Law and Information

Today, I attended a small, but really interesting conference chaired by my colleagues Professor Werner Wunderlich und Prof. Beat Schmid from the Institute for Media and Communication Management, our sister institute here at the Univ. of St. Gallen. The conference was on “The Future of the Gutenberg Galaxy” and looked at trends and perspectives of the medium “book”. I’ve learned a big deal today about the current state of the book market and future scenarios from a terrific line-up of speakers. It was a particular pleasure, for instance, to meet Prof. Wulf D. von Lucus, who’s teaching at the Univ. of Hohenheim, but is also the Chairman of the Board of Carl Hanser Verlag, which will be publishing the German version of our forthcoming book Born Digital.

We covered a lot of terrain, ranging from definitional question (what is a book? Here is a legal definition under Swiss VAT law, for starters) to open access issues. The focus of the conversation, though, was on the question how digitization shapes the book market and, ultimately, whether the Internet will change the concept “book” as such. A broad consensus emerged among the participants (a) that digitization has a profound impact on the book industry, but that it’s still too early to tell what it means in detail, and (b) that the traditional book is very unlikely to be substituted by electronic formats (partly referring to the superiority-of-design-argument that Umberto Eco made some time ago).

I was the last speaker at the forum and faced the challenge to talk about the future of books from a legal perspective. Based on the insights we gained in the context of our Digital Media Project and the discussion at the forum, I came up with the following four observations and theses, respectively:

Technological innovations – digitization in tandem with network computing – have changed the information ecosystem. From what we’ve learned so far, it’s safe to say that at least some of the changes are tectonic in nature. These structural shifts in the way in which we create, disseminate, access, and (re-)use information, knowledge, and entertainment have both direct and indirect effects on the medium “book” and the corresponding subsystem.

Some examples and precursors in this context: collaborative and evolutionary production of books (see Lessig’s Code 2.0); e-Books and online book stores (see ciando or Amazon.com); online access to books (see, e.g., libreka, Google Book Search, digital libraries); creative re-uses such as fan fiction, podcasts, and the like (see, e.g., LibriVox, Project Gutenberg, www.harrypotterfanfiction.com).

Law is responding to the disruptive changes in the information environment. It not only reacts to innovations related to digitization and networks, but has also the power to actively shape the outcome of these transformative processes. However, law is not the only regulatory force, and to gain a deeper understanding of the interplay among these forces is crucial when considering the future of books.

While fleshing out this second thesis, I argued that the reactions to innovations in the book sector may follow the pattern of ICT innovation described by Debora Spar in her book Ruling the Waves (Innovation – Commercialization – Creative Anarchy – Rules and Regulations). I used the ongoing digitization of books and libraries by Google Book Search as a mini-case study to illustrate the phases. With regard to the different regulatory forces, I referred to Lessig’s framework and used book-relevant examples such as DRM-protected eBooks (“code”), the use of collaborative creativity (“norms”), and book-price fixing (“markets”) to illustrate it. I also tried to emphasis that the law has the power to shape each of the forces mentioned above in one way or another (I used examples such as anti-circumvention legislation, the legal ban on book-price fixing, and mandatory copyright provisions that preempt certain contractual provisions.)

The legal “hot-spots” when it comes to the future of the book in the digital age are the questions of distribution, access, and – potentially – creative re-use. The areas of law that are particularly relevant in this context are contracts, copyright/trademark law, and competition law.

Based on the discussion at the forum, I tried to map some of the past, current, and emerging conflicts among the different stakeholders of the ecosystem “book”. In the area of contract law, I focused on the relationship between authors and increasingly powerful book publishers that are tempted to use their unequal bargaining power to impose standard contracts on authors and transfer as many rights as possible (e.g. “buy out” contracts).

With regard to copyright law, I touched upon a small, but representative selection of conflicts, e.g. the relation between right holders and increasingly active users (referring to the recent hp-lexicon print-version controversy); the tensions between right holders and (new) Internet intermediaries (e.g. liability of platforms for infringements of their users in case of early leakage of bestsellers; e.g. interpretation of copyright limitations and exemptions in case of full-text book searches without permission of right holders); the tension between publishers and libraries (e.g. positive externalities of “remote access” to digital libraries vs. lack of exemptions in national and international copyright legislation – a topic my colleague Silke Ernst is working on); and the tension between right holders and educational institutions (with reference to this report).

