Government Affairs

Issue
Digital Rights Management systems (DRMs) restrict the use of digital files (usually valuable original intellectual property such as movies, music, etc.) in order to protect the interests of copyright holders. DRM technologies can control file access (number of views, length of views), altering, sharing, copying, printing, and saving. These technologies may be contained within the operating system, program software, or in the actual hardware of a device.

DRM systems take two approaches to securing content. The first is "containment," an approach where the content is encrypted in a shell so that it can only be accessed by authorized users. The second is "marking," the practice of placing a watermark, flag, or an electronic tag on content as a signal to a device that the media is copy protected.

Some content industries argue that digital media will lead to large-scale piracy, a la NAPSTER's sound recording peer-to-peer file sharing, on an alarming basis. The technology community is concerned that DRM technology and legislation requiring the inclusion of copy control systems pose serious threats to privacy, open source software development, and the fair use of copyrighted content. Technical standards have provided little defense against copyright piracy in the past (the software industry has attempted to use them) and alienated consumers. Legislative mandate of any type of technology standard is intrusive and could fundamentally change the path of free-market technological development.

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Impact to Business
If any legislative body mandates standards for technology, the government will essentially be selecting technology winners and losers. History has shown that the best technology is technology that is developed and tested by the marketplace. Further, mandatory technical standards, covering a range of computer and electronic goods could make products user-unfriendly and alienate a critical customer base. This hurts the content community, electronic consumer product community, and the technology industry. The impact on electronic commerce is unclear. Finally, integrating any new technical specifications into sophisticated technology products is a costly long-term process that ultimately hurts producers of these products.

Status
The issue is under active discussion in the United States. In 2004, Senators Hatch, Leahy, Frist and Boxer introduced a bill called the "Induce Act" which would make it illegal to induce others to commit copyright infringement. The bill as drafted is so broad that it could threaten legitimate IT products that have copying and networking functionalities. Cisco and other leading IT companies engaged in a process with Senate Judiciary Committee staff to revise the language of the bill to provide for explicit protections for legitimate IT products. We will monitor whether this legislation is reintroduced in the new Congress.

The US motion picture industry lobbied the US Congress to impose copy protection standards on technology industries and successfully obtained draft legislation to this effect in 2002. The introduction of draft legislation was followed by a series of intensive negotiations and meetings with Members of Congress by industry and consumer group representatives on all sides of the issue. The result was a senior level group, representing a range of technology and content industries, engaged in dialogue regarding the technical possibilities of establishing a DRMs standard. This group, the Copyright Technical Working Group (CPTWG) and other private sector consortia, have worked to address the issue. The US Congress remains engaged on the issue.

The Federal Communications Commission (FCC) issued rules on the specific issue of digital broadcast and the ability to make analog copies. The FCC has required a "broadcast flag" recognition technology for use in systems to receive over-the-air digital television broadcasting. The FCC may consider similar requirements in the case of digital radio broadcasts in the future.

In Europe, the European Commission's Copyright Directive supports the use of DRMs. While the Directive does not impose the adoption of DRMs, it does call for voluntary measures by copyright holders to protect copyrighted materials. It also establishes that fair compensation to copyright holders for legal, private copying should take into account the application or non-application of technical protection measures.

There is, however, a lack of clarity as to if or how DRMs will be taken into account when defining new levy schemes as required by the Directive.

The European Commission acts as a facilitator who promotes a DRM environment that is acceptable to all market players. Ultimately, it is up to the different stake holders, such as industry, right holders, collecting societies and users, to build consensus on the applicability of DRM. To this end, a Commission Staff Working Paper on DRMs has been published to assess the policy options available for promoting the use of DRM. Workshops on DRM were held on 28 February 2002 and on 25 March 2003. As a result, four working groups were established. The Commission considers legislation tackling DRM issues a last resort and believes that standards should be developed by industry and be voluntary.

In March 2004, the Commission established a High Level Group on DRM. The group presented a final report on Intellectual Property and Digital Rights Management Systems in July 2004.

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Cisco Position
Intellectual property protection is critical to Cisco and to Cisco's business.
We respect the needs of content-based industries to have their product protected. However, mandatory technical standards are not the way to go.
Any solution to this issue must carefully balance the needs of the content industry with the preservation of technological innovation, consumer choice and ultimately the preservation of the vital new world of electronic commerce.

Key Messages
Getting quality content on the web is a "demand-side" strategy for increasing the uptake of broadband by consumers.
We should look to both technologies and innovative business models to foster the widespread, legal distribution of high-quality, digital content.
The private sector should continue to work toward developing cutting edge technologies to protect digital content.
These products and services should address the legitimate expectations of consumers for the use of all forms of technology and commercial content.
It is clear that piracy causes harm to innovators and copyright owners, and ultimately consumers and the economy.
There is no "silver bullet" to resolve the issue of piracy. Solving the piracy problem in the digital world is going to require more than digital protection technologies.
The most effective role of government is to ensure adherence to existing laws and treaties against piracy around the world.
All interested parties should work together to educate consumers about their responsibilities and the harm piracy causes.
In the EU, levies are not a mechanism to compensate for piracy. The use of DRM should be taken into account when determining the levies to compensate for "private copying."

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Resources
ITI Statement on Digital Rights Management
Alliance for Digital Progress (ADP)
European Commission: Digital Rights Management