3/15/2013

RESEARCH PAPER

DIGITAL RIGHTS MANAGEMENTS IMPACT ON FAIR USE RIGHTS

CST 8299 400: Ethics for IT Professionals | Matthew Kearns

DIGITAL RIGHTS MANAGEMENTS IMPACT ON FAIR USE RIGHTS

March 15, 2013

INTRODUCTION
Imagine that your cars manufacturer decided your car was not authentic, and disabled the vehicle while you were driving it, or even though you had paid for it the manufacturer couldnt process your engine start-up request and you just had to deal with it. This hypothetical situation is a real-world analog to the situations facing customers that wish to use software that is protected by Digital Rights Management (DRM) when the DRM component fails. Digital Rights Management is an unnecessary and intrusive means of content protection. The following paper will explore: What DRM is, What fair-use (or Fair Dealing under Canadian law) is in the context of Web 2.0 Why DRM is implemented, and a selection of protection schemes, What root issues are behind the stakeholders conflict, and an example of the conflict Instances where DRM has failed and why, and the fallout from the failure, Possible alternatives to DRM and one success story for open media,

A note on nomenclature for this paper: There are several terms that will used interchangeably to label content providers (i.e. Content creators, creators, copyright holders, distributors) and consumers (i.e. purchasers, consumers, the public). Each of the terms carry their own definition, but for the scope of this paper they will refer to the group they belong to.
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WHAT IS DRM?
Digital Rights Management (DRM) is defined by Dr. Grace Agnew, Associate University Librarian for Digital Library Systems at Rutgers University, as the management of the rights belonging to creator, or the rights holder of digital content 1, and expanded upon by the National Institute of Standards and Technology as (a) system of IT components and services, along with corresponding law, policies and business models, which strive to distribute and control intellectual property and its rights2. Ideally, a working DRM model would protect content from piracy, but would respect all non-exclusive rights such as fair-use. In practice this rarely happens.

Fair use is defined by the Electronic Freedom Foundation (EFF) essentially as (A) limitation on the exclusive rights of copyright holders.3 Ideally, the concept of fair use entails all but the exclusive rights not explicitly reserved for the copyright holder. In practice these rights include: use of the content in review or critique of the content itself, to create derivative work of original and to create a copy of the work for personal use or back-up.

These two ideas are codified legally and ethically in different ways, and in many cases are at odds conceptually by critics on either side. Currently, there are legal decisions

Rutgers University Dr. Grace Agnew - Restrictions of Digital Rights Management. 2009, YouTube, March 1, 2013. <http://youtu.be/aRfX2gPwXMo>
2

Howard Paul, What You Cannot Protect, You Cannot Own, American National Standards Institute, March 12, 2013. <http://www.ansi.org/news_publications/other_documents/protect.aspx?menuid=7>
3

Electronic Frontier Foundation Fair Use Frequently Asked Questions (and Answers) 2002, Web. March 10, 2013. < http://w2.eff.org/IP/eff_fair_use_faq.php>

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that are being made on national and international levels that affect how and when DRM may be implemented, and either respected or broken, with no small amount of acrimony between various stakeholders, and legislators that are expected to act as referee. To be sure, Digital Rights Management currently experiencing very difficult growing pains, and may be in a phase where alternatives that work may be a better option than adopting restrictions that are inflexible and using legislative back-stopping to enforce them. The impacts of DRM will be far-reaching, and if permitted to propagate, will allow content creators and copyright holders to individually dictate what licensed usage will be, instead of legislators and the judiciary reserving and refining the concepts for the public.

DEFINING FAIR-USE OR FAIR DEALING IN THE CONTEXT OF WEB 2.0

The concept of fair use has its genesis in copyright law where use of a piece of intellectual property is be protected from exploitation by either creators or the public at large, assuming good faith by all parties. For the purposes of this paper, the terms FairUse and Fair Dealing will be used interchangeably, though they are distinct concepts under the law.

