UNITED STATES OF AMERICA
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LIBRARY OF CONGRESS
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COPYRIGHT OFFICE
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RULEMAKING HEARING
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FRIDAY,
APRIL 11, 2003
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The hearing was held at 9:30 a.m. in the Mumford
Room (LM-649) of the Library of Congress' James Madison
Building, 101 Independence Avenue, SE, Washington, DC, Marybeth
Peters, Register of Copyrights, presiding.
PRESENT:
MARYBETH PETERS Register of Copyrights
DAVID CARSON Copyright Office General Counsel
CHARLOTTE DOUGLASS Principal Legal Advisor
ROBERT KASUNIC Senior Attorney
STEVEN TEPP Policy Planning Advisor
WITNESSES:
JONATHAN BAND
DAVID BURT
STEVE ENGLUND
SETH FINKELSTEIN
SETH GREENSTEIN
THOMAS LEAVENS
NEAL R. GROSS
COURT REPORTERS AND TRANSCRIBERS
1323 RHODE ISLAND AVE., N.W.
(202) 234-4433 WASHINGTON, D.C. 20005-3701 (202) 234-4433
[HTML'ization by Seth Finkelstein, along with certain technical corrections.]
[ OFFICIAL TRANSCRIPT: http://www.copyright.gov/1201/2003/hearings/transcript-apr11.pdf ]
C-O-N-T-E-N-T-S
PANEL I - Compilations of lists of websites blocked by
censorware ("filtering software") applications
Seth Finkelstein, supporting the exemption . . . . . . . . . . . . . 6
Jonathan Band, American Association of Law . . . . . . . . . . . . 15
Libraries, American Library Association,
Association of Research Libraries,
Medical Library Association, and
Special Libraries Association, supporting the exemption
David Burt, N2H2, Inc., opposing the exemption . . . . . . . . . . 18
Question-and-Answer Period . . . . . . . . . . . . . . . . . . . . 25
PANEL II - Copy-protected Red Book Audio Format compact discs
Seth Greenstein, Digital Media Association . . . . . . . . . . . . 108
Thomas Leavens, Full Audio Corporation . . . . . . . . . . . . . . 124
Steve Englund, Recording Industry Association . . . . . . . . . . . 134
of America
Question-and-Answer Period . . . . . . . . . . . . . . . . . . . . 142
A F T E R N O O N S E S S I O N 1:33 p.m.
MS. PETERS: Okay, we're going to resume this afternoon, turning to a different topic. It's the copy protected Red Book Audio Format compact disc.
You weren't here this morning. How we are going to do this is each of you gets to make a statement. Then we'll ask questions, and then you can ask questions of each other. How it worked this morning was, though, the Panel asked questions of each other as we went along. So we'll see how this plays out.
We're going to start with the proponent of the exemption, which is you, Seth, and then go to you, Thomas, and then end up with you, Steve. Is that okay?
So let's begin.
OPENING STATEMENT BY SETH GREENSTEIN
MR. GREENSTEIN: Thank you very much. Good afternoon.
MS. PETERS: Good afternoon.
MR. GREENSTEIN: On behalf of the Digital Media Association, first of all, thank you very much for inviting us here to testify on behalf of our proposed exemption.
Before I begin, I would like to make two important points. The first point is that webcasters also seek to promote legitimate enjoyment of music with compensation to copyright
owners and to artists.
A lot of what we do involves promotion of compact discs by exposing the audiences to new music and through online commerce, "Buy" buttons and links to sites where CDs are offered for sale.
We empathize with the labels' efforts to secure that market. We recognize what's happening to the CD market. We are concerned about it, too. Music is a very important part of what we do. To the extent that the record industry is suffering because of lag in CD sales, we feel the pain as well.
The second point I would like to make is that, in fact, the exemption that we are seeking is not our preferred solution. The preferred solution really is to be able to work together with the labels to ensure that all webcasters have access to all non-protected, high-quality recordings from all labels. That would be the preferred solution.
The problem is that there are so many labels and so many webcasters that it is, frankly, not possible to do that. It's not possible, I think, for the Recording Industry Association to make any kind of a guarantee in that regard.
Thus, we are here today, largely because we see the protected compact disc coming at us, and we are concerned about how the future will affect webcasters as a whole. Webcasters need to have access to sound recordings. Some webcasters play compact discs directly on CD audio players or
from computers, more likely. But most of them make ephemeral recordings of those compact discs.
We need ephemeral recordings for a number of reasons. First, we have multiple servers to handle the level of traffick that comes into our sites. So we need to have a copy for each of the servers.
We need to have copies that are optimized for transmission in high quality at different bandwidths. Some people still connect through dial-up access as well as through various levels of broadband access. We need to have copies that are optimized for each of those transmission means.
Of course, there are different transmission codecs that are used. The Windows Media Player is one; Real Player is another; QuickTime for Apple, or MP3 streaming. Those are some examples of the different kinds of codecs that are used for making webcast transmissions. For each of those transmission formats, there needs to be a file in that particular format.
Webcasters' libraries include hundreds of thousands of recordings for the major webcasters. Typically, for a particular channel, there will be several thousand that are active at a given time or for a particular genre. There will be several thousand that are active at a particular time, and, of course, new songs are added constantly. Some of the old songs in the catalog are cycled through, so that the sound of the service remains fresh.
A few webcasters have very sizable businesses that are capable of reaching very extensive audiences, similar to the types of audiences and size of audiences that some radio stations reach. But most webcasters are small businesses. They are startups. They hope to become big businesses some day, but they are still in their early stages of development.
The Digital Millennium Copyright Act, and particularly the statutory licenses under Section 112 and 114, entitled all of these services to have the same degree of access, the same license rights. So that all these services could have access to the same music at the same royalty rates and on the same terms.
The DMCA created a level playing field, a secure marketplace where success would be built on the entrepreneurial acumen of the leaders of the services, on the technological innovation of the software that's used and the web developers who develop not only the music transmission means, but also the look and feel, if you will, of the site.
The sound quality of the service, of course, is a very important attribute of the success of a service, and, of course, the ears and the skills of their music programming staffs.
The basis of competition among webcasters, therefore, are the features that they offer, the visual impression of the website and of the player, the marketing
acumen, the brand recognition, the ancillary services and information that are offered, the music programming skill, of course. But key among these also is the timely availability of sound recordings and the sound quality of the webcasts themselves. Internet radio has many benefits for the public and for copyright owners of sound recordings. We play more genres of music than you will ordinarily hear in a particular marketplace of radio. You will hear music by more artists. You will hear deeper cuts off of particular artists' albums. But, of course, they also have pop channels where consumers expect to hear the latest hits as they are being released. Webcasters, we believe, have a chance to be highly competitive with radio and to beat radio at its own game in many respects. Small webcasters have the opportunity to be competitive with other webcasters, if we are offered the chance to survive and grow. One of the most fundamental concerns the webcasters have is the concern of having prompt access to music. Radio stations typically receive service from record companies. Some webcasters do, but, typically, most webcasters don't receive sound recordings from record labels. Webcasters most often purchase sound recordings at retail. They then take these compact discs and rip the CDs onto their webcast servers. Another avenue for some companies is
that they will contract with a third-party company that will already pre-rip the sound recordings into files and formats that can be used by various webcast services.
As I noted, many genres of music and many webcast channels rely on the influx of new music. Particularly pop channels need access to music on the day and date when they are released. A top 40s station, top 40 channel, has to have the top 40. It's quite often the case that a song will debut in the top 10. It won't work its way up the charts from No. 200. It will debut at the top. These services need to have access to the sound recordings as soon as they are released.
For those webcasters who do receive advance copies, it is very important that their files can be on their servers before the date that the CD actually reaches the marketplace, so that they can be ready and able to webcast as soon as the date of release arrives.
But, ironically, the advance copies that are sent to webcasters are most likely to be the ones that are copy protected. Again, it is a legitimate concern that the record labels have that these may leak onto the Internet services such as KaZaA or similar Internet peer-to-peer services, often get access to sound recordings before they are released on the street and released in stores. The way that that often occurs, or one way that that may occur is from advance copies.
These are the copies that are most likely to be
copy-protected, but these are also the copies that we, as webcasters, are vitally interested in getting access to early, so that we can rip the files onto our servers and have them ready for webcasting on the date that they are available for broadcast.
Well, given the webcasters' shared interest with the record industry in promoting lawful services for sale and consumption of music, we understand, we share the frustrations that apparently motivate their desire to apply these technological protection measures to audio compact discs.
But we are concerned that the interest and content protection will result in additional disadvantages and impediments for the success of U.S. webcasters. Over the past few years, there has been talk about labels applying protections to compact discs in the United States. There are few known experiments here in the United States to date. The soundtrack for "More, Fast, and Furious"; there's a Charlie Pride CD. We have heard that the Donnas has been released with content protection, and some others. It is much more common in Europe, in Australia, and elsewhere.
Recently, Macrovision issued a press release that was picked up in the press that said that there were 100 million discs that they had released in other markets that were encoded with their system. SunnComm has announced that they have contracts as well for a different kind of a system for applying
protection to compact discs. Again, so far, this has happened mostly in Europe and elsewhere. But there are articles that are indicating that record labels are planning to do this in the United States as well. Up until now, the systems that have been used have not worked very effectively. I have talked to a number of DMA members who have said that they have encountered copy-protected audio discs in the past, and the content protections don't work particularly well. They were able to try multiple times to get access to the content, and the content protection system eventually failed and they were able to do the ripping. But systems are getting better. They are getting more sophisticated, and we can't count on getting access to the sound recordings without circumvention. As I mentioned, recently, Arista Records, a major record company, part of the BMG family, has issued a news report saying that they are going to begin applying protection measures more widely, even in the United States, to all their products. As I noted, this has happened at least currently with respect to promotional CDs. These content protections take a number of different forms. Some of them you could call copy protection; some of them you could call access control, in that some of them prevent the discs from playing on computing devices. Some of them also prevent ripping.
Some of them have what is called the second session; that is, in addition to the music in the compact disc Red Book Audio Format, they also include a second compressed version of it that is either playable on a computer but not able to be ripped from the computer onto a hard drive or may allow some limited types of ripping, but it's in a particular compressed format that is not as high quality as the Red Book Audio Format itself.
So the application of these protection measures creates some fundamental problems for many Internet webcasters. First, of course, delay in getting the recordings onto our services. Second is the impact on the sound quality.
If the only content we have access to is through the second session, which is a compressed file, then the sound quality of what we are webcasting is not going to be on a par with the other sound recordings that we are webcasting.
Third, of course, rather obviously, there's an economic aspect to this as well, even pursuant to the statutory licenses. As you know, the past decision of the CARP was that webcasters are to pay 8.8 percent of their license fee for performing sound recordings for making ephemeral recordings. And if we are prevented from making those ephemeral recordings, essentially, webcasters are paying for a license right they cannot use.
We believe that we meet the standards that are set
by the Copyright Office and by the statute for this exemption. Clearly, the making of ephemeral recordings is a non-infringing use of the class of works.
We, as webcasters, are likely to be adversely affected by this prohibition. It's not just a matter of inconvenience or expense. This is a substantial adverse impact on the competitiveness of services, the ability to compete based on the availability of sound recordings at the time when others have access to them, and as to the sound quality. Ultimately, it has an impact as well on the dissemination of copyrighted works and the availability of copyrighted works to the public via webcasting.
This is a measure that controls access to copyrighted works. As I noted, some are access controls, in that they do not even permit the CDs to be played on computers. Some are copy-control measures.
But I submit to you that Congress has said something important with respect to the applicability of Section 1201(a)(1) to this particular case, because the exemptions that were provided in the law, the limited exemptions that were provided, specifically note that those who take advantage of circumvention pursuant to the exemptions are not to be liable under 1201(a)(1).
If 1201(a)(1) did not apply with respect to the making of ephemeral recordings, then there would have been no
need for Congress to have included 1201(a)(1) in the language of the exemption. Because they did, they recognized that there was an implication under 1201(a)(1), even with respect to the making of ephemeral recordings. Therefore, an exemption from 1201(a)(1) ought to be available to us as well. Now if these protections are widely applied, what are the options that are available to webcasters? Well, Option No. 1 is, pursuant to the exemption, we can ask a label to provide us with an unprotected copy. They may refuse or they may delay giving us access to the recording. We may not know when recordings are coming out. We may not know when others are receiving promotional copies of recordings in advance of the release date. The statute provides no definition of what is a reasonable time to delay before you are allowed to circumvent. A reasonable time in webcasting is really instantaneous, because when others have access to the content, we need to be competitive; we need to have access to the same sound recordings that others are able to webcast. Otherwise, the compulsory license and the intention of Congress to create a level playing field becomes meaningless. Another possibility is that, if we ask a label for a copy, they may provide a copy in compressed form, and the compressed form may be in a lower sound quality to the quality that we otherwise webcast on our services.
Under the current exemption, once provided with a lower-quality, compressed version, we would have no option to circumvent. The statute itself seems to say that, if the copy is provided, we have no ability to circumvent without a further exemption under 1201(a)(1).
Another possibility, of course, is that when we ask a label for an unprotected copy, they may give us a copy in a format that is not used by the service. They may provide it, for example, in the Windows Media Player format, just as an example, when the particular service operates using Real Player transmission means. If that's the case, then we will have to convert the file from Windows Media Player, which is itself a compressed format, into the Real Audio format, which results in yet further audio degradation of the signal.
There is a second option available to webcasters, if protections are widely applied, which is we can try to obtain the files from a third-party ripping service. That, of course, increases the expense, and that expense is not economically feasible for many smaller webcasters.
Of course, there is the possibility that even the third party's efforts to obtain access to a copy-protected file may be thwarted by the technological protection measure. So the third party may delay in having access to the file or may not have access to it at all, if their attempts to circumvent are unsuccessful.
Option No. 3 available to webcasters is to develop your own circumvention tool. Well, that's what's contemplated under the statutory exemption. It is, of course, time consuming. It assumes that there is a high level of skill even among small webcasters to be able to perform that circumvention.
Of course, there is no guarantee that a particular service is going to use a specific content-protection method. We will have to have available on staff someone who is able to circumvent various copy-protection means, various content protection means, and to continually work on these means as the technological measures themselves evolve and become more sophisticated.
