Transcript of the 1^st Panel, Sat Mar 1, 2003 at the DRM Conference at UCB.

9:00-10:45 am
DRM-related legal and policy initiatives in the U.S.
Pamela Samuelson, Boalt Hall (moderator)
Fritz Attaway, Motion Picture Association of America
Jerry Berman, Center for Democracy and Technology
Ed Black, Computer & Communications Industry Association
Richard Epstein, U. of Chicago Law School
Jon Healey, LA Times
Emery Simon, Business Software Alliance
Mozelle Thompson, Federal Trade Commission

Pam Samuelson: this session will be different in format than the other sessions in that each person will not present a paper but rather it will be a discussion focusing on legal and legislative policy initiatives about DRM in the US, so start thinking of your questions. We are going to focus on legal and policy issues related to digital rights. I think it is fair to say that in 1998 when Congress passed the DMCA, they hoped that it had resolved for the foreseeable future the problems or challenges that digital technologies would pose of copyright holders, and they were told, just give these few additional rights and everything will be fine. And just five years later, that seems an overoptimistic hope, if there was one. So instead of the thriving eCommerce markets that were anticipated, we have actually a wide array of content available, some of which is freely distributed and lawfully so, and some of which is freely distributed, and not so lawfully so. And so, Congress and other policy organizations such as the FCC are faced with a number of proposals, some of those proposals like the Hollings bill from last year would have required standard technical measures that would have been invented in every digital media device, and the Broadcast Flag proposal that’s now pending before the Federal Communications Commission would strengthen the rights of the rights holders considerably more and so there are other bills such as the one Rep. Lofgren just talked about, and a similar bill that Rep. Boucher just has already introduced into the 108^th Congress aimed at finding a somewhat greater balance and undoing the excesses of the DMCA. Sen. Wyden has recently announced that he has some interest in some consumer protection type legislation, in relation to labeling DRM protected material, and so I think this Congress will be dealing with consumer protection side issues as well as the content owners efforts to get stronger and stronger protections. In addition, I think there have been lawsuits under the DMCA, and also there is a lawsuit brought by against one of the recording companies for a defective CD because it caused harm to the computer and that lawsuit just survived a motion to dismiss, and so the courts as well as the legislatures are going to be dealing with some consumer protection issues about DRM.

So 5 years later we know that the DMCA is not being use just to get rid of those black box piracy enabling technologies, it’s being use in a wide variety of other cases like the Lexmark case which Rep. Lofgren mentioned, as well as the Chamberlain v. Skylink case which is about garage door openers, and so I think in some sense the DMCA is more controversial now that it was in 1998, and so there are calls for an effort to reform the DMCA to get rid of these unintended consequences.

We have with us today a great panel of experts on a wide variety of topics and I am going to introduce our panelists and then throw open our first question. At the far end of the table is Emery Simon, BSA, and next is John Healey, LA Times, then Richard Epstein, Fritz Attaway, MPAA, Ed Black, Jerry Berman, Mozelle Thompson, Commissioner of the FTC. The thing to do first is to start with a general question. It seems as though there is a lot of concern over widespread copying. Since this conference is about DRM technology, it seems like a good place to start is will DRM technology actually solve the piracy problem, mandated or not, and I’d like to see what the panelists think about that question. Emery?

Emery Simon: Okay, so first of all, let me tell you that I support the DMCA, and I think it’s a good law, not a perfect law, it’s got problems, but it’s done a lot of good things, but the vilification of it astounds me. I work for software industry, software piracy costs the software industry over $11 billion a year. It’s not a hypothetical problem, it’s a real problem. That piracy steals jobs, tax revenues, money for innovation, and the DMCA is a tool, a tool that can be used, and to see it as a powerful weapon to overreach to extinguish your rights I think is a little fantastic, as in reality doesn’t mess well with that frequency, so to answer your question, piracy is a real problem and the DMCA is a tool that helps in that fight, and we’ve had some pretty good litigation to help in that fight, that the courts have not had trouble interpreting it, people may not like those interpretations…

Pam Samuelson: If you’ll forgive me, that wasn’t actually the question I asked, you can say something about that, but the question was not whether the DMCA but whether DRM is a solution to the piracy problem.

Emery Simon: They are a tool in that fight, not a solution, and there will never be a perfect tool, but they are a very powerful and worthwhile tool, absolutely.

Richard Epstein…I think a lot of this depends upon exactly whether you think the tool in this case is sufficient for this task or whether you think it’s overbroad, and going back to the Betamax case, and you stop all contributory infringement, and you stop all use, the question is did create a partition between the things you want to stop verses things you don’t, and I think the only way to succeed at least for a part of that is to have fairly strong kinds of management rights, the question that is design, so and the Hollings bill is silly, and to the extent you kill the box, it’s taking all kinds of non-infringing uses and subjecting them to similar kinds of restrictions as others, but I think in effect if you have system which in effect will charge for digital content, much in the way you charge for telephone use by a per-play basis, which would kill the assignment problem, which is that you don’t care whether I watch it or someone else watches it, and I think the whole point, you know I disagree with Cong. Lofgren, is that you really don’t want the first sale doctrine in this kind of a world, but you want to have the continuous monitoring of this kind of use so that price discrimination can take place. And that we have to completely rethink the analog world, where … if one free copy that gets out and is capable of infinite reproduction, then the entire technology is lost.

Fritz Attaway.. Well, Emery’s answer was the correct answer in my view, DRM is part of the solution, not the entire solution, and the problem we face is uncontrolled trafficking in illicit content over the Internet. DRM technology will help the leakage problem that allows content to get to the Internet in an unprotected form. It will provide us a means to deliver our content to consumers in a secure fashion, but there will always be leakage. But we will have to address that in a couple of ways, one is by increasing security, like increasing security from video screenings, and promotional screeners, and other security measures. Secondly, we have to enforce our rights under the copyright laws, we have to bring actions against mass infringers, we have to use the expedited subpoena rights under the DMCA. I know you probably heard about that yesterday with Sarah Deutsch, but in fact a deal was made with the ISPs in 1998, under which they received a broad safe harbor against contributory and vicarious infringement actions in return for which they agreed to notice and takedown a notice and an expedited subpoena process. And unfortunately some ISPs are trying to renege on that but at least one district court judge said that they couldn’t. And the third thing we have to do is to provide consumers with content, in a more convenient and enjoyable form than they can get through illicit methods, and we are trying to do that.

Ed Black…Let me just say first of all, I work for a great cross section of companies that have a great need for and utilize IP in many ways, and we are strong supporters of a strong copyright system, but we also over the years have understood the value of the balance of that system, and have worked to kind of make sure that we keep a system which in all ways, that promotes innovation and keeps competition alive. With regard to the question of DRM, though. In a way, I think it’s a little bit the wrong question, because does DRM help solve the problem, well the problem is not piracy, the problem is we are in a different era now, the digital revolution has truly thrust change in innumerable ways, and it requires a rebalancing, a recalibration, a new equilibrium, of all the legitimate interests. Hollywood is a legitimate interest; consumers are a legitimate interest, libraries, a lot of intervening players. There are a tremendous number of interests here that frankly have been thrown into turmoil because of changes in technology, and the second level changes resulting from that, and what we need to be thinking about is not solving a piece of the problem, of which too much piracy is part of it, but we need to be rethinking how restructuring our whole information flow restrictions and access issues in a comprehensive way that is fair and is reasonable to most of the players. It’s a much bigger issue, and in that context, DRM is a valuable tool, and a very dangerous weapon, and it not easy to define the discussion because there are so many variations of it that are going to be in play.

