ElcomSoft verdict: Not guilty

In the first major test of the criminal provisions of the Digital Millennium Copyright Act, a jury finds ElcomSoft not guilty of creating a tool to steal eBooks.

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SAN JOSE, Calif.--A jury on Tuesday acquitted a Russian software company of criminal copyright charges related to selling a program that can crack antipiracy protections on electronic books.

The case against ElcomSoft is considered a crucial test of the criminal provisions of the Digital Millennium Copyright Act (DMCA), a controversial law designed to extend copyright protections into the digital age.

The company faced four charges related to directly designing and marketing software that could be used to crack eBook copyright protections, plus an additional charge related to conspiring to do so. The jury acquitted the company of all charges.

Jury foreman Dennis Strader said the jurors agreed ElcomSoft's product was illegal but acquitted the company because they believed the company didn't mean to violate the law.

"We didn't understand why a million-dollar company would put on their Web page an illegal thing that would (ruin) their whole business if they were caught," he said in an interview after the verdict. Strader added that the panel found the DMCA itself confusing, making it easy for jurors to believe that executives from Russia might not fully understand it.

ElcomSoft attorney Joseph Burton said that Tuesday's win was important as one of the first setbacks for publishers seeking to assert the law against programmers. But he cautioned that the acquittal did not mean software developers should consider themselves immune from future criminal prosecutions under the law.

"This is sort of the first dent in the DMCA," Burton said. "Up until now, the large publishers have sort of had their way...(but) I think developers still need to be careful."

Prosecutors declined to comment other than to say that they respected the jury's decision.

The case was launched in July 2001, when ElcomSoft employee Dmitry Sklyarov was arrested during the Las Vegas Defcon hackers conference after giving a speech about his company's software, which is designed to crack protections on Adobe Systems' eBooks. Prosecutors, working with Adobe, said ElcomSoft's Advanced eBook Processor violated the DMCA.

But after protests from programmers, Adobe backed away from its support of the case against Sklyarov, and prosecutors set aside charges against Sklyarov in exchange for his testimony in the case against his employers.

During the trial, which lasted two weeks, the government said ElcomSoft created a tool for burglars and characterized the company as an affiliate of hacker networks that was determined to sell the Advanced eBook Processor despite its questionable legality. U.S. Assistant Attorney Scott Frewing charged that company representatives knew all along that they were violating the DMCA by designing and offering the software to the public.

The defense, in turn, argued that ElcomSoft acted responsibly, removing the software from the Web just days after learning of Adobe's concerns. Both Sklyarov and ElcomSoft President Alexander Katalov testified that they did not think their software was illicit and did not intend for it to be used on books that were not legally purchased. Under cross- examination by the defense, an Adobe engineer acknowledged that his company did not find any illegal eBooks even after hiring two companies to search the Web for unauthorized copies.

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Because both the defense and prosecution agreed that ElcomSoft sold software designed to crack copyright protections, the case essentially turned on ElcomSoft's state of mind during the period it was offering the software.

After much wrangling among attorneys over the definition of the word "willful," the judge told jurors that in order to find the company guilty, they must agree that company representatives knew their actions were illegal and intended to violate the law. Merely offering a product that could violate copyrights was not enough to warrant a conviction, the jury instructions said.

The verdict comes after a series of legal wins by publishers seeking to restrict the use of digital technology, which some believe heralds the death knell for traditional media businesses, from film studios to music and book publishers.

The DMCA makes it a crime to offer for sale products that circumvent digital copy protections, including encryption schemes, the issue at stake in the ElcomSoft case. Other provisions create penalties for creating and distributing such tools, raising protests from programmers that the law could, among other things, bar academic research and inhibit open discussion of encryption technology, including in news reports. Last year, in a major ruling favoring the film industry, a federal appeals court ordered a Web site to remove links to code capable of cracking encryption on DVDs, citing the DMCA.

Lawyers not involved in the case said the ElcomSoft verdict boded ill for future criminal prosecutions under the controversial copyright law. A "not guilty" verdict in a criminal case comes without the ability to appeal, unlike the civil copyright cases targeting Napster and other companies that have bounced through federal court in recent years. Future courts won't be bound by Tuesday's verdict, which will stand untouched.

"It is troubling for enforcement of the (criminal provisions of the) DMCA," said Evan Cox, an attorney with the San Francisco firm of Covington & Burlington. "This was the kind of case that the DMCA was meant to prevent. If this enforcement led to a not guilty verdict, you have to wonder what would lead to a successful case."

Some lawyers speculated that the jury might have been rendering an opinion on the law itself, as well as on the strict legality of ElcomSoft's activities.

"The jury has the flexibility to think about (ElcomSoft's motives) and essentially nullify the law if they think it is overreaching," said Jefferson Scher, a partner at Carr & Ferrell. "I think there's a little O.J. factor if they decided that the law shouldn't be read as strictly as it seems to read."

News.com's John Borland contributed to this report.