There is, of course, a fourth option, which is we could take the analog output signal from a CD audio player, not a PC, digitize it, and then put it into different formats as necessary. But, of course, that results, again, in lower sound quality than going directly digital to digital.
It is inconvenient. It involves additional expense, and, of course, there is no guarantee that there will not be future analog-protection means applied. So that, in and of itself, could be a temporary solution.
I guess in closing what I would like to say is that DMA and our members really hope that this is a problem that can be resolved without an exemption. We hope that this is something that can be resolved among copyright owners and
webcasters.
But, if not, and there are some practical problems to resolving it between every webcaster and every sound recording copyright owner, we need the safety valve that is intended to be provided by Congress through the 1201(a)(1) exemption. In particular, the kinds of safety valves we're looking for: the ability to circumvent without delay. Particularly, that's true in cases in which a copyright owner previously has refused access to a particular sound recording.
The statutory exemption seems to imply that the requests to the content owners have to be made on a sound recording-by-sound-recording basis. We would think that, once refused, we ought to be able to immediately begin circumvention efforts because of the likelihood that the refusal is going to be repeated. Doing it on a sound-recording-by-sound-recording basis for the tens of thousands of sound recordings that are issued every year is simply not practical.
Second, we would seek the ability to circumvent where the music files that are provided to us by a content owner, if provided, are not of a quality that is equivalent to the other music files that we webcast on our services.
Lastly, of course, where the music files that are provided by a particular content owner are not provided in all formats that are needed by the service, we would need the ability to go back to the highest-quality available recording
and do the encoding into a particular format. So, once again, we are certain that we are able to webcast in all formats with sound recordings of equivalent quality.
In closing, we would say that we believe that the exemption is justified, and we request that the exemption be granted. Thank you.
MS. PETERS: Thank you.
OPENING STATEMENT BY MR. LEAVENS
MR. LEAVENS: Good afternoon. My name is Tom Leavens. I'm General Counsel for Full Audio in Chicago, and we want to thank you for the opportunity to be here and provide our views on this issue with you this afternoon.
Full Audio is a digital music distribution company located in Chicago. We were formed four years ago. We launched our service in April of last year. We have recently relaunched under the name Music Now.
I should say, initially, to echo some of the remarks that Seth has made, that we support all the efforts to ensure the protection of the legitimate distribution of music. We are not against copy protection. Our interests are aligned with the record companies in that respect. We want them to be healthy. They provide the very thing that we sell. So we are very much aligned with them in that respect.
We are here today simply to talk about a very specific operational and competitive issue that we see coming.
Our content partners are all the major labels. We have agreements with Universal, Warner, EMI, BMG, and Sony. We have agreements also with the independents Sanctuary and Koch, and we are also working to add additional independent labels onboard with our content. We also have an agreement with the Harry Fox Agency, which is along the lines of the agreement that the RIAA has with the Fox Agency. So our goal from the beginning was to be a legitimate licensed business. We have achieved that. We enjoy good relations with our content suppliers. Our distribution partners are Microsoft. We are embedded in the Microsoft Corona Player, along with Pressplay. We are distributed through Clear Channel, through Charter, and through Earthlink. As far as my own personal experience, I spent eight years as General Counsel for a record company prior to joining Full Audio about two-and-a-half years ago. So I can speak a little bit from the perspective of operationally what goes on within an independent record company. The service of Full Audio initially involved only conditional downloads. In relaunch, which occurred last month, we also added permanent downloads and DMCA-compliant radio. So our experience with radio is relatively recent. We maintain different files for each one of these features, each one of these functions, at different bit rates.
For example, we have radio which is offered both at a 32-bit rate and a 128-bit rate. We also have our downloads with separate files at a 128-bit rate. So we have a need for making sure that we have files not only at this different bit rate, but making sure that it's in conformance with the codec and the DRM that we are using, which is .wma. We obtain our files principally from compact discs. We also do receive some electronic files from the labels that we have that our content deals with, and we have also purchased some files from a third-party supplier, as Seth has mentioned. We prefer to use compact discs for the reason that it is an actual object that gives us a lot of information, which is important, on publishing, but it is also important for us to be able to re-encode when we need to, for any number of reasons, whether we're going to be upgrading on the bit rate or in the case where we have loss of files, which has definitely occurred I shouldn't say a lot, but when it does happen, it is important for us to be able to replace a file very quickly. Having CD is the best way to do that. We have on the radio side over 200,000 files currently in our service, and we are adding thousands of files to that radio service each month. It is a process that must be an automated process. We cannot have exception processes
involved with the way in which we add files to our radio service. Every time we have an exception process, it adds by a level of magnitude time that is expensive for us, that puts us at a competitive disadvantage.
Every time that we have to in some way single out a particular disc and deal with it on an individual basis, it's an extraordinary expense to us because it takes away from the systems that we have set up in order to accommodate the massive amount of music that we need to be able to put into our system in order to be competitive.
The process not only has to be automated because of its volume, but we also need to be able to identify and track the files in our system for purposes of meta-data and for purposes of being able to report usage. It's very important that each file, when it comes in, has an individual file number attached to it. We track it through the system. When anything about that file appears in the service, there has to be an associated meta-data to accurately describe it. There's all kinds of reasons why this is not something which -- it is not a system that is susceptible in any way to individual attention.
We have been following the developments in the copy protection and have been talking to our content suppliers about that over the course of our initial negotiations with them and during the time that we have been in agreements with them. It has principally been along the lines of the consequences, the
implications to us, for our conditional download service because that is what we have been doing up to about a month ago.
We have received assurances that things are going to be worked out with respect to the people that we have talked to, and we have no reason to believe that that's not the case.
We want that to happen. It is not only that it is going to be easier for us if that happens, but, of course, we are paying under the DMCA for the right to make ephemeral copies. We think that implies an obligation to deliver means for us to be able to make one.
But here are our issues: We don't know when a recording is going to be copy-protected at this point. It's anecdotal. It's maybe something that we learn for the first time when we try to encode something. But if it's part of this automated process, it's not going to come to our attention really until it gets kicked out in some way when we're trying to encode something.
We don't know what solution has been applied for the copy protection, what it is that we would need to do in order to make a copy from that, where it is that we would go.
As Seth mentioned, we don't know really how it is that 112(a) would be interpreted with respect to whether the notice that we would give to the record company would be a blanket notice or whether it would be individual notices. If it is individual notices, again, that is something which we just
really can't accommodate, given the number of files that we are dealing with on a monthly basis.
We don't know what a reasonable time would be for us to have to wait. We don't know how that is going to be interpreted by our competition either with respect to how long we keep something out of our service before we would implement any kind of any circumvention or any circumvention efforts.
We don't really know, either, what our recourse would be in the event that there is a problem with a file that is delivered to us. The problem could be the quality of the file delivered or the format or some other kind of incompatibility. We don't understand really what it is that would be our alternatives under those kinds of circumstances.
We know, we believe that the issues that we would have with respect to the type of protection that we would be getting or that we would be encountering from the record labels is not really a question of bad intent as far as their performance. Our content providers have worked hard to deliver content to us under our conditional download service, and we see that this is probably something that is going to continue as we go into radio, although we have not been receiving any service with respect to our radio service.
I am not sure how many webcasters do receive service for the webcasting. Any of the service that we have received has been only in connection with our conditional
download or permanent download service. It would not include any files that go beyond that, because, obviously, anything that the record company releases is something that we could use for radio, but we have not received any files that go beyond just what is available for our download service.
What is going to happen really is that, while there has been this productive work that we have encountered with the major record labels that we are dealing with, that as they deal with this issue of copy protection, that, first of all, there is a greater amount of content that they are going to have to deal with, obviously, as opposed to the subset that we get licensed.
They are going to have to deal with a greater number of companies, which are going to be in the several hundreds as opposed to -- I'm not sure how many are the shipment licensees, but I don't imagine that it's more than 25 or 50 something that they are currently dealing with at this point.
And there's the greater range of encoding requirements that each of the webcasters are going to have as well. To the extent that we have received files from the record companies, they have been files that have been according to requirements and specifications that we have worked out with them, but we're just one company. We would need, for example, in addition to what we are getting for a conditional download, we would need files for our radio that would be at two different
bit rates for .wma.
The range that the record company would get would be -- I can't imagine the different numbers that the other webcasters would be having or all the different encoding requirements that they would have. But the record companies are going to face a tremendous number of variations in those files which is far different than what it is that they are serving up today.
Our fear is that the introduction of the copy protected discs is going to overtake the ability of the record labels to service all the webcasters without creating some kind of competitive disadvantage somewhere. That ultimately is what it comes down to for us.
We also are concerned that the smaller companies, the independent companies, are not going to have the resources in order to serve the files that would be necessary in order for us to be able to use recordings that are otherwise copy protected. Having worked for the small record company, I know the resources just aren't there to be able to do that.
The independents that we have used have been very cooperative with us, but the systems that they have are not the same as the systems for the larger record companies and they are not going to be in a position to be creating those just for the purposes of serving us as webcasters.
Then there are some companies that just may elect
to give just favored service to others, and that is something that we just have to anticipate is going to occur at some point.
In essence, what is preferable for us is the record companies be able to self-execute on this compulsory license that we have under the DMCA, that we not be involved with a complicated process whereby we have to be making approaches, waiting for periods of time, having to put ourselves at jeopardy of a competitive disadvantage of some kind of way to exercise the rights that we have as webcasters.
As long as our webcasting is DMCA-compliant, just as with the mechanical license that the record company has for phonorecords, it's simply an elective process that they undertake without having to take any other steps dealing with the publisher. Our goal would be to be in that same position, that we would not have to be required to be approaching the record companies in order to be able to exercise the rights under the DMCA.
Thank you.
MS. PETERS: Thank you.
Steve?
OPENING STATEMENT BY STEVE ENGLUND
MR. ENGLUND: Thank you for the opportunity to present the views of the Recording Industry Association concerning DMA's proposed exemption.
We appreciate the concern that the webcasters have
expressed for the piracy concerns of record companies. We also recognize that webcasters are, in fact, licensed under Section 112(e), are entitled to make ephemeral copies, and many record companies work productively with many webcasters to make that happen in ways that are entirely outside the statutory process.
It just appears to me that, based on the things that we have heard from Seth and Tom, that it is not necessary for webcasters to receive permission to circumvent access controls in order to have access, and it may not be quite the panacea that it might first appear if they were to get that permission.
It's important to begin, though, with an understanding of the purpose of Section 1201 and this proceeding. Congress enacted 1201 because it recognized that access-control and copy-protection technology are desirable tools that copyright owners should be encouraged to use, and that these technologies can, in fact, increase access to works.
So 1201 is designed to promote the use of these technologies. We are concerned that any inclusion of copy protected CDs on the list of exemptions will undercut Congress' intentions in creating Section 1201 to promote the use of such technologies.
But Congress did create this proceeding as a failsafe mechanism, but this failsafe mechanism applies only to technologies that control access to works. The purpose of this
proceeding is to ensure that access is not unjustifiably diminished.
This proceeding is not about copying. Yet, all we have heard from Seth and Tom is about copying.
The very name of DMA's proposed class for the exemption contradicts its place in this rulemaking. Protected CDs are primarily designed to inhibit copying, not access. While it's true that some copy-protected CDs might, as a technical matter, employ both access and copy-control measures, it's very clear from what we have heard this afternoon that DMA isn't concerned about access because there can be no question that webcasters have access in a variety of ways. Their concern is about copying.
We heard from Seth that one of the options available to webcasters is to play a CD that is copy-protected on a CD player. Seth suggested using the analog output to make copies. I submit they can use the digital output to make copies, if he's concerned about analog-to-digital signal degradation, but it is very clear that a copy-protected CD can be readily accessed and that copies can be made from it if webcasters need to make copies. They can access it in the digital domain if they need to make copies.
So, in addition, there's no assurance under Section 112 or Section 1201 that webcasters, or any other user of copyrighted works, ought to have access to works in the most
convenient means. I think that it is sufficient that webcasters have access to make copies in the digital domain as they do. There's no need for an exemption.
In the last rulemaking on this subject, the Office rightfully rejected requests for DVD exemption under somewhat similar circumstances. You noted, properly, that it wouldn't be a violation of 1201(a) for an individual to circumvent copy controls as long as in doing so he or she did not circumvent access controls. That is very similar to the case that is presented here.
There the Office found that in the case of motion pictures on DVDs, anyone with the proper equipment can access the work, just as a webcaster with a CD player can access the sound recording on a CD. The Office denied the DVD exemption because of the absence of evidence that access controls were being used to lock up material in a way so that there was effectively no means for a user wanting to making an infringing use to get access. That, too, is the situation here. Webcasters have access to the music on copy-protected CDs by playing them in CD players.
So, in the absence of that evidence, I think you ought to reject DMA's proposal. But even if there is a genuine issue here as to access, DMA has presented only hypothetical concerns that are well short of the substantial adverse effect on non-infringing uses that's required to support an exemption.
They haven't offered any evidence that webcasters have been unable to access sound recordings in the past, and they have offered only speculation that the copy control might affect webcasters in the future. As Seth noted, there have been only a very small number of copy-controlled CDs that have been commercially released in the United States. It's by no means clear that there will be a substantially larger number released in the future, certainly not sufficient to support a finding of substantial adverse effect on non-infringing uses.
But even if you thought that there could be, Congress provided the solution in Section 112(a)(2). Webcasters should ask copyright owners, not the Copyright Office, for the means to make copies.
It has been suggested that circumvention will solve all of the problems of the webcasters. On the other hand, many of the comments we have just heard suggest that it is really no panacea.
Tom talked about his need to have an automatic process with no exceptions, but I think if you give webcasters permission to circumvent, you will end up with precisely the situation that Seth described as unworkable: every webcaster needing to have a staff hacker to circumvent access controls. As the access controls technology changes, webcasters will have to keep circumventing.
So I don't think that Tom achieves his goal of
having an automated process with no exceptions because, if he is permitted to circumvent access controls, he is going to have to hack every CD that he receives. Instead, the right answer is that webcasters should do what Section 112(a)(2) says they should do, which is to ask copyright owners for the means to make copies.
