired by the user.
  4  So we don't have a situation where the copyrighted
  5  work is being licensed to the customer.  You have a
  6  situation where that customer lawfully acquires a
  7  copy of the copyrighted work.
  8              Bleem feels very strongly that the
  9  consumer's ability to play that copy of the
 10  copyrighted work on any platform they choose is a
 11  non-infringing use of the copyrighted work, and that
 12  must be protected.  This provision opens the door
 13  for substantial impacts on the consumer's ability to
 14  perform that non-infringing use.
 15              If, in fact, it was determined that
 16  playing a PlayStation disc using Bleem was a
 17  circumvention, then all of these consumers would be
 18  foreclosed from a clear non-infringing use of that
 19  copyrighted work which they paid $40 for, for a
 20  simple CD.
 21              So in looking -- again, taking this to
 22  the specific and maybe working outward, and trying
 23  to get to the particular question the Office has to
 24  address here, should there be a class of works that
 25  is exempted from this.  The PlayStation game CD
 26  provides a pretty good example.

                                                   PAGE 218
  1              You have a disc which is sold to
  2  customers, which this provision could and is likely
  3  to substantially affect their ability to perform
  4  non-infringing uses.  To the extent that you can get
  5  around the chicken and egg problem that you have
  6  with this provision in trying to put the burden on
  7  the proponents of a particular class of works when
  8  the statute has not yet taken effect, so it's
  9  virtually impossible to come up with discrete
 10  verifiable measurable impacts, this example goes
 11  pretty far towards that.
 12              Because we have shown the impacts, or we
 13  can show the impacts that even a simple DMCA has had
 14  on Bleem in trying to sell its product over the past
 15  year.  And that it's likely, very likely to have a
 16  similar effect on consumers down the road.
 17              The problem with letting this act take
 18  effect, so that we can then ultimately prove this
 19  impact, is that three years down the road is an
 20  eternity in the age we live in, in terms of the
 21  technological advancements.  There's a new
 22  PlayStation platform coming into effect that's DVD-
 23  based.  A variety of changes.
 24              So these issues will tend to become moot
 25  over the course of that time period.  So there's a
 26  real risk here that in the course of the three years

                                                   PAGE 219
  1  that it would take to reevaluate a particular
  2  exemption, the question will no longer be relevant.
  3              I think with that I'll kind of stop my
  4  comments here -- we've been talking a lot about in
  5  theory and the different ideas going out -- and
  6  maybe open it up to questions.  If you have any
  7  particular questions we can certainly discuss how
  8  these access devices work, and the distinctions with
  9  the licensing issues between the DVD issues.
 10              MS. PETERS:  All right.  Thank you.  It
 11  is now five minutes after four.  Some people have
 12  been sitting here since 1:30.  And what we're going
 13  to do is take a short break.
 14              When we come back, before we ask our own
 15  questions, I'm going to give anyone on the panel an
 16  opportunity to say anything else that they may want,
 17  based on what they've already heard.  So why don't
 18  we take -- it's now, what, 4:15?  We'll come back.
 19              (Whereupon, a brief recess was taken.)
 20              MS. PETERS:  Good afternoon again.  We
 21  are going to resume the final part of our hearing.
 22  And for those of you who find this room a little
 23  warm, we have been told that all the facility people
 24  have gone for the day.  And so there is nothing we
 25  can do about it.  So, hopefully this won't take too
 26  much longer.

                                                   PAGE 220
  1              I left it with anyone who had anything
  2  that they wanted to add before we got into questions
  3  could do so now.  So is there anyone who wishes to
  4  speak?
  5              MS. GROSS:  I just wanted to go back to
  6  a few points raised by a couple other folks, and
  7  talk about them.  The first would be the example
  8  given why it should be illegal to circumvent a DVD
  9  the same way it's illegal to circumvent HBO.  It's
 10  really an irrelevant example.
 11              Circumventing HBO is something you
 12  haven't paid for.  If you bought a DVD, if you
 13  purchased it, it is something that you have a right
 14  to view as opposed to HBO.  So that example really
 15  doesn't add anything to this discussion.
 16              I think it's also important to point out
 17  that if many VHS movies are unplayable on machines
 18  because of the international difference in
 19  standards, that's a pretty good reason to exempt
 20  them, simply because it will provide greater
 21  opportunity for people to receive copyrighted works
 22  they never would have had a right to, or the ability
 23  to receive beforehand.
 24              I think it's also important to point out
 25  that equipment to play a different region's DVDs is
 26  not readily available.  CSS prohibits such equipment

                                                   PAGE 221
  1  from being marketed in other regions.  And Sigma
  2  Systems website offers an OEM card for Linux
  3  drivers, but it does not sell its computers.  So as
  4  far as I'm aware there is not yet an available Linux
  5  player available to consumers.
  6              Another point I wanted to make was that
  7  if having content on a single hard disk means that
  8  instant massive piracy will occur, why is there no
  9  massive piracy since October when DCSS was released?
 10  Or since December when it was publicized?
 11              I think it's also important to note that
 12  the MPAA has said, both publicly and in court
 13  depositions, they don't have a single piece of
 14  evidence of DCSS-related piracy.  Technological
 15  measures can never implement the true contours of
 16  fair use.  So far, every measure offered by
 17  providers has been more restrictive than the law
 18  allows, not less restrictive.
 19              And I also think it's important to point
 20  out that Congress intended that access to things
 21  like a book be protected, only before purchase, not
 22  after.  Not after it's been read with impunity.  So
 23  what's wrong with that for the new media, too?  In
 24  fact, the DMCA states explicitly that the same
 25  limitations shall apply.

                                                   PAGE 222
  1              And my last point is I want to raise
  2  that the Supreme Court has said that every person's
  3  a publisher on the Internet.  And that gives a
  4  greater First Amendment protection than paper or
  5  other traditional media, not less protection as the
  6  copyright -- so I just wanted to make those few
  7  points regarding different views that you've heard.
  8              MS. PETERS:  Thank you.  Anyone else?
  9  Mr. Goldberg.
 10              MR. GOLDBERG:  I'm Mort Goldberg.  I
 11  have some general comments based on the last --
 12  well, all five days of the hearing.
 13              Much of the five days' testimony appears
 14  to me within the scenario that has been scripted by
 15  Lewis Carroll.  I don't propose to revisit the
 16  entire scenario, but only to comment briefly on what
 17  we've been exposed to, and what may seem to some of
 18  us to be a trip down the rabbit hole.
 19              Specifically, I propose to mention
 20  briefly just the following:  One, the threats of
 21  being thrown in jail or fined criminally.  Second,
 22  the issue of a congressional imbalance -- and I
 23  refer to the legislation, not the legislators.
 24  Third, the treaty obligations of the United States.
 25  Fourth, the claim of an exemption for fact works or
 26  so-called thin copyright works as being a -- as

                                                   PAGE 223
  1  constituting a particular class exemption if the
  2  First Amendment, freedom of speech in 1201.  And
  3  lastly, an overview of the five days of testimony.
  4              With regard to the criminal penalties,
  5  there's been a good deal of apprehension voiced,
  6  both here and in the hearings in Washington, about
  7  the criminal provisions.  Apprehension, that is, by
  8  librarians and educators.
  9              This is perhaps raised, or these
 10  statements of apprehension are perhaps made as a
 11  proffer of evidence as to some sort of adverse
 12  effect.  But unless I'm missing something in my
 13  reading of the statute, these claims ignore 1204(b),
 14  which exempts libraries and educational institutions
 15  from criminal liabilities with regard to 1201.
 16              If the witnesses are concerned, not
 17  about the institutions themselves, but about the
 18  library users, the students and faculty,
 19  researchers, then I think we have to look at 1204(a)
 20  which says that to constitute a criminal violation
 21  it has to be willful.  It has to be for purposes of
 22  commercial advantage or private financial gain.
 23              As the panel knows, this is essentially
 24  the same language as in the criminal copyright
 25  provision 506(a)(1).  And I'm not aware, and I don't
 26  think the panel is aware, of any evidence that the

                                                   PAGE 224
  1  longstanding 506 has filled our presence with
  2  librarians, educators, researchers and students.
  3              With regard to the matter of balance,
  4  the claim has been made that it's up to the
  5  Copyright Office and up to the Librarian to strike a
  6  balance.  Congress has already done so in many
  7  pages, many, many pages of exhaustive and exhausting
  8  detail.
  9              There is essentially just a single
 10  sentence to 1201(a)(1)(A), but there are pages and
 11  pages of exceptions.
 12  And nothing in Section 1201(a)(1) suggests or
 13  permits this panel, or the Librarian, to make
 14  amendments to those exceptions, to enlarge them or
 15  to diminish them.
 16              There are also numerous exceptions in
 17  Section 108 and elsewhere giving special treatment
 18  to a variety of not for profit institutions.
 19  Congress has again struck the balance in those
 20  provisions.  And you can mumble various latin
 21  phrases, but in English the essence of it is that
 22  specific legislation is to be followed specifically.
 23              Treaties.  We have the WCT and the WPPT,
 24  the WIPO Copyright Treaty, the WIPO Performances of
 25  Phonograms Treaty, and we have TRIPS and we have the
 26  Berne convention.  As Ms. Gross has reminded you,

                                                   PAGE 225
  1  Article 11 of the WCT and parallel provision in WPPT
  2  obligates the U.S. to provide adequate legal
  3  protection and effective legal remedies against the
  4  circumvention of effective technological measures.
  5              Whether there is an access right granted
  6  under Section 1201 really doesn't make any
  7  difference.  It's clear that adequate legal
  8  protection and effective legal remedies can't be
  9  provided against circumvention without 1201.  TRIPS
 10  requires the U.S. also to give adequate and
 11  effective intellectual property protection.
 12              The broad exemptions of the sort that
 13  have been requested in the five days of the hearings
 14  clearly would violate these treaties.  The
 15  exemptions would not qualify under the three-step
 16  test under the WCTR 10.2, Berne 9.2 and TRIPS 13.
 17  Mainly the three steps that such exemptions can be
 18  only in certain special cases, not all works, not
 19  all works of which fair use is to be made, et
 20  cetera.
 21              And secondly, exemptions have to be
 22  those that do not conflict with a normal
 23  exploitation of the work.  Selling copies of the
 24  Bible in Guttenberg days was the normal exploitation
 25  of work.  Now we have many, many, many normal
 26  exploitations of the work.  And clearly the kind of

                                                   PAGE 226
  1  exemptions that have been requested here would
  2  violate that -- or would not comply with that
  3  portion of the three-step test.
  4              And lastly, the three-step test requires
  5  that any exemption not unreasonably prejudice
  6  legitimate interests of the author.  There has been
  7  a great deal of testimony by the copyright owners as
  8  to the significant prejudice that would be incurred
  9  by them if the exemptions were to be adopted.
 10              With regard to fact works and thin
 11  copyright.  Mention, as we may, that these -- that
 12  the anticircumvention provision with regard to these
 13  works should not apply, but there should be an
 14  exemption for them.  And if we look at some of them,
 15  we have to wonder exactly what such an exemption
 16  would bring.
 17              Newspapers are, of course, notably fact
 18  works.  The Wall Street Journal, it's my
 19  understanding, is available online, as is the New
 20  York Times.  But unlike the New York Times, the Wall
 21  Street Journal charges for its subscription.  It
 22  seems to me that the Wall Street Journal has many,
 23  many facts in it.
 24              And I just do not think that the
 25  congressional contemplation was the Librarian should
 26  adopt an exemption for fact works in order to permit

                                                   PAGE 227
  1  people to circumvent the access control mechanisms
  2  of Dow Jones, which I do not represent.  And to
  3  thereby make fair use of the facts that are found in
  4  The Wall Street Journal.
  5              Likewise, with regard to the fact-heavy
  6  legal treatises.  I think the argument would be that
  7  all they do is give you the facts of the cases, and
  8  the cases, of course, are public domain.  So it's
  9  clearly fair use to just look at a treatise and get
 10  at the public domain material if you just want to
 11  know what the case held.  I don't think that such
 12  fact-intensive works should qualify for exemptions.
 13  And on and on.
 14              Histories have also been mentioned.  I
 15  guess this would permit us to circumvent access
 16  control mechanisms with regard to Arnold Toynbee,
 17  Carl Sandburg, Winston Churchill, and on and on, all
 18  historians.  Because clearly there are lots and lots
 19  of facts, and we want to get fair use access to
 20  them.                                          0
 21  freedom of speech.  Freedom of speech is what the
 22  protesters yesterday and today in this proceeding
 23  have been exercising, quite properly.  Telling
 24  Congress and the Copyright Office what they should
 25  do with the DMCA.  That's kind of a base to the
 26  themes of this proceeding.                     0

                                                   PAGE 228
  1  That's freedom of speech.  But freedom of speech is
  2  not -- what I understood a speaker to say in the
  3  Washington sessions -- some sort of right to get at
  4  and use copyrighted expression.  And if I heard
  5  correctly the speaker in Washington said that the
  6  Supreme Court in Harper v. The Nation supported her
  7  view in that decision.
  8              My recollection of Harper v. The Nation
  9  is the decision held just the opposite.  That the
 10  First Amendment gives no privilege to U.S. copyright
 11  expression, even when the expression is of such
 12  great public significance as the memoirs of a
 13  current President of the United States.
 14              And contrary to what may have been the
 15  implication attributed to that decision a few
 16  minutes ago, or earlier this afternoon, the fair use
 17  safety valve certainly does not exculpate all
 18  infringements as mere free speech.
 19              I may be the only one, other than the
 20  members of the Copyright Office panel, that has sat
 21  through the entire five days of the hearings.  But
 22  it's apparent to me that only in a Lewis Carroll
 23  scenario could it be deemed that there's been
 24  sufficient showing of the actual impact or likely
 25  impact that the statute requires.

