[Ecommerce] New York Times: Antipiracy Rule for Broadcasts Is Struck Down

[Thiru Balasubramaniam]

http://www.nytimes.com/2005/05/07/technology/07tele.html?hp&ex=1115524800&en=bbc56a35944bfdc4&ei=5094&partner=homepage

May 7, 2005


    Antipiracy Rule for Broadcasts Is Struck Down

*By STEPHEN LABATON
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*

WASHINGTON, May 6 - A federal appeals court handed a major setback to
Hollywood and the television networks on Friday when it struck down an
antipiracy regulation requiring computer and television makers to use
new technology that would make it difficult for consumers to copy and
distribute digital programs.

The unanimous ruling by the three-judge panel, in an important case at
the intersection of intellectual property and technology, was a stinging
rebuke for the Federal Communications Commission. The court said the
commission exceeded its authority when it approved the rules in 2003.

It was a significant victory for libraries, consumer groups and civil
liberties organizations. They had maintained that the regulation, known
as the broadcast flag rule, would stifle innovation in technology and
make it more difficult for consumers and users of library services to
circulate material legitimately.

Although an appeal is possible, lawyers involved in the case said the
fight would shift in the near term to Congress, which is already
weighing legislation. Hollywood executives and their lobbyists warned
that if the rule was not resurrected by Congress, studios and
broadcasters would sharply limit the digital programming available over
the airwaves, focusing instead on channels limited to cable and
satellite services, where they have other means to control what can be
copied.

The Supreme Court is expected to issue a ruling soon in another closely
watched case involving digital rights and intellectual property,
Metro-Goldwyn-Mayer
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=MGM>
Studios v. Grokster Ltd. In that case, the court is considering whether
the online services that enable copyright songs and movies to be shared
freely over the Internet can be held liable themselves for copyright
infringement.

The rule at issue in Friday's decision would have required manufacturers
to install special technology in new computers and televisions that
would enable them to recognize a "broadcast flag" - specially embedded
computer bits in the programs created by the studios and the networks.
The new equipment would then restrict redistribution and reuse of the
programs.

For years, the movie studios and television networks urged the
commission to adopt the rule, citing the recording industry's experience
with companies like Napster
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and saying restrictions on copying and distributing programs by
consumers were essential to the transition from analog to digital
television. They maintained that without the imposition of the broadcast
flag, shows would be copied and then transmitted limitlessly through the
Internet, much the way music is.

But the critics said that the studios and networks were unduly alarmist
and that the new rule, which was to have taken effect July 1, would
prevent consumers from copying and using programs for legitimate reasons.

Research librarians submitted affidavits in the case contending that the
broadcast flag rule would make it impossible to distribute broadcast
clips and other research material over the Internet to researchers and
students.

Critics also maintained that the commission had overreached and had
moved to regulate the Internet more tightly, ridiculing the agency in
the aftermath of the rulemaking as the "federal computer commission."

The rule was challenged from the moment it was issued in November 2003.
The case was filed last year in the United States Court of Appeals for
the District of Columbia, the usual venue for challenging commission rules.

The outcome of the case was signaled during oral arguments in February,
when the judges aggressively questioned F.C.C. lawyers about whether the
agency had exceeded its authority by setting technical standards having
nothing directly to do with broadcasting transmissions.

"You've gone too far," said Judge Harry T. Edwards during the oral
arguments, as he pressed a government lawyer to justify how the agency
could possibly set standards governing computers and the Internet. "Are
washing machines next?"

But the breadth of Judge Edwards's opinion was more than many lawyers
had expected.

"In this case, all relevant materials concerning the F.C.C.'s
jurisdiction - including the words of the Communications Act of 1934,
its legislative history, subsequent legislation, relevant case law, and
commission practice - confirm that the F.C.C. has no authority to
regulate consumer electronic devices that can be used for receipt of
wire or radio communication when those devices are not engaged in the
process of radio or wire transmission," Judge Edwards wrote.

"And the agency's strained and implausible interpretations of the
definitional provisions of the Communications Act of 1934 do not lend
credence to its position. As the Supreme Court has reminded us, Congress
'does not ... hide elephants in mouse holes.' "His opinion, in American
Library Association v. Federal Communications Commission, was joined by
Judges David B. Sentelle and Judith W. Rogers.

David Fiske, the commission's top spokesman, said that the agency did
not have a comment about the decision and that the government had not
decided whether it would seek an appeal either to the full Court of
Appeals or to the Supreme Court. Some lawyers said it was unlikely that
the Supreme Court would consider the matter as the case did not satisfy
the criteria for such review.

The broadcast flag rule was adopted at the urging of Michael K. Powell
when he was commission chairman. It was supported by Kevin J. Martin, a
commissioner at the time who became chairman this year.

In recent weeks each side in the lawsuit has been talking to lawmakers
in anticipation of the ruling.

"Without a broadcast flag, consumers may lose access to the very best
programming offered on local television," said Edward O. Fritts,
chairman and chief executive of the National Association of
Broadcasters. "This remedy is designed to protect against unauthorized
indiscriminate redistribution of programming over the Internet."

Dan Glickman, president of the Motion Picture Association of America,
offered similar warnings. "If the broadcast flag cannot be used, program
providers will have to weigh whether the risk of theft is too great over
free, off-air broadcasting and could limit such high-quality programming
to only cable, satellite and other more secure delivery systems," he
said. "It is important to remember that this decision is only about the
F.C.C.'s jurisdiction, not the merits of the broadcast flag itself."

But Gigi B. Sohn, president of Public Knowledge, a digital rights
advocacy group that led the fight against the broadcast flag rule,
warned that intervention by Congress could create a new set of problems
for consumers and innovators.

"If Congress starts to go down the road of giving the F.C.C. broad power
over new applications and technologies, who knows what comes next?" Ms.
Sohn said. "This case is about the future of technology."

Government officials and industry executives report that digital
television has slowly been gaining in popularity. Nearly 1,500 stations,
or about 90 percent of the total, now broadcast some digital programs.
Industry executives project sales this year of about 15 million
television sets able to receive digital programs, about half of all sets
sold. Indeed, some sets already being sold are equipped for a broadcast
flag.

Cable televisions now have the ability to sell digital programs to as
many as 90 million homes, and about 300 hours of digital programming is
available each day in many markets.