Why Hollywood Hates RealDVD

Why does Hollywood hate RealDVD so much? Here's a hint: it has nothing to do with piracy and everything to do with controlling innovation.

Earlier this week, a district court in San Francisco extended the temporary restraining order (TRO) blocking RealNetworks' distribution of its RealDVD software, at least until a full-dress preliminary injunction hearing can be held sometime in late November. Although reporters have done a good job reporting on the hearing, they have not answered a more basic question: why does Hollywood care so much about RealDVD in the first place?

It's not about piracy. After all, those who want to copy DVDs have plenty of free, widely available, easy-to-use software to choose from (e.g., Handbrake, DVD Shrink, Mac The Ripper). And those who want to skip the tedium of DVD ripping altogether can easily download movies from unauthorized sources like The Pirate Bay. In short, Hollywood can't possibly believe that the $30, DRM-hobbled RealDVD software represents a piracy threat in an environment rife with easier options.

So why unleash all the expensive lawyers to kill RealDVD? Answer: to send a message about what happens to those who innovate without permission in a post-DMCA world.

As we've said for years, DRM systems like the Content Scramble System (CSS) used on DVDs are not principally about preventing piracy. Rather, DRM is the legal "hook" that forces technology companies to enter into license agreements before they build products that can play movies (Hollywood lawyers candidly admit this "hook IP" strategy). Those license agreements, in turn, define what the devices can and can't do, thereby protecting Hollywood business models from disruptive innovation.

This arrangement reverses the previous innovation status quo. Where non-DRM'd content (e.g., books, broadcast TV, the CD) is concerned, innovators do not have to ask permission before building new products that can copy and play copyrighted works (e.g., the photocopier, the VCR, the iPod). But where DRM'd content like DVDs are concerned, Hollywood intended the DMCA's anti-circumvention provisions to slam the door on that kind of disruptive innovation. After the DMCA, technology vendors would have to ask permission, sign licenses, and make concessions, if they were going to build things to play DRM'd Hollywood movies.

So it's not that Hollywood implacably hates personal use format-shifting and space-shifting -- rather, Hollywood wants to make sure those new features happen on Hollywood's terms ("pay us again"), on Hollywood's timetable ("later"), and only after valuable concessions have been wrung from technology companies ("watermark detection, compliance & robustness requirements, down-rezzing").

That's why RealDVD is such a threat. By reading the existing CSS license carefully, Real (and Kaleidescape before it) found a way to create a new product category without first getting permission from (and paying obeisance to) the Hollywood studios. Real's defection represents a threat to several schemes that Hollywood has been working on for throttling DVD innovation over the next several years. For example:

• Managed Copy: Hollywood has been negotiating for years with technology companies over "Managed Copy," a mechanism that will allow limited copying of DVD and Bluray discs onto PCs and portable devices. "Managed Copy" has been promised for years, yet has not materialized, thanks to power struggles inside the organizations that run the relevant DRM licenses (DVD-CCA for DVDs, AACS-LA for Bluray). In the course of these negotiations, Hollywood has managed to wrest several important concessions from technology vendors (including requiring that computers do watermark detection to spot pirated copies when reading data from Bluray discs, and imposing DRM on resulting copies). If those technology companies can build things like RealDVD and Kaleidescape under the terms of the existing contract, then the prospect of more negotiations and concessions for Managed Copy suddenly seems much less appealing.
• Digital Copy: Hollywood has begun selling DVDs that come with a second disc that permits the making of a copy on a PC. The catch? You have to pay extra for the right to make this personal use copy -- in other words, Hollywood is stealing your fair use rights and selling them back to you piecemeal.
• Internet Download Services: you already bought it on DVD, but now Hollywood wants you to buy it a second time from iTunes, Amazon, or MovieLink if you want to watch the same movie on a PC or iPod.

