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Protecting Copyright and Innovation in a Post-Grokster World

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Grokster Ruling Adds to Content Community’s Expanding Legal Toolkit to Limit Lawful Activities and Restrict Innovation, Says CEA’s Shapiro

In Wake of Grokster, Copyright Holders Should Not Seek Further Restrictions on Technology and Consumer Rights

ARLINGTON, VA, Sept. 28, 2005 – Content creators do not need any additional legal tools to restrict technology, innovation and consumer rights in the wake of MGM v. Grokster, stated Consumer Electronics Association (CEA) President and CEO Gary Shapiro in testimony delivered today before a congressional committee. Testifying on behalf of CEA and the Home Recording Rights Coalition (HRRC), Shapiro made his comments before a hearing held by the Senate Judiciary Committee exploring “Protecting Copyright and Innovation in a Post-Grokster World.”

The Committee convened the hearing to explore the impact of the recent Supreme Court ruling in Grokster. In this case, the Court specifically found that peer-to-peer networks can be held liable for copyright infringements committed by users.

Shapiro noted that the content community continues to seek additional controls despite winning the Grokster case and enjoying the legislative gains of recent years.

“Right now,” Shapiro reported, “the recording industry is approaching another Senate committee with a proposal to give the FCC broad power to impose design requirements on new digital radios. Unlike the TV ‘broadcast flag,’ the proposal from the Recording Industry Association of America (RIAA) is not aimed at mass, indiscriminate, anonymous distribution of content over the Internet. The RIAA digital radio proposal is aimed squarely at limiting noncommercial recording entirely within private homes and automobiles.

“Just last week,” Shapiro added, “the motion picture industry announced it is forming an exclusive consortium called ‘MovieLabs’ to examine and license approved copy protection technologies. This consortium of six major motion picture companies gives them unprecedented market power over innovation and creativity. Centralizing licensing in a body owned and controlled solely by the movie industry is a powerful weapon in the wake of Grokster – proprietors do not need additional weapons at this time.”

While the case at face value dealt with peer-to-peer file sharing, the implications of the ruling go far beyond the issue of peer-to-peer.

“In Grokster, the Court created an ‘inducement’ doctrine based on subjective intent,” testified Shapiro. “We are concerned about the future interpretation of this doctrine in the lower courts and its impact on innovation, technology creativity and consumers’ established fair use and home recording rights.

“The use of technology to shift content in time, place, form and structure is redefining our culture and spurring new forms of creativity,” Shapiro noted. “On any typical day, the wired family sends news to friends over the Internet; rips songs from CDs to portable players; downloads information from the Web to be used in school and business reports; and copies information from home repair, cooking or shopping websites. Teenagers take images, sounds and text, and weave them together in unpredictably creative and innovative ways. Yet, all of these increasingly commonplace activities involve conduct that an overly broad interpretation of the Grokster case could prohibit.”

Shapiro told the Committee that the Grokster ruling makes it difficult for a new product or technology to garner the funding necessary to come to market.

“Before developing a product in the Post-Grokster environment, an innovator or entrepreneur will have to persuade everyone–from outside bankers to inside counsel – that it can be sold without risk of a lawsuit. Venture capital migrates away from risky, litigation-prone areas,” stated Shapiro.

Concerns over the impact of Grokster are magnified by the fact that copyright law has repeatedly been changed to strengthen the rights of copyright owners while narrowing the rights of consumers and technology entrepreneurs. Terms of copyright protection are longer, penalties of infringement are harsher and the Digital Millennium Copyright Act (DMCA) makes it illegal to create technologies which circumvent a copyright protection scheme.

In closing, Shapiro said, “If the content community insists that they need further protections under the law, then we ask at a minimum that a clear statement of manufacturers and consumer protections be part of the equation. To this end, in the House of Representatives, CEA and HRRC continue to support H.R. 1201, a bill that would codify the doctrine established in the landmark Betamax case. Namely, products that have substantial non-infringing uses are legal even if they can be used for copyright infringement.”

About HRRC
The Home Recording Rights Coalition, founded in 1981, is a leading advocacy group for consumers’ rights to use home electronics products for private, non-commercial purposes. The members of HRRC include consumers, retailers, manufacturers and professional servicers of consumer electronics products. Further information on this and related issues can be found on the HRRC website, http://www.hrrc.org.

About CEA:
The Consumer Electronics Association (CEA) is the preeminent trade association promoting growth in the consumer technology industry through technology policy, events, research, promotion and the fostering of business and strategic relationships. CEA represents more than 2,000 corporate members involved in the design, development, manufacturing, distribution and integration of audio, video, mobile electronics, wireless and landline communications, information technology, home networking, multimedia and accessory products, as well as related services that are sold through consumer channels. Combined, CEA’s members account for more than $121 billion in annual sales. CEA’s resources are available online at http://www.CE.org, the definitive source for information about the consumer electronics industry.

CEA also sponsors and manages the International CES – Defining Tomorrow’s Technology. All profits from CES are reinvested into industry services, including technical training and education, industry promotion, engineering standards development, market research and legislative advocacy.


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