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LEGAL ASPECTS OF DIGITAL RIGHTS MANAGMENT IN EUROPE

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    LEGAL ASPECTS OF DIGITAL RIGHTS MANAGEMENT
                     IN EUROPE

                                       By Markus Schneider

                                     Markus@CTI.DTU.DK


This paper is written on the assumption that a minimum level of copy right protection is
needed. Thus, the discussion in the paper focuses on the allocation of rights and
obligations associated with copy rights, and does not question the very existence of copy
rights per se.

In the discussion about copy rights and parties thereto concerned, it is important to
remember that – in today‟s world – the value of the copy right is generally not realized by
the creator of the work, but by the distributor and producer (e.g. record labels, film
studios). Hence, the profits derived from the success of a work are to a substantial degree
not received by the creator, but rather the producing companies. Consequently, “copy
right holder” often refers to companies deriving benefits from the usage, management
and enforcements of those rights.

     1. General Observations

             a. Economic Value of Intellectual Property Rights

Besides cultural, social and technological aspects influencing the adoption of an
Intellectual Property Rights (IPR) policy, traditionally, considerable consideration has
been given to the economic value of an IPR. Thus, one objective of intellectual property
legislation – as an implementation of IP policy – has always been to provide an incentive
for the creation of and investment in new works (such as music, films, media, software,
broadcasts). 1 Consequently, from an economical point of view, an appropriate legal
framework should – among other things – seek to maintain and foster investment in the
content creation sector, and to ensure that the creator of (or investor in) content work is
(a) protected from unauthorized exploitation (i.e. piracy and counterfe iting), and (b)
receives a fair remuneration (return) for his work (investment). 2 More specifically with
regard to the digital age, it is argued that, since literary or artistic work in digital form can

1
   Thus, IPR contributes to improved competit iveness, employ ment and innovation. In Europe, the
contribution made by copyright-based goods and services to the GDP accounts for almost 6% and is
significant. Fro m a somewhat different view, intellectual property rights are the right holders‟ “currency”,
and constitute merchandise.
2
  In legal terms, the creator of a work is given a legal monopoly and an exclusive right to grant licenses for
the usage of his property for the creation of which he has invested time and money.
easily be reproduced and converted after distribution, unhindered and unauthorized
exploitation (e.g. piracy) of copy right protected work would – absent adequate protection
– in the long run have negative effects on the creation of such work, since its creation
requires substantial investments upfront which are regained afterwards through various
distribution channels.

             b. Relative Right

However, this economic value of an IPR and its “property nature” does not exclude the
imposition of obligations on the copy right holder for other grounds. While the copy right
holder should be protected from unauthorized exploitation and receive fair remuneration,
exceptional circumstances can justify restrictions of copy rights. For instance, once a
copy right protected product has legitimately been purchased, a strong case ca n be made
for the obligation of the copy right holder to allow the consumer to make a (converted)
copy for personal usage on other devices. 3 Other exceptions and limitations of copy rights
concern inter alia educational institutions, public libraries and the usage for certain
purposes (e.g. quotations) in order to foster the rapid distribution of information and
knowledge. 4

Thus, while the relative nature of the copy right is not in dispute, the crucial issue is how
to allocate rights and obligations, and weigh those contradictionary interests against each
other in order to create an IP legislation which takes all interests into due account.

             c. Why new IP legislation?

The issue how to balance the – primarily economic 5 – interest of the individual copy right
holder with other – social, cultural and economic – interests of the public is not new at
all. Technological progress has always been influencing the regulatory framework for
IPR and is constantly forcing legislators to take new approaches towards balancing those
contradictionary interests. Today, digitization, computerization, and global distribution
networks such as the Internet challenge the current IP framework.