As far as competition law is concerned, I sketched a scenario in which Google Book Search would reach a dominant market position with strong user lock-in due to network effects and would decline to digitize and index certain books or book programs, for instance due to operational reasons. Based on this scenario, I speculated about a possible response by competition law authorities (European authorities in mind) and raised the question whether Google Book Search could be regarded, at some point, as an essential facility. (In the subsequent panel discussion, Google’s Jens Redmer and I had a friendly back-and-forth on this issue.)

Not all of the recent legal conflicts involving the medium “book” are related to the transition from an analog/offline to a digital/online environment. Law continues to address book-relevant issues that are not new, but rather variations on traditional doctrinal themes.

I used the Michael Baigent et al. v. Random House Group decision by the London’s High Court of Justice as one example (has the author of Da Vinci Code infringed copyright by “borrowing” a theme from the earlier book Holy Blood, Holy Grail?), and the recent Esra-decision by the German BVerfG as a second one (author’s freedom of expression vs. privacy right of a person in a case where it was too obvious that the figure used in a novel was a real and identifiable person and where intimate details of the real person were disclosed in the book.)

Unfortunately, we didn’t have much time to discuss several interesting other issues and topics that were brought up and related to the generation born digital and its use of books – and the consequences of kids’ changed media usage in a changed media environment, e.g. with regard to information overload and the quality of information. Topics, to be sure, that John Palfrey and I are addressing in our forthcoming book.

In sum, an intense, but very inspiring conference day.

Update: Dr. David Weinberger, among the smartest people I’ve ever met, has just released a great article on ebooks and libraries.

Over the past few weeks, our graduate students at the Univ. of St. Gallen have done quite some heavy lifting in the three courses that I described here. In my own course on law and economics of intellectual property rights in the digital age, we’ve completed the second part of the course, which consisted of three modules dealing with digital copyright, software and biz methods patents, and trademarks/domain name disputes. We were very fortunate to have the support of three wonderful guest lecturers. Professor John Palfrey taught a terrific class on digital media law and policy (find here his debriefing and putting-into-context). Klaus Schubert, partner with WilmerHale, provided an excellent overview of the current state of software patenting in and across the EU, in the U.S., and Japan and made us think about the hard policy questions up for discussion. Last week, Professor Philippe Gillieron from the Univ. of Lausanne discussed with us the legal and economic aspects of domain name disputes and ways to solve them (the focus was on UDRP – in my view a particularly interesting topic when analyzed through the lens of new institutional economics theory, see also here for variations on this theme.)

In the last session before “flyout” week, Silke Ernst and I had a first cut at a synthesis aimed at tying together several of the core themes we’ve been discussing so far. At the core of the session was the question as to what extent the law & economics approach can help us to deal with the complex IPR-questions that are triggered while transitioning from an analog/offline to a digital/online information environment. The students contributed to the session by presenting their views on the promises of and limits on a law & economics approach to IPR in the digital age. Using the time while traveling from Oxford back to Zurich, my recollection of the in-class discussion looks as follows (alternative interpretations, of course, encouraged and welcome) – starting with the argument that the law & economics approach to IPR serves at least two functions:

• On the one hand, it provides a toolset that helps us to frame, analyze, and evaluate some of the complex phenomena we observe in cyberspace (such as, for instance, large-scale file-sharing over P2P networks or the user-created content), and enables us to gain a better understanding of the interaction among existing rules and norms and these phenomena. We might want to call it the “analytical function” of law & economics (this aspect gets close to – but is in my view not exactly identical with – what has traditionally been described as the “positive” strand of discussion in law & economics.)