Presumably, at least in many cases that will happen because, as Seth and Tom indicated, quite apart from the statutory structure or any issue of circumvention, many record companies provide files either in CD form or electronic forms to many webcasters. In those kinds of relationships, people can bargain over formats and people can bargain over delivery and means that will achieve the needs of webcasters.
But it appears here that the webcasters are trying to rewrite Section 112(a). We heard several instances in their remarks that they have concerns about the period of time that Section 112(a)(2) gives for copyright owners to provide a copy that has the means to be copied.
They have particularly taken exception to the need to have this period of time. They want to be able to circumvent on the first day that a release becomes available, even if they haven't previously known that a release was going to be available. That is just taking exception to specific provisions of Section 112(a)(2) that Congress has provided.
In addition, DMA's approach in its comments at
least would likewise ask the Office to stand conventional statutory interpretation on its head. In essence, DMA argues that, because Congress created Section 112(a)(2), Section 1201 must prevent them from doing something they want to do, and because Congress failed to include a similar exemption in 112(e), that "omission," as DMA's comments call it, has to be rectified.
But this isn't the proceeding to correct Congress' omissions, nor is it a proceeding to rewrite the terms of Section 112(a)(2). The Office had it exactly right in the rulemaking three years ago when you decided that you should proceed with particular caution when Congress has already made in the statute specific judgments about the scope of an exemption. Certainly, the record before you right now provides no basis for you exercising the heightened standard of particular caution, why you want to essentially rewrite Section 112(a)(2).
As I have already mentioned, this whole issue is highly speculative. DMA certainly has not provided the highly specific, strong, and persuasive evidence that is required to establish a likelihood of future adverse impact under the standards for this proceeding to apply to the alleged future harm.
It is by no means clear that record companies will ultimately deploy copy-protection controls in any substantial
numbers. Even if they do, record companies understand that webcasters may play or are an important outlet for their works. So webcasters and record companies will both be motivated to work together to address the issue in the marketplace, should it be the case that copy protection becomes widely used.
Accordingly, the Office should not at this time grant an exemption. The Office can certainly revisit the issue in three years, if there is more evidence of a problem then.
MS. PETERS: Thank you very much.
Now I'm going to turn it over to the Copyright Office Panel, but before I go to Charlotte and ask her to start the questioning, I'm having trouble with one piece, which has to do with access controls. Most of the testimony had to do with copy controls.
Seth, you did say that there was some issue or some of these CDs had access controls. Could you explain what the technology is and where the access control is, and is it in all, a few, whatever?
MR. GREENSTEIN: The access control that has been applied to date prevents a compact disc that is playable in a normal home audio player from being played on a personal computer.
MS. PETERS: Okay. So it can be played on -- so it's that it can't be played on it?
MR. GREENSTEIN: It cannot be played on a
computer's CD-ROM drive. That's the nature of the access control that's being applied.
MS. PETERS: But it still can be played on a CD player?
MR. GREENSTEIN: It can, and if you are listening in your home or if you are in some radio broadcast studios at least of the past, they generally rely on audio players. Webcasters don't generally use audio players. It's the rare webcaster that uses an audio CD player rather than a personal computer. Frankly, even radio broadcast studios now are migrating away from pure audio players, going to personal computer-based systems.
So to the extent that this kind of control is applied to a compact disc, it will prevent webcasters from engaging in the act of webcasting at all. Even if there were no copy protection applied, the access control would prevent the ripping from occurring in the first because you could not play it.
MS. PETERS: Do you want to add anything to that?
MR. LEAVENS: Well, just to concur that we launched with 36 channels, and we anticipate that we are going to be adding more. We do not serve that off of a conventional CD player. We serve that off the computer.
We need to be able to store, and through the programs which we developed, be able to sort and play those
files off the computer, and not have somebody sitting at a device and playing a CD off of a conventional CD player.
MS. PETERS: Steve, could you comment?
MR. ENGLUND: Yes, I think Seth has accurately described the technology that is used by many of the implementations here, now not all of the implementations. There are a variety of different technology vendors here. They all use somewhat different techniques. There are some vendors that use somewhat different techniques that we probably would say are not access controls, but Seth is right that there is the large class of the evolving technologies here that could be considered access controls in that they permit access on some devices and not other devices.
But I think it is entirely sufficient for webcasters to be able to access the works on a home or professional CD player because that is all that is required for purposes of this proceeding. They have access by playing it, a CD, in a CD player. They have perfectly straightforward means of copying that material entirely in the digital domain on their computers using methods that essentially Seth described. As a result, there's no access issue here for the Office to address.
MS. PETERS: Okay. So the record industry, in making its music available, is essentially going to make it available in just CDs that play in dedicated players as opposed to making them available to play on computers?
MR. ENGLUND: I think, as I said, it is by no means clear that record companies are going to use this technology to a substantial degree at all. That is an open question, and yet a further reason why it is premature for the Office to put copy-protected CDs on the exemption list at this time.
There are a number of tradeoffs that record companies face in considering the technology. Certainly, record companies have a substantial interest in deploying an effective technology that permitted universal access and substantially limited copying. But these technologies are not all that effective, as Seth suggested.
Technologies come at a cost, both out-of-pocket costs and perhaps a customer-acceptance cost. Record companies will balance those considerations and make their own decisions about whether to use this technology or not. Some may; some may not. The particular configurations they use will be their decision, and it is by no means clear what those configurations will be.
Seth accurately described the kind of configuration that many people have talked about, which is a disc that would have two so-called sessions on it, a first session of conventional Red Book Audio that is playable in the ordinary course on a customary CD player and a second session that is accessible in the ordinary course by a computer.
We have heard that it may not be compressed in the way that the webcasters would like it, but, in fact, they are likely to have access on both CD players and computers. So they are asking for an opportunity to circumvent the access controls on the first session because they're not satisfied with the sound quality of the access they get through the second session. But I think that is the question that is being presented to you.
MS. PETERS: Okay, but just on that one that has the first session and the second session, those still have to be on dedicated -- can they be used in computers?
MR. ENGLUND: The short answer is yes.
MS. PETERS: Okay.
MR. ENGLUND: The interest of record companies is in selling products that can be readily accessible by all consumers.
MS. PETERS: Okay.
MR. ENGLUND: So one of the technological challenges that record companies and the vendors of CD copy protection technology face is how to achieve universal access, because nobody is going to make money in the record business by selling records nobody can access.
MS. PETERS: Okay.
MR. ENGLUND: The emerging way or an emerging way of doing that is to provide for access differently in the case of CD players and computer CD-ROM drives because there are
technical differences in the way those two kinds of drives read the data off the CD.
So the first session provides access on a CD player. The second session provides access on a computer. But the particular files in the second session, which are accessible by the computer, may be compressed so that there's less injury to copyright owners from having higher-quality files available. They may be secured by a DRM. There are a number of different configurations that are possible.
MS. PETERS: I was just having a real hard time figuring out where the access issue was, but I think I now at least understand it.
Did you want to say something?
MR. GREENSTEIN: I just wanted to address a couple of points with respect to whether the access that Steve suggests is available is actually sufficient. We are talking about professional users here. The kind of access that might be sufficient for a home user is different than for a professional user. Professional users have to be able to work with files in particular ways in order to optimize their services.
Again, we compete based largely on the availability of high sound quality through very small speakers. You have to start with the highest-quality product in order to achieve that. You have to optimize your product. You have to optimize the sound quality of the files to make sure that what
comes out at the other end is thoroughly acceptable to the consumer, at least equivalent to the FM or CD experience.
If you start with a compressed file and then have to start processing it from there, it's, well, garbage in/garbage out. It gets worse and worse, deteriorates each time, to a level that is unacceptable and, in fact, creates some disparity of the signal.
We would like our signal to become consistent in sound quality throughout. If some sound recordings sound really good and some do not, then our service is the one who suffers. We are the ones that get the blame, not the record companies, even though it may be the record company's fault.
Finally, one other point that Steve mentioned is, well, perhaps one way we could get access to the content would be to start off with an audio CD player --
MS. PETERS: A CD player, yes.
MR. GREENSTEIN: -- and then take the outputs from that. The formats are different. Again, there's conversions that have to occur, and the conversions will, again, result in some degradation of sound quality.
We would like to be able to go directly from digital to digital in the same digital format, so as to avoid those kinds of problems and to have a higher sound quality as our end product.
MS. PETERS: Can I just, before we go to you, Tom,
can I just ask a question? With what you just said, you almost suggest that your recommendation for an exemption is limited by use. It's by professional webcasters. Is that right?
MR. GREENSTEIN: Well, inasmuch as every webcaster has the obligation to pay license fees and to, therefore, we hope gain some income because of that, we think of all webcasters as being professional.
MS. PETERS: So everybody who -- I was actually trying to get a handle on the scope of what you were proposing.
MR. GREENSTEIN: Yes. I mean, the specific exemption that we are seeking is on behalf of those who engage in the act of webcasting and who have that need to make ephemeral recordings. It is not a more generalized request.
Now I also understand from prior rulings that you have said that the exemption is not on a user-by-user basis. I would ask you, with great respect, to revisit that, I would think for the health of the industries that are sitting here at the table.
Obviously, a generalized exemption to circumvention is not going to be something that is good for the recording industry or for our industry. But, on the other hand, our industry cannot get along without having exemption and access to these recordings.
MS. PETERS: Okay.
MR. GREENSTEIN: So I would ask you, respectfully,
to revisit that ruling in this context.
MS. PETERS: I hear your respectful request. (Laughter.)
Tom?
MR. LEAVENS: I wanted to make a practical point, and that is that the option of doing something in real time with a CD is not really there for us. I am not in charge of the encoding process at our company, but I did ask the people who are before I came here today what the consequences would be for us to have to do things in real time. Roughly, it multiplies the time dedicated about 15 times.
So it's a process that we now do where we put the CD in, and it's encoded at the bit rate that we want within a relatively short period of time. If we had to start doing things, playing the entire CD through, and then perhaps going through a second process or a third process in order to arrive at a file, it becomes economically undesirable for us to be able to offer the service that we do, which is the array of channels that we want to offer, the richness of the content that we want to offer, which requires us to have thousands of new tracks added every month to the service.
MR. GREENSTEIN: One other point that I did want to address that Steve made, which is the immediacy of the threat. It's true, at the moment all we know about are that there have been a few commercially-released CDs into stores that
have protections applied to them. Some of these are access control. I think, as a matter of fact, all of them pretty much were access control as well as copy-protected. We have started to see within our services advance copies, promotional copies, that have content protection applied to them.
But there is an article that we have seen, and it's dated March 28th. This is on news.com. I can submit this to the Office, if you wish, along with a written statement. I think it would probably be useful for the Office to see.
It indicates that an analyst for J.P. Morgan says that Arista Records, a subsidiary of BMG, "appeared to be moving to market with CD copy-protection technology. They expect volume shipments of protected CDs to ship commercially in the U.S. as early as in the May-June timeframe," using the SunnComm technology, which is a step beyond what we have previously seen in the marketplace.
MS. PETERS: You just said, "copy protection." Is it access?
MR. GREENSTEIN: Well, it's difficult to know because the SunnComm solution is capable of both. The SunnComm solution, I believe they have multiple "flavors." One of the "flavors" is this second session type of technology.
MS. PETERS: Okay. I actually wasn't going to ask questions. Yes, Steve?
MR. ENGLUND: Several miscellaneous points that
people have raised: First, Seth referred a moment ago to advance copies, and I believe he did in his earlier remarks as well. It strikes me that the advance copies are probably the copies that record companies are most interested in protecting with this kind of technology, but the universe of copies that least justifies an exemption in this proceeding because the advance copies are ones that record companies are providing the webcasters. Very often, they are ones that record companies and webcasters are bargaining over the terms in which they will be provided.
As long as there is that relationship apart from the statutory structure, one of the things they ought to talk about is whether the copies will be copy-protected. It seems to me a webcaster ought to say, "Thank you for all of those CDs you have been giving me, but I can't use them. Please give me CDs I can use." If that takes place, then I submit that some exemption is not necessary.
Second, Seth referred to processes that are workable for home users versus commercial users and suggested that, while it might be fine for a home user to make copies in real time using a regular CD player, that it is not workable for a commercial user. One of the issues that we struggle with in licensing of webcasters all the time is that there is a very small number of large commercial webcasters, the ones represented by DMA. Many of them have or are pursuing
relationships with large record companies. Many of them are serviced, at least in part, by record companies already. They have the relationships to deal with the issue.
The question that arises, and the reason Seth has said that he is here, is for small webcasters who in many cases really are home users because two people are operating a webcast out of the basement. It strikes me that it is very difficult in our licensing purpose to try to identify who is a hobbyist and who is a real webcaster. The folks who are kind of hobbyists/kind of commercial probably would find it a lot more workable to engage in exactly the kind of copying we have talked about, and it seems that they ought to have sufficient access to satisfy all the purposes of this proceeding.
Finally, I am obviously here today out of concern that you will adhere to your previous decision that you cannot define a class of works relative to a use, rather but that it must start with the identification of a class of copyright works. I think you were clearly right that you have to start with a class of copyrighted works.
I kind of assume it's going to be sound recordings, but, as I read the statute, you certainly do have the power to identify a class of users who are affected by a particular type of technological protection measure and a particular non-infringing use they would like to make. If you make such a finding, as I read the statute, it is that use by
that class of users that is privileged.
So I don't think that you ought to put copy protected CDs or even sound recordings on copy-protected CDs on your list of exemptions. But if you do, I hope you will make clear that not everybody in the world is allowed to circumvent, but only webcasters who are licensed and making and paying for license to ephemerals under 112(e).
MS. PETERS: Thank you.
Charlotte?
MS. DOUGLASS: Yes. Seth, are you happy with the class of works that you have described in terms of Red Book Audio CDs? I'm sorry. Did you hear me? Did you describe the class of works as precisely as you wanted to in the request for an exemption?
MR. GREENSTEIN: Thank you. That's an excellent question.
I think that we described it that way because that was the threat that was known, but I think it's also correct that, in fact, the class could be broader because it could be any type of sound recording, any format that is desired to be used by a webcaster for making the ephemeral recordings.
