The written statement of Public Knowledge, Consumers Union and
Consumer Federation of America submitted to the Senate Judiciary
Committee for the hearing on S. 2560

COMMITTEE ON THE JUDICIARY UNITED STATES SENATE

HEARING ON

PROTECTING INNOVATION AND ART WHILE PREVENTING PIRACY

S. 2560, THE INTENTIONAL INDUCEMENT OF COPYRIGHT INFRINGEMENTS ACT
OF 2004

WRITTEN STATEMENT OF

GIGI B. SOHN, PRESIDENT
PUBLIC KNOWLEDGE

GENE KIMMELMAN, SENIOR DIRECTOR OF ADVOCACY
CONSUMERS UNION

MARK COOPER, DIRECTOR OF RESEARCH
CONSUMER FEDERATION OF AMERICA

JULY 22, 2004

On behalf of Public Knowledge, Consumers Union, and the Consumer
Federation of America, we are pleased to submit this written
testimony for the record of the July 22, 2004 hearing on “Protecting
Innovation and Art while Preventing Piracy” (An Examination of S.
2560, The Inducing Infringement of Copyrights Act of 2004).

Public Knowledge is nonprofit public interest organization that
seeks to ensure that citizens have access to a robust public domain,
an open Internet and flexible digital technology. Consumers Union,
publisher of Consumer Reports, is an independent, nonprofit testing
and information organization serving only consumers; its advocacy
offices and Consumer Policy Institute address the crucial task of
influencing policy that affects consumers. Consumer Federation of
America is a nonprofit association of 300 consumer groups,
representing more than 50 million Americans, that was established in
1968 to advance the consumer interest through research, education
and advocacy.

As representatives of consumer interests, our groups must
acknowledge the extent to which consumers have a stake in the
balances of rights built into our copyright-law framework. We all
benefit when creators create, and so we benefit from our copyright
law to the extent that it adequately provides incentives for
creators. At the same time, we also benefit from our copyright law
to the extent that it allows all of us to make the fullest possible
lawful use of copyrighted works. The consumer electronics revolution
and the digital revolution have given consumers immense new
opportunities to use copyrighted works lawfully, as well as to
create new works of our own. Consumers and society in general have
greatly benefited from the rapid pace of technological development,
ranging from the VCR and TiVo to the personal computer and the
Internet. So, in addition to having a stake in the proper
functioning of copyright law, consumers also have a stake in
technology policy that not only allows but also promotes innovation.
Because S. 2560 in its current form will chill innovation — and in
doing so limit consumer choice — by putting technology makers and
vendors at greater risk of expensive litigation, our
consumer-advocacy organizations must oppose it.

I. Introduction and Summary

Although we understand that some stakeholders are now insisting on
quick Congressional intervention that would amend our copyright law
in order to target peer-to-peer services, they have not made the
case for new legislation, certainly not for quick legislation, and
especially not for the legislative approach outlined in S. 2560.

There is, of course, no particular need for a “rush to judgment” in
considering this legislation. The courts are still developing the
appropriate legal framework for determining secondary infringement
liability on peer-to-peer networks. The prospect of disagreement
among the circuits or the current state of the law as to secondary
liability does not in itself necessitate immediate legislative
action. Our courts, including the Supreme Court, have untangled many
a knotty problem in copyright law, including the problem of whether
to protect “sweat of the brow” investments in collections of data
(Feist v. Rural Telephone) and - particularly relevant to this bill
- whether technology that can used for infringement should entail
liability for that technology’s maker or provider (Sony Corp. v.
Universal City Studios).^[1] It would be a
mistake for Congress to assume the courts will necessarily draw the
wrong conclusions about how to respond to peer-to-peer file-sharing
and other changes in the technological landscape.

Although there is no compelling reason yet for Congress to intervene
on these issues, we believe that, should Congress ultimately decide
to intervene, it will find a better starting point for debate in the
alternative proposal outlined by IEEE in the appendix to their
testimony. As it currently stands, S. 2560 is a profoundly flawed
measure that creates more confusion than it resolves, and that
imposes a significant risk of litigation that would effectively
chill the development and deployment of new technologies generally.

Our substantive testimony consists of two main arguments:

• First, S. 2560 assumes that those who
  provide technologies and tools that can be used for infringement
  ought to face liability for the technology regardless of their
  non-infringing uses, and that our copyright law must be amended to
  protect the content industry from technology that “induces”
  unlawful conduct. We believe this approach is misconceived.
• Second, we believe the legislation as
  introduced is seriously flawed and sweeps too far in ways that
  puts reasonable consumer expectations of new consumer-electronics
  products, new digital-technology products, and innovative products
  and services in general, at risk.

II. S. 2560 Penalizes Technologies Rather than Unlawful Actions

Most technologies can and will be used by some to harm the legal
interests of others. This longstanding principle is true of most
digital technologies, and in particular of the Internet and its
peer-to-peer functions, which date from the creation of the
Internet. At the heart of S. 2560 is the belief that certain digital
technologies, by themselves, “induce” unlawful behavior and, in
particular, copyright infringement. Without expressly saying that
such technologies should themselves be categorically illegal
regardless of their lawful uses, the language of S. 2560 allows
courts to interpret “intentional inducement” so that any use of the
technologies that copyright holders find troubling can be deemed a
predicate for “inducement” liability.

