D.C. showdown looms over file swapping

Technology companies and the record industry are nearing a last-minute showdown on Capitol Hill over a controversial bill aimed at quelling file swapping.

The bill, sponsored by Sen. Orrin Hatch, R-Utah, and dubbed the "Induce Act," was introduced earlier this year, in large part as a response to court rulings that have said that file-sharing software companies were not liable for copyright infringement by their customers.

A round of negotiations between the Recording Industry Association of America (RIAA) and technology organizations closed this week without reaching compromise, according to people familiar with the talks. Hatch's Judiciary committee was scheduled to vote on a version of the legislation Thursday, but adjourned without taking up the bill. The issue is now most likely to be taken up when Congress returns for a short session in November, participants in the negotiations said.

The prospect of a vote on Thursday had prompted a flurry of last-minute protest letters from technology and consumer organizations.

"The recording industry (proposals) would effectively put at risk all consumer electronics, information technology products, and Internet products and services that aren't designed to the industry's liking," read one letter sent Wednesday and signed by lobby groups representing technology companies, including News.com publisher CNET Networks. "We urge you not to move forward now."

The issue has become a key rallying point for many in Silicon Valley who fear that the legislation might have impact well beyond the file-swapping world. The result has been a relationship between technology and content companies at its most tense since bitter battles over Hollywood-sponsored antipiracy proposals in 2002.

The RIAA is taking a conciliatory approach toward the technology industry, saying it is solely interested in stopping file-swapping companies that profit from copyright infringement. The group has said it is open to changing the legislation in whatever way necessary to achieve that goal.

"In a short period of time, there has been remarkable progress," RIAA spokesman Jonathan Lamy said. "A coalition of groups and members of Congress have coalesced around the core proposition that the 'bad actors' deserve to be held accountable. No one is defending the parasitical business model of the illegitimate peer-to-peer networks. The remaining issues are definitional and we continue to work through those."

Rolling back Betamax?
At the core of the RIAA's push--and of much of the technology industry's fear--is an effort to change the way that a 20-year-old court decision affects copyright law.

In 1984, the Supreme Court said that the Sony Betamax videocassette recorder was legal to sell, despite being widely used to copy movies and television shows. The court reasoned that the device could not be banned outright because it had a number of uses that did not involve copyright infringement. That rule, later known as the Betamax doctrine, now protects virtually all products that can make copies as long as they too have "substantial noninfringing uses."

This has proven a key part of the legal defense for peer-to-peer software companies such as Grokster and Streamcast Networks against charges of copyright infringement by the record industry and Hollywood studios. They've said, and federal courts have agreed, that the file-swapping networks can be used for legal purposes despite the widespread song and movie piracy they allow.

However, judges in those cases said that if content companies didn't like those decisions, they should take it up with Congress--and that's just what the RIAA has done.

Hatch and the record industry group have said they want to focus heavily on behavior, rather than on specific technology. They say that the file-swapping companies are "inducing" illegal behavior on the part of their customers and should be held liable for that action.

Technology companies and consumer advocates say this threatens to roll back the Betamax doctrine and expose to liability a wide variety of companies--from Web browser makers to iPod maker Apple Computer.

The senator outlined his goals for the bill in a letter to Register of Copyrights Marybeth Peters, who has supported the bill. In the letter, Hatch wrote that he wants a "technology-neutral bill directed at a small set of bad actors, while protecting our legitimate technology industries from frivolous litigation."

Reports from the participants in negotiations this week were mixed. Recording industry sources said that substantial progress had been made, although the parties remained split on how to define peer to peer. Consumer groups said the gap remained wide.

The technology groups pressed Hatch on Wednesday to put a hold on the bill's progress, citing the need for more public scrutiny of the bill's language, which remains in flux.

"Every one of the half-dozen drafts proposed would make fundamental changes to copyright law, with potentially enormous impact on innovation, creativity, and competition," the Center on Democracy and Technology wrote in a letter to Hatch on Wednesday. "Given the short period over which (the bill) has been discussed, the absence of hearings on the new language, and the overall lack of opportunity for the public to comment, we believe it would be in the best interests of all parties to allow a more orderly process to go forward."

If the bill faces a vote as scheduled on Thursday in the Judiciary Committee, it still could be changed before it faces a full vote in the Senate. Participants said that the vote could be delayed at the last minute, however, given the fluidity of the situation.

Congress will return in November to vote on budget bills after the election, and most observers expect the bill to be taken up again then.

In the meantime, technology executives are rallying people to contact Congress to express their displeasure over the bill, which was a hot topic of conversation at the Web 2.0 conference in San Francisco this week.

HDNet founder and Dallas Mavericks owner Mark Cuban summed up the fears of many of the event's attendees. "If you're at this conference, your livelihood is at risk if the Induce Act passes," he said.