More specifically, digital technologies have transformed the copyright environment and
have given rise to a potentially worldwide market for content producers and national
cultural products where distribution through networks offers enourmous economies of
scale and scope. On the other hand, digitization increases the risk of piracy and enables
the unauthorized reproduction at high quality. More concretely, in the analogue world,
reproduction resulted in losses of quality, was time consuming and quite costly. Today,

3
  Art 5 Sec 2 lit b EUCD g ive MS the possibility to allow consumer to make a copy for private usage.
4
  The copy right is restricted in those cases, as the circulation of information and access thereto is a
necessary precondition for the successful cooperation and development in science and education. If the
economic value for the individual right holder is given too much weigh in this balancing of interests,
negative effects on the further development of society as a whole are likely to result.
5
  For scientists, the reputation they gain as a result of their works is often more important than any financial
remuneration. Absent adequate protection, diffusion through digital networks does not only endanger the
“economic right” for compensation (of the publishing company), but also the “moral right” for recognition
(of the scientist).
with virtually no loss in quality, digital content can be reproduced with little effort, time
and investment. Furthermore, in the analogue world, once the product was sold,
unauthorized reproduction was difficult to effectively control and prohibit, 6 but remained
rather limited. With the emergence of the Internet as a worldwide communication
platform, unauthorized reproduction becomes not only easier, but also takes a new global
dimension. Especially the rapid expansion of broadband networks and their capacity to
transmit large volumes of multimedia content at high speeds calls for adjustments to be
made in respect of protection of digital content. For those reasons, content owners
advocate the usage of technological Digital Rights Management Systems (DRMS) to
enhance control over the usage of the purchased product, and to adjust the “IP
equilibrium” once again to a new environment.

Any new legal framework has to take these possibilities and dangers into consideration.
Due to these new possibilities, on a global scale it was recognized that IP legislation has
to adapt to the new digital environment. 7 Any legislator is called upon to evaluate those
new developments and readjust rights and obligations of all parties concerned as to
achieve equilibrium. 8

While for many it is clear that a new approach has to be taken, any result will be highly in
dispute. On the one hand, one might argue that the system of remuneration as it is in
existence today was sufficient as the content creation industry has prospered in the past
and nowadays successfully contributes to a considerable extent to the economy. If one
takes this view, then an increase in the rights (and profits) of the content owners coupled
with much more stringent control (and enforcement) of usage rules which themselves are
much more restricted, is difficult to justify by digital reproductio n facilitation alone. If,
on the other hand, one fears that the new technological reproduction and communications
possibilities do pose a serious threat to the existence of future content creation, even more
effective copy right protection is needed in order to secure long-term growth of the



6
  Remuneration, as a consequence, was only partly based on direct consumption of copy right protected
work, but also derived from indirect lev ies on hardware enabling the reproduction of such work (e.g.
printers). Consumers paid those levies which were then collectively used to remunerate creators of wo rk.
7
     On European level, the Co mmission prepared a Working document on DRMS
(http://www.europa.eu.int/informat ion_society/topics/mu lti/digital_rights/doc/workshop2002/drm_working
doc.pdf)            and          held          a          workshop            in        February          2002
(http://www.europa.eu.int/informat ion_society/topics/multi/digital_rights/events/index_en.htm).        As   a
follow-up to this first DRM Workshop, the Informat ion Society DG of the Co mmission has decided to
establish four working groups that will hold one meeting between July and December 2002. (see
http://www.europa.eu.int/information_society/topics/multi/dig ital_rights/events/index_en.htm). Similarily,
in the US, workshops on DRM are taking place (e.g. http://crypto.stanford.edu/DRM2002/index.ht ml).
8
  Besides technological progress which is similarly relevant on a global scale, specifically in Europe, the
goal of the Common Market demands the abolition of national differences in the fields of IP. Therefore, an
overriding objective of Eu ropean IP legislation has always been harmonization. Differences on national
level in the field of IP (especially with respect to the substance and its enforcement) hinder the achievement
of the Common Market. To illustrate the problem, differences in ways of ensuring that IP is respected - for
example, differences in systems of sanctions from one Member State to another - make any fight against
counterfeiting and piracy less effective as technology enables those engaged in piracy to take advantage of
those countries where their risks are the lowest.
sector, and the economy as a whole. The problem is that the outcome of those
developments and its actual impacts on investment 9 are highly uncertain.

More specifically with respect to the modernization of IP legislatio n and to an actual
implementation of those newly allocated rights and obligations of the copyright holder
and other parties concerned set forth on legislative level, one crucial question is how and
to what extent to utilize DRMS as new technological enforcement tools. On the one hand,
DRMS seem to offer a viable to solution to the problem of unauthorized exploitation, and
consequently, of fair remuneration. On the other hand, it causes different legal questions
to emerge. For instance, should legislation prescribe DRM standards in order to speed up
the introduction of DRM? When are DRM systems reliable enough to justify the
departure from funding through hardware levies in order to avoid double payments? How
do DRMS affect the individual‟s right for a private copy, and “fair usage” in general?
How can sufficient privacy protection be ensured ? To what extent should research results
in the increasingly important field of cryptology be prohibited as those results enable the
circumvention of copyright protection?