I mean if, for example, CDs over the next couple of years go away and we move toward super-audio CD or we move toward a DVD audio or other types of formats, or protected electronic formats, or even a higher-quality second session
format, those are formats that webcasters could reasonably wish to use for webcasting purposes and for the making of ephemeral recordings that they need for the purposes of webcasting.
So perhaps you were right, in my effort to be moderate, perhaps I was too modest in defining the class, and that might more properly be defined as a class of sound recordings that are used for making of ephemeral recordings.
MS. DOUGLASS: Is sound recordings the only class?
MR. GREENSTEIN: That is all we are seeking, yes.
MS. DOUGLASS: Okay.
MR. GREENSTEIN: Because that is really what is covered under the statutory license that is at issue.
MS. DOUGLASS: Okay. Are you really concerned or unsatisfied with 112 as it is and, if so, if you could fix it, how would you fix it to more precisely help me understand what it is you want to do that the statute doesn't do for you now?
MR. GREENSTEIN: I think, again, at the risk of concurring with Steve too often, I concur with him that the real solution here is not to have to use 112 ever for this purpose. But, again, we are talking about safety valves, and the safety valve that is there in the exemption for 112 I think is insufficient in a number of ways that I described.
First, because it seems to imply that you have to make the request on a sound-recording-by-sound-recording basis, on a phonorecord-by-phonorecord basis, that becomes unworkable.
It becomes extremely expensive and time-consuming.
We would submit that it ought to be that, if the requests have been made and regularly refused, that you can continue to ask from time to time, but you should be able, nevertheless, to just plunge right in and do perform the circumvention, that you need to be on the street the day and date of release with the same sound recordings that your competitors are able to play.
I think that the other aspect of it has to do with quality, that, again, the statutory exemption as written seems to imply that, if you are given a low-quality recording by the record company in response to your request, then you have lost the ability to circumvent. We submit that that's not sufficient, that we have to maintain the high quality of our services, no matter which sound recordings we are dealing with, and should be able to circumvent for that purpose.
MS. DOUGLASS: So, for you, access control is prevention of being able to access a high enough quality of sound to transmit to your audience?
MR. GREENSTEIN: Right. I would think that you can kind of summarize the concerns in three or four ways: timing, to be able to get prompt access to recordings; quality, the sound quality; the formats that you need. Again, if, for example, you are delivered copies only in particular formats that you use sometimes but not all the time or don't use at all,
that creates a problem for you, but the statute would say that you're no longer able to circumvent. Of course, there is the whole issue of the impact on competitiveness and the expense of getting around the access controls by other means.
MS. DOUGLASS: Have you all talked about it among the industries? I know the belt-and-suspenders type of approach you have to make in doing business, but have the two industries talked about it to an extent that you would be happy to -- could you work it out among yourselves? I think that's the point.
MR. GREENSTEIN: We would like to. I think, again, that is the optimum solution. The problem is that we don't have everybody at the table. The Recording Industry Association and Sound Exchange, while they represent a very large number of companies, I think can't bind them all. This is a problem that exists for any company that applies content protection and for any large number of webcasters and the many that DMA represents and the many that DMA does not represent.
MS. DOUGLASS: This kind of proceeding, since it's every three years, it bears the burden of proof that is substantial, at least by some account. Why would you want to try to obtain an exemption here as opposed to getting a more permanent fix? Even if you get one this time, you would have to do it again. I mean, this is just a personal question.
MR. GREENSTEIN: Uh-hum. I think the permanent fix is the better one. Well, I think, actually, voluntary
agreements are best. Second is a permanent fix, and perhaps the first would lead to the second by consensus between the industries.
But failing that, we have to take advantage of the tools and the opportunities that are available. As you see, hundreds of millions -- more than a hundred million CDs have been protected elsewhere in the world. There are news reports coming out of labels in the United States looking toward copy protection and other kinds of access controls.
We see the train coming. We would like to jump on the train, but we're afraid we're going to get hit by it instead. So I think we have to take advantage of the opportunity that's in front of us now, and that is why we have submitted the request for an exemption.
MS. DOUGLASS: And you have taken this opportunity, standing on the harm that the train is coming, that you've heard that it's been done in Europe? Have any of your members, for example, actually tried to -- have any of your members been harmed by this phenomenon?
MR. GREENSTEIN: We have encountered them. Our members have told us that they have tried to rip discs and met with copy protection and met with access controls.
They said that, up until now, the methods that have been applied have been reasonably ineffective. So trying repeatedly or trying a couple of things that I don't think
anybody would consider to be circumvention per se, they have been able to get access to the material and to make the copies that they needed.
But the methods are getting more sophisticated. I think we are not going to see much longer the circumvention by taking a felt-tip pen and writing on a particular area of the disc. When we start to encounter these types of access controls, it is going to be a lot more difficult for us, and the impact of it can be much more substantial and severe.
MS. DOUGLASS: I think that's it. Thank you.
MS. PETERS: Steve?
MR. TEPP: Thank you.
Let me start with you, Mr. Englund. The TPMs we're talking about that will not allow a CD to be played back in a computer, is that the purpose of the TPMs or is that an incidental effect of the copy control?
MR. ENGLUND: Certainly, the fundamental purpose of copy protecting CDs is to protect the CDs from copying. Record companies are highly motivated to let people enjoy music on any platform they can choose.
It has been the difficulty of the technological challenge here in securing the CD format against modern ripping technology that has kind of led people in the direction of the second session technology and other approaches that we have talked about this afternoon.
It may not be completely clear whether that is, in fact, an access control since ultimately it allows access on both platforms, but it is certainly not -- it is, as you described it, more of a byproduct of how you prevent copying than of a desire to prevent access on a particular platform because record companies want people to be able to access and enjoy music.
MR. TEPP: Given that, by definition, we're talking about application TPMs prospectively, because I think everyone agrees that to date it's been a very limited application, to what extent is the recording industry looking to continue or not continue that incidental effect of the copy controls that it does apply and may apply in the future?
MR. ENGLUND: I think many record companies are interested in principle in copy protecting CDs. They are not the primary innovators of the technology here. There are a number of copy control companies that are the technology innovators. They are testing the various technologies that are available. They are thinking about, though, these technologies are effective and cost-effective and likely to result in more money at the bottom line rather than less, and they will make decisions based on that factor; they will make those decisions independently. It is possible that some record companies will deploy some forms of copy protection on some CDs
and others won't.
Does that answer the question?
MR. TEPP: I think so. Let me toss something out for the whole Panel.
To what extent -- and this is a technical question, so I apologize asking it to three lawyers -- to what extent, to the best of your knowledge, is it possible to circumvent the copy control but not the access control aspects of the TPMs we're talking about?
MR. GREENSTEIN: Well, I'll take a whack at it. (Laughter.)
It is the blind leading the blind here.
I think one thing I would mention first is that one of the technological protection measures that seems to be in the offing is something that does play in the computer, but it permits access only to the lower-quality second session. So the access control that is being applied there is really an access control with respect to the higher-quality format, which is what webcasters would need in order to perform webcasting.
I guess as to the technological question you have asked, I think none of us knows the answer because none of us really has seen the technology that's going to be used. I mean we know that there is a Macrovision technology out there that they acquired largely from their own efforts, plus Midbar and Cactus. That is the one that has been rather easily
circumvented in Europe and Australia and elsewhere. But as far as the SunnComm solutions, they really have not hit the market yet. So we don't know exactly what the impact is going to be.
MR. ENGLUND: I basically agree that so far the copy-protection aspects of copy-protected CDs have been somewhat easy to circumvent. For the reasons I described earlier, I think they may always be easy to circumvent, because if the music can be rendered in a CD player, it can probably be copied. It is a difficult technological challenge to copy protect CDs. A lot of companies are working hard to do it. Record companies are very interested in their efforts, but it really by no means is clear as a technological matter, from what I hear from the technologists at the record companies, that technology vendors will ultimately succeed in securing the CD format to a very high degree. We hope they will. If they do, we will be interested in deploying it, but today it's not clear that they will succeed.
MR. GREENSTEIN: I think there is a perception, even on behalf of the vendors of the copy protection, that the consumer in markets outside the United States is somewhat more docile and more accepting of limitations than the United States consumer may be. So it is difficult to predict even what the reaction will be from the U.S. consumer to these technologies and how long they will persist.
We have to look out at the moment, assuming that the threat is going to be as real as it could be, that the statements of record companies that they have made on their websites, for example, in the UK and elsewhere, that they intend to move toward universal application of these technologies mean that they are going to be applied in the United States as well. If so, the means may not be known, but the impact I think ultimately is going to be very predictable, at least for webcasters and their ability to make the ephemeral recordings that we need.
MR. TEPP: Okay, thank you. Let me turn now to Mr. Greenstein and Mr. Leavens for a question about sort of the business side of it, of webcasting. You indicated that there are some, although it sounded like a small minority, but some webcasters who do use CD players rather than computers to generate the ephemeral copies that are the subject of the requested exception. Why is it that they are satisfied with that and others are not? What's the distinction there?
MR. GREENSTEIN: Actually, to clarify, I think I was the one who mentioned that. It was not that they used them to make the ephemeral recordings, but, rather, that they used them for webcasting, similar to the way that you used to have turntables in a radio studio, radio broadcast studio, or you currently have professional CD audio players in these studios, in broadcast studies for radio, that is essentially what some
webcasters do, particularly non-commercial webcasters, educational institutions, and such. But I don't know of any larger-scale webcaster that works off of CDs directly.
MR. LEAVENS: We don't. For purposes of trying to manage and track the number of tracks that we have, we have in place software which ensures that the broadcast is DMCA compliant. We actually have real people who program each of the radio stations in the sense of selecting the songs that are going to be there, determining the relative importance of the songs and how frequently they're going to be played, and that.
But this is a service that depends upon the able body of a computer to serve it up, to select, to track, to make sure that we're going to be paying the royalties correctly that we need to under the DMCA. It's not a circumstance where we could have somebody sitting at a player and taking out a CD and putting it in and in some way trying to -- I suppose they could be playing it off of a track list that is computer-generated, but they would then have to be somehow inputting information as to what they're playing and how long it is. It just isn't going to work for the scale in which we are working.
MR. TEPP: It's operational logistics, then, is what you're saying?
MR. LEAVENS: That's right, and to be competitive with who we view as our competitors, we can't operate that way.
MR. ENGLUND: Just to be clear, I have never
suggested that webcasters need to play CDs on CD players in real time as they are transmitting, but it is entirely possible to use CD players to access access-protected CDs, to the extent that's necessary to make ephemeral copies once, but would thereafter be used on a repeated basis and organized with the kind of scheduling software that Tom was talking about.
MR. TEPP: Well, clearly, Section 112 envisions the creation of ephemeral copies. So let me turn to that for a moment.
A comment made by DMA talks about the -- and we've already talked about it today -- the exception to 1201(a)(1) in 112(a), but the absence of a corresponding provision in 112(e). I guess there are two ways to look at that.
The way that you have painted it is let's correct this omission, but I'm interested in your response potentially to the opposite interpretation, that if Congress chose to put it in 112(a) but chose to omit it from 112(e), does that reflect a congressional intent that there not be an exception to 1201(a)(1) for the purposes of 112(e)?
MR. GREENSTEIN: I'm speaking in stereo with both microphones. (Laughter.)
In fact, I think that actually in the comment is an error because 112(e)(8) does provide an equivalent exemption.
MR. TEPP: Of course, we have it all memorized.
MR. GREENSTEIN: That's right. (Laughter.)
The "bible" has come out now.
MS. PETERS: Speak for yourself.
MR. GREENSTEIN: I would say that statement is an error in the written comment.
MR. TEPP: Okay.
MR. CARSON: The only one, no doubt?
MR. GREENSTEIN: Ever. (Laughter.)
MR. ENGLUND: Seth, is the request, then, to broaden the scope of (e)(8)?
MR. GREENSTEIN: No, actually, it's for an exemption of 1201(a)(1). (Laughter.)
MR. ENGLUND: Effectively, to broaden (e)(8)?
MR. GREENSTEIN: To correct certain operational deficiencies, in light of the oncoming train. It's not to broaden (e)(8) specifically or to broaden 1201(a)(2). The issue really is that there are certain situations in which this exemption will not be workable and will continue to work substantial adverse effects on webcasters' ability to make ephemeral recordings.
MR. TEPP: That has to do with the need to request permission?
MR. GREENSTEIN: Again, it's timing, quality, format.
MR. TEPP: Okay.
MR. GREENSTEIN: And expense.
MR. TEPP: Okay, well, that leads me well into another question I had. The statute that lays out the standards for this rulemaking speaks of non-infringing uses of works. It does not speak of particular formats of works or certain devices to render classes of work. So what is your best pitch as to why issues like format and devices, and the four principles you've laid forth, fit within the criteria of the rulemaking?
MR. GREENSTEIN: I think these are all part of the non-infringing use that's contemplated under the ephemeral recordings exemption and license; that the reason for ephemeral recording exemption, and particularly the multiple ephemeral recording license, was specifically because of the need recognized by Congress for webcasters to have files available to them in multiple formats, multiple bit rates, multiple codecs, and for multiple servers. So that is a use that was clearly contemplated by Congress. That is statutorily the license and, therefore, by definition, not infringing. So I think, specifically, this is the type of non-infringing use that is cognizable under a 1201(a)(1) exemption.
MR. TEPP: Well, a minute ago you were talking about the 112(e)(8) and how what you're asking for here is an exception under 1201.
MR. GREENSTEIN: Yes.
MR. TEPP: Presumably, the 112(e)(8) is meant to deal with the various factors which went into the enactment of 112(e). What you are asking for is somehow broader than that, and it has to be considered by this Panel and the Library in the context of the standards in 1201.
So can I ask you, with reference to 1201, to talk about the concerns you have raised and how they qualify within the standard we are constricted by?
MR. GREENSTEIN: Well, I think the standard is whether there is likely to be a substantial adverse impact with respect to non-infringing uses; that is, being impeded by the technological protection measure with respect to access control.
With respect to the likelihood, again, the CDs marketplace, they're starting to show up on our doorstep where there are copies that are for promotional use only being delivered to webcasters. What are the promotional uses? The promotional use is not just to listen to it for your own personal enjoyment. It's to be able to actually use them in your webcasting activity. These protected CDs are unusable by us.
