On-Line Industry Reshapes Copyright Bill

The on-line industry has won several critical concessions during the congressional debate over cyberspace copyright reform, but many unresolved issues are blocking passage of a new law this year.

The debate pits copyright owners -- represented by the Washington-based Creative Incentive Coalition -- against an alliance of on-line companies, Internet access providers and telecommunications companies.

The companies in the alliance share a determination to minimize their entanglement in lawsuits caused by on-line copying and theft of digital property, such as software and music. "Any additional [legal] burden... will be passed along to the end user and our customers. [It] is detrimental to the entire industry," said Brian Muys, a spokesman for PSINet Inc., Herndon, Va.

But the copyright owners want the on-line industry to help eliminate on-line theft of intellectual property, which they say will cost them billions of dollars every year in lost revenue.

On-line theft will cripple the future of cyberspace, said John Raffetto, a spokesman for the coalition, which includes Microsoft Corp., the Motion Picture Association of America, the American Publishers Association and the Recording Industry Association of America. "A lot of content won't ever make it onto the Internet without copyright protection" laws and technology, he said.

The House bill, HR 2441, had been scheduled for a vote on May 22 by Rep. Carlos Moorhead's intellectual property panel of the House Judiciary Committee. That vote was postponed and had not been rescheduled as of press time. A House staffer said last week that the panel is waiting for chairman Moorhead to schedule the bill for a vote. Moorhead, a California Republican who will retire in November, has said he wants the bill completed by the end of the congressional session in early October.

"That's the goal, but there is a ways to go," said David Joergenson, Moorhead's spokesman. "If it does not go, [Moorhead] won't go into a month-long funk," he said.

The Senate bill, S 1284, was drafted by Sen. Patrick Leahy, D-Vt., and Sen. Orrin Hatch, R-Utah, the chairman of the Senate Committee on the Judiciary. Hatch said recently that he planned to hold more hearings on the bill before considering a vote. Both bills were derived from a white paper on copyright reform by the National Information Infrastructure Task Force, headed by the Department of Commerce.

Initially, the bills demanded that the on-line and communications companies be held responsible for on-line theft of intellectual property. But executives from the on-line industry said they couldn't monitor their networks to detect thefts, and the threat of lawsuits would stymie the industry's growth.

During negotiations by Moorhead's subcommittee over the last few months, the on-line and communications companies won several major concessions. For example, telephone companies that merely transmit data without altering or adding data won't be liable if the data includes stolen intellectual property.

Also, on-line companies will escape many lawsuits if they quickly cut off stashes of stolen property, such as pirated software found at a World Wide Web page. Copyright owners will be responsible for finding the stashes and for altering the on-line companies. Also, on-line companies won't be liable if their customers transmit stolen intellectual property via private e-mail.

"From the on-line perspective, the [bill] has come a long way," said Brian Ek, a spokesman for Prodigy Services Co., White Plains, N.Y.

However, the on-line industry needs additional language to protect itself from lawsuits, said Bruce Joseph, an attorney at the Washington firm of Wiley, Rein, Fielding who is working under contract for Prodigy. For example, the bill should bar direct liability lawsuits against on-line companies, he said.

This change is needed because some judges have concluded that Internet servers create illegal copies of software during transmission from one computer to another.

Another battle is taking place over section 1202 of the bill, which states rules for the electronic anti-theft devices being developed by copyright owners. Section 1201 bars companies from selling products designed to decipher the cyberspace locks that prevent illegal copying or the copying of identification labels used to show who owns a digital picture or a software program. "That's where we really are focusing now," said Raffetto.

But the measure is opposed by the Home Recording Rights Coalition, a coalition sponsored by the manufacturers of video recorders.

The copyright owners won't define the technology they develop to label and protect their intellectual property. Without a carefully written law, the manufacturers would be exposed to lawsuits if they did not keep pace with anti-piracy technology developed by the intellectual owners.

The threat of lawsuits could prevent manufacturers from building videocassette players, said Ruth Rodgers, the association's executive director. The legislation "does not give the [manufacturing] industry any standards to go by" when developing new products, she said.

Without an agreed standard, manufacturers may be held liable for copyright violations if their Internet servers or VCRs can't include the newest copyright protection devices that will be developed by the copyright owners, said Joseph.