Fair-Use is codified in the United States as a legal safety valve.4 It is broadly interpreted as the allowance of legal, unlicensed use of intellectual property in derivative works, as well as for use in commentary, academic pursuits, news reporting, archiving
4

17 USC 107 Limitations on exclusive rights: Fair use. Feb 10, 2013. <http://www.law.cornell.edu/uscode/text/17/107>

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and research. The concept is an important traditional safety valve in the scope of Web 2.0 as it allows for linking to articles in-situ and quoting of works that are hosted elsewhere. Fair Dealing under Canadian Bill C-42 (1985) Copyright Act5, and Bill C-11 (2012) Copyright Modernization Act6, is significantly more elusive as it is defined more as what it is not than what it actually is. Fair dealing is restrictive as it enumerates specific rights separate from content creators instead of the American approach of globally reserving all public rights other than the creators exclusive rights. The current state of the Copyright Modernization act has a curious allowance for time and format-shifting of content, however due to the provision of respecting DRM locks; these are effectively short-circuited as many format shifts require the breaking of DRM.7

Both US and Canadian codes follow similar ideas of fair-use that were set out in the Berne Convention of 1886 (though the US only ratified the convention in 1988), though the expression of these rights vary from the original text. The text of the 1971 Berne Convention enumerates fair practice in Article 10, and under Article 9 delimits exclusive

Government of Canada, Copyright Act (R.S.C., 1985, c. C-42). Exceptions: Fair Dealing 29. Department of Justice. Feb 10, 2013 <http://laws-lois.justice.gc.ca/eng/acts/C-42/>
6

Government of Canada Copyright Modernization Act, 29.21 Parliament of Canada. Feb 10, 2013 <http://www.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&DocId=5697419&File=45#7>
7

Colebatch, Chabriol et al. Digital Locks and Canadian Research Library Collections: Implications for Scholarship, Accessibility, and Preservation Feliciter Issue #1, 2013 vol 59, 12-13.

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rights by permitting copies of the work that do not unreasonably prejudice the legitimate interests of the author.8

WHY USE DRM?

To understand why DRM is divisive, it is worth explaining why it is used in the first place. Content creators wish to be paid for their work, and in most cases consumers are not ethically averse to paying for the content given that the content is worthwhile to buy, and is reasonably priced. The 80-10-10 rule of thumb in retailing holds that 10% of the population will buy an item and never steal, no matter how high the price is and 10% will steal that same product no matter how low the price. The remaining 80% will pay what they think a reasonable price is, and may steal it if they think its necessary but the price is too high.9

To content creators and rights holders, Digital Rights Managements role in that equation is to keep otherwise honest people, honest. Rights holders set a price that they believe is equitable and consumers that purchase the product will be able to use it as outlined in the user agreement, or refuse to purchase. To them, DRM is the lock on the door that keeps people from stealing the product. A beneficial secondary effect of DRM is an end-run around the principle of first sale, which is a benefit to creators as it

World Intellectual Property Organization, Berne Convention for the Protection of Literary and Artistic Works Article 10. Paris: 1979.
9

Shteir, Rachel. The Steal: A Cultural History of Shoplifting. London, England: Penguin, 2011. 203-204

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eliminates the secondary market for actual goods, instead forcing consumers to buy a new product for each use. 10 Some implementations of DRM are simplistic. Sierra Entertainment, Lucasarts and several other large computer game producers original protection scheme involved referencing documentation manuals at points within the game before proceeding. This was originally easily defeated by photocopying the manuals along with copying the game to diskette or CD, and the net-negative was that the pirated game was actually more convenient to use than the original.11

Newer DRM schemes entail either a one-time digital key exchange with a parent server, a periodic check of the softwares digital checksum or hash with a parent server during updates, and most controversially a full-time connection requirement to use the software. Traditionally, this scheme has been used by game developers, but has begun to merge into other areas of computing such as office suites.12 The desired effect of DRM is to halt piracy by inducing a requirement to phone home when the program is activated at some point. If the check-in should fail to produce a legal hash/connection, the program can then disable itself. The observed effect is not so clear cut: It keeps poor or technologically deficient consumers honest only by enforcing a price they cant or dont wish to pay. Those who are not tec hnologically

10

Zwollo, Kim. "Digital reuse rights in a fast-changing publishing environment: Content users demands and licensing options for publishers." Information Services & Use 32. 2012. 79-83. 11 Dont Copy That Floppy! Retro Gamer #83. November, 2010. 68-71.
12

Null, Christopher Meet the Microsoft Office Luddites: Why power users won't live in the cloud . March 12, 2013. March 13, 2013. <http://www.pcworld.com/article/2030500/meet-the-microsoft-office-luddites-whypower-users-wont-live-in-the-cloud.html?page=2>

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deficient however, see it as a minor deterrent. For many paying consumers the effect of DRM is a nuisance at best, and at worst it deprives them of the ability to rightly use the item they have purchased. Currently, the main arguments for DRM heavily favor creators rights at the cost of consumers rights. In many cases, there is no recourse for the customer that has purchased a product that has defective DRM other than to request the creator refund the purchase price or use consumer protection services built-in to their payment method.