This paper briefly describes the European IPR legislation in general, and gives an
introduction to the content of the European Copyright Directive (EUCD). The focus lies
on DRMS, where associated legal problems are addressed in order to foster an objective
debate about this important topic.


    2. IPR LEGISLATION ON EUROPEAN LEVEL

             a. Introduction

IP legislation on European level is rather young. It was only in 1988 when the
Commission released a Green Paper on Copyright and Technology initiating copyright
legislation at European level. 10 A subsequent Commission Communication11 was adopted
in 1990 where the Commission published its working program in the field of copyright
and neighboring rights. In both documents the Commission examined the most urgent
problems requiring immediate action at Community level with a view to adjusting to the
emergence of new technologies. The Commission identified six areas, 12 where the
copyright laws of EU Member States should be harmonized so as to foster the



9
  For instance, in the context o f securing investments, it is of crucial importance to what extent downloaded
music or films are actually reducing sales thereof. It can be possible that a major part of those downloaded
files would have never been purchased at “offline” price levels. Consequently, the major argu ment of
securing investment looses much power.
10
    Green Paper on copyright and the challenge of technology - Copyright issues requiring immed iate action
COM(88)172, June 1988.
11
   COM (1990) 584 of 05.12.1990.
12
    Efforts have centered on the legal protection of computer programs and databases , satellite broadcasting
and cable transmission , rental right and lending right , certain related rights and the duration of protection.
functioning of the Common Market. On basis of those initiatives, 13 today European IP
legislation consists of eight Directives 14 (seven 1st Generations and one 2nd Generation)
which can be allocated to three pillars:

     o substance IPR legislation relating to rights (e.g. what kind of work is protected)
       and exceptions (e.g. copies for private use, exceptions for educational
       institutions),
     o enforcement of those rights (sanctions for piracy and trading with products
       enabling circumvention of copy protection), and
     o management (exploitation) of those rights.

In the first pillar, harmonization is developed the most as all of the 1st Generation
Directives have now successfully been implemented. With respect to harmonization
regarding enforcement, the Commission has published a Green Paper 15 on combating
counterfeiting 16 and piracy17 in the single market, and a follow-up Communication.18
Currently, the Commission is working on a proposal to harmonize laws against piracy
and counterfeit. Regarding the third pillar, 19 and more specifically with respect to DRMS
as the technological tool to administer copyrights, the new 2nd Generation EUCD obliges
MS to introduce a legal framework which effectively prohibits the circumvention of
copyright protection schemes.

             b. 1st Generation Directives

13
   Only the one Directive protecting topographics of semiconductor products was adopted before the Green
Paper                                              was                                             published.
(http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexap i!prod!CELEXnu mdoc&lg=en&nu mdoc=3198
7L0054&model=guichett)
14
   http://europa.eu.int/comm/internal_ market/en/intprop/docs/index.ht m.
15
   COM (1998) 569 of 15.10.1998. In this Green Paper the Co mmission notes that initiatives on IPRs have
so far focused essentially on harmonizing national legislation and on creating unitary rights at Community
level, and that, in view of the scale of counterfeiting and piracy, it is now necess ary to ensure proper
implementation not only of the legislation itself but of the rights and obligations of market operators
resulting from that legislation in the single market. This Green Paper marked the start of a wide -ranging
consultation of all the parties concerned, the MS and the institutions of the EU which aims to determine the
economic impact of counterfeit ing and piracy in the single market, to assess the effectiveness of the
relevant legislat ion and to propose a number of initiat ives to improve the situation.
16
    Counterfeits are copied and packaged to resemble the original as closely as possible. The original
producer's trademarks and logos are reproduced in order to mislead the consumer into believing that they
are buying an original product.
17
   Piracy is the unauthorized duplicat ion of an original record ing for co mmercial gain without the consent
of the rights owner. The packaging of p irate copies is different fro m the original.
18
   COM(2000) 789 of 30.11.2000. In th is Co mmunicat ion the Co mmission puts forward an action plan
announcing inter alia a proposal for a directive aimed at strengthening the means for enforcing intellectual
property rights and defining a general framework for the exchange of informat ion and administrative
cooperation, training activities for officials of law enforcement authorities and public informat ion and
awareness activities and, in the longer term, harmonizing the minimu m thresholds for criminal sanctions.
19
   The management and licensing of IPRs, both indiv idual and collective, has to be operational for the
Internal Market to function properly. An operational management of rights is of particular importance in
the context of the new Informat ion Society services. The discussion about harmonization of th e third pillar
started with the 1995 Green Paper on Copyright in the Information Society and resulted in various follow-
ups until the EUCD was finally adopted in 2001.
In the wake of the 1988 Green Paper, six sectorial Directives harmonizing national
copyright laws of the Member States were adopted according to the areas identified as
requiring harmonization. 20 Those Directives cover the legal protection of:

