Copyright bill splits PC industry

In May, graphics software company SciTech received an email threat: Hand over $25,000 or we'll post instructions on the Internet telling users how disable your 30-day trial timer and keep using your software for free. The blackmailer's big mistake was not hacking copyrighted software, but asking the company for money.

If he hadn't, the FBI wouldn't be investigating the incident. Why? Because in the United States, it's not illegal to divulge how to steal software as long as you don't steal it, according to the Software Publishers Association (SPA).

Bootleg copies of music, movies, and software are estimated to make anywhere from $15 billion to $20 billion worldwide, various trade groups estimate. Software alone generates $1 billion of that, the SPA says. That's why the group is supporting controversial Congressional legislation that makes it illegal to defeat or create devices that defeat copyright protection schemes.

The provision is part of the "enabling legislation" for an international digital copyright treaty drafted last December by the United States and 160 member nations of the World Intellectual Property Organization (WIPO). The treaty is supposed to help copyright owners protect their interests in cyberspace, where copying is rampant.

Sen. Orrin Hatch (R-UT) has introduced a treaty ratification bill in the Senate. But what should have been a routine approval is turning into a pitched battle that's pitting larger software makers against device manufacturers and smaller software vendors, potentially delaying the treaty's ratification until next year.

The Digital Future Coalition (DFC) released a letter this week criticizing the enabling legislation, singling out the copyright circumvention provision. A similar provision was defeated at the December WIPO meetings.

"For us, it's a real trade barrier issue," said Christine Owens, manager of government relations for Storage Technology. Owens represents the American Committee for Interoperable Systems (ACIS), a group of computer industry companies including Sun Microsystems, Hitachi, 3Com, and America Online for the Digital Future Coalition.

Owens said small software firms and device makers routinely "reverse engineer" competitors' programs, decompiling them to see how they work in order to make compatible or competing products. That means defeating anticopying devices, she noted. Under the new law, simply defeating the device would be a crime, even if the purpose isn't to steal anything.

"Car companies like Ford and GM routinely take their competitors' vehicles apart. Reverse-engineering software is no different," said Owens. "This bill makes formerly protected activities illegal."

Big software companies don't think that's so bad. "We'd be perfectly happy if reverse engineering were outlawed," said Diane Smiraldo, vice president of public affairs for the Business Software Alliance, a group of top software firms including Microsoft and Adobe that support the provision. "It's taking apart someone else's code to steal it."

But the SPA said the provision wasn't designed to stop "fair uses" like reverse engineering. Instead, it was created to keep thieves from posting lists of bootleg serial numbers or selling software hacks that allow pirated programs to run without their associated hardware keys. The provision contains a fair-use exemption that will protect innocents, said Mark Traphagen, an SPA lawyer.

"If you can't import, create, or have devices that circumvent copyright, the fair-use savings is a moot point," DFC's Owens countered. "I agree with the intent of the exemption, but it's just not practical in light of the rest of the provision."

The law takes too wide an approach to copyright enforcement, she added. Instead of punishing criminals, it forbids devices that might be used to commit crimes. Under such a law, for example, the home video recorder might never have been created because it can be used to copy movies.

But Traphagen argued that copyright preemption devices are already illegal in many industries. For example, devices that intercept and unscramble satellite or cable TV signals are illegal. "What [the provision] does is provide a general copyright framework so that other people, rather than just television producers, can take advantage of technical protection," he said.

That worries consumer electronics device makers, who joined the DFC in opposing a similar provision struck out of the WIPO treaties. VCRs, CD-ROM burners, floppy disk drives, and even cassette decks could be used to bootleg copyrighted works. The manufacturers worry this provision could make them criminals.

Instead, the provision is aimed more at devices that have no other inherent commercial use other than to circumvent copyright protection, such as hacks and bootleg serial numbers, according to Traphagen. But, he admitted, that doesn't mean device makers aren't in peril of the law. "What they were looking for was a complete insulation from liability. Section 1201 does not provide that for them, neither does it provide strict liability if a device can circumvent copyright protection."

Some security experts fear the provision would make their jobs nearly impossible, while doing little to stop crooks. "This bill would make it illegal for people who create software locks to have the tools required to test them," said Henry Roberts, who writes copy-locking software for Advanced Software Technologies. "Copyright infringement is already illegal, but people do it anyway. Since people are breaking laws anyway by stealing software, I wonder, 'How much good an additional law is anyway?'"

Owens said provisions such as the copyright preemption are aimed at preserving the lead of U.S. companies, but it could eventually work against them by creating a less competitive global market. "The United States leads now, but if we try to create such a proprietary intellectual property system it could backfire in the long run. If someday a Japanese company starts to lead, then we're the ones that are screwed and left out."

The SPA's Traphagen said the DFC, which also includes library and civil liberties groups, is purposefully misconstruing the provision's intent. "I detect a wider agenda here to expand their privileges at the cost of copyright holders."

The DFC letter also criticized the WIPO treaties' enabling legislation for failing to clarify other important copyright issues for the digital age, such as whether the "first-sale" doctrine applies to software as it does to books. "First sale" allows anyone who purchases a book to resell it, but software "shrink-wrap" licenses routinely forbid this.

In addition, the DFC said the legislation should address whether unilateral "shrink-wrap" or "click-wrap" licenses are enforceable and should be allowed to deprive users of "fair-use" rights or whether they can contain other provisions that override existing law. It also wanted the legislation to clarify libraries' rights to lend and make archival copies of digital materials and what liability, if any, Internet service providers have for material on their networks.

A separate bill to immunize ISPs from liability that may arise from copyright infringers who use their services was introduced in the House in July. (See related story)

The enabling legislation is scheduled to be debated after the Labor Day holiday break. It's not expected to come to a vote until next year.