Again, we have seen the news articles. That is
really all we can rely on at this point. We can rely on news articles that describe the intention of the various labels to start engaging in widespread content protection in the United States in the coming months; projections and information from analysts, reliable analysts from J.P. Morgan talking about this; the content-protection companies themselves like Macrovision and SunnComm, Macrovision, in particular, talking about how hundreds of millions of these discs have been protected and are available elsewhere in the world.
This is, you know, likely to happen in the United States if the news reports are true and if the experiences of consumers are not so overwhelmingly negative that it forces record companies to back off on their plans.
The substantial nature of the impact, I think I have tried to describe at length how it would have a very severe impact on competitiveness of services that are by nature entrepreneurial businesses in a brand-new marketplace trying to establish a new medium. We have several strikes against us already, and we are trying to develop the means to compete.
One of the ways that we compete is on timing and sound quality. Those are two of the ways that we compete. To the extent that we are unable to compete in that way, we are disadvantaged with respect to radio, disadvantaged with respect to those entities that have prompt access and high quality, which include perhaps some of the larger webcast competitors,
but also include the record companies themselves, which are engaging in various webcasting activities, either on their own or through joint ventures that they have entered into.
So the impact is substantial. Clearly, it's a non-infringing use, and the impact is created by the presence of a technological measure that controls access.
Again, maybe I can ask this to Steve, so he can help me puzzle through this. Because the statute refers to the fact that you would not be liable under Section 1201(a)(1) for making an ephemeral recording. Why would Congress have needed to say that if it didn't view this kind of activity as being potentially liable under 1201(a)(1), which is with respect to technological measures for access controls? If this is purely copy control, why would Congress have needed to say this at all, since there is no provision with respect to the circumvention of copy controls under 1201(b)?
MR. ENGLUND: I have wondered the same thing myself and concluded that it is perhaps not the only thing in the statute that is simply not necessary. (Laughter.)
But, as we have talked about earlier this afternoon, there may well be particular implementations of particular technologies on some CD products that are technically access controls.
Thank you for pointing out 112(e)(8). I shouldn't
have taken Jon at his word that there is an omission. (Laughter.)
Once you consider that there is 112(e)(8), it seems like your mantra of time and quality, formats, and competitiveness becomes simply timing. With respect to timing, Congress has provided a mechanism whereby webcasters can ask for copies, and if they don't receive them, they can circumvent. Circumvent is ultimately what you're asking for here. So you're saying that a reasonable time is, in fact, unreasonable because it impacts your competitiveness, but that is the injury you suffer.
With respect to quality, formats, and competitiveness, Congress has given you permission to circumvent, maybe not on the time table you would like, but, nonetheless, it has given you permission to do the circumvention that you're trying to be able to do in this proceeding.
So that your issues of quality, formats, and competitiveness are already addressed in the statute to the same extent they could be addressed in this proceeding. Therefore, the mantra becomes simply timing. And the question is whether rewriting the provisions of 112(e)(8) to take out the timing requirements that Congress put in is a substantial adverse impact, but it's not.
MR. GREENSTEIN: I think it certainly is not just about timing, because, as I mentioned, if in fact I were to go
to a record label and ask for a copy in order to make the ephemeral recordings for its server, and it was given, let's say, the 32-bit copy that Tom can use on the Music Now service with respect to the lower-bit-rate transmissions, but would do him no good with respect to the higher-bit-rate transmissions such as people who have cable modems or DSL at home, then the way the statute is written, it would appear that the webcaster is simply out of luck. They have gotten a phonorecord from the copyright owner, and there is nothing more to do about it.
I think the underlying presumption, I think, that everyone had when we were discussing the DMCA back in those halcyon days of 1998 was that we were dealing with phonorecords that were the types that we all knew about. They were the CD. They were the CD quality, all of equal quality, and that's really what we were facing.
I think, since then, the market reality has proven otherwise, where, for example, the second session that we're talking about is something that is of substantially lower quality.
MR. ENGLUND: I think it's just speculation what kinds of copy a record company might provide if a webcaster asked for it. It seems to me it's as likely that they will provide an unprotected CD as that they would provide something bad, because record companies certainly care about quality. Record companies don't want their music to be perceived as
sounding bad.
It's simply speculation, and the Office has rightfully found that speculation is not substantial adverse impact, particularly when it ought to be proceeding cautiously, given that Congress has provided a specific exemption.
MR. TEPP: Well, let me ask you something along those lines, Mr. Greenstein and Mr. Leavens. Has your industry used 112(e)(8) and been told the second session copy is all you are getting or has it been used at all? What is your experience with that?
MR. LEAVENS: Full Audio really has had limited experience in the whole webcasting area. So, unfortunately, I can't say that we have encountered the circumstance where we have requested something and been denied.
We have encountered the circumstance where we have a promotional CD, which we simply tried out because it's an Arista CD and we wanted to find out whether in fact what we had been reading about was true, and it was true; we weren't able to encode it in any way. It's not been released commercially, I guess. So it's not something which we can put into the service. I don't know, when it is released, whether it's going to be copy-protected at that time, but the experience that we have encountered has been relatively little, I guess.
So we're going on the basis of what we understand to be the practice which is coming toward us, all the reports
that we see, and, frankly, from the perspective of us, it makes a lot of sense to have copy protection in the marketplace in order to ensure that kind of legitimate delivery of content.
So we're not disfavoring it in any kind of way. We favor it because, as I said, we are very much involved with DRM ourselves as a company. We rely upon DRM in order to deliver secure files, which enforce the rules that we have with respect to our subscribers.
So we are not inconsistent in any kind of way. It's simply that we see that there is this development which we don't know it's not going to happen. I know that perhaps could be characterized as speculation, but it does seem very inevitable, certainly within these three years, that we are going to be encountering this.
MR. GREENSTEIN: From the other webcasters that I've spoken to, they have encountered copy-protected discs, but they have not been of the second session variety yet. So they have not really had the opportunity to see whether 112(e)(8) works or not. At the moment, their experience has been simply that whatever discs they have encountered, they have been able to overcome with something that I think nobody would characterize as circumvention.
MR. ENGLUND: And nobody I've talked to in the recording industry is aware of anybody ever having asked under 112(a)(2) or (e)(8).
MR. GREENSTEIN: There's a certain chicken-and-egg aspect to this, I admit, but the problem is that we read the news reports, we see what's happening abroad, and we know that protection mechanisms are getting more and more powerful and are potentially coming to market in the United States. Again, if this J.P. Morgan analyst is correct, then it's going to happen as soon as May to June with respect to a major record label. That's the major record label that has the copy-protected disc or the protected disc that Full Audio's service has seen on the promotional basis only.
So we can see the reports saying that this is going to happen. It has not happened yet. But now is the time that we have to come to you to make our pitch, and so here we are.
MR. TEPP: Okay, I just have a couple more questions. Let me go to you, Mr. Englund.
Mr. Greenstein has just repeated the concerns based on this analyst's prediction about upcoming use, an increase in use, of TMPs on CDs by recording labels. Let me ask you, if it comes to pass that the recording industry does apply TMPs more than it has in the past -- I guess it is a two-part question -- why hasn't it been done to date very much, and why might it be done more in the future?
MR. ENGLUND: As I have said before, record companies, in principle, are very interested in protecting CDs
from copying, but how you do that and whether you do that, when you do it, are complicated business decisions that involve a lot of factors that need to be balanced.
One is the effectiveness of the technology, and another is the cost of the technology, since these technologies do come at some cost, both internal and out-of-pocket.
Another is the potential for consumer resistance. While my impression is that there has not been a lot of consumer resistance outside the United States, there have certainly been some vocal opponents in the United States, so that one has to have some pause about that.
Ultimately, record companies need to make a decision about whether the investment in copy-protection technology and the potential for consumer backlash is justified by the potential for reducing copying. Thus far, the available technologies have merely provided a speed bump to copying, what some people characterize as keeping honest people honest.
The cost/benefit decision that people have made so far has been that it is not clearly warranted. If the technology got better, maybe it would be more clearly warranted. With more experience, maybe it would be warranted.
It is just premature to try to predict what the problem is, and there is no need for you to try to predict whether there is a problem here because webcasters have access. Webcasters have access by copying from CDs. Webcasters have
access under an explicit statutory exemption that they would like to broaden so as to have faster access perhaps, but that is really all we are talking about here, is merely a matter of timing.
MR. TEPP: Okay, let me ask my last question then of Mr. Leavens and Mr. Greenstein. Mr. Leavens, you just spoke a moment ago about recognizing the importance of DRM in your own industry, and, similarly, on the part of the record labels. So my question is, to what extent do you think that there is a legitimate countervailing argument to the proposed exception that there are genuine anti-piracy concerns that make an exception for sound recordings potentially a dangerous one?
MR. GREENSTEIN: I guess let me speak first, if you don't mind, which is I think, given the nature of what we are asking, it really poses no danger to the sound recording copyright owner at all. All we are asking is that legitimate businesses that webcast music should be able to do that on a competitive basis that is equal to other similar services, be it radio broadcasting or webcasters that may have better relationships or more direct relationships with record companies.
There is really no threat whatsoever. Again, we are not asking for a generalized exemption or prohibition on application of access-control protection or content protection to all compact discs or all sound recordings. We are seeking
the ability to circumvent in a limited class of users for a specific type of works, solely to promote lawful activity. So I cannot see how that is going to have any negative impact on the record industry generally.
We have other requests that are being made for circumvention with respect to compact discs, technological protection measures. Each of those should be judged on its own merit. This one, I think, is a narrow and particularly meritorious case.
MR. ENGLUND: This time I have to disagree with Seth. First, even if it is possible for you to create some exemption, coupled with an identified class of users and a use that is limited so as to extend the benefit of the exemption only to webcasters and only to webcasters licensed to ephemeral copies, I think that the webcasters' interest in getting their copies faster than the express statutory provisions provide doesn't justify that exemption.
But, more importantly, there is a large risk here for sound recording copyright owners. That is the risk that other people in the larger universe, including courts, should a record company ever try to enforce the provisions of 1201, will interpret 1201 so as to find that the inclusion of copy protected CDs on your list of exemptions allows everybody to circumvent. I think that that is a risk, given your finding three years ago.
Even though I think that you probably do have the power to limit an exemption to a particular class of users, uses or users, I certainly can't rule out the possibility -- in fact, I'm very concerned -- that a court might say, "Copy-protected CDs are on the list. Therefore, they can be circumvented."
Quite apart from the strict legal issue, I think that, even if you conclude, and you rightly conclude, that you can limit an exemption to webcasters and to ephemerals, that our experience with enforcement litigation suggests that the issue will have to be dealt in every case at great expense and great loss of time.
I can only think about Section 1008 of the Copyright Act, the limitation on actions under the Audio Home Recording Act. The Office has found, everybody has found who has ever considered the issue, that the Audio Home Recording Act does privilege peer-to-peer file-trading networks, but the issue comes up. Every litigation has to be fought back at considerable cost.
MR. GREENSTEIN: And you win each and every time. (Laughter.)
MR. ENGLUND: So the question is whether Arista Record Companies ought to have their legitimate efforts to bring enforcement actions hampered and delayed, sometimes by months. In the Napster case the action was delayed for a long time while AHRA issues were considered. To suffer that kind of harm while
this issue is fought -- that was fought over and over again. I think that's something that the Office has to take into account in deciding whether the webcasters' desire for accelerated timing is a substantial adverse impact.
MR. LEAVENS: Full Audio has been the beneficiary of some of the litigation that the RIAA has fought. So we certainly are not advocates for hobbling them, but when you consider the kind of defense that somebody would impose here, they would have to establish that they are a webcaster, that they have filed their notice with the Copyright Office, that they have facilities.
It is not an easy thing to do. You can't justify it on the basis of, "Whoops, I was a webcaster" or "I intended to be a webcaster." It is like defending a fair use on the basis of a review you have not ever even written yet.
So I think that the risk of, on a practical level, of creating some kind of greater burden with respect to litigation or enhancing piracy I think is pretty remote.
MR. ENGLUND: I think I have to disagree. If the Copyright Office says that sound recordings released on copy protected CDs are an exempt class of works, I think everybody who is ever accused of circumventing access controls on them will say sound recordings are an exempt class of works. End of story.
MR. LEAVENS: Well, I suppose if that were
something that we were asking, but we're only asking for purposes of being able to do an ephemeral copy for exercising our rights under the compulsory licensing provisions of the DMCA. It's very narrow, and that's a very high standard for somebody who's a simple hacker to try to meet.
MR. GREENSTEIN: And just to emphasize a point that I think the Panel understands, but Steve seems to miss somehow, this is not just a question about timing. This is a question about timing, quality, format --
MS. PETERS: That we got. (Laughter.)
MR. GREENSTEIN: Yes, I knew that you did. I just wanted to make sure that perhaps, having seen that you get it, Steve might also get it on the rebound. (Laughter.)
MR. ENGLUND: I'm just being dense this afternoon. (Laughter.)
MS. PETERS: I have consulted with my two staff members who haven't yet spoken. They tell me they have a number of questions, especially the gentleman on my left.
So I'm going to suggest that we take like a five minute break, so that people can use facilities, so they can endure the rest of the afternoon. (Laughter.)
Okay?
(Whereupon, the foregoing matter went off the record at 3:23 p.m. and went back on the record at 3:32 p.m.)
MS. PETERS: Our witnesses are back, the Commissioners are here, so let's go. Rob?
MR. KASUNIC: Okay. I just have a few questions, mostly -- well, let me begin with Seth. Based on the current situation -- and let me just see if I have this straight -- that there's no actual harm in the marketplace now related to access controls on Red Book CDs or any other kind of music that you were talking about needing exemption for, right? Is that right?
MR. GREENSTEIN: We have actually encountered protected discs. Thus far, the means that have been used have been completely ineffective. Therefore --
MR. KASUNIC: Copy-protected discs, though, right?