     o   computer programs (1991), 21
     o   rental rights, lending rights and the main neighboring rights (1992), 22
     o   satellite broadcasting and cable retransmission (1993), 23
     o   the duration of protection of authors‟ rights and neighboring rights (1993), 24
     o   the databases (1996), 25
     o   and resale rights of artists (2001). 26

All EU Member States have now implemented these first six acquis communautaire
Directives into their national laws. Considerable harmonization has been achieved on
rights and exceptions through those Directives. By providing a high comparab le level of
copyright protection in all Member States, this harmonization has created a climate
conducive to innovation and creativity while making it easier for these rights to be
exercised throughout the Community. 27

Those Directives are “first generatio n” Directives, since they address rather sectorial
issues. For example, they apply only to certain categories of works (software, databases)
or rights (rental rights), they focus on a particular situation (satellite broadcasting, cable
retransmission) or address a particular feature of protection (duration). Those Directives
do not, however, provide an adequate basis for completing the single market. The
Commission has therefore decided to foster harmonization of national laws in different
areas where due consideration is given to technological changes that are taking place.


20
   At least two of these Direct ives have already a close link to the digital world : the Soft ware Direct ive fro m
1991 and the Database Directive fro m 1996 with its comb ination of copyright and sui generis protection.
Generally, only work which has some creativ ity is protected by law. The comp ilat ion of databases is
usually not requiring creative work. Thus, absent special – sui generis – protection, the owner of databases
would have no means to prohibit unauthorized reproduction of its content.
21
   Council Directive 91/ 250/ EEC of 14 May 1991 on the legal protection of computer programs
22
    Council Directive 92/ 100/ EEC of 19 November 1992 on rental right and lending right and on certain
rights related to copyright in the field of intellectual property
23
    Council Direct ive 93/83/ EEC of 27 September 1993 on the coordination of certain rules concerning
copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission
24
    Council Directive 93/98/ EEC of 29 October 1993 harmonizing the term of protection of copyright and
certain related rights
25
    Directive 96/9/ EC of the European Parliament and of the Council o f 11 March 1996 on the legal
protection of databases
26
   Direct ive 2001/ 84/ EC of the European Parliament and of the Council of 27 September 2001 on the resale
right for the benefit of the author of an original work of art . According to this Directive, authors of an
original work of graphic or plastic art – or his/her heirs or other beneficiaries – are entitled to receive a
percentage of the sale price of a work when it is resold by art market professionals, such as salesrooms, art
galleries and, in general, any dealers in works of art. The proposal harmonises the payment of the resale
royalty Co mmunity-wide for all protected works of visual arts.
27
    Less harmonization has been achieved in respect of public lending r ights and some provision of the
Duration directive.
Before this background, the Commission drafted the European Copyright Directive
(EUCD).



             c. 2nd Generation Copy Right Directive (EUCD)
The EUCD 28 is different from 1st generation Directives in that it harmonizes several
essential IPRs of authors, performers, phonogram producers, film producers, and
broadcasting organizations. The Directive has the most horizontal impact of all acquis
communautaire Directives, as it applies without prejudice to existing provisions
contained in all 1st Generation Directives.