Jerry Berman… representing a consumer organization that is very concerned about the internet and the role of the internet, as an open communications medium, and an open platform, but I’m just going to answer Pam’s question, DRM is part of the solution, and there will be lots leakage, lots of leakage, but its part of the package, no one is looking for the perfect solution, but it’s going to be deployed, and consumers and internet organizations that care about balance within the DRM structure have to pay attention to that deployment.

Jon Healy…I don’t have an opinion, I’m not from a.. maybe that’s .. but a couple of quick observations. Emusic was referred to yesterday, and they distribute content in a non-DRM format, and their business model was like the major record labels, business call for distribution, they wanted to .. (word).. content, when Napster happened eMusic still had an enforcement tool available to them, they didn't need DRM to .. with Napster because essentially they could use their hashes assigned to each of their file. So on the enforcement front, DRM is a tool, but I think from history you can say it's not a necessary tool. And the question of whether eMusic business model is successful or not, you couldn't conclude that it was successful over whether or not they had DRM attached or whether the mp3 files were more confusing than DRM files — the question really came down to what content did they have. That might also involve the DRM issue, because they weren't willing to use DRM so they wouldn't get content out. You have to think very carefully about the relationship between DRM and the business model, because it is not necessary… given that you have to do things like enforcement.

Pam Samuelson... the Hollings bill hasn’t been reintroduced in this congress, and it seems unlikely that it will be, but it does seem like the broadcast flag issue is a very similar kind of proposal, and so I think it would be good for us to talk about the Broadcast Flag, and so Fritz perhaps you could start us off by telling us why the motion picture industry is so keen on having a Broadcast Flag, and then maybe we can talk about why the BF is not such a great idea.

Fritz Attaway…I have to take issue with you, it is not at all a similar proposal to the Hollings bill. It certainly has copyright implications, but at it’s core, it is a communications issue. Cable and satellite delivery systems, because they have a conditional access system, have the ability to protect content, including preventing content from being redistributed over the Internet. Over-the-air broadcasters do not have the ability, and the question before the FCC is should they give off air broadcasters a level playing field where they can offer program suppliers some security against the redistribution over the Internet. Without that security, content providers will naturally migrate away from off air broadcast television to cable and satellite. So the issue is maintenance of free television. We support that because free television is a major customer of ours, and we want free television to continual to exist in the marketplace, however if it doesn’t we will market our content through conditional access systems, and bypass free television. I don’t think that is in the best interests of consumers, but if one wants to argue, I suppose one can.

Jerry Berman…I think the broadcast flag is certainly not the Hollings bill, and it’s intent is not. It is in a much narrower field. It’s not a bill or a proposal, so it’s one size fits all, one technology. But it’s very difficult to describe how the flag will be deployed and that’s why we have to pay attention to whether it could take on characteristics of the Hollings bill. I think that turns on a number of things. For example, there’s what kind of process will be available for other technologies to get on both Table A, will that be an objective set of criteria? Who will make the decision, the government, or a technology board, or the market, about how you get on that table. Because it is saying that the government is playing a regulatory role, in terms of putting an imprimatur on technologies. But you have heard the cable people say that they are going to take a standard to the FCC, and also look for a governmental blessing. There is one last point, an interesting issue of language, the Hollings bill was considered a mandate, when standards bodies involving industry, the content and IT agree on a DRM standard, that becomes a standard, not a mandate. The problem has been for consumers, who have not had a clear role in the standards process, it’s hard to say it’s not a mandate from their point of view if their legitimate concerns have not been taken into account. I think is a serious question. Getting the consumer voice into the …. I’m not saying the broadcast is wrong, or that it can’t be a part solution. But there are serious issues about how it works and whether it’s an open process.

Emery Simon…So the technology companies I work with have been pretty vocal and vehemently opposed to the Hollings bill, and we have created a coalition to work hard against it. Is the FCC exercise a mandate, the answer is it’s too early to tell because we don’t know what the FCC is going to do. The FCC could certainly issue regulation, which would have a pervasive effect downstream, on devices, in fact on any device that comes into contact with content that originates in the … broadcast. In the alternative, the FCC could do very little. So it is simply too early to tell, but the potential is certainly there, for it becoming the kind of mandate that has a pervasive effect that the Hollings bill was intended or at least conceived as having.

Ed Black… I would agree with the later part of your statement, there, that we don’t know but it has aspects of being a mandate, in an area. A quick reference to the Hollings bill, I think it was a terrible idea, but a wonderful piece of legislation because it helped galvanize a tremendous amount of interest on this thing. The BF is very complex, and it’s hard to separate out the process that led up to where we are right now, there are issues of participation, openness, competitiveness, that cloud the concept of a flag. The idea that you could have a flag, in an open container setting world, where you didn’t have a mandate from the government, I mean, a lot of people could say, hey, let’s try it. See if it has some value. When it starts getting to be a standard chosen by a small group of players, and in the formulation we think it is likely to be involving, which gets a huge perpetual into the future leverage over how it will be done. They will be able to change it with no outside involvement, just on their own will, a small group of companies. It’s a lot of aspects of this broadcast right proposal that are terribly troubling, and if it, in any version we are seeing, are even close to coming to fruition here, and is in fact supported by the FCC, I think we would have a very bad situation.

Mozelle Thompson… I’m from the government and I’m here to help you (laughter). At the outset, my general counsel requires me to say that my comments here are my own and not necessarily those of the other commissioners. But listening to what I’ve heard so far, I hear your questions, Pam, but I’m not sure the questions you ask are the ones you really mean to ask, in the sense that, it’s like we do antitrust and consumer protection. There is nothing wrong with being a monopolist, it depends on how you achieve the monopoly and it depends on how you achieve market power. The same principles are applicable here because what we are talking about is standards setting, whether it’s done by a self-regulatory body or whether it’s done by the government, the question is does the standard actually appear to be overbroad, so instead of protecting innovation and incentiving innovation, it actually does is cast a chill on innovation, and actually thwarts the very purpose of having intellectual property rights. The question is not DRM, yes or no. It can be a helpful tool. It’s under what context it’s being developed and how its being used. The same thing for the Broadcast Flag legislation, and too often we hear people talking from the polar extremes. We are not talking about; this is not the field of dreams, build it and they will come. We have a lot of people out there who want access to content. What I find very interesting, is that we are increasingly a demand driven economy, where consumer confidence becomes important, but what I see is very little being done to focus on what the demand is, and what are the levers that you can have to create demand, so that no one knows exactly what consumers are thinking, or they don’t think in the long term. Instead you see proposals, which are kind of like eating your young. Let’s figure out how to make this work against the people we want to attract. I don’t think that’s a long term winning strategy for anyone.

