EFF Prepared Testimony at Copyright Office section 1201 rule-making hearings presented by EFF Staff Attorney, Gwen Hinze

May 15, Panel 3 EFF 3rd Proposed Exemption - Foreign audiovisual works and movies released on non region 1 DVDs and not otherwise available in the United States

EFF is requesting an exemption for a limited class of DVDs - foreign audiovisual works that are released on non region 1 DVD format and are not otherwise available on DVD in the United States. Region coding controls on DVDs currently preclude American consumers from playing foreign movies they have lawfully acquired and lawfully imported into the United States, on their US DVD players. The exemption we have proposed would permit consumers to play these movies. Playback of a DVD is a non-infringing use of these audiovisual works since private performance is not one of the exclusive rights granted to copyright owners by section 106 of the Copyright statute.

As Mr. Attaway of the Motion Picture Association of America stated in his testimony before this rule-making on May 2,[1] the purpose of the region coding system is to allow copyright owners to control marketing of their works. The region coding system does not, and was not designed to, protect any of the rights granted to copyright owners by section 106 of the Copyright statute.

In considering whether to grant this exemption, we are asking the Copyright Register and the Librarian of Congress to decide whether preservation of an existing business model should outweigh consumers' ability to make a non-infringing use of their lawfully acquired and lawfully imported DVD movies.

The parties opposing this exemption have made four main arguments:

First, the joint commenters have argued that EFF has not met its burden of proof of establishing harm amounting to a substantial adverse impact on noninfringing uses. They deride the figures provided in EFF's comments for the numbers of movies from Australia, Japan, and India, that are not released in the US on region 1 DVD format in the United States, as being "somewhat suggestive of the number of titles in this class and the U.S. demand for them, but they are presented in a way that tends to exaggerate both these qualities."

However, the joint commenters have criticized only the figures provided for Indian movies and have not disputed the figures provided for (region 4) Australian movies or (region 2) Anime works.

In terms of actual harm, I note that 124 individual consumers have filed comments in support of this exemption describing their inability to play numerous lawfully acquired DVD movies that are not available in a region 1 format. These comments constitute detailed, first-hand evidence of non-infringing uses that American consumers are currently prohibited from making due to region coding access controls. .

The joint commenters also argue that in order to meet the "substantial adverse effect" standard of proof for this exemption, EFF is required to show the numbers of foreign movies released on DVDs that will not play on region 1 DVD players. This would require a showing for every foreign country, of the number of foreign movies that are never released in the United States, and a showing that they are released solely on DVDs that are not coded either "1" or "all." If this were the standard of proof that an exemption proponent had to meet, it would negate Congress' intent in establishing this rule-making process - namely, as the Commerce Committee stated, to provide a fail safe mechanism to protect consumers' noninfringing uses. It would also raise serious questions about the procedural fairness of this process. The only parties who could feasibly gather that data are the parties opposing this exemption. These parties have chosen not to disclose this data - even though by doing so, they could presumably refute our claims, if the scope of people affected is as minimal as they suggest.

EFF submits that the data on the record of this proceeding, in EFF's comments, and in the over 124 comments filed by consumers, is sufficient to prove a present substantial adverse impact on users' ability to make noninfringing uses of their lawfully acquired works.

Our opponents also argue that this exemption should be not granted because American consumers can acquire a VHS version of the relevant foreign movie. As DVDs continue to overtake VHS as the preferred movie distribution medium, this is not a feasible alternative to address the likely harm to consumers in the next 3 years.

[My colleague Ren Bucholz is currently showing a pie chart comparing the growth of sales of DVD versus VHS over the last 3 years. DVD sales overtook VHS in the US in early 2002, and as you can see on this slide, DVD rentals overtook VHS in March this year].