The notion that otherwise useful technologies, rather than the
behavior of those who use it unlawfully, should be discouraged is
strangely at odds with other approaches to the dynamic that exists
in other parts of our law and public policy. Generally our society
allows individuals to own and use most products and technologies, so
long as they are used lawfully. It is difficult to see why new
technological tools, products, and services that may be used for
copyright infringement by some individuals should be said to
“induce” unlawful behavior in consumers generally.

The presumption should be that consumers are acting lawfully with
new digital tools, just as the presumption has always been that
consumers with access to photocopiers are not being “induced” to
infringe.

III. S. 2560 is Seriously Flawed as Written

Even if we were to accept the premise behind this legislation, and
even if we were to accept that the time is right for legislating, we
maintain that the bill is so seriously flawed that Congress should
not considered it as written.

The most serious flaw with the legislation is that it would erode
(and perhaps effectively overturn) the Sony decision and, as a
result, place in jeopardy the development of any new consumer
electronics products for the foreseeable future. In replacing the
“substantial non-infringing use” standard from the Sony case with a
far more vague “reasonable person”-based standard, Congress would
put technology makers in the position of trying to guess whether any
products they might make could conceivably be deemed to have induced
copyright infringement.

The Sony standard has for the last 20 years provided the basis not
only for the growth of the consumer electronics industry, through
the further development of the VCR, CD players and recorders, and
DVD media and players, but also for computer peripherals and devices
such as the iPod, which is a hybrid of the music and computer
worlds. Ironically, the content industry also has been one of the
biggest beneficiaries, as the VCR-based segment of the movie
audience industry now provides a little more than half of
Hollywood’s income. According to Newsweek, consumers spent $60
million more on the DVD for “Finding Nemo” than they spent on seeing
the movie in theatres.

That growth in income signifies progress for both the content
industry and consumers. But S. 2560 would put all of that progress
at risk by establishing new, lower standards of liability that would
essentially allow content companies to sue a technology or
electronics company over any new device or service about which it
was concerned, so long as it might be said that the device or
service “induces” infringement.

This nominal attempt to import the concept of “inducing” copyright
violations from patent law into copyright law has resulted in a new
concept that does not do justice to either area of law. The “active
inducement” concept in patent law requires proof that someone has
actively marketed a device or instructed someone on how to infringe
a particular patent. That is a concept wholly at odds with the
“reasonable person” standard in S. 2560 or with its creation of
liability for “inducement” even in the absence of knowledge of a
specific copyright that is being infringed.

In short, the downside of S. 2560, as introduced, is that it creates
immense financial risks for any innovator who might be deemed to
have “induced” infringement merely by introducing a new technology
into commerce, knowing that it is possible the technology might be
used unlawfully, even though the technology was designed and
manufactured to provide consumers with lawful uses. The resulting
chilling effect will harm consumers by discouraging innovators from
bringing new digital technologies and products to market.

We believe the alternative proposal offered by IEEE is instructive
in this regard. While we do not concur with IEEE that legislation is
necessary, we believe that the language proposed by IEEE in the
appendix to its testimony comes closer than the current bill to
defining a balanced starting point for discussion about whether to
include a new “inducement” liability in our copyright framework.

IV. Conclusion

We thank the Judiciary Committee for giving Public Knowledge,
Consumers Union, and the Consumer Federation of America the
opportunity to submit testimony regarding the need for, and likely
unwanted consequences of S. 2560. We wish at this point to recommend
also the testimony of Gary Shapiro on behalf of CEA and HRRC -
testimony that eloquently explores at greater length the legal and
conceptual flaws that face the current version of S. 2560. We again
note that, while we disagree with IEEE’s prescription for amendment
of our copyright law, we nevertheless must commend IEEE for
developing an alternative proposal that attempts to address a number
of the concerns we raise here. Finally, we stand ready to engage in
further constructive dialog with the Judiciary Committee and its
staff regarding S. 2560 and any other copyrighted-related proposal
that may affect consumers’ and citizens’ rights to lawfully use
copyrighted works and benefit from new technologies.

Respectfully Submitted,

Gigi B. Sohn
President
Public Knowledge

Gene Kimmelman
Senior Director of Advocacy Consumers Union

Mark Cooper
Director of Research
Consumer Federation America

1 We respectfully disagree with the Registrar of
Copyright’s expressed willingness to revisit the Sony case. In her
testimony before this committee, Marybeth Peters has suggested that
“it may become necessary to consider whether [Sony] is overly
protective of manufacturers and marketers of infringement tools,
especially in today’s digital environment.” Even apart from Ms.
Peters’s disturbing willingness to abandon or alter a legal standard
that has resulted in both greater consumer experience of copyrighted
works and an astonishing growth in profitable markets for
copyrighted works, we note that one man’s “infringement tool” is
another man’s iPod.