James Gannon's IP Blog

In the past couple of weeks, some news articles and blogs have been highly critical of the proposed amendments to the Canadian Copyright Act found in Bill C-32. Much of the criticism has focussed on the issue of  TPMs, or “digital locks”, despite these provisions being almost identical to those that were found in the previous copyright bill and roughly equal to the TPM-related protection laws found in virtually every other industrialized country.

Although I had previously addressed much of the unfounded criticisms of these provisions in my previous blog entry, Top 5 Myths About the New Copyright Bill and Digital Locks, in the last week some commentators have found a new angle to impugn these new laws: that the new user exceptions in Bill C-32 (format-shifting, time-shifting and backup copies) are all “trumped” by the “digital lock laws”. As Rory McGreal of Athabasca University wrote in the Calgary Herald:

Do you see what I see in the new copyright Bill C-32? Amid all the noise about new rights for users, upon closer scrutiny, this bill, rather than granting new rights, can effectively block users from making use of any and all of their rights, even existing ones. It is true that this bill now recognizes rights that we all thought we already had, like viewing our legally purchased Irish video in Canada, or playing our Leonard Cohen song on our CD and copying it to our iPod, or watching Desperate Housewives on Monday instead of Sunday evening. But even the new rights granted to teachers to use excerpts from Catcher in the Rye or clips from the Anne of Green Gables television show are meaningless if vendors choose to use a digital lock.

So while not exactly a myth, what isn’t being reported is that this condition to the new exceptions is absolutely vital to ensure that Canadians have access to all the new and innovative digital distribution platforms that have been fostered in our WIPO-compliant trading partner nations. The reasoning is quite simple.

TPMs are being used more and more as a way for distributors to market the same creative work (movie, song, game, etc.) in a variety of different digital “products”. Each of these products or offerings are being provided at different price-points. Content providers will offer digital works TPM-free for a certain price while at the same time offering the work with a TPM that restricts use of the work in some way (by time, quality, number of views, ad-restricted) at a lower price. Adequate legal protections for the TPM on the second product is absolutely vital to sustain a viable market for the first product.

As an example, the same distributor will make a song available on iTunes, TPM-free, for $0.99 while also making that same song (plus music video) available for free on YouTube or even on the label’s own website – subject of course to a TPM that prevents the YouTubers from copying the stream and creating their own TPM-free local copy of that song identical to the copy being offered for $0.99 on iTunes. It’s not hard to see why the business model of providing ad-supported songs on services like YouTube and Spotify will completely undermine the market for the $0.99 iTunes single if users can legally circumvent YouTube’s TPM and download the track and format-shift it to a PC or iPod.

Business models that rely on TPMs to enable these diversified digital offerings are simply not viable if every user can remove the TPM placed on products at lower price-points and obtain a TPM-free version of the product that the creator may also be offering at a higher price-point. Allowing unconditional circumvention of TPMs for purposes such as format-shifting, time-shifting and backup copies will result in a “lowest common denominator” digital marketplace where the cheapest format in which the works are offered becomes the de facto format, given that consumers can legally circumvent any restrictions placed on cheaper formats by taking advantage of the user exceptions.

Think of the example of trial-version software. Software and game developers will often offer a limited-time trial-version of their software either for free or at a significantly reduced price. In order to enforce that time restriction, the trial-version of the software program includes a TPM that prevents additional copies of the same trial-software from being copied on the same computer – otherwise, consumers could just keep re-installing copies of the trial version and never have to pay for the full TPM-free version. However, if consumers can legally circumvent these TPMs in order to create backup copies of the trial software on their computers, the market for the full-priced TPM-free software is effectively undermined. For this reason, if software developers use TPMs to create restricted versions of their programs, these restrictions must be legally enforceable despite user backup exceptions. If not, the market would once again adopt a “lowest common denominator” approach where the cheapest version becomes the de facto version.

As a final example consider the emerging digital distribution models for movies from services such as Netflix or Blockbuster Online. Right now, Blockbuster makes digital movies available for download in two formats – either “Rent” for around $3-4 or “Buy”, usually around $15-20. If you select the “Rent” option, Blockbuster provides you with a movie file that is protected by a TPM. This TPM serves two purposes – first, it causes the movie file to delete itself 24 hours after the first time the movie is viewed. Second, it prevents the file from being copied so that renters can’t simply make hundreds of copies of the file, each of which destroys itself 24 hours after that file is accessed.

I hope by now that a graphic isn’t necessary to understand the simple point that if consumers can circumvent these TPMs in order to make time-shifted, format-shifted or backup copies of the “Rented” movie files, the market for the “Buy” option is effectively undermined. Why would anyone buy a $20 movie when they could legally circumvent protections on a $4 rental to create unlimited backup copies?

The new consumer exceptions in Bill C-32 are an important piece of the legislation that will grant users greater flexibility and convenience to use digital media. They are a necessary component of bringing Canadian copyright law into the digital age. However, these exceptions must be balanced against the need to foster and support the emerging digital distribution platforms that rely on TPMs in order to sustain a working business model. Digital distribution services such as Blockbuster and Spotify will simply refuse to make their services available in regions that will not adequately protect their distribution models. I look forward to seeing these important user exceptions enacted with appropriate balancing conditions such as the current TPM restrictions in sections 29.22(1)(c), 29.23(1)(b) and 29.24(1)(c) of Bill C-32.