| Contacts: | Jeff Joseph tel: 703 907-7664 e-mail: jjoseph@CE.org |
Jenny Pareti tel: 703 907 7079 e-mail: jpareti@CE.org |
INDUCE ACT WILL ELIMINATE BETAMAX PROTECTIONS, CREATE A HUGE NEW CLASS OF LIABILITY FOR INNOVATORS AND OTHERS, SAYS CEA
Legislation Threatens Technology, Innovation and Consumers Rights
| Washington, District of Columbia | 7/22/2004 |
The Inducing Infringement of Copyrights Act of 2004 (S.2560) will gut the Supreme Court's Betamax ruling and unleash massive new litigation on innovators and venture capitalists, Consumer Electronics Association (CEA) President and CEO Gary Shapiro warned a congressional panel here today. Shapiro made his comments while testifying before a hearing on the bill, introduced last month by Senator Orrin Hatch (R-UT), held by the Senate Judiciary Committee.
"S.2560 is by far the biggest threat to technology and innovation in 20 years," testified Shapiro. "Whatever the intent of its supporters, S.2560 is neither a narrow bill nor a bill targeting only P2P companies. If this bill had stood as law, Americans would never have enjoyed products from the VCR to the TiVo, from the iPod to the photocopier."
Shapiro noted that S.2560 would create a new type of copyright liability for any device or person that "aids, abets, induces or procures" the copying of copyrighted works. Liability would be determined by whether or not the defendant "intended" to induce. The result, he argued, would be the creation of a massive new liability regime as innocent products and services are targeted for litigation.
"I urge you to consider the harm this bill will engender as litigation is unleashed over every new development in technology," Shapiro continued. "Consumers will be the ultimate losers as venture capitalists back away, innovation is chilled, and new products never come to market."
Shapiro explained how the bill jeopardizes the critical protections created by the landmark Betamax case decided 20 years ago by the U.S. Supreme Court. In sum, the Court found that a manufacturer is not liable for the conduct of another person if the product has any commercially significant non-infringing use.
"The Betamax case is the Magna Carta for the technology industry," Shapiro explained. "Betamax gave a green light to inventors and venture capitalists, ensuring that they could go forward without fear of liability. S. 2560 would reverse and rewind this critical ruling. Betamax is based on an objective assessment of a product's capabilities. S. 2560 relies on a subjective evaluation based on business and investment records, or on circumstantial evidence of what someone had in mind in bringing a product to market."
To reinforce the broad implications and dangers of the bill, Shapiro pointed to the example of Replay, a company making personal video recorders, which was driven into bankruptcy by copyright litigation brought by several motion picture studios. The complaint filed by three studios specifically attacks standard recording features, found on any TiVO or PVR as "inducements" to copyright violation. In his prepared testimony, Shapiro pointed to paragraphs of a November 14, 2001 complaint filed by MGM, Fox and Universal, sections of which attacked the Replay product solely on the basis of its capacity to store and index a consumer's own recordings. The lawsuit, filed in the United States District Court for the Central District of California, charged that "... expanded storage and sorting features organize disparate recordings into coherent collections, and cause, facilitate, induce and encourage the storage or "librarying" of digital copies of the copyrighted material."
"This is a grim foreshadowing of the litigation we will see if this bill allows the media giants to go back once again and challenge lawful technologies such as MP3 players, TiVO or the Clearplay content filtering system," Shapiro warned. "This bill's concept of "inducement" is so broad that potential defendants include not only innovators who build products, but also the venture capitalists who fund them and the journalists who write about them," Shapiro explained. "Meanwhile, the potential number of plaintiffs is endless, since virtually every American is a copyright owner. I shudder to think of the uses trial lawyers will have for this broad new cause of action."
Shapiro also warned of the potential impact of the bill on consumers. "Despite its laudable intention to target bad actors, the proposed bill would limit the freedom of consumers to purchase and then use technology that would enrich their lives," he noted. "In all fairness, consumers should not be limited in what they can do with technology simply because 'bad actors' can't be trusted to use technology responsibly."
Shapiro noted that opposition to this bill has been expressed by manufacturers, Internet portals, financial services companies, the telecommunications industry, ISPs, venture capitalists, journalists and consumer groups. Reinforcing that point, Shapiro noted that his statement before the Committee also was made on behalf of the Home Recording Rights Coalition, of which he serves as chair, and was endorsed by the Computer and Communications Industry Association, as well as public interest groups Public Knowledge, the Digital Future Coalition and the Electronic Frontier Foundation.
"Mr. Chairman, we share your concerns about commercial piracy, and we pledge our cooperation," said Shapiro in conclusion. "In turn, we know you share our conviction that painting a massive liability bull's-eye on the technology and venture capital industries is not in America's interest. We look forward to cooperating with you, your staff, and with the Committee, in the legislative process."
About CEA:
The Consumer Electronics Association (CEA) is the preeminent trade association promoting growth in the consumer technology industry through technology policy, events, research, promotion and the fostering of business and strategic relationships. CEA represents more than 1,700 corporate members involved in the design, development, manufacturing, distribution and integration of audio, video, mobile electronics, wireless and landline communications, information technology, home networking, multimedia and accessory products, as well as related services that are sold through consumer channels. Combined, CEA's members account for more than $90 billion in annual sales. CEA's resources are available online at www.CE.org, the definitive source for information about the consumer electronics industry.
CEA also sponsors and manages the International CES - Defining Tomorrow's Technology. All profits from CES are reinvested into industry services, including technical training and education, industry promotion, engineering standards development, market research and legislative advocacy.