So that's the real story here. It's not about piracy. It's about Real defecting from the DRM licensing cartel, building what consumers want now instead of negotiating endlessly for a spot in Hollywood's next Five Year Plan for the DVD format.

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Why MPAA Should Lose Against RealDVD

Earlier this week, the motion picture industry sued RealNetworks over its RealDVD software. The MPAA companies also asked for an immediate temporary restraining order (TRO) to block Real from distributing the product, which allows consumers to copy their DVDs onto their personal computers for later playback.

There are many obvious reasons why this is a short-sighted and futile gesture by the studios (as Jon Healey of the L.A. Times points out), but let's focus just on the fatal flaws in their legal theory. (We've posted the key legal documents, including TRO briefs, for those who want to read them and form their own opinions.)

In order to obtain a TRO or preliminary injunction, the studios have to demonstrate both (1) a likelihood of prevailing on the merits of the case and (2) irreparable harm if they don't get an immediate order blocking distribution of RealDVD. They fail on both counts.

Irreparable Harm ... Not

Let's take "irreparable harm" first. The studios claim that if consumers get the power to copy DVDs (gasp!), it will be a catastrophe for Hollywood's DVD, VOD, and digital download businesses. I'm not sure what alternate version of reality the MPAA is living in, but consumers have been able to copy DVDs for a long time, thanks to free, widely available DVD rippers like Handbrake, DVD Shrink, and MacTheRipper. And, as we pointed out back in 2006 in a filing with the Copyright Office, this isn't a fringe activity only for hacker super-users. DVD rippers are in wide circulation and have been routinely reviewed in the mainstream press (like the Fort Worth Star-Telegram, PC World and MacWorld, not to mention Lifehacker). In fact, most of us were wondering how RealDVD was going to compete with Handbrake, particularly since RealDVD costs more ($30 v. free) and does less (Windows only v. multi-platform, DRM restrictions v. no restrictions).

So if DVD copiers are already in the hands of millions of consumers, how does the introduction of RealDVD threaten "irreparable harm" to Hollywood? Answer: it doesn't.

Hollywood also argues that "Real's (false) prophesies of legality have the likely potential of altering consumer attitudes towards DVD-copying and, accordingly, consumer behavior." That's absurd. If the distribution of RealDVD does not threaten irreparable harm (because it's just one more DVD ripper), then Real's public statements about their legal position (all protected by the First Amendment) certainly can't tip the balance. After all, the MPAA's litigation, legislation, and public education efforts have already reached far more consumers than Real could ever hope to. Plus, there are those FBI warnings in every DVD, as the studios tout in the first line of their TRO brief: "Anyone who has ever watched a popular movie on a DVD knows from the opening frames that copying the content of the DVD is strictly prohibited."

[Aside for law nerds: The studios also make a half-hearted claim that they are entitled to a presumption of irreparable harm because that's the norm in intellectual property cases. That argument died two years ago, with the Supreme Court's 2006 ruling in eBay v. MercExchange rejecting those "presumptions." In fact, these same movie studios lost this same argument in front of the district court judge in MGM v. Grokster last year. See 518 F.Supp.2d 1197, 1212-14 (C.D. Cal. 2007).]

DMCA Violation ... Not

Nor are the studios likely to prevail on the merits of their DMCA claim. According to the studios, RealDVD "circumvents" the CSS encryption system that protects DVDs. The problem with that argument is that Real has a license from DVD-CCA to decrypt DVD movies, and the DVD-CCA v. Kaleidescape case tells us that the license does not prohibit making bit-for-bit digital copies of DVDs, so long as you keep them secure and play them in a software player that complies with the license requirements. This brings us to the heart of the studio's argument:

Although Real has authorization under the CSS license to use the decryption keys and licensed technology to play content on DVDs, Real does not have authority to use that technology to make a permanent, playable copy of DVD content. By using authorized technology for an unauthorized purpose, Real "avoid[s]," "bypass[es]" and "impair[s]" those very measures. In short, RealDVD circumvents CSS's access- and copy-control protections.