                                                   PAGE 229
  1              There's been no showing of any
  2  substantial diminution of availability for non-
  3  infringing uses, there's been no showing that the
  4  prohibition is the cause of any substantial adverse
  5  impact.  And prospectively, there also has been no
  6  showing of extraordinary circumstances of likely
  7  impact.  There's been no showing that the basis of
  8  evidence that is highly specific, strong and
  9  persuasive.  And in the absence of which, Congress
 10  has made clear, that the prohibition would be unduly
 11  undermined.
 12              I, too, thank you for the opportunity to
 13  make these observations at the hearing.  And I join
 14  Mr. Russell in being pleased to answer any questions
 15  you may have.
 16              MS. PETERS:  Thank you very much.
 17  Anyone else?  If not, we will start the questioning
 18  with our General Counsel, David Carson.
 19              MR. CARSON:  Thank you.  Mr. Marks, we
 20  heard from Ms. Gross that there is not yet an
 21  available -- Linux player available to consumers.
 22  That the Sigma player was the only one available.
 23  It's available in OEM product.  Is that your
 24  understanding, first of all?
 25              MR. MARKS:  I wish I had more
 26  information on that.  I know there are two licensees

                                                   PAGE 230
  1  of the CSS technology who are producing applications
  2  for Linux system.  I know the Sigma design is a
  3  hardware application.  I don't know exactly how it
  4  functions.  But I will be happy to get information,
  5  more information to you when I find out the details
  6  of this license.
  7              MR. CARSON:  Yes.  Thank you.
  8              MR. MARKS:  I also wanted to mention
  9  that the DVD Copy Control Association was actually
 10  the organization responsible for administrating the
 11  CSS licenses.  I would be happy to supply the
 12  Copyright Office and the Register with any
 13  information that they would like.
 14              So I will try and get that information,
 15  but I would also suggest perhaps an inquiry to them.
 16  Or maybe I should suggest to them that they file
 17  additional written statements with you.
 18              MR. CARSON:  The latter might be a good
 19  idea.  Let's assume for a moment, though, that the
 20  statement is correct.  Which means, I assume, that
 21  if I'm running Linux operating system on my
 22  computer, and I want to play DVD, there is no way
 23  that I can do that unless I go out and buy a new
 24  computer which has this driver on it that's an OEM
 25  installation.
 26              Isn't that a problem?

                                                   PAGE 231
  1              MR. MARKS:  I don't think it's a
  2  problem.  Because I think, first of all, if you have
  3  bought a DVD and you have a software operating
  4  system that doesn't support an application to play
  5  the DVD, you don't have to buy a new personal
  6  computer.  You might need to purchase a new
  7  operating system, or you might need to purchase a
  8  new software application when it becomes available
  9  to play DVD, to install on your computer. 
 10       For example, even under the prevalent Windows
 11  operating system -- and if I am misspeaking myself,
 12  I hope maybe someone who's in the audience from
 13  Microsoft will correct me.  But I think on prior
 14  versions of Microsoft, Microsoft Windows operating
 15  system, they didn't have media player pre-installed
 16  on the Windows operating system that would allow for
 17  playback of DVDs.
 18              Therefore if you purchased a DVD and you
 19  had a Windows operating system, and you had a PC
 20  that had a DVD-ROM drive, you might still need to
 21  purchase a software application to enable your PC to
 22  play the DVD.  So I really don't see where there's a
 23  great difference between that situation and the
 24  Linux situation.
 25              MR. CARSON:  Although anyone can get a
 26  little media player for free, I think.  Can't they?

                                                   PAGE 232
  1              MR. MARKS:  That may be the case.  But
  2  then there's no prohibition to a software developer
  3  in taking out a license to create the equivalent
  4  application, software application for the Linux
  5  system and making it available to its users for
  6  free.
  7              MR. CARSON:  But if no one has done
  8  that, why is it a problem for an individual user who
  9  wants to be able to watch that DVD on his own
 10  computer, which happens to run a Linux operating
 11  system, to do what he has to do so that he can view
 12  it?
 13              MR. MARKS:  The problem with that is
 14  that it's not simply a matter of the encryption and
 15  protection on the DVD disk guaranteeing the payment
 16  by that individual user for the copy of the disk.
 17  The whole purpose of the encryption in the first
 18  place is because it carries with it certain copy
 19  control applications.
 20              As Ms. Gross correctly said, one of
 21  those applications, for example, is that the content
 22  not be permitted to flow out a digital outport from
 23  a computer.  If the user is allowed to circumvent
 24  the technical protection measures, yes, that may
 25  enable the consumer to view the content from the DVD
 26  disk.

                                                   PAGE 233
  1              But it may also, and likely would also
  2  undermine the other protections that are inherent in
  3  the DVD system, and allow for very easy unauthorized
  4  reproduction and distribution of the content of the
  5  DVD.  For example, over the Internet.  So that's the
  6  risk that is entailed by allowing for that
  7  individual circumvention.
  8              MR. CARSON:  Ms. Gross, let's assume
  9  that between now and October 28th, Sigma or somebody
 10  else do release whatever equipment it is for
 11  commercial purchase, so you can go down to Comp USA
 12  or wherever, and buy what you need to put on your
 13  machine running with this operating system and view
 14  DVDs.  Is that going to moot the issue, at least
 15  with respect to Linux users?
 16              MS. GROSS:  Well, the problem is that
 17  there are additional operating systems that are
 18  being created every day.  And individuals should not
 19  be required to go out and purchase a $10,000 license
 20  in order to build an application that will play
 21  their DVDs.  That's something that would be
 22  unprecedented in other forms of media.
 23              Additionally, there are problems with --
 24  there are antitrust problems for tying the hardware,
 25  the machine, to the software itself, the DVD.
 26  Microsoft is about to be broken up for this very

                                                   PAGE 234
  1  reason.  And so I think you need to think about
  2  antitrust implications in tying the two together as
  3  well.
  4              MR. CARSON:  Okay.  But let's focus just
  5  on Linux users.  I know there are other operating
  6  systems out there.  But certainly, from personal
  7  experience I can say, having looked at the comments
  8  that have come in to us, the vast majority of
  9  comments we have received in this proceeding have
 10  been from people who run computers on -- with a
 11  Linux operating system that are upset that they
 12  can't use those computers to watch DVDs.
 13              So let's focus purely on those people.
 14              MS. GROSS:  Linux users.
 15              MR. CARSON:  Linux users, yes.  If, in
 16  fact, the Sigma piece of equipment suddenly were
 17  available on the shelves of your nearest computer
 18  equipment store, would there still be a problem for
 19  Linux users?  Or would Linux users basically --
 20  would you have to say on behalf of Linux users --
 21  assuming you're speaking on behalf of them -- will
 22  find that problem solved?  No need for the Librarian
 23  to address that aspect of the problem?
 24              MS. GROSS:  Well, I think it would
 25  depend on the terms of the license for CSS.  The
 26  thing that is so attractive to people for using

                                                   PAGE 235
  1  Linux is their ability to manipulate their own
  2  software on their own machines.
  3              And if the Linux player prohibits
  4  people's ability to use their machines, and to
  5  manipulate the software and images in ways that they
  6  have a legal right to do, I think we'd still have a
  7  problem.  So I wait and see this machine, and what
  8  it does and what it doesn't do.
  9              MR. CARSON:  Okay.  Let me ask a
 10  question for any of the representatives of the
 11  copyright owners who would like to take a stab at
 12  it.  And I recognize we've heard this a hundred
 13  different ways over the five days of testimony.  But
 14  if someone could just sort of put in a nutshell why
 15  is it that we want to protect technological measures
 16  that control access to copyrighted works?  Why is it
 17  important to do that?
 18              MR. METALITZ:  I'll answer that question
 19  on two levels.  One that I think is -- we should
 20  never overlook, is that it's important because
 21  Congress has decided its important.  And that
 22  obviously constrains what this rulemaking proceeding
 23  can do within that determination that's already been
 24  made.
 25              But I think the larger reason, and the
 26  reason why Congress decided that it was important to

                                                   PAGE 236
  1  protect it, is that these types of measures are
  2  really key enabling tools for electronic commerce.
  3  And if we're serious about developing electronic
  4  commerce being works of authorship, then we have to
  5  recognize -- as you've heard today from Sony
  6  Computer Entertainment America and from Time Warner
  7  and MPAA -- that that commerce is not going to
  8  exist, or it's going to be extremely stunted and
  9  distorted unless copyright owners have the ability
 10  to use these types of technological control
 11  measures.
 12              That they have the ability to manage and
 13  control access to their works in order to
 14  disseminate them more broadly.  And that they have
 15  the legal back-up to prevent, or to deal with
 16  instances of circumvention.
 17              So if we want to see a thriving
 18  electronic marketplace in these works, we need to
 19  have these tools to do that, and Congress recognized
 20  that.  And so did the other countries, the hundred
 21  and some countries that adopted the WIPO treaties.
 22  And I think that is a real -- that's a very
 23  important step.
 24              Because this is a new aspect to
 25  international discipline in the field of copyright.
 26  It really is not like what has been done in the

                                                   PAGE 237
  1  Berne convention, TRIP.  It goes a step beyond that.
  2  And I think that is fueled by a recognition that
  3  this is essential.  We need these tools in order to
  4  make copyrighted materials available around the
  5  world in a global electronic market.
  6              MR. GOLDBERG:  If the value can be taken
  7  without having to pay for it, then the copyright
  8  owners are not going to create the value.
  9              MR. MARKS:  I would also like to
 10  supplement that.  While the protections for
 11  technical -- while the legal protections for
 12  technical protection measures are new and are
 13  copyright law and the DMCA, and are relatively new -
 14  - international treaties only dating back to 1996
 15  with the adoption of the two WIPO treaties -- the
 16  concept of giving legal protection to technical
 17  measures that control access to works is not new.
 18              The Communications Act of our United
 19  States law, as passed by Congress, has protected
 20  encrypted broadcast signals, whether they be radio
 21  signals or television signals, for decades.  I
 22  cannot tell you exactly from when that law dates.  I
 23  have it back in my office, and I'd be happy to do a
 24  supplemental submission on that.
 25              But there's the Satellite Home Viewer
 26  Act of, I think, 1988 or 1984.  And Section -- I

                                                   PAGE 238
  1  think it's 301 or 201 of the Communications Act
  2  beforehand which prohibits the unauthorized
  3  descrambling of encrypted signals for exactly the
  4  reasons that have been stated by the other speakers.
  5  That it has been deemed necessary to provide that
  6  legal back-up for these technological protection
  7  measures to facilitate commerce and copyrighted
  8  broadcasts or signals.  Or, now in the new digital
  9  environment, other works that can be made available
 10  in electronic form.
 11              MR. CARSON:  Now, CSS -- clarify for me.
 12  CSS is an access control device, or a copy control
 13  device, or both?
 14              MR. MARKS:  I'm so glad you asked that
 15  question.  Because this is the way CSS works.  Can I
 16  give a little bit of background on this?
 17              MR. CARSON:  I think you need to answer
 18  it, yes.
 19              MR. MARKS:  Okay.  Originally, when
 20  content owners were looking to try and protect their
 21  content on this new digital format of DVD, they
 22  tried to come up with a legislative approach whereby
 23  copy control flags would be inserted in the DVDs,
 24  which is strictly a copy control technology.  And
 25  playback devices, whether they be consumer
 26  electronic devices or computers, would be mandated