MR. GREENSTEIN: No, access as well. I mean, for example, some of the protection systems that have been used in the past don't work on Macintosh computers at all. As a matter of fact, they would then prevent you from reopening the drawer of you CD-ROM in your Macintosh. I actually talked to a couple of people who have had to take their Macintosh drives back to an Apple retailer to try to get it fixed because they couldn't get the CD out once it was in. So there are those kinds of unique access controls that have been applied, but so far, at least for the webcasting
community, who thrive, I guess, on Windows and other operating system environments, we have not been prevented from getting access by the control measures that have currently been applied.
MR. KASUNIC: Well, I guess just an aside then. Let me ask Steve: These measures that were precluding use on an Apple computer were not planned by the recording industry to operate as an access control in that way, to destroy Apple computers, were they? (Laughter.)
MR. GREENSTEIN: It's part of a Microsoft conspiracy. (Laughter.)
MR. ENGLUND: The answer must be no. (Laughter.)
I am not sure what particular products, what particular technologies were at issue here, but it is certainly the case that no record company intentionally locked up anybody's Apple CD-ROM drive.
MR. KASUNIC: So there were some unintended access problems on limited devices that have come into the market? Is there any reason to believe that those will not be fixed in the marketplace?
MR. GREENSTEIN: Again, some of the more intended -- maybe not that one, in particular -- some of the technologies that were applied were intended to prevent playback on personal
computing devices. So, from that perspective, they were intentionally access control to prevent playback as well as to prevent copying. I guess if you prevent playback, you have by nature prevented copying on a personal computer.
MR. KASUNIC: Okay, then in terms of that actual harm, how substantial was it?
MR. GREENSTEIN: At the moment, as I said, the substantiality is not with respect to what has happened in the past. The fear is the oncoming train.
MR. KASUNIC: So it is di minimis at present in the actual market?
MR. ENGLUND: I think he's told you it's well nigh non-existent.
MR. GREENSTEIN: I think that would be correct.
MR. KASUNIC: Okay. Then what we're focusing on is likely harm, right?
MR. GREENSTEIN: That's correct.
MR. KASUNIC: And in order to, as we have defined likeliness in the typical sense, that it is more likely than not, what evidence is there that this is going to be more likely than not, that you will not be able to negotiate in the future, that the recording industry will refuse, that the marketplace will not take care of it, any of those other possibilities will fail to happen, and that that is more likely and that you will be denied access, that that is the likelihood?
MR. GREENSTEIN: There are several parts to the question. Let me see if I can take them one by one.
First is the likelihood that content protection is going to be applied. I think, given the experience in Europe, given the fact that we are now starting to see these discs coming in on promotional discs, these protection measures being applied to promotional discs, given what we have heard from analysts and various news reports, it's likely that this is going to happen and going to happen in the near term.
That is what we are starting to see now, and we can see the risk. Particularly as CD sales continue to decline in the world market, for various reasons, it is likely that content protection is going to be applied. So that threat is real.
The impact, we believe, is substantial because, first of all, I guess the impact is substantial because we can say for a certainty that not every webcaster is going to be able to "one on one" with every record company. Even the largest webcasters are going to have some difficulties getting in touch with independents.
MR. KASUNIC: But that is taking another step in this. We haven't even gotten there yet. First, we have to find likelihood before we can see whether we get to the point of this being substantial.
MR. GREENSTEIN: All right, I guess I was getting
to the point of the likelihood of the negotiations issues. The reason that there is statutory license, or one of the reasons that there is a statutory license, had to do with the administrative difficulty of negotiating one on one between all of the webcasters and all of the record labels. There are thousands of webcasters and thousands of record labels. Administratively, it was impossible to say that they could predictably deal with them one on one to get the licensed content that they needed. The same administrative difficulties are going to happen here. So the impact from that perspective, is it likely that there are going to be webcasters who are going to be disadvantaged in this way? Absolutely. Is it going to happen to everybody in the same way? I would say absolutely not. I think it is extremely likely that somebody like a Yahoo or Real Networks or an America Online will have a much easier time dealing with the issue than will even Full Audio or webcasters that are smaller in size. But, yet, the statutory license guarantees them all equal access and equal rights.
MR. KASUNIC: When is it likely, and more likely than not? How do we know that it is going to take place? Maybe, then, at some point it is likely that copy protection or some form of access protection will be employed. What evidence is there that it is going to be employed in the next three-year period and that these problems will occur?
MR. GREENSTEIN: The evidence that we have is the experience in Europe, the content-protected CDs that we're starting to see coming in through the door as promotional CDs, the few CDs we have seen as experiments that have come in the door in the past using less-effective protection mechanisms, user ports, that license agreements have been signed with companies such as SunnComm that do have more effective protection mechanisms.
We have pronouncements on the websites of various record companies, particularly BMG and EMI, with respect to their intentions to apply content protection more widely to all of their CDs as possible. If this is going to happen, it is going to happen in the next three years.
We are also, we hope, moving from a purely CD centric environment to other kinds of distribution means as well, such as DVD audio and super-audio CD and we hope greater online distribution with DRMs.
With respect to the CD copy protection -- and DVD audio is already protected, I suppose -- if this is going to happen, it's going to happen within the next three years or it will likely not happen at all.
MR. KASUNIC: Well, then, in terms of what our requirements are of having them, more likely than not, we can look to circumstantial evidence, and the only thing that I really heard in terms of that was the deployment and licensing
articles. Are those the basis, the circumstantial basis, for the likelihood, aside from your --
MR. LEAVENS: Well, I think Seth had mentioned the statements of the record companies themselves of their intention that appears on the websites.
MR. GREENSTEIN: The statements, in particular, I think are more on the websites of record companies with respect to their non-U.S. operations. So, for example, I would be happen to provide to the Office -- there's a statement from the BMG website about what their intentions are, about the importance of copy protection for CD audio.
MR. KASUNIC: In the non-U.S. market?
MR. GREENSTEIN: In the non-U.S. market, that is where the statements have been made. That's correct. The U.S. market is the largest market for compact discs, however, and to say that you're experimenting in a smaller market I think is not necessarily a guarantee that it's going to only stay in the smaller market, particularly because we have seen limited experiments happening here in the U.S., when you have limited experiments happening first in Europe, in Australia, in Japan, and then announced intentions to go to a more widespread protection mechanism there.
The fact that we have seen experiments here in the United States indicates that there's a substantial likelihood that the protections will become in the United States, once
those experiments are through.
MR. KASUNIC: Steve, do you have --
MR. ENGLUND: I certainly agree with your line of questioning.
MR. KASUNIC: Right.
MR. ENGLUND: Seth has admitted that there is essentially no harm presently. Where there is an assertion of a likelihood of future harm, the proponent is required to show by highly-specific, strong, and persuasive evidence that the harm is more likely than not. Where proponent is seeking to rewrite an existing statutory exemption, you should proceed with particular caution.
So this proposal is positioned within the framework of this rulemaking in the position that has the absolute highest bar to be overcome. They are required to prove a lot of harm with a great deal of likelihood, and better evidence than I have seen in the last couple of minutes.
And, still, you should proceed cautiously. I think within that context you should deny the proposed exemption.
MR. KASUNIC: Well, based on what Seth had just said about the experience in Europe dealing with the use of these controls in Europe, how does that fit into -- does that support a circumstantial case of the use in this country?
MR. ENGLUND: No. It is very clear that there
have been experiments, both abroad and in the United States, with copy-control technology. If there were effective, cheap, well-accepted copy-control technology, the threat of universal access, there would be a lot of interest in deploying it, but it is a very open question today whether it will ultimately be deployed to a significant degree in the United States.
MR. KASUNIC: Has the recording industry made any statements that you're aware of that they would be unwilling to work with webcasters in terms of necessary uses in the future, should there be problems with certain kinds of copy protection?
MR. ENGLUND: I'm certainly aware of no such statements.
MR. KASUNIC: Are you, Seth?
MR. GREENSTEIN: I'm not aware of any such statements. Again, we came to you hoping that we could work this out in the marketplace, but, yet, this proceeding exists as a safety valve, and that's the valve that we're looking for.
MR. ENGLUND: Yes, they say they want to work it out in the marketplace, but this sure came as a surprise to us, and they have never asked us in the marketplace to work it out, rather than perhaps it has been dealt with among the individual companies. Certainly servicing is something that is routinely dealt with among individual companies, quite apart from the statutory structure. But DMA never approached RIAA and said, "We really need to be working on legislation to rewrite
112(e)(8)."
MR. KASUNIC: Well, let me turn a question to Tom about, in terms of the automation issue, how will this -- I think a point that Steve made -- how will this be a panacea? If this exemption were to be put in place, how would this help? How would this automate the process?
MR. LEAVENS: Well, it removes the preliminaries to the process, first of all. It allows us to self-execute without having to go through all the notice and the waiting, and that.
I'm not sure exactly how it is that it is going to enhance our ability, frankly, to automate. I just know that we need to keep our system operating as an automated process as much as we can. One of the things that I had overlooked in mentioning about the need to rip the CD, as opposed to doing something real time, is simply the way in which you obtain meta data at that particular point, as opposed to having to enter that on some kind of manual basis.
So, in terms of what we have to do in any kind of manual process or real-time process that involves having to simply play the CD, we are not able to integrate the meta-data in the same kind of way, which additionally adds to our time.
I guess what we are foreseeing is the hope that there is going to be a solution that would allow us to have some kind of a circumvention that we can build into our system that's
going to be recognized when the CD is put into the system, and kick in automatically without it being kicked out and us having to pay particular attention to it. I'm not a technology person, so I don't know how all that would happen.
MR. KASUNIC: Wouldn't this put webcasters in more competition, in more competitive disadvantages, because some webcasters would be able to circumvent and others wouldn't? Actually, this wouldn't level the playing field, but it would be based on what an individual webcaster was capable of doing?
MR. LEAVENS: It is really something that we view as being for those circumstances where we can't make agreements with people, where we can't reach accommodations.
You ask about, has there been something that has been determined industrywide? We would love that, but, as Seth mentioned, we can't get everybody to the table. We can't control the activity; RIAA can't control the activity of all of its members. Not all record companies are members of the RIAA.
So what we are looking for is something that essentially gives us the ability to work under the circumstances where we can't work out something on a consensual basis. It's akin to, I guess again, the mechanically license that record companies have for musical compositions.
The number of times in our record company that we exercised that right was very little, but when we needed it, when we were in circumstances where we had somebody that wasn't
going to give a consensual license, we had the ability to get the license anyway.
So I'm really thinking about this in terms of not the labels that are going to be responsible, who are going to have the resources, who are going to have the inclination to work with us and work with other webcasters. I'm thinking about the others who may not have the inclination, may not have the resources, may not be found.
MR. KASUNIC: If this is -- I guess to Seth -- if this is a likely problem during the next three-year period, how would this not be a likely problem into the future beyond that three-year period? Isn't this just a general problem that would be more appropriately addressed by Congress?
MR. GREENSTEIN: It might be a problem that occurs. Well, let me take it point by point.
I think, if it occurs in the next three years, and I think it is likely to happen -- otherwise, we wouldn't be here in front of you -- then, yes, it is likely to be a problem that persists into the future. It is a problem that I would hope, once it becomes identified, finds another solution because I think the safety valve is always, and should be, the last resort.
There should be other ways to deal with this. It should be something that could be dealt with either by voluntary agreements or by Congress. I mean, certainly, if you're looking
for the panacea, the panacea is to require, as a condition of the statutory license, that everybody who pays an ephemeral gets service by the record company of an uncopy-protected compact disc with the highest audio quality. That's not likely to happen.
So we can't look just to the panaceas. We have to look to the realities of what is second best and what is the absolute minimum that we would need. The absolute minimum is that, if all else fails, we need to have the ability to circumvent in a rapid timeframe, not on a sound-recording-by sound-recording basis, but where it has been shown to you that you are either not going to get the sound recording from the record company on a timely basis or you are going to get it in a quality that is not sufficient for your needs, you have the ability to exercise self-help.
So, from that perspective, that is really what the request is about. Is it likely that this would be a request that would have to be renewed in three years? I think the answer is probably yes, because a safety valve would be needed then as well, although, again, I would hope that the majority of the problem would be accommodated in other ways through marketplace discussions.
MR. KASUNIC: I know David has a lot of questions. So I have just one more, and this is to Steve in terms of a comment you made about the scope of the exemption, should we
choose to find an exemption here, and that it could be narrowed to the particular scope of use.
Do you believe that we should, within the exemption itself, actually, or that we have the authority to fashion an exemption that would include a particular use?
MR. ENGLUND: No, I don't think that you ought to create an exemption, but I think the relevant statutory provision is 1201(a)(1)(D), at the bottom of page 179, carrying over to 180, in your purple books here, which says that, "The Librarian shall publish a class of copyrighted works...that non infringing uses by persons who are users of the copyrighted work are or are likely to be adversely affected."
And the key phrase is the last one: "And the prohibition contained in subparagraph (a) shall not apply to such users with respect to such class of works for the ensuing three-year period."
I think that it may well be a sufficient basis for you to identify webcasters as a class of users that is likely to be affected and to privilege only the activity of webcasters that has been identified.
MR. GREENSTEIN: Once again, I'm forced to agree with Mr. Englund. (Laughter.)
MS. PETERS: David?
MR. CARSON: All right, I would like to go back to
the first question asked by Charlotte a few days ago. (Laughter.)
Seth, this will actually follow up on that, because I think you agreed with Charlotte that in the comment you filed all you identified as a class itself was copy protected Red Book Audio Format compact discs, correct?
MR. GREENSTEIN: That's correct.
MR. CARSON: Let me take it a step further. Maybe I missed it, but when I read the entire comment, I think the entire comment was about copy protection and not about access controls. Am I right or did I miss in the written comment about access controls?
MR. GREENSTEIN: Perhaps it was spoken as the scope of the discs themselves, and the sound recording formats is perhaps too narrow. Perhaps it was too narrow in reference to copy protection alone.
There are other access controls that are being applied that would also have the effect of preventing playback on computers or other types of access by computers and, therefore, prevent ultimately the making of the ephemeral recordings.
I guess what was meant by the focus on copy protection was really twofold. First, that that is really the ultimate problem that we are seeking to address, the ability to make the ephemeral recordings. So any technological protection
measure that interferes with the ability to make those ephemeral recordings is really what is at issue in our comment ultimately.