The trouble with this line of argument is that two courts have ruled that "using authorized technology for an unauthorized purpose" does not violate the DMCA. According to those courts, if someone gives you a password, and then you use it in an unauthorized way, there's no DMCA "circumvention." Here, the "password" would be the CSS keys to decrypt DVDs, which Real received as a DVD-CCA licensee. So using those keys for an "unauthorized purpose" is no DMCA violation. And, since the studios are seeking their TRO based solely on the DMCA, that should be the end of that.

[Aside for copyright nerds: if you believe the MPAA that the DVD-CCA license does not authorize "copying," but only "playback" of DVDs, then what about all the temporary RAM copies that are made by all licensed DVD players? The MPAA just got done arguing strenuously in the Cablevision case that all those RAM copies count as copies, no matter how short-lived. Have they changed their minds and embraced the Second Circuit's contrary ruling?]

The court should deny the TRO (and any subsequent preliminary injunction). Let the MPAA try to prove its case in court. In the meantime, let Real distribute RealDVD into the crowded market of PC-based DVD rippers and hard-drive based DVD jukeboxes. After all, Handbrake is more likely to kill off RealDVD than Hollywood is.

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Capitol v. Thomas: Judge Orders New Trial, Implores Congress to Lower Statutory Penalties for P2P

Joining the ranks of federal district judges in Arizona and Massachusetts, District of Minnesota Chief Judge Michael Davis today concluded [44-page PDF] that simply making a music file available in a shared file does not violate copyright law, and ordered a new trial in Capitol Records v. Jammie Thomas.

The case made headlines last year as the first peer-to-peer file-sharing case to go all the way to trial. In October 2007, a jury held Thomas liable and awarded $222,000 in damages to the record companies, based in whole or in part (it wasn't clear) on an instruction that merely making a file available violates a copyright owner's distribution right. Earlier this year, Chief Judge Davis said he was concerned that he might have made a mistake with that instruction and asked for more briefing on whether Thomas deserved a new trial. EFF, joined by Public Knowledge, the United States Internet Industry Association, and the Computer and Communications Industry Association filed an amicus brief urging the Court to reject the RIAA's making available theory.

One key holding:

The Court’s examination of the use of the term “distribution” in other provisions of the Copyright Act, as well as the evolution of liability for offers to sell in the analogous Patent Act, lead to the conclusion that the plain meaning of the term “distribution” does not including making available and, instead, requires actual dissemination.

. . .

If simply making a copyrighted work available to the public constituted a distribution, even if no member of the public ever accessed that work, copyright owners would be able to make an end run around the standards for assessing contributor copyright infringement.

In addition, Chief Judge Davis called on Congress to amend the Copyright Act:

The Court would be remiss if it did not take this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer-to-peer network cases such as the one currently before this Court. . . . While the Court does not discount Plaintiffs’ claim that, cumulatively, illegal downloading has far-reaching effects on their businesses, the damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs. Thomas allegedly infringed on the copyrights of 24 songs—the equivalent of approximately three CDs, costing less than $54, and yet the total damages awarded is $222,000—more than five hundred times the cost of buying 24 separate CDs and more than four thousand times the cost of three CDs. While the Copyright Act was intended to permit statutory damages that are larger than the simple cost of the infringed works in order to make infringing a far less attractive alternative than legitimately purchasing the songs, surely damages that are more than one hundred times the cost of the works would serve as a sufficient deterrent.

. . .

Unfortunately, by using Kazaa, Thomas acted like countless other Internet users. Her alleged acts were illegal, but common. Her status as a consumer who was not seeking to harm her competitors or make a profit does not excuse her behavior. But it does make the award of hundreds of thousands of dollars in damages unprecedented and oppressive.

