[A2k] (Cato Institute) Circumventing Competition: The Perverse Consequences of the Digital Millennium Copyright Act

[Thiru Balasubramaniam]

March 21, 2006
Policy Analysis no. 564

http://www.cato.org/pub_display.php?pub_id=3D6025


    Circumventing Competition: The Perverse Consequences of the Digital
    Millennium Copyright Act

by Timothy B. Lee



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Executive Summary

The courts have a proven track record of fashioning balanced remedies
for the copyright challenges created by new technologies. But when
Congress passed the Digital Millennium Copyright Act in 1998, it cut the
courts out of this role and instead banned any devices that "circumvent"
digital rights management (DRM) technologies, which control access to
copyrighted content.

The result has been a legal regime that reduces options and competition
in how consumers enjoy media and entertainment. Today, the copyright
industry is exerting increasing control over playback devices, cable
media offerings, and even Internet streaming. Some firms have used the
DMCA to thwart competition by preventing research and reverse
engineering. Others have brought the weight of criminal sanctions to
bear against critics, competitors, and researchers.

The DMCA is anti-competitive. It gives copyright holders=97and the
technology companies that distribute their content=97the legal power to
create closed technology platforms and exclude competitors from
interoperating with them. Worst of all, DRM technologies are clumsy and
ineffective; they inconvenience legitimate users but do little to stop
pirates.

Fortunately, repeal of the DMCA would not lead to intellectual property
anarchy. Prior to the DMCA's enactment, the courts had already been
developing a body of law that strikes a sensible balance between
innovation and the protection of intellectual property. That body of law
protected competition, consumer choice, and the important principle of
fair use without sacrificing the rights of copyright holders. And
because it focused on the actions of people rather than on the design of
technologies, it gave the courts the flexibility they needed to adapt to
rapid technological change.