                                                   PAGE 239
  1  by legislation to look for and respond to those copy
  2  control flags.
  3              So that would have involved strictly a
  4  copy control technology, as enforced by law.
  5  Somewhat similar and based on the Audio Home
  6  Recording Act.  The Motion Picture Association of
  7  America started -- entered into negotiations with
  8  the consumer electronics companies to develop
  9  exactly such a technological system and legislative
 10  structure.
 11              Those discussions resulted in a draft
 12  piece of legislation called the Digital Video Home
 13  Recording Rights Act, or Home Recording Act.
 14  Something like that, DVRA, I think we refer to it.
 15              When those discussions were opened up to
 16  the computer industry, the computer industry said,
 17  "No.  We cannot sign onto this.  We do not agree
 18  with the concept of having Congress mandate that our
 19  devices look for and respond to copy control flags
 20  and content.  Copy control flags are essentially
 21  ancillary data that are easy to get lost and it
 22  would be very burdensome to make our machines have
 23  to look at all the streams of data, especially
 24  digital data which basically are just ones and
 25  zeroes, and have to assertively look for these copy

                                                   PAGE 240
  1  control flags.  We won't do it, we won't sign up for
  2  it."
  3              And the strength of the computer
  4  industry is really demonstrated in the no-mandate
  5  provision of the DMCA.  That there is no mandate to
  6  affirmatively look for copy protection measures.
  7              So here we were, after months if not
  8  years of work, kind of back at square zero.  What
  9  are we going to do?  The computer industry did
 10  acknowledge that making our films available in
 11  digital format did pose works.  We did, after weeks
 12  and months of discussions, get them to realize that,
 13  unlike software, you know, Warner Brothers is still
 14  exploiting Casablanca in Version 1.0.
 15              Now, we don't update it, we don't change
 16  it.  We -- you know, it's the same classic movie
 17  that we exploit.  So once somebody has a copy of it,
 18  they don't have an incentive to get the revised
 19  copy.  The work is the work.
 20              Understanding that, the computer
 21  industry came back to us and said, "Fine.  This is
 22  our position.  If data is coming to our machines in
 23  the clear," meaning unencrpyted, descrambled, "We
 24  believe we have no obligation to look for any copy
 25  control flags, to look for any copy protection
 26  devices, or to really follow any rules with respect

                                                   PAGE 241
  1  to that data.  The data comes in the clear, and we
  2  can -- our machines should be able to do whatever
  3  they like with that data, and send it out the
  4  machine in the clear."
  5              Now, this is completely apart from any
  6  copyright rules, or the fact that if a user is
  7  making unauthorized copies that he may be infringing
  8  the copyright law.
  9              They said, "But if that data is
 10  scrambled, if it is encrypted, and we want our
 11  machines, our computers to make use of that data,
 12  then we have a choice.  We can either sign up and
 13  get a license to decrypt that data and follow the
 14  rules and conditions that are in that license.  Or
 15  our machines will simply pass along the encrypted
 16  data, keeping it in encrypted form.  We agree that
 17  our devices and machines should not be permitted to
 18  simply descramble and hack through and encryption
 19  system without any sort of authorization or
 20  permission."
 21              Having reached that understanding, that
 22  is the basis upon which we built the CSS system.
 23  The CSS system, called Content Scramble System,
 24  involves initially scrambling the content on the DVD
 25  disk.  So it is encrypted, even though that's
 26  completely transparent to the user.

                                                   PAGE 242
  1              Because when you put your DVD into your
  2  DVD player, or your DVD computer, in most
  3  circumstances you just press "Play" and the disk
  4  plays.  So you don't even necessarily realize that
  5  it's encrypted, but the disks are encrypted.
  6              Those devices, whether they be players
  7  or personal computers or the Sony PlayStation who
  8  would like to have their devices be able to display
  9  and play back those DVD disks need to get a license
 10  to be able to decrypt the CSS encryption system.
 11  They do that by going to the DVD-CCA and applying
 12  for a CSS license.
 13              That CSS license gives them the keys and
 14  tools to be able to decrypt the disks.  It also
 15  imposes certain conditions on what the device can do
 16  with the content once it is decrypted.  One of those
 17  obligations, for example, is that the content is not
 18  allowed to flow out in the clear on a digital
 19  output.
 20              Another example of an obligation is that
 21  the device has to insert Macrovision on content
 22  before it goes out the analog output.  So by this
 23  combination of encryption technology and licensing,
 24  you have really a structure that involves access
 25  control and copy protection.

                                                   PAGE 243
  1              MR. CARSON:  Well, it sounds -- I'm
  2  sorry, someone else?
  3              MR. HANGARTNER:  I was just about to
  4  jump in with a comment.  I mean, I think this
  5  discussion needs to step back a little bit and look
  6  at the DMCA.  As Professor Samuelson mentioned in
  7  her comments to the court in one of the CSS cases
  8  back in New York, that these DMCA access provisions,
  9  circumvention provisions are really an adjunct means
 10  of regulating company infringement.  They're not
 11  really an end in themselves, particularly when we're
 12  talking about a lot of different situations.
 13              We've got broadcast situations, we've
 14  got pay-per-view situations, you've got end-users
 15  that actually buy a copy of the copyrighted work.
 16  It really has to be viewed in that context, that
 17  this is a means of regulating copyright infringement
 18  rather than an end in itself.
 19              I think it's also important to, as you
 20  look at these things, to think a little bit about
 21  what these access control mechanisms do.  For
 22  example, the whiz code that's used by Sony is not
 23  really a copy protection system.  What it does is it
 24  limits the games that can be played on a PlayStation
 25  console.

                                                   PAGE 244
  1              This serves a variety of purposes.  By
  2  linking together this access control system with the
  3  patents that Sony has obtained that relate to that
  4  access control system, Sony's created a system where
  5  PlayStation video games can only be published by a
  6  licensed game developer.  So they use this as a
  7  means to control the ability of people to make games
  8  that can be played on a PlayStation console.  So
  9  that they maintain control over all of the creative
 10  works that can be used on that console system.
 11              They also use it to put in place these
 12  regional controls that we talked a little bit about
 13  before.  So this whiz code, it doesn't prevent
 14  copying of the disks.  I mean, you can copy a
 15  PlayStation disk.  It may or may not copy that whiz
 16  code, but you can copy the PlayStation disk and
 17  access the information off that copy on a device
 18  other than a PlayStation console.
 19              So, I guess the thrust of my comment is
 20  really to keep in mind that core purpose of access,
 21  circumvention and control as an adjunct to copyright
 22  infringement, which is what this is really all
 23  about.  Preventing infringement of people's
 24  copyright.
 25              I wanted to mention, David Herpolsheimer
 26  has showed up.  I think he may want to jump here

                                                   PAGE 245
  1  with a quick comment on the same subject, if that's
  2  okay.
  3              MR. CARSON:  Well, if we get a chance,
  4  in a while.  But I sort of would like to stick with
  5  what I was talking about with Mr. Marks.
  6              It strikes me that what we are
  7  describing is perhaps a copying control device in
  8  access control clothing.  In other words, you've got
  9  a device that controls access to a work, but not in
 10  the way that, certainly before this rulemaking
 11  began, I thought we were talking about.  We were
 12  talking about access control devices.
 13              In other words, I assumed -- naively,
 14  perhaps -- that a technological measure that
 15  controls access to a work, the purpose of that is to
 16  make sure that authorized users and only authorized
 17  users are getting access to the works.  So if I paid
 18  the price to the copyright owner otherwise be able
 19  to use that work, then I'm entitled to use it.
 20              And if he somehow gets access to it by
 21  circumventing encryption or passwords, or whatever,
 22  then she's in trouble because she's not an
 23  authorized user.  I'm not in trouble because I am.
 24  That's got nothing to do, as far as I can tell, with
 25  what you're talking about.

                                                   PAGE 246
  1              What you're really talking about, I
  2  think, is an access control measure that is designed
  3  to channel someone towards a device which has copy
  4  controls on it.  Is that a fair description, or am I
  5  misdescribing it?
  6              MR. MARKS:  I think it's partially a
  7  fair description.  I think it is also used -- the
  8  fact that the work is encrypted is used to try and
  9  guarantee that the user has legitimately -- has
 10  legitimate access to the work as well.  I mean, I
 11  don't think it's completely devoid, the CSS system,
 12  of trying to ensure that those people that -- for
 13  example, would just simply duplicate the DVD disks -
 14  - you know, pirates who would duplicate the DVD
 15  disks.
 16              And if there were pirate players that
 17  were unlicensed, they wouldn't be able to play those
 18  disks because they were encrypted with CSS.  That
 19  serves an access control function as well.
 20              MR. CARSON:  But a duplicated --
 21              MR. MARKS:  A duplicated DVD disk is
 22  going to duplicate the CSS encryption.
 23              MR. CARSON:  And can be played on any
 24  legitimate player.

                                                   PAGE 247
  1              MR. MARKS:  And can be played on any
  2  legitimate player, legitimate licensed CSS player.
  3  And not be played on non-licensed players.
  4              MR. CARSON:  Okay.  So I don't see how
  5  you're stopping the -- I don't see how you're
  6  stopping the piracies of DVDs in that respect.
  7  Pirated DVDs can be sold on the open marketplace and
  8  played in any legitimate DVD player.
  9              MR. MARKS:  Without infringement
 10  copyright?
 11              MR. CARSON:  No, no, no.  Certainly not.
 12  But we know pirated goods are on the market all the
 13  time.
 14              MR. MARKS:  Yes, they are.
 15              MR. CARSON:  And infringing copyrights,
 16  that's very nice to know they're still out there.
 17  So I'm trying to figure out what this technological
 18  measure is doing, and I'm not seeing it as really in
 19  any way restricting access to authorized users.
 20  I'll get to you in a moment, Steve.
 21              In other words, there's no reason to
 22  believe as a general proposition that someone who
 23  has a commercially manufactured and marketed DVD,
 24  manufactured by Sony, perhaps, or any of the major
 25  studios -- Time Warner, whatever -- is not an
 26  authorized user.

                                                   PAGE 248
  1              If someone has that DVD which is
  2  manufactured by Time Warner, you're going to presume
  3  they're an authorized user, aren't you?
  4              MR. MARKS:  Yes.  Although you'd have to
  5  sort of define what you mean by authorized user.  If
  6  someone has purchased a DVD from Time Warner,
  7  they're authorized to play it on a licensed DVD
  8  player.  They can play it as many times as they
  9  want, there's no restriction on saying it's a one-
 10  time play, it's a two-time play.
 11              Are they authorized to make
 12  reproductions of it, are they authorized to copy it
 13  to their hard drive, are they authorized to
 14  redistribute it in electronic form?  The answer is
 15  no.  So what do you mean by authorized user?
 16              MR. CARSON:  Are they authorized to view
 17  it on any machine they can find, that they can make
 18  to view it?
 19              MR. MARKS:  No, no.  They're authorized
 20  to view it on a licensed device.  If someone were to
 21  buy a VHS cassette, and they didn't have a VHS
 22  player, are they authorized to disassemble the
 23  videocassette, reproduce the film in there in 35-
 24  millimeter print and play it on their movie camera?
 25  I don't think so.

                                                   PAGE 249
  1              MR. CARSON:  Okay.  But, first of all,
  2  there's no contractual privity between the purchaser
  3  of that DVD and Time Warner, I assume.  There's no
  4  shrink-wrapped license.  You know, you don't sign a
  5  license saying, "I agree only to play this on an
  6  authorized player," when you purchase the DVD.
  7              MR. MARKS:  That's correct.  And neither
  8  is there a shrink-wrapped license when you buy a VHS
  9  cassette that's in NTSC format, and you only have a
 10  PAL player.
 11              MR. CARSON:  Okay.  I go to Europe, I
 12  buy a videocassette, it's PAL.  I bring it back here
 13  and when I play it, I find, oh my God, I got a --
 14  what was I thinking?
 15              MR. MARKS:  Right.
 16              MR. CARSON:  But, wait a minute.  I can
 17  take it down to a shop and they can convert it for
 18  me to NTSC, and they'll make a copy for my own
 19  personal use for NTSC.  Would doing that be a
 20  violation of Section 1201(a)?
 21              MR. MARKS:  It would not be a violation
 22  of Section 1201(a), because that's not a technical
 23  protection measure.  The fact that it's in PAL is
 24  not a technical -- or encryption.  It's not a form
 25  of technological protection measure.