EFF applauds Chief Judge Davis's thorough rejection of the RIAA's effort to rewrite copyright law and thereby avoid the trouble of actually proving any infringement has occurred. And we wholeheartedly endorse the court's call to amend the Copyright Act's oppressive damages provisions.

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DoJ Agrees: IP Enforcement Bill is a Bad Idea

Yesterday, the Department of Justice delivered a letter to Senators Specter and Leahy, blasting S.3325, the "Enforcement of Intellectual Property Right Act of 2008." In the letter, the DoJ echoes, almost exactly, the concerns that EFF and other public interest groups have had for months:

We strongly oppose Title I of the bill, which not only authorizes the Attorney General to pursue civil remedies for copyright infringement, but to secure "restitution" damages and remit them to the private owners of infringed copyrights. First, civil copyright enforcement has always been the responsibility and prerogative of private copyright holders, and U.S. law already provides them with effective legal tools to protect their rights....

Second, Title 1's departure from the settled framework above could result in Department of Justice prosecutors serving as pro bono lawyers for private copyright holders regardless of their resources. In effect, taxpayer-supported Department lawyers would pursue lawsuits for copyright holders, with monetary recovery going to industry.

Third, the Department of Justice has limited resources to dedicate to particular issues, and civil enforcement actions would occur at the expense of criminal actions, which only the Department of Justice may bring. In an era of fiscal responsibility, the resources of the Department of Justice should be used for the public benefit, not on behalf of particular industries that can avail themselves of the existing civil enforcement provisions.

Unfortunately, pressed by the entertainment industry, the Judiciary Committee has already approved S.3325, and the measure has been "hotlined" for speedy passage by unanimous consent. Let's hope that Congress, even if it won't listen to the public interest community, will listen when the Department of Justice itself says this is bad legislation.

UPDATE: Congress listens! At the request of Senator Ron Wyden of Oregon, the civil enforcement provisions have been stripped out of S.3325:

I am happy to announce that after substantial discussions Chairman Leahy and the Senate Judiciary Committee have agreed to remove provisions from S.3325 that would have resulted in a massive gift of scarce federal resources to Hollywood and the recording industry.

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EFF Urges Copyright Office to Fix Digital Music Mess, but Carefully

In comments filed today, EFF joined with other public interest and consumer groups in urging the Copyright Office to clarify the process for licensing digital music services, but to steer clear of larger digital copyright controversies. The comments were filed in a rulemaking involving the Section 115 compulsory license for "digital phonorecord deliveries" (DPDs) that has been dragging on since 2001 (read the July 16, 2008 "notice of proposed rulemaking" for a summary of the tortured history of the proceeding).

The issues are fantastically complex (even most copyright experts are perplexed by the morass surrounding digital music licensing), but the current logjam boils down to music publishers against everyone else. Every music recording involves two copyrights: one for the sound recording (i.e., the "master"), which is usually controlled by a record label, and one for the musical work (i.e., the "composition"), which is usually controlled by a music publisher. Different music services need different sorts of licenses (and those that simply host materials uploaded by users or simply distribute software may need no license at all), and it has been notoriously complicated to figure out who to contact for the relevant licenses.

The licensing of sound recordings has been getting easier, not least because the four major labels cover so much of the waterfront, and because licensing aggregators are consolidating the independent labels. It's the music publishers that represent the last great obstacle to streamlined licensing, in large part because there are so many of them. The good news here is that Congress in 1995 created a compulsory license in Section 115 of the Copyright Act, which means that so long as you pay a set rate, you can get a license to any and all musical works that you need. The bad news is that the interpretation of what the compulsory license covers, as well as the rate setting, has been trapped in regulatory limbo for years, creating uncertainty for everyone.

The Copyright Office has been trying to break the logjam with respect to digital music services by issuing regulations clarifying the scope of the DPD compulsory license. In particular, the Copyright Office is aiming to cut through some of the complexity by saying that the compulsory license is broad enough to cover any and all copies (whether server-side or client-side, whether on a hard drive or in a RAM buffer) made in the course of any kind of digital music service (whether downloading, streaming, or time-limited subscription).