The availability of VHS sources of these works is likely to decrease in the next three years for two reasons. First, as in the United States, foreign movies are increasingly being released only, or predominantly on DVD, and retailers are ceasing to carry or reducing their stock of VHS tapes in response to consumer demand. For instance, our submission cites the 2002 decision of Japanese Anime company Bandai Entertainment to release only on DVD. And as previously quoted in slide from this morning, Marylou Bono, Vice President of Home Video Marketing for Warner Strategic Marketing in the United States stated that Warner decided in January of this year to phase out VHS releases, because as she put it, "VHS is dead." I'd also like to point out on the slides that we showed this morning that Circuit City ceased carrying VHS tapes in June 2002, and in September 2001 Blockbuster reduced their stock of VHS tapes by 25 percent.

The second reason is as VHS tapes degrade, the existing stock of older works on VHS tapes will diminish. Unless an exemption is granted to allow American consumers to view their lawfully acquired DVDs, they will increasingly be walled off from the benefits of cultural exchange offered by foreign movies.

The joint commenters' second major argument against this exemption is that consumers are not actually denied access to their lawfully obtained DVDs because they can purchase alternative DVD players. There are two options available to consumers here. First, consumers can buy a multi-region or all-region player. Apart from the fact that these are not easy to find, since neither Amazon.com nor any of the five major US consumer electronics stores sell these any more, the joint commenters have taken the position in several lawsuits that playing a DVD on one of these players violates section 1201(a), because it goes beyond the scope of authority granted by a copyright owner.

In the appellate brief in the Universal v. Remeirdes case cited in our submission[2], and most recently, in their March 2003 summary judgment papers in the pending 321 Studios' litigation,[3] the MPAA and several of the movie studios have argued that the scope of authority given to consumers is limited to playing the DVD on a DVD-CCA licensed DVD player. Since the DVD-CCA's multi-tiered licensing system requires DVD players to respond to a DVDs' region coding tags, multi-region players are not DVD-CCA authorized, and playing a DVD on them therefore violates section 1201, according to the MPAA and its member studios.

I should note here that I was sincerely surprised to see a statement by Mr. Attaway in his May 2 testimony, responding to a question from Mr. Carson, which appeared to present a completely contrary position to the public position taken by MPAA and its members in these two lawsuits I've just mentioned, in relation to their construction of section 1201(a)(3)(B).

Assuming, for the moment, that the copyright owners still believe that playing a DVD on a multi-region player violates section 1201, that leaves consumers with the second option of purchasing up to 3 region-specific players from the relevant foreign countries, paying associated shipping costs, and purchasing a more expensive multi-standard television or a PAL or SECOM to NTSC converter, to overcome incompatibility of broadcast standards, and conversion of electricity standards.

I'd like to make two points here. First, this is a significant capital equipment cost to ask a consumer to bear to play back a movie. Second, and more importantly, the consumer's desired use is non infringing. Playback of a DVD is a private performance. It is not one of the exclusive rights granted to copyright owners under section 106 of the Copyright statute. It is also clearly lawful for consumers to import foreign movie DVDs for personal non-commercial use under section 602 of the Copyright statute. On closer inspection, then, the joint commenters' arguments distil down to the claim that it is appropriate to impose a significant cost burden on American consumers to enjoy what is a non-infringing use of lawfully acquired media, in order to preserve an existing marketing system for these works.

The third argument made by some of our opponents against granting this exemption is that the system of geographic region coding is part of the exclusive right of distribution granted to copyright owners under section 106, and, therefore granting an exemption would violate this right. This is not accurate. Copyright law does not grant copyright owners unfettered control over distribution. The Copyright statute recognizes a number of limitations on copyright owners' distribution right. Two of these limitations - the first sale doctrine reflected in section 109, and the right of personal importation recognized in section 602 for non-commercial purposes - both support the exemption we have sought.