                                                   PAGE 250
  1              I thought you were going to ask me,
  2  frankly, would that be a violation of copyright.
  3  And I'm not sure I have the answer to that.  A
  4  commercial service that is reproducing copyrighted
  5  films into different formats, I think they might
  6  well be violating copyright law.
  7              MR. CARSON:  We don't have to resolve
  8  anything here.
  9              MR. MARKS:  I'm glad we don't have to.
 10              MR. CARSON:  But getting back to what we
 11  were talking about.  The kinds of things you were
 12  talking about -- yes, if I buy the DVD I certainly
 13  would have the right to make copies of it, I'll
 14  grant you that.  But why don't I have the right to
 15  put it on my computer that maybe running a Linux
 16  operating system?  And maybe I can't get a hold of
 17  any equipment that is authorizing license that will
 18  allow me to view that DVD player.
 19              But if I can get a hold of that DCSS
 20  code, and if I can manage to crack that myself, so
 21  that I can view it on my own computer, where's the
 22  problem?  Whose rights have I violated?
 23              MR. MARKS:  Okay.  I'm a little
 24  uncomfortable about talking about DCSS because of
 25  the ongoing litigation.

                                                   PAGE 251
  1              MR. CARSON:  Well, let me tell you that
  2  you better get comfortable because this is a
  3  rulemaking that could affect DCSS.
  4              MR. MARKS:  That's fine, that's fine.
  5  But, you know, let me try and answer the question
  6  for you.  It's a matter of balance.
  7              As I was trying to describe before, if I
  8  can, as an individual user, circumvent the
  9  technological protection measure on a DVD disk, and
 10  copy that content to my hard drive, there is a risk
 11  that the content owner has that the use by that
 12  individual will not simply be home viewing, but may
 13  also be infringing.  Making unauthorized
 14  reproductions, making distributions over the
 15  Internet.
 16              This is not sort of speculative use,
 17  people do that with MP3 files all the time today, of
 18  music.  Given that degree of risk, the inconvenience
 19  that is posed to a user who purchases a DVD disk,
 20  but doesn't have a DVD player -- which you can get
 21  for under $200 -- or a software program that he can
 22  install on his computer, or her computer to play the
 23  disk, if you balance those out I think the
 24  inconvenience to the individual user is far
 25  outweighed by the risks to the copyright owners.

                                                   PAGE 252
  1              And the risk to the general public that
  2  if this sort of circumvention is permitted, then
  3  millions of DVDs that are sold today may not be sold
  4  tomorrow.  Because content owners may decide it's
  5  simply too great of a risk for them to put their
  6  content on that digital format.  That's the
  7  balancing that needs to take place, in my view.
  8              MR. CARSON:  And I'm not sure you've got
  9  the wrong balance there, philosophically.  But just
 10  looking at the scheme we have in Section 1201,
 11  Congress made the judgment that it was not going to
 12  make it unlawful for an individual to circumvent the
 13  technological measure that controls the use of a
 14  work.  Copying and so on.
 15              It did make the judgment that it would
 16  make it unlawful to circumvent a technological
 17  measure that controls access to a work.  And again,
 18  isn't this access control measure -- CSS that you're
 19  talking about -- a measure that is really designed
 20  as its end, not to control access but to control the
 21  use, by channeling you to that device whose purpose
 22  is to control use?
 23              MR. MARKS:  Well, I think the problem
 24  is, is it's mixed.  I mean, as I was trying to
 25  describe, we could not put in an effective
 26  technological measure that would not fail us with

                                                   PAGE 253
  1  respect to the no-mandate provision in the DMCA,
  2  without employing encryption, which is an access
  3  control technology.
  4              So the very structure of the DMCA
  5  itself, in terms of the no-mandate provision kind of
  6  forced our hand to go to the structure.  Now, I want
  7  to be very clear.  We already had devised the CSS
  8  structure prior to the implementation of the DMCA in
  9  October of 1998.
 10              But it only reinforced that structure
 11  that we moved to, as a result of the computer
 12  industries saying to us, "If the content is
 13  scrambled, we will not descramble it.  We will not
 14  have our machines descramble it without
 15  authorization.  If the content is in the clear,
 16  don't ask us to try and follow any rules with
 17  respect to that content."
 18              MR. CARSON:  Steve, you've been wanting
 19  to jump in.
 20              MR. METALITZ:  Yes.  If I may, just
 21  three reactions to your -- to this line of
 22  questioning.  First, I've said it before and I'm
 23  sure we'll say it again.
 24              But it is significant that in your
 25  drawing a distinction between access controls that
 26  are set up with the goal of preventing infringement,

                                                   PAGE 254
  1  piracy, unauthorized uses, and some other types of
  2  access controls that perhaps don't have that close a
  3  link -- it is significant to me that Congress did
  4  not make that distinction.
  5              Congress did not say that access control
  6  mechanisms that are for some pure and noble purpose
  7  other than preventing piracy have a privileged
  8  status, and more protection against circumvention
  9  than those that are -- as I think Dean has indicated
 10  -- closely linked to the preventing or dealing with
 11  a huge risk of rampant piracy that CSS has intended
 12  to address.
 13              And since this is not a congressional
 14  committee, but a rulemaking created by Congress, I
 15  think those -- it's important to respect both the
 16  distinctions Congress did make and the distinctions
 17  Congress did make.
 18              Secondly, I don't think that the type of
 19  system that CSS represents is quite as brand new and
 20  unprecedented as your question might have implied.
 21  I don't think it's really much different in kind
 22  from other types of access controls such as what
 23  we've heard before, and probably you heard earlier
 24  this week.  A license that would only allow access
 25  to certain material from certain designated

                                                   PAGE 255
  1  machines, designated by IP number, or some other
  2  fashion.
  3              Now, that's not the exactly the same as
  4  only allowing it from licensed players.  But it's
  5  similar in the sense that it is an access control
  6  that manifests itself by saying, "This material may
  7  be accessed on certain machines, and not on other
  8  machines."
  9              And again, that's exactly the kind of
 10  access control Congress had in mind when it enacted
 11  Section 1201(a)(1), and that it wanted this
 12  rulemaking to look at.
 13              And finally, it just strikes me that
 14  this whole CSS issue is very -- I mean, it's almost
 15  a model for a case of -- a business case of a
 16  problem, if it is one, that can be solved by the
 17  marketplace, and probably is being solved by the
 18  marketplace.
 19              If there isn't currently a freestanding
 20  Linux player, a Linux plug-in that can be used to
 21  play DVDs on a Linux-based computer -- if there's a
 22  market to do that, it strikes me that having to pay
 23  $10,000 for the license if the market is more than,
 24  you know, a couple thousand people, that's probably
 25  a pretty good deal.  And that market need will be
 26  filled.

                                                   PAGE 256
  1              And similarly with other -- I think it's
  2  also important to recognize that we sometimes think
  3  of the only platforms for playing DVDs as DVD
  4  players and computers.  But, in fact, I would
  5  venture to say that at least in Japan today, neither
  6  of those is the main way that people watch DVDs.  
  7                               The main way they
  8  watch DVDs is using their PlayStation 2.  And that
  9  did more to advance the sales of DVDs in Japan than
 10  anything else.  And that may someday be the case
 11  here.
 12              There are going to be many platforms.
 13  There already are, and there are going to be more.
 14  I think the only thing that perhaps makes it a
 15  little difficult for us to see that this is an issue
 16  that the market is going to solve, and that people
 17  will have access to a wide variety of platforms on
 18  which to play DVDs is that there's kind of a
 19  theological taint to this as well.  I think we ought
 20  to get it out in the open.
 21              And even if the plug-in for playing --
 22  for example, for playing a DVD on Windows were
 23  available for free -- and maybe it is, for all I
 24  know.  I don't know what the strategy is for
 25  distributing that.  There are people, probably some
 26  in this room, that wouldn't do it because they don't

                                                   PAGE 257
  1  want their machines to be tainted by anything that
  2  emanates from Redmond, Washington.
  3              That's a fact.  And if that constitutes
  4  a sufficient market, that market need is going to be
  5  fulfilled.  But it is a little different from the
  6  typical market situation, where people aren't
  7  theologically motivated in their decisions, but
  8  they're motivated by other factors of what's
  9  cheapest and what's most efficient and what works
 10  best, and so on and so forth.
 11              So, I think that sometimes clouds the
 12  picture a little bit.  It makes it a little harder
 13  to see that this is really a marketplace issue that
 14  the marketplace is likely to resolve.  And the
 15  result is going to be that virtually anybody that
 16  wants to watch DVDs on any platform that's readily
 17  available will be able to do so.
 18              MR. MARKS:  Can I take one more shot at
 19  responding?  I think one of the underlying
 20  assumptions of your question, if I can be so
 21  presumptuous, is that if you have bought a DVD disk
 22  you have the right to access the content that's on
 23  the DVD disk.  And so if you don't have the
 24  appropriate playback equipment, why shouldn't you be
 25  able to circumvent the protections to get at the
 26  content?

                                                   PAGE 258
  1              I think that argument would be more
  2  powerful if, in fact, the content was only released
  3  on a DVD disk.  But, in fact, if you want to see
  4  "The Matrix," you don't have to buy a DVD to do so.
  5  You could see it in the theater, you could see it on
  6  VHS.
  7              So the fact that the work is available
  8  in many alternative formats seems to me to also
  9  justify the fact that one should not permit
 10  circumvention of a technological protection measure
 11  by a user simply because the user has chosen to
 12  purchase the work in a format for which the user
 13  doesn't have an appropriate player.  And for which
 14  alternative players are available on the market at
 15  very consumer-friendly prices.  It seems like a
 16  fairly weak argument to me.
 17              MR. CARSON:  But it is my understanding
 18  that the quality of what you see on DVD is much
 19  better than that which you see on VHS, for example.
 20  And it's also my understanding that oftentimes when
 21  you get a motion picture on DVD, there's a lot of
 22  added value material that you don't get on a VHS.
 23              MR. MARKS:  Precisely why consumers go
 24  out and buy new equipment.  When CDs were first
 25  released, nobody had CD players.  Consumers decided
 26  that, "Hey, this is a great format, it's worth my

                                                   PAGE 259
  1  investment in a new piece of playback equipment."  I
  2  see no difference in the DVD context.
  3              If consumers like the new material
  4  that's available on DVD, like the new quality that's
  5  available on DVD, they have a choice.  They can buy
  6  the DVD and buy a piece of playback equipment, or
  7  not.
  8              MR. CARSON:  Ms. Gross, maybe you can
  9  help me out.  I'm reading my notes, but I'm not
 10  quite sure I'm recalling what you said.  But you
 11  said something to the effect that -- were you saying
 12  that someone from MPAA had stated that a person
 13  wanting to make a fair use of a DVD should have to
 14  obtain a license to do so?
 15              MS. GROSS:  That's right.
 16              MR. CARSON:  Repeat that, and tell me
 17  who it was that said that.
 18              MS. GROSS:  Sure.  Let me just remember.
 19  I was at a conference at Yale Law School a few weeks
 20  ago, and General Deputy Counsel of the MPAA -- I
 21  believe Geckner was his last name.  One of the
 22  audience members posed him a question, and said,
 23  "I'm a multimedia artist, and I rely on making fair
 24  use of clips of videos for creating new works.  If I
 25  want to use the DVD to copy a small clip of that to
 26  include in a new work that I'm going to create, is

                                                   PAGE 260
  1  it your position that I would be required to get a
  2  license?"  And the MPAA said yes, it is.
  3              MR. CARSON:  Would that be your
  4  position,
  5  Dean?
  6              MR. MARKS:  What my position would be is
  7  that I don't think wanting to use clips from a DVD
  8  that might constitute and qualify for fair use in a
  9  new work would be sufficient justification to
 10  circumvent the technological protection measure of a
 11  CSS system that's on a DVD.
 12              Does that mean that the multimedia
 13  artist is completely out of luck?  I don't think so.
 14  Because the multimedia artist can access clips of
 15  the content from a VHS copy, or when the content is
 16  on screen, make a camcorder copy of the content and
 17  use it.
 18              And people may laugh about that, but the
 19  highest -- one of the largest sources of piracy of
 20  our films is from people bringing camcorders into
 21  movie theaters and making camcorder copies, and then
 22  reproducing them.  And you'd be surprised at how
 23  good the quality is.
 24              MR. CARSON:  Well, I've seen some of the
 25  pretty poor quality ones.