Besides harmonization, the main purpose of the Directive is to bring IP legislation in line
with the Information Society and technological developments by structuring copyright
protection in the new environment. 29 The Directive establishes a framework which
balances incentives to create and distribute content with mechanisms which ensure
appropriate revenue through the exercise of the rights, and at the same time serves the
interest of the public by requiring access to certain copy right protected work and for
certain types of usage.

Lastly, the Directive obliges MS to transpose into national law the main international
obligations arising from the two treaties on copyright and related rights 30 adopted within
the framework of the World Intellectual Property Organization (WIPO) in 1996. 31 Those
treaties demonstrate that the world is increasingly growing together making
harmonization with respect to IP legislation on international level necessary.

             d. Content of EUCD

The EUCD complements the existing legal framework for digital products and services,
and covers inter alia reproduction rights, the right of communication, distribution rights,
provisions regarding exception to those rights, sanctions in case of infringements, 32 and
protection of technological measures. The Directive also obliges the Commission to
periodically submit a report on the application of the Directive, and more specifically on

28
    Direct ive 2001/29/ EC of the European Parliament and of the Council of 22 May 2001 on the
harmonizat ion of certain aspects of copyright and related rights in the information society
29
   In 1996 the Commission adopted a communication concerning the follow-up to the Green Paper on
copyright and related rights in the informat ion society (http://europa.eu.int/scadplus/leg/en/lvb/l24152.ht m)
This communication presents the results of the consultation of interested parties and puts forwards priority
issues for legislative action in order to establish fair rules throughout the Community governing the
protection of copyright within the context of the single market. Subsequently, the Commission adopted the
EUCD.
30
   Those treaties are the Copyright Treaty (WCT) and the Performers and Phonograms Treaty (WPPT).
31
   The Internal Market Council of 16 March 2000 had adopted the decision to adhere to the two WIPO
Treaties on behalf of the European Co mmun ity. http://europa.eu.int/scadplus/leg/en/lvb/l26054.ht m
32
   Sanctions if IPR are infringed have to be effective, proportionate and dissuasive. The Directive, however,
does not prescribe criminal sanction in case of a violat ion.
the application of the Articles relating to the exceptions and limitations, the technical
measures employed by the MS and the sanctions and remedies introduced.

As for the specific rights contained in the EUCD, Article 2 expressis verbis obliges MS to
grant the creator of a copy right protected work the exclus ive right to authorize or
prohibit any reproduction. Article 2 also specifies the acts of reproduction covered by
exclusive rights as to comprise direct or indirect, temporary or permanent reproduction
by any means and in any form, in whole or in part. 33

With respect to the right of communication, Article 3 states that copy right holder have
an exclusive right to authorize or prohibit any communication to the public of the
originals and copies of their works. This right entails the making available to the public
of their works in such a way the public may access them from a place and at a time
individually chosen by them (e.g. Internet). This provision also covers the on- line
demand services but it is distinct from and complementary to the right applicable to
broadcasts and does not cover private communications.

As for the distribution right, Article 4 harmonizes for authors the exclusive right of
distribution to the public of their works or copies thereof. It stipulates that this
distribution right is exhausted where the first sale or other transfer of ownership in the
Community of a copy is made by the right holder or with his consent. This provision does
not apply to services (on- line services included).

Crucially, the Directive in Article 5 lays down a number of mandatory 34 and non-
mandatory exceptions to the right of reproduction and the right of communication.

Inter alia, Art 5 Sec 2 EUCD contains non- mandatory exceptions exclusively relating to
the rights of reproduction concerning reprography, private use, educational institutions
and broadcasts made by social institutions. Common to those exceptions is their non-
economic nature. However, in most cases, MS have to determine “fair compensation”
and ensure that the right holders actually receive it.

With respect to exceptions to the right of reproduction and communication to the public,
Art 5 (3) EUCD lists in lit (a) through (o) 15 instances (e.g. researching purposes, non
commercial use for the benefit of disabled persons, criticism or review use for public
security purposes or performance of an administrative or judicial procedure, quotations
for various purposes,…) which can be foreseen by national legislation. However, MS
cannot provide for additional exceptions. Common to all is their non-commercial usage,
and consequently the non-obligation to pay remuneration. Most importantly, those


33
   The protection covers (a) authors and their works; (b) performers and fixations of their performances; (c)
phonogram producers and their phonograms; (d) producers of the first fixat ions of films, in respect of the
original and copies of their films; (e) broadcasting organizations and fixat ions of their broadcasts, whether
those broadcasts are transmitted by wire or over the air, including by cable or satellite.
34
   Mandatory exceptions (Art 5 Sec 1 EUCD) exist for the right of reproduction in respect of certain
temporary acts of reproduction which are integral to a technological process and have no economic
significance (e.g. caching during transmission, web browsing).
exemptions give MS the – limited – ability to balance in legislative form the interests
between the right holder and the public.




