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30 Days of DRM - Day 03: Oversight of DRM Misuse (Markets)

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Monday August 21, 2006
Today's installment focuses on the need for an amendment to the Competition Act should Canada introduce anti-circumvention legislation.  The Act should be amended to ensure that the Competition Bureau is not restricted in its ability to bring actions against abusive behaviour stemming from the application of an anti-circumvention provision. 

This argument is a bit technical, but important. 
The background is that courts in the United States have adopted the principle of copyright misuse, which is an equitable defence in infringement cases where the plaintiff's actions have expanded their copyright past the statutory limits (i.e. anticompetitive acts).  The doctrine was "created to address situations in which the owner of an intellectual property right used his or her legal monopoly to create such an asymmetry in the balance of rights that courts refused to enforce the normal intellectual property rights."

The 1990 4th Circuit Court of Appeals decision in Lasercomb America Inc. v. Reynolds provides a good illustration of the doctrine's application.  The plaintiff, Lasercomb, developed and licensed software used to form steel dies for the paper industry.  It licensed four copies of the software to Reynolds, who circumvented the protective devices and made an additional three unlicensed copies. There was no dispute that Reynolds had infringed copyright, but it argued that Lasercomb was barred for recovery from the infringement because it included a clause in its software license that prevented the licensee from developing competing software for 100 years.  The court agreed, ruling that "a misuse of copyright defense is inherent in the law of copyright just as misuse of patent defense is inherent in patent law." In fact, the court's analysis indicated that copyright owners were prohibited from using their grant of a monopoly in a particular work to obtain a monopoly in a subject matter outside the rights associated with the copyright. 

While Canadian courts have yet to adopt the doctrine of copyright misuse, similar principles are found in Section 32 of the Competition Act.  The section provides that the Competition Bureau has the right to act where an intellectual property right, including a copyright, is used to:

(a) limit unduly the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any article or commodity that may be a subject of trade or commerce,

(b) restrain or injure, unduly, trade or commerce in relation to any such article or commodity,

(c) prevent, limit or lessen, unduly, the manufacture or production of any such article or commodity or unreasonably enhance the price thereof, or

(d) prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, transportation or supply of any such article or commodity

The Competition Bureau's powers are offset, however, by Section 79(5) of the Competition Act, which address abuses of dominant position.  It provides that:

"For the purpose of this section, an act engaged in pursuant only to the exercise of any right or enjoyment of any interest derived under the Copyright Act, Industrial Design Act, Integrated Circuit Topography Act, Patent Act, Trade-marks Act or any other Act of Parliament pertaining to intellectual or industrial property is not an anti-competitive act."

In light of this provision, the Competition Tribunal has been very reluctant to tamper with intellectual property agreements.

Why is this relevant to anti-circumvention legislation?  The experience with TPMs in other jurisdictions, as illustrated by the discussion over the past two days, provides a compelling case for an engaged, active Competition Bureau as the technology is inserted into ever-more products and services.  The potential for DRM misuse is very real, yet if anti-circumvention provisions are included in the Copyright Act, the Bureau may precluded from acting to address anti-competitive activity by virtue of its own statute which deems such behaviour a mere exercise of an IP right and not anti-competitive.  If the Competition Bureau is unable to act, there will be little to prevent owners of intellectual property right from using their legal monopoly to create additional monopolies or to engage in anti-competitive behaviour.  Without a legal principle to mitigate against abuse, Canada would be open to the prospect for even greater abuse of anti-circumvention provisions than that found in the United States. To ensure that the Competition Bureau can act, a statutory exception is needed to clarify that Section 79(5) would not apply to anti-circumvention provisions.

For more on these issues, see my article on Anti-Circumvention and Canadian competition law, Neal Hartzog's article on the U.S. copyright misuse doctrine, and Dan Burk on anti-circumvention misuse.
Comments (1)add comment

Mark said:

...
Problems I see with anti-circumvention legislation are that:
* They don't carry on over borders consistantly, and neither does the the anti-circumvention technology.
* Government will always decide it is exempt, and should have full access to encrypted data. So, it is law which neccessarily excludes government from the law itself, yet is neccessarily strictly enforced on the population. Privacy errodes, but goverment power escalates, which usually results in less trust in the government.
* Anti-circumvention technology should be required to be inherently secure, and not protected by civil law. It becomes possible to implement a very minor form of protection and then they use the court system to protect assests properly. Strictly speaking, any electronic format is an encryption of the real work (such as music), so if the law is too loosely worded simply putting a music CD into a computer could be a form of circumvention (the CRIA and RIAA already think this is so).
* The corporations shouldn't be permitted to relax technological measures in exchange for a more powerful system (for them) in which lawsuits for minor amount are necessarily settled since the cost of defending oneself far outstrips the cost of settling (as in the 20,000 lawsuits by the RIAA in the US). The DMCA means they can make trivial protections in order to demonstrate trivial circumventions for large scale lawsuits.
* The people who want to steal will simply come from countries in which there is no DMCA circumvention law. It solves nothing in the world of piracy.
* When all is said and done, and the whole world is "Safe frome the evils of intellectual piracy!", the total sales of music will be pretty much what it has always been. Most people are honest, in spite of everything the CRIA says about Canadians.
* If the corporations think DMCA is so wonderful, they should sell exclusively in the USA. They have choices, and one of them is to bypass countries which have laws fair to its citizens. Goodbye, and good luck with that.
* The law must also protect purchases. If you decide to buy iTunes music, and then Microsoft becomes your platform of choice, you shouldn't have to repurchase your music simply because the encryption is different. DMCA law is used to restrict consumer choices, and its very easy to test. Simply put a website that states you will convert iTunes to Microsoft formats, and see if the letters "DMCA" is in the first or second paragraph of the letter you get 2 days later from Apples lawyers.
August 21, 2006

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