STAKEHOLDERS ISSUES
The concept of consumers fair-use is a traditional safety valve that protects their rights while legally enumerated exclusive rights protects those of copyright holders. DRM becomes a polarizing factor because it fundamentally diminishes fair-use once implemented in several ways: Does not respect copyright-public domain time limits or other legal changes that come after implementation, Disables or encumbers socially beneficial pursuits (ie. Criticism, comment, satire, research, scholarship) Disallows or significantly encumbers migration between different devices (format-shifting) Prevents backing-up of legitimate software.

Conversely, DRM is ostensibly seen by copyright holders as useful because it:

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Halts piracy/infringement Enforces copyright holders exclusive rights on works Keeps profits from being lost to allow development of new products.

The idea behind DRM is the content creator gives a fully usable product to the consumer and the consumer pays for the product. Unfortunately, this ideal falls short primarily because once the consumer consents to using the DRMed software, if defective, the consumers lines of redress are severely limited.

Part of the issue that adds to the contentious nature of implementing DRM is that the only recourse a content creator has once the DRM lock has been broken on the software is to fall back on federal level anti-circumvention laws that penalize the behaviour. Moreover, due to the pervasiveness of the internet and the singular nature of DRM schemes, once the DRM lock is broken once, it must be updated or reengineered to protect the content. A legitimate, open and robust security system will guard against this: a single fraudulent credit card transaction does not derail a banks entire charge-card system, just as a single secured web-session that is violated doesnt cause the abandonment of all public key encryption. A broken DRM lock on a piece of software can however break it for every other piece of the same software, and others that use the same scheme.

As a side-effect of the reliance on legal prosecution of cases against copyright infringers, the anti-circumvention laws have had a major chilling-effect on the research into schemes used by DRM vendors.
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In one well-publicized instance, Princeton engineer Edward Felten led a research team that investigated the Secure Digital Music Initiative (SDMI) watermarking scheme in pursuit of a cash prize by SDMIs creators, the Recording Industry Association of America (RIAA) and Verance Corporation. After finding that the system was easily unlocked, Felten opted to publish his findings (thus forgoing the prize) at the Fourth International Information Hiding workshop in 2001.

As a consequence of electing to publish the teams findings, Felten and his research team were threatened by the RIAA for violation of the Digital Millennium Copyright Act (DMCA). In the letter from SDMI spokesperson Matt Oppenheim, it was inferred that any information divulged as a result of participating in the challenge could expose Felten and his team to legal redress under the DMCA. Felten, with help from the EFF sued the SDMI groups however the case was dismissed13 due to lack of standing. Felten presented his findings at another conference, and the Department of Justice (USDOJ) assured Felten that there could be no prosecution under the DMCA for his work. Feltens case is one of the most publicized, but not at all the only case of content creators using the big-stick of litigation to attempt to cow researchers into not publishing findings.

13

United States District Court, District of New Jersey, Felten v. RIAA. November 28, 2001. Feb 3, 2013 <https://www.eff.org/sites/default/files/filenode/20011128_hearing_transcript.pdf>

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UNSUCCESSFUL DRM IMPLEMENTATIONS

The overall intent of DRM is to be mostly transparent to the end-user, only present during sign-in or installation of the product as an ex-ante control method, and ultimately keep the product from being stolen or misused. The reason that this rings false is the reason that many people come to learn about DRM in the first place: when it fails.

