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Witness Testimony
Ms. Debra Rose
H.R. 107, The Digital Media Consumers' Rights Act of 2003
Thank you Mr. Chairman for the opportunity to discuss H.R. 107, the "Digital Media Consumers' Rights Act." I appear on behalf of the Entertainment Software Association (ESA). I joined ESA in January of this year, after serving as counsel on the House Judiciary Committee, Subcommittee on Courts, the Internet, and Intellectual Property for the past seven years. It is an honor to testify before you, Chairman Stearns, Ranking Member Schakowsky, and Members of the Subcommittee, on these important issues. ESA strongly opposes H.R. 107 because it will substantially harm the entertainment software industry in two ways: 1) it eliminates the protections created by Congress in the "Digital Millennium Copyright Act (DMCA)" for technological measures which video game publishers use to protect their products against unauthorized use; and 2) it will stifle the growth of the digital marketplace through unnecessary government regulation of the labeling of media products instead of allowing private industry to inform consumers of the permissible uses of their products. The ESA serves the business and public affairs interests of companies that publish video and computer games, including games for video game consoles, personal computers, handheld devices, and the Internet. ESA members produced more than 90 percent of the $7 billion in entertainment software sold in the United States in 2003. In addition, ESA's member companies generated billions more in exports of American-made entertainment software, helping to power the $20 billion global game software market. The entertainment software industry is one of the nation's fastest growing economic sectors, more than doubling in size since the mid-1990's and in so doing, has generated thousands of highly skilled jobs in the creative and technology fields. Our industry makes a tremendous investment in its intellectual property. For an ESA member company to bring a top game to market, it often requires a team of 20 to 30 professionals- sometimes twice that number- working for two to three years to fuse together the work of writers, animators, musicians, sound engineers, software engineers, and programmers into an end-product which, unlike other entertainment products, is interactive. On top of these research and development costs, publishers will invest at least $5 to $10 million to market and distribute the game. The reality of the marketplace is that games enjoy a very short commercial window in which to produce a return on these investments as the vast majority of a game's sale occurs within the first two months after the game is released. As a result, only a small percentage of game titles actually achieve profitability, and many more never recover their front-end R&D costs. In this market environment, it is easy to understand how devastating piracy and added government regulation can be, siphoning revenue required to sustain the enormously high creative costs necessary to produce commercially profitable video games. It is also the reason why technological protection measures play such a vital role in game publishers' efforts to protect their products' commercial viability. I. THE DMCA The digital environment allows users of electronic media to copy, send, and retrieve perfect reproductions of copyrighted material easily and nearly instantaneously, to or from locations around the world. In response, the DMCA sought to make digital networks safe places to disseminate copyrighted works for the benefit of consumers and copyright owners. The DMCA was the foundation of an effort by Congress to implement United States treaty obligations and to move the nation's copyright law into the digital age. The DMCA implements two 1996 World Intellectual Property Organization (WIPO) treaties: the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Specifically, the treaties require legal prohibitions against circumvention of technological protection measures employed by copyright owners to protect their works. Congress determined that current law did not adequately protect digital works and that to promote electronic commerce and the distribution of digital works, it was necessary to provide copyright owners with legal tools to prevent widespread piracy. As a result, Title I of the DMCA implements the treaty obligations by creating a new prohibition in the Copyright Act on circumvention of technological protection measures. Title I of the DMCA added a new chapter 12 to the Copyright Act. Section 1201 divides technological measures into two categories: measures that prevent unauthorized access to a copyrighted work and measures that prevent unauthorized copying of a copyrighted work. 1201(a) prohibits the act of circumventing access controls and the manufacture or sale of devices that permit such circumvention. 