So far, so good. The DPD compulsory license was created by Congress to prevent music services from having to find and negotiate one-by-one with every music publisher for every song. If some incidental copy is left hanging outside the 115 license, that goal would be frustrated.

But, as discussed in the EFF comments, the Copyright Office's proposal goes a bit too far by trying to resolve a number of other, unnecessary, copyright controversies that should be resolved by the courts or Congress. In particular, the proposed regulations took the position that temporary RAM buffer copies made in the course of streaming should qualify as copies under copyright law, precisely the issue that the Cablevision DVR opinion decided the other way just a few weeks ago. The proposed regulations also unnecessarily weigh in on the question of whether the distribution right reaches digital transmissions, an issue EFF has addressed in several court cases.

There is no need for the Copyright Office to get entangled in these continuing controversies in order to clarify the DPD compulsory license. It is enough for the regulations to clarify that all of the activities of digital music services can be licensed under the compulsory license, without coming to any conclusions about whether any particular activities must be licensed. Rather than issuing broad statements that will only spawn more litigation, the Copyright Office should stay out of these extraneous controversies and focus instead on clarifying the Section 115 compulsory license.

UPDATE: The Copyright Office is posting all of the comments received. Reply comments are due on Sept. 15, 2008, and a hearing will be held in Washington, D.C. on Sept. 19, 2008 (details here).

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Required Reading for "User-Generated Content" Sites: Io Group v. Veoh

In an important ruling handed down yesterday, a federal district court threw out a copyright infringement suit brought by adult video producer Io Group against Veoh, concluding that the video hosting site qualifies for the DMCA safe harbor. The ruling should be required reading for the executives of every "Web 2.0" business that relies on "user-generated content."

Veoh, like YouTube, is a streaming video site that hosts videos uploaded by users. Io Group sued Veoh in 2006 after finding clips from 10 of its copyrighted adult films on the Veoh site. So far, this is a familiar story -- user-generated content site gets sued by copyright owner for naughty uploading habits of users (see, e.g., lawsuits against MySpace, iMeem, YouTube, Redlasso, Hi5, Multiply, Stage6, MP3tunes, Scribd, Usenet.com, Bolt, and Grouper). But this is the first case to get to a final ruling, and it's a total victory for Veoh.

The key to Veoh's victory was its scrupulous attention to the DMCA safe harbors. Veoh responded to compliant DMCA takedown notices on a same-day basis, it notified users of its policies against copyright infringement, it registered a Copyright Agent with the Copyright Office, it terminated users who were repeat infringers and blocked new registrations from the same email addresses, it used hashes to stop the same infringing videos from being uploaded by other users. These efforts actually go beyond the requirements of the DMCA safe harbors, and made it clear that Veoh was serious about responding to copyright infringement notices.

This ruling provides valuable guidance to companies that host video, audio, and text files on behalf of users (see, e.g., Muxtape). Too many "Web 2.0" start-ups are careless about the requirements of the DMCA safe harbors. They don't register a Copyright Agent, or keep good records of their responses to takedown notices, or have a demonstrable policy of terminating "repeat infringers." Sure, doing this "compliance" work costs time and money. But, as the Veoh decision demonstrates, the payoff can be enormous, since copyright is almost certainly the biggest liability risk these sites face.

The ruling also debunks some of the favorite anti-safe harbor arguments bandied about by entertainment industry lawyers (and gives a boost to YouTube in its fight with Viacom). The court specifically rejects the argument that "transcoding" content to facilitate access disqualifies a service provider from the safe harbor (Veoh automatically transcodes uploaded videos into Flash). The ruling also joins other courts in concluding that, even if Veoh made money from advertising around the videos, it still qualifies for the safe harbor because it lacks the "right and ability to control" (see Section 512(c)(1)(B) of the Copyright Act) the infringing activities of its users.