• On the other hand, law & economics may guide us at the design level (again, this gets close to what has been termed “normative” law & economics. For reasons I don’t want to discuss here, I don’t want to work with this distinction in the present context.). First, it can help us to identify the need for law reform by showing that the existing rules have a negative impact on social welfare. Here, the design function intersects with the previously mentioned analytical function. Second, law & economics provides a consistent framework to evaluate the impact of alternative means of regulation on the (economic) behavior of individuals and compare costs and benefits of different approaches aimed at solving a particular problem.

At a more granular level, we might identify the following promises and limitations of a law & economics approach with regard to the respective functionality:
Analytical function

• Promises: coherent framework, consistent and shared set of criteria, rational and quasi-objective analysis, …
• Limitations: Bounded rationality/areas of non-rationale behavior, lack of transparency regarding underlying causalities, limited possibilities to quantify phenomena, lack of empirical data, …

Design function:

• Promises: Cost-benefits analysis of alternative policy choices, taking into account perspectives of different actors in an ecosystem, at least ideal-type predictions based on models, …
• Limitations: Complexity of real-life situations, non-economic perspectives, motives, and effects, non-economic values, …

We reached some sort of consensus that the law & economics approach indeed provides a great toolset to analyze at least some of the trickiest IPR-related policy questions in cyberspace. However, the large majority seemed also to agree that some of the limitations of such an analysis become particularly visible in the digitally networked environment with phenomena such as commons-based peer production of content based on intrinsic motivations. Most of us also agreed that it would be dangerous to attempt to answer the IPR policy questions only against the backdrop of law & economics theory. Indeed, many of the decisions to be made in this space ultimately include choices about core values of our society that do not easily translate into the frameworks of law & economics, like for example informational justice, equal access, participatory culture, or semiotic democracy.

I’m very much looking forward to continuing the discussion about the role of law and economics in the digital age with my colleagues, the teaching team, and – most importantly – with the wonderful group of students enrolled in this seminar.

My colleague Daniel Haeusermann and I just released a new paper entitled “E-Compliance: Towards a Roadmap for Effective Risk Management.” In the article, which is largely based on consulting work we’ve been doing, we argue that the widespread use of digital communication technology on the part of business organizations leads to new types of challenges when it comes to the management of risks at the intersection of law, technology, and the marketplace. In order to effectively manage these challenges and associated risks in diverse areas such as security, privacy, consumer protection, IP, and content governance, we call for an integrated and comprehensive compliance concept in response to the structural and substantive peculiarities of the digital environment in which corporations – both in and outside the dot-com industry – operate today. See also this post. The conclusion section of the paper reads as follows:

Through significant efforts, the legal system has adjusted to the changes in the information and communications technology of daily corporate life—changes at the intersection of the market, technology, and law. Organizations must make adjustments on their part as well in order to deal with the consequences resulting from these changes in the legal system. The observation that led to this essay was that these adjustments represent a greater challenge than the already decreasing entropy surrounding concepts such as “e-commerce law” or “cyberlaw” would suggest. Our initial foray into the concept, characteristics, responsibilities and organizational guiding principles of e-Compliance confirms this observation.

E-Compliance, as discussed in this article, is confronted with the phenomenon of a close interconnection between law and technology, a prominent dynamization of the law, massive internationalization of issues and legal problems, as well as a strong increase in the significance of soft law. These characteristics, which in part may also apply to traditional areas of compliance such as financial market regulation, call in their interplay for the further development of compliance concepts as well as adaptation of the affected aspects of corporate organization. Due to the increasing amalgamation of corporate organizational nexus and ICT, the symbiotic relations between traditional compliance and e-Compliance will be increasingly amplified. The view that e-Compliance represents merely a single risk area among the many of compliance is therefore outdated in our opinion. E-Compliance is actually a multidimensional and multidisciplinary task, although there are certainly areas of law that are particularly affected by digitization (or also which particularly impact digitization) and therefore are of particular importance for the field of e-Compliance.

Thus, in conclusion, the authors do not posit a special “e-Sphere” within or without existing compliance departments. Rather, we argue for an integrated and comprehensive compliance concept that appropriately makes allowance for the structural and substantive peculiarities of e-Compliance as outlined in this essay and stays abreast with the pace of digitization.

