Witness Testimony
Mr. Jack Valenti
President and Chief Executive Officer
Motion Picture Association of America
1600 Eye Street, NW
Washington, DC, 20006
H.R. 107, The Digital Media Consumers' Rights Act of 2003
Subcommittee on Commerce, Trade, and Consumer Protection
May 12, 2004
10:00 AM
WHY H.R. 107 IS A PRIME HAZARD TO THE FUTURE OF AMERICAN INTELLECTUAL
PROPERTY
1. H.R. 107 has one unfixable defect: It will legalize the hacking of copy
protection measures, which in turn will make it impossible to truly protect
valuable creative property.
We must remember that tapes copied on a VCR become progressively unwatchable
after the first few generations. Not so in the digital format. The 1000th copy
of a digital movie or piece of computer software is as pure and pristine as the
original.
If H.R. 107 becomes law, it then becomes legal to sell machines that
circumvent, or hack, the copy protections on a movie, whether distributed as a
DVD or online, so long as the device is "capable of enabling significant
noninfringing use of the copyright work." This would devastate the home
sale market, as anyone could use these products to "rent, rip, and
return" DVDs borrowed from video stores. In addition, it will greatly
diminish the incentive for investment in new and innovative distribution
mechanisms for digital content, such as distributing movies online. All
legitimate digital distribution of movies depends on encryption and digital
rights management technologies to control unbridled distribution. If breaking
this encryption is legalized, why would movie studios invest in the
infrastructure to deliver their products digitally when devices to strip the
content of protection are legal and commonplace?
2. Keep in mind that, once copy protection is circumvented, there is no known
technology that can limit the number of copies that can be produced from the
original. In a recent symposium on the DMCA, Professor Samuelson of UC Berkeley
posed the question: "whether it was possible to develop technologies that
would allow…circumvention for fair uses without opening up the Pandora's Box
so that allowing these technologies means that you're essentially repealing the
anti-circumvention laws."
The question was answered by the prominent computer scientist and outspoken
opponent of the DMCA, Professor Ed Felton of Princeton: "I think this is
one of the most important technical questions surrounding DRM - whether we know,
whether we can figure out how to accommodate fair use and other lawful use
without opening up a big loophole. The answer, I think, right now, is that we
don't know how to do that. Not effectively."
Moreover, there is no known device that can distinguish between a "fair
use" circumvention and an infringing one. Allowing copy protection measures
to be circumvented will inevitably result in allowing anyone to make hundreds of
copies - thousands - thereby devastating the home video market for movies. Some
40 percent of all revenues to the movie studios come from home video. If this
marketplace decays, it will cripple the ability of copyright owners to retrieve
their investment, and result in fewer and less interesting choices at the movie
theater.
3. It is important for the Congress to understand that intellectual property
is America's greatest export prize which comprises more than five percent of the
GDP - brings in more international revenues than agriculture, aircraft,
automobiles and auto parts - and is creating NEW jobs at three times the rate of
the rest of the economy. Why is it in the national interest to put to risk this
engine of economic growth? Why?
4. Moreover if Congress creates this enormous loophole in the DMCA by passing
H.R. 107, every nation in the world will immediately revise its own copyright
rules to do the same. American intellectual property protections will be
un-done, not only here but around the world. Why should other countries protect
our property in their land if we don't do the same here?
5. H.R. 107 language was proposed in 1998 and was soundly defeated by the
Congress.
My colleagues from the Business Software Alliance and the Recording Industry
Association of America will elaborate on a number of these points. They will
also talk about the "labelling" requirements proposed by the bill, and
I want to make sure that the MPAA is clear that we support voluntary, not
mandatory labelling. I want to focus the remainder of my testimony on one of the
underlying issues driving this debate at this time: the issue of "back-up
copies."
There are three reasons why the legislation to permit "backing up"
DVDs is unsuitable for passage. Making back-up copies of DVDs:
" Is not legal.
" Is not necessary.
" And allows "hacking" of encrypted creative material, which
in turn puts to peril the future home video market.
