A system of logo-based disclosure of DRM on download products.

• Author: Aldrich, Nika
• Position: Digital Rights Management - Report

1. Introduction

   Many people and organizations maintain the opinion that Digital Rights Management (DRM) technologies are counterproductive, (1) a part of unsustainable business models, (2) or anathema to either the language or the purpose of United States intellectual property laws. (3) Others take the position that Digital Rights Management technologies help to enable new business models, (4) protect the rights of artists, (5) and create economic benefits. (6) Some argue that including restrictions for use of a product is within the general freedom to contract. (7) Others argue that allowing freedom to contract away one's rights in copyrighted works undermines the purpose of copyright law. (8) I acknowledge the ongoing debate and the valid arguments articulated on each side. My position does not speak to DRM itself. Rather, I acknowledge that the United States Congress has smiled upon the use of such technologies (9) and created significant consequences for those who attempt to undermine DRM technologies. (10)

   Congressional support does not, however, provide carte blanche to use DRM in any fashion imaginable. Those who utilize DRM in their products must still comport with other areas of law. Further, even within the bounds of congressional approval for DRM, manufacturers must make wise economic and customer relations decisions about how to implement it in order for its use to provide the economic benefits they intend. The past few years have seen lawsuits regarding different aspects of the implementation of DRM (11) such as criminal investigations (12), refunds (13), recalls (14), attempts at revising legislation's (15), and even letters to the public from CEOs of major corporations explaining their reasons for using DRM. (16) With this increased activity in the media and the public intellectual marketplace, companies are realizing that using DRM can cause both an economic backlash and a customer-relations nightmare. (17)

   I assert that for economic, customer-relations, and legal reasons, it is in the best interest of manufacturers and distributors for customers to have adequate notice of the use of DRM technologies on products they buy. I further assert that the current method of providing notice of DRM technologies on downloaded products is insufficient. I therefore recommend a logo-based method of disclosing the use of DRM for all Internet-downloadable products.

   In the first part of this paper I present the problem that downloaded products frequently contain DRM and do not provide adequate notice to consumers. I first argue that adequate notice is beneficial to retailers and copyright holders. Benefits accrue for economic, customer-relations and legal reasons. Second, I show that while license agreements frequently disclose DRM, I also explain how disclosure through license agreements is inadequate. I then explore the reasons that adequate notice is difficult to provide. Finally, I posit the requisite characteristics of adequate notice of DRM.

   In the second part of this paper, I present a solution to the problem of inadequate notice and the difficulty in providing it. The solution is based on three elements: a logo based system for basic disclosure at the time of purchase of the presence of generic forms of DRM; additional information provided through linked websites or pop-up text boxes; and disclaimers of further contractual and legal limitations. I then show how this system not only provides all of the benefits proffered in the first part of this paper, but further meets all of the requisite characteristics of adequate notice, and finally provides the possibility of further benefits should the system gain industry-wide acceptance.

2. Definitions

   For the purposes of this paper, Digital Rights Management technologies are technological measures that are effective in preventing access to or protecting the authors' rights in copyrighted or copyrightable materials. (18) The covered technological measures include, but are not limited to, scrambling and encryption. Measures are "effective in preventing access to" a copyrightable work if, in their ordinary course of operation, they require the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work. (19) Measures are effective in protecting the rights of a copyright owner "if the measure, in the ordinary course of its operation, prevents, restricts, or otherwise limits the exercise of a right of a copyright owner." (20) This definition therefore mirrors the protections offered in the Digital Millennium Copyright Act. (21)

   For the purposes of this paper, "downloadable material" is any copyrightable content that is delivered to the purchaser via electronic means and in which the content is not delivered in a fixed medium. Downloadable material includes any songs, videos, books, or software delivered through the Internet, games and ring-tones delivered wirelessly to cellular phones and television shows delivered to the end user in a digital format. (22)

   A "purchaser" is one who pays money to receive the content. This definition encapsulates content that is not sold to the user, per se, but is rather licensed or distributed as part of a service to the consumer. Such "services" might include cable television, digital radio services, Internet downloading services such as paid video-on-demand, and service agreements such as the iTunes Store agreement.

3. Background

   The traditional approach to a paper tackling a topic such as this is to spend a portion discussing the history of the issue. In this case, tradition would yield a discussion of the history of the perceived need for and use of DRM. The reasons for this approach have a logical foundation, it is necessary to understand the history of the issue in order to lend credence to the future existence of a problem to be solved.

   Despite this tradition, I choose to forgo the ritual on two accounts. First, a detailed history of the use of rights management in general, at least as it pertains to the music industry, currently the most ubiquitous user of such technologies, has recently been exhaustively covered elsewhere. (23) Second, those interested in DRM in the legal community are well aware that the legal issues surrounding it are gaining momentum at a rapid pace. (24) As early as 2003, the academic legal community galvanized efforts on the topic in substantial form. (25) Since then, academic interest has accelerated. (26)

   Public interest has increased as well. The public face of DRM on downloadable products, Apple Computer, announced in 2007 that it has now sold two billion songs with its "FairPlay" DRM scheme. (27) While heralded at first as a boon to the music industry, which was fighting declining sales, (28) a groundswell of critical attention centered on Apple's system by 2005. By 2006, France and Apple were at odds, (29) and Apple nearly pulled its iTunes store out of France entirely. (30) While France backed down temporarily, several other European countries are considering the matter. (31)

   Responding to the building concern about the topic, Apple's CEO, Steve Jobs, published an open letter entitled "Thoughts on Music" on February 6, 2007. (32) The media widely covered the letter, which denounced DRM in general, but justified its current use by Apple.. (33) Front pages of internet news sites around the world covered the letter and it was a prominent front page story on CNN (34) and the BBC (35) in addition to hitting the blog community like a presidential scandal. (36) This prompted a virtual parade of open letters from industry executives, trade associations and prominent figures in DRM related communities, (37) each marking their territory in what appeared to be an imminent battle to win the hearts and minds of consumers and influence the threat of possible future litigation.

   Between the media, legal academics, corporations and the public, interest in DRM is at an all time high. In short, there is substantial evidence to support the timeliness of a project aimed at addressing issues related to the use of DRM on downloadable products.

   1. Adequate Notice is Beneficial to Retailers and Copyright Holders

      Companies that sell products utilizing DRM should notify consumers of the use of DRM on their products. This notice is necessary and in the best interest of businesses for economic, customer relations and legal reasons.

      First, companies will find it in their economic interest to disclose the use of DRM on their products. (38) When customers have expectations of how they can use a product and the product fails to meet those expectations for any reason, the cost of customer maintenance increases. Among these costs are the increased costs of pre-sales customer contact. If customers are unsure about what a product does, then customers may resort to expensive pre-sale communication with manufacturers, distributors or retailers. For online-sales companies, the proportional cost of overhead such as customer contact is likely to be more expensive than with non-downloaded products. (39) This is due to the fact that online stores operate with lower overhead, therefore addressing each customer communication requires a disproportionately higher percentage of that overhead. (40) Each pre-sale communication with a customer that requires one-to-one email or telephone communication is disproportionately expensive. In addition to pre-sale calls, companies must pay the price of help-line, or post-sale customer support contacts for customers who acquire downloaded products and are dissatisfied because the products fail to meet their expectations,. Worse than the costs of customer support are the costs associated with product returns from customers. Product returns are especially expensive because they require twice the transaction costs but result in no sale. This becomes particularly expensive with downloaded products because no physical product is...