     3. DRM LEGISLATION

Besides provisions relating to substance IP legislation, the EUCD contains a Chapter III
entitled Protection of technological measures and rights-management information
regarding the third (management) IP pillar. 35 It obliges MS to enact effective legislation
against the circumvention of any technical protection measure, and the removal DRM
protection. In this respect, the EUCD stresses the importance of compatibility but does
not prescribe certain standards. Rather, is addresses the industries to develop open,
interoperable and compatible standards for DRMS.

Generally, two facts have to be taken into account when formulating a new IP policy
regarding DRM. Firstly, copy right management can be conducted more efficiently than
in the analogue world. Secondly, in the past remuneration was not based on direct
compensation, but also on indirect hardware levies. While those levies burdened the
manufacturers as they made reproduction devices more expensive, the introduction of
mandatory protection devices in their products are another factor that increases their
costs. 36

             a. What is DRM? 37

There are various DRM standards and functioning methods, none of which is established
yet. DRM means the use of technologies (a) to identify copy right protected digital
content, (b) to set usage rules, and (c) to enforce these usage rules, which can be based on
contract or law. 38 Hence, DRMS are forming an important complementary part to the
legal framework as they are intended to facilitate the legal distribution of digital content.
The success of DRMS depends on two factors: Legal framework and widespread
availability of operational technology.


35
   Based on the 1996 WIPO treaty, Chapter III EUCD resembles Section 1201 of the DMCA.
36
    The broadcasting technology is similar to the SDMI technology for music and CSS encryption
technology for DVDs.
37
        Various       EU      Docu ments      relating       to     DRMS       can      be     found        on
http://europa.eu.int/information_society/topics/multi/dig ital_rights/documents/text_en.htm. The issue of
rights management, or trading in rights, had not really been tackled at European Community level until the
early 1990s. With the advent of the Informat ion Society, it formed part of the consultation process initiated
by the 1995 Green Paper on Copyright in the Information Society. The consultations revealed indications
for a need to harmonize some features of collect ive management at EC level.
38
   For examp le, in the broadcasting area, the FCC init iated a hearing whether or not to oblige digital TV
vendors to implement the Broadcast Flag technology in order to prevent unauthorized reproduction digital
TV. Viewers would only be able to make an analog or encrypted digital copy of the program they were
watching.
In principle, Digital Rights themselves are not different from IPRs that are granted in the
analogue world. The prime advantage of DRM is that more than in the analogue world,
right holders are in a position to control the usage of their property. Generally, one can
distinguish between individual and collective rights management. 39 As for the former,
confirmed by the new EUCD, it is presumed that the individual right holder has the
freedom to deal with his rights. In this context, the role of – national – contract law is
crucial. Regarding collective management, one can say that for all aspects of rights
management, policy maker‟s rather than individuals should give some guidance.

             b. DRM provisions in the EUCD40
Within the European IP legislation framework, DRM issues are dealt with in the EUCD,
and more specifically in its third Chapter. Articles 6 and 7 EUCD provide a legal
framework for the protection of technological measures. Importantly, the EUCD seeks to
harmonize MS legislation in respect right of DRMS as today many aspects (e.g.
distribution, relevant applicable law, licensing) are left to MS laws. Though the EUCD
does not introduce DRMS standards, it supports the use of DRMS by protecting technical
measures, and by requiring MS to take into account the application and non-application
of technological measures when providing for fair compensation in the context of the
private use exception for which fair compensation is required.