Please contact Daniel or me if you have comments.

My colleague and friend Dr Ian Brown, co-leader of the EUCD best practice project (check out the wiki and the project report), has posted a great article written for the EDRI-gram on the International Intellectual Property Alliance’s (IIPA) recent recommendations to the US Trade Representative’s 2007 review of global copyright laws. Ian concludes:

It is not surprising that US companies lobby to change global laws that would increase their profits. On past performance, the US government is likely to take careful note of their recommendations. But European nations should robustly defend their right to shape copyright policy to meet the needs of their own citizens, and not just those of large copyright holders.

I hope the EUCD best practice project mentioned above and similar initiatives support European policy makers in identifying the leeway they have under the WIPO Internet Treaties and the EUCD when shaping their copyright and DRM frameworks.

We have just released our EUCD best practice guide. The report, sponsored by the Open Society Institute (OSI), provides a set of recommendations for transposing the EU Copyright Directive (EUCD) into the national copyright frameworks of accession states and candidate countries. The guide, which could also inform future law reform in existing member states and is related to stock-taking studies such as the Gowers Report (released yesterday) and the forthcoming official review of the EU copyright framework, is based on a peer-produced compilation and comparison of existing EUCD implementations across the EU.

The best practice guide takes a closer look at four clusters of legal issues typically associated with EUCD-implementation. First, in a cross-sectional manner, it provides recommendations regarding the implementation of the EUCD’s anti-circumvention provisions (i.e., legal protection of technological protection measures). Second, it suggests a series of principles in areas of copyright law that shape the ways in which we – as peers – can produce and distribute information. The third section deals with universal access issues, including teaching and research exceptions, exceptions for libraries, archives, and the like, and copyright exceptions for disabled people. Third, the document provides recommendations with regard to selected copyright provisions that have an impact on political and cultural participation.

Here is an overview of the recommendations we’ve made:

Anti-circumvention provisions

• In order to avoid unintended consequences in general and spillover effects of anti-circumvention legislation in particular, (a) define the subject matter and scope of TPM as narrow as possible; (b) choose a liberal approach to exceptions and limitations and make sure that beneficiaries of exceptions can enjoy them; and (c) take a minimalist approach to sanctions and remedies for the violation of anti-circumvention provisions.
• Provide a definition of the circumstances (“minimum threshold”) under which TPM are considered to be “effective”.
• To the extent possible, limit the scope of prohibited circumvention-relevant conduct to situations where circumventions would lead to actual infringement of copyright.
• Immediately establish a mechanism for the enforcement of copyright exceptions vis-à-vis TPM and in the absence of voluntary measures by right-holders. Provide for an easily accessible and effective enforcement mechanism.
• Incorporate a private copying right vis-à-vis TPM analog to traditional private copying exceptions in order to foster access to information, knowledge, and entertainment.
• Use discretion with regard to sanctions and penalties and adhere to the principle of proportionality. Consider limitations on criminal and civil liability for non-profit organizations such as libraries, archives, etc., flexible sanctions for innocent infringers, and limitations on sanctions for legitimate purposes such as research and teaching.

Peer collaboration & distribution

• Provide for a broad private copying exception that is applicable to both analog/offline and digital/online works.
• Use discretion with regard to sanctions and penalties imposed on illegal file-sharing (uploading) and adhere to the principle of proportionality. Consider limitations on criminal and civil liability for small-scale infringements.
• Provide for a private copying exception that encompasses the act of downloading copyrighted material from the Internet, including from P2P file-sharing networks, regardless of the lawfulness of the master copy or the distribution platform.