                                                   PAGE 261
  1              MR. MARKS:  Some are pretty poor
  2  quality, some are pretty good quality.
  3              MR. CARSON:  Okay.  One last thing I'd
  4  like to ask you, Mr. Marks, on this subject.  You
  5  give a very articulate explanation and justification
  6  for the regional codes, and the way in which motion
  7  pictures are marketed.
  8              Given all that, however, why should it
  9  be a violation of the law for an individual who may
 10  go to Europe or Asia, or wherever, and pick up a DVD
 11  of a motion picture there and bring it home, to
 12  circumvent for his or her own personal use, so he or
 13  she can view that DVD in his or her own home?  Why
 14  is that a problem?
 15              MR. MARKS:  It really goes to the same
 16  question you asked about the access control, why
 17  it's a problem if they don't have a player.  It's
 18  because of the fact that the technological
 19  protection measure is not only dealing with access,
 20  but is also dealing with subsequent uses of the
 21  content.
 22              I would like to just say a couple of
 23  points about the regional coding, which I missed.
 24  And which some of my colleagues pointed out to me.
 25              MR. CARSON:  Okay.

                                                   PAGE 262
  1              MR. MARKS:  Another reason why we need
  2  regional coding, why we do regional coding is that
  3  the law in various territories is different with
  4  regard to censorship requirements.  So we cannot
  5  simply distribute the same work throughout the world
  6  in the same version.  Local laws impose censorship
  7  regulations on us that require us to both exhibit
  8  and distribute versions of the films that comply
  9  with those censorship requirements.
 10              In addition, the way -- at least the
 11  economics of our business currently work, when we
 12  license distribution of our works to licensees in
 13  other countries, whether it be video distributors or
 14  broadcast distributors, often a precondition in the
 15  license contract that the distributor seeks is that
 16  the film has had a theatrical release in the U.S.
 17  prior to being exploited in the foreign country.
 18              So, those are two other additional
 19  considerations as to why the regional coding scheme
 20  is in place in the first place.
 21              MR. CARSON:  Now, if I understand your
 22  explanation why it's a problem to even let the
 23  individual user circumvent, to watch that foreign
 24  DVD, it's not that it would be such a horrible thing
 25  for the copyright owner if one person, one
 26  individual happened to see it in his or her home at

                                                   PAGE 263
  1  a time when he shouldn't have, but that it's linked
  2  to these other protections.
  3              MR. MARKS:  That's correct.  If there
  4  was some way to guarantee that a person who was
  5  circumventing the CSS protection technology to view
  6  a Region 2 disk on a Region 1 player was only going
  7  to view that disk on the player in the privacy of
  8  his or her own home, without further distributing or
  9  copying the disk, it would be less of a problem.
 10              There's still the problems associated
 11  that I described before about the windows of
 12  exploitation.  Which would make it problematic if
 13  you're one individual with the entire population of
 14  Italy that, in the privacy of their own homes
 15  circumvented regional coding to play a DVD of a
 16  movie that had never been -- that had not never
 17  been, but had not yet been theatrically released in
 18  Italy and was scheduled -- yes, that would have a
 19  detrimental impact on us.
 20              But in your hypothetical of a single
 21  individual user I would say, yes, if that single
 22  individual user was circumventing solely to be able
 23  to view the content of the DVD disk in the privacy
 24  of their own home, with some iron-clad guarantee
 25  that that circumvention was not going to lead to

                                                   PAGE 264
  1  further risks of unauthorized reproduction and
  2  distribution, I would agree with you.
  3              MR. CARSON:  But why is it that CSS had
  4  to be designed in such a way that someone who
  5  circumvented in order to overcome the regional
  6  coding, also necessarily would be circumventing the
  7  copy protection?  Couldn't you have done it in a
  8  different way that it wouldn't have been a problem?
  9              MR. MARKS:  No.  It isn't that it's
 10  necessarily designed that way.  Well, let me back
 11  up.
 12              The way the CSS system works is that the
 13  content in the clear is restricted from being made
 14  available on a hard drive of a computer, or what's
 15  known as a user-accessible bus.  I can only speak to
 16  the unauthorized decryption systems that have --
 17  that the hack, frankly, of DSS that has occurred to
 18  date.  And with that hack the content of the DVD
 19  disk is made available in the clear, on a computer
 20  user's hard drive.  And so that is a problem.
 21              We didn't design it so that any attempts
 22  to circumvent would mean it killed the whole system,
 23  but in fact the circumvention device program that's
 24  been developed to date accomplishes that, imposes
 25  that risk.  And the problems with that is that that
 26  circumvention device is distributed with messages

                                                   PAGE 265
  1  that say, "Here it is, copy DVDs to your heart's
  2  content, send them to your friends."  So it sort of
  3  poses the parade of horrible risks that we're
  4  concerned about.
  5              MR. CARSON:  On the subject of regional
  6  coding, Ms. Gross, you spent a fair amount of time
  7  talking about that as being a problem.  I'm trying
  8  to figure out how big a problem it really is.  And
  9  how many U.S. residents actually go abroad and bring
 10  back foreign DVDs, and then find themselves
 11  frustrated by their inability to play them?
 12              MS. GROSS:  I think many probably do.  I
 13  don't have a number, I don't have a statistic.  But
 14  I think it's fairly common.  When you travel, you
 15  like to -- myself, I like to get music from whatever
 16  region I'm in, and bring it back home with me.  I'm
 17  sure some people are perhaps the same way for
 18  movies.                                        0
 19  problem.  But again, I don't have a number that this
 20  number of people by DVDs abroad.  That I can't tell
 21  you.
 22              MR. CARSON:  You think it's huge enough,
 23  though, that we should make an exemption to a right
 24  that Congress has said that copyright owners have a
 25  right to do, just because you think that there may

                                                   PAGE 266
  1  be a few people -- or even quite a few people -- who
  2  might find themselves inconvenienced in that way?
  3              MS. GROSS:  Well, I think I know that we
  4  are.  I think that, judging from the enormous number
  5  of comments that were received from people
  6  complaining about their inability to watch their
  7  DVDs, that it is a problem.  It's a rather large
  8  problem.  And it also is a problem outside the U.S.
  9              The proceeding here was not just
 10  designed to decide whether or not U.S. residents
 11  would be able to watch their DVDs, but whether
 12  people in general were allowed to watch their --
 13  would be restricted from non-infringing uses.
 14              And you think about entire worldwide
 15  audience of people who want access to watching DVDs
 16  from worldwide producers, that's a large number.
 17              MR. CARSON:  Are you saying that Section
 18  1201 has extra-territorial application?  I'm not
 19  sure I follow what you're saying.
 20              MS. GROSS:  No, I'm not saying that at
 21  all.  I'm just saying that there's a lot of people
 22  in the U.S. and in the world who are prohibited.
 23              MR. CARSON:  Okay.  But I'm trying to
 24  figure out why we should be concerned about people
 25  elsewhere in the world who are prohibited.  Because
 26  I don't understand how Section 1201 affects them,

                                                   PAGE 267
  1  and therefore I don't understand why we should be
  2  considering an exemption for Section 1201 for their
  3  benefit.
  4              MS. GROSS:  Well, I think it's also
  5  important to note that it's not just when you travel
  6  that you want to get a DVD and bring it back.  But
  7  you simply can't purchase or order DVDs from foreign
  8  distributors.  Maybe you want to get a DVD of an
  9  Indian movie, and you're prohibited from playing it
 10  on your device when you bring it -- when it arrives
 11  in the mail.
 12              MR. MARKS:  But if I could respond just
 13  for a moment.  The Indian producer, the Indian film
 14  producer is not prohibited from producing DVD disks
 15  that would be playable on Region 1 machines.  So,
 16  for example, we produce DVD disks that are playable
 17  on Region 1 disks and Region 2 disks and Region 3
 18  disks.  And there's no prohibition on a producer
 19  from producing DVD disks that are playable on
 20  different regions.
 21              And, in fact, the producer has the
 22  ability to produce a single DVD disk that would be
 23  playable on all regions.  If you have a producer, a
 24  content owner who is not concerned about the windows
 25  of exploitation, they can produce a DVD disk that's
 26  multiregion, and playable on all regional players

                                                   PAGE 268
  1  throughout the world.  So there is flexibility built
  2  into the system.
  3              MR. CARSON:  I may be exhausting your
  4  knowledge here, but let's take that example.  And
  5  India has, I think, the second-largest film industry
  6  in the world.  First?  Okay.                   0
  7  of India the market for those films is probably
  8  fairly limited.  Do you know whether most Indian
  9  films are coded so that -- on DVDs, so that they can
 10  be viewed worldwide?  Or are they simply regionally
 11  coded?
 12              MR. MARKS:  Do you know what?  I don't
 13  know, but I will try and find out.  I don't even
 14  know if Indian producers are making their films
 15  available on DVD, but I will try to find that out.
 16              MR. CARSON:  Okay.
 17              MS. GROSS:  I just wanted to clarify
 18  what I was saying.  The Notice of Inquiry was
 19  requesting whether or not there was harm to people,
 20  and it didn't ask whether or not there was harm to
 21  U.S. people.
 22              MR. CARSON:  Okay.  But let's keep in
 23  mind that ultimately what we're trying to do here is
 24  figure out whether we should recommend an exemption,
 25  and that exemption -- I don't think -- can directly
 26  affect what happens outside the United States.

                                                   PAGE 269
  1              All right.  So, the harm I've heard from
  2  yourself -- and I want to make sure I've got your
  3  catalogue of problems here with DVDs.  We've got the
  4  problem for people with Linux operating systems,
  5  which some people would say is being resolved or may
  6  soon be resolved, depending on how available this
  7  driver is, I guess.  You've certainly got your
  8  doubts about that.
  9              You've got the problem of regional
 10  coding.  What are the other specific problems we've
 11  got that we need to be worried about with respect to
 12  DVDs?
 13              MS. GROSS:  The fact that fair use is
 14  completely prevented.  As we've heard here today,
 15  people are required to get a license in order to
 16  make a fair use of a DVD.  This idea that, well, you
 17  can simply go out and buy a VHS, it doesn't work.
 18  And it doesn't work because DVDs are a completely
 19  different experience than a VHS.
 20              They have director's cuts, you can look
 21  at different shot angle, different camera angles.
 22  There's all sorts of additional information that is
 23  included in the DVD that you simply cannot get on a
 24  VHS.  There is no equivalent to a DVD, so fair use
 25  is severely impacted.  It's completely prohibited.

                                                   PAGE 270
  1              MR. CARSON:  What other fair uses of a
  2  DVD can't engage in under the current regime?
  3              MS. GROSS:  If I want to make a back-up
  4  copy for my own personal use.
  5              MR. CARSON:  Okay.  Let's stop with
  6  that.  What case law tells you that you have a fair
  7  use right to make a back-up copy of the DVD for your
  8  own personal use?
  9              MS. GROSS:  I think that Sony v.
 10  Universal Cities says that.
 11              MR. CARSON:  Really?  That's an
 12  interesting proposition.
 13              MR. MARKS:  I don't think so.
 14              MS. GROSS:  Software law specifically
 15  allows you to do that, and DVDs certainly fall under
 16  software.
 17              MR. CARSON:  DVDs fall within Section
 18  117, is that what you're saying?
 19              MS. GROSS:  DVDs are software.
 20              MR. CARSON:  Okay.  Are you saying that
 21  they're covered by Section 117?
 22              MS. GROSS:  I'm not really sure what 117
 23  is.
 24              MR. CARSON:  Okay.  You might want to
 25  take a look at it, and let us know in your post-
 26  hearing comments.

                                                   PAGE 271
  1              MS. GROSS:  But I think that the 9th
  2  Circuit decision in the Diamond RIAA case, that
  3  people have a fair use right to copy an entire song
  4  onto their computer hard drives for personal use --
  5  I think you'll find a lot of that in the case law.
  6              MR. CARSON:  You might want to cite a
  7  few cases to us, then, too.
  8              MS. GROSS:  I will do that.
  9              MR. CARSON:  I'm not terribly familiar
 10  with a whole lot of case law that says you can do
 11  that.  Let's go on.  What are the fair uses are that
 12  you're saying can't be done right now?
 13              MS. GROSS:  Well, in one of the
 14  affidavits submitted in the DCSS case was Professor
 15  Charlie Nessen (phonetic) from Harvard Law School,
 16  who talked about how he typically would like to use
 17  a portion of a DVD from the movie, "The Client," I
 18  think it was, as part of educating the law students
 19  on how to handle certain situations.
 20              And he's now prohibited from taking that
 21  snippet of the DVD and showing it to his students.
 22  That's an educational use that is prohibited.
 23              MR. CARSON:  Okay.  He could do that
 24  with a VHS version, correct?
 25              MS. GROSS:  Well, he might be able to.
 26  But there's no guarantee that he could.

