Hatch's 'Induce' Bill Spurs Debate Among Industry Groups

WASHINGTON, D.C.-The RIAA and recording-artist organizations are disputing claims by a coalition of consumer electronics, technology and Internet companies that the proposed "Inducing Infringement of Copyrights Act" (IICA), S. 2650, would undermine the Supreme Court's 1984 Sony-Betamax decision on legitimate uses of new technology.

That ruling held that time-shifting was a legitimate use for the VCR and that manufacturers of a product could not be held secondarily liable for infringing uses of the product by others so long as the product was capable of substantial noninfringing uses.

The new bill, authored by Sen. Orrin G. Hatch, chairman of the Judiciary Committee, targets the makers of file-sharing software products that have made "free" trading of music and movies a worldwide phenomenon.

In the letter, the tech groups maintain that the proposed law would chill innovation and drive investment in technology and accompanying jobs overseas.

"By combining (1) a new and separate cause of action for 'intentional inducement,' (2) a lower civil, rather than higher criminal, standard of liability and (3) a circumstantially 'reasonable' test," states the letter, "S. 2650 would seem to ensure that massive and intrusive discovery proceedings and a jury trial would await any innovator or investor who introduces to the market a product that some copyright owner, someplace, believes will 'induce' infringement."

The letter's signatories include the Electronic Freedom Foundation, Verizon, TiVo, Intel, Google, the Consumer Electronics Assn. and Public Knowledge.

P2P United, the lobbying group representing Grokster, Blubster, Morpheus and others, also sent a letter to Hatch and the committee, saying the companies do not induce piracy. "The astonishing claim that the kind of wholly decentralized peer-to-peer software developed by the members of P2P United "functions like Earth Station 5's 'piracy machine' is utterly inaccurate and indefensible," says the group.

The RIAA, in contrast, says that the Hatch bill builds upon the Sony vs. Betamax decision, which explicitly said bringing a device like a VCR into the marketplace does not constitute an intentional inducement to infringe.

"Many products have a variety of uses, both legitimate and illicit," says an RIAA spokesman. "This Act only targets those who intentionally cause copyright infringement. Under the Act, the legal standards set forth by the Supreme Court in Sony are expressly preserved."

Jay Rosenthal, counsel for the Recording Artists Coalition (RAC), echoes that sentiment. "Congress is a very serious deliberative body. They understand how to parse the legal difference between the intent of the creator of the Betamax machine and the intent of the creator of a P2P music-sharing program," he says.

Upon introducing the measure, Senator Hatch stated: "This bill will also preserve the Sony ruling without reversing, abrogating or limiting it. The Inducement Act will simply import and adapt the Patent Act's concept of "active inducement" in order to cover cases of intentional inducement that were explicitly not at issue in Sony. The Inducement Act also preserves the Section 512 'safe harbors' for Internet service providers."

Sources say Hatch wants to pass a "solid" P2P anti-piracy bill before he steps down as chairman at the end of this session of Congress.

The bill has the co-sponsorship of Senate leaders from both parties, including majority leader Sen. Bill Frist, R-Tenn.; minority leader Tom Daschle, D-S.D.; Lindsay Graham, R-S.C.; and Barbara Boxer, D-Calif.

"Congress is doing the right thing and shining a light on the bad actors who have hijacked a neutral technology," says the RIAA spokesman. "No amount of hyperbole or scare tactics can change that."

Behind the publicly aired debate, however, sources say that groups on both sides of the issue are working behind the scenes-but not together-to try and forge an amended version of the bill, or one with added language that might alleviate some of the opposition's fears.

In its announcement of support last month, the RIAA noted the words of U.S. District Court Judge Stephen Wilson when he ruled in April 2003 on the liability of peer-to-peer services Morpheus and Grokster.

"The court is not blind to the possibility that Defendants may have intentionally structured their businesses to avoid secondary liability for copyright infringement, while benefiting financially from the illicit draw of their wares," wrote Wilson,

"While the court need not decide whether steps could be taken to reduce the susceptibility of such software to unlawful use, assuming such steps could be taken, additional legislative guidance may be well-counseled," he added.

Wilson, however, cleared the P2P firms of secondary liability. The RIAA has appealed the case.

Mitch Bainwol, chairman/CEO of RIAA, says, "As this legislation makes clear, the debate isn't digital versus plastic. It isn't old versus new. Here's what it is: Legitimate versus illegitimate. It's iTunes, the new Napster and Wal-Mart, Rhapsody and others versus the likes of Kazaa, Imesh and Grokster. It's whether or not digital music will be enjoyed in a fashion that supports the creative process or one that robs it of its future."