While there are still plenty of unexplored legal questions surrounding the DMCA safe harbors, this ruling provides important practical guidance for companies that host user-uploaded content.

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What If the Kindle Succeeds?

The news recently has been full of reports that Amazon's e-book reader, the Kindle, is doing better than expected. Analyst Mark Mahaney from Citibank says Amazon is on track to sell about 380,000 Kindles this year, and says the Kindle "is becoming the iPod of the book world," with sales expected to hit $1 billion by 2010.

For it's part, Amazon remains coy about releasing the actual numbers, so it might be best to take these predictions with a grain of salt — and sales of the Kindle haven't come close to the numbers for the iPod. But Amazon has reported that, of titles carried in both paper and electronic form, the e-books comprise 10% of sales, a percentage that is likely to grow.

Steve Jobs said recently that the whole idea of e-book readers was flawed since "people don't read anymore". But for those of us who do read, the e-book elicits skepticism for different reasons. For us, the look and feel, even the smell, of a physical book is part of the joy of reading. Will anyone actually want to curl up with an electronic device for an evening of literary comfort?

But the success of the Kindle suggests that some people will. And digital books bring some advantages that suggest the trend won't disappear any time soon:

• Ease of access: We have become accustomed to the fact that we can access millions of songs and albums instantaneously online, with a single click. The same is now increasingly possible with books.
• Ease of sharing: Everyone loves to share a good book with friends. Digital books can be shared as easily as sending an email — and you don't need to give up your copy in order to do so! (Publishers may try to restrict copying with DRM copy protection, but as we saw with MP3 files, this strategy will fail.)
• Ease of carrying: A single Kindle device can carry at least 200 books. As the technology improves, you will soon be able to carry a copy of your entire library in your bag (and have a back-up at home), just as you now carry your music collection in your pocket.
• Price: As more people use digital books and as competition increases, the price of digital books will come down, reflecting the real costs of production — no expensive printing, no shipping across country or storing in warehouses.

Skeptics should remember that it wasn't long ago that many predicted that CDs would never replace vinyl, and later that MP3s would never replace CDs. You can still find great record stores that specialize in vinyl, but the trend towards digital music has been steady and unstoppable. And the music industry has paid a huge price for their failure to embrace the new technology. After first ignoring new technologies, they then proceeded to try to sue innovators, restrict users with DRM copy protection and then punish fans with indiscriminate lawsuits, none of which did a thing to stop online sharing of music. Sales are down, illegal filesharing is up, and no one has found a way to unite the industry around monetizing the sharing of digital music (though EFF has suggested a Better Way Forward).

Will the same thing happen to the publishing industry as books become digital? If the trend continues, with better devices promising longer battery life and better screen resolution, digital books will become a force to be reckoned with. Are we doomed to watch the publishing industry run through the same gamut of bad decisions that have plagued the recording industry for the last few years?

Here are some questions the book industry should be asking itself.

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Condition or Covenant, and Why Should You Care?

Imagine that you write some code, and offer it to the public under an open source license that requires that if someone distributes modified versions of the code, the modified versions also be open sourced. Now assume someone distributes modified versions of your code, but fails to open source the modified code.

Do you have a claim for breach of contract? Or for copyright infringement? Or both? And why should anyone other than a law professor care?

Copyright law and contract law are very different. The things you need to prove to win a case are different. Copyright law is federal, while contract claims fall under state law, which varies from state to state. Copyright damages will often be more expansive than contract damages. The standards for injunctive relief are different. The prevailing party in a copyright case can seek attorneys' fees, while the general rule in contract cases is that both sides bear their own attorneys' fees.

So it matters whether copyright or contract law applies.