                                                   PAGE 272
  1              MR. CARSON:  Why is there no guarantee
  2  that he could?  What on earth could stop him?
  3              MS. GROSS:  Because there's no guarantee
  4  that the film will be released in VHS.  There's no
  5  guarantee that the DVD is the same equivalent
  6  content.
  7              MR. CARSON:  Okay.  That particular film
  8  is in VHS right now.
  9              MS. GROSS:  Okay, that film may be.
 10              MR. CARSON:  Okay.  We're talking about
 11  now and the next three years.  Are you seriously
 12  telling me that there are films that are going to be
 13  released in DVD in the next three years that will
 14  not be available in VHS?
 15              MS. GROSS:  I think that's right.
 16              MR. CARSON:  Why do you think that's
 17  right?
 18              MS. GROSS:  Because they're completely
 19  separate products, a DVD and a VHS.
 20              MR. CARSON:  Well, if they're the same
 21  film -- although the DVD may have added value.
 22              MS. GROSS:  I think they're very
 23  different.  When you incorporate all the additional
 24  information and the incredibly rich multimedia
 25  experience that a DVD provides, it's not at all the
 26  same.

                                                   PAGE 273
  1              MR. CARSON:  Okay.  Professor Nessen
  2  wants to show a film clip from the motion picture.
  3  He's going to be able to do that with a VHS version.
  4  There's no question, is there?
  5              MR. MARKS:  He'll be able to do that
  6  with the DVD version.  I mean, if he has a DVD
  7  player in his classroom, Section 110 covers that use
  8  of display in the classroom.  There's no prohibition
  9  on that.
 10              MR. CARSON:  I'm just baffled.  I don't
 11  know how he can't do what you're saying he can't do,
 12  with what's available to him now.  And I think Mr.
 13  Marks is correct.  He can take a DVD player into the
 14  classroom, and a tv, and he can show that clip.
 15              MS. GROSS:  As long as that movie is
 16  available in that format, that's true.
 17              MR. CARSON:  Well, if it's not available
 18  in that format, he's in trouble anyway.  Because
 19  we're talking about a DVD right now, and a DVD
 20  player.  I'm sorry, I'm just trying to understand
 21  the fair uses that people can't engage in using the
 22  currently authorized equipment.  And so far I
 23  haven't heard any.
 24              MS. GROSS:  Simply playing their DVD on
 25  their computer --

                                                   PAGE 274
  1              MR. CARSON:  Okay, we've talked about
  2  that.  Let's talk about fair use, though.  What are
  3  the fair uses that are prevented under the current
  4  regime?
  5              MS. GROSS:  If I wanted to make a small
  6  copy, or a small excerpt of a certain part for a
  7  certain reason that's only available in DVD, I'm
  8  prohibited.
  9              MR. CARSON:  Is that correct, Mr. Marks?
 10              MR. MARKS:  Are you talking about
 11  legally prohibited?
 12              MS. GROSS:  I'm talking about --
 13              MR. MARKS:  Or having technically --
 14  making it technically difficult to do so?
 15              MS. GROSS:  I'm talking about
 16  technically prohibited.
 17              MR. MARKS:  Again, my answer would be
 18  that, yes, when it comes out the analog output it
 19  will be protected by Macrovision.  And yes, the
 20  content will not go out a digital output at the
 21  beginning.  So it makes it more technically
 22  difficult to make a copy of a small clip from a DVD.
 23              Is it impossible?  No one.  And that's
 24  the camcording example that I used.  When it is
 25  running, you can copy a snippet of it on a
 26  camcorder.  It may not be convenient, it may not be

                                                   PAGE 275
  1  the best copy quality that you would like, but I
  2  don't believe the fair use doctrine says that a user
  3  gets to take fair use copies of the best format and
  4  best quality of the work is available.
  5              Nobody has ever argued that film studios
  6  have to make their 35-millimeter theatrical prints
  7  available to users who want to take out clips or
  8  snippets for the purpose of fair use.
  9              MR. CARSON:  So you're basically saying
 10  analog is good enough for fair use?
 11              MR. MARKS:  Yes, I am.
 12              MR. HANGARTNER:  But doesn't the law
 13  already actually cover that, in that you've kind of
 14  separated the idea of access versus fair use.  That
 15  if this person wants to copy it, that they have to
 16  circumvent Macrovision in order to make the snippet.
 17  I thought that that was covered under fair use in
 18  some of the comments -- actually, Marybeth Peters
 19  early on before Congress that access versus
 20  infringement, or am I just totally out of my mind?
 21              MR. CARSON:  We're not psychiatrists, we
 22  couldn't answer that.
 23              MS. PETERS:  Thank you.
 24              MR. HANGARTNER:  In actually being able
 25  to copy the works, I thought we were talking more
 26  here about access than really talking about copying

                                                   PAGE 276
  1  the works.  It this professor wants to copy the work
  2  with a Macrovision output that comes out, and they
  3  circumvent the technological measure for that
  4  purpose, that's very separate from what we're
  5  talking about here in Section 1201(a) for access in
  6  particular.
  7              MR. CARSON:  Well, the point's a fair
  8  one.  That if the access control is preventing you
  9  from having the means to make a copy which might be
 10  fair use, then maybe you have a problem.  I think
 11  that's Ms. Gross's point.
 12              MR. HANGARTNER:  That already exists, I
 13  guess, with Macrovision and with the copying that's
 14  there.  Not to argue the other side of things.  I'm
 15  just trying to understand it as well.
 16              MS. GROSS:  Since all copying is
 17  prohibited by the DVDs, fair use by definition is
 18  prohibited.
 19              MR. CARSON:  All right.
 20              MR. MARKS:  See, I think that's a
 21  mistake in conception of fair use.  To equate fair
 22  use with copying is almost like equating fair use
 23  with consumption.  I mean, fair use can involve not
 24  literally copying a work, but copying some of the
 25  expression of a work for parody.  Copying some of
 26  the expression of a work for criticism and comment.

                                                   PAGE 277
  1  It's not just about physically copying the format
  2  that the work happens to be in.
  3              MR. CARSON:  Well, I'm trying to think.
  4  Aside from the time-shifting situation in Sony, have
  5  there been cases holding that the actual copying of
  6  a motion picture is fair use?
  7              MS. GROSS:  The Diamond multimedia
  8  decision, RIAA v. Diamond.  That's not motion
  9  pictures, but MP3.
 10              MS. PETERS:  And there's an Audio Home
 11  Recording Act.
 12              MR. MARKS:  That's correct.
 13              MS. PETERS:  That has the serial copy
 14  management piece in it, that says there's no
 15  infringement when you make the copy.
 16              MR. CARSON:  So I think we're going
 17  into, at best, maybe a murky area as to whether fair
 18  use is even available in that context.  I'd be
 19  interested in hearing or seeing some authority from
 20  you about actual replication of portions of motion
 21  pictures as being fair use.  Because I'm not sure
 22  the case law is out there, but I may have overlooked
 23  it.
 24              MS. GROSS:  Well, I think that the Sony
 25  v. Universal Cities case was about people's ability
 26  to make a complete copy of a complete movie.

                                                   PAGE 278
  1              MR. CARSON:  In the context of time-
  2  shifting, you're absolutely right.
  3              MR. MARKS:  Time-shifting of free over-
  4  the-air television.  Sony v. Betamax does not stand
  5  for the proposition that you can make a complete
  6  copy of a work from pay-per-view television, from a
  7  videocassette, from DVD.  It simply does not stand -
  8  - fair use always balances the rights of the
  9  copyright owner and the use interests that are being
 10  asserted by the putative fair use user.  It's not an
 11  absolute.
 12              MR. CARSON:  All right.  Mr. Hangartner
 13  and Mr. Herpolsheimer, feel free to jump in.  Well,
 14  first of all, you mentioned a decision just handed
 15  down here in the Northern District of California.
 16  We're not aware of that decision, but we'd certainly
 17  like to know more about it.  If you have a copy of
 18  it, we'd like to see it.
 19              MR. HANGARTNER:  Oh, there actually is
 20  not a written decision yet.  It was an oral ruling
 21  from the bench last Tuesday in the case, Sony
 22  Computer Entertainment America v. Connectix
 23  Corporation.
 24              MR. CARSON:  Oh, this is on remand?
 25              MR. HANGARTNER:  No.  Actually, this was
 26  on summary judgment.  Connectix moved for a summary

                                                   PAGE 279
  1  judgment on the DMCA claim brought by Sony, which
  2  claimed that it was a circumvention device.
  3              MR. CARSON:  I'm sorry, go ahead.
  4              MR. HANGARTNER:  And the court granted
  5  summary judgment for Connectix.  The transcript
  6  should be available next week, and we could provide
  7  a copy if you'd like that.
  8              MR. CARSON:  Yes, that would be great.
  9  And I gather you expect a written decision to be
 10  forthcoming?
 11              MR. HANGARTNER:  It's not clear.  The
 12  court was not clear if it would be doing a written
 13  decision in the near future, or if it would be
 14  holding off on a written decision until sometime in
 15  the future.  But I think the transcript may -- well,
 16  it will contain the court's comments regarding a
 17  written decision.
 18              MR. CARSON:  Okay.  One thing I wasn't
 19  able to get out of your testimony is what classes,
 20  if any, you are advocating that we recommend the
 21  Librarian exempt from Section 1201(a).  Do you have
 22  a suggestion for us?
 23              MR. HANGARTNER:  Well, the thing of that
 24  I threw out, right off the top of my head, was -- I
 25  mean, I'm not sure of his name, but the fellow over
 26  here in the green tie who was talking earlier.  He

                                                   PAGE 280
  1  mentioned that one way to look at this is to start
  2  from the very specific and move to the more general.
  3              And so I was sort of throwing out to
  4  start from the very specific.  In our instance, the
  5  particular class of works that Bleem is most
  6  concerned about at this point is PlayStation video
  7  games, which are produced on CD-ROM.
  8              Now, I know David's been thinking a bit
  9  about other classes of works, and maybe I'll turn it
 10  over to him.  This is one of these things that I'm
 11  sure we'll have an awful lot to say about in our
 12  post-hearing comments.  But how you move from that
 13  very specific example, which as I described earlier,
 14  you've got a class of works which are distributed
 15  without license, that are actually sold so that the
 16  person acquires a copy of it.  And they're sent out
 17  on a CD format that is accessible.  So it's a very
 18  specific type of disk that forms that very
 19  particular class of works.
 20              Now, whether there is that class of
 21  works shall be defined more generically than
 22  PlayStation video disks is an issue that, I think,
 23  requires some thought.  How you can create a class
 24  of works that strikes the right balance here.  I
 25  don't know, David, do you have thoughts on that?

