By Dugie Standeford for Intellectual Property Watch
European copyright owners’ organisations, consumer groups and artists’ collecting societies voiced strong differences of opinion on the importance of, and need for, digital rights management (DRM) systems to spur development of Internet content at an 11 October European Commission hearing.

The hearing is part of a consultation on content online in the single market that aims to find a coherent, European Union-level approach to dealing with the challenges technology convergence poses for the content industry, EU Information Society & Media Commissioner Viviane Reding said. It will lead to a Commission communication, to emerge toward the end of the year, that will explore possible actions to boost the competitiveness of Europe’s online content and production industry as well as the best way – legislation, best practices, financial support – to accomplish them.

The Commission, which views DRM as one key to making online content more available, is looking for ways to guarantee adequate protection of copyrighted material as well as a “high level of consumer friendliness” without lowering consumer privacy and free speech rights, Reding said.

Continued support for DRM technologies is one of three principles on which the Commission approach should be based, said Business Software Alliance (BSA) Director of Policy Europe Francisco Mingorance. DRM is being threatened by national efforts to undermine its effectiveness, he said, citing the recent enactment of a French law on copyright and related rights that requires content owners to disclose their DRM systems to third parties to ensure interoperability of platforms.

DRMs are “very useful tools” but they are creating problems, said Victoriano Darias, legal adviser to the European Grouping of Societies of Authors and Composers (GESAC). They are not particularly good at tracking works and often are not interoperable, he said. But their chief problem is that the technology is not yet able to control the number of private copies made. Once a CD is copied, the DRM system becomes ineffective, Darias said, leaving consumers free to make as many additional copies as they want. Add to that the fact that many online services are offering music without DRM protection, and artists are being short-changed, he said.

The information technology sector is lobbying “very, very hard” for private-copy levies on CDs and other media to be phased out in favour of DRM, Darias said. That would be premature because the systems are compatible. The Commission should refrain from imposing a solution and let the market decide, he said.

But Mingorance said private copying levies hurt consumers and create lost sales for artists. BSA data show that at the EU level, levies had a €2.1 billion direct impact on consumers and producers last year. And, because levies on MP3 players and mobile phones with MP3 capabilities reduce the number of such devices sold, the indirect impact on sales of online music and phone ringtones could be €247 million worth of lost music download (and ringtone) sales by 2008, one study for BSA reported.

The levy system is “out of control,” Mingorance said. As more music, online or off, is protected by DRM or other formats, levies on devices and media should be reduced accordingly, because the levies are to compensate copyright owners, who are now being compensated by DRM. So if a certain percentage of the entire music market were delivered through a secure online system or protected format, then levies should theoretically be reduced by the same percentage. That is not happening because European law either is not enforced or is not clear enough, he said.

Most creators seem to agree that DRMs “do not enforce copyright protection but business models,” said Cornelia Kutterer, senior legal advisor to the European Consumers’ Organisation (BEUC). The group has called for an open debate on alternative remuneration proposals for artists, she said.

One such discussion now taking place concerns a Commission proposal to create a collective rights management system for online music in which three or four “pools” grant pan-European licenses, though only for their own repertoire, Darias said. A music service operator who wants to exploit all of the repertoires would have to obtain a license from each pool.

GESAC, however, told Reding it favours a “one-stop-shop” model by which, “through the cooperation of the existing authors’ societies, any licensee can get a license of as much repertoire as possible (ideally the world repertoire, if rights holders agree) in one single act” from any of the existing groups, provided they meet certain quality criteria and apply the tariff of the country of the country where the consumer is located.

Piracy and Privacy

Piracy of online content remains a major problem, though it is overshadowed to some extent by other issues, GESAC and BSA said. But BEUC is worried about a Commission proposal to criminalize commercial copyright infringements, Kutterer said. The draft directive blurs the lines between commercial and non-commercial copyright infringement, and fails to clarify private copying from non-commercial infringement.

Another “concrete threat” to online content distribution is an opinion by the EU Article 29 Data Protection Working Party on privacy issues related to intellectual property rights, Mingorance said. Under the group’s “restrictive” reading of the EU privacy directive, Internet Protocol (IP) numbers must be treated as “judicial data” deserving additional protection, he said. That prevents content owners from using a suspected pirate’s IP address to chase him because they must obtain the person’s permission to do so first.

Resistance to Regulation

None of the groups appeared anxious for greater EU-wide regulation in the online content arena. Any effort to do away with private copy levies should be “carefully assessed,” GESAC’s Darias said. The appropriate copyright system is already in place and no new regulation is required, said Mingorance.

One reason why online game subscriptions are doing well is that the industry has been lightly regulated on the national and EU levels, said a spokesman for the Interactive Software Federation of Europe (ISFE). The organization stressed the value of self-regulation, citing the pan-European rating system developed by the industry without any government support. ISFE’s message to the Commission is that self-regulation works on an EU basis, the spokesman said, adding, “The less regulation, the better.”

Dugie Standeford may be reached at info@ip-watch.ch.