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Here's a surefire way to stifle innovation

Policy analyst Patrick Ross says a well-meaning proposal wending through Congress will achieve the opposite of the author's intent.

During the Grokster debate, we frequently heard those opposed to the content industry's position chant, "Don't stifle innovation!"

Now that the Grokster decision has been handed down and innovation still appears to be among us, it's important to continue the fight for new ideas. That effort should include preserving, through intellectual-property protection, the innovation of online business models that empower consumers by offering for sale or rental goods with differing uses at varying price points.

Ultimately, if consumers are going to be able to fully benefit from the flexibility and ease of access afforded by the Internet, they must not have their choices curtailed by misguided federal legislation.

A well-meaning U.S. Congressman, Rick Boucher of Virginia, is the author of the legislation in question. He first tried to make circumvention of copy-protection mechanisms legal back in 1998, when Congress was debating the Digital Millennium Copyright Act. His effort to amend the bill failed.

Since then, he has been continuing his crusade through standalone bills; his version in this Congress is HR-1201. Boucher claims that digital rights management (DRM) on DVDs, CDs and other mediums can stifle fair use. The U.S. Copyright Office largely has disagreed in DMCA review proceedings, but Boucher nonetheless persists.

What has changed since 1998, however, is distribution. It is uneconomical for a content producer to offer multiple versions of physical media with a variety of technological protection measures, or TPMs. If the producer did manage such a range, there could easily be compatibility issues with playback devices. Thus, few TPM options exist in the world of physical media, and Boucher can always come up with a scenario he believes involves fair use that is limited by TPM.

But when the content is delivered purely as digital bits, there is no limit to the range of TPM that can be applied. Content producers can also quickly change their options to meet market demand. What is a publisher to do when it finds out that it can't get students to buy e-textbooks when they expire after a mere four months? By changing one line of code, those four months can be expanded to a full year.

Consumers would be legally sanctioned to break their contracts with the content providers.

Online music subscription services can experiment with the number of music players permitted, the number of computers allowed, whether the songs are "owned" or rented, etc., and can change those settings on the fly if market forces demand it. That's far more difficult with physical media. The TPM being put into upcoming high-definition DVD formats, for example, likely will remain in place for years, if not for the entire duration of the format.

What does this infinite flexibility for digital TPM mean for media distributed online? It means consumers will have more choice. More legal music options are already available online, and at The Progress & Freedom Foundation's recent Aspen Summit, we heard Warner Music Group Chairman and CEO Edgar Bronfman Jr. promise an e-label for up-and-coming artists.

At an event we hosted earlier this year, Motion Picture Association of America President Dan Glickman said his members are hard at work on new online distribution methods for motion pictures. And more anecdotally, the increasing number of e-books available on PDAs attests to the potential of that growing market.

When content producers know that they can experiment with various protection approaches, they're more comfortable entering the online market. Also, investors are more inclined to fund such efforts. Imagine a world of unlimited digital content, packaged with a range of TPM at varying prices. In that world, consumers can purchase exactly the amount of use they need and not pay for more.

But if HR-1201 becomes law, every consumer could legally hack any TPM by claiming fair use, and as fair use isn't codified, there would be as many definitions of it as there are consumers. Consumers would be legally sanctioned to break their contracts with the content provider.

No sane business operator enters a contract in which one party has the right to disregard its terms at will, but that's what HR-1201 permits. That hated TPM would disappear from the market, as there's no reason to employ a lock if everyone has a legal right to the key. But as TPM leaves, so do the digital offerings that come with it.

There's a lot of creative thinking going on today in the world of TPM, as Sun Microsystems' president Jonathan Schwartz just acknowledged at the Aspen Summit. That imaginative thinking, coupled with the creativity involved in producing everything from music to movies, books to video games, podcasts to quilting patterns, combines to form the potential for unlimited consumer choice. As a consumer myself, I'm all for that. So we must continue the mantra a little longer--"Don't stifle innovation!"