                      i. Article 6 EUCD

Article 6 EUCD obliges the Member States to provide legal protection against the
circumvention of any effective technological measures covering works or any other
subject- matter. 41 Article 6 Sec 1 EUCD states that MS “shall provide adequate legal
protection against the circumvention of any effective technological measures, which the
person concerned, carries out in the knowledge, or with reasonable grounds to know, that
he or she is pursuing that objective.” Additionally, Article 6 Sec 2 EUCD extends this
legal protection to preparatory acts such as the manufacture, import, 42 distribution, sale or
provision of services for works with limited uses. More concretely, MS shall provide
adequate legal protection devices, or the provision of services which “(a) are promoted,
advertised or marketed for the purpose of circumvention of, or (b) have only a limited
commercially significant purpose or use other than to circumvent, or (c) are primarily

39
   Collective management is the exercise of copyright and related rights by organizations acting in the
interest and on behalf of the owners of rights.
40
   http://europa.eu.int/scadplus/leg/en/s06020.ht m
41
   There is a proposal for a new bill in the US Judiciray Co mmittee which would give media co mpanies the
rights to disrupt peer-to-peer networks that they believe are being used for piracy of copyrighted works.
The bill significantly limits the rights of those whose computers are damaged as a result of such intrusion,
which could be done by any methods short of file deletion. (http://news.com.co m/ 2100-1023-
945923.ht ml?tag=cd_mh).
42
   For examp le, the U.S. Customs Service has blocked the shipment into the U.S. of a cable (decryption
chip or algorith m), fro m the Hong Kong company Lik-Sang, that connects the Sega DreamCast with a PC
so that software developers can write code for the gaming console. Customs claimed that the cable vio lates
the DMCA anti-circu mvention provision because it allows the DreamCast console's memory to be
uploaded to a PC. Sega has denied that it was the source of the complaint to the Customs Service.
designed, produced, adapted or performed for the purpose of enabling or facilitating the
circumvention of, any effective technological measures.” 43 Thus, it is not only the actual
violation of a copy right that constitutes an infringement, but also the creation of
technological tools which potentially can violate copy rights.

As for relevant terms, “technological measures” refers to “any technology, device or
component that, in the normal course of its operation, is designed to prevent or restrict
acts, in respect of works or other subject-matter, which are not authorized by the
rightholder of any copyright or any right related to copyright”. Furthermore,
technological measures shall be deemed “effective” where the use of a protected work or
other subject- matter is controlled by the rightholders through application of an access
control or protection process, such as encryption, scrambling or other transformation of
the work or other subject- matter or a copy control mechanism, which achieves the
protection objective. 44

Section 4 provides for the obligation of MS to ensure that rightholder make available to
the beneficiaries the exceptions and limitations as contained in Article 5. In the absence
of voluntary measures taken by rightholders, MS should ensure the implementation of an
exception or limitation for those who may benefit from it. MS may also take such
measures with regard to the exception for private use, unless reproduction for private use
has already been made possible by rightholders.

                     ii. Article 7
Secondly, Article 7 EUCD relates to obligations concerning rights- management
information. The rights management of a protected work or other subject- matter
includes information relating to the work or subject- matter and the protection scheme.
The Directive lays down provisions protecting the sc heme from any unauthorized
alterations or distribution. More concretely, Art 7 (1) EUCD obliges MS to “provide for
adequate legal protection against any person knowingly performing without authority any
of the following acts: (a) the removal or alteration of any electronic rights- management
information; (b) the distribution, importation for distribution, broadcasting,
communication or making available to the public of works or other subject- matter …
from which electronic rights- management information has been removed or altered
without authority, if such person knows, or has reasonable grounds to know, that by so
doing he is inducing, enabling, facilitating or concealing an infringement of any
copyright…” as for the definition of “rights-management information”, it “means any

43
    Article 6 Sec 2 EUCD. Similarilyi, Sect ion 1201 of the UD DCMA reads as follows:
„„(2) No person shall manufacture, import, offer to the public, provide, o r otherwise traffic in any
technology, product, service, device, co mponent, or part thereof, that- (A) is primarily designed or
produced for the purpose of circumventing a technological measure that effectively controls
access to a work protected under this title; (B) has only limited commercially significant purpose or
use other than to circumvent a technological measure that effectively controls access to a work protected
under this title; or (C) is marketed by that person or another acting in concert with that person with that
person‟s knowledge for use in circumventing a technological measure that effectively controls
access to a work protected under this title.”
44
   Article 6 Sec 3 EUCD.
information provided by rightholders which identifies the work... the author or any other
rightholder, or information about the terms and conditions of use of the work or other
subject- matter, and any numbers or codes that represent such information.”



                c. Key Issues for Discussion

This last section raises four issues that are becoming more and more important in the new
digital environment.