And, truth be told, the hypothetical at the top of this post is not quite so hypothetical; it is very close to the facts in Jacobsen v. Katzer, a case concerning open sourced code from the Java Model Railroad Interface group. Today, the Federal Circuit vacated a district court decision [PDF] that had held that only contract law was implicated by the defendants' alleged breach of the open source license applicable to the JMRI code.

The court concluded that the key question was whether the parts of the agreement the defendants allegedly breached were mere covenants (things the defendants agreed not to do when they accepted the license), or also conditions of the license (things that must be satisfied in order for the defendants to be licensed at all). Because the license at issue went out of its way to state that licensees' obligations were "conditions," the court concluded that if the defendants were in breach, the plaintiff could sue for copyright infringement.

There are a lot of things in this opinion that the open source community should cheer. The opinion notes that open source software "can often be written and debugged faster and at lower cost than if the copyright holder were required to do all of the work independently," and points out that "[t]here are substantial benefits, including economic benefits, to the creation and distribution of copyrighted works under public licenses that range far beyond traditional license royalties." And the court emphatically concluded that "[c]opyright holders who engage in open source licensing have the right to control the modification and distribution of copyrighted material."

While we're pleased to see a panel of learned judges endorse the legal foundations of the open source software paradigm, the decision may also encourage proprietary software vendors who frequently fill their "end user license agreements" with restrictions that are denominated as "conditions" on the license.

If violating a "condition" in a EULA results in copyright infringement liability, what's to stop a software vendor from imposing conditions that are unrelated to copyright law (e.g. an agreement not to disparage the copyright owner, or to wear pink bunny ears on Tuesdays), or even antithetical to copyright law (e.g. a waiver of fair use rights)?

For a view of the dark side of "conditions" imposed in proprietary software licenses, consider the "thou shalt not run software we don't like" terms that Blizzard imposes on those who purchase World of Warcraft software, terms that recently were upheld in court despite a very astute amicus brief by Public Knowledge.

We're sure to see this issue come up again in future cases, so stay tuned.

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Victory for DVRs in the Cloud

Twenty-four years ago in the Sony Betamax case, the Supreme Court declared that using a VCR to "time-shift" — to record a television program for viewing at a later time — was a fair use. Today, the Second Circuit rejected [PDF] an attempt by the content industry to change the rules of the game if your video recorder is stored "in the cloud" on the Internet.

In March 2006, Cablevision announced that it would be launching a "remote storage" DVR (RS-DVR) system that would operate much like a TiVo, except that the recordings would be stored on hard drives in Cablevision buildings rather than on a box under a consumer's television. A collection of studios and networks sued Cablevision, arguing that RS-DVRs would violate copyright.

Wait, doesn't the Sony Betamax case say that time-shifting is legal? Yes, but that's not what the plaintiffs complained about. Indeed, they carefully avoided attacking what the consumers would be doing. They instead argued that an RS-DVR is different, because Cablevision is making the copy, and that somehow makes all the difference.

Cablevision, supported by EFF and other amici, explained that this was the wrong way to think about things. When a consumer presses the record button on a remote control, it's the consumer who's making the copy, regardless of whether the copy is being stored on a hard drive a few feet away, or in a data center miles away. Although the district court agreed with the plaintiffs, the appellate court today resoundingly sided with Cablevision, EFF, and the other amici that supported Cablevision:

In the case of a VCR, it seems clear . . . that the operator of the VCR, the person who actually presses the button to make the recording, supplies the necessary element of volition, not the person who manufactures, maintains, or, if distinct from the operator, owns the machine. We do not believe that an RS-DVR customer is sufficiently distinguishable from a VCR user to impose liability as a direct infringer on a different party for copies that are made automatically upon that customer’s command.

This is exactly the right result. As we pointed out in our amicus brief, a rule holding Cablevision liable merely because it housed and maintained the servers in this case could imperil a wide variety of innovative business models that rely on the use of remote computing, ranging from examples like Internet-enabled self-service photo processing and printing, to cloud computing services offered by companies like Amazon, Apple and Google.