1201(b) prohibits the manufacture or sale of devices that circumvent copy controls. Congress balanced these new protections by ensuring consumers would continue to have the ability to make certain legitimate uses of copyrighted works in the digital environment. Congress created a tri-annual rule-making process conducted by the Librarian of Congress to evaluate the impact of the circumvention prohibitions on consumers' ability to make fair use of copyrighted works and to issue exemptions as necessary. Since the enactment of the DMCA, two such rule-makings have been successfully conducted by the Librarian. The protections afforded by the DMCA are essential to the vitality and continued growth of the entertainment software industry. Game products are produced and exist only in digital format and are used exclusively on electronic media devices. Given the rampant hard goods and Internet piracy- with piracy levels that reach as high as 80% and 95% in some markets- game publishers must utilize technological measures to have a chance at recouping the tremendous investment that is required today to bring a successful game to market. The entertainment software industry uses an array of technological protection measures (TPMs) on its various products, including those for personal computer, console, and handheld games. For example, video game consoles have built-in access controls designed to prevent the playing of counterfeit versions of the games. These self-help protection methods act as "digital locks," that regulate unauthorized access to the game content. Video game consumers consistently report a high level of satisfaction with their purchase and use of game products. In other words, the use of TPM's has not interfered with the entertainment software industry's ability to meet consumer expectations with regard to access, play, portability, and ability to make full use of a game title. The DMCA ensures that game publishers have legal recourse against those who circumvent protection measures or manufacture and distribute products that enable circumvention. Without this protection, development and digital distribution of new products becomes an exceedingly risky proposition because publishers place at considerable risk the tens of millions of dollars spent in developing and marketing game products. On the other hand, as has been shown during in the two 1201 rulemakings, both copyright owners and consumers have benefited from the DMCA because more digital entertainment products are being made available to the public in user-friendly formats. II. H.R. 107 ELIMINATES DMCA PROTECTIONS AND LEGALIZES CIRCUMVENTION DEVICES Under the misleading title of "Fair Use Amendments," section 5 of H.R. 107 eliminates the protections of the DMCA and opens the flood gates for massive piracy of copyrighted works. H.R. 107 Legalizes Trafficking in "Hacking" Tools Section 5(b)(1) amends Title 17 to state that it is not a violation of law to circumvent a technological measure that controls access to a copyrighted work, if the circumvention does not result in an infringement of the work. Section 5(b)(2) further states that it is not a violation of law to manufacture, distribute, or make non-infringing use of a hardware or software product capable of enabling significant non-infringing use of a work. While these proposals are described as reasonable and necessary by the supporters of H.R. 107, the stark reality is that no technology exists to ensure that circumvention is only done for legitimate fair use purposes. Any technology or device capable of "enabling significant non-infringing use" is also capable of permitting rampant piracy. In fact, at a recent Digital Rights Management Conference, Professor and leading DMCA-critic Edward Felten acknowledged, "The answer, I think, right now, is that we don't know how to do that. Not effectively," in response to the question of whether it was possible to develop technologies that would allow circumvention for fair uses without opening up the Pandora's box and essentially repealing the anti-circumvention laws. In addition, once a TPM is circumvented, the game is unprotected or in the clear. The resulting copy is a perfect copy that can be available for any purpose, not just fair use. In the digital world of today, the "single copy" envisioned by supporters of H.R. 107 will quickly become hundreds, or thousands, of equally high-quality copies distributed instantly around the world. As ESA's President, Doug Lowenstein, recently testified in a Senate Subcommittee hearing on international and domestic enforcement of intellectual property laws, "Billions of dollars worth of pirated entertainment software products are present in worldwide markets today." Today, there are illegal devices such as "mod chips" and "game copiers" which circumvent access controls and allow for play of counterfeit games. H.R. 107 would legalize these devices and pave the way for uncontrollable and massive piracy. The use of TPMs reflects a technological attempt by rights holders to prevent the illegal use and copying of their products. When they are not hacked and work effectively, TPMs save the games industry millions of dollars per year in losses to piracy. Game companies spend substantial sums for the use of TPMs in protecting their games. Some game companies have gone even further and have developed their own proprietary TPMs to protect their product. All of the industry expenditures on preventative measures not only protect industry from the financial damages caused by piracy but also save taxpayers and law enforcement millions of dollars by protecting such legitimate commerce from criminal activity and also benefit consumers by encouraging widespread dissemination of copyrighted materials through legitimate channels. The DMCA anti-circumvention provisions were enacted to help incentivize such private sector expenditures on and investment in preventative measures by providing remedies against devices that undermine such measures. H.R. 107 would vitiate such