Richard Epstein…I have a simple question as someone who is kind of an outside expert to the area. I think the basic thing you want to achieve by this system, is to make sure that marked content, which in fact is propriety and protected, is not subject to unauthorized use. The question I have to ask is whether or not when you do this, you engage in various kinds of restraints, which make free entry by other parties inappropriate. So the question here is protecting property rights without creating monopolies, is the basic cast you are trying to achieve. And until someone tells me enough about the specifics of the legislation, I don’t know whether or not we are cartelizing an industry, or whether we are protecting property, and until someone answers that question, I can’t tell you whether or not I’m for or against the proposal. And if you are going to try and win the public over, they are not much more educated than I am on this kind of thing, and somebody is going to have to be a little bit more specific, and so I can almost answer this with, how are you going to avoid the monopoly problem while you create the protection problem

Fritz Attaway…What monopoly problem do you see? (laughter) We are not in the business of creating the essential material. We make entertainment. If you don’t like the entertainment, and quite frankly, sometimes we make movies we can’t subpoena people to see…

Mozelle Thompson… You fly to Washington and tell us how important your industry is, and now you come here and play, like oh, we’re just fluff that comes out of …?

Fritz Attaway…Well, just the opposite. We are very successful in creating entertainment that a lot of people want to see. We are successful not only in this country, but around the world want to see. But copyright has been described as a monopoly. But it is an exclusive right to maintain control out of that creative content, and that is not a bad thing, it’s a good thing. Because, it incentivizes the creation and distribution of that content, which is what the Supreme Court just said in the Eldred case. That was a ringing endorsement of the monopoly of copyright. It’s a good thing, it’s not a bad thing.

Richard Epstein… Well, monopoly could mean one of two things: it could mean the protection of an individual work, or it could be the cartelizing of an industry, it’s the same thing as you have on the patent side. If it’s just the former, I’m with you. But if it’s the second, I’m against you. As far as Eldred, it was one of the most disgraceful decisions that ever came down in the sense that it gave a monopoly for nothing. And when you are running a bargain, you don’t want to have those retrofittings going on here. And so again, I’m want to know something about the mechanisms, not the aspirations. At this point, God lies in the detail and the plumbing, and until I see the way the pipes are put together, I can’t tell what’s going on. I’m putting myself in the position of the consumer, and what I have learned about what this conception of what the Broadcast Flag is and does, I haven’t heard enough to make a judgment, and until I have more information, I think everyone will be extremely skittish and skeptical of what should be done.

Jerry Berman… Well, let’s explore a little bit. A lot of the comments on the Broadcast Flag were for it, and then a lot said it’s ineffective. I don’t think that is responsive, who controls and makes decisions about the technologies that would create a market of technologies that would recognize and permit over time a range of other uses and permissions that are not a copying of millions of copies over the Internet. For example, the technology and encoding rules that would allow the Internet to be part of the home entertainment network. Right now, as I read it, Fritz, the rule would say that three studios would have to agree that the technology is robust and compliant. Isn’t that a little close to giving the power over the technologies to the incumbents?

Fritz Attaway… Jerry, unfortunately you engage in selective reading. You are right, that is one of the criteria, but it is one of four. There are other criteria, as well. One of which is technology that is equally effective as what is already on Table A, and I would say that is a very objective criteria, and one that the FCC can easily measure and it is open to absolutely any new innovative technology, so long as it is equally effective. And I would also like to point out, some of the irresponsible rhetoric you have no doubt heard, the broadcast flag only does one thing, it only prevents the redistribution of digital content over broad digital networks. It has no effect on copying whatsoever. You can make all the copies you want to. You can do anything you want to with those copies. You can make copies of copies. It does not affect copying.

Jon Healy…Could I jump in on that, one of the impacts though, correct me if I’m wrong, in today’s digital networking technologies, there is no way to have Ethernet in play. Basically, the digital connection would have to be encrypted, so if I have Ethernet set up in my home, and I want to move video, broadcast digital video around that network, which I imagine people are going to want to do someday, I couldn’t do it with Ethernet, I’d have to come up with a different technology.

Fritz Attaway... Using today’s technology, yes, you are correct, but I think that will change very quickly. I think there will be secure methods of moving content on Ethernets and even over the Internet by email, it’s just a matter of developing the technology to do that, and we have no problem with that. Our only problem is the mass redistribution of content to tens of millions of people over the Internet, which destroys the aftermarket for television programs.

Jerry Berman… Fritz, with copying, let me ask you this. We’ve been having a dialog with CET, and Consumer’s Union, with a range of companies and across sectors, but take this example, and we get different answers to different questions, and I think nailing this stuff down is absolutely… and I’m not foreclosing on the broadcast, and we get different answers to different questions. Pam Samuelson appears on Nightline to talk about copyright, I want to take a snippet, on a compliant computer, and send it to someone downstream. Not the whole Nightline, and maybe it shouldn’t even be flagged, and I want to send that snippet to her office. Can I do it under the flag proposal?

Fritz Attaway… Yes if the technology exists to allow you to do that securely.

Mozelle Thompson… Maybe this highlights a bit of the problem, because the question is, when does a grant of any sort of intellectual property rights, which I do think is a monopoly, and a legal monopoly. When it bleeds over into non-infringing uses, that’s when you have an innovation problem and a competition problem that gives me great pause, because then consumers don’t even know what they are not getting, they don’t know what they are not seeing, they don’t know whether they could have gotten something cheaper either. So the question is whether you use a blunt instrument to get to a pinprick problem. Now I’m not going to say that there is a diminumous problem here, but what I am saying is it gives me a bit of hesitation. And I will tell you this is an area where I have not formed judgments, but the answer is not 0 and the answer is not 100 , it’s somewhere in between, and it has to have some flexibility. And I’m worried about when you wind up creating standards that at the outset windup appearing to be overbroad.

Fritz Attaway...I agree with you. The tools are often more blunt than you would like them to be. But let me give you an illustration. It’s a balancing test. The DVD. It is true that certain possible uses of the fair uses are not possible because of the content scramble system. However, the content scramble system was essential to induce movie owners to release their product in that environment. The DVD has become the most popular consumer electronics device in history. Millions of consumers are enjoying movies, in a way that they never had an opportunity to do so before. So you weigh what consumer benefit was produced by the DVD, against what consumer negative impact there was, which I submit to you is diminumus, and consumers are a whole lot better off today, than ten years ago when the only home video source was VHS.

Mozelle Thompson… Let me point out some issues, It strikes me, that the potential chilling effect, as mentioned by the Congresswoman (this morning), if you wind up selling product that could potentially harm machines people have, and you fail to disclose it, that’s problematic, so I can’t think of that as being a good thing. But I’m going to take a step back even further. Two years ago when I was looking at the merger of AOL/Time Warner, and we were looking at Time Warner owning monopoly cable power over 22 large markets in the US, the movie industry and others, asked for us to put some strong conditions, so that the people providing the pipe weren’t able to have a chilling effect over innovation by jiggering with standards for sets with set top boxes, so that there could be a variety of ways that content producers could get into your house. Now, how am I supposed to respond, when those very same producers come back and say, yes, so long as it’s done our way…

Richard Epstein… Ignorance is bliss, I think, on many of these panels. As best I can tell, the objection against the Broadcast Flag seems to be at this particular point is that it will stop fragmented use that would normally be protected under the fair use doctrine. I haven’t heard any kind of other monopoly arguments, and if that’s where it sits, then I guess I’m with Fritz. Although, two seconds ago, I was against him. And it seems like that is a trivial loss, as compared to the games you get from the distribution. The problem with fragments is, I think, much more serious. You get ten people who want fragments, and they each take ten minute fragment, and then somebody could reassemble the movie on the outside, and the difficultly that you have to remember is that he is working in a precipice environment, and if he loses one pristine copy of a DVD to an unauthorized network, then he’s lost a billion of copies to it, and so when you start saying there is just a small breach in the wall, this is an industry in which everything cascades instantly, and it seems to me that if a Flag can do what he says, and does nothing more, and I don’t believe this yet, because I don’t know enough about the technical stuff, but if that’s the representation, you don’t have the problems that you have with the Hollings situation, where you are mucking up a computer thing which takes all sorts of nonprotected software, and is software specific and content specific rather than machine general, and so therefore in effect, that should be the line we go down, and we should be pleased that at least in the first instance, we’ve got Hollings off the table, now you can tinker with this thing, but it it’s a question of doing it all, in his way, or doing it none, because the fair use leakage becomes essentially a complete stream, then I would rather give up that little bit of consumer right in order to keep the instruments working.

