CONGRESSIONAL TECH MANDATES PROPOSED TO THWART FILE-SHARING

But Coleman’s veteran ranking member, Sen. Levin (D-Mich.), stole show when he repeatedly pressed witnesses to say why Congress shouldn’t require technological solutions to thwart unauthorized downloading: “We negotiate trade agreements with other countries and try to protect intellectual property… Here, if there is a technology that could be effective, should we mandate its use? That’s the question that I think we need to struggle with if it’s not done voluntarily.” Meanwhile, RIAA’s new chairman outlined steps that P2P industry might take to persuade recording industry to end its campaign of filing suits against grass-roots individuals, especially its demand that P2P sites filter out copyrighted works.

Levin said he believed “it’s technologically feasible” to modify P2P software so every time copyrighted material was downloaded, a pop-up appeared warning it was illegal. He asked panel of copyright owners whether Congress should mandate modest software modification, and MPAA Pres. Jack Valenti replied “at some point we'd probably have to do that.” However, RIAA Chmn. Mitch Bainwol, citing agreement his predecessor, Hilary Rosen, reached last year with Business Software Alliance (BSA) and Computer Systems Policy Project (CSPP), told Levin that RIAA didn’t support “mandates on technologists.”

Levin went even further with his suggestion of regulations when grilling next panel, which included 2 witnesses in P2P industry. He asked the witnesses this question: “Is it technologically possible for a software developer to include in online software the capacity to block a person who has downloaded the software from using it, such as a turn-off switch?” FullAudio founder Chris Gladwin, who supports RIAA’s suits and has negotiated licensing agreements with major record labels, said yes. Sharman Networks Exec. Vp Alan Morris, whose company distributes Kazaa free, said no.

But Levin, who obviously was not happy with that answer, then read from Kazaa’s end-user license agreement (EULA) in which Kazaa tells downloaders “your rights under this agreement will terminate” if user breaks law or violates intellectual property rights of 3rd party. Levin’s position was that Gladwin said Kazaa had technological ability to shut off users who shared copyrighted material, it said in its EULA it would shut off users, so it should be shutting off users. “These honor agreements are common,” Morris replied, saying Kazaa in practice had “no technological control” over its users. Its EULA, he said, “is not enforceable.” Asked whether Kazaa would use such technological approach if Gladwin were right and it was possible, Morris said question was “hypothetical.”

Sharman Networks is incorporated in Vanuatu, which also gave Levin pause. “We've got a lot of experience with that jurisdiction” on committee, he said, and it’s “not a positive one,” referring to State Dept. finding that had singled Vanuatu out as source of international money laundering. Asked why Sharman, Australian company, was headquartered there, Morris said because Vanuatu was “tax haven” close to Australia, comparing it with U.S. companies’ incorporating in Del. Levin also asked that committee be given permission to reveal publicly Sharman Networks’ ownership, which isn’t publicly disclosed but is contained in deposition committee possesses. Morris said he would have to get back to Levin on that. Valenti said it was “very difficult” to negotiate with business headquartered on “an obscure island in the South Pacific” that “thumbs their noses” at companies incorporated in U.S.

RIAA did find itself on hot seat when questioned on its subpoenas and on fact that it could ask for damages up to $150,000 for each shared song. Bainwol said RIAA hadn’t requested that amount, and most settlements hadn’t totaled much more than retail value of acquired music. Rep. Sununu (R-N.H.) said “I don’t hold RIAA responsible for the $150,000 statute” but it “is not in balance” with infringement. However, Valenti defended amount, saying it was created with motion picture industry in mind, where an average major-release movie cost $90 million to make. Coleman said filing suit against consumer for file sharing when potential damages could quickly reach into millions put possible defendants at disadvantage and was overkill in trying to send message on piracy. “Public floggings would get people’s attention, but we don’t do that,” Coleman said, “but public floggings are not part of the law. The [$150,000 per song] is.”

Coleman said Sec. 512 of Digital Millennium Copyright Act (DMCA) was unfair to consumers because user didn’t receive notice from copyright owner that ISP account was subject to subpoena. But Bainwol said ISPs “have the right to notify the user.” One witness, Lorraine Sullivan, who was sued by RIAA and settled for $2,500, said she first learned of RIAA’s interest in letter from her cable modem provider, Time Warner, but she said company told her “not to worry about the matter,” that she was likely to get only cease-and-desist letter.

Levin agreed that drawback of Sec. 512 subpoenas was that individual whose personal information was being disclosed to copyright owner wasn’t required to be notified under law. He suggested provision be changed to require such notice if RIAA didn’t start doing so voluntarily. Recording artist LL Cool J, opponent of file sharing, said “I agree. That’s very fair and I think it’s very, very smart. I think it’s the right direction.” Sen. Pryor (D-Ark.) said news accounts were reporting that “innocent bystanders [are] being dragged into this litigation,” but Bainwol said “there are a number of safeguards, and more on the way.”

Morris said recording industry was refusing to work with P2P providers regarding licensing artists. Kazaa partner Altnet offers licensed content on Kazaa, and Altnet Exec. Vp Derek Broes told Coleman, “we encourage you to encourage the industry” to work with P2P providers both on licensing and copy protection. “The issue is control of online distribution,” Morris said, arguing that RIAA’s problem was that it didn’t control P2P. Recording artist Chuck D made similar argument, saying he had seen up close how controlling recording industry could be.

But Bainwol said it was difficult to negotiate with P2P providers when their software enabled rampant piracy. “It’s Jesse James wanting to get hired at the bank,” Bainwol said. He laid out 3 conditions for P2P to meet before serious negotiations could occur, adding that steps also would bring end to lawsuits against individuals: (1) Change default so that users aren’t sharing files. (2) “Meaningful disclosure” that uploading and downloading is illegal. (Morris later said he would be open to more prominent displays of copyright warnings, dismissing it as “design” issue.) (3) “Most important,” Bainwol said, P2P sites must filter out copyrighted work: “No more excuses.”

LL Cool J dismissed argument that because technology made file sharing possible, sharing copyrighted works was acceptable. “A lot of things are possible,” he said, “that doesn’t make it right.” He also dismissed argument that artist received free promotion when his or her work was shared, arguing that if he stole diamond necklace from Tiffany’s, then promoted necklace on Web site, resulting promotion for Tiffany’s wouldn’t outweigh company’s economic loss. “It’s anti-American,” he said: “I'm not against the Internet, I just wish that these things could be done, this music could be downloaded, legitimately.”

Full Committee Chmn. Collins (R-Me.) said “until we change how people perceive the Internet,” piracy would continue. “I don’t think lawsuits are the answer.” She told Bainwol and Valenti that “I don’t think the education campaign has been successful.” Bainwol said suits had encouraged parents to talk with their children about intellectual property, and usage on P2P sites had gone down. Morris said decline in usage on Kazaa was “normal seasonal drop” that always occurred, and that “it looks like [usage] is coming back.”

Just as Coleman testified recently before Senate Commerce Committee hearing on this topic, Commerce Committee member Boxer (D-Cal.) testified as first witness at Coleman’s hearing. “Downloading works is theft,” she said: “If there’s anything coming out of this hearing” other than that idea “it’s a problem.” She said unauthorized file sharing was costing entertainment industry jobs, threatening privacy of P2P users and making children on P2P networks vulnerable to pornography. “No one likes these lawsuits,” she said, but file sharer of copyrighted material “is still a thief.”