First, back-up copies are not legal. The Copyright Act does NOT say "buy
one movie, get one free." There is no more a "right" to a back-up
copy of a DVD than a back-up DVD player, lawn mower or set of wine glasses.
(Indeed, Congress included language in the DMCA that mandated that VCRs include
technology to block the copying of prerecorded movies.) What H.R. 107 really
says is "it's okay to make extra copies, and it's okay to circumvent
encryption to do it."
Second, and more fundamentally, back-up copies of DVDs are not necessary. As
said earlier, an encrypted DVD is well nigh indestructible. Most people I know,
and I include myself, take a favorite DVD with them when they travel. It is
highly portable. Moreover, an encrypted DVD can be watched over and again,
hundreds of times without any degrading of sight, sound and color. And if by
some very rare happening a DVD should malfunction, another can be bought at
ever-lowering prices.
Let's remind ourselves about what has happened since 1998, when this proposal
was last placed before - and rejected by - this Committee and the Congress. What
has happened is the most immediately successful innovations in the history of
how we as a nation enjoy audio-visual entertainment. The American consumer has
adopted the encrypted DVD faster and more completely than any previous new
consumer electronics product. This DVD revolution has been the key fact of life
for making the American movie industry so hospitably received in countries all
over the world.
The Copyright Office looked at this entire issue in great detail in last
year's DMCA rulemaking proceeding and, for the second time since the DMCA was
enacted, denied an exemption for making backup copies of DVDs. Their analysis is
correct. There's no reason to reverse the course the Congress set in 1998: to
bring the benefits of digital dissemination of copyrighted materials to the
American consumer by encouraging the use of technological controls on access and
use of those materials.
As you are aware, "321," before being enjoined by two federal
courts from carrying on its illegal business, was one of the leading purveyors
of hacking technology targeting our DVDs. 321's machines automatically labelled
the copy of the DVD "for back-up use only." Yet our investigators and
law enforcement officials have found unauthorized copies with that very label
being sold in the pirate marketplace.
We return to this one incontrovertible point: there is no way to know, at the
moment that protection is stripped away, what use will be made of the resulting
immaculate but unauthorized copy. Once the hacker has done his work, the
protection is gone forever. The adverse impact of the hacking on the men and
women who have invested their time, toil and talent to make the movie in
question could be minimal - but it could equally be monumental. There is simply
no way of telling in advance.
So let's be frank about the impact of enacting H.R. 107. This is not just
about facilitating back-up copies, illegal and unnecessary though they may be.
It's not even about enabling consumers to make their own extra copies, rather
than to pay for them in the normal channels of commerce. It's about opening a
Pandora's Box that our present technological capabilities are powerless to
close.
Let me address one final point. This discussion has been about DVDs. But
looming much larger is the issue of digital distribution.
Today our ability to digitally distribute movies legally - and the pirates'
ability to digitally distribute them illegally - is subject to limits of speed.
But there are experiments now going on that will reshape and enlarge the ease
and speed of delivery. Cal Tech reported one experiment called "FAST,"
which can download a quality DVD movie in five seconds! Another experiment,
"Internet-2," has dispatched 6.7 gigabytes halfway around the world in
one minute! (An uncompressed DVD-movie contains some 4.6 gigabytes.)
With this kind of lightning-fast speeds just around the corner, our dream and
our plan is to develop digital distribution systems that will allow you to
select and watch any movie ever made from the comfort of your own home.
Consumer-friendly choices are promoted by providing consumers with legitimate
market-driven alternatives for renting, purchasing or even copying. But these
options will never come to pass if the circumvention of technology that provides
these consumer choices is legalized by this legislation.
Development of these options all depend on copy protection - encryption
schemes - and digital rights management to work. Under H.R. 107, someone will
legally be able to develop, manufacture, sell, and use hacking tools. There is
no point investing in expensive technologies to safely distribute our products
digitally if we know that in moments they will be stripped of their protection.
If this bill is enacted, the digital dream will turn into a digital nightmare.
H.R. 107 is not just bad for copyright owners; it's bad for consumers. We
urge that this bill be rejected.
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