Universal Access

• Provide a broad teaching exception that not only covers materials for face-to-face use in the classroom of educational facilities, but also the use of works at home for studying purposes. The preparation and post-processing of courses at educational institutions should be included as well.
• Implementations should not (further) limit the scope of the teaching exception as stipulated in the EUCD. Instead, provide for open definitions of the limitations on exempted uses for teaching purposes.
• Transpose the quotation exception by allowing quotations in multimedia works with an educational purpose or within instructions and textbooks for educational use.
• Provide for an exception that allows publicly accessible libraries and archives as well as documentation centers to make copies of entire works for specific purposes, without respect to whether these institutions are part of an educational or scientific institution or of a museum.
• Explicitly allow the reproduction of works on any medium in both digital and analog format.
• Allow the sharing of out-of-print copies among beneficiaries if certain requirements are met (out-of-print clause).
• Explicitly regulate the question of traditional as well as advanced forms of electronic document delivery by privileged institutions such as public libraries in the national copyright act.
• Permit electronic forms of delivery (e.g. in graphic file format) of individual copies of articles in periodicals and parts of published works to patrons for private study and research for non-commercial purposes, regardless whether the relevant material is available via an on-demand service or not.
• Provide for a broad disability exception to both the rights to reproduction and communication to the public that might mention, but is not limited to, certain types of disabilities such as visual or hearing impairment.
• Consider an exception or limitation for people with disabilities without requiring fair compensation.

Political & Cultural Participation

• Provide for a current-event exception and prescribe the conditions under which the freedom of expression right trumps the exlusive author’s rights. Do not restrict the scope of the exception to traditional media, such as newspapers, television or radio.
• The quotation right should allow diverse forms of quotations. It should encompass multimedia quotes as well as texts.
• Allow private persons to disseminate public and political speeches over the internet.
• Explicitly allow creative forms of political and cultural crticism. Use caricature, parody or pastiche as exemplary forms, but do not restrict the exception to these forms.

Download the full report for detailed discussion, references to member state implemenations, and case law examples.

The long-awaited final report of Gowers Review of U.K.’s IP framework has been released earlier today and is online available here. (Summary here.) Personally, I’m particularly interested in Gowers recommendations 8-13, addressing copyright issues, and I’m thrilled to see significant similarities between the findings in the Growers report and our own recommendations in the forthcoming EU Copyright Directive Best Practice Guide (to be released within the next couple of days; draft version here.) Stay tuned.

This morning, I had the pleasure and honour to speak – “as the European voice” – at the FTC hearing on “Protecting Consumers in the Next Tech-ade” (check out the official weblog for more information and summaries of the discussion.) I was asked to report about the legal and regulatory discussions on DRM in Europe and to focus on DRM interoperability in particular. The latter question is also part of an ongoing research collaboration between the Berkman Center at Harvard Law School and our St. Gallen Research Center for Information Law. The research project is aimed at exploring the interaction between interoperability and e-innovation, an important aspect that was only briefly mentioned at today’s hearing.
Here is the longer and slightly modified (links added) written version of my statement. For a more detailed discussion, check out the excellent paper “DRM Interoperability and Intellectual Property Policy in Europe” by Mikko Valimaki and Ville Oksanen.

Over the past few years, much of the legal/regulatory debate in Europe about DRM has focused on the legal protection of technological protection measures and its ramifications for the digital ecosystem, because EU member states have faced the challenge to transpose the rather vague EU Copyright Directive into their national laws and comply with the relevant anti-circumvention provisions of the WIPO Internet Treaties.

Introducing and harmonizing anti-circumvention laws across Europe has been a long and an enormously controversial process. As far as DRM is concerned, three topics in particular have caused heated controversies:

• DRM and its legal protection vis-à-vis traditional limitations on copyright such as the “right” (or privilege) to make copies for private purpose;
• DRM and “fair compensation”;
• DRM and interoperability.

Given our panel’s topic, please let me address the interoperability issue in some greater detail – a topic that has gained much attention in the context of iTunes’ penetration of the European market, esp. in France.

At the European level, though, no coherent DRM interoperability framework exists, although DRM interoperability has been identified as an emerging issue by the European Commission, which has established – among other things – a multi-stakeholder High Level Group on DRM that has also addressed DRM interoperability issues.

The lack of specific and EU-wide DRM interoperability provisions leaves us with three areas of law that address this issue more generally, both at the EU level as well as the level of EU member states. The areas are: copyright law, competition law, and consumer protection law.