Ed Black.. Let me try one more on this. The problem is not the technology of the Flag being inserted, or companies trying to say here’s what we think should be done. It is that there is a specific solution investing huge power in a small group of companies, which they are asking that that power in essence be ratified. They become the agents of government, in a sense, where the power that will be provided by the FCC ratifying the rule. That’s an enormous amount of power, which we think, we see ways in which it can have an impact steering technology, choking off viable alternative options for technology, in spite of Fritz’s saying well, there can be similar functionality. Yeah, well we can end up in litigation for lots of years, in the interim, you will be in a situation where lots of people will be chilled from going in those alternative directions.

Pam Samuelson... Yeah, as I understand it, part of the concern is that the broadcast flag doesn’t just constitute a regulation of TV tuners, it will also affect modulators and demodulators, and downstream devices, and to the extent that motion picture companies have the power to say yeah or nay to the development of these technologies, that I think in the concern.

Fritz Attaway… There is no proposal on the table that gives us that power. I don’t know what the source of that statement is.

Pam Samuelson…Well, Emery is actually in disagreement with you.

Emery Simon… That’s not true Fritz, because the motion picture industry has identified universal problems of piracy, of which the Broadcast Flag addresses one, and that’s free over-the-air digital transmissions, but there are lots of other sources of leakages, and the model that is, or is not, put into regulation, which is in effect this law, through the Broadcast Flag exercise will undoubtedly will create precedence for how subsequent piracy problems will be resolved. Moreover, we know that 5 years ago, P2P piracy was not something we were aware of, and today it’s a huge issue, not only for the movie industry, but for the software industry as well. And I can assert with full confidence that in 5 years from now, there will be yet another form. And so the piracy problem that studios confront, software companies confront, the broadcast companies confront, is that the Broadcast Flag sets into motion a regulatory intervention model, which will then become a model that will have a certain gravitas, a certain center of gravity, proceeding thereafter with these issues, and if you think technology drives your products, and you think technology is good for your industry, and we do it by solving the problems with certain bad things that could limit, with chilling technologies and by that you’ll be putting yourselves in ….

Fritz Attaway... So your position is that we should not solve a problem that you readily admit exists, because the solution, although itself is benign, could possibly maybe someday in the future perhaps be a president for something you don’t like? What kind of a position is that?

Richard Epstein… That’s not my position.

Emery Simon… That’s not mine either. (laughing)

Richard Epstein…. I’ll tell you, it’s not mine, and maybe that means something a little different to Fritz, but what I’ve heard is, one a delegation to a private body to set standards which would act as an exclusive barrier to entry to new technologies, that’s what I hear. The question one has to ask is, as you hear it, is, is it true? And I would like someone to tell me whether or not there is a scenario in which if we give this man and his friends a part control over the lever, he can stop a new form of technology from emerging. I want to know that, and I also want to know why it would be in his interests to do so. I don’t quite hear the answers, I mean, I hear the fears, I don’t think they are the (word) as Fritz makes them out to be. On the other hand they are not as specific as I would want them to be before I would be prepared to say this technology has too many interests to behold.

Emery Simon…Your example is… the premiere example is the technology that was developed to protect DVDs before CSS came along, which was a technology worked out by the motion picture industry and the consumer electronics industry, which they legislated, and there was a big long bill and a big long standards document that went along with it, and it was a mandate and when the computer and software industry looks at that technology, we came to the conclusion that it would make so many calls on CPUs, so constantly, that performance would be degraded dramatically. So there is an example of a way that you can come up with bad solutions, and the way that CSS came about, and the DVD solution came about, was to abandon that approach, where a whole bunch of engineers sit down and do the standards process, which is what they do all the time, figure out standards, and when the figured out a standard that worked, people kind of made it into what eventually became CSS. So yes, you can have bad solutions that have substantial negative impacts.

Pam Samuelson... Jon, I wonder if you would say a few words about how you try to, as a reporter, cover stories about things like Broadcast Flags which involve so many complex technologies and people who have so many different views about what the proposals are about.

Jon Healy… Well, I try to understand it as a user would understand it, which means getting past the engineering details as fast as I can, with as little insight as I can bring to bear, cause a lot of these things are process debates, and my average reader doesn’t care about the process, they care about the results. That’s not to say the process isn’t important. So, the first thing to do is figure out what the problem is that people want to solve, which in the Broadcast Flag instance, was all about Internet redistribution. Which is a problem for us, but wasn’t much of a problem until in Napster pointed it out for the music industry, and sort of by assumption or extrapolation, the video industry figured it would come to them as well. So after that, you have to look at what technologies might be out there to solve the problem. In this case of the Broadcast Flag, the standard setting body for the TV industry, the ATSC, had already identified a set of bits that could be used to act as a trigger, right? So then it became a policy question. And that’s the hardest part of my job is seeing all the ramifications of the different policies, which also means understanding in a better way what the problem is. Because, everyone is concerned I think in the Broadcast Flag debate, not about solving the problem. There is an agreement that unauthorized Internet redistribution is an issue for the video guys that needs to be addressed. What they are concerned about is that if you takes steps A, B, and C, then what happens? It’s almost a test of your imagine, because we don’t know what’s going to happen…

Jerry Berman…One last comment, I really, in trying to probe Richard’s question about whether there is monopoly control, and whether other technologies can get on cable, I asked Fritz about one of the parameters of this, three studios agree, but I didn’t ask him about the other, where two studios and ten technology companies, and whether that is a down part. There’s the certification part. But those issues, I don’t want my position construed as selective questioning, or that I’ve got an agenda. I really think that we have to explore how this Flag or any of these standards are going to work and we have to get inside the game and inside the process, and unless people can ask questions, and not have their positions construed, they are great at stating your position, um, and distorting it, and I think that is debating it but not at shedding light on the issue.

Pam Samuelson… So an alternative to the FCC or Congress doing mandates through legislation or regulation, is this private standard setting process, and I want to come back to something Jerry said a little bit ago about the public interest and standard setting organizations in context, because very often these standard bodies are primarily engaged, the people who engage in this tend to big players with stakes, and the question is, is there a way for these processes to be open to public interest representation?

Emery Simon… Well, first of all, I have been involved in these standard setting bodies, so anyone can show up, but what you are identifying is actually a tension in a hard question, where in order for public interest group to engage in an exercise that is expensive and requires specific engineering skills and know-how, and those people don’t come for free. It’s a hard thing to do. So if you are going to a voluntary industry and private sector led standards setting body, for public interest groups to participate in that is a tough thing. The alternative is to have this discussion in a public interest forum, like Congress or the FCC, which then generates the alternative problem of legislation or regulation. So there is a tension between those things. For my money, it’s still better to try to do this through voluntary efforts, and include whoever wants to show up at these things and speak their minds.