That's not all there was to cheer in the Cablevision decision. The court also reminded everyone that in order to be a "copy" for purposes of copyright law, a work must be "sufficiently permanent or stable to permit it to be . . . reproduced . . . for a period of more than transitory duration" (here, the court concluded that data in temporary buffers in the Cablevision system that would be overwritten in, at the longest, 1.2 seconds were of transitory duration). In the digital age, where routers and caches often make fleeting copies of bytes in the ordinary course, this was welcome news.

And, finally, the court rejected the plaintiffs' argument that Cablevision was engaging in unauthorized public performances. The way the Cablevision system was designed, every time a consumer decided to record a given show, Cablevision would store a separate copy of that program, and each of those copies could be played back only by the consumer who recorded it. The plaintiffs urged the court to hold that if 1000 copies of the season finale of Desperate Housewives are played back in 1000 households, that's a public performance. The court instead correctly concluded that each of those copies is playable in only one household, which means that we're talking about 1000 private viewings, not a public performance.

Just three years ago, in MGM v. Grokster, the Supreme Court proclaimed that copyright law should "leave breathing room for innovation and vigorous commerce," and today the Second Circuit has done just that.

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Senators Announce New Intellectual Property Enforcement Bill

Last week, members of the Senate Judiciary Committee introduced S. 3325, the "Enforcement of Intellectual Property Rights Act of 2008," a bill that proposes a number of alarming changes to copyright law. The bill is the Senate's gift to big content owners, creating new and powerful tools -- many of which will be paid for by your tax dollars -- for the entertainment industry to go after infringers. But it doesn’t offer a lick of protection for legitimate innovators and technology users that may be buried by the copyright juggernaut.

One of the bill's most disturbing changes would give the Attorney General new powers to sue individuals on behalf of rightsholders like the MPAA and the RIAA. Bill proponents claim that these new powers, which would allow the AG to bring "milder" civil as well as criminal actions, are necessary because some offenses don’t rise to the level of criminal conduct. This justification just doesn’t make sense. If it’s a low-level offense, why should our top cops pursue it? Traditionally, those types of offenses can and will be pursued by the parties who believe they have actually been harmed, namely the copyright owners. The real "problem" may be that some so-called "offenses" can’t be proven beyond a reasonable doubt, the standard for any crime. This new provision would allow the AG to sidestep that high burden of proof -- a burden that gives the average citizen an important measure of protection from the overwhelming power of the government.

The Attorney General of the United States surely has better things to do than serving as muscle for the entertainment industry, especially when that industry is clearly well-capable of enforcing its copyrights on its own.

The bill also seeks to create an Intellectual Property Enforcement Coordinator position in the Executive Office, with an advisory committee consisting of members from various government departments and agencies. Given the extraordinary budget pressures lawmakers now face, it is shocking that they would consider funding a new layer of federal bureaucracy. In fact, the DoJ itself has spoken out against similar Congressional efforts to rearrange its priorities with bureaucratic meddling.

There's more: another provision creates new categories of infringement at the border, suggesting that individuals need the permission of copyright holders to bring copies of music or movies with them overseas or even through the United States. If the bill is passed, something as simple as taking your iPod to Mexico could be considered an infringement of the copyright owners’ distribution right. The bill also proposes to lengthen the list of items that can be impounded as part of a civil copyright infringement suit, while broadening the list of articles that can be seized and destroyed by the government. (Meanwhile, the Anti-Counterfeiting Trade Agreement (ACTA) is being negotiated in secret by a number of countries, pairing this unprecedented public threat with a potentially catastrophic secret one.)

Whether or not you believe the entertainment industry’s claims about the extent of the piracy problem, there is no reason the American taxpayer should be picking up Hollywood’s legal costs while movie studios are celebrating record box office returns and record-breaking single-title revenues.

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