Copyright Law

The EU Copyright Directive, mandating the legal protection of DRM systems, does not set forth rules on DRM interoperability. Recital 54 only mentions that DRM interoperability is something member states should encourage, but does not provide further guidance and seems to trust in the market forces. However, one might argue that the anti-circumvention framework itself allows the design of interoperable systems – e.g. a music player able to play songs encoded in different DRM standards – by outlawing only trafficking in such circumvention devices that are (inter alia) primarily designed and marketed for circumvention of effective TPM. Along these lines, at least one Italian Court has ruled – in one of the Bolzano rulings – that the use of modified chips aimed at restoring the full functionality of a Sony PlayStation (incl. its ability to read all discs from all markets despite region coding) is not illegal under the EUCD’s anti-circumvention provisions.

At the EU member state level, France has taken a much more proactive approach to DRM interoperability. A draft of the revised copyright law (implementing the EUCD) introduced an obligation of DRM providers to disclose interoperability information upon requests without being compensated. This “lex iTunes” has triggered strong reactions by the entertainment industry, and the final version of the law softened up the original proposal. Current French law states that a regulatory authority mediates interoperability requests on a case-by-case basis. Under this regime, too, DRM providers can be forced (under certain conditions) to disclose interoperability information on non-discriminatory terms, but they now have the right to reasonable compensation in return.

Competition Law

The baseline is: Competition law in Europe may become relevant in cases where a company with a dominant market position refuses to license its DRM standard to its competitors. However, to date, there exists no case law at the EU level where competition law has been applied to the DRM interoperability problem. But there are important cases (IMS Health and Magill, but also the anti-trust actions against Microsoft) illustrating how competition law — at least in exceptional circumstances — can give the need for interoperability more weight than the IP claims by dominant players. In France, Virgin Media tried to use competition law as an instrument to enforce access to iTunes FairPlay system. The French competition authority, however, has ruled in favour of iTunes, partly because it considered the market for probable music players to be sufficiently competitive (click here for more details).

Consumer Protection

From a consumer protection law perspective, three issues seem particularly noteworthy. First, the Norwegian Consumer Ombudsman has been very critical about Apple’s iTMS interoperability policy in response to a complaint by the consumer council. The Ombudsman argues that iTMS is using DRM and corresponding terms of services to lock its consumers into Apple’s proprietary systems.

Second, a French court fined EMI Music France for selling CDs with DRM protection schemes that would not play on car radios and computers (check here and here). EMI violated consumer protection law because it did not appropriately inform consumers about these restrictions. The court obliged EMI to label its CDs with the text: “Attention – cannot be listened on all players or car radios”.

Third, a recent proposal by the European Consumers’ Organisation proposes to include DRM in the unfair contract directive. The idea behind it is that consumer protection authorities should also be able to intervene against unfair consumer contract terms if the terms are “code-” rather than “law-based”.

I’m currently in Berlin, attending Wizards-of-OS 4.0, a terrific conference organized by Volker Grassmuck and this team. Earlier the week, Lawrence Lessig, Yochai Benkler, and Hal Varian – to name just a few – had been presenting. Yesterday, I had the pleasure to chair a panel on the EU Copyright Directive. In essence, the session sought to analyze and evaluate the current EU copyright landscape as shaped in important ways by the EUCD (among other directives). On the panel were Bernt Hugenholtz, Director of the Institute for Information Law at the Univ. of Amsterdam; Tilman Lueder, Head of Unit “Copyright and knowledge-based economy”, DG Internal Markets, European Commission; Cornelia Kutterer, Senior Legal Advisor BEUC; and Maja Bogataj, Director of the Intellectual Property Institute, Slovenia.

The four presentations, each rich in substance, touched upon a broad variety of important issues and it is almost impossible to summarize the panel. However, I think there were at least three recurring themes where some sort of consensus among the panelists emerged.

Harmonization of copyright law comes at significant cost and leads to a race to the top as far as the protection of copyright holders’ interests are concerned.