                         i. Fair Usage
In an increasingly converging environment where digitalization and computerization
allow consumers to easily reproduce and convert purchased products into various
formats, the question arises to what extent DRM should limit those new possibilities, and
restrict the term “fair use”. Today, for example, some record labels made CDs which are
not usable on computers in order to prevent illegal copying. The question in this context
is whether an user should have the right to listen to his legitimately purchased product on
another device? Other rights can be put forward:

1. Users have the right to "time-shift" content that they have legally acquired.
This gives you the right to record video or audio for later viewing or listening. For
example, you can use a VCR to record a TV show and play it back later.
2. Users have the right to make backup copies of their content.
This gives you the right to make archival copies to be used in the event that your original
copies are destroyed.
3. Users have the right to use legally acquired content on the platform of their
choice.
This gives you the right to listen to music on your Rio, to watch TV on your iMac, and to
view DVDs on your Linux computer.
4. Users have the right to translate legally acquired content into comparable
formats.
This gives you the right to modify content in order to make it more usable. For example,
a blind person can modify an electronic book so that the content can be read out loud.
5. Users have the right to use technology in order to achieve the rights previously
mentioned.
This last right guarantees your ability to exercise your other rights. Certain recent
copyright laws have paradoxical loopholes that claim to grant certain rights but then
criminalize all technologies that could allow you to exercise those rights. In contrast, this
Bill of Rights states that no technological barriers can deprive you of your other fair use
rights. 45



45
     http://www.d igitalconsumer.org/bill.ht ml.
From a legal perspective, one question relates to the nature of those “user rights” – should
it be an affirmative right of the consumer, or merely an exception to the exclusive right of
the copy right owner which serves as a defense in cases of infringements? 46

                     ii. Standardization
The EUCD states that “compatibility and interoperability of different systems should be
encouraged”. In addition, the EUCD provides that protection mechanisms should not
“prevent the normal operation of electronic equipment and its technological evelopment”.
However, the directive is limited in such references and does not create any legal
framework for standardization at EU level.

In order to avoid that the emergence of incompatible standards hampers the achievement
of this desired interoperability, dialogue and consensus-building at European level should
be encouraged. The European standards bodies (CEN/ISSS) currently are evaluating the
need for and possibilities for standardization, and plan to investigate the available
technologies and the extent to which their use is already standardized by industry
consortia or may need to be standardized.

                    iii. Compensation
With the introduction of DRMS a second source of remuneration for copyright holders
can lead to double compensation as levies on hardware facilitating reproduction are still
in place. The question is when DRMS are effective enough to depart from hardware
levies and rely solely on DRMS.

With respect to “fair usage”, the Directive expressively states that “fair remuneration”
determination for private usage has to take the (non-)application of DRMS into account.47
As those exceptions are non- mandatory, differences on national level will still exist in the
future.
                    iv. Criminal Sanction for breach of Article 6 (1) and (2)?

As for the nature of sanctions in case of an infringement, the EUCD speaks only of “legal
protection”. Thus, it gives MS the possibility to introduce criminal action for breaching
Art 6 (1) and (2) EUCD. 48 Many expect that the majority of MS will only introduce civil
actions, but not criminal. Before the goal of harmonization, one of the aims of the EUCD
is to standardize laws across Europe, but in practice, the directive may lead to greater


46
    In the US, currently there are t wo bills in the senate which would call for modification of the
anticircu mvention provision of DMCA 1201 so that it explicitly permits circu mvention of copy protection
schemes for fair-use purposes, such as rendering media on another device that the consumer owns.
47
   Recital 35, A ricle 5.2.b.
48
   The US Dig ital M illen iu m Copyright Act (DM CA) imposes express criminal sanctions against those who
destroy rights management information. Most notably, in 2001 the Russian cryptographer Dmitri Sky larov
was arrested by USA authorities and held in custody for a breach of the DMCA. Jon Johansen, who
developed the DeCSS DVD circu mvention program, will likely receive no relief.
diversity. More concretely, the EUCD creates – at least – the means for rights holders to
take civil action to prevent the removal of DRM.