Landmark case tests digital rights laws: Lack of adequate copyright protection is hindering the growth of digital content services, according to some in the industry - News Analysis: ICANN; Digital Content Copyright - Vivendi Universal's Canal Plus Group vs News Corp's NDS Group plc

CommunicationsWeek International, April 1, 2002 by Michelle Donegan

When Vivendi Universal's Canal Plus Group last month accused News Corp's NDS Group plc of hacking its digital TV smart card code and publishing it on the Internet, the media giants rekindled the heated debate over digital copyright protection.

So, too, did it serve to highlight opposing views over just what is responsible for holding back the growth of digital content delivery: the immaturity of technology to protect copyright; or inadequate commercial models being adopted by content owners. While these issues may seem remote to telecoms service providers, these are the regulatory and strategic minefields they will have to navigate if they plan to deliver digital video content over their networks.

In an unprecedented law suit between rival media conglomerates, Canal Plus is seeking $1 billion in damages for the alleged piracy of its pay TV content and software, which it says enabled perhaps millions to watch pay-TV for free.

This high-profile case of media piracy puts the technology camp, in particular digital rights management (DRM) systems, in the spotlight.

DRM systems range from encryption software that prevents content being accessed, to payment systems that track content distribution and ensure artists are compensated when their works are bought or played. The systems are supposed to provide extra copyright protection for content owners, according to new copyright laws in the U.S. and the EU (see box). The Vivendi case will test this new legal concept for digital content protection.

"Effectively, what they're [accused of] hacking is the rights management systems used by broadcasters," said John Enser, partner in media and communications law practice Olswang, based in London. "This case will flush out what the real level is of liability and how many people actually have these illegal smart cards."

According to Enser, DRM systems will be an inevitable part of digital content distribution because they're the most reliable systems for making sure content owners are paid.

"Unless you have protection, you can't add value to your content," says Martin Lambert, chief technology officer and founder of digital rights management company Sealed Media, of London.

In an attempt to protect its content interests, the music industry--perhaps spurred by the high-profile Napster case--provides two examples of content providers working together to form their own DRM systems: MusicNet, a joint venture of RealNetworks, AOL Time Warner, Bertelsmann AG, EMI Group plc and Zomba; and PressPlay, an initiative of Sony Music Entertainment and Universal Music Group, which officially launched last summer.

MusicNet launched only in December of last year. "This is the first kind of service that offers a warehouse of electronic media," says David Schickle, technical director, EMEA, at media delivery technology company RealNetworks, based in London.

Not created for the Internet

But some legal experts say what is holding back digital content delivery is not technology or law, but reluctance and fear to commit to Internet-based business models among content owners that have not been geared to deliver their content over the Internet.

"There are two critical factors preventing content owners from delivering content over the Internet: the complexity of rights background and the fear that [copyright holders] will lose control of their rights," says Patrick Cliffe, senior associate at international law firm Norton Rose, based in London. "Rights backgrounds are so complex that it's holding up the delivery of content over the Internet."

Moreover, the content owners still seem to be struggling to get the digital distribution business model right. "It's about business models," says Olswang's Enser. "The limits you have in terms of a MusicNet subscription, for example, make it an unappealing commercial model when you consider that the alternative is free."

RELATED ARTICLE: Setting the rules: governments move to protect content through DRMs

Given the high-profile legal battles now over copyright and the Internet, governments need to strike a delicate balance between promoting the use of digital rights management (DRM) systems and preventing content owners from abusing these systems by denying access or extorting disproportionate fees for their content.

Last month, the European Commission held a workshop to discuss how to promote DRMs in the European Union. A new copyright directive, which must be implemented in each member state by the end of this year, gives further copyright protection to content owners that use DRM systems.

"[The directive] gives copyright-type protection for content that is hacked [via a DRM system]," says John Enser, a partner at media law firm Olswang. "You could use DRM to give you greater protection than you get under copyright. Potentially, this gives the content owner greater power. So, the directive strikes a careful balance."

But the Commission is deliberating over whether to recommend standards for interoperability or simply issue more guidance for how these systems are to be used.