Bernt Hugenholtz explained in quite some detail, based on a recent (still confidential) report he wrote for the European Commission, why we should be very skeptical about copyright harmonization. He argued, in essence, that the EU step-by-step-harmonization efforts have imposed a huge burden on both the EU legislative machinery as well as on national lawmakers who, in the past 15 years or so, have had continuously to transpose EU copyright directives into their national laws. More fundamentally, he raised the question whether harmonization, at all, can be the right tool – vis-à-vis enormously time-consuming legislative processes (the work on the EUCD goes back to 1996) – in a quicksilver technological environment. The strongest argument against harmonization, though, is the observation that harmonization has created significant asymmetries and imbalances: It significantly distorted the traditional balance between the interests of copyright holders on the one and the interests of users and the public at large on the other hand in favor of copyright holders. Bernt also argued that harmonization (vis-à-vis the principle of territoriality of copyright law) has produced negative effects on the Internal Market. In the recommendation-part of his speech, he proposed to restrain from future harmonization in this area. Rather, he suggested the use of soft law and, in the long run, of the creation of a unified, truly European Copyright Law.

The EUCD has created significant asymmetries and imbalances that need to be fixed.

It doesn’t come as a surprise that Cornelia Kutterer in particular has made it very clear in what ways and areas the EUCD has favored copyright holder’s interest over user’s interest. Much of the discussion focused on Art. 5 EUCD, which sets forth (largely voluntary) exceptions and limitations, and on the legal protection of technological protection measures. In the latter context, Cornelia addressed issues such as interoperability and (lack of) transparency. From a very different perspective, Tilman Lueder was questioning whether the EUCD has struck the right balance between exclusive rights and fair compensation, and whether compensation models will prevail in the age of digital distribution (vis-à-vis DRM.)

The solution to some of the flaws of the EUCD might be found in other areas of law such as competition law or consumer protection law.

With regard to potential answers to the problems created, in part, by the EUCD, Cornelia Kutterer – as well as previously Tilman Lueder to some extent – proposed to consider the use of consumer protection laws and competition law to rebalance interests. She suggested, for instance, to conceptualize DRM as “technical terms” in analogy to contractual terms, and to extend the scope of the Unfair Contract Terms Directive in a way that it includes such technical terms (“code”) too. Another issue to be dealt with in the consumer protection acquis is EU-wide labeling requirements for DRM.

Later this morning, we will ask how accession and candidate countries can learn from these (largely: bad) experiences surrounding the EUCD in particular and EU copyright harmonization in general. At a workshop sponsored by the Soros Foundation, we will talk in greater detail about the pitfalls of EUCD implementation (what Maja Bogataj yesterday has described as “cut-translate-paste”-legislation). In this context, we will also explore as to what extent best practices of implementation can be identified that might be helpful to future EU member states (and, probably, in the context of law reform projects.) We had a first cut at what shall become a EUCD best practice guide, check it out here. It’s an initial and uncompleted draft and very much research in progress, so feedback and contributions are most welcome and much appreciated.

Earlier this week, I had the opportunity to provide expert testimony before the Legal Affairs Committee of the Swiss Council of States (roughly equivalent to the U.S. Senate) regarding Switzerland’s implementation of the WIPO Internet Treaties and revision of the copyright act, respectively. It doesn’t come as a surprise that the bill is hotly debated among different stakeholders, and the committee members confirmed that they have received many letters and e-mails in the run-up to the hearing.Right after a presentation by Apple’s iTMS Switzerland Managing Director, I testified about alternative business models for the distribution of digital content that don’t (primarily) rely on DRM protection. Of course, I was also talking about the Berkman Center’s Digital Media Exchange Project. After the presentations, the committee members asked a series of excellent questions about technological, economic, and legal aspects of DRM. Since the debates are traditionally confidential, I can’t go into details here. Instead, I would like to point to some of the characteristics of the bill that I find particularly commendable:

• The bill only prohibits the circumvention of effective technological protection measures aimed at protecting copyrighted materials.
• The bill includes a definition of the effectiveness criterion.
• The ban cannot be enforced against individuals who circumvent TPMs in order to make use of the work in a way that is traditionally permitted by the copyright act (e.g. making a private copy).
• In contrast to the EUCD, all the exceptions and limitations also apply to on-demand services.
• Although the bill creates civil and criminal liability, it adheres to the principle of proportionality with regard to sanctions and penalties. In the context of criminal sanctions in the case of circumvention of TPMs, intent (“Absicht”) is required.