                                                   PAGE 281
  1              MR. HERPOLSHEIMER:  My concern is more
  2  with the way that we've seen 1201 used specifically
  3  against us, and against the Japanese variant of that
  4  law used against some of our retailers in Japan.  Is
  5  that it seems to be being used to expand the scope
  6  of copyright beyond where it already affords
  7  protection for copying for infringement for a lot of
  8  areas.
  9              That they're taking this sort of
 10  technological measure and applying almost a self-
 11  help program that some content providers can use to
 12  really lock down their content.  And limit the
 13  ability of end-users to actually not just have fair
 14  uses, but have uses at all to the content that they
 15  have gone out and lawfully purchased copies of
 16  copyrighted works.
 17              And that the imposition of -- like I
 18  said, expanding 117 to go beyond -- or not 117.  It
 19  should be 1201 to go beyond what I've seen in some
 20  of the early history, and some of the statements,
 21  again from Ms. Peters, really talking about it being
 22  something to expand the growth of digital networks.
 23  And to allow copyrighted works to be disseminated
 24  more freely over digital networks by protecting the
 25  rights of copyright holders.  And we're all in favor
 26  of that, because we produce content just like

                                                   PAGE 282
  1  everybody else here.  We want to have our works
  2  protected.
  3              But to then take that protection that's
  4  really going more towards specific kinds of uses.
  5  When you're talking about digital networks, it's
  6  almost like protecting -- in the example that he had
  7  of walking in and videotaping a movie in a movie
  8  theater.
  9              What we're really talking about here is
 10  specific accesses of watching a one-time pay-per-
 11  view movie, or you know, playing a copyrighted video
 12  game over a network where you need to protect that
 13  content to make sure it doesn't just get kind of
 14  sucked off and reproduced.
 15              I think it's a different issue, when you
 16  start taking that protection to access, where the
 17  encryption is really essential to protecting the
 18  work over that network. And then trying to apply it
 19  to areas where there are already substantial and
 20  very effective protections against infringement.
 21              You know, to start wrapping access
 22  around that starts, I think, hobbling the ability of
 23  users to actually use their works.  And gives an
 24  unfair amount of control, I think, to the copyright
 25  holder that's beyond the rights that they should

                                                   PAGE 283
  1  have under the copyright law.  The rights that this
  2  Act is supposed to support.
  3              MR. CARSON:  Mr. Russell, if I don't
  4  happen to have the Sony PlayStation equipment, but
  5  I've got a Sony PlayStation game, why on earth
  6  shouldn't I be allowed to use the Bleem emulators
  7  where I can play that game on my computer, or on the
  8  Sega equipment or something else?
  9              MR. RUSSELL:  Well, quite frankly, and I
 10  don't want to try our case here.  It's not limited
 11  to the DMCA claim.  We have concerns about other IP
 12  rights that we have in these games and in the
 13  system, and to the way we build these games, that we
 14  have alleged that Bleem and both Connectix has
 15  violated.
 16              So I think the case goes well beyond
 17  what is on issue here, which is 1201(a)(1)(A), and
 18  that is not -- we did not bring any action, of
 19  course, against Bleem or Connectix in those.  And
 20  the ruling in the court is not under that section.
 21              MR. CARSON:  All right.  Okay.  But what
 22  I'm trying to get at -- let me put it another way.
 23  If I did use the Bleem emulator, say, after October
 24  28th of this year, so that I could play one of the
 25  PlayStation games on my PC, would it be your
 26  position that I would be violating Section 1201?

                                                   PAGE 284
  1              MR. RUSSELL:  I think that the issue is
  2  an interoperability issue.  And I think that is
  3  dealt with in the DMCA under, I believe, it's --
  4              MS. PETERS:  F.
  5              MR. RUSSELL:  F.  And I think F amends
  6  or is an exemption from Section 1201(a).  So you
  7  know, I think that what we're dealing with here, if
  8  that's what we're concerned with, there is a
  9  provision that deals with this.  And then the
 10  question is whether it's lawful reverse engineering
 11  to achieve interoperability.
 12              And I'm not going to go through that.
 13  That's not the area of discussion here, and I think
 14  that's something that is very, very fact-specific.
 15  And certainly should not be made -- determined on
 16  the -- they come up on an individual basis, and
 17  shouldn't be determined on a broad exemption by a
 18  video game class.
 19              MR. CARSON:  This is late in the day, so
 20  maybe I'm not making myself clear.  But what I'm
 21  trying to understand is if I were to use a Bleem
 22  emulator, would I, in engaging in that conduct, be
 23  circumventing some technological measures that Sony
 24  has that were designed to restrict my access to the
 25  PlayStation games?  And if so, would I be violating
 26  Section 1201(a)?

                                                   PAGE 285
  1              MR. RUSSELL:  Again, I believe that it
  2  will fall under the exemption that falls under
  3  Section 1201(f).  Because I believe what's happening
  4  here is, no, you may not be violating the -- you may
  5  not be circumventing it, you will be having reverse
  6  engineered it.
  7              MR. CARSON:  No, I wouldn't be.  I'm
  8  using the --
  9              MR. RUSSELL:  You're the end-user?
 10              MR. CARSON:  I'm the end-user.
 11              MR. RUSSELL:  No, I don't believe the
 12  end-user is.
 13              MR. CARSON:  And you don't think the
 14  end-user is circumventing technological protections,
 15  either?
 16              MR. RUSSELL:  The technological
 17  protection is in the disk and in the machine.  So I
 18  don't believe that the end-user is.
 19              MR. CARSON:  Okay, okay.  That's really
 20  what I was getting at.  Thanks.
 21              MR. HERPOLSHEIMER:  Okay.  Well, just on
 22  that level, one thing that's interesting is that's
 23  exactly what they alleged against us in court.  Is
 24  that if the end-user isn't doing it by using our
 25  product, and our product certainly couldn't be doing
 26  it -- and the thing that I'm really afraid of here

                                                   PAGE 286
  1  in the United States is what's happening to us right
  2  now in Japan.
  3              They have a very similar implementation
  4  as we do in 1201.  Their law there, I think, is the
  5  Unfair Competition Act.  But it's very similar in
  6  that it protects against unauthorized circumvention
  7  of technological measures that effectively control -
  8  - blah, blah, blah.
  9              But they have some very specific
 10  language that say that the playing of pirated video
 11  games -- this is one of the concerns that, in our
 12  particular circumstance, comes up, is that because
 13  this whiz code is proprietary to Sony, and in fact
 14  patented, if we were to recognize it we would be in
 15  violation of their patent.
 16              That because of the whiz code -- that
 17  because we don't recognize the whiz code we are
 18  violating or we are circumventing their protections.
 19  In Japan, they say the that the act of playing a
 20  pirated game isn't actually an infringement.  It's
 21  making the copied game is an infringement there.
 22              They specifically preclude video games,
 23  they specifically speak towards issues like whether
 24  or not the protection on the disk is actually
 25  voluntary.  In the case of video games it's one
 26  where every manufacturer of PlayStation games is

                                                   PAGE 287
  1  required to appoint Sony as part of their license
  2  for the development tools.  They're required to make
  3  them their sole manufacturers of CDs, and that
  4  protection is included in the CDs.  So is it truly
  5  voluntary?
  6              In spite of all this, Sony is still
  7  going out and going to our retailers there and
  8  basically threatening them with lawsuits unless they
  9  cease to carry our product and pay back -- I don't
 10  know, $200 per copy, I think, for every copy they've
 11  sold.  And write a letter apologizing to Sony for
 12  ever carrying it in the first place.
 13              And these are the kinds of things that,
 14  if there's any vagueness or if there isn't a clear
 15  exemption for certain kinds of uses in the law that
 16  we can point to, and that we can make clear and
 17  understandable -- this is in the face of MIDI
 18  (phonetic) in Japan.  Actually telling the people,
 19  "No, we don't see that there's anything wrong with
 20  it, but who knows what the judge will say?"
 21              But I'm just afraid that we're going to
 22  have the same kind of issues in this country.  Where
 23  they can go and they can say, "Look, Bleem is a
 24  product that violates the DMCA.  You, by selling it
 25  as a store, are in violation of the DMCA," with the
 26  further enactments going down to end-users.  And

                                                   PAGE 288
  1  putting out ads and saying, "Anybody who uses Bleem
  2  is in violation of the DMCA, and we're going go
  3  after them."
  4              Contrary to what he said here today,
  5  that's not what they have expressed in court and in
  6  numerous threatening letters to our retailers.
  7              MR. RUSSELL:  Quite frankly, I don't
  8  feel this is an appropriate forum to try our case.
  9              MR. CARSON:  I'm not trying to try
 10  anyone's case.  I'm just trying to figure out
 11  whether there's an issue here within our domain,
 12  which is why I'm asking --
 13              MR. RUSSELL:  No, I understand that.
 14              MR. HANGARTNER:  I'd just point out,
 15  too, that it's not really a matter of trying the
 16  case.  But the fact is that Sony and many of the
 17  other folks who have spoken here today are putting
 18  the burden on the proponents of a specific exemption
 19  to establish that there is an impact.  And I think
 20  that this discussion is relevant to that.
 21              This is an actual impact that, despite
 22  the fact that 1201(a)(1)(A) is not yet in effect, we
 23  can point to -- provide tangible evidence that this
 24  is a -- there's a real risk of this.  And that's the
 25  only reason this is coming out.  It's not an issue
 26  of trying cases here, or anything else.  But it's

                                                   PAGE 289
  1  relevant experience that I think bears on this
  2  discussion.
  3              MR. GOLDBERG:  May I point out that it
  4  is not the copyright owners who have placed the
  5  burden, it's Congress.
  6              MS. PETERS:  That is right.  And we
  7  still do have one more comment period for people who
  8  want the opportunity to add additional material.
  9              MR. CARSON:  In response to positions
 10  taken at these hearings.
 11              MS. PETERS:  It is now quarter of six.
 12  So instead of going in order, I'm just going to
 13  basically ask if there's anyone here who wants to
 14  ask questions.  I'm going to look around.  Okay,
 15  Rachel, we'll start with you.
 16              MS. GOSLINS:  I know it's late and it's
 17  hot.  So I'll try and keep it really, really brief.
 18  Ms. Gross, I was just wondering how you would
 19  respond to Mr. Marks' argument that, without these
 20  technological protections in existence, without the
 21  existence of them, his company or other companies
 22  wouldn't have put out these products at all.
 23              So, you know, in a sense they're out
 24  there and they're doing some consumers some good.
 25  Why should the fact that they decided to put them
 26  out in a protected format mean that you -- that

                                                   PAGE 290
  1  anybody has a right to circumvent that, in lieu of -
  2  - if we accept his argument that in lieu of these
  3  protections, they wouldn't even be on the market.
  4              MS. GROSS:  Well, I wouldn't say anybody
  5  has a right.  But I think that it's really kind of
  6  false to say that people will not create, that
  7  society will not create absent of technological
  8  protection measures.  People have always created,
  9  and they will continue to create.
 10              And I think we can look right now to the
 11  music business, and what's going on in the Internet
 12  with music and MP3s.  And companies like and
 13  eMusic, and all sorts of new business models that
 14  are coming up and proliferating, and all sorts of
 15  new artists who are putting their music out there.
 16              Society has never had more choice in
 17  accessing music legitimately.  So I think it's
 18  really sort of false to say that society will
 19  discontinue creation of intellectual property absent
 20  this level of protection.
 21              MS. GOSLINS:  Okay.  Dean, just two
 22  really quick questions.  Do you currently stagger
 23  video?  Does your company, or do you know if other
 24  companies currently stagger video releases between
 25  the -- whatever the initials are of the U.S. format
 26  and the PAL format?

                                                   PAGE 291
  1              MR. MARKS:  Yes, there is staggering.
  2  Really, it depends upon the distribution channels of
  3  the media -- windows of exploitation.  Generally, in
  4  general, movies are released first in the United
  5  States before they are overseas.  And in general --
  6  this is subject to some exceptions -- video release
  7  occurs six months after in the United States.
  8              So, to the extent that the theatrical
  9  release in Europe is later than the theatrical
 10  release in the U.S., the video release in Europe is
 11  later than in the U.S.  And in some countries -- and
 12  I'm not sure it's still the case today, but it
 13  certainly up to recently was the case in France,
 14  there was a law that said you could not release on
 15  video prior to six months after theatrical release.
 16  So we're constrained by some of those laws as well.
 17              If I may, I just wanted one quick
 18  response to Ms. Gross' reply to your answer -- your
 19  question, rather.  It's late in the day for all of
 20  us.
 21              I wasn't asserting that absent
 22  technological protection measure people would stop
 23  creating.  I was saying that, absent the ability to
 24  use technological protection measure, creators and
 25  publishers and distributors may not make their works
 26  available on certain formats like DVD.  I was not

                                                   PAGE 292
  1  saying that there would no longer be creative
  2  activity.
  3              MS. GOSLINS:  Okay.  And one more quick
  4  question.  And I know -- I certainly don't want to
  5  get into a long discussion about it at this hour.
  6  But I'm curious, the question I posed to Steve this
  7  morning about what happens if we do decide that we
  8  exempt a class of works, what does that mean under C
  9  & D.  I'm just curious to hear your answer to that,
 10  since we're taking a poll.
 11              MR. MARKS:  I was hopeful that Steve's
 12  scholarly and forthright answer would settle it for
 13  everyone.  But I basically agree with what Steve
 14  said.  And it's -- on the one hand I'm sort of
 15  sympathetic to the argument that the reference to
 16  users in 1201(d) is users who are making only non-
 17  infringing uses.
 18              But the problem that I have with that is
 19  fair use is -- as we all know and as the Supreme
 20  Court has said -- a balancing test that operates on
 21  a case by case basis that's very factually
 22  intensive, and like in Acoff-Rose you have courts
 23  that, at every level of the way, reversed one
 24  another.
 25              So it's hard for me to imagine creating
 26  bright line rules concerning classes of works for

                                                   PAGE 293
  1  non-infringing uses, and determining sort of ab
  2  initio what those non-infringing uses are.  Is it
  3  impossible for all non-infringing uses?  No.  I
  4  would say private viewing of videos, for example, in
  5  one's own home is a non-infringing use.  Clear.
  6  Clear enough.
  7              But there are all sorts of copying for
  8  what purpose, or for example, where it's really hard
  9  to come up with those bright line rules ab initio.
 10  And so that somewhat leads me to think that maybe
 11  Steve is correct, that when 1201(D) was referring to
 12  users, it was referring to users in general, and not
 13  just users who are making non-infringing uses.
 14              The second point being, if one was
 15  limiting that to users who are making non-infringing
 16  uses, how do you really monitor and sort of enforce
 17  that?  It would be rather difficult.
 18              That being said, I was very sensitive to
 19  Mr. Carson's argument that we don't want to
 20  necessarily turn 1201(b) into the bluntest
 21  instrument possible.  So I think it's a very
 22  complicated question.
 23              MS. GOSLINS:  Okay.  Mort, do you have a
 24  response to that?

