HATCH, LEAHY BILL TARGETS P2P, IS CITED AS PROMOTING FAIR USE

Senate Judiciary Committee Chmn. Hatch (R-Utah)’s new bill, S-2560, has the backing of Senate leadership, and would hold P2P providers accountable for copyright infringements by software users. That approach is strongly opposed by backers of a House bill that would facilitate copying of digital files in ways that are currently prohibited. The debate occurred as a Senate subcommittee held a hearing on P2P.

The Inducing Infringements of Copyright Act, less than 200 words long, states that if a “reasonable person” were to see that someone’s behavior was facilitating the violation of copyright, that someone would be criminally liable. The content industry suffered a setback last year when a U.S. District Court ruled that Grokster wasn’t liable for piracy of its users because, like the Sony Betamax, P2P software could be used for non-infringing purposes. Hatch’s bill would allow copyright holders to sue P2P companies even though there are noninfringing uses for their software, and the bill was warmly welcomed by MPAA, RIAA and the Business Software Alliance.

Hatch in his floor statement quoted the judge in the Grokster case as saying “additional legislative guidance may be well-counseled.” “That may be so,” said Phil Corwin, outside counsel for StreamCast Networks (Morpheus), but he said “the Judiciary Committee should have enough faith in the judicial process” to allow the case to proceed, to the U.S. Supreme Court if necessary, “before they try to precipitously change the rules of the game midstream.” Morpheus is part of the Grokster case. The bill’s cosponsors include Judiciary ranking Democrat Leahy (Vt.), Sens. Boxer (D-Cal.) and Graham (R-S.C.), as well as Senate Majority Leader Frist (R-Tenn.) and Minority Leader Daschle (S.D.).

S-2560 is “carefully crafted to preserve the doctrine of fair use,” Leahy said in a Senate floor statement. “Indeed, by targeting the illegal conduct of those who have hijacked promising technologies, we can hope that consumers in the future have more outlets to purchase creative works in a convenient, portable digital format.” He also said the bill allows ISPs safe harbor, and doesn’t target technology. “As a practical matter, if a law is targeted at certain software, the designers will simply design around the law and render it useless,” Leahy said, adding S-2560 simply upholds existing principles in copyright law of “secondary copyright liability.”

Some of the alleged file-sharers pursued by RIAA have been children. Hatch said in his floor statement that the involvement of children was a driving force behind his bill, but faulted the P2P software the children were using. “Tragically, some corporations now seem to think that they can legally profit by inducing children to steal,” he said. “Some think they can legally lure children into breaking the law with false promises of ‘free music.'” Hatch called the P2P business model “malicious,” saying the companies “know better than to break the law themselves so they profit from infringement by inducing users of their software to do the ‘dirty work’ of actually breaking the law.” He cited the Grokster case, saying it found “these corporations ‘clearly know’ that most users of their software infringe, ‘derive a financial benefit from the infringement’ and ‘may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefiting financially from the illicit draw of their wares.'” Unfortunately, Hatch said, the court “also demanded ‘additional legislative guidance,'” and thus S-2560 was introduced.

The bill “targets the bad actors who are encouraging others to steal,” Frist said in a floor statement, echoing Leahy in saying it was grounded in secondary liability law. The bill “is not a technology mandate,” he said: “Only individuals or organizations which profit from intentionally encouraging others to violate our copyright laws should fear this legislation.” He praised the music industry, including artists in Nashville, for exploring digital distribution options. But he said “no one in the music industry or any other intellectual property field can survive when his or her work is being stolen. Those who are intentionally and actively encouraging this theft should be held accountable.”

While Frist and Leahy both said the bill implemented existing secondary liability law, the head of a P2P trade group said otherwise. P2P United Exec. Dir. Adam Eisgrau said that like the Digital Millennium Copyright Act (DMCA), which created the new crime of circumvention of copy protections, S-2560 “creates a new crime” of secondary liability. He said the “unconscionable” bill was introduced “in the dark of night, with no hearings” and was “the result of an unbelievably flawed legislative process.” Corwin also called for “full and comprehensive hearings.” While he acknowledged the bill could be on the Senate fast track, he said one or 2 senators might be willing to put a hold on the bill if it were facing a Senate floor vote. Public Knowledge Pres. Gigi Sohn said in a statement that the bill is overbroad “because it regards almost any action that leads to infringement to be a potential offense even if the person who engages in the act never intended to cause infringement.” While understanding a desire to target “egregious companies that promote infringement,” she didn’t believe the bill met that goal. Legal Dir. Mike Godwin said the bill “runs the risk of gutting” the Sony Betamax decision by discouraging and even outlawing future technologies that have substantial non- infringing uses.

CEA also expressed concerns and said the Senate Judiciary Committee should hold a hearing on S-2560. CEA said it was an overbroad bill that would stifle innovation. CEA Pres. Gary Shapiro said: “We understand that the intent of the sponsor is to stamp out companies that are inducing children to receive unlawfully distributed and otherwise illicit material. But it could also have a huge negative impact on legal multipurpose devices, software and home networking products. It essentially would grant copyright owners veto power over the introduction of any new technology for home and personal use.”

The content industry welcomed the legislation. MPAA Pres. Jack Valenti said it’s “grounded in the common-sense notion that people who ‘actively induce’ others to break copyright laws are themselves violating copyright laws, and should face legal consequences.” He said the bill if passed would clarify for the courts “that those who actively encourage others to break the laws designed to protect copyrights should not escape liability for their actions.” RIAA Chmn. Mitch Bainwol, Frist’s former chief of staff, said the bill “places the spotlight squarely on the bad actors who have hijacked a promising technology for illicit means and ignoble profits.” “Under this legislation, the path to legitimacy remains clear,” he said: “Respect the law and block the exchange of works the copyright owner has not authorized.” BSA Pres. Robert Holleyman called the bill “a reasonable balance between anti-piracy and technological innovation.”

House Judiciary Committee leadership, meanwhile, ripped into House Commerce Committee Chmn. Barton (R-Tex.) late Tues., accusing him in a statement of a “bold jurisdictional power grab.” Barton had hours earlier promised to mark up HR-107 by House Internet Caucus Co-Chmn. Boucher (D-Cal.) in July. The bill would permit circumvention of copy-protection mechanisms if the use is non-infringing, and Boucher said that while the House Judiciary Committee had secondary referral of the bill, they couldn’t stop it from reaching the floor. Boucher drafted the bill to have a primary referral in Commerce, and Barton is a cosponsor.

“We strongly oppose the substance of HR-107,” said Judiciary Committee Chmn. Sensenbrenner (R-Wis.), ranking Democrat Conyers (Mich.) and Courts, Internet & Intellectual Property Subcommittee Chmn. Smith (R-Tex.) in the statement. They said the bill would “eviscerate a key provision” of DMCA, a law they said has permitted the DVD player to become as common as a VCR. While Boucher and chief Republican cosponsor Doolittle (Cal.) said Tues. that the DMCA put copyright protection and fair use out of balance, the Judiciary leaders said HR-107 “would undo a law that is working and destroy the careful balance in copyright law between consumers’ rights and intellectual property rights.” But they said their “strong objections to the substance of HR-107 are matched by our objections to what appears to be a bold jurisdictional power grab.” The Judiciary Committee has long had “exclusive jurisdiction over copyright law,” they said, vowing to “wholeheartedly oppose this move in a bipartisan fashion, as we would expect Energy and Commerce Committee leaders to do if we attempted to write energy legislation.”