On the other hand, several areas of concern remain (see here and here for background information):

• It’s unclear as to what extent the beneficiaries of a copyright exception can make use of it vis-a-vis TPM. An earlier draft created an innovative and powerful enforcement mechanism (see former draft art. 39b and art. 62, translated here), but the revised draft before the parliament now proposes the establishment of an oversight body (“Beobachtungsstelle”) that facilitates discussion between the stakeholders and might have the power, upon authorization by the Swiss Federal Council, to intervene (e.g. by way of recommendations) in the case of DRM misuse if the “public interest” would require it.
• The encryption exception has been mentioned in materials, but not in the bill itself.
• The ban of trafficking in circumvention devices is absolute.
• The bill doesn’t address transparency and interoperability issues – although I agree that the copyright act is not the best place to deal with these issues.

Besides these TPM-related issues, it is noteworthy that downloading files from P2P services remains legal (private copying exception) under the current version of the bill. In this context, one might also want to mention that the bill doesn’t seem to build on the (contested) assumption that DRM and anti-circumvention laws will reduce piracy. Here as in all other areas, it will be interesting to observe – given the lobbying efforts by the copyright industry – how the draft legislation further evolves once it is debated in public by our national law-makers.

As part of the Digital Media Project, Berkman Faculty Director Terry Fisher and Berkman Fellow Bill McGeveran just released a terrific study entitled “The Digital Learning Challenge: Obstacles to Educational Uses of Copyrighted Material in the Digital Age”, exploring whether innovative educational uses of digital technology – ranging from DVDs in the classroom to online resources such as Wikipedia – are hampered by copyright restrictions. Here’s the abstract:

This foundational white paper reports on a year-long study by the Berkman Center for Internet and Society, funded by a grant from the Andrew W. Mellon Foundation, examining the relationship between copyright law and education. In particular, we wanted to explore whether innovative educational uses of digital technology were hampered by the restrictions of copyright. We found that provisions of copyright law concerning the educational use of copyrighted material, as well as the business and institutional structures shaped by that law, are among the most important obstacles to realizing the potential of digital technology in education.

The paper builds on four detailed case studies of initiatives that have encountered such obstacles. Each of these initiatives is moving forward, but only by fighting against a copyright-related system that instead should be helping educators accomplish their goals. The four case studies are:

• A plan to use social networking software to help new social studies teachers interact and share classroom resources, which confronts copyright problems when teachers incorporate third-party content into their materials;
• The need of film studies professors to bypass encryption on DVDs – likely in violation of federal law – in order to show selected film clips to their students;
• An effort to make a digital database of hard-to-find but important American music available on college campuses, which encountered massive obstacles in the rights clearance process;
• The shortcomings of special statutory provisions intended to benefit public broadcasters, but limited to over-the-air broadcast so that they have become nearly irrelevant as the need to distribute content on multiple digital platforms increases.

Drawing on these case studies, other research, and comments made by a cross-section of scholars, lawyers, librarians, and educators who participated in two day-long workshops organized as part of the project, the following emerged as the most significant copyright-related obstacles to educational uses of content:

• Unclear or inadequate copyright law relating to crucial provisions such as fair use and educational use;
• Extensive adoption of “digital rights management” technology to lock up content;
• Practical difficulties obtaining rights to use content when licenses are necessary;
• Undue caution by gatekeepers such as publishers or educational administrators.

While the primary task of the foundational white paper was to identify these obstacles, the paper concludes with some discussion of paths toward reform that might improve the situation. It suggests that certain types of legal reform, technological improvements in the rights clearance process, educator agreement on best practices, and increased use of open access distribution would help overcome the obstacles we identified.

My colleagues Silke Ernst und Daniel Haeusermann contributed a comparative legal analysis to the latest Berkman report.