This exemption would only extend to DVDs that consumers are lawfully allowed to import into the United States under section 602 of the Copyright statute. The joint commenters have argued in relation to one of the examples cited by EFF that allowing consumers to play a lawfully imported DVD movie that was currently in a US theatrical release would undermine box office profits. However, this is already permitted by section 602 of the Copyright law. The same argument could equally be leveled at lawfully imported foreign VHS tapes. Congress has already drawn the balance in favor of permitting exactly this behavior and it should not make a difference whether the consumer is trying to play a foreign movie purchased on DVD or VHS. Nothing in the legislative history of the Digital Millennium Copyright Act indicates that Congress intended to override section 602 or section 109, or otherwise extend the rights granted to copyright owners under section 106, by enacting section 1201.

The fourth argument made by opponents of this exemption is a claim to user facilitation and a corresponding warning of reduced availability should any exemption be granted for region coded works. The joint commenters state at pages 26 and 27 of their comments that the use of region coding helps preserve the market opportunity for U.S. distributors to make foreign works available, and that foreign titles would become far more widely available to American viewers through U.S. distributors "so long as the distributors can be assured that region coding access controls are respected in the United States" [p.27]. The same argument was made by testifiers at the May 2 hearing in this proceeding.

In response, I'd like to point out, first, that we are seeking this exemption precisely because many foreign movies have not been released in the United States, despite the existence of region coding and CSS on DVDs for the last 3 years. U.S. copyright owners can control the scope of this exemption by choosing to release a foreign work in Region 1. Second, there is no sense in which this exemption would deprive U.S. distributors of an economic benefit. U.S. distributors have not lost any profits because the work was not available in the United States. Copyright owners' foreign distributors have also not been harmed economically because they have received their designed purchase price.

Third, the threat that copyright owners will not release content unless there is absolute legal protection for technological protection measures, is not actually borne out by the last three years' experience of the Content Scramble System protection on DVDs. Prior to the introduction of the DVD format, copyright owners argued that they required legal protection for technological protection measures to overcome the threat of illegal copying, and to provide incentives to make digital content available. As a result, content released by the major motion pictures on DVD has been protected by CSS since 1998. However, as I mentioned in this morning's hearing, CSS has not been effective at preventing large scale commercial reproduction of DVDs. It was defeated almost immediately by a group of hobbyists and the tools for circumventing CSS are widely available on the Internet and from commercial vendors in the United States. As the MPAA frequently points out, large numbers of unauthorized copies of motion pictures are widely available for download on the Internet. Given the copyright owners' stated concerns about the need for protection against digital piracy, you would expect the copyright owners to have abandoned releasing content on CSS-protected DVDs. But exactly the opposite is true. DVD sales overtook VHS sales in early 2002, and as I mentioned, Warner Home Video is moving to release movies only on DVD.

My point here is that motion picture studios have continued to make their copyrighted works available on DVDs notwithstanding the ease of defeating CSS. Granting an exemption for circumvention for a limited class of movies owned by consumers who have paid for these works and have lawfully imported them into the United States will not have any bearing on copyright owners' decisions to make content available.

Finally, I'd like to emphasize that this limited exemption does not open the floodgates to widespread copyright infringement. First, the exemption is limited to noninfringing playback of movies and does not immunize infringing behavior. It doesn't include reproduction. Second, as section 1201(a)(1)(D) makes clear, any exemption granted by the Librarian of Congress cannot be interpreted to authorize infringing behavior. If anyone were to go beyond the scope of the exemption and make an unauthorized reproduction or distribution of a DVD work, copyright owners would continue to have the ability to bring suit for infringement, and the full range of remedies currently available to them today under copyright law.

Thank you.

[1] Transcript, p.87

[2] Universal City Studios v. Remeirdes, Reply Brief for Plaintiffs-Appellees at 63, note 43 (2nd Circuit, filed Feb 28, 2001.

[3] 321 Studios v. MGM Studios et al, Reply Memorandum of P & A in support of Motion for Partial Summary Judgment, filed March 28, 2003, p.7