Second, it is because of the reference to 1201(a)(1) in the two statutory exemptions that seems to recognize that a copy-protection mechanism that prevents the making of an ephemeral recording is potentially otherwise actionable under 1201(a)(1) and, therefore, an exemption would be justified.
I guess we refer to that in the footnote, that there are other access control means that have been applied, but that Congress made this express statement indicating that, at least from their perspective, the making of ephemeral recordings was control of access; a technological protection measure that prevents the making of ephemeral recordings was an access control under 1201(a)(1). So it is perhaps from that implication that we sought specifically to focus both on the ephemeral recordings and also brought it under the 1201(a)(1) proceeding with respect to even the copy protection.
MR. CARSON: All right. Well, apart from what you said in that footnote, referring to Section 112(a)(2) and newly discovered 112(e)(8), I gather, what other argument do you have for us as to why we can pay any attention whatsoever to copy controls as such in this rulemaking?
MR. GREENSTEIN: To copy controls as such?
MR. CARSON: Yes.
MR. GREENSTEIN: Well, 1201(a)(1) does talk about direct controls access.
MR. CARSON: Right.
MR. GREENSTEIN: To the extent that the control that is applied prevents playback or other types of access, then certainly it is cognizable under 1201(a)(1), but, otherwise, I would say specifically that Congress appears to have spoken in this matter, that the making of ephemeral recordings and any control measure that prevents the making of ephemeral recordings is potentially actionable under 1201(a)(1) and, therefore, justifies an exemption.
MR. CARSON: And that's your best argument, is it? (Laughter.)
Let me give you every opportunity, Seth.
MR. GREENSTEIN: That's my story, and I'm sticking to it. (Laughter.)
MR. CARSON: Okay, very good.
Now back to the other point I was making: Again, apart from what you have just told me, I see nothing in the comment you wrote that talks about access controls as such. Why are we talking about this today?
You, of all people, know very well the process we set forth here, what was in our initial Notice of Inquiry, the process we had for filing late requests, if you didn't get it in
on time. I have to say, and we are not ruling from the Bench here, but I have a very hard time understanding how you have put before us the question of access controls on CDs. I am wondering why we are talking about it right now. How is that question before us properly at this point, given the procedures we have set forth?
MR. GREENSTEIN: I think it is before you because, again, an access control can have the effect of preventing the ability to make an ephemeral recording. Again, putting aside the argument with respect to the actual statutory language that Congress wrote in the two exemptions, anything that prevents playback or access to a file on a disc will prevent the making of an ephemeral recording. So you have to start there.
If there's an access control measure that prevents it from being played back in a CD or prevents the making of a copy of a file on a CD or another type of disc, then that is an access-control measure that ultimately has the effect of preventing the making of an ephemeral recording.
MR. CARSON: All right. Now I know this has been asked before and I know it has been answered before, but I'm a simpleton, I guess. I am having a hard time getting my hands on just specifically what kinds of access controls you have actually seen out there. So can you, as simplistically as possible, explain to me what kinds of access controls you are aware of being used on CDs now, either in the real marketplace
here or in test markets that you're aware of?
MR. GREENSTEIN: I guess the two that we're aware of, one deals specifically with the ability to even play back a protected file on a computer. The second has to do with this second session technology.
Essentially, what that does is that it prevents the computer from reading -- therefore, copying or playing back -- the full, high-quality audio, Red Book Format audio, on the disc. Instead, it allows access by the computer only to the much lower-quality, compressed Windows Media Player format, or whatever format happens to be adopted in that particular solution.
The SunnComm solution, as I understand it, uses the Microsoft Windows Media Player format, or the .wma format, but prevents access to the full, high-quality audio. Those are the two technologies that are access-control technologies that we are aware of at this point.
MR. CARSON: Okay. Now I'm pleased that I have got probably two of the world's experts on Section 112 in front of me because I would like to ask a question that has always bothered me about 112. It may not sound like it's leading anywhere, but I think perhaps it is.
So, Mr. Leavens, if you feel you're an expert on this, by all means, you pipe in, too. (Laughter.)
But I happen to know that Seth and Steve are --
MR. GREENSTEIN: I thought you were talking about Rob and Steve. (Laughter.)
MR. CARSON: So tell me, construing the statutory language of 112(c) -- and we'll just talk about 112(c)(1); we won't go on to the little "A's" or the "B's", and so on.
MR. GREENSTEIN: "C"?
MR. CARSON: Well, 112(e), I'm sorry. My eyes - there's bad light here. 112(e), you're absolutely right. How is it that that statutory license permits you to make more than one phonorecord when in the fifth line of the text we're all looking at, it says it's a license to "make no more than one phonorecord" of the sound recording?
MR. ENGLUND: The parenthetical that follows says, "unless the terms and conditions of the statutory license allow for more."
MR. CARSON: And where do we find those terms and conditions?
MR. ENGLUND: Do you want to answer that one? (Laughter.)
MR. GREENSTEIN: I would hope they are in the regulations that were enacted by the Librarian.
MR. CARSON: Pursuant to the CARP process?
MR. GREENSTEIN: Pursuant to the CARP process and
pursuant to various voluntary submissions to the Copyright Office for the regulations to implement voluntary license agreements as industrywide agreements.
MR. CARSON: Steve, do you concur with that?
MR. ENGLUND: It is certainly our understanding that the result of the CARP decision is that webcasters are permitted to make multiple ephemerals under 112.
MR. CARSON: Okay. So the CARP has the power in setting rates and terms to have -- actually, it sounds like it has considerable power to determine the scope of this license. Is that a fair statement?
MR. ENGLUND: I think it is fair to say that this parenthetical authorizes the CARP to deviate from the one-copy rule and permit multiple copies.
MR. CARSON: Okay.
MR. ENGLUND: I would not go so far as to say that it can deviate from the statute in other respects.
MR. CARSON: Okay. Let's turn to 112(e)(8), the newly-discovered provision that may offer some hope, but perhaps not enough to some of us here.
Does the CARP have power in setting rates and terms to construe 112(e)(8) -- and let's put it to you, Seth - to construe it in such a fashion that 112(e)(8) can, in fact, pursuant to regs issued initially by the CARP, and ultimately by the Librarian, you can get everything you need out of it? Does
the CARP say anyone, any webcaster, who needs to get access to a sound recording in the appropriate format that that webcaster needs may demand that the sound recording copyright owner make it available to him in that particular format, or would that be beyond the scope of the power that the CARP has?
MR. GREENSTEIN: I would need to ponder the question further. I think the answer depends on whether that could be seen as within the scope of the current language, within a reasonable interpretation of the statutory language, or if it is something that is beyond the scope of reasonable interpretation of the statutory language. I cannot say, as I sit here, that I have the right answer for you.
MR. CARSON: Okay, fair enough. Steve, anything?
MR. ENGLUND: Having thought about it for all of 30 seconds --
MR. CARSON: That's more than I think of most of the things I do. (Laughter.)
MR. ENGLUND: My visceral reaction is that the CARP probably could not. There certainly is legislative history, more in the 114 than the 112 context, but maybe in the 112 context, of what rates and terms mean for the purpose of the statutory licenses. There are some examples that are given of the sorts of things that are like terms.
I think the CARP is permitted to authorize
multiple copies because the statute says very specifically that they can. It is certainly not obvious to me, as I sit here, that the CARP could write into the statutory license a term that says, on demand, record companies shall deliver CDs in whatever format a webcaster wants.
MR. CARSON: All right, I understand that. Now, Steve, you said something probably 45 minutes or an hour ago that I took down, and I don't know if you will even remember having said it now. But I was curious about what you meant.
You were talking about 112(e)(8), and you said, in discussion, that the "Congress has already given you," referring to Seth, "what you want with respect to quality and format," and I think there was one other thing that I missed, "although perhaps not timing."
Can you elaborate on what you meant when you say Congress has given him what he needs or wants with respect to quality and format?
MR. ENGLUND: This is a proceeding about circumvention of access controls. All that Seth is asking for is permission to circumvent access controls. Congress has given him that.
MR. CARSON: Maybe not what he wants, but as far as it's willing to give it to him?
MR. ENGLUND: Yes.
MR. CARSON: Is that what you are saying?
MR. ENGLUND: It says in 112(e)(8) that, if he doesn't do it in a timely manner, he can circumvent. I suppose his argument is how copyright owners are going to be so motivated to prevent webcasters from circumventing that they will just give them copies of -- the term -- "terribly low quality," and that will satisfy the obligation and force the webcasters to use the low-quality copy and cut off the ability of webcasters to circumvent. That doesn't seem very practical to me.
MR. CARSON: Of course, 112(e)(8) doesn't say that the record company gives you copies, does it?
MR. GREENSTEIN: That's right. I was dealing with talking about the transmission of a copy of a phonorecord because that, to me, seems a lot more likely and practical than the likelihood of a copyright owner delivering to a webcaster a general means of circumventing the content-protection system.
I think that it would not be wholly unreasonable, despite the statutory language, for a copyright owner to fear that, having made this available to webcasters, this means they might somehow or another find their way into the marketplace in a more broad way.
I recognize that the statutory language says that what the copyright owner is supposed to make available is the means to undo the access-control protection. I just have a very practical fear that that is not what would happen in practice
then. Instead, what would happen is, at most, we would get access to copies of the files without the protections applied.
MR. CARSON: Well, why not stand on your rights? I mean, doesn't this language arguably give you exactly what you are asking us to give you? In other words, if the copyright owner has to give you the means to circumvent, if they really have to do that, you have got exactly what you want and you can get it in whatever format you want, can't you?
MR. GREENSTEIN: Well, of course, they don't have to. They could say that it is not technologically feasible or economically reasonable for them to do so.
MR. CARSON: And then you get to do exactly what you're asking us to let you do?
MR. GREENSTEIN: Right, although, again, according to the statutory language, this has to be accommodated on a sound-recording-by-sound-recording basis.
MR. CARSON: Is that clear to you?
MR. GREENSTEIN: It says, "a phonorecord" and "such phonorecord." If I were to read that language quite literally, that would mean that the request has to be made on a phonorecord-by-phonorecord basis.
MR. CARSON: Okay. Now looking at that same language, all right, the language says the copyright owner has to do this in a timely manner in light of the transmitting organization's reasonable business requirements.
Now it strikes me, Seth, that you have made a pretty compelling case that in many cases your reasonable business requirements are going to be right now or in the next few hours or, at best, the next day or two, and anything beyond that is beyond reasonable business requirements.
MR. GREENSTEIN: Uh-hum.
MR. CARSON: I think that would be, if I were in your shoes, that would be my position. Isn't that your position?
MR. GREENSTEIN: That would be my position.
MR. CARSON: And, Steve, do you acknowledge that there may be circumstances where that's exactly the case?
MR. ENGLUND: I don't know whether it's hours or days, but I understand that webcasters have a legitimate interest in getting new releases on quickly. I certainly see the language here, which speaks for itself.
MR. CARSON: So, Seth, what's your problem with this particular provision when you're talking about timing? Isn't the timing here good enough, given your reasonable business needs?
MR. GREENSTEIN: The problem is that, again, it has to be done on a phonorecord-by-phonorecord basis. That leads to the timing issue. Because if you have to make the request on a phonorecord-by-phonorecord basis, then you have to give an appropriate amount of time for the record company, for
the copyright owner, to respond. That seems rather implicit.
If they don't respond within five minutes, when I needed the sound recording on my air yesterday, does that give me the right to circumvent? I don't know the answer to that. None of us knows the answer to that.
To say that the way that we should go about this is by, essentially, filing a lawsuit against the sound recording copyright owner to get the court to enjoin them positively to provide these means to us I think is not economically within reach of most webcasters and not practical, given the needs of the webcasters themselves.
MR. CARSON: All right. I think, just in response to the last question Rob asked, both Steve and Seth suggested that we do have the power in determining classes of works to narrow the eligibility of people who can take advantage of exemptions for particular classes of work.
So have I misconstrued what either of you said?
MR. GREENSTEIN: That's correct.
MR. CARSON: Okay. Now that's interesting to hear. Let me just remind you that that was not the conclusion this Office came to three years ago. I mean, we, in no uncertain terms, made our interpretation of how this statute works.
It strikes me a little puzzling, I'm a little puzzled to be sitting here today in a hearing and hearing you
for the first time suggest that it ain't necessarily so and there may be another way of interpreting it. I have seen nothing in writing. I have seen no legal analysis.
I think if you read the Notice of Inquiry, we said certainly we're not locked into any legal analysis or legal interpretation we did three years ago, but we're going to expect you to make a pretty good case because those decisions of interpretation that we made a few years ago are decisions that we put a lot of thought into, and we've got a relatively firm conviction they're right. And if they're not right, then someone really does have some kind of a burden to persuade us that it is wrong.
Do you really think that you have carried that burden, just by coming in here today and orally, in about 30 seconds each, telling us what you think?
MR. ENGLUND: I'm not the proponent of the exemption.
MR. GREENSTEIN: Well, I don't know how much I can add to the arguments that were made last time around by those organizations that argued to you, I thought convincingly, that exemptions ought to be available to certain classes of users in particularly meritorious cases.
The language of 1201(a)(1)(B) talking about how - it talks about non-infringing uses by persons who are users of a copyrighted work and that the prohibition shall not apply to
such users with respect to such class of works. It seems to open the opportunity for the Office to apply exemptions to particular users for particular classes of works, and particularly meritorious circumstances.
If the circumstance that I have put before you, at least with respect to the non-infringing nature of the use and the justification for the use, doesn't seem to be meritorious, I don't know what would. But it seems to me that under the circumstances and under the statutory language, one could reasonably say that an exemption could be granted to a particular class of users, so that the prohibition would not apply to such users.
MR. CARSON: Okay.
MR. ENGLUND: I think an exemption has to be made with respect to a class of works.
MR. GREENSTEIN: Yes.
MR. CARSON: No, we understand that. Yes, I think you do say that's at least a starting point. Okay.
Steve, I want to make sure I understand what the point is of the second session. Why is there?
MR. ENGLUND: Record companies want people to get their music. A way of doing that is to provide different access or access through different means on different kinds of devices. The second session is a means of providing access on PCs.
MR. CARSON: But is it necessarily part of that
that the quality of what you get in the second session is poorer than the quality of what is on the first session, or whatever you call the other session?