Jerry Berman…I really believe that this is a, my organization has fought against government mandates from the CEA and to the export controls, and we want to avoid as much regulation of the Internet as possible, yet the irony is, the only place we have a voice right now is at the FCC, which is trying to regulate Broadcast Flags. Emery raises a very serious question: if we want to participate in, it’s open, but it takes money, resources, etc., and that barrier has to be crossed, because otherwise there is no chair at the table. But there is the other side. Let’s say we can cross that Rubicon, our organization is trying to find funds, and with some help from some very concerned people, are in a position to try and bring technology and some know how into the processes. But there is a second point for consumer organizations, if you get into the process, you gotta be in good faith, attempting to work on the standards, and there are a lot of people in this audience, who believe that if you get into the details, whether snippets for fair use, or anything else I can think of, degraded signals, that you are on a slippery slope, and you are therefore going to end up endorsing the process. So if it’s a aero sum gain, consumers will not, they can’t participate. If they are going to participate, they are going to have to get into the weeds.

Fritz Attaway… Jerry, there is another safeguard that you are not addressing. Emery is right, these standard bodies are open, but Jerry, I agree with you, sometimes it is inconvenient or even impossible for consumer groups to participate. But there is a very effective safeguard for consumers in place. It’s called the marketplace. If standards are set that are unacceptable to consumers, they will be rejected. And they are frequently. You see it every day. Technology is put own into the marketplace every day and it dies.

Richard Epstein… We are not worried about that. We are worried about the question, stuff that doesn’t get out into the marketplace because the standards that are put into place have some sense of the bought kind of situation. The problem is, I have no ax to grind, I represent no associations. But I don’t know who fills this chair of which the public is supposed to sit? It seems to me you have large numbers of individuals, and there is an aggregation problem, and the traditional methodological individualist, which I am, says the only way you get to social utility is to sum individual utilities, or the public is only coalitions and groups and so forth. And so hearing that, there is some sort of mythical override, leads me to fear again that there will be some sort of saving dictator who will be able to protect us all from ourselves, which will be to our own ruination. And the time to figure out how to work this process is going to be very very difficult, given that constraint. I want to know whether you are you going to be strengthening markets or strengthening monopolies. There is a long history in the law, in every area from imports on down, where safety regulations are protected from monopoly, I don’t know whether that is happening here and until someone answer that question, I don’t know where to cast my ballot.

Emery Simon...Let me confuse things with the facts. So you say where is the evidence that the marketplace with respond. The software industry has used DRMs for 25 years. It goes through a cycle. The software industry tightens up the DRMs and consumers scream, cause they can’t do very much with the software when it fails, or they want to reload it. Companies loosen up on the DRM, and the piracy goes way up, and then they tighten up on it. And that has been the cycle, in continuous cycles, and we’re reconciled to that cycle. What we do in that cycle is we abandon technologies that consumers hated the worst. I’ll give you an example. There is something called a dongle, a little piece of hardware that people attach to the back of the PC, which the PC has to shake hands in order to run the software, and people hated it. So, nobody uses a dongle anymore. So yes, there are DRMs that are hated by the marketplace and are taken out of the marketplace, in response to the market.

Ed Black…To answer the question about open processes. First of all, there are thousands of standards created all the time. Most of the time, the process is created well, but a key measure of it working well is the number of players in it, and how competitive it is, and when they are dominated by a few very large players, the temptation is not to create an open standard, but to create a competitive disadvantage for the rest of the competitors looms large, and I think with the Broadcast Flag we see this, I see that as one of the problems. But in general, I would love to see consumer interests able to be more vigorously represented more often. To the extent that we have a highly competitive group of players in the standards making process, there is a certain amount of capability of the marketplace for the consumer voice is somewhat heard, but when you have a smaller subset, when you have big players, that’s when you have this.

Jon Healy… Question, to spin off the first question, so who should decide which programs can carry a flag? Is that something you want your industry groups together and play, so maybe we will put a flag on Saturday morning shows, but we won’t put a flag on news because that’s really opinion these days (laughter). Like I said at the introduction, l don’t have opinions, I just have observations. One might argue that the best place for those policy decisions isn’t, to borrow the phrase from the Microsoft presentation a couple of days ago, isn’t with the technologists, it’s with the policy makers.

Jerry Berman...There are … go ahead… you go first.

Mozelle Thompson… Thank you, this is where I’m here to help you. (laughter) It is important to have, and this is something I’ve been involved in technology issues, and the government might get involved in, which may make this particular area a little different than some of the others, that no one group has the answer, that it is important to have certain kinds of narrow issues and certain broader issues, so it’s important to have a diversity of views, and it’s important to recognize that those views may not be made out of sticks and stones, and they can change over time. Now, the marketplace is a great force but sometimes that market is not perfect, but sometimes it’s involved in antitrust issues, or consumer protection issues, and we are not regulators, we are law enforcers, which means that the market works most of the time, but every once in a while you have to kick it in the butt, because course corrections that are necessary. And that gets us to standard setting, that standard setting, we have a presumption that standard setting organization are good, to the extent that they can bring rationality to a marketplace, and bring efficiencies, consumers benefit. The question is, are there circumstances under which standards setting organizations, or whether it’s done by self-regulatory groups or whether it’s done by government, whether people are using the government standards, or whether it becomes corrupted, either by not full participation, which means, lets say you have a patent, so you don’t disclose, upps. Or lets say there are a group of market players that are trying to have some ancillary effect outside the scope of what is necessary to control that particular intellectual property right, so there are any number of very important fact driven questions. So it’s important to really get into that discussion. But I would also say that I would not be so quick to characterize public forums that are sponsored by government, as simply those that wind up legislating or rule making. We at the FTC are holding a workshop on spam in a few weeks; we had one on privacy technology. We had one on B2B marketplaces, where we took no action, and we took the step of saying we were taking no action, because we wanted to see it develop. So I think that we can actually form a place where we can talk very candidly, and perhaps get a little less positional and perhaps get a little more in the problem solving mode.

Jerry Berman...That would be very very helpful. Fritz I understand, the consumer is a check, but there are certain things where the consumer is not dispositive, and the most important areas are in free speech and policy. Those are rights, which may conflict with majority opinion. The majority may love getting Harry Potter and but they may not care if all news and public affairs is flagged and not available. And I think that those issues have to be addressed. Because if we are going to be in a closed system, and rely on future technologies, should some content be unflagged? I won’t go into the rights of the disabled, but on first amendment rights alone, I think there is a serious issue.

Fritz Attaway… Jerry, you once again mention free speech, despite the fact that court after court after court has said that free speech does not mean you have the right to take someone else’s speech and use it. The first amendment has nothing to do with what we are talking about here.

Pam Samuelson… I’ve read those cases and that actually isn’t what they say. (laughter)

Mozelle Thompson.. This gets to the instance of the over breadth that I’m talking about, in the sense that I’ve heard the same thing when we are talking about what constitutes commercial speech as well, and so when the business community tells me that they can use information for whatever purpose, that’s not true either. So it’s important to try to get to the middle of what’s reasonable. I always like people who cite the first amendment on the one hand and then on the other hand, you know at the same time, that’s reserved for lawyers.