Some very recent incidents that have been discussed as major failures of DRM are: EAs 2013 Simcity release and Blizzard Entertainments Diablo 3 release due to their use of always-on or trusted-computing-based DRM, even in single-player mode Sony BMGs XCP and MediaMax rootkit scandal, BigPond Music (Australia) dropped support of the protected Microsoft WMA file format due to incompatibilities with other player software, primarily Apple iTunes, Barnes & Noble eBook store locks purchased books when the credit card used to buy them expires. The common denominator in the examples above is a failure in the technology that prevented or interfered with a legal and fair-use of the content purchased. In each case, content that was purchased was rendered unusable. Aside from the fiduciary duties that copyright holders must live up to, the use of DRM crippled law-abiding and paying customers content. There is a moral duty for distributors to ensure that paid-for content is made available, yet customers have effectively no recourse once a distributor reneges on that duty other than possibly pursuing a claim with their payment carrier.
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This is not always plausible or effective.

Failures of the DRM system that lock consumers out of the content that they have purchased tends to push people to piracy because pirated content is more convenient and reliable than the legal content. While this is not the only reason people use pirated content or break DRM locks, this is the most easily addressable by removing the locks altogether.

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EFFECTIVE ALTERNATIVES TO DRM

An interesting observation about DRMs impacts is that it does not protect content; so much as it is a legally enforceable method to protect content creators rights to temporarily make profit from their works. Alternative methods of content protection are present, but in some cases content creators are choosing to forgo DRM locks for a number of reasons, most common is that the return on investment in DRM is observed to be nil at best, and more often than not actually encourages piracy. Some examples that make a strong case for open media: UK Music store 7 Digital announces DRM-Free Music outsells protected content four to one. When Apple iTunes stopped selling DRM covered tracks in April 2009, sales immediately doubled to over 2 billion songs per year, and has increased annually. Sony now sells eBooks in Germany without DRM restrictions. Linux and other Open Source operating systems are freely available using GNU General Public License, developers like Red Hat Inc. generate revenues of $1.3 B USD annually, Louis CK Live at the Beacon Theatre sold as DRM-free download at a price of $5.00, gains 220,000 sales ($1.1M) in 7 days. In regards to the final example: Louis Szekely (stage-name: Louis C.K.) is an American stand-up comedian, and Emmy award-winner who maintains a web-storefront that sells his and other comedians shows in a variety of formats. On December 10, 2011 he

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released Louis CK at the Beacon Theatre as a DRM-free download for the price of $5.00. No option to purchase physical media, nor were other distribution avenues like Netflix offered. This was quite a gamble on his part, as he knew that the content would be downloaded and pirated almost immediately, and he stood to lose all of the $200,000 production costs that had been invested up top that time.

The business model used incorporated much of what is used in the Open Music Model, and notably excluded middle-men that drive up costs for consumers. More pointedly, Szekely adopted business principles that created higher acceptance, and profit. When downloading the show, this letter from Szekely14 was displayed after purchase asking them to not pirate the show, and explained the direct relationship between the comic and the audience:
To those who might wish to torrent this video: look, I dont really get the whole torrent thing. I dont know enough about it to judge either way. But Id just like you to consider this: I made this video extremely easy to use against well-informed advice. I was told that it would be easier to torrent the way I made it, but I chose to do it this way anyway, because I want it to be easy for people to watch and enjoy this video in any way they want without corporate restrictions. Please bear in mind that I am not a company or a corporation. Im just some guy. I paid for the production and posting of this video with my own money. I would like to be able to post more material to the fans in this way, which makes it cheaper for the buyer and more pleasant for me. So, please help me keep this being a good idea. I cant stop you from torrenting; all I can do is politely ask you to pay your five little dollars, enjoy the video, and let other people find it in the same way. Sincerely, Louis C.K.

14

Lawler, Ryan Louis C.K. cant stop the pirates. December 12, 2011. March 12, 2013. <http://gigaom.com/2011/12/12/louis-ck-pirate-bay/>

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As there were no locks on the media, it was pirated almost immediately, but the rate of piracy was significantly lower than other of his releases. Within 12 hours of release the production costs were realized, and within three days he had grossed $550,000.15 On December 21, 2011 Szekely posted on his website and announced on Late Night with Jimmy Fallon that 220,000 people had bought the show, and that the shows gross was $1.1M.16 Szekely offered a mixture of reasons as explanation for the success of the show: primarily that the price of the download was low enough to be afforded easily, but also the download option offered easy access, no need to sign up for any recurring bills or email, open video format allowed interoperability and finally, making the legal option more attractive than piracy. It is important to note that Szekely admits if he used a distribution company, he would have made a lot more money, and exerted a lot less effort. However he also admits that had he gone that route, the show would have been pirated, and there would have been no innovation in the business model. As a result, comedians that are not well known would likely have not had any proof that this model could work and would have to rely on the traditional Hollywood business model. This model may prove to be a major innovation, as even today, there are less than 400 seeders17 of the show on the