incentives and thereby foster a greater reliance on law enforcement and government resources to address the resulting increase in the volume of illegal products. Courts and law enforcement would be additionally burdened wile commerce in legitimate products would be reduced in the face of competition with illegal counterparts, resulting in additional losses to taxpayers. H.R. 107 Undoes what Congress Accomplished in 1998 H.R. 107 will undo the carefully balanced resolution which Congress enacted in the DMCA to address the issue of "fair use." Because it is impossible to limit the use of circumvention devices to only "fair uses," Congress rejected this same proposal, several times in fact, when considering the DMCA in 1998. Representative Boucher advocated the so-called "fair use" exemption in both the Commerce and Judiciary Committees and both Committees rejected it. Instead, to ensure consumers the continued ability to make fair use of copyrighted works in the digital environment, Congress, under the leadership of the Commerce Committee, created a "failsafe" procedure. Every three years, the Librarian of Congress, in conjunction with the Copyright Office and the Commerce Department, initiates a review of whether public access to copyrighted materials is being harmed or threatened as a result of the circumvention prohibition in the DMCA. If, after holding hearings and reviewing testimony, there is evidence to support the claim that users are not able to make non-infringing use of a class of works, the Librarian may exempt persons who engage in noninfringing uses of works in that class from the prohibition against circumvention of access controls. Since the enactment of the DMCA, the Librarian has conducted two rulemakings and issued significant exemptions. In both rulemakings, and particularly the most recent which was completed just last year, the Librarian considered and rejected the broad proposals contained in section 5 of H.R. 107. The Librarian did not find any evidence to warrant a blanket exemption from the DMCA for circumvention devices that allow consumers to make noninfringing uses. To get directly to the point, the well-designed rulemaking enacted by Congress in 1998 is working. H.R. 107 would render it useless because all circumvention devices would be legal. Trafficking in of such circumvention devices to commit video game piracy would essentially be legal and the entertainment software industry would enter a very, very dark age. III. H.R. 107 CREATES UNNECESSARY GOVERNMENT REGULATION OVER THE LABELING OF MEDIA PRODUCTS, STIFLING DIGITAL MARKET PLACE H.R. 107 would require every copy-protected music CD to include in its labeling a notice prescribed by the Federal Trade Commission (FTC) informing consumers of the restrictions on the CD's playability and recordability. While H.R. 107 currently pertains only to music CDs, legislation in the Senate would apply similar onerous labeling requirements on all digital content. The entertainment software industry has a strong and proactive track record in voluntarily providing information about our products to customers. Consumers of video games have known and accepted for years that video game hardware systems and computer and video game software are copy-protected in various ways. For example, there is no legitimate expectation on the part of consumers to copy a PlayStation game for use on a GameCube or an Xbox, or to copy a PC game for use on a dedicated game console. Our industry's consumers know that the games they purchase are embedded with certain technological restrictions. Under the bill, the FTC would be given sweeping new regulatory powers to promulgate new labeling requirements on an annual basis. A rulemaking by an agency unfamiliar with multiple emerging digital protective technologies and consumer expectations is unwise and likely to lead to misguided regulation -- consumer expectations can vary tremendously by product type - expectations about music and other copyrighted products are often very different than those concerning video games. Indeed, in its 2001 report to Congress, the U.S. Copyright Office said, "In any event, these issues of consumer expectations and the growth of electronic commerce are precisely what should be left to the marketplace to determine." We oppose mandated labeling proposals because we believe they are unnecessary, they impose government into private sector business licensing practices, and they assume that the federal government is better able to determine "legitimate consumer expectations" than the free market. The marketplace, not Congress or the FTC, is where legitimate consumer expectations over product use or access should be mediated. The computer and video game industry is a perfect example of this marketplace success - an industry whose products have always included protection from unauthorized copying and distribution, whose consumers have accepted and understood these use and access restrictions, and whose relationship with these consumers has made us the fastest growing segment of the entertainment industry. Our industry's consumers know our products and their uses because of the unique nature of our games and the devices on which they are played. Burdening this industry with new regulatory requirements would provide no added benefit for our consumers, and is a classic example of trying to "fix something that isn't broken." Related Documents |
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