Pam Samuelson…So I think it’s time to go to a controversial subject, perhaps some discussion about the anti-circumvention regulations, since Congressman Lofgren was here talking to us in part about that, as was mentioned yesterday, a preliminary injunction has been issued in the Lexmark case against Static Control’s continued ability to sell their toner cartridges and that case, and the Chamberlain case and the universal garage door opener are DMCA claims that I think are unintended consequences. The question of whether there might need to be some tweaking of the anti-circ rules to exclude these kinds of cases from the scope seems like it might be worth talking about.

Jerry Berman…I think that there are several areas where the Congresswoman agrees that there needs to be tweaking, and we could maybe agree on some of the tweakings, but here is where I gotta make two points. Unless consumers are really organized, and the technology community, and get into the game Rep.s Lofgren and Boucher are flying alone, and they are not going to be able to tweak the DMCA. And there are serious interests who don’t want to open up the DMCA for very good reasons. It protects their software, it protects their content, and they are not interested in opening that to the political realm. Even if they agree that changes need to be made, they will not willingly take the risk. That has to be created by others who want to make those changes, organizing and delivering political power, not market power, to put those issues on the table. And I don’t think we are anywhere near it. And when Larry Lessig says in the face of the Flag, the DTV bill, the need to wrestle with fair use, a standards body, and draw an X thru Congress, and say let’s go somewhere else, because we lost the Eldred case is, I think, a fundamentally message. If you want to affect these policies, you have to be organized and you have to be in Congress and they have gotta hear your voices. Because the reality is, the content people are well known, they have a lotta power, and they have a good case. They are very worried, they don’t want what happened to the record industry to happen to them. They have an enormous amount of power, but the balancing of that case, but the consumers, including us, are not sufficiently there.

Richard Epstein… Yeah um, I am a little bit mystified, I don’t think that there is anything where the village is this big, or where you can tweak it, what happens is you build up a huge head of steam, and you may take care of the garage door opener case, which does or does not matter, with these compatible systems, but any legislation you are going to do is going to have massive movements in the opposite direction and if this is the extent to which we have a problem, my own strong inclination is that I will listen to any side in the face of judicial format to see whether or not there is an implied exception to see if the cases get reversed, but I don’t think two swallows make sum of difference. There are billions upon billions of interests on the other side, and the moment you start to create a crack in the other side, you make a crack in the edifice of protection, and the whole wall comes crumbing down, and the discontinuous nature of this business is something that leads one to think that they are attractive in principle, in an abstract way, but terribly dangerous when you are trying to implement them, because there is no way you could break the flow, the slope is simply too steep.

Fritz Attaway… I don’t want to sully Jerry’s reputation, but I’m going to agree with him, um, do you mind? (laughter). The bill that was introduced by Cong. Boucher is not tweaking the DMCA, it repeals the DMCA. The essence of the DMCA is the prohibition against trafficking in circumvention devices. We realize we cannot station a policemen in the home of every consumer to see if they are circumventing any particular technological measure. What we have to do is prevent the mainstream commercial availability of circumvention devices and that’s what the DMCA gives us. Cong. Boucher has introduced a bill that says that any device that is capable of allowing fair use is not a circumvention device. It totally repeals the essence of the DMCA. Burglar tools have legitimate uses. You can legally break into your own home, but if burglar tools were allowed in mainstream commerce, the predominant use of those tools would be to burglarize peoples’ homes. Same thing with circumvention devices. So Cong. Boucher presented this view in 1998, it was soundly rejected, he’s presenting it again today, and I predict it will be equally soundly rejected.

Ed Black…Let me talk a little bit about the history of the DMCA. First, we went back to WIPO and white papers before then, and there were many years of discussions by a lot of players, on how to structure this world. There were a number of people to whom a certain proposal that wound up becoming the law, and believe me, I think the law was modified to a much more balanced position than it started out in some of the early drafts. But circumvention was used, because a decision was made in the process, there was a choice… either you said that fundamentally that everything is to be banned, and you make exceptions for some uses, or you do the reverse, and you say we won’t ban stuff per se, but we will itemize and list all those improper burglar tools that can be identified, and create a rapid way to identify them, and so that that would be prohibited. So it was really which side of the presumption and where the exceptions were. Many of us argued that in a rapid and changing technological era, that it was really wrong to say that there was a blanket prohibition on devices, when we knew what was going to be out there, that anti-circumvention tools that might inadvertently be structured in such a way, so that totally innocent products could have an effect of looking like a circumvention tool. So facing that unknown world, none of us wanted that to be, so we were going to be very liberal in identifying something that was going to be misused, we’ll deal with it, we’ll list it. But in fact, we had the opposite effect, and we basically are living this that now. Even now with the exceptions, which are modest, were fought tooth and nail, for research, and no one even thought of encryption research as an exception two months before the bill was passed and it surfaced and it was fought tooth and nail and I am in agreement with Emery, in those days, we were the two organizations debating the scope of encryption research, and what we have resolved, and were beaten on by Sen.s Hatch and Leahey to come to resolution on was where we are based on the political powers and forces involved. There was no broad understanding in Congress with what they were doing, these were nitty gritty little debates that were fought out in the trenches, and the impact, we think, is as we predicted. Far reaching consequences of people coming to use the anti-circumvention provisions for anti-competitive uses, not for intellectual property protections purposes, and that’s the danger.

Pam Samuelson…The auto parts industry is very concerned about the Static Control case. So that might be a good segue into asking whether there might be some anti-trust enforcement in this as a way of kind dealing with this problem, or is Congress going to have to amend the statue, because there is, I think, a serious problem here.

Richard Epstein…There is an analogy to this, in the telecommunications business, the 1996 Act preserved the enforcement of the antitrust laws, and then what happened is the class action lawyers got hold of that and the case is now going to the Supreme Court, in the Trinko case, to see if you can stop it. There is in fact an antitrust problem that lurks behind all these things for the reasons that Ed said. Anytime you have a standard that conforms, it’s a standard that can exclude. And you just don’t know which side of the line, abstractly, it turns out you are going to be on. I think however, for the most part, that if one is going to organize a sane system, if you think you have the legislative thing pretty well in tact, to allow an anti-trust circumvention as it were, of the legislative structure, is generally going to allow the whole thing to be blown open, so I would be extremely cautious about this, and I would like to preserve the antitrust law in an explicit fashion, namely to the extent that you have individual players who have separate properties, and they’ve set prices on it, which is fine. But the moment, two guys come together to try to decide how to set prices, they are in effect not in the copyright world anymore, you are now in the antitrust world. So Universal gets together with Paramount, and they say this is what we are going to charge for a minimum picture, the fact that both of them has a copyright gives them no protection against that. I think everyone would agree with this, I would hope but that would be the extent to which anti-trust stuff would intrude in this area.

Mozelle Thompson… I can’t think of anything I disagree with more, in the sense that there has never been a partial with the exception of baseball.

Richard Epstein... I’m defending that…

MozelleThompson…a legislative prescription about how you define competition for purposes of a given industry or given actions. That is a very factored analysis, and I would resist any attempt legislatively to try to jigger those rules. I think that is in appropriate.

Richard Epstein... No, I mean the question is, why is the one exception that I have announced not sufficient under today to deal with the problems? Because the danger is that a lot of this antitrust stuff is extremely erratic, and a lot of this antitrust stuff is brought for anticompetitive reasons themselves, and so I just don’t understand structurally what it is that we gain, except to increase the jurisdiction of the FCC. My view is I don’t want them to be any bigger than anybody else, and so let me ask the question in a slightly different fashion.. if in fact we prevent collusion in the form that I have mentioned, which I think is widely accepted, what is there left for an antitrust law to do if you have an extremely tightly brokered view with respect to some of these nitty gritty exceptions…

Mozelle Thompson… Because you are defining collusion in one very specific way, and there are a number of different ways companies can act anti-competitively, and that’s something I think you are aware of.

Richard Epstein… I want to know what those other ways would be, I can’t believe that this is a situation where you are aware of over-monopolistic behavior….

Mozelle Thompson….My job here is not to sit here and debate with the law professor about woulda, coulda shoulda…. My job here is to sit down and learn, because….

Richard Epstein… From the law professor….

Mozelle Thompson... But learn facts from people.

Richard Epstein… Now wait a second….

Mozelle Thompson…No, let me finish, let me finish. I also teach law school. And I’m here for a different kind of reason. I think that what was raised earlier about what kind of public voice there is, I won’t diminish the value of that public voice. I mean sure, there is a lot of money, there are a lot of interests out there, but that’s not to say that the interests of consumers or end users are not important, or to the extent that they are organized, that they may not be able to get at the legislative bits, but they sure can inform the legislature about what is going on, and they surely have a role in informing people like us, when people who legislate ask us what our opinions are. So knowing what happens out there on the ground, and knowing what the side effects are, are important. For example, a lot of people don’t know, and they should know, that one of the principle tools in antitrust are squealers, people who are competitors and things who see things that are going on that we might not be able to see. And then we get a chance to sit down and think about what the impact is. I don’t want to preach those issues, but that’s why I would have some reservations about until we have a talk about what the scope of legislation might be, or what a fix might be. Let’s sit down and get a survey of what is actually happening on the ground, because none of us up here, we may have a snippet about what we think is happening, but none of us have a total picture.

Emery Simon...Let me ask you a question, about Lexmark, whether it is an unintended situation or an unanticipated one, I don’t know. As a matter of what the DMCA is focused on is the piracy issues, and so it was based on relationships between companies, competitors and the marketplace. So it was certainly an unanticipated situation. Whether the DMCA should be used in that way or not, I personally think it should not, but whether it will or not, the courts will decide, and whether it will be or not, if the courts decide this thing erroneously, there will be a role for coming back and looking at this thing again. On the things that Zoe Lofgrin talked about this morning, I think one of the most revealing things was a question that was asked yesterday afternoon to a group of technologists, which is, do you know, as a matter of technology, how to create a set of technologies that allows fair uses without letting everything out of the bag. And the answer yesterday, and I’m not diminishing the importance of fair use or individual interests or anything, but if you don’t know how to fix that problem with technology, if you fix it as a matter of law, what you have done is a matter of practice of the marketplace, what you’ve done is you have eviscerated, the very purpose of the statute. And that seems to me a little bit of overkill.

Richard Epstein…This is a completely discontinuous problem. That is, there is no fine tuning. It’s a zero-one situation. And on that I agree with Emery. To think that you would want to do in order to preserve fair use is to decimate an entire industry, or two industries as the case may be, strikes me as being an extremely kind of odd conclusion to reach. I don’t see where the intermediate fix is, and once there is one pristine copy gets out, then there are billion pristine copies out there, and one has to realize that there is this precipice, which I think determines the shape of the entire debate.

(Ed Felten holding his head in a painful way)

Ed Black…I mean the question is, industries are going to be destroyed? We’ve heard that over and over and over and over….

Richard Epstein…No we need fair use, but the question is, can you fine tune this? And if the answer to Emery’s question as before is no, that it turns out that the intermediate solutions has this then…

Ed Black… that’s not the questions….

Richard Epstein… part of the question is to whether you can precisely calibrate your responses to this issue. I don’t think you can.

Mozelle Thompson...I think what you are saying is that if in the end, Armageddon going to happen, we shouldn’t do it. I think that’s a duh?

Richard Epstein… No I’m not trying to say that….

Mozelle Thompson… The question is, what is there in the middle? I haven’t heard this….

Richard Epstein...It’s not that the technology constraints the set of intermediate choices we have today. This is not fair use in the traditional sense of literary criticism that you need to make with somebody else’s work. This is fair use in the sense of reproduction for private uses, and unless someone can explain how you can make one copy without making ten billion copies, then the issue becomes a very serious one. Is it Armageddon? Well…

Jerry Berman... Richard, there are ways to do that. You have not asked for explanations, you have just said it’s not possible, therefore let’s not explore it. But what Mozelle said is that whether it’s the DMCA, or what can be done about fair use, the only way to get out of extreme positions, either with legislative proposals, is to sit down and talk about the facts and how the technology works. You’ve made some assumptions about the technologies that are not true. There are companies that will tell you that even within the 5(C) rules on the Flag, that you can make, that there are other possible signals can be sent, snippets, unflagged materials, pieces of Harry Potter that are degraded so you can’t put Harry Potter back together, you need to know that it would take 17 hours to put Harry Potter together. So those facts need to be discussed. The forum is missing. It is totally adversarial. One of the problems is that when Congress, when they are holding hearings on the Internet, you can count on your hands, the number of Congressmen who know that it is in fact similar to a television set, and that is a serious problem. And creating those forums, and creating ways to bring the technologists and consumers together, is absolutely critical to get out of this kind of … we are having.

Emery Simon... See I think Jerry that speaking in absolutes, which is unfortunately what we all tend to do, which is wrong. So let’s look at the fair use concept, and the fair use concept is a public interest, public policy balancing statute, which essentially says that if you are going to do something socially redeeming, will excuse the fact that you’ve made fair use copies, and that’s a good thing, and what you do is you do a balancing interest. So now we look at the overall context that the anti-circumvention rules appear in, and you do a balancing test again. So on the one hand, you balance the potential threat, it’s not an absolute threat, and probably Richard overstated it, but it is a serious potential threat. And you balance against that the public interest that is inherent in the balancing of fair use. The problem is that it is not going to be the same answer in every situation. I believe that the DMCA for the moment, has gotten it about right. And I believe that doing what Zoe and Rich and others propose would be a mistake. It’s too early to make those decisions, let’s let it play out a little bit longer, lets have some proof of the fact that there is really a lot of harm going on here because frankly I haven’t seen all that much.

(Fritz left for some reason…)

Jerry Berman…I agree, I’m all for the documentation, and document and talk about the facts within a forum, and fair use is a balancing task, but within the constraints of DRM technology, where the possibility of exercising it and then defending it in traditional fair use terms may not be possible, so that you are on the end of asking someone for the technology to do it, and if that’s true, then you have to find a way, a forum, of how to rebalance those things, because there is no way to do the balance, if you turn it on it’s head and made it a permission.

Jon Healy…Aren’t we presupposing that the universe gets DRM? I mean, if there are non-DRM sources of content in the marketplace, and the public doesn’t like the DRM sources, then you would think the non-DRM sources would win, and that would provide your outlet for fair uses and other uses that DRM content would not provide.

Pam…I think that is one of the things Larry Lessig was trying to envision with his Creative Commons initiative.

I actually want to open it up to questions from the floor. Don?

Don Whiteside, Intel... You might think of CSS as an imperfect solution that had great benefit for content providers and consumers six years ago. We are now at a point where we can actually expand CSS to have portability. I am curious when we will see an update to the CSS, DRM protections and others, very similar to what the cable industry just announced….

Fritz Attaway… Before I avoid answering that question, I want to apologize to Pam and the audience, about leaving, don’t drink four cups of coffee and two waters before appearing on an hour and a half panel. Don, I wish could answer the question but they are way above my pay grade, I agree with you that they need to be made, but I am not involved in the negotiations, but I hope that a resolution comes quickly.

Jon Healy… Does Intel happen to have a reference design for that? Cause it might come in handy….

Pam Samuelson….Mark?

Mark Lemley…So, the consensus, to the extent that there is any consensus on this panel, seems to be, the Hollings bill is a bad idea. Why is it a bad idea? Because it mandates the way we build things, and there are references by Fritz, and Richard at least would agree with this, that the market is the preferable solution. My question is this, why then is the Broadcast Flag at the FCC? I would expect a market based solution to be one in which device manufactures, perhaps at a standard setting organization, but not uniformly, compete to make devices that do or do not encode software, right? And if they are in fact concerned, as Fritz said at the beginning, which is that we will not send content for free, unless these devices exist, then I would expect the market to develop such a process on it’s own. The fact that we are not at the market, that we are instead asking the FCC, I take it, to mandate something along these lines, suggests to me that what we want is any kind of market driven or even standard setting process in the classical sense but is instead regulation. Maybe there is a good reason for that, but if there is a good reason for that, then maybe we have to decide what that is, but we have to abandon this pretense that we are in fact doing anything different, that we are in fact regulating technology, and we have to come out and say that we are regulating technology, and this is why it’s a good thing. 

Emery Simon… Well, it is in fact a good thing. And the reason is that the marketplace way to solve this problem is for broadcasters to encrypt their signals and operate the same way that cable and satellite delivery systems do, where the broadcaster can control the types of devices that process their signals and require those devices not to pass that content onto the Internet. However, the policy implications of doing that are rather extreme. It would immediately render useless ever consumer digital television device that has been sold in the marketplace. I think that the…

Mark Lemley… That’s not a market based solution? Right?

Emery Simon… Well, it is.

Mark Lemley… We don’t want to do it because it would prevent a bunch of devices from being useful, but perhaps what is happening is that the market is solving the problem in a different way, right? It’s not moving toward…

Emery Simon… So what are you suggesting? That we should just ignore the problem?

Mark Lemley…No, I think you can make an argument for regulation, but I think you have to make an argument for it as regulation. You’ve got to abandon this pretense that Broadcast Flag is a market based solution to anything. You’ve got to say, we need regulation to solve this problem, government please help us.

Emery Simon… I’m sorry if I gave the impression that we don’t think it’s regulation. It is regulation, absolutely, of course it is.

Richard Epstein… But Mark, I think the difference between this and Hollings is that in one case you are trying to control the show and in another case you are trying to run the box. And therefore the level of interference under Hollings is at least presumptively higher than it is under Broadcast Flag, and what one has to do is to go into the details to see whether that statement is true or false. And I’m not the guy to do that.

Ed Black… Whether it’s Hollilngs or the Broadcast Flag, or a frankly monopoly position of the standard, the truth is, all of those defeat a real competitive marketplace where there might be a chance for the kind technology that might be acceptable to consumers to work out. We are all trying to prejudge that process and I think that is where we are going wrong.

Lucky Green… I do have a question about the Broadcast Flag, and it’s potential anticompetitive consequences, not in the content space, but in the HDTV receiver space, and this question is really going to…(words) and the FTC. There are currently HDTV receivers that are quite expensive, it’s one of the many reasons why high quality television broadcast is not being received by many in the American television population. They are many high dollars. There are currently, which can’t be presumed in the best interests of both the MPAA and viewers, and certainly the efforts of Congressional mandates to encourage the HDTV player, there are projects underway at present, software defined related projects, that using just very inexpensive dish receiver, or perhaps a …(word) …that by performing all the processing on the existing PC, it permits the receiver to get HD reception, and it is a fraction of the cost of any computer based solution is currently on the market based on …. (words). .. Needless to say, this is all done with software, and since the software is all being given away in source code form, downloaded from the Internet, the robustness requirements that necessarily would be to accompany the Broadcast Flag that a, would be consequences in the real world, cannot possibly be met, hence a considerably less expensive technology would be of obvious consumer benefit, would be kept of the market, if a Broadcast Flag were to be implemented. So I’m wondering, is this truly in the best interests of the MPAA, for HDTV receivers that are four or five times more expensive than they could be, and what does the FTC have to say about that?

Fritz Attaway... HDTV receivers are going to have to be able to process protected content. And that’s totally separate and apart from the Broadcast Flag issue. People are not going to invest in an HD receiver only to watch over-the-air broadcasting. They are going to want to watch cable, they are gonna want to watch satellite, gonna want to watch DVDs, they are gonna want to watch premium content that is protected. All the Broadcast Flag would do is to say that off air content has to be rooted through a protected interface that is going to be there anyway because it needs to be there to render all of this other content that will be protected and consumers will not be able to watch, unless they have a device that can handle this kind of content. So there is no additional cost. The protection has to be there anyway to receive the other kinds of content.

Jon Healy … When you make software, an HDTV receiver that meets the robustness requirements of, that approaches the robustness requirements?

Fritz Attaway... I’m afraid I went to law school, not engineering school, so…

Emery Simon… Let me try to answer that, because I was involved in that process. So the answer is, we haven’t agreed on what robustness rules should be, and there is a proposal in front of the FCC, but that doesn’t mean there is consensus on what the robustness rules will be. If we were to agree on what those robustness rules are, then our experience in the past has been that yes, we can deploy that software. I just want to come back to one important point raised. The right way to protect Broadcast is to encrypt it. The reason why the music industry has a huge piracy problem is because their product is out there in the clear. The reason why DVDs will go with CSS there is less of a crack, is less of a problem with DVDs is because its not in the clear. When you put out free over-the-air broadcast in the clear, you are asking for trouble.

Richard Epstein… My questions in listening to this discussion is that maybe that is an obsolete technology? Over-the-air broadcast. Because I don’t know for sure….

Emery Simon…Do you know what percent of the American public who gets their television that way? Less than 20%.

Richard Epstein…Well then you are telling me something which I kind of guessed, because I have a cable and a dish at my house. I get anything I can get over-the-air, over those two things. So what we really have to do is to junk that technology, put everything through encryption, once you encrypt it then you can monitor it, once you can monitor it, then you don’t care about it, including the assignment problem, and then we can all go home, including the FCC.

Mozelle Thompson... With all due respect, a lot of people like me are among those 20%.

Richard Epstein... Yeah, but you won’t look that way if it turns out… it’s like Life Magazine, where it turns out that there was a time when picture magazines were great, but then television came along and they could never quite recover. And what will happen is that if in fact we adopt the technology is that you as a private citizen will adopt more rapidly than you as an FCC regulator.

Pam Samuelson... So actually, I think this is an extraordinary moment to close. Thank you very much.