15

Perpetua, Matthew Louis C.K. Sells Over 110K Copies of Stand-Up Special in Three Days. Rolling Stone. December 14, 2011. March 12, 2013. <http://www.rollingstone.com/movies/news/louis-c-k-sells-over-110kcopies-of-stand-up-special-in-three-days-20111214>
16

Szekely, Louis Another Statement from Louis C.K. Louisck.net. December 21, 2011. March 12, 2013. <https://buy.louisck.net/news/another-statement-from-louis-c-k>
17

The Pirate Bay Search results: Louis CK live at the beacon Retrieved: March 15, 2013 <http://thepiratebay.se/search/Louis%20CK%20live%20at%20the%20beacon/0/99/0>

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Torrent tracking website The Pirate Bay, as compared to other releases that have thousands of seeders over a year after original release.

CONCLUSION
The state of the art in Digital Rights Management (as of March 15, 2013) is not a viable method to enforce copyright protection on digital products. From a purely pragmatic stance the arguments against, cost of implementation, evidence of ineffectiveness, and risk of backlash should at least give content creators pause to reflect on the return on investment. Content creators seeking to profit from their works may do well to heed the advice Kim Dotcom18 (of Megaupload.com fame):
How to stop piracy: 1 Create great stuff 2 Make it easy to buy 3 Same day worldwide release 4 Fair price 5 Works on any device.

18

Dotcom, Kim @KimDotcom. January 7, 2013. March 15, 2013. Tweet. <https://twitter.com/KimDotcom/status/288199968932630528>

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Bibliography
Colebatch, Chabriol et al. "Digital Locks and Canadian Research Library Collections: Implications for Scholarship, Accessibility, and Preservation." Feliciter Issue #1 2013, vol 59. 2013. Print. Copyright Act. "R.S.C. 1985 c. C-42 29." Fair Dealing. Department of Justice, 1985. Web. 10 February 2013. Copyright Modernization Act. "R.S., c. C-11 (2012)." 2012. Web. 10 February 2013. "Don't Copy That Floppy!" Retro Gamer #83 10 November 2010. Print. Dotcom, Kim. "@KimDotcom." 7 January 2013. Twitter. Tweet. 15 March 2013. Dr. Grace Agnew - Restrictions of Digital Rights Management. Dir. Rutgers University. Agnew, Grace . YouTube, 2009. YouTube. 1 March 2013. Electronic Frontier Foundation. Fair Use Frequently Asked Questions (and Answers). 2002. Web. 10 March 2013. Felten v. RIAA. No. 01 CV 2669. United States District Court, District of New Jersey. 28 November 2001. Web. 3 February 2013. Lawler, Ryan. "Louis C.K. cant stop the pirates." 12 December 2011. Gigaom. Web. 12 March 2013. Null, Christopher. "Meet the Microsoft Office Luddites: Why power users won't live in the cloud." 13 March 2013. PCWorld. Web. 13 March 2013. Paul, Howard. "What You Cannot Protect, You Cannot Own." n.d. American National Standards Institute. Web. 12 03 2013. Perpetua, Matthew. "Louis C.K. Sells Over 110K Copies of Stand-Up Special in Three Days." 14 December 2011. Rolling Stone. Web. 12 March 2013. "Search results: Louis CK live at the beacon." 15 March 2013. The Pirate Bay. Web. 15 March 2013. Shteir, Rachel. The Steal: A Cultural History of Shoplifting. London, England: Penguin, 2011. Print. Szekely, Louis. "Another Statement from Louis C.K." 21 December 2011. Louisck.net. Web. 12 March 2013. U.S.C. "17 107 (Cornell 2012)." Limitations on exclusive rights: Fair use. 1976. Print. 10 February 2013. World Intellectual Property Organization. "Berne Convention for the Protection of Literary and Artistic Works." Article 10. Paris: WIPO, 1979. Treaty. Zwollo, Kim. "Digital reuse rights in a fast-changing publishing environment: Content users demands and licensing options for publishers." Information Services & Use 32 (2012). Print. 16 | P a g e