                                                   PAGE 294
  1              MR. GOLDBERG:  I'm not sure I agree that
  2  the users are to be defined in that way.  But I'll
  3  have to take another look at it.
  4              MS. GOSLINS:  Four questions, and then
  5  that's it.
  6              MR. KASUNIC:  I have one question.  This
  7  is in regards to CSS.  I know we've talked a lot
  8  about it.  But CSS protects both access and the
  9  Section 106 rights of the copyright owners, as you
 10  said before.
 11              MR. MARKS:  Right.
 12              MR. KASUNIC:  1201(a)(1) protects only
 13  technical protection measures that protect access.
 14              MR. MARKS:  Right.
 15              MR. KASUNIC:  And Congress specifically
 16  chose not to have a prohibition for circumvention of
 17  the conduct -- of measures that protect the Section
 18  106 rights.  So if we have a technological
 19  protection measure that does not discriminate
 20  between access and copy protection measures, the
 21  latter of which was not -- was specifically chosen
 22  by Congress not to
 23  be -- that conduct not to be prohibited, who should
 24  bear that burden of this indiscriminate use of
 25  technology?

                                                   PAGE 295
  1              Since Congress did choose that the
  2  latter will not be protected, shouldn't this burden
  3  be placed on the copyright owner to show that
  4  there's a need for this, or why the indiscriminate
  5  use is necessary?
  6              MR. MARKS:  Let me answer that in a
  7  couple of pieces.  One, that I don't think it's
  8  indiscriminate use.  I was trying to describe
  9  through the history of the development of the CSS
 10  copy protection structure why the content industry
 11  was really -- I don't want to say forced, but really
 12  led to develop a structure where encryption was the
 13  hook.
 14              It was because of the reactions we were
 15  getting from the computer industry, and the fact
 16  that we knew these works were going to be played on
 17  computer platforms.  And by the limits in the law
 18  that say if you put a mere copy control technology,
 19  like an SEMS flag in audio, absent a particular
 20  legislative provision like the Audio Home Recording
 21  Act that mandates consumer electronic players to
 22  look for and respond to SEMS, the law under the DMCA
 23  says there's no obligation to respond.
 24              So the notion of trying to implement
 25  copy protection technology in a way that devices
 26  will respond, required us to go to a system where

                                                   PAGE 296
  1  encryption was the initial hook.  So it's not really
  2  an indiscriminate use, it's a way -- it was really,
  3  frankly, our only way of trying to implement
  4  effective copy protection technology. 
  5              But I'm not quite done yet, though.
  6  Thankfully, in the area of CSS -- and this goes to
  7  the gentleman, David, David's remark.  In this
  8  particular instance, the content flows out the
  9  analog output with Macrovision.  Macrovision is the
 10  copy control technology that inhibits copying of the
 11  analog signal.
 12              And the CSS license, a condition of the
 13  CSS license is that devices, whether they be the
 14  computers or the DVD players, apply Macrovision to
 15  the signal as it goes out the analog output.
 16              If a user circumvents Macrovision in
 17  order -- on the content of the DVD as it flows out
 18  the analog output, in order to make a copy the lack
 19  of the prohibition in the law of circumventing copy
 20  protection technology by an individual applies.
 21              So, therefore, if the individual user --
 22  and I think this is what you were getting at -- were
 23  to circumvent Macrovision, it doesn't fall within
 24  the 1201(a)(A) prohibition.  It would be a
 25  circumvention of a copy control technology that is
 26  permitted under the law.

                                                   PAGE 297
  1              MR. METALITZ:  Rob, could I add just a
  2  sentence or two to that answer?
  3              MR. MARKS:  But I want to clarify, if
  4  there are any lingering questions on that.  Because
  5  I think it's a very important point
  6              MR. METALITZ:  I was just going to say
  7  your question used the word "burden," and we may be
  8  confusing two burdens here.  In any particular case
  9  if someone were alleging a violation of
 10  1201(a)(1)(A) the Plaintiff would have to prove that
 11  what was circumvented was an access control.  And if
 12  that's the issue, and it was put into the issue --
 13  you know, the burden of proof on that would rest
 14  with the Plaintiff to show that.
 15              Here, of course, we're only talking
 16  about the burden in this proceeding.  Things are a
 17  little bit different.  Congress has already decided
 18  that these circumventions should be outlawed, and
 19  the question of exception is that the burden is on
 20  the proponent of the exceptions.  But I just wanted
 21  to clarify that.
 22              MR. KASUNIC:  But the burden is on the
 23  proponent of the exemptions for the access controls.
 24  But here we have some, at least testimony that there
 25  are some adverse effects from -- whether they're
 26  cured or not is another question.  So there was some

                                                   PAGE 298
  1  showing that there were adverse effects to certain
  2  users of this, in terms of the access.
  3              The hypothetical we had in Congress of
  4  going into the bookstore to buy the book doesn't
  5  seem appropriate here, in terms of access.  Here we
  6  had legitimate users going into that bookstore and
  7  buying the book, the DVD, only to find that then
  8  that was locked in addition.  And that different
  9  uses of that were restricted after that lawful
 10  access was --
 11              MR. METALITZ:  The way you pose that
 12  question -- and it really has come up in a lot of
 13  the comments here.  You know, it almost sounds like
 14  you're raising a consumer protection issue.   That
 15  somehow the consumer is surprised to find that when
 16  she buys a DVD in Europe that she can't play it on a
 17  U.S. machine, or that if you -- to use the late
 18  lamented DIVX technology -- it's probably unlamented
 19  by many in this room.  But that was a technology
 20  that was a time-limited DVD, in effect.  And you
 21  could only play it three times or over a certain
 22  period of time.
 23              I think we have to distinguish between
 24  whether someone maybe wasn't aware when they bought
 25  it, and therefore didn't know what the limitations
 26  were, versus the question of whether it's legitimate

                                                   PAGE 299
  1  to have the limitations at all.  Or whether there's
  2  some problem, from the perspective of this
  3  proceeding, with using access control mechanisms to
  4  enforce those limitations.
  5              Now, when people subscribe to HBO, they,
  6  I think generally do know.  They're put on notice
  7  that it's a time-limited subscription.  They can't
  8  go back later and put in a black box to see again
  9  what their subscription has expired to.
 10              But, you know, that's a separate -- the
 11  consumer protection side of that is a separate
 12  question from whether, A, the copyright owner can
 13  use those access control mechanisms, and B, whether
 14  it's illegal to circumvent those.  And, as Dean has
 15  pointed out, for some 20 years it's been illegal to
 16  circumvent those protections.  So this, again, is
 17  not really a new concept.
 18              MR. MARKS:  Steve, I just want to
 19  supplement the HBO example, because there had been a
 20  comment that the HBO example was irrelevant because
 21  if you had paid for your HBO subscription -- if you
 22  were descrambling because you hadn't paid for your
 23  HBO subscription, that was a different case for
 24  having bought a DVD, paid for it and not be able to
 25  play it.

                                                   PAGE 300
  1              That was not the example that I used in
  2  my testimony.  The example I used was you had
  3  purchased a subscription to HBO, and during the time
  4  that you are a legitimate purchaser of HBO's
  5  service, you own a television set -- granted there
  6  aren't many around today, probably, except maybe in
  7  antique stores.  But the tv set that was not cable-
  8  ready, that could not accommodate a set-top box.
  9              The HBO signal would be coming to your
 10  home in encrypted form.  If you had a television set
 11  that could not accommodate the set-top box with a
 12  descrambler for the HBO system, under the
 13  Communications Act you do not have a right to buy a
 14  black box and decrypt the HBO signal in order to get
 15  the content.  Even if you're a subscriber and have
 16  paid for HBO.  And that's the point I wanted to try
 17  and make.
 18              MR. GOLDBERG:  May I comment on the
 19  implication of the question there?  I think the
 20  question implicates the matter of burden very
 21  clearly.  And we are to focus on distinct,
 22  verifiable and measurable impacts, isolated or de
 23  minimis effects, speculation, conjecture, et cetera.
 24  That does not amount to meeting of burden.  And I
 25  think that those effects that are isolated, de

                                                   PAGE 301
  1  minimis, speculation, et cetera, should be regarded
  2  as such.  And not as meeting a burden.
  3              MR. KASUNIC:  I just want to offer Ms.
  4  Gross or anyone else an opportunity.
  5              MS. PETERS:  I just want to ask one
  6  question on behalf of libraries.  Libraries purchase
  7  DVDs.  And DVDs, do they deteriorate or do they stay
  8  good forever?  You're a library that's an archive.
  9              MR. MARKS:  Right.  My understanding --
 10  and again, this is going to be an additional
 11  question for me to research for you -- is that the
 12  life of a DVD disk is greater than the life of a VHS
 13  tape, an analog videocassette.  That that will
 14  deteriorate more quickly than a DVD disk will.  But
 15  it is not my understanding that a DVD disk will not
 16  ever degradate over time.
 17              MS. PETERS:  Are you aware of libraries
 18  purchasing and then seeking in the purchase, the
 19  ability to somehow make a back-up copy that isn't in
 20  exactly the same format, but in a neutral format
 21  that they can basically have as machines become not
 22  available?  Or do you know what libraries are doing
 23  with regard to that?
 24              MR. MARKS:  I don't know.  And I haven't
 25  heard of any such request being made.

                                                   PAGE 302
  1              MS. PETERS:  Well, they clearly have a
  2  right under Section 108, to the point where it's
  3  deteriorating, to make back-up copies.  And the
  4  question is if you had an access control on it,
  5  wouldn't that then inhibit the ability that they
  6  have by law with regard to the copy?
  7              MR. MARKS:  It may, it may.  And I think
  8  if that sort of problem develops, I think a much
  9  more sensible remedy to that problem is for the
 10  library and the content owner to work out some sort
 11  of guideline, whereby the content owner needs to
 12  make available a copy that's suitable for archiving
 13  to the library.  Rather than enacting or adopting an
 14  exception to the prohibition on circumvention.
 15              I understand that 1201(a)(1)(B) really
 16  only gives you rulemaking authority in this context,
 17  to adopt exceptions or exemptions for circumvention.
 18  But I know the Library of Congress has other
 19  rulemaking abilities in terms of preservation or
 20  archiving or library exceptions.  And I think that
 21  would be proper place to address those concerns.
 22              MS. PETERS:  Okay.  Well, it's now after
 23  six o'clock.  I want to thank all the witnesses for
 24  -- I'm looking around before I do this.  Is there
 25  anyone else who wants to ask a question on the

                                                   PAGE 303
  1  panel?  Is there anyone else out there who wants to
  2  say anything?
  3              All right.  It's after six, and that I
  4  really do appreciate all the effort that went into
  5  people to appear here today.  And also your
  6  willingness to answer our questions so thoroughly.
  7  And I also want to thank people who attended.
  8              There is one more opportunity to have
  9  input into the evidence that we're gathering.  And
 10  that, of course, is the comments that can come in up
 11  to June the 23rd on what was raised in here.  Thank
 12  you very much.
 13              (Whereupon, at 6:05 p.m., the hearing
 14  was adjourned.)