MR. ENGLUND: There are inherent limitations on the space and the capacity of the CD carrier to hold data. In order to have a typical number of recordings in the first session, you would probably almost certainly compress the data in the second session.
MR. CARSON: It almost has to be more than that, doesn't it? I mean, why bother having two different forms on there unless there's something different about the second form?
MR. ENGLUND: In addition, the second session is to protect it, so that -- it may be compressed, and it may also be protected with a digital-rights-management system, so that copying is limited.
MR. CARSON: Okay. But I'm not sure I heard a response from you to the point made by Seth, and perhaps by Tom, that when you're webcasting -- and we all understand, I think, that most webcasters, probably all webcasters, are transmitting from server copies, not from CD players; I think at one point you finally acknowledged that -- that they are necessarily going to have to use the second session copy and not the better quality copy in those cases where you are using the second session features. That's understood, isn't it?
MR. ENGLUND: I don't think it is.
MR. CARSON: Okay, so why is that?
MR. ENGLUND: For a couple of reasons. First, thanks to newly-discovered 112(e)(8), they can circumvent the access controls in the first session.
MR. CARSON: Okay. So even if they've got the second session, because they can copy that, 112(e)(8) gives them the ability to circumvent to get the first session copy, is that true?
MR. ENGLUND: Interesting question.
MR. CARSON: Great. Seth, do you still need to be here?
MR. ENGLUND: I may have misspoken.
MR. CARSON: Let me give you a moment because this may be important.
MR. ENGLUND: Section (e)(8) begins, "If the transmitting organization entitled to make a phonorecord" -- and it's a webcaster with a license -- "is prevented from making such phonorecord by reason of the application of technical measures that prevent reproduction of the sound recording." There's a bit of a disconnect there, as has been noted.
I suppose the answer has got to be that, if they have access, that they can't circumvent, but they've still got the opportunity to work with the copy in the second session and they've still got the ability to copy the first session.
MR. CARSON: Okay, I was curious about that
because I don't quite understand it. When you say, "copy the first session," put it in a CD player, I gather, and then what do you do with it? How do you get it onto that server? Because that's where it's got to end up.
MR. ENGLUND: You string a wire from the CD player to the server.
MR. CARSON: Okay, and that works?
MR. ENGLUND: Yes.
MR. GREENSTEIN: No. (Laughter.)
MR. ENGLUND: I've never tried it.
MR. CARSON: Okay.
MR. ENGLUND: But it's clearly the case that you can transmit the output of a CD player to the sound card of a computer. It may be slower than ripping, clearly slower than ripping. You have heard from Tom that ripping is much faster, but it is clearly possible to send those bits over a wire, capture them, and format them into the same bits that would have been rendered on the CD player.
MR. CARSON: Let me hear what our other two panelists have to say about that.
MR. LEAVENS: Well, I suppose one can make their own gravel, too.
MR. CARSON: I'm sorry, their own what?
MR. LEAVENS: Their own gravel, too. I sounded a
little facetious, but from the sense that you are describing a process that is entirely inappropriate to the systems that are set up for us to operate and the benefits that we're supposed to be enjoying by this digital technology.
So I can't speak to the technical aspects of the statute that you're talking about, but we have no remedy really, from what you are describing here, as far as being able to play something in real time and then somehow get that translated into a digital file. There are far too many processes involved, far too much time involved.
MR. CARSON: Well, let me make sure -- Seth, go ahead.
MR. GREENSTEIN: I'm just trying to understand exactly how this would work, because the output of a CD player, let's say analog or digital, it's not the same format that is computer data. It's a different data format. Dealing with digital data first, it's a different data format.
So you would need to convert it into the data format that the computer understands. Then the computer can record it, and then you can start manipulating it, then, to have it encoded for different bit rates and different codecs, a much more cumbersome process, much more expensive, and, frankly, when you're talking about doing this in real time for tens of thousands of sound recordings per year, prohibitive.
If we are talking analog, then you would have to
go through a very similar process where you would have to go at the analog output and digitize it. And each time you perform transformations on data, you are losing some sound quality. As hard as you try and as good as the technology is, you are losing some data each and every time as you go from one format into another, which has an impact on the sound quality.
MR. CARSON: Steve, do you disagree with that?
MR. ENGLUND: To some degree. It is true that the data format used in Red Book Audio is different from the .wav file format that is commonly used on computers and commonly used as the input to encoders and compression software.
But the process of turning Red Book Audio into a .wav file is something that happens all the time in a computer when you rip. It is not a computational matter. At least it is not clear to me that it is a computational matter.
It is much different from the process that would have to take place to convert the so-called S/P-DIF output of a CD player into a .wav file on a computer. It seems like the kind of data transformation that could be accomplished by somebody writing software, if the software doesn't exist already. I have never had occasion to look for it.
MR. CARSON: You folks may get a subsequent question from us on this, because it sounds like you think this is a significant point, Steve, and I'm taking it as a significant point.
MR. ENGLUND: To the extent that Seth's concern here is quality and not timing --
MR. CARSON: Yes, yes.
MR. ENGLUND: I mean, he says, "The second session isn't sufficient for me."
MR. CARSON: Right.
MR. ENGLUND: I think the second session ought to be sufficient access for purposes of 1201. You have previously found that there is no right here to get access in the best, most convenient possible way.
But to the extent that quality consideration is material here, a way to get CD quality audio is to play it in the CD player.
MR. CARSON: Well, let's be clear in what we said before. I think what we said before was, when you are talking about fair use, for example, someone who under the doctrine of fair use is able to make a good claim, "I should be able to get a copy of this," doesn't necessarily have the right to get that copy in the optimal, best digital format. There may be other ways of doing it, and that may meet all the requirements of fair use.
We are talking now about a statutory license where people who comply with the terms of the license do have, in effect, a right to transmit performances of those works to their customers, and that is what you want them to be able to do, I
believe.
So, under those circumstances, are you, nevertheless, saying they have no reason to expect that they are going to get good quality content that they can retransmit?
MR. ENGLUND: We're not talking about good quality versus bad quality.
MR. CARSON: Well, I thought that was the whole point.
MR. ENGLUND: No, we were talking about less-than full-CD quality, but they transmit in less-than-full-CD quality. I think the considerations are very similar to your past finding, which was, in fact, made in the fair use context, as you indicated.
The statutory license does not address access or quality. There is no requirement in the statutory license that if a record company has chosen to release a recording only on cassette tape, that it provide access on CDs to webcasters who might want higher quality.
MR. CARSON: Yes, but we are not talking about that. We are talking about a CD which has high quality here and right next to it somewhat lower quality. Because of the way you set it up, you are necessarily, at least according to Seth's scenario, not to your scenario, you are necessarily relegating them to the lower-quality copy.
It's not that you only put it out in audio
cassette. You've got good quality and so-so quality, and you're telling Seth, "Sorry, you're stuck with so-so quality."
MR. ENGLUND: I think you should not rush to assume that the quality is so-so.
MR. CARSON: Okay, that was my next question.
MR. ENGLUND: The quality is whatever the author of the CD chooses to encode it at, and that will be based on a number of product design considerations. It is not the desire of record companies to sell a low-quality product. Record companies want consumers to be able to buy and enjoy the music and pride themselves on selling quality product. Occasionally, it has been suggested that one way of securing the CD format is to offer a second session that is somewhat degraded in sound quality, but a better technological approach is probably to secure it with a digital rights management system. In any event, I'm not a "golden ear." There are some people called "golden ears" who listen to recordings and can tell such differences, but I don't know that I can tell the difference between an MP3-compressed file and a CD-quality file, at least when listening to it on my computer speakers. So I think you should not rush to assume that this is lousy quality.
MR. CARSON: Okay, so you're telling us there is no reason for us to conclude that the second session copy is
going to be of such quality that it is not going to be as useful for webcasting purposes or to put it --
MR. ENGLUND: It would be commercially-acceptable quality because record companies don't want to put out a product that is not commercially-acceptable.
MR. CARSON: And, again, the only reason, is it a fair characterization of what you said earlier that the only reason that the second session may be lower quality is simply because there's not enough room on the disc to put two equally good-quality copies on it, or might there be other reasons why the quality of that second session one isn't going to be as good? Had there been a choice, we don't want it to be as good of quality? Is there any reason to think that is going to happen?
MR. ENGLUND: That may play into the analysis. It may largely be a matter of the technology vendor's choice of how the second session technology is implemented in terms of what kinds of formats are supported in the second session.
MR. CARSON: Seth, I think you are straining for the mike or no?
MR. GREENSTEIN: Yes, I was. I wasn't straining, but reaching. (Laughter.)
There is an important difference between the types of users that are targeted for the second session versus
webcasters. The type of users targeted for the second session, that's the end product that they are going to use. That's the end product they're going to listen to.
Probably, you know, is it as good as the kind of MP3 file that you would rip for yourself? Probably yes. But webcasters don't use it as the end product. It is the source material for them. That is the starting point from which they have to make additional transformations, from which they have to make better-quality recordings for the high-bandwidth users, lower-quality recordings for more optimal transmission over lower bit rates. They have to go from one media format to another, to another, to another, to make sure that they've got the full range of copies that they need to provide full service to all of their potential users.
From that perspective, broadcasters, webcasters, always like to start with the very highest quality. A television broadcaster doesn't use a VHS tape when they show movies. HBO doesn't use VHS tape. I mean they use digital beta tapes. They use the highest-available quality format. They don't use DVDs. They use professional-quality media.
CD audio is not the highest quality available, but it is the highest quality that is commercially available in retail that webcasters have easy access to if they don't get service of higher-quality copies from the record companies.
They need to start with the highest-quality source
material in order to perform the transformations, in order to afford the public and to offer to the public a competitive service.
MR. CARSON: Steve, when I was asking an earlier series of questions, there was one followup I think you were suggesting but I wasn't hearing it very clearly. Does it still seem pertinent?
MR. TEPP: Well, it's a short one. I'll just jump in with it.
It went back to the question you were asking about 112(e)(8) and the phonorecord-by-phonorecord concern that was expressed. And the question was, to what extent can you, of your own initiative, simply bundle requests?There is nothing in the text of 112(e)(8) that appears to prohibit that.
So couldn't you engage in a little self-help on that problem by bundling the appropriate requests for accessible phonorecords and address that concern?
MR. GREENSTEIN: By bundling requests, you mean, essentially, to make requests in advance, to say that for everything you release over the next coming three years, we would like to have access to them?
MR. TEPP: I don't think that would work under - well, I want your opinion. That's not what I was asking about.
MR. ENGLUND: I really wouldn't rule out the possibility. That's precisely the right marketplace solution
here. This is all speculation, but if a webcaster were to ask a record company, "Are you ever going to service me when I ask you for a copy," and the record company says, "No, I'm not ever going to service you," that seems like wholly sufficient. It seems like the sort of thing that we shouldn't be speculating about, proceeding where there is a very high burden of proof to be overcome before an exemption should be granted.
MR. GREENSTEIN: I guess we have the reverse concern. I mean, suppose the answer comes back and says, "Well, no, ask me on a record-by-record basis. I'll let you know what's available for that and whether it's appropriate to give you the circumvention tool, whether it's appropriate to give you a file, or what level of quality file I'll give you. Ask me in particular cases, and I'll give you particular answers."
MR. TEPP: Let me just follow up with one thing, and then I will give it back because I've already had my chance.
But, given, as Rob has articulated quite well, the standard we are dealing with here of likelihood, is there any reason to think that particular CDs, even within a single label, are going to get that sort of disparate treatment, where they will give you "yes" to some, "no" to others, "We'll give you the tool here, but we will give you something else; we will give you an unprotected copy there."?
MR. LEAVENS: Do you mean track by track within a CD?
MR. TEPP: Either track by track within a CD or CD by CD within a label's repertoire.
MR. LEAVENS: I suppose there may be some artist considerations that go into whether there is something that is granted. There may be some particular artists more concerned about that kind of thing than others, or there may be -- I know there are provisions in our contracts with the labels for our conditional download service that allows the record labels to withdraw tracks from our service simply on the basis of artist relations issues.
When they get involved with contractual negotiations with the artist, they are not compelled to stop exporting through services such as ours, but they may want to remove them from the marketplace, so that is not an issue when they are talking to them. We have actually encountered that a couple of times, not a lot, but it is the kind of thing that does go on all the time in the record industry. The labels are very sensitive about their relationships with their artists. They are protective of that. It is the most important relationship that they've got.
So there may be reasons, for purposes of artist relations, that there could be a variation in how it is that they are granting consent or not granting consent.
MR. TEPP: So I know I promised that was the last one. I'll really keep to this one.
Is it fair to say, then, that what this whole request boils down to is the problem with the potential phonorecord-by-phonorecord approach of 112(e)(8), and that barring that, 112(e)(8) does everything you need?
MR. GREENSTEIN: Again, depending on the response that you get from the copyright owner, it could. It has the potential to offer everything that is necessary, but there's no guarantee in it that, if it is literally applied, that the problems would be addressed. Literally applied, the problems would not. That is the reason why we are spending so much time, and that Tom flew in from Chicago, and that lawyers are getting paid to address this issue.
I guess one other way to look at it is maybe by analogy to the experience of the motion picture industry, where they don't apply copy protection to every motion picture cassette. They apply it somewhat selectively, depending upon the value of the title, whether it is being sold at a low-price point, whether it is being sold at a higher-price point.
Certain motion pictures they can apply the technological protection measures at various levels of intensity, depending upon the need. A lot of it is business marketing philosophy. If a particular work is especially valuable, they may apply copy protection to it using a very strong, robust system. If it is another artist, they may apply it less or they may not apply it at all.
It is difficult to predict, although I think in the marketplace, if the experience in the motion picture marketplace is any guide on this, then I think it is quite likely that there will be different reactions with respect to different sound recordings, the same way that there are different copy-protections mechanisms and modalities applied with respect to motion pictures.
MR. TEPP: I will keep my promise this time. Thanks.
MS. PETERS: Guess what, we're finished. I want to thank each and every one of you. This was a long session, but it was a very helpful session for us. I can't speak for you.
In any case, thank you.
(Whereupon